Bombardier, Inc. Annual Report 2019

FY2019 Annual Report · Bombardier, Inc.

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We are a leading manufacturer of both planes and trains, operating under two reportable segments: Aviation and
Transportation. We provide efficient, sustainable and enjoyable transportation solutions. Our products, services,
and most of all, our 60,000 dedicated and highly skilled employees are what makes us a global leader in mobility
and innovation. As at the date of this report, we have over 70 production and engineering sites in over 25
countries and a worldwide network of service centres.

AVIATION

Designs, develops, manufactures, markets
and provides aftermarket support for three
class-leading families of business jets -
Learjet, Challenger and Global, in addition
to outfitting various aircraft platforms for
specialized use.

TRANSPORTATION

Offers a wide-ranging portfolio of innovative
and efficient solutions in the rail industry.
Covers the full spectrum of rail solutions,
ranging from global mobility solutions to a
variety of trains and sub-systems, services,
system integration and signalling to meet
the market’s needs and expectations.

Revenues(1)
$7.5 billion
Order backlog(2)
$16.3 billion
Employees(3)
24,350

Revenues(1)
$8.3 billion
Order backlog(2)
$35.8 billion
Employees(3)
36,050

All amounts in this financial report are in US dollars unless otherwise indicated.
(1) For fiscal year 2019.
(2) As at December 31, 2019. Order backlog for Aviation includes $14.4 billion for business aircraft and $1.9 billion for other aviation.
(3) As at December 31, 2019, including contractual and 1,700 inactive employees. Approximately 200 Corporate office employees are not

allocated to a reportable segment.

SETTING A PATH TO COMPLETE THE TURNAROUND

Bombardier has come a long way since launching its turnaround plan. We have addressed our
underperforming aerospace assets, completed our heavy investment cycle, and put the
company on a solid path toward organic growth and margin expansion, while prudently
managing our liquidity and heavy debt. We enter 2020, focused on initiating the final phase of
our turnaround plan, deleveraging our balance sheet and addressing our capital structure to
provide Bombardier with the financial flexibility necessary to compete and win in the future.

Dear Shareholders,

While 2019 was challenging from a financial
performance standpoint, the actions taken by
the team throughout the year moved us much
closer to achieving our turnaround goals. Of
course, this progress would not have been
possible without the dedication and hard work of
our more than 60,000 employees around the
world, who have demonstrated exceptional
talent in making our turnaround possible. On
behalf of all our shareholders, I thank our
employees for their many contributions, for
embracing change and for making Bombardier a
truly amazing company.

Since we launched our turnaround plan and
given our high debt load, a fundamental
objective was to protect shareholder value by
having sufficient liquidity to manage all possible
scenarios, contingencies and market conditions.
In 2019, we took the right actions to ensure we
maintained a minimum of $2.5 billion to
$3.0 billion cash-on-hand. We successfully
raised $2 billion of debt, mainly used to push out
maturities from 2020-21 to 2027; and we nearly
doubled the size of our revolver credit facility at
Transportation.

Over the past two years, we also announced
M&A transactions, including the sale of the CRJ
program and our Aerostructures business in
2019, which will collectively generate $2 billion
of gross proceeds and eliminate nearly $1 billion
of net liabilities.(1)

The significance of the CRJ and Aerostructures
transactions should not be overlooked. They
represent major steps in Bombardier’s exit from
the commercial aircraft business, a business
that lost approximately $400 million in 2016.
While not reflected in the financial performance,
Bombardier’s exit from commercial aerospace
has been widely recognized by all stakeholders,
customers, employees, partners and
governments for the responsible manner in
which it was done and for the positive impact it
will have on the aerospace sector in Québec
and Canada, including preserving thousands of

jobs and attracting major OEM’s (Airbus and
MHI) to Montréal’s aerospace cluster.

In 2019, we also successfully completed a
number of important structural actions to
streamline our operations and reduce costs
across the portfolio. These actions included:
(i) the consolidation of all our aerospace assets
and engineering capabilities into a single
Bombardier Aviation business unit; and (ii) the
acquisition and successful integration of the
Global 7500 wing program from Triumph to
secure our growth.

There were many notable accomplishments at
Bombardier Aviation in 2019, including the
production ramp-up of our new Global 7500
business jet, which continues to lead the
industry setting records for speed, distance,
efficiency and cabin comfort. In addition, we
significantly strengthened our portfolio with the
successful completion and entry-into-service of
the Global 5500 and Global 6500 aircraft; on-
time, on-budget, and with better than promised
performance capabilities. Aviation’s aftermarket
growth also remains on plan, delivering double-
digit organic growth in 2019 and successfully
executing on major expansion projects around
the world, including new facilities in Singapore,
London and Miami.

At Transportation, the focus in 2019 was on
completing the transformation and reshaping of
the business. While steady progress was made
toward this goal, production ramp-up challenges
and delays in achieving certain technical
milestones and software certifications resulted in
the company incurring additional costs and
delayed cash flow, negatively impacting
Bombardier’s financial performance.

Among the actions taken to ensure improved
execution and operating performance at
Transportation was strengthening and
reorganizing the Leadership team. This included
naming a new President, a new Chief
Commercial Officer, a new Chief Engineer and
new regional Presidents, all of whom bring the
strong technical, operational and customer focus

BOMBARDIER INC. / 2019 FINANCIAL REPORT 1

necessary for Transportation to deliver world-
class project execution and sustained financial
performance.

These actions resulted in a positive impact, most
notably in the improved backlog and the major
project wins, such as the Cairo Monorail, as well
as progress made addressing the challenges
associated with our legacy projects.

Transportation’s 2019 backlog growth and
margin improvement were impressive. Total
order intake exceeded $10 billion, a record level.
Almost 70% of these orders came from service
contracts, signalling projects, high reuse
platforms and/or options on existing rolling stock
contracts, which carry much lower execution
risk.

Project execution in 2019 also improved as
evidenced by the successful completion of
several large legacy projects in New York City,
London and Toronto. Significant progress was
made - and continues to be made - on the
remaining legacy projects, including London
Overground's LoTrain project and the Swiss
Federal Railways (SBB) trains. These remaining
projects are expected to be largely completed
along with final commercial resolutions by the
end of 2020. At that time, Transportation’s full
earnings and cash generation ability will become
clear as we reap the benefits of our refreshed
product portfolio, higher-margin backlog and
solid growth fundamentals.

In 2019, Bombardier reaffirmed its commitment
to supporting the communities where it operates.
In Canada, for example, we launched a
refreshed internship program that included a
commitment to providing more than 1,000 paid
internship positions over the coming academic
year. We also supported the education of the
next generation of aerospace technicians with
the recently announced donations of a CRJ
regional jet and Global 7500 Flight-Test Vehicle
to Centennial College in Toronto, ensuring
students will receive valuable hands-on-training
before entering the workforce. Bombardier’s
ongoing commitment to innovation and R&D
investment was also recognized by Canada’s

Research Info Source, Inc. In their annual
ranking of Canada’s Innovation Leaders,
Bombardier was named the leading corporate
R&D investor for the seventh consecutive year.

Since the launch of our turnaround plan, every
action taken has been with an eye towards the
ultimate goals, de-leveraging of the balance
sheet, addressing our capital structure and
providing Bombardier with the financial flexibility
to compete and win. In 2019, we proactively
launched a comprehensive process to evaluate
a range of alternatives that would allow the
company to accelerate its deleveraging and
position the business for long-term success.

Successfully concluding our strategic review and
any resulting actions, while simultaneously
driving improved operational and financial
performance across the organization, are the
key objectives for 2020.(1)

Consistent with these goals, in February 2020,
we announced an agreement to transfer our
remaining interests in the Airbus Canada Limited
Partnership to Airbus and Investissement
Québec. This transaction further strengthens
liquidity with approximately $600 million of cash
proceeds and the elimination of capital
requirements over the next two years.

In closing, we are confident that we are taking
the right actions to place Bombardier in the best
position for sustainable long-term growth and
success and the entire leadership is very excited
about the tremendous opportunities ahead. We
look forward to updating shareholders on our
progress throughout the coming year.

Alain Bellemare
President and Chief Executive Officer

(1) Forward-looking statement. See the forward-looking statements assumptions on which the guidance is based and forward-looking

statements disclaimer in Overview.

2 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Table of Contents

MANAGEMENT’S
DISCUSSION
AND ANALYSIS

CONSOLIDATED
FINANCIAL
STATEMENTS

For the fiscal year ended
December 31, 2019

For the fiscal years ended
December 31, 2019 and 2018

131

BOMBARDIER INC. / 2019 FINANCIAL REPORT 3

BOMBARDIER INC.
MANAGEMENT’S DISCUSSION
AND ANALYSIS

For the fiscal year ended
December 31, 2019

Table of Contents

OVERVIEW

AVIATION

TRANSPORTATION

OTHER

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: Aviation and Transportation.

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 2019 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, 2019

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

Term

ACLP

AFS

bps

Description

Airbus Canada Limited Partnership (formerly
CSALP)

Term

FVOCI

Description

Fair value through other comprehensive income
(loss)

Available for sale

Basis points

FVTP&L Fair value through profit and loss

GAAP

Generally accepted accounting principles

BT
Holdco

Bombardier Transportation (Investment) UK
Limited

CAGR

Compound annual growth rate

CCTD

Cumulative currency translation difference

CDPQ

Caisse de dépôt et placement du Québec

CGU

CIS

Cash generating unit

Commonwealth of Independent States

CSALP C Series Aircraft Limited Partnership

Defined benefit

Defined contribution

DDHR

Derivative designated in a hedge relationship

DSU

EBIT

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

Earnings (loss) before income taxes

GDP

HFT

IAS

IASB

IFRIC

IFRS

Libor

Gross domestic product

Held for trading

International Accounting Standard(s)

International Accounting Standards Board

International Financial Reporting Interpretation
Committee

International Financial Reporting Standard(s)

London Interbank Offered Rate

MD&A

Management’s discussion and analysis

N/A

NCI

nmf

OCI

Not applicable

Non-controlling interests

Information not meaningful

Other comprehensive income (loss)

PP&E

Property, plant and equipment

PSU

R&D

RSU

RVG

Performance share unit

Research and development

Restricted share unit

Residual value guarantee

Entry-into-service

SG&A

Selling, general and administrative

Earnings (loss) per share attributable to equity
holders of Bombardier Inc.

U.K.

U.S.

United Kingdom

United States of America

EBT

EIS

EPS

Euribor

Euro Interbank Offered Rate

BOMBARDIER INC. / 2019 FINANCIAL REPORT 5

OVERVIEW

Table of Contents

HIGHLIGHTS
OF THE YEAR

KEY
PERFORMANCE
MEASURES AND
METRICS

STRATEGIC
PRIORITIES

SEGMENT
REPORTING

GUIDANCE AND
FORWARD-
LOOKING
STATEMENTS

CONSOLIDATED
RESULTS OF
OPERATIONS

CONSOLIDATED
FINANCIAL
POSITION

LIQUIDITY AND
CAPITAL
RESOURCES

CAPITAL
STRUCTURE

RETIREMENT
BENEFITS

RISK
MANAGEMENT

NON-GAAP
FINANCIAL
MEASURES

6 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

HIGHLIGHTS OF THE YEAR

Transitioning towards sustainable financial performance

For the fiscal years ended December 31

2019

(1)

2018

Variance

RESULTS

Revenues
Adjusted EBITDA(2)
Adjusted EBITDA margin(2)
Adjusted EBIT(2)
Adjusted EBIT margin(2)

EBIT

EBIT margin

Net income (loss)

Diluted EPS (in dollars)
Adjusted net income (loss)(2)
Adjusted EPS (in dollars)(2)

Cash flows from operating activities

Net additions to PP&E and intangible assets
Free cash flow (usage)(2)

As at December 31
Cash and cash equivalents(4)
Available short-term capital resources(5)(6)

Order backlog (in billions of dollars)

Aviation

Business aircraft
Other aviation(6)

Transportation

$ 15,757

896

5.7 %

470

3.0 %

$ 16,236

$ 1,304

(3)%

(31)%

8.0 %

(230) bps

$ 1,029

(54)%

6.3 %

(330) bps

(498)

$ 1,001

nmf

(3.2)%

6.2 %

(940) bps

$ (1,607)

(0.76)

(396)

(0.25)

(680)

523

$ (1,203)

2019

$ 2,629

$ 3,925

(3)

318

0.09

438

0.14

597

415

182

2018

$ 3,187

$ 4,373

14.4

1.9

35.8

14.3

4.3

34.5

nmf

(0.85)

nmf

(0.39)

nmf

26 %

nmf

Variance

(18)%

(10)%

1 %

(56)%

4 %

(1) Refer to Note 3 - Changes in accounting policies, to our Consolidated financial statements, for the impact of the adoption of IFRS 16,

Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.

(2) 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 and Liquidity and capital resources section for reconciliations to the most comparable IFRS measures. Prior to
the first quarter of fiscal year 2019, the Corporation reported non-GAAP measures labelled “EBIT before special items” and “EBITDA
before special items”. Beginning in the first quarter of fiscal year 2019, the Corporation changed the label of these non-GAAP measures
to "adjusted EBIT" and "adjusted EBITDA", respectively, without making any change to the composition of these non-GAAP measures.
The Corporation believes that this new label aligns better with broad market practice in its industry and better distinguishes these
measures from the IFRS measurement "EBIT".

(3) Included the proceeds from the sale of the Downsview property for approximately $600 million in 2018.
(4) Includes cash and cash equivalents of the aerostructures businesses presented under Assets held for sale totalling $51 million as of

(5) Defined as cash and cash equivalents plus the amount available under our revolving credit facilities.
(6) Including 20 firm orders for CRJ900 as of December 31, 2019 and 45 firm orders for CRJ900 as of December 31, 2018. CRJ production

is expected to conclude in the second half of 2020, following the delivery of the current backlog of the aircraft.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 7

KEY HIGHLIGHTS AND EVENTS

Financial performance reflects ongoing turnaround of the businesses, as Aviation reshapes its portfolio
and Transportation moves forward on completion of challenging projects.
• Revenues totalled $15.8 billion, led by an 8.5% growth in business aircraft activities, offset by the divestiture

of commercial aircraft programs and lower revenues at Transportation, mainly on account of contract
estimate revisions.

• Adjusted EBITDA(1) and adjusted EBIT(1) of $896 million and $470 million respectively reflect improvements
at Aviation as it exits underperforming commercial programs and ramps-up production on the Global 7500,
while Transportation's results were impacted by additional charges and investments to complete
challenging projects. Reported EBIT loss for the year of $498 million includes an impairment charge related
to the ACLP investments.

• Free cash flow usage(1) for the year of $1.2 billion was driven by additional investments made to address

legacy rail projects as well as the deferral of deliveries, mainly at Transportation.

Fourth quarter cash generation reached $1.0 billion, in line with the prior year but short of expectations

due to delayed cash inflows.

Cash from operating activities amounted to $(680) million for the full year, and to $1.1 billion in the

fourth quarter.

• Business Aircraft and Transportation backlog continued to increase in 2019, reaching over $50 billion in

aggregate, while the CRJ backlog declines as production winds down.

• Year-end cash on hand of approximately $2.6 billion and $1.3 billion available on revolving credit facility;

liquidity to be further strengthened by the additional $1.6 billion of proceeds expected by mid-year of 2020
from the sale of the remaining ACLP interests, CRJ program and the aerostructures business(2)

Reshaping the Aviation portfolio with increased focus on Business Aircraft
• Completed the sales of Business Aircraft’s flight and technical training activities to CAE Inc. and the

Q Series program assets and operations to De Havilland Aircraft of Canada for combined proceeds of
approximately $800 million.

• Entered into a definitive agreement with Mitsubishi Heavy Industries, Ltd. (MHI) in June 2019 for the sale of
the CRJ program for a cash consideration of $550 million payable upon closing, and the assumption by MHI
of certain financial assets and liabilities, including credit and residual value guarantees and lease subsidies.

• Entered into a definitive agreement with Spirit AeroSystems Holding, Inc. (Spirit) in October 2019, whereby

Spirit will acquire Bombardier’s Belfast and Casablanca aerostructures operations and the Dallas
maintenance, repair and overhaul (MRO) facility, for a cash consideration of $500 million and the
assumption of approximately $700 million of liabilities, including government refundable advances and
pension obligations.

• On February 12, 2020, Bombardier entered into an agreement with Airbus SE and the Government of

Quebec, under which Bombardier transferred its shares in the Airbus Canada Limited Partnership (ACLP) to
Airbus and the Government of Quebec, improving Bombardier’s cash position. This includes cash proceeds
of approximately $600 million from Airbus, of which $531 million was paid upon closing with the balance to
be paid over 2020-21, and the elimination of all future capital requirements for the A220 program, estimated
at approximately $700 million.

(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 and Liquidity and capital resources section for reconciliations to the most comparable IFRS measures.
(2) Forward-looking statement. See the forward-looking statements assumptions on which the guidance is based and forward-looking

statements disclaimer in Overview.

8 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Positioning Transportation for Stronger Financial Performance
• Actions and initiatives undertaken in 2019 to progress Transportation challenging projects:

Completed delivery of several large legacy projects, including Metropolitan Transportation Authority
(MTA) in New York City, Crossrail in the U.K. and Toronto Transit Commission (TTC) in Toronto.

Achieved key milestones on other major projects, including in-service reliability improvement on Swiss
Federal Railways (SBB) in Switzerland and the homologation of the multi-unit software for LoTrain in
the U.K., paving the way for train deliveries.

• Transportation continued to grow and improve the quality of its backlog with $10.0 billion in new orders, and

a book-to-bill ratio(1) of 1.2 for the year. Backlog reached $35.8 billion at the end of 2019.

Approximately 70% of 2019 orders coming from service contracts, signalling projects and options on

rolling stock contracts, carrying lower execution risk.

Backlog share of services and signalling contracts increased to 48% (42% a year ago).

Acceleration of Deleveraging Phase of Turnaround
• Consistent with Bombardier’s five-year turnaround plan, and following a comprehensive review of strategic

alternatives, the Company is actively pursuing options to strengthen its balance sheet and enhance
shareholder value. The objective is to position the business for long-term success with greater operating
and financial flexibility.(2)
(1) Ratio of new orders over revenues.
(2) Forward-looking statement. See the forward-looking statements assumptions on which the guidance is based and forward-looking

statements disclaimer in Overview.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 9

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.
•
Free cash flow(1), as a measure of liquidity generation.
•
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.

(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures, Consolidated results of operations 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.

10 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

For the fiscal years ended and as at
December 31

2019

(1)

2018

FIVE-YEAR SUMMARY

2017
restated(2)

2016

2015

Profitability
Revenues
Adjusted EBITDA(3)(4)
Adjusted EBITDA margin(3)(4)
Adjusted EBIT(3)(4)
Adjusted EBIT margin(3)(4)
EBIT
EBIT margin
Net income (loss)
Diluted EPS (in dollars)
Adjusted net income (loss)(3)
Adjusted EPS (in dollars)(3)

Liquidity

Cash flows from operating activities
Net additions to PP&E and intangible
assets
Free cash flow (usage)(3)
Cash and cash equivalents(6)
Available short-term capital resources(7)

Capital structure

Interest coverage ratio(8)
Financial leverage ratio(8)
Weighted-average long-term debt
maturity (in years)

$ 15,757
896
$
5.7 %
470
3.0 %

(498)
(3.2)%

$ (1,607)
(0.76)
$
(396)
$
(0.25)
$

(680)

$
523
$ (1,203)
$ 2,629
$ 3,925

0.6
10.9

4.6

$ 16,236
1,304
$

$ 16,199
$ 1,046

$ 16,339
798
$
4.9 %
427
2.6 %
(58)
(0.4)%
(981)
(0.48)
(268)
(0.15)

$
$
$
$

$ 18,172
992
$
5.5 %
554
3.0 %

$ (4,838)

(26.6)%

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

6.5 %
725
4.5 %
299
1.8 %

(525)
(0.24)
91
0.04

$
$
$
$

531

137

(5) $ 1,317
(5) $
(786)
$ 3,057
$ 4,225

$ 1,201
$ (1,064)
$ 3,384
$ 4,477

$ 1,862
$ (1,842)
$ 2,720
$ 4,014

1.3
7.9

5.3

0.8
9.7

5.8

1.5
7.3

6.3

$
$
$
$

8.0%

1,029

6.3%

1,001

6.2%
318
0.09
438
0.14

597

415
182
3,187
4,373

1.5
6.6

4.3

(1) Refer to Note 3 - Changes in accounting policies, to our Consolidated financial statements, for the impact of the adoption of IFRS 16,

Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.

(2) Restated due to the adoption of IFRS 15, Revenue from contracts with customers.
(3) Non-GAAP financial measures. Refer to the Non-GAAP financial measures, Consolidated results of operations and Liquidity and capital

resources sections for definitions of these metrics and reconciliations to the most comparable IFRS measures.
(4) Refer to the Consolidated results of operations section for details of special items recorded in 2019 and 2018.
(5) Included the proceeds from the sale of the Downsview property for approximately $600 million in 2018.
(6) Includes cash and cash equivalents of the aerostructures businesses presented under Assets held for sale totalling $51 million as of

December 31, 2019. Refer to Reshaping the portfolio section in Aviation, Note 15 - Cash and cash equivalents and Note 30 - Assets held for
sale in the Consolidated financial statements for more details on the transactions as well as the accounting treatments. Also included cash
and cash equivalents of the C Series aircraft program presented under Assets held for sale amounting to $69 million as of December 31,
2017.

(7) Defined as cash and cash equivalents plus the amount available under the revolving credit facilities.
(8) Refer to the Capital structure and Non-GAAP financial measures sections for computations of these ratios. In 2019, the Corporation

changed the definitions of these ratios as a result of adopting IFRS 16, Leases.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 11

STRATEGIC PRIORITIES

Acceleration of deleveraging phase of turnaround

Since launching the turnaround plan, Bombardier has addressed underperforming aerospace assets, completed
the heavy investment cycle, and set itself on a solid path toward organic growth and margin expansion while
prudently managing liquidity and its heavy debt load.

By the end of 2020, Bombardier expects to start deploying excess cash on hand initiating the deleveraging phase
of the plan. This strong liquidity position is supported by cash on hand of $2.6 billion as of December 31, 2019,
expected approximately $1.6 billion proceeds from the ACLP remaining interest, CRJ program and Aerostructures
sales. Deleveraging is expected to further accelerate as the Corporation transitions toward positive free cash flow
generation expected by the end of the year.(1)

With the final phase of the plan in motion, Bombardier is also actively pursuing alternatives to accelerate debt
paydown in order to position the business for long-term success with greater operating and financial flexibility.

(1) Forward-looking statement. See the forward-looking statements assumptions on which the guidance is based and forward-looking statements

disclaimer in Overview.

12 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Forward-looking statements
Forward-looking statements(1) in this section of the MD&A are based on and subject to the following material assumptions:

Overall business

• normal execution and delivery of current backlog;
•

the ability to understand customer needs and portfolio of products and services to drive market demand and secure new
orders;

• continued deployment and execution of leading initiatives to improve revenue conversion into higher earnings and free

cash flow(2), through improved procurement cost, controlled spending and labour efficiency;

• delivering on the transformation plan targets, through restructurings and other initiatives addressing the direct and

indirect cost structure, focusing on sustained cost reductions and operational improvements, while reducing working
capital consumption;
the ability of the supply base to support product development and planned production rates on commercially acceptable

•
terms in a timely manner;
•
•
•
•
•
•

the ability to identify and enter into further risk sharing partnerships and initiatives;
the effectiveness of disciplined capital deployment measures in new programs and products to drive revenue growth;
the ability to recruit and retain highly skilled resources to deploy the product development strategy;
the stability of the competitive global environment and global economic conditions;
the stability of foreign exchange rates at current levels; and
the ability to have sufficient liquidity to execute the strategic plan, to meet financial covenants and to pay down long-term
debt or refinance bank facilities and maturities.

Aviation
• closing of the sale of our regional jet program and Belfast and Morocco aerostructures businesses and Dallas MRO by

mid-year 2020;

the alignment of production rates to market demand;
•
•
the ability to manage the learning curve as we ramp up production and deliveries of the Global 7500 aircraft;
• continued deployment and execution of growth strategies, and continued growth of the aftermarket business;

the ability to invest in our product portfolio;

•

the accuracy of the analyses and assumptions underlying our business case including estimated cash flows and
revenues over the expected life of our programs and thereafter;
the accuracy of our assessment of anticipated growth drivers and sector trends; and

•
• new program aircraft prices, unit costs and ramp-up.
Transportation
• our ability to execute and deliver business model enhancement initiatives;
• our ability to release working capital stemming from delivery challenges experienced;
• our ability to successfully move forward and complete challenging projects;
• our ability to meet project milestones on schedule and reach customer settlements on key projects;
•
•

the ability to leverage the global manufacturing footprint and transfer best practices and technology across production;
the realization of upcoming tenders and our ability to capture them based on market forecasts(3), leading to estimated
future order intake; and

• successful deployment and execution of growth strategies, including the value chain approach and the creation of

ecosystems, site specialization and the creation of engineering centres of excellence, and the evolution of the backlog
and revenue mix towards less challenging legacy projects and more lower-risk projects, signalling and systems and
operations and maintenance contracts.

For a discussion of the material risk factors associated with the forward-looking information, refer to the Risks and
uncertainties section in Other.
(1) Also refer to the Guidance and forward-looking statements section for the forward-looking statements disclaimer.
(2) Non-GAAP measure. Refer to the Non-GAAP measures for definition of this metric and to the Analysis of results section for a

reconciliation to the most comparable IFRS measures.

(3) For more details, refer to the market indicators in the Industry and economic environment section of the Transportation segment.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 13

SEGMENT REPORTING

During the second quarter of 2019, the Corporation announced the strategic formation of Bombardier Aviation,
consolidating all aerospace assets into a single, streamlined and fully integrated business. As a result of our
integration following this announcement, our reportable segments are now Aviation and Transportation. Business
Aircraft, Commercial Aircraft and Aerostructures and Engineering Services are reported under Aviation. The
Corporation’s interest in ACLP is treated as a corporately held investment and therefore is included in Corporate
and Others.

The restated results under the new reportable segments are as follows.

Three-month period ended March 31, 2019

Revenues
Adjusted EBITDA(1)
Adjusted EBIT(1)
EBIT
Adjusted EBITDA margin(1)
Adjusted EBIT margin(1)
EBIT margin

Aviation

Transportation

Corporate and
Others

1,410

202

144

664
14.3%
10.2%
47.1%

2,107

118

83
5.6%
3.9%
3.9%

(1)
(54)
(56)
(63)

(2)

Total

3,516

(2)

266

171

684

Three-month period ended June 30, 2019

Aviation

Transportation

Corporate and
Others

2,120

222

151

340
10.5%
7.1%
16.0%

2,194

146

111

87
6.7%
5.1%
4.0%

—
(56)
(56)
(56)

(2)

Total

4,314

(2)

312

206

371

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

most comparable IFRS measures.

(2) Includes share of net gain (loss) from ACLP of $1 million for the first quarter of 2019 and $(9) million for the second quarter of 2019.

14 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Revenues
Adjusted EBITDA(1)
Adjusted EBIT(1)
EBIT
Adjusted EBITDA margin(1)
Adjusted EBIT margin(1)
EBIT margin

Three-month period ended March 31, 2018

Aviation

1,675

52
5.4%
3.2%
3.1%

Transportation

Corporate and
Others

(2)
(40)
(42)
(42)

2,355

214

189

191
9.1%
8.0%
8.1%

Total

4,028

265

201

Three-month period ended June 30, 2018

Aviation

Transportation

Corporate and
Others

2,003

144

105

69
7.2%
5.2%
3.4%

2,259

232

207

163
10.3%
9.2%
7.2%

—
(40)
(41)
(41)

Total

4,262

336

271

191

Three-month period ended September 30, 2018

Aviation

Transportation

Corporate and
Others

1,504

166

129

132
11.0%
8.6%
8.8%

2,140

212

187

184
9.9%
8.7%
8.6%

(1)
(45)
(45)
(49)

(2)

Total

3,643

(2)

333

271

267

Three-month period ended December 31, 2018

Aviation

Transportation

Corporate and
Others

—
(65)
(65)
(65)

(2)

Total

4,303

(2)

370

286

342

2,142

242

184

171
11.3%
8.6%
8.0%

2,161

193

167

236
8.9%
7.7%
10.9%

Aviation

Transportation

7,324

643

472

424
8.8%
6.4%
5.8%

8,915

851

750

774
9.5%
8.4%
8.7%

Fiscal year ended December 31, 2018

Corporate and
Others

(3)
(190)
(193)
(197)

(2)

Total

16,236

1,304

1,029

1,001

(2)

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

most comparable IFRS measures.

(2) Includes share of net loss from ACLP of $13 million for the third quarter of 2018 and $27 million for the fourth quarter of 2018.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 15

GUIDANCE AND FORWARD-LOOKING STATEMENTS

Starting in the third quarter of 2019, Bombardier's three existing aerospace units are consolidated into a single
Bombardier Aviation business segment. As a result of this change, the Corporation updated its 2019 guidance.

2019 guidance provided
in our 2018 Financial
Report(1)

Updated 2019
guidance(2)

2019 results

Revenues

Adjusted EBITDA(4)

Business Aircraft

Commercial Aircraft

Aerostructures and
Engineering Services

Transportation

Consolidated

~ $1.4 billion

~ $6.25 billion }

$2.25-$2.50 billion

Aviation(3)
~ $8.0 billion

$7.5 billion

~ $9.5 billion

~ $8.75 billion

$8.27 billion

$16.5-$17.0 billion

$15.8 billion

$1.65-$1.80 billion

$1.20-$1.30 billion

$0.90 billion

Business Aircraft

~ 7.5%

Commercial Aircraft

~ ($125 million)

Adjusted EBIT(4) and
adjusted EBIT margin(4)

Aerostructures and
Engineering Services

EBIT

Transportation

Consolidated

Free cash flow(4)

Consolidated

Cash flows from operating
activities

Consolidated

Net additions to PP&E and
intangible assets

Consolidated

}

Aviation(3)
~ 7.0%

7.1%

~ 5.0%

0.8%

7.5%

~ 9.0%

$1.15-$1.25 billion

$700-$800 million

$470 million

N/A

$(498) million

Breakeven ± $250
million

~ ($500 million)

$(1,203) million

N/A

$(680) million

$523 million

175

Aircraft deliveries (in units)

Business Aircraft

150 - 155

Commercial Aircraft

~30 CRJ and Q400

}

Aviation(3)
175 - 180

(1) Refer to our 2018 Financial Report for further details.
(2) Refer to our First Quarterly Report for the period ended March 31, 2019, our Second Quarterly Report for the period ended June 30, 2019 and

Segment Reporting section of this MD&A for further details.

(3) Refer to our Segment Reporting section of this MD&A for further details. The assumptions on which the guidance for the aerospace segments

was based continue to apply to the guidance for the Aviation segment.

(4) 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.

16 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

2019 guidance(1)

CONSOLIDATED
Revenue guidance for the year was revised to be in the range of $16.5 to $17.0 billion as a result of lower revenues
at Transportation, driven by production ramp-up adjustments, unfavourable currency impact and earlier than
anticipated closing of the sale of Business Aircraft’s training activities and the Q400 program. Revenues for the full
year of $15.8 billion were below Guidance mainly as a result of revised estimates on certain rail contracts in the
fourth quarter.

Adjusted EBITDA(2) and adjusted EBIT(2) guidance were revised down to $1.2-$1.3 billion and $700-$800 million,
respectively, mainly reflecting revised margins at Transportation. Full year adjusted EBITDA(2) and adjusted EBIT(2)
were $896 million and $470 million respectively as a result of additional charges related to certain projects in the
U.K., Switzerland, and Germany recognized in the fourth quarter.

Free cash flow(2) guidance for the full year was revised to a usage of approximately $500 million as a result of
additional investments and costs at Transportation, and the timing risk on some key rail projects with delivery
milestones near the end of the year. Full year free cash flow usage(2) was $1.2 billion largely due to the timing of
cash inflows from milestone payments on large Transportation projects, and the later-than-anticipated closing of
certain orders and call-offs.

AVIATION
Revenue guidance was reduced by $250 million from the earlier than anticipated closing of the sale of Business
Aircraft’s training activities and the Q400 program. During the second quarter of 2019, as a result of the
consolidation of the three existing aerospace units into a single Bombardier Aviation business segment, the
corporation updated its 2019 guidance. Full year revenues guidance at Aviation was updated to approximately
$8.0 billion, net of eliminations. Revenues for 2019 at Aviation were $7.5 billion mainly due to certain business
aircraft deliveries shifting into 2020.

New segment adjusted EBIT margin(2) guidance was set at approximately 7% for the year, in line with the previous
aerospace segments guidance, and excluding the Airbus Canada Limited Partnership contribution (reclassified as a
corporately held investment). A total of 175 to 180 aircraft deliveries were expected for 2019. For 2019, Aviation’s
adjusted EBIT margin(2) and deliveries were largely in line with guidance.

TRANSPORTATION
Revenue guidance was lowered to approximately $8.75 billion driven by slower production ramp-up and
unfavourable currency impact. 2019 revenues of $8.3 billion were lower as a result of revised estimates on certain
rail contracts in the fourth quarter.

On the earnings front, adjusted EBIT margin(2) guidance for the full year was revised from approximately 9% to
approximately 5%, mainly as we made additional investments and incurred additional costs to both complete the
legacy projects and to protect the delivery schedule for other projects. For 2019, adjusted EBIT margin(2) was 0.8%
as a result of additional charges related to certain contracts in the U.K., Switzerland, and Germany. This resulted in
approximately 30% of 2019 revenues recorded with neutral or negative margins.

(1) Forward-looking statement. See the forward-looking statements assumptions on which the guidance is based and forward-looking statements
disclaimer in Overview.
(2) 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.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 17

Other Objectives(1)
Cash and cash equivalents and liquidity(2) estimates for December 31, 2019 remained unchanged through the year
at > $3.0 billion and > $4.0 billion, respectively. The Corporation ended the year with cash and cash equivalents of
$2.6 billion and liquidity(2) of $3.9 billion reflecting delayed cash inflows mainly from Transportation in the fourth
quarter.

Net additions to PP&E and intangible assets were estimated at approximately $800 million for the full year. 2019 net
additions to PP&E and intangible assets were favourable relative to expectations, at $523 million.

2020 outlook(3)

Consolidated

Revenues

Adjusted EBITDA(4)

Adjusted EBIT(4)

Free cash flow(4)

REVENUES

2020 Outlook

>$15.0 billion
From sustaining businesses

~7.0%

~3.5%

Positive,
Excluding RVG Payments

Revenues from sustaining business aircraft and Transportation activities in 2020 are expected to grow organically
by double-digit percentage over the $13.7 billion revenues recorded from these businesses in 2019. This strong
growth is expected mainly from the acceleration of Global 7500 deliveries contributing to a total of 160 aircraft or
more for the year at Aviation. The anticipated consolidated revenue growth is also supported by the ongoing
production ramp-up of Transportation, driven by the solid orders from the past few years.

The 2020 revenue outlook excludes the partial year contribution from the ongoing divestitures of the CRJ and
Aerostructures businesses. In 2019, these businesses along with other non-recurring revenues from divested
businesses (Q400 and Business Aircraft training) generated $2.1 billion of revenues. These revenues are expected
to reduce to less than half of this amount in 2020 given expected transaction closing dates.
(1) Refer to our 2018 Financial Report for further details.
(2) Defined as available short-term capital resources.
(3) Forward-looking statement. See the forward-looking statements assumptions on which the guidance is based and forward-looking statements
disclaimer in Overview. Revenues guidance is based on the assumption that foreign exchange rates remain stable at 1.10 for the conversion
of the amounts in Euro to U.S. dollars.

(4) 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.

18 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

EARNINGS

Adjusted EBITDA(1)

Adjusted EBIT(1)

Adjusted EBITDA(1) and adjusted EBIT(1) are expected to increase by approximately 130 bps and 50 bps,
respectively, mainly from the acceleration of Global 7500 deliveries at Aviation and gradual margin normalization at
Transportation. Adjusted EBITDA margin(1) is expected at approximately 7.0% for the year. This improvement in
financial performance is largely driven by the progress on the Global 7500 learning curve and continuous growth in
aftermarket services at Aviation. Transportation margin is also expected to increase in 2020 as it normalizes from
the 2019 contract estimate adjustments, while also continuing to carry a large share of projects with no margins.
Adjusted EBIT margin(1) is expected to grow to approximately 3.5%, including a higher amortization expense as
Global 7500 deliveries increase. The full year outlook for earnings reflects partial year contribution from ongoing
divestitures of the CRJ and Aerostructures businesses.

(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.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 19

FREE CASH FLOW(1)

Free cash flow(1) is expected to be positive in 2020, excluding credit and residual value guarantee (RVG) payments
which are estimated at approximately $200 million. These payments are expected to be paid from the CRJ
transaction proceeds. We expect positive free cash flow(1) from both Transportation and business aircraft sustaining
businesses, mainly from a shift towards working capital release and stable year over year investments in PP&E and
intangible assets.

(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.

This MD&A includes forward-looking statements, which may involve, but are not limited to: statements with respect to our objectives,
anticipations and outlook or guidance in respect of various financial and global metrics and sources of contribution thereto, targets, goals,
priorities, market and strategies, financial position, market position, capabilities, competitive strengths, credit ratings, 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; growth strategy, including in the business aircraft aftermarket business; 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; expectations regarding progress and
completion of challenging Transportation projects and the release of working capital therefrom within the anticipated timeframe; expectations
regarding revenue and backlog mix; the expected impact of the legislative and regulatory environment and legal proceedings on our business
and operations; strength of capital profile and balance sheet, creditworthiness, available liquidities and capital resources, expected financial
requirements and ongoing review of strategic and financial alternatives; the introduction of productivity enhancements, operational efficiencies
and restructuring initiatives and anticipated costs, intended benefits and timing thereof; the expected objectives and financial targets underlying
our transformation plan and the timing and progress in execution thereof, including the anticipated business transition to growth cycle and cash
generation; expectations and objectives regarding debt repayments and refinancing of bank facilities and maturities; and intentions and
objectives for our programs, assets and operations. As it relates to the pursuit of a divestiture of our operations in Belfast and Morocco and the
sale of the CRJ aircraft program (collectively, the Pending Transactions), this MD&A also contains forward-looking statements with respect to: the
expected terms, conditions, and timing for completion thereof; the respective anticipated proceeds and use thereof and/or consideration therefor,
related costs and expenses, as well as the anticipated benefits of such transactions and their expected impact on our outlook, guidance and
targets, operations, infrastructure, opportunities, financial condition, business plan and overall strategy; and the fact that closing of these
transactions will be conditioned on certain events occurring, including the receipt of necessary regulatory approvals.

Forward-looking statements can generally be identified by the use of forward-looking terminology such as “may”, “will”, “shall”, “can”, “expect”,
“estimate”, “intend”, “anticipate”, “plan”, “foresee”, “believe”, “continue”, “maintain” or “align”, the negative of these terms, variations of them or
similar terminology. Forward-looking statements are presented for the purpose of assisting investors and others in understanding certain key
elements of our current objectives, strategic priorities, expectations, outlook and plans, and in obtaining a better understanding of our business
and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

By their nature, forward-looking statements require management to make assumptions and are subject to important known and unknown risks
and uncertainties, which may cause our actual results in future periods to differ materially from forecast results set forth in forward-looking
statements. While management considers these assumptions to be reasonable and appropriate based on information currently available, there is
risk that they may not be accurate. The assumptions underlying the forward-looking statements made in this MD&A in relation to the Pending
Transactions discussed herein include the following material assumptions: the satisfaction of all closing conditions (including receipt of regulatory
approvals on acceptable terms within commonly experienced time frames) and successful completion of such transactions within the anticipated
timeframe, the realization of the intended benefits therefrom (including receipt of expected proceeds) within the anticipated timeframe. For
additional information, including with respect to the other assumptions underlying the forward-looking statements made in this MD&A, refer to the
Strategic Priorities and Guidance and forward-looking statements sections in applicable reportable segment.

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
“Brexit”, the financial condition of the airline industry, business aircraft customers, and the rail industry; trade policy; increased competition;
political instability and force majeure events or global climate change), operational risks (such as risks related to developing new products and
services; development of new business and awarding of new contracts; book-to-bill ratio and order backlog; the certification and homologation of
products and services; fixed-price and fixed-term commitments and production and project execution, including challenges associated with

20 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

challenging Transportation projects and the risk that actions and initiatives undertaken by Transportation to move forward and complete such
projects may not be successful, and the intended outcome and release of working capital therefrom not being realized, within the timeframe
anticipated or at all; pressures on cash flows and capital expenditures based on project-cycle fluctuations and seasonality; risks associated with
our ability to successfully implement and execute our strategy, transformation plan, productivity enhancements, operational efficiencies and
restructuring initiatives; doing business with partners; inadequacy of cash planning and management and project funding; product performance
warranty and casualty claim losses; regulatory and legal proceedings; environmental, health and safety risks; dependence on certain customers,
contracts and suppliers; supply chain risks; human resources; reliance on information systems; reliance on and protection of intellectual property
rights; reputation risks; risk management; tax matters; and adequacy of insurance coverage), financing risks (such as risks related to liquidity and
access to capital markets; retirement benefit plan risk; exposure to credit risk; substantial existing debt and interest payment requirements;
certain restrictive debt covenants and minimum cash levels; financing support provided for the benefit of certain customers; and reliance on
government support), market risks (such as risks related to foreign currency fluctuations; changing interest rates; decreases in residual values;
increases in commodity prices; and inflation rate fluctuations). For more details, see the Risks and uncertainties section in Other in this MD&A.
With respect to the Pending Transactions discussed herein specifically, certain factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements include, but are not limited to: the failure to receive or delay in receiving regulatory approvals
on acceptable terms or at all, or otherwise satisfy the conditions to the completion of these transactions or delay in completing, and uncertainty
regarding the length of time required to complete, such transactions, and all or part of the intended benefits therefrom not being realized and the
anticipated proceeds therefrom not being available to Bombardier within the anticipated timeframe, or at all; and alternate sources of funding that
would be used to replace the anticipated proceeds from such transactions may not be available when needed, or on desirable terms. For more
details, see the Risks and uncertainties section in Other in this MD&A.

Readers are cautioned that the foregoing list of factors that may affect future growth, results and performance is not exhaustive and undue
reliance should not be placed on forward-looking statements. Other risks and uncertainties not presently known to us or that we presently believe
are not material could also cause actual results or events to differ materially from those expressed or implied in our forward-looking statements.
The forward-looking statements set forth herein reflect management’s expectations as at the date of this report and are subject to change after
such date. Unless otherwise required by applicable securities laws, we expressly disclaim any intention, and assume no obligation to update or
revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements
contained in this MD&A are expressly qualified by this cautionary statement.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 21

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 (income)
Adjusted EBIT(2)
Special items
EBIT
Financing expense
Financing income
EBT
Income taxes
Net income (loss)
Attributable to
Equity holders of Bombardier Inc.
NCI
EPS (in dollars)
Basic
Diluted
As a percentage of total revenues
Adjusted EBIT(2)
EBIT

(1)

Fourth quarters
ended December 31
2019
$ 4,205
3,997
208
235
125
(81)
(5)
(66)
1,630
(1,696)
257
(106)
(1,847)
(128)
$ (1,719)

2018
4,303
3,637
666
292
72
(7)
23
286
(56)
342
261
(33)
114
59
55

(1)

Fiscal years
ended December 31
2019
$ 15,757
14,157
1,600
1,013
292
(128)
(47)
470
968
(498)
1,072
(230)
(1,340)
267
$ (1,607)

2018
$ 16,236
13,958
2,278
1,156
217
(66)
(58)
1,029
28
1,001
712
(106)
395
77
318

$ (1,770)
51
$

$
$

(0.74)
(0.74)

$
$

15
40

0.02
0.02

$ (1,797)
190
$

$
$

(0.76)
(0.76)

$
$

232
86

0.10
0.09

(1.6)%
(40.3)%

6.6%
7.9%

3.0 %
(3.2)%

6.3%
6.2%

(1) Refer to Note 3 - Changes in accounting policies, to our Consolidated financial statements, for the impact of the adoption of IFRS 16,

Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.
(2) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section for a definition of this metric.

Computation of diluted EPS

Fourth quarters
ended December 31
2019

2018

Fiscal years
ended December 31
2019

2018

Net income (loss) attributable to equity holders of
Bombardier Inc.
Preferred share dividends, including taxes
Net income (loss) attributable to common equity
holders of Bombardier Inc.
Weighted-average diluted number of common shares
(in thousands of shares)
Diluted EPS (in dollars)

(1,770)
(7)

(1,777)

15
25

(1,797)
(21)

(1,818)

232
4

236

2,397,868
(0.74)
$

2,477,954
0.02
$

2,383,987
(0.76)
$

2,501,047
0.09
$

Other non-GAAP financial measure(1)

Fourth quarters
ended December 31
2019

2018

Adjusted EBITDA
Adjusted net income (loss)
Adjusted EPS

$
$
$

63
(172)
(0.10)

$
$
$

370
149
0.05

$
$
$

896
(396)
(0.25)

$
$
$

(1) Refer to the Non-GAAP financial measures section for definitions of these metrics and reconciliations to the most comparable IFRS

measures.

22 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Fiscal years
ended December 31
2019

2018
1,304
438
0.14

Reconciliation of segment to consolidated results(1)

Revenues
Aviation
Transportation
Corporate and Others

Adjusted EBIT(3)
Aviation
Transportation
Corporate and Others(4)

Special Items
Aviation
Transportation
Corporate and Others

EBIT
Aviation
Transportation
Corporate and Others(4)

Fourth quarters
ended December 31
2018
2019

(2)

Fiscal years
ended December 31
2018
2019

(2)

2,413
1,793
(1)
4,205

143
(234)
25
(66)

49
2
1,579
1,630

94
(236)
(1,554)
(1,696)

2,142
2,161
—
4,303

184
167
(65)
286

13
(69)
—
(56)

171
236
(65)
342

7,501
8,269
(13)
15,757

531
70
(131)
470

(663)
48
1,583
968

1,194
22
(1,714)
(498)

7,324
8,915
(3)
16,236

472
750
(193)
1,029

48
(24)
4
28

424
774
(197)
1,001

(1) Figures are restated as a result of the formation of Bombardier Aviation, our new reportable segment. Refer to the Segment reporting

section in Overview for further details.

(2) Refer to Note 3 - Changes in accounting policies in our Consolidated financial statements, for the impact of the adoption of IFRS 16,

Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.
(3) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section for a definition of this metric.
(4) Includes share of net gains from ACLP of $57 million and $37 million for the fourth quarter and fiscal year ended December 31, 2019,

respectively (share of net losses of $27 million and $40 million for the fourth quarter and fiscal year ended December 31, 2018,
respectively). The share of net gains from ACLP in the fourth quarter of 2019 includes certain provision reversals within ACLP amounting to
approximately $60 million.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 23

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 our core performance or where their separate presentation will assist
users in understanding our results for the period. Such items include, among others, the impact of restructuring
charges and significant impairment charges and reversals.

The special items recorded as losses (gains) were as follows:

Impairment on ACLP investments

Gain on disposal of a business - Training business

Gain on disposal of a business - Q Series business

Restructuring charges

Loss on repurchase of long-term debt

Pension adjustments

Reversal of Learjet 85 aircraft program cancellation provisions

Primove impairment and other costs

Purchase of pension annuities

C Series transaction with Airbus

Gain on disposal of PP&E
Gains on disposal of PP&E under sale and leaseback
transactions

Tax litigation

Changes in credit and residual value guarantees

Loss on sale of long-term contract receivables

Impairment of non-core operations

Income taxes

Of which is presented in
Special items in EBIT
Financing expense - loss on repurchase of long-term debt
Financing expense - loss on sale of long-term contract
receivables
Financing income - interest related to tax litigation
Income taxes

Fourth quarters
ended December 31
2018
—

2019
1,578

Ref
1

—

(3)

—

(20)
1,610

1,630
—

—

—
(20)
1,610

—

(28)

—

(66)

(31)

—

48
12

(56)
—

(11)
48
12

Fiscal years
ended December 31
2018
—

2019
1,578

(516)

(210)

(18)

—

217
1,269

968
84

—

—
217
1,269

—

(29)

616

(561)

(66)

(35)

(34)

(23)
21

28
—

(15)
(23)
21

1. The Corporation performed an impairment test in the fourth quarter of 2019 on its investments in ACLP since there
were indicators of impairment. The Corporation determined that the carrying amount of its investment in ACLP
exceeded its recoverable amount, and accordingly recorded an impairment charge of $1,578 million. See Note 40 -
Investments in Joint ventures and Associates for more details.

2. The sale of Business Aircraft’s flight and technical training activities for a total net consideration of $532 million

resulted in a pre-tax accounting gain of $516 million ($383 million after deferred tax impact of $133 million). See
Note 31 - Disposal of a business for more details in respect of the transaction.

3. The sale of the Q Series Aircraft program assets for net proceeds of $285 million resulted in a pre-tax accounting

gain of $210 million ($184 million after tax impact). See Note 31 - Disposal of a business for more details in respect
of the transaction.

24 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

4. For fiscal year 2019, represents severance charges of $86 million partially offset by curtailment gains of $7 million
and by the reversal of previously-recorded impairment charges of $8 million, related to previously-announced
restructuring actions. For fiscal year 2018, represents severance charges of $43 million partially offset by
curtailment gains of $10 million, and impairment charges of PP&E of $8 million, all related to previously-announced
restructuring actions.

Following the announcement that the CRJ production is expected to conclude in the second half of 2020, following
the delivery of the current backlog of aircraft, the Corporation has recorded severance charges of $7 million
partially offset by curtailment gains of $3 million, and has recorded $24 million of other related charges for fiscal
year 2019. In addition, the Corporation has recorded a write down of deferred tax assets of $87 million to reflect
the expected impact of the conclusion of the CRJ announcement.

5. Represents the loss related to the redemption of the $850-million Senior Notes due 2020, and the partial

redemption of the €780-million Senior Notes due 2021 and $1,400-million Senior Notes due 2021.

6. On October 26, 2018, the High Court in the United Kingdom ruled that pension schemes must equalize for the

effect of unequal Guaranteed Minimum Pensions between male and female for benefits earned during specified
periods (“GMP equalization”). The Corporation estimated the impact of the ruling on its pension plans and
recognized an additional obligation of $28 million as at December 31, 2018. The one-time P&L impact was
recognized in fiscal year 2018 as a past service cost under IAS 19 - Employee Benefits. In fiscal year 2019, the
Corporation adjusted the pension obligation related to equalization for an Aviation plan in the U.K. The adjustments
of $26 million was recorded as a past service cost under IAS 19 - Employee Benefits.

7. Based on the ongoing activities with respect to the cancellation of the Learjet 85 aircraft program, the Corporation

reduced the related provisions by $18 million for fiscal year 2019 ($29 million for fiscal year 2018). The reduction in
provisions is treated as a special item since the original provisions were also recorded as special items in 2014
and 2015.

8. Following a reassessment of the value of the Primove e-mobility technology and the status of existing contractual

obligations, the Corporation recorded in fiscal year 2019 an additional contract provision of $5 million ($4 million for
fiscal year 2018).

9. Represents the non-cash loss on the settlement of defined benefit pension plans resulting from the purchase of
annuities with insurance companies. As part of its ongoing de-risking strategies, the Corporation has an initiative
for the buy-out of annuities payable to pensioners or deferred pensioners for certain plans to the extent they are
fully funded on a buy-out basis, subject to compliance with certain conditions including applicable pension
legislations.

10. The acquisition by Airbus of 50.01% of ACLP, the entity that manufactures and sells the C Series aircraft

(rebranded A220) resulted in a pre-tax accounting charge of $616 million ($552 million after tax). The pre-tax
accounting charge reflects all elements of the transaction, including: (i) the $270 million fair value of warrants
issued by Bombardier to Airbus on July 1, 2018, (ii) a $310 million derivative liability which is associated with the
expected off-market return on units to be issued to Bombardier by ACLP under Bombardier’s funding
commitments, and iii) other Bombardier obligations towards ACLP, which mainly comprise supply chain obligations
for Aerostructures and Engineering Services.

11. Related to the sale of the Downsview property to the Public Sector Pension Investment Board (PSP Investments).

12. The Corporation sold and leased back two facilities in Transportation in line with our transformation plan.

13. Represents a change in the estimates used to determine the provision related to tax litigation.

14. The provisions for credit and residual value guarantees were reduced following a change in credit risk assumption
for an airline. The reduction of the provisions was treated as a special item since the original provisions were
recorded as special items in 2015.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 25

15. For fiscal year 2018, the Corporation sold long-term contract receivables in Transportation, which resulted in a loss

of $31 million recorded in financing expense.

16. An impairment charge related to non-core operations of $17 million recorded in the fiscal year 2018 with respect to

the expected sale of legal entities, as part of the Transportation transformation plan.

Net financing expense

Net financing expense amounted to $151 million and $842 million, respectively, for the fourth quarter and fiscal year
ended December 31, 2019, compared to $228 million(1) and $606 million(1) for the corresponding periods last fiscal year.

The $77-million decrease for the fourth quarter is mainly due to:

•
•

net gains on certain financial instruments classified as FVTP&L ($142 million); and
a loss related to the sale of long-term contract receivables in Transportation, which was recorded as a special
item in 2018 ($31 million).

Partially offset by:

•

•
•

•

lower borrowing costs capitalized to PP&E and intangible assets following the entry-into-service of Global 7500
($57 million);
higher interest on long-term debt, after the effect of hedges ($14 million);
interest component as a result of a change in the estimates used to determine the provision related to tax
litigation, recorded as special items in 2018 ($11 million); and
interest expense on lease liabilities, as a result of the adoption of IFRS 16, Leases, effective January 1, 2019
($8 million).

The $236-million increase for the fiscal year is mainly due to:

•

lower borrowing costs capitalized to PP&E and intangible assets following the entry-into-service of Global 7500
(234 million);
a loss related to the redemption of the $850-million Senior Notes due 2020, and the partial redemption of the
€780-million Senior Notes due 2021 and $1,400-million Senior Notes due 2021, which was recorded as a
special item in 2019 ($84 million);
net losses from changes in discount rates of provisions ($36 million);
higher interest on long-term debt, after the effect of hedges ($50 million); and
interest expense on lease liabilities, as a result of the adoption of IFRS 16, Leases, effective January 1, 2019
($32 million).
Partially offset by:
•
•

net gains on certain financial instruments classified as FVTP&L ($202 million); and
a loss related to the sale of long-term contract receivables in Transportation, which was recorded as a special
item in 2018 ($31 million).

•
•
•

(1) Refer to Note 3 - Changes in accounting policies, to our interim consolidated financial statements, for the impact of the adoption of IFRS 16,

Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.

Income taxes

The effective income tax rates for the fourth quarter and fiscal year ended December 31, 2019 were 6.9% and (19.9)%,
respectively, compared to the statutory income tax rate in Canada of 26.6%.

The lower effective income tax rate recovery in the fourth quarter is mainly due to:

•
•

the negative impact of the non-recognition of tax benefits related to tax losses and temporary differences; and
the negative impact of the permanent differences.

The higher effective income tax rate for the fiscal year ended December 31, 2019 is mainly due to:

•
•
•

the negative impact of the net non-recognition of tax benefits related tax losses and temporary differences;
the negative impact of the net write-down of deferred income tax assets; and
the negative impact of the permanent differences.

26 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

The effective income tax rates for the fourth quarter and fiscal year ended December 31, 2018 were 51.8% and 19.5%,
respectively, compared to the statutory income tax rate in Canada of 26.7%.

The higher effective income tax rate in the fourth quarter is mainly due to:

•
•

the negative impact of the write-down of deferred income tax assets; and
the negative impact of the net non-recognition of tax benefits related tax losses and temporary differences.

Partially offset by:

•

the positive impact of the permanent differences.

The lower effective income tax rate for the fiscal year ended December 31, 2018 is mainly due to:

•
•

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

Partially offset by:

•

the negative impact of the write-down of deferred income tax assets.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 27

CONSOLIDATED FINANCIAL POSITION

The total assets increased by $14 million in the fiscal
year(1), including a positive currency impact of
$135 million related to foreign exchange. The
$121-million decrease excluding currency impacts is
mainly explained by:
•

a $1.1-billion decrease in investments in joint
ventures and associates due to the impairment of
the Corporation’s investment in ACLP(2); and
a $688-million decrease in cash and cash
equivalents. See the Free cash flow usage and
the Variation in cash and cash equivalents tables
for details.
Partially offset by:
•

•

a $660-million net increase in inventories in
Aviation mainly due to the ramp-up in production
for business aircraft, partially offset by a decrease
due to sale of the Q Series aircraft program;
a $518-million increase in PP&E mainly due to
the impact of the adoption of IFRS16, Leases(3);
a $329-million increase in trade and other
receivables in Transportation and Aviation; and
a $169-million increase in other financial assets
mainly due to changes in fair value of derivative
financial instruments.

•

The total liabilities and equity increased by $14 million
in the fiscal year(1), including a currency impact of
$135 million. The $121-million decrease excluding
currency impacts is mainly explained by:
•

a $2.1-billion decrease in equity mainly due to
the impairment of the Corporation’s investment in
ACLP(2) and remeasurement of defined benefits
plans of $470 million; and
a $707-million decrease in provisions mainly due
to utilization of provisions in Transportation and
Aviation.
Partially offset by:
•

•

a $1.1-billion increase in contract liabilities mainly
in Aviation mainly related to advances received
on new and existing orders for business aircraft;
a $495-million increase in retirement benefit
liability mainly due to remeasurement of defined
benefits plans;
a $469-million increase in other liabilities mainly
due to the impact of the adoption of IFRS16,
Leases(3);
a $319-million increase in trade and other
payables mainly in Aviation; and
a $241-million increase in long-term debt.(4)

•

*The total assets and the total liabilities in the above graphs as at

December 31, 2019 include $1.3 billion and $1.8 billion,
respectively, related to the CRJ program and aerostructures
businesses, which are presented under Assets held for sale.
Refer to the Reshaping the Portfolio section in Aviation and to
Note 30 - Assets held for sale in our Consolidated financial
statements for further details.

(1) For the purpose of the Consolidated financial position explanations included in this section, assets and liabilities include assets and

liabilities reclassified as Assets held for sale. Refer to Note 30 - Assets held for sale in our Consolidated financial statements for further
details.

(2) Refer to the Consolidated results of operations section for further details regarding special items.
(3) Refer to Note 3 - Changes in accounting policies in our Consolidated financial statements, for the impact of the adoption of IFRS 16,

Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.

(4) Refer to Note 29 - Long-term debt in our Consolidated financial statements for further details.

28 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

LIQUIDITY AND CAPITAL RESOURCES

Free cash flow(1)

Free cash flow (usage)(1)

Net income (loss)
Non-cash items
Amortization
Impairment charges on ACLP investments
Impairment charges (reversals) on PP&E and intangible
assets
Deferred income taxes
Gains on disposals of PP&E and intangible assets
Losses (gains) on disposals of businesses
Share of income of joint ventures and associates
Share-based expense (income)
Loss on repurchase of long-term debt
Loss on sale of long-term contract receivables

Dividends received from joint ventures and associates
Net change in non-cash balances(3)
Cash flows from operating activities
Net additions to PP&E and intangible assets
Free cash flow (usage)(1)

Fourth quarters
ended December 31
2019
(1,719)

2018

(2)

129
1,578

—
(173)
(3)
9
(81)
(4)
—
—
29
1,308
1,073
(121)
952

84
—

—
(1)
(61)
7
(7)
(2)
—
31
23
1,160
1,289
(248)
1,041

Fiscal years
ended December 31
2019
(1,607)

2018

318

(2)

422
1,578

(4)
113
(10)
(730)
(128)
30
84
—
49
(477)
(680)
(523)
(1,203)

272
—

11
(74)
(636)
616
(66)
65
—
31
72
(12)
597
(415)
182

(1) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section for definitions of this metric.
(2) Refer to Note 3 - Changes in accounting policies, to our Consolidated financial statements, for the impact of the adoption of IFRS 16,

Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.
(3) Refer to Note 35 - Net changes in non-cash balances, to our Consolidated financial statements for further details.

Cash flows from operating activities
The $216-million decrease in cash flows from operating activities for the fourth quarter is mainly due to:

lower net income before non-cash items ($370 million).

•
Partially offset by:
•

a positive period-over-period variation in net change in non-cash balances ($148 million) (see explanations
below).

The $1,277-million decrease in cash flows from operating activities for the fiscal year is mainly due to:

•
•

lower net income before non-cash items ($789 million), and
a negative period-over-period variation in net change in non-cash balances ($465 million) (see
explanations below).

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 29

Net change in non-cash balances
For the fourth quarter ended December 31, 2019, the $1.3-billion inflow is mainly due to:

•

•
•

a decrease in Transportation's net contract assets due to deliveries and advances received on new and
existing orders;
a decrease in inventories in Aviation mainly due to deliveries for business aircraft; and
an increase in trade and other payables in Aviation and Transportation.

For the fourth quarter ended December 31, 2018, the $1.2-billion inflow was mainly due to:

•

•
•

an increase in contract liabilities in Aviation due to advances received on new and existing orders, as well
as the prepayment of $155 million of royalties by CAE under an extended Authorized Training Provider
agreement;
an increase in trade and other payables in Transportation and Aviation;
a decrease in Transportation's other financial assets mainly due to the sale of long-term contract
receivables for proceeds of $133 million;
a decrease in Transportation's contract assets following deliveries; and
a decrease in trade and other receivables in Aviation, partially offset by an increase in Transportation.

Partially offset by:

•

an increase in inventories in Aviation mainly due to ramp up in production for business aircraft.

For the fiscal year ended December 31, 2019, the $477-million outflow is mainly due to:

•
•
•
•

an increase in inventories in Aviation mainly due to the ramp-up in production for business aircraft;
utilization of provisions in Transportation and Aviation;
an increase in trade and other receivables in Transportation and Aviation; and
a decrease in other liabilities mainly in Transportation.

Partially offset by:

•

•
•

an increase in contract liabilities in Aviation mainly related to advances received on new and existing
orders for business aircraft;
an increase in trade and other payables in Aviation; and
a decrease in Transportation’s net contract assets.

For the fiscal year ended December 31, 2018, the $12-million outflow was mainly due to:

•
•
•
•

•

an increase in inventories in Aviation due to ramp up in production for business aircraft;
an increase in Transportation’s contract assets following ramp up in production ahead of deliveries;
a decrease in provisions mainly in Transportation;
a decrease in Transportation's other liabilities mainly due to a decrease in contract provisions and tax
payable; and
an increase in trade and other receivables in Transportation.

Partially offset by:

•

•
•

an increase in contract liabilities in Aviation and Transportation due to advances received on new and
existing orders, as well as the prepayment of $155 million of royalties by CAE under an extended
Authorized Training Provider agreement;
an increase in trade and other payables in Aviation and Transportation; and
a decrease in Transportation's other financial assets mainly due to the sale of long-term contract
receivables for proceeds of $133 million.

30 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Net additions to PP&E and intangible assets

Fourth quarters
ended December 31
2019

2018

Additions to PP&E and intangible assets
Proceeds from disposals of PP&E
and intangible assets
Net additions to PP&E and intangible assets

(135)

14
(121)

(334)

86
(248)

(552)

29
(523)

Fiscal years
ended December 31
2019

2018
(1,164)

749
(415)

The $127-million decrease in net additions to PP&E and intangible assets for the fourth quarter is mainly due to:

•

lower investments in aerospace program tooling and lower capitalised borrowing costs following the entry-
into-service of the Global 7500 aircraft program.

Partially offset by:

•

lower proceeds from disposals of PP&E due to the sale and leaseback of two facilities in Transportation for
$77 million during the fourth quarter of 2018.

The $108-million increase in net additions to PP&E and intangible assets for the fiscal year is mainly due to:

•

lower proceeds from disposals of PP&E due to the sale of the Downsview property for approximately
$600 million and the sale and leaseback of two facilities in Transportation for $77 million during 2018.

Partially offset by:

•

lower investments in aerospace program tooling and lower capitalised borrowing costs following the entry-
into-service of the Global 7500 aircraft program;

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 31

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 availability of working capital financing initiatives, 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

Cash flows from operating activities
Net additions to PP&E and intangible assets
Deconsolidation of cash and cash equivalents of ACLP
Outflows related to a disposal of business
Investments in non-voting units of ACLP
Capital injection in ACLP
Net proceeds from disposal of businesses
Sale of investments in securities
Net proceeds from issuance of long-term debt
Repayments of long-term debt
Net change in short-term borrowings
Payment of lease liabilities(2)
Purchase of Class B shares held in trust
under the PSU plans
Dividends paid - preferred shares
Issuance of Class B shares
Issuance of NCI
Dividends to NCI
Effect of exchange rates on cash and cash equivalents
Other

Balance at the end of period/fiscal year
Reclassified as assets held for sale(4)
Balance at the end of period/fiscal year

(1)

Fourth quarters
ended December 31
2018
2019
2,318
2,255
1,289
1,073
(248)
(121)
—
—
(11)
—
(140)
—
—
(52)
—
—
133
—
—
—
(4)
—
—
(533)
—
(31)

—
(5)
—
—
—
47
(4)
2,629
51
2,578

—
(5)
2
—
(22)
(24)
(101)
3,187
—
3,187

(1)

Fiscal years
ended December 31
2018
2019
3,057 (3)
3,187
597
(680)
(415)
(523)
(151)
—
(36)
—
(225)
(350)
—
(64)
—
826
133
—
—
1,956
(15)
(1,762)
—
—
—
(112)

—
(20)
—
49
(4)
130
(4)
2,629
51
2,578

(97)
(20)
506
—
(93)
13
(67)
3,187
—
3,187

(1) Refer to Note 3 - Changes in accounting policies, to our Consolidated financial statements, for the impact of the adoption of IFRS 16, Leases.

Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.

(2) Lease payments related to the interest portion, short term leases, low value assets and variable lease payments not included in lease liabilities
are classified as cash outflows from operating activities. The total cash outflows for the fourth quarter and fiscal year ended December 31, 2019
amounted to $41 million and $168 million, respectively.

(3) Includes cash and cash equivalents of the C Series aircraft program presented under Assets held for sale amounting to $69 million as of

December 31, 2017.

(4) Includes cash and cash equivalents of the aerostructures businesses presented under Assets held for sale totalling $51 million as of December
31, 2019. Refer to Reshaping the portfolio section in Aviation, Note 15 - Cash and cash equivalents and Note 30 - Assets held for sale in the
Consolidated financial statements for more details on the transactions as well as the accounting treatments.

Available short-term capital resources

Cash and cash equivalents(1)
Available revolving credit facilities(2)
Available short-term capital resources

December 31, 2019
2,629
$
1,296
3,925

As at
December 31, 2018
3,187
$
1,186
4,373

(1) Includes cash and cash equivalents of the aerostructures businesses presented under Assets held for sale totalling $51 million as of December
31, 2019. Refer to Reshaping the portfolio section in Aviation, Note 15 - Cash and cash equivalents and Note 30 - Assets held for sale in the
Consolidated financial statements for more details on the transactions as well as the accounting treatments.

32 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

(2) Includes undrawn amount under Transportation’s €1,154 million unsecured revolving credit facility as of December 31, 2019; included undrawn
amounts under Transportation’s €689 million and the Corporation’ s $397 million unsecured revolving credit facilities as of December 31, 2018.

Our available short-term capital resources include cash and cash equivalents and the amounts available under our
unsecured revolving credit facility. The facility is available for cash drawings for the general needs of Transportation.
Under this facility, the same financial covenants must be met as for Transportation’s letter of credit facility. Refer to
the Financial covenants section for details.

The Corporation voluntarily cancelled the $397 million
unsecured revolving credit facility, in the third quarter
of 2019, which was available for the Corporation
excluding Transportation, in order to more efficiently
manage the Corporation’s short-term credit facility
given the Corporation’s strong cash position.

The Corporation has an unsecured revolving credit
facility amounting to €1,154 million ($1,296 million) ,
available to Transportation for cash drawings. The
facility matures in May 2022 and bears interest at
Euribor plus a margin. That facility was unused as of
December 31, 2019.

Uncommitted Short Term credit facilities
The Corporation has a €75 million ($84 million)
uncommitted Short Term credit facility. This facility is
available to Transportation for cash drawings. This
facility was unused as of December 31, 2019.

Some totals do not agree due to rounding.

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 facility that is
available for cash drawings. Letters of credit are generally issued in support of performance obligations and
advance payments received from customers.

December 31, 2019

Transportation facility
Corporation excluding Transportation facility

December 31, 2018

Transportation facility
Corporation excluding Transportation facility

Amount
committed

Letters of
credit issued

Amount
available

Maturity

5,052 (1) $

n/a
5,052

4,511
361
4,872

(1)

4,846 $
n/a
4,846 $

4,024 $
188
4,212 $

206
n/a
206

487
173
660

2023 (2)
n/a

2022
2021

(1) € 4,498 million as at December 31, 2019 (€ 3,940 million as at December 31, 2018).
(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
2023.

The Corporation voluntarily cancelled the $361 million letter of credit facility, in the fourth quarter of 2019, which
was available for the Corporation excluding Transportation. The issued letters of credit under this facility were
replaced by various bilateral agreements.

In addition to the outstanding letters of credit shown in the above table, letters of credit of $4,395 million were
outstanding under various bilateral agreements as at December 31, 2019 ($3,874 million as at December 31,
2018).

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 33

The Corporation also uses numerous bilateral bonding facilities with insurance companies to support
Transportation’s operations. An amount of $3.8 billion was outstanding under such facilities as at December 31,
2019 ($3.7 billion as at December 31, 2018).

See Note 36 – Credit facilities, to the consolidated financial statements, for additional information.

Financial covenants

The Corporation is subject to various financial covenants under the Transportation letter of credit facility and the
Transportation revolving credit facility, which must be met on a quarterly basis. Those 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 37 – Capital management or to the
specific terms used in the MD&A. In addition, the Corporation must maintain a minimum Transportation liquidity of
€750 million ($843 million). Minimum liquidity required is not defined as comprising only cash and cash
equivalents as presented in the consolidated statement of financial position.

The conditions were all met on a quarterly basis and as at December 31, 2019 and 2018 and January 1, 2018.

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.

Future liquidity requirements

Our Aviation segment requires 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 flow(1), debt
repayments and other material cash outlays expected to occur in the future. We have a financing plan to position
ourselves with a flexible and strong financial profile whereby we opportunistically access capital markets,
depending on market conditions, for the issuance of equity and new long-term debt capital.

In March 2019, the Corporation issued, at 99.246% of par, unsecured Senior Notes of $2 billion, bearing an
interest of 7.875%, due on April 15, 2027. The Corporation used the net proceeds to redeem all of its outstanding
7.75% Senior Notes due 2020 of $850 million for a total consideration of $890 million as of September 30, 2019.
In addition, the Corporation redeemed, €366 million ($414 million) aggregate principal amount of the 6.13% Notes
due 2021 of €780 million for a total aggregate purchase price consideration of €401 million ($450 million) and
$382 million aggregate principal amount of the 8.75% Notes due 2021 of $1,400 million for a total aggregate
purchase price consideration of $422 million along with any related fees and expenses. The remaining net
proceeds were used for general corporate purposes.

We continuously evaluate opportunities to strengthen our capital profile by improving leverage ratios, refinancing
debt maturities, and reducing the overall cost of funds by diversifying sources of capital. Bombardier has the
option to buy back CDPQ’s investment in BT Holdco. The CDPQ instrument carries a 15% minimum return
threshold under a Bombardier initiated buyback. Given the cost of this instrument, we may seek to
opportunistically redeem this CDPQ security while preserving an appropriately capitalized balance sheet. There
can be no assurances on the completion, the form, or the timing of such buyback.

(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 and Liquidity and capital resources section for reconciliations to the most comparable IFRS measures.

34 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

The weighted average long-term debt maturity was 4.6 years as at December 31, 2019. There is no significant
debt maturing before 2021. $1,483 million of long-term debt due in 2021 is comprised of €414 million ( $465
million) due in May 2021 and $1,008 million due in December 2021. See Note 29 - Long-term debt, to the
consolidated financial statements, for more details.

* Excludes other long-term debt amounting to $26 million as at December 31, 2019. See Note 29 Long-term debt, to the Consolidated financial

statements, for more details.

Expected timing of future liquidity requirements

December 31, 2019

Long-term debt(1)
Interest payments
Purchase obligations(2)(3)
Trade and other payables
Other financial liabilities
Derivative financial liabilities

Total
9,324
3,297
13,134
4,682
2,140
205
32,782

Less than
1 year
8
668
8,589
4,682
444
202
14,593

1 to 3 years
3,183
$
1,187
4,496
—
347
3
9,216

3 to 5 years
2,250
$
785
43
—
367
—
3,445

Thereafter
3,883
657
6
—
982
—
5,528

(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.

(3) The purchase obligations comprise approximately $400 million of obligations related to the aerostructures businesses that are presented as

assets held for sale.

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. In addition, required pension
contributions have not been reflected in this table as such contributions depend on periodic actuarial valuations
for funding purposes. See the Retirement benefits section of this MD&A for more details on contributions to
retirement benefit plans. The amounts presented in the table represent the undiscounted payments and do not
give effect to the related hedging instruments, if applicable.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 35

The Corporation leases buildings and equipment. The maturity analysis of lease liabilities, was as follows:

Within 1 year
Between 1 to 5 years
More than 5 years

As at
December 31, 2019
129
148
243
520

We believe our available short-term capital resources of $3.9 billion should give us sufficient liquidity to execute
our plan in the short-term. We currently anticipate that these resources will enable the development of new
products to enhance our competitiveness and support our growth; will enable us to meet currently anticipated
financial requirements in the foreseeable future; and will allow the payment of dividends on preferred shares, if
and when declared by the Board of Directors.(1)
(1) See the forward-looking statements disclaimer.

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 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.

Credit Ratings

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

Investment-grade rating

Bombardier Inc.’s rating

BBB-
Baa3
BBB-

February 12, 2020
CCC+
B3
B-

December 31, 2019
B-
B3
B-

Over the long term, we strive for our credit ratings to improve as we progress towards profitability and cash flow
targets in line with our strategic priorities. See the Strategic priorities section in Overview of the MD&A for more
details.

36 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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 or where their execution will assist users in understanding
our results for the period.

As a result of adopting IFRS 16, Leases, we changed the definitions and naming of adjusted interest, adjusted
debt, adjusted EBIT and adjusted EBITDA, all of which are used in our global metrics. Refer to the Non-GAAP
financial measures section for the definitions of these metrics and reconciliations to the most comparable IFRS
measures.

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.

Interest coverage ratio

Adjusted EBIT(1)
Adjusted interest(2)
Adjusted EBIT to adjusted interest ratio

For the fiscal year ended December 31

$
$

2019
470
732
0.6

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

most comparable IFRS measures. EBIT for the fiscal year 2019 is $(498) million.

(2) Represents interest paid as per the supplemental information provided in the consolidated statements of cash flows.

Financial leverage ratio

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

As at and for the fiscal year ended December 31

$
$

2019
9,744
896
10.9

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

most comparable IFRS measures. Long-term debt as at December 31, 2019 is $9,333 million; EBIT for the fiscal year 2019 is
$(498) million.

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
monitor our bank covenants to ensure they are all met.

In addition to the above global metrics, we separately monitor our net retirement benefit liability, which amounted
to $2.3 billion as at December 31, 2019 ($2.2 billion as at December 31, 2018). 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.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 37

RETIREMENT BENEFITS

Bombardier sponsors several Canadian and foreign
retirement benefit plans consisting of funded and
unfunded defined benefit 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.

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.

In Canada and the U.S., since September 1, 2013, all
new non-unionized employees join DC plans (joining
DB or hybrid plans is no longer an option). In the U.K.,
all 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.

* Mainly comprised of changes in discount rates.
** Net retirement benefit liabilities amounting to $414 million related

to the aerostructures businesses to be sold to Spirit were
reclassified as liabilities directly associated with assets held for
sale.

*** Other is mainly comprised of changes in other actuarial
assumptions, experience adjustments and impact of asset
ceiling.

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 estimated 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 2019, as the actual gain on plan assets of $1,216 million was above expected
return, an actuarial gain of $954 million was recognized.

38 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

* Includes liability arising from minimum funding requirement and

impact of asset ceiling test, if any.

** The balance includes net retirement benefit liability in the

amount of $99 million reclassified as liabilities directly associated
with assets held for sale.

*** Net retirement benefit liability amounting to $414 million related

to the aerostructures businesses to be sold to Spirit were
reclassified as liabilities directly associated with assets held for
sale.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 39

DB plan contributions were at $286 million in 2019,
compared to $230 million the previous year. DB plan
contributions are estimated at $276 million for 2020,
including the estimated total contribution for the
aerostructures businesses of approximately $47
million for 2020. The future level of contributions will
be impacted by the evolution of market interest rates
and the actual return on plan assets.

In 2019, DC pension contributions totalled $86 million.
These contributions are estimated at $97 million for
2020.

F: Forecast
* Includes the estimated total contribution for the aerostructures
businesses amounting to approximately $48 million for 2020.

Investment Policy and De-risking Strategies

The investment policies are established to achieve a long-term investment return so that, in conjunction with
contributions, the plans have sufficient assets to pay for the promised benefits while maintaining a level of risk that
is acceptable given the tolerance of plan stakeholders. See below for more information about risk management
initiatives.

The target asset allocation is determined based on expected economic and market conditions, the maturity profile
of the plans’ liabilities, the funded status of the respective plans and the plan stakeholders’ tolerance to risk.

The plans’ investment strategy is to invest broadly in fixed income and equity securities and to have a smaller
portion of the funds’ assets invested in real return asset securities (global infrastructure and real estate listed
securities).

As at December 31, 2019, the average target asset allocation was as follows:

• 54%, 60% and 50% in fixed income securities, for Canadian, U.K. and U.S. plans, respectively;
• 38%, 31% and 50% in equity securities, for Canadian, U.K. and U.S. plans, respectively; and
• 8% and 9% in real return asset securities, for Canadian and U.K. plans, respectively.

In addition, to mitigate interest rate risk, interest rate hedging overlay portfolios (comprised of long-term interest
rate swaps and long-term bond forwards) will be implemented for the pension plans when the market will be
favourable and the plans’ triggers will be reached.

40 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Under certain pension legislations, and subject to compliance with certain conditions, the buy-out of annuities with
insurance companies would discharge the Corporation and administrators of their respective obligations.
Accordingly, in 2018, annuities were purchased for pensioners of seven pension plans registered in Ontario, the
U.K. and the U.S. Also, in 2019, annuities were purchased for pensioners of the three Bombardier Aviation
pension plans registered in Ontario. Overall, in 2018 and 2019, annuities were purchased for 4,690 pensioners
with total premiums paid to insurers by the pension funds of approximately $676 million. The buy-out of annuities
payable to pensioners of other pension plans will be contemplated in the coming years when these plans become
fully funded on a buy-out basis.

Pension Asset Management Services monitors the de-risking triggers on an ongoing basis to ensure timely and
efficient implementation of these strategies. The Corporation and administrators periodically undertake asset and
liability studies to determine the appropriateness of the investment policies and de-risking strategies.

Risk management initiatives

The Corporation’s pension plans are exposed to various risks, including equity, interest rate, inflation, foreign
exchange, liquidity and longevity risks. Several risk 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.

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 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. The buy-out of annuities with insurance companies transfers all of the risks listed above to insurers
for the annuities purchased.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 41

Retirement benefit cost

Pension
benefits
265
$
86
351

$
$
$

$
$

231
34
86

288
63

Other
benefits
(8)
$
—
(8)

n/a
(8)
n/a

(18)
10

$
$

2019

Total
257
86
343

231
26
86

270
73

$
$
$

$
$

Pension
benefits
357
$
91
448

$
$
$

$
$

321
36
91

393
55

Other
benefits
16
$
—
16

n/a
16
n/a

6
10

$
$

2018

Total
373
91
464

321
52
91

399
65

$
$
$

$
$

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

The retirement benefit cost for fiscal year 2020 for DB plans(1) is estimated at $331 million, of which $263 million
relates to EBIT expense or capitalized cost and $68 million relates to net financing expense.

(1) Including plans for the aerostructures businesses.

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 2020
(Forecast)
(24)
4
6

$
$
$

(1)

Net retirement benefit liability
as at December 31, 2019

$
$
$

(514)
126
83

A one-year increase in life expectancy for all DB plan beneficiaries would impact plans in major countries as
follows:

Increase

Canada
U.K.
U.S.

Retirement benefit cost
for fiscal year 2020
(Forecast)
7
5
2

$
$
$

(1)

Net retirement benefit liability as
at December 31, 2019

$
$
$

114
143
35

Details regarding assumptions used are provided in Note 24 – Retirement benefits, to the consolidated financial
statements.

(1) Including plans for the aerostructures businesses.

42 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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.

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(1) 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
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.

A primary area of focus is product development,
where our biggest opportunities to create value
reside, and also our most significant risks.
Recognizing the long-term nature of product
development activities and the significant human
and financial resources required, we follow a
rigorous gated product development process,
designed to ensure early identification and efficient
mitigation of potential risks. At the heart of this
process is our Bombardier Engineering System,
followed for all programs throughout the product
development cycle. This process is regularly refined
to integrate the lessons learned from our own
programs and from the industry. 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 leading experts to demonstrate technical
feasibility, customer acceptance and financial return.
(1) Refer to the Investor information section following the Notes to
the consolidated financial statements for more information on
Board members and Board Committees.

Source: International Organization for Standardization

(ISO) 31000:2009

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 43

We continuously apply what we learn on one program to the other programs, by sharing ideas and learning in our
various functional committees and through regular peer reviews, bringing together the expertise across all
platforms to drive alignment and common approaches, establish best practices and leverage the knowledge and
experience of our people. This review confirms the availability of human and financial resources, the maturity and
manufacturing readiness of new technologies and the overall strength of the business case.

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.

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.

44 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Foreign exchange management

Owner

Hedged exposures

Hedging policy(1)

Risk-mitigation strategies

AVIATION

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.

TRANSPORTATION

Forecast cash inflows and outflows
denominated in a currency other
than the functional currency of the
entity incurring the cash flows.

Hedge 100% of the identified
exposures at the time of order
intake.

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

Use of forward foreign exchange
contracts, mainly to sell or
purchase Canadian dollars, euros,
U.S. dollars, Swiss francs,
Swedish krona and other Western
European currencies.

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.

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 U.S. dollars
and buy Canadian dollars.

CORPORATE
OFFICE

Interest cash outflows in currencies
other than the U.S. dollar, i.e. the
euro and the Canadian dollar.

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.

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 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.

Aviation
As at December 31, 2019, the hedged portion of our Aviation’s significant foreign currency denominated costs for
the fiscal years ending December 31, 2020 and 2021 was as follows:

For fiscal years

Expected costs denominated in foreign currency
Hedged portion of expected costs denominated in
foreign currency
Weighted-average hedge rates – foreign currency/USD

Canadian dollars

Pounds sterling

2020

2021

$2,384

$2,364

2020

£258

2021

£248

79%

33%

82%

12%

0.7716

0.7575

1.3252

1.2464

Sensitivity analysis
A U.S. one-cent change in the value of the Canadian dollar compared to the U.S. dollar would impact Aviation’s
expected costs for the year ending December 31, 2020 by approximately $24 million, before giving effect to
forward foreign exchange contracts ($5 million, 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 Aviation’s
expected costs for the fiscal year ending December 31, 2020 by approximately $3 million, before giving effect to
forward foreign exchange contracts (less than $1 million impact after giving effect to such contracts).

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 45

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, 2019 would have impacted equity, before the effect of income taxes, by
$25 million.

46 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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

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 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.

BOTH
REPORTABLE
SEGMENTS

AVIATION

We are exposed to credit
risk through trade
receivables arising from
normal commercial
activities and lending
activities, related primarily
to aircraft loans, lease
receivables, and
investments in financing
structures 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
have provided 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 availability of working capital
financing initiatives and the funding of product development and other financial commitments. We engage in
certain working capital financing initiatives that impact our cash flows from operating activities such as the sale of
receivables, arrangements for advances from third parties and the negotiation of extended payment terms with
certain suppliers (for more details, refer to Note 38 - Financial Risk Management, to the consolidated financial
statements). We continually monitor any financing opportunities to optimize our capital structure and maintain
appropriate financial flexibility.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 47

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. 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.

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 EBIT for fiscal year 2019 by $107 million.

48 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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
Adjusted EBIT(1)

EBIT excluding special items. Special items comprise items which do not reflect the Corporation’s
core performance or where their separate presentation will assist users of the consolidated
financial statements in understanding the Corporation’s results for the period. Such items include,
among others, the impact of restructuring charges and significant impairment charges and
reversals.

Adjusted EBITDA(1)

Adjusted net income
(loss)

Adjusted EPS

Adjusted EBIT plus 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.

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 (usage)

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

Adjusted debt

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
short-term borrowings and lease liabilities.

(1) Starting January 1, 2019, EBIT before special items and EBITDA before special items are replaced with adjusted EBIT and adjusted

EBITDA, respectively. The definitions of both measures remain unchanged.

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. Other entities in our industry may define
the above measures differently than we do. In those cases, it may be difficult to compare the performance of
those entities to ours based on these similarly-named non-GAAP measures.

Prior to the first quarter of fiscal year 2019, the Corporation reported non-GAAP measures labelled “EBIT before
special items” and “EBITDA before special items”. Beginning in the first quarter of fiscal year 2019, the
Corporation changed the label of these non-GAAP measures to "adjusted EBIT" and "adjusted EBITDA",
respectively, without making any change to the composition of these non-GAAP measures. The Corporation
believes that this new label aligns better with broad market practice in its industry and better distinguishes these
measures from the IFRS measurement "EBIT".

Adjusted EBIT, adjusted EBITDA, adjusted net income (loss) and adjusted EPS
Management uses adjusted EBIT, adjusted EBITDA, adjusted net income (loss) and adjusted EPS for purposes of
evaluating underlying business performance. Management believes these non-GAAP earnings measures in
addition to IFRS measures provide users of our Financial Report with enhanced understanding of our results and
related trends and increases the transparency and clarity of the core results of our business. Adjusted EBIT,
adjusted EBITDA, adjusted net income (loss) and adjusted EPS exclude items that do not reflect our core
performance or where their exclusion will assist users in understanding our results for the period. For these
reasons, a significant number of users of the MD&A analyze our results based on these financial measures.
Management believes these measures help users of MD&A to better analyze results, enabling better
comparability of our results from one period to another and with peers.

Free cash flow (usage)
Free cash flow is defined as cash flows from operating activities less net additions to PP&E and intangible assets.
Management believes that this non-GAAP cash flow measure provides investors with an important perspective on
the Corporation’s generation of cash available for shareholders, debt repayment, and acquisitions after making
the capital investments required to support ongoing business operations and long-term value creation. This non-
GAAP cash flow measure does not represent the residual cash flow available for discretionary expenditures as it
excludes certain mandatory expenditures such as repayment of maturing debt. Management uses free cash flow
as a measure to assess both business performance and overall liquidity generation.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 49

Adjusted debt
We analyze our capital structure using global metrics, based on adjusted debt, adjusted EBIT, adjusted EBITDA
and adjusted interest(1). Refer to the Capital structure section for more detail.

Reconciliations of non-GAAP financial measures to the most comparable IFRS financial measures are provided in
the tables hereafter, except for the following reconciliations:

•

adjusted EBIT to EBIT – see the Results of operations tables in the reporting segments and Consolidated
results of operations section; 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.

(1) Represents interest paid as per the supplemental information provided in the consolidated statements of cash flows.

Reconciliation of adjusted EBITDA to EBIT

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

Fourth quarters
ended December 31
2018
342
84

2019
$ (1,696)
129

—

1,630
63

—

(56)
370

Fiscal years
ended December 31
2018
1,001
272

2019
(498)
422

(4)

976
896

20
1,304

Reconciliation of adjusted net income (loss) to net income (loss) and computation of adjusted EPS

Net income (loss)
Adjustments to EBIT related to special items(1)
Adjustments to net financing expense related to:
Loss on sale of long-term contract receivables(1)
Accretion on net retirement benefit obligations
Net change in provisions arising from changes in interest rates
and net loss on certain financial instruments
Interest portion of gains related to special items(1)
Tax impact of special(1) and other adjusting items
Adjusted net income (loss)
Net income attributable to NCI
Preferred share dividends, including taxes
Adjusted net income (loss) attributable to equity holders of
Bombardier Inc.

Fourth quarters ended December 31
2018
(per share)

2019
(per share)

$ (1,719)
1,630

0.68

—
0.01

(0.04)
—
(0.01)

—
22

(84)
—
(21)
(172)
(51)
(7)

(0.02)

0.01
0.00

0.02
0.00
0.02

55
(56)

31
15

67
(11)
48
149
(40)
25

(230)

134

Weighted-average adjusted diluted number of common shares
(in thousands)
Adjusted EPS

2,397,868
(0.10)
$

2,477,954
0.05
$

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.

50 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Fourth quarters ended December 31
2018
0.02
0.03
0.05

2019
(0.74)
0.64
(0.10)

Reconciliation of adjusted net income (loss) to net income (loss) and computation of adjusted EPS

Net income (loss)

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

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

Tax impact of special(1) and other adjusting items

Adjusted net income (loss)

Net income attributable to NCI
Preferred share dividends, including taxes

Fiscal years ended December 31
2018
2019
(per share)
(per share)

$ (1,607)
968

0.41

0.03
—
0.03

(0.05)
—
0.09

84
—
73

(130)
—
216
(396)
(190)
(21)

0.01

—
0.01
0.03

0.01
0.00
(0.01)

318
28

—
31
65

36
(15)
(25)
438
(86)
4

Adjusted net income (loss) attributable to equity holders of
Bombardier Inc.

(607)

356

Weighted-average adjusted diluted number of common shares
(in thousands)
Adjusted EPS

2,383,987
(0.25)
$

2,501,047
0.14
$

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
Lease liabilities
Adjusted debt

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

Fiscal years ended December 31
2018
2019
0.09
(0.76)
0.05
0.51
0.14
(0.25)

As at December 31
2019
9,333

(76)
9,257
487
9,744

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OVERVIEW 51

AVIATION

Table of Contents

KEY
PERFORMANCE
MEASURES AND
METRICS

HIGHLIGHTS GUIDANCE

PROFILE

AND
FORWARD-
LOOKING
STATEMENTS

INDUSTRY AND
ECONOMIC
ENVIRONMENT

ANALYSIS OF
RESULTS

RESHAPING
THE
PORTFOLIO

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

• Order backlog, as a measure 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.

PROFITABILITY

LIQUIDITY

•

EBIT, EBIT margin, adjusted EBIT(1) and adjusted EBIT margin(1), as measures of performance.

Free cash flow(1), as a measure of liquidity generation.

CUSTOMER
SATISFACTION

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

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

manner, as a measure of meeting customer needs for the entire life of the aircraft.

• On-time return to service and high-quality workmanship at Bombardier-owned maintenance facilities,

as a measure of efficiency.

EXECUTION

•

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

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

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

52 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

HIGHLIGHTS

Focused on growing business aircraft activities through new programs and
network expansion

RESULTS(1)

For the fiscal years ended December 31
Revenues
Aircraft deliveries (in units)
Business aircraft
Commercial aircraft(3)
Adjusted EBITDA(4)
Adjusted EBITDA margin(4)
Adjusted EBIT(4)
Adjusted EBIT margin(4)
EBIT
EBIT margin
Net additions to PP&E and intangible assets

As at December 31
Order backlog (in billions of dollars)
Business aircraft
Other aviation(6)

(2)

2019
7,501

142
33
812
10.8%
531
7.1%

1,194

15.9%
373

2019

14.4
1.9

$
$

2018
7,324

Variance

2 %

137
35
643
8.8%
472
6.4%
424
5.8%
303

(5)

5
(2)
26 %
200 bps
13 %
70 bps
182 %
1010 bps
23 %

2018

Variance

14.3
4.3

1 %
(56)%

$
$

(1) Figures are restated as a result of the formation of Bombardier Aviation, our new reportable segment. Refer to the Segment reporting

section in Overview for further details.

(2) Refer to Note 3 - Changes in accounting policies, to our Consolidated financial statements, for the impact of the adoption of IFRS 16,

Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.

(3) On May 31, 2019, the Corporation completed the previously announced sale of the Q Series aircraft program assets, including aftermarket
operations and assets, to De Havilland Aircraft of Canada Limited (formerly Longview Aircraft Company of Canada Limited). Hence, the 7
Q Series aircraft deliveries for the fiscal year ended December 31, 2019 are for the first five months only; the deliveries for the fiscal year
ended December 31, 2018 included 15 Q Series aircraft.

(4) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics and the

Analysis of results section hereafter for reconciliations to the most comparable IFRS measures.

(5) Included the proceeds from the sale of the Downsview property for approximately $600 million in 2018.
(6) Including 20 firm orders for CRJ900 as of December 31, 2019 and 45 firm orders for CRJ900 as of December 31, 2018. CRJ production is

expected to conclude in the second half of 2020, following the delivery of the current backlog of the aircraft.

KEY HIGHLIGHTS AND EVENTS

2019 marked a pivotal year for Aviation, starting with the consolidation of Bombardier’s three aerospace
segments into a single unit, Bombardier Aviation.

Stronger Financial Performance as Aviation Reshapes its Portfolio
• Revenues for Aviation totalled $7.5 billion for 2019. This reflects an 8.5% revenue growth from business

aircraft activities and continued double-digit organic growth from aftermarket.

• The segment achieved 175 aircraft deliveries during the year, comprised of 54 Global, 76 Challenger,

12 Learjet, as well as 33 commercial aircraft.

The fourth quarter’s activity level was high, with deliveries reaching 52 business aircraft as

Global 7500 deliveries accelerated.

• Adjusted EBITDA margin(1) was 10.8% for the year, up 200 bps driven by the exit of the Q400 and C Series
programs. This profitability was nonetheless diluted in 2019 by CRJ activities, accounting for $1.2 billion in
revenues for the year.

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

Analysis of results section hereafter for reconciliations to the most comparable IFRS measures.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / AVIATION 53

• The adjusted EBIT margin(1) of 7.1% is up 70 bps year-over-year, reflecting the early production ramp up and
higher amortization associated with Global 7500 deliveries, as well as the dilution from commercial aircraft
activities.

• Business aircraft backlog increased slightly for the second consecutive year, reaching $14.4 billion at year

end, while the CRJ backlog declined as production winds down.

•

Concentrating on Business Aircraft while Addressing Underperforming Programs
•

In February 2019, the Corporation acquired the Global 7500 aircraft wing program operations and assets from
Triumph Group Inc. This transaction enabled the company to leverage its extensive technical expertise to
support the ramp-up of the Global 7500 aircraft and secure its long-term success.
In March 2019, we concluded the sale of Business Aircraft’s flight and technical training activities to CAE Inc.
for net proceeds of $532 million.
In May 2019, we completed the previously announced sale of the Q Series program assets, including
aftermarket operations and assets, to De Havilland Aircraft of Canada for net proceeds of $285 million.
In June 2019, the Corporation entered into a definitive agreement with Mitsubishi Heavy Industries, Ltd. (MHI)
for the sale of its regional jet program for a cash consideration of $550 million payable upon closing, and the
assumption by MHI of approximately $200 million of liabilities related to credit and residual value guarantees
and lease subsidies. The transaction is currently expected to close by mid-year 2020 and remains subject to
regulatory approvals and customary closing conditions.(2)
In October 2019, the Corporation and Spirit AeroSystems Holding, Inc. (Spirit) announced that they have
entered into a definitive agreement, whereby Spirit will acquire Bombardier’s aerostructures activities and
aftermarket services operations in Belfast, U.K. and Casablanca, Morocco, and its aerostructures
maintenance, repair and overhaul facility in Dallas, U.S. for a cash consideration of $500 million and the
assumption of approximately $700 million of liabilities, including government refundable advances and
pension obligations. The transaction is expected to close by mid-year 2020 and remains subject to regulatory
approvals and customary closing conditions.(2)

Positioned for Growth through certification and ramp up of New Programs and Service Network
Expansion
• Reaching full-scale production of the class-defining Global 7500 aircraft. With increased deliveries, the
Global 7500 aircraft is expected to contribute significantly to revenues growth in 2020. As the aircraft
progresses on the learning curve, it will also contribute to margin expansion.(2)

• Certified the new Global 5500 and Global 6500 aircraft, followed by the entry into service of the Global 6500

aircraft in 2019, offering customers the perfect combination of range, speed, field performance and smooth
ride.

• Continued and consistent growth of the aftermarket business, with further expansion of the service network in

Singapore planned for 2020

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

Analysis of results section hereafter for reconciliations to the most comparable IFRS measures.

(2) Forward-looking statement. See the forward-looking statements assumptions on which the guidance is based and forward-looking

statements disclaimer in Overview.

54 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

GUIDANCE AND FORWARD-LOOKING STATEMENTS

2019 guidance provided in our 2018 Financial Report(1) Updated 2019

guidance(2)

2019 results

Revenues

Business Aircraft ~ $6.25 billion

Commercial Aircraft ~ $1.4 billion

Aerostructures and Engineering Services $2.25-$2.50
billion including intersegment revenues

~ $8.0 billion

$7.5 billion

EBIT margin

N/A

15.9%

Adjusted EBIT(3)
and
adjusted EBIT margin(3)

Business Aircraft ~ 7.5%

Commercial Aircraft ~ ($125 million)

~ 7.0%

7.1%

Aerostructures and Engineering Services ~ 7.5%

Aircraft deliveries (in units)

Business Aircraft 150-155

Commercial Aircraft ~ 35 CRJ and Q400

175-180

175

2019 guidance

Revenue guidance was reduced by $250 million from the earlier than anticipated closing of the sale of Business
Aircraft’s training activities and the Q400 program. During the second quarter of 2019, as a result of the
consolidation of the three existing aerospace units into a single Bombardier Aviation business segment, the
Corporation updated its 2019 guidance. Full year revenues guidance at Aviation was updated to approximately
$8.0 billion, net of eliminations. Revenues for 2019 at Aviation were $7.5 billion mainly from lower Business Aircraft
revenues.

New segment adjusted EBIT margin(3) was set at approximately 7.0% for the year, in line with the previous
aerospace segments guidance, and excluding the Airbus Canada Limited Partnership contribution (reclassified as
a corporately held investment). A total of 175 to 180 aircraft deliveries were expected for 2019. For 2019, Aviation’s
adjusted EBIT margin(3) and deliveries were largely in line with guidance.

(1) Refer to our 2018 Financial Report for further details.
(2) Refer to our First Quarterly Report for the period ended March 31, 2019, our Second Quarterly Report for the period ended June 30, 2019

and Segment Reporting section of this MD&A for further details.

(3) Profitability guidance is based on adjusted EBIT margin. 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 measures.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / AVIATION 55

Forward-looking statements
Forward-looking statements(1) in this section of the MD&A are based on and subject to the following material assumptions:

• normal execution and delivery of current backlog;

•

the ability to understand customer needs and portfolio of products and services to drive market demand and secure new
orders;

• continued deployment and execution of leading initiatives to improve revenue conversion into higher earnings and free

cash flow(2), through improved procurement cost, controlled spending and labour efficiency;

• delivering on the transformation plan targets, through restructurings and other initiatives addressing the direct and

•
terms in a timely manner;
•

the ability to identify and enter into further risk sharing partnerships and initiatives;

•

the effectiveness of disciplined capital deployment measures in new programs and products to drive revenue growth;

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

the stability of the competitive global environment and global economic conditions;

the stability of foreign exchange rates at current levels;

the ability to have sufficient liquidity to execute the strategic plan, to meet financial covenants and to pay down long-term
debt or refinance bank facilities and maturities;

• closing of the sale of our regional jet program and Belfast and Morocco aerostructures businesses and Dallas MRO by

mid-year 2020;

•

the alignment of production rates to market demand;

• continued deployment and execution of growth strategies, and continued growth of the aftermarket business;

•

the ability to invest in our product portfolio;

• new program aircraft prices, unit costs and ramp-up.

(1) Also refer to the Guidance and forward-looking statements section in Overview.
(2) Non-GAAP measure. Refer to the Non-GAAP measures for definition of this metric and to the Analysis of results section for a

reconciliation to the most comparable IFRS measures.

56 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

PROFILE

This section will focus on business aircraft, including specialized aircraft and customer services, following the
announcements made by the Corporation during 2019 in relation to the definitive agreement with
Spirit AeroSystems Holding, Inc. for the sale of Bombardier’s aerostructures businesses in Belfast and Morocco,
and the definitive agreement with Mitsubishi Heavy Industries, Ltd. for the sale of the regional jet program.

Strong portfolio positioned for growth

We skillfully design, develop, manufacture, market and provide aftermarket support for three class-leading
families of business jets - Learjet, Challenger and Global. Our business jet portfolio spans from the light to the
large categories, in addition to outfitting various aircraft platforms for specialized use.

With approximately 4,900 aircraft in service worldwide, Bombardier Aviation has developed an aftermarket and
support network of service facilities including wholly-owned service centres in the U.S., Europe and Asia, regional
support office (RSO) locations, mobile repair trucks and world-class aircraft parts availability sustained by parts
facilities, including depots, hubs and repair facilities worldwide.

MARKET SEGMENT: BUSINESS AIRCRAFT

LIGHT BUSINESS JETS
Models: Learjet 70, Learjet 75 and Learjet 75 Liberty(1)
Market category: Light business jets
Key features(2): As part of the legendary Learjet family, of
which more than 3,000 aircraft have been delivered to
date, the class-defining Learjet aircraft continue to set the
standard by bringing large jet features to a light jet
platform. Learjet aircraft feature a flat floor throughout the
cabin, offering a smooth ride and the ultimate in comfort.

The new Learjet 75 Liberty aircraft will offer the only
Executive Suite in the light jet category featuring a
spacious six-seat configuration with a standard pocket
door between the cockpit and cabin for the quietest flight
experience. The Learjet 75 Liberty aircraft will be certified
to more stringent Part 25 regulations prescribed by U.S.
Federal Aviation Administration (FAA), applicable to
commercial airliners, unlike most competitors in the light
jet category that are certified to Part 23 regulations.

Learjet 75 Liberty aircraft

(1) Currently under development. See the Global 8000 and Learjet 75 Liberty aircraft disclaimer at the end of this MD&A.
(2) Under certain operating conditions, when compared to aircraft currently in service.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / AVIATION 57

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

Market category: Medium business jets
Key features(1): A masterful expression of high-end
craftsmanship and functionality, 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 the
ultimate in-flight experience with industry-leading
connectivity, immersive sound system and cabin
management system that effortlessly bring it all together.

Bombardier has continually invested in the Challenger
platform. In 2019, Bombardier announced a suite of
updates to its Challenger 350 aircraft, further underscoring
its leadership position in the super mid-size segment. New
enhancements include a performance improvement
package particularly effective for short runways, available
compact Head-up Display (HUD) and Enhanced Vision
System (EVS), along with improved cockpit aesthetics and
cabin sound-proofing technology.

The Challenger 300 Series has been the most delivered
medium business jet for the last decade.

The Challenger 600 Series has been the most delivered
business jet in its segment for the last decade.

LARGE BUSINESS JETS
Models: Global 5000, Global 5500, Global 6000,
Global 6500, Global 7500 and Global 8000(2)
Market category: Large business jets
Key features(1): Skillfully designed to leave a lasting
impression, the flagship Global aircraft family covers the
large jet category with six aircraft models that feature a
smooth ride and intelligently crafted interiors with
redesigned cabins that balance luxury with productivity
and feature the industry’s fastest worldwide inflight internet
connectivity combined with comprehensive cabin
management systems to keep passengers entertained
and connected at all times.

The Global 6000 aircraft family is the most delivered
business jet in the large category. Bombardier’s new
performance-leading Global 5500 and Global 6500 aircraft
received Transport Canada type certification in
September 2019, followed by entry-into-service of the
Global 6500 business jet in the same month.

The segment-defining Global 7500 aircraft extends the
family with a true four-zone cabin, full crew-rest area and
the longest range to link virtually any key city pair
worldwide, non-stop. The Global 7500 aircraft entered
service in December 2018, and has since achieved
several significant milestones, notably the longest non-
stop city pair flight in business aviation history from
Sydney, Australia, to Detroit, Michigan.

Challenger 350 aircraft

Global 7500 aircraft

(1) Under certain operating conditions, when compared to aircraft currently in service.
(2) Currently under development. See the Global 8000 and Learjet 75 Liberty aircraft disclaimer at the end of this MD&A.

58 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

BOMBARDIER SPECIALIZED AIRCRAFT
Models: Learjet, Challenger and Global business jets

Market category: Special mission aircraft

Key features: Bombardier Specialized Aircraft designs, develops and delivers a range of capabilities to operators around the
world, with more than 500 specialized aircraft in service. Bombardier’s diverse fleet, which includes the Learjet, Challenger
and Global business aircraft platforms, represents the ideal solution for government missions, from surveillance and
reconnaissance to medical and dignitary transport. Solutions range from turnkey packages comprising the complete design,
building, testing and certification activity, through to specialist engineering support and technical oversight of customer specific
projects.

MARKET SEGMENT: CUSTOMER SERVICES

MAINTENANCE: ADDING VALUE THROUGHOUT THE LIFECYCLE
Services portfolio: Extensive, worldwide capabilities to maximize scheduled maintenance as well as value added packages,
including refurbishment and modification of business aircraft, and component repair and overhaul services. Through original
equipment manufacturer expertise, a wide variety of services can be performed in house, as well as through dispatching
mobile repair teams to customers’ aircraft.

Key features: Offering worldwide service and support through wholly-owned service centres, line maintenance stations,
30 Bombardier mobile response vehicles, two aircraft and a network of authorized service facilities.

OFFERING PEACE OF MIND THROUGH PARTS AND SMART SERVICES
Services portfolio: Providing manufacturer approved parts backed by industry leading 2-year warranty, as well as repairs to
customer owned parts, and a growing portfolio of innovative cost-per-flight-hour parts and maintenance plans available for
Learjet, Challenger and Global aircraft. Options include the Smart Services offering, which can be tailored to include landing
gear overhaul and unscheduled maintenance coverage, among other selections.

Key features: Supporting 24/7 parts support with parts facilities worldwide anchored by three major hubs in Chicago,
Frankfurt and Singapore, as well as six regional depots. A sophisticated inventory management system ensures worldwide
parts availability throughout the depot and hub network as well as the wholly-owned service centres. Repair facilities in North
America and Europe provide repair services on customer-owned parts. Unlimited access to two Mobile Response Team
aircraft to shuttle parts in support of aircraft-on-ground requirements. From coverage on exchanges and repairs of airframe
components, including flight deck avionics, Smart Services provides budget predictability and worldwide parts availability.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / AVIATION 59

24/7 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 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. Bombardier is enhancing its customer support footprint around the
world with service centre expansion announcements for Miami Opa-Locka and Singapore, new line maintenance stations in
Van Nuys, Teterboro and Dubai. These initiatives underscore Bombardier’s ongoing, transformational commitment to providing
the most comprehensive onsite, mobile and aircraft-on-ground resolution services in the industry.

60 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

INDUSTRY AND ECONOMIC ENVIRONMENT

This section will focus on indices relevant for business aviation, following the announcements made by the
Corporation during 2019 in relation to the definitive agreement with Spirit AeroSystems Holding, Inc. for the sale
of Bombardier’s aerostructures businesses in Belfast and Morocco, and the definitive agreement with
Mitsubishi Heavy Industries, Ltd. for the sale of the regional jet program.

New products elevated 2019 industry deliveries

Business aviation deliveries grew in 2019, driven by new product introductions and low pre-owned inventory
levels. These factors offset the softening of certain key indicators for the industry. World GDP growth in 2019
slowed to 2.6%, from 3.2% in 2018.(1) The slowdown in global growth was due to the uncertainty arising from the
U.S. trade dispute with China. Industry confidence, measured by the Barclays Business Jet Indicator, averaged
just below the threshold of market stability for 2019.(2) Forecasted U.S. corporate profits for 2019 are expected to
maintain stability compared to 2018, arriving at $2.1 trillion.(3) Pre-owned aircraft inventory expressed as a
percentage of the overall fleet has been decreasing and remains healthy at 10.2%.(4) Finally, the industry delivered
an estimated total of 592 units in 2019, up 15% year-over-year, which is above the average of total annual
deliveries over the past 10 years. Large category aircraft deliveries grew for the last 3 years, with their market
share continuing to increase due to rising demand for large cabin and longer range aircraft.(5) Industry revenues
also grew by 17% following the ramp-up of several new products introduced in larger categories.(6)

The following key indicators are used to monitor the health of the business aviation market in the short term:

INDICATOR

INDUSTRY
CONFIDENCE

CORPORATE
PROFITS

PRE-OWNED
BUSINESS JETS
INVENTORY
LEVELS

AIRCRAFT
UTILIZATION
RATES
AIRCRAFT
SHIPMENTS
AND BILLINGS

CURRENT SITUATION

STATUS

Based on the latest Barclays Business Jet Indicator, published in December 2019, the
measure of industry confidence averaged at 49 points for 2019(2), and was just below the
threshold of market stability.

Forecasted U.S. corporate profits are expected to maintain stability at $2.1 trillion for 2019.(3)

The total number of pre-owned aircraft available for sale as a percentage of the total
worldwide fleet has increased over the past year to 10.2%, but remains at healthy levels.(4)

Business jet utilization in the U.S. decreased by 2.5% in 2019 compared to 2018.
Business jet utilization in Europe decreased by 2.3% in 2019 compared to 2018.(7)

In the business aircraft market categories in which we compete, we estimate that business
aircraft deliveries went up by 15%(5) and total billings by 17%(6) in 2019 compared to 2018.

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

environment.
(1) According to Oxford Economics Global Economic Databank dated January 15, 2020.
(2) According to the Barclays Business Jet Survey dated December 11, 2019. Average has been calculated using the monthly data.
(3) According to the U.S. Bureau of Economic Analysis News Release dated December 20, 2019.
(4) According to JETNET and Ascend (by Cirium).
(5) Based on our estimates, public disclosure records of certain competitors, the General Aviation Manufacturers Association (GAMA) shipment

reports and Ascend (by Cirium).

(6) Based on our estimates, public disclosure records of certain competitors, the General Aviation Manufacturers Association (GAMA) shipment

reports, Ascend (by Cirium) and B&CA Magazine list prices.

(7) According to the U.S. Federal Aviation Administration (FAA) and Eurocontrol websites.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / AVIATION 61

Source: Barclays from the start of 2018, previously UBS
* The Business Jet Indicator is a measure of market confidence

from industry professionals, gathered through regular surveys of
brokers, dealers, manufacturers, fractional providers, financiers
and others.
Methodologies used in the calculation of the Business jet
Indicator may differ following a change in the source of the data.
UBS did not issue a survey for Q4 2017.

Sources: JETNET and Ascend (by Cirium)
* As a percentage of total business jet fleet, excluding very light

jets.

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

Source: Eurocontrol

Short-term outlook
Global growth is expected to reach 2.5% in 2020(1), in line with recent years. This economic outlook combined with
low pre-owned inventory levels and balanced aircraft backlog should continue to support a stable business jet
market. The business environment for the year is reinforced by the Barclays Business Jet Indicator which jumped
8 points to 47 points for January 2020(2), on the back of increasing customer interest. The potential exit of certain
legacy platforms in the industry should offset the unit growth of new products. Industry revenues are expected to
keep growing with the increasing contribution of large aircraft in the overall industry delivery mix.

(1) According to Oxford Economics Databank dated January 15, 2020.
(2) According to the Barclays Business Jet Survey dated January 23, 2020.

62 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Long-term outlook
In the longer term, all demand drivers are well-oriented. Wealth creation and the continued emergence of
developing countries are expected to grow our customer base. The retirement of older models combined with the
introduction of new models will help meet the needs of new customers. The evolution of new ownership models,
such as fractional and charter businesses will make business aviation even more accessible.

Business aviation is poised for growth and with the industry’s most comprehensive product portfolio, we believe
we are well positioned.

Customer services

Business Aircraft’s worldwide customer services network includes wholly owned service centres, parts hubs, parts
depots, line maintenance facilities, regional support offices, customer response centres, mobile customer
response teams, as well authorized service facilities and authorized training providers.

The demand for service and support 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 the large installed base of
business aircraft, we will continue to focus on these high margin activities.

Market indicators

INDICATOR

INSTALLED BASE

AVERAGE ANNUAL
FLIGHTS HOURS

AVERAGE AGE OF
FLEET

CURRENT SITUATION

STATUS

The installed base for Bombardier business aircraft increased by approximately 2% to
approximately 4,900 aircraft in 2019 when compared to 2018.(1)
Based on our estimates, Bombardier business aircraft average annual flight hours
decreased by 1.8% in 2019 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 has increased by
1.0% in 2019 when compared to 2018.(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 fleet database Ascend (by Cirium).

Short-term outlook
Based on the market indicators above, the demand for parts and service programs is expected to grow
significantly. We continue to actively seek out strategic locations for expansion in order to move closer to
customers, further 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 should dominate in terms of market size, the business aircraft fleet
growth in non-traditional markets should create new opportunities for aftermarket services.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / AVIATION 63

ANALYSIS OF RESULTS

Results of operations(1)

Revenues

Business aircraft
Manufacturing and other(3)
Services(4)
Commercial aircraft(5)
Aerostructures and engineering services(6)

Total revenues
Adjusted EBITDA(7)
Amortization
Impairment reversals on PP&E and intangible assets
Adjusted EBIT(7)
Special items
EBIT
Adjusted EBITDA margin(7)
Adjusted EBIT margin(7)
EBIT margin

Fourth quarters
ended December 31
(2)
2018

2019

Fiscal years
ended December 31
(2)
2018
2019

$
$

1,640
311
231
231
2,413
234
91
—
143
49
94
9.7%
5.9%
3.9%

$
$

1,177
317
421
227
2,142
242
58
—
184
13
171
11.3%
8.6%
8.0%

$
$

4,163
1,254
1,227
857
7,501
812
282
(1)
531
(663)
1,194

10.8%
7.1%
15.9%

$
$

3,794
1,200
1,756
574
7,324
643
171
—
472
48
424
8.8%
6.4%
5.8%

(1) Figures are restated as a result of the formation of Bombardier Aviation, our new reportable segment. Refer to the Segment reporting

section in Overview for further details.

(2) Refer to Note 3 - Changes in accounting policies, to our Consolidated financial statements, for the impact of the adoption of IFRS 16,

Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.

(3) Represents revenues from sale of new aircraft, specialized aircraft solutions and pre-owned aircraft.
(4) Represents revenues from aftermarket services including parts, Smart Services, service centres, training and technical publication.
(5) Represents manufacturing, services and other.
(6) Represents external revenues.
(7) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics.

Revenues
The $271-million increase for the fourth quarter is mainly due to:

•

higher revenues from business aircraft manufacturing and other, mainly due to higher deliveries of large
aircraft.
Partially offset by:

•

lower revenues from commercial aircraft, mainly due to the sale of the Q Series aircraft program on
May 31, 2019.

The $177-million increase for the fiscal year is due to:

•

higher revenues from business aircraft manufacturing and other, mainly due to higher deliveries and a
favourable mix of large aircraft;
higher revenues from aerostructures and engineering services, mainly due to revenues from contracts
with ACLP(1) being presented as external revenues starting July 1, 2018, partially offset by lower volume
for other external contracts; and
higher revenues from business aircraft services, mainly due to an increase in sales of spares parts and
increase in activities in service centres, partially offset by the sale of the business aircraft training
activities on March 14, 2019.

Partially offset by:

•

lower revenues from commercial aircraft, mainly due to the deconsolidation of ACLP(1) starting in the third
quarter of 2018 and the sale of the Q Series aircraft program on May 31, 2019, partially offset by an
increase in CRJ aircraft deliveries.

(1) Effective June 1, 2019, the name of CSALP is changed to ACLP.

64 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Special items
Special items comprise items which do not reflect our core performance or where their separate presentation will
assist users in understanding our results for the period. Such items include, among others, the impact of
restructuring charges and significant impairment charges and reversals.

The special items recorded as (gains) losses in EBIT were as follows:

Gain on disposal of a business - Training business

Gain on disposal of a business - Q Series business

Restructuring charges

Reversal of Learjet 85 aircraft program cancellation
provisions

C Series transaction with Airbus
Gain on disposal of PP&E
Purchase of pension annuities

Changes in credit and residual value guarantees

Pension adjustments

Tax litigation

EBIT margin impact

Fourth quarters
ended December 31
2018
$ —

2019
—

Ref
1

Fiscal years
ended December 31
2018
$ —

2019
(516)

5
6
7

(3)

—
—
4

—

(28)

7
—
2

—

(21)

(210)

(18)

—
—
4

—

(663)

—

(29)

616
(561)
22

(34)

(21)

(2.0)%

(0.6)%

8.8%

(0.6)%

1. The sale of Business Aircraft’s flight and technical training activities for a total net consideration of

$532 million resulted in a pre-tax accounting gain of $516 million ($383 million after deferred tax impact of
$133 million). See Note 31 - Disposal of businesses.

2. The sale of the Q Series Aircraft program assets for net proceeds of $285 million resulted in a pre-tax
accounting gain of $210 million ($184 million after tax impact). See Note 31 - Disposal of businesses.

3. For the fourth quarter and fiscal year ended December 31, 2019, represents change in severance charges of
$(1) million and $24 million, respectively, partially offset by curtailment gains of nil and $2 million, respectively,
related to previously-announced restructuring actions.
Following the announcement that the CRJ production is expected to conclude in the second half of 2020,
following the delivery of the current backlog of aircraft, the Corporation has recorded severance charges of
$7 million partially offset by curtailment gains of $3 million in the first quarter of 2019, and has recorded
$14 million and $24 million of other related charges for the fourth quarter and the fiscal year of 2019,
respectively.

For the fourth quarter and the fiscal year ended December 31, 2018, represented severance charges of
$35 million and $37 million, respectively, partially offset by curtailment gains of $6 million related to the
previously-announced restructuring actions.

4. Based on the ongoing activities with respect to the cancellation of the Learjet 85 aircraft program, the

Corporation reduced the related provisions by $3 million and $18 million for the fourth quarter and fiscal year
ended December 31, 2019 ($28 million and $29 million for the fourth quarter and fiscal year ended
December 31, 2018). The reduction in provisions is treated as a special item since the original provisions
were also recorded as special items in 2014 and 2015.

5. The acquisition by Airbus of 50.01% of ACLP, the entity that manufactures and sells the C Series aircraft

(rebranded A220) resulted in a pre-tax accounting charge of $616 million ($552 million after tax). The pre-tax
accounting charge reflects all elements of the transaction, including: (i) the $270 million fair value of warrants
issued by Bombardier to Airbus on July 1, 2018, (ii) a $310 million derivative liability which is associated with
the expected off-market return on units to be issued to Bombardier by ACLP under Bombardier’s funding
commitments, and iii) other Bombardier obligations towards ACLP, which mainly comprise supply chain
obligations for Aerostructures and Engineering Services.

6. Related to the sale of the Downsview property to the Public Sector Pension Investment Board (PSP

Investments).

BOMBARDIER INC. / 2019 FINANCIAL REPORT / AVIATION 65

7. Represents the non-cash loss on the settlement of defined benefit pension plans resulting from the purchase
of annuities with insurance companies. As part of its ongoing de-risking strategies, the Corporation has an
initiative for the buy-out of annuities payable to pensioners or deferred pensioners for certain plans to the
extent they are fully funded on a buy-out basis, subject to compliance with certain conditions including
applicable pension legislations.

8. The provisions for credit and residual value guarantees were reduced following a change in credit risk

assumption for an airline. The reduction of the provisions was treated as a special item since the original
provisions were recorded as special items in 2015.

9. On October 26, 2018, the High Court in the United Kingdom ruled that pension schemes must equalize for the

effect of unequal Guaranteed Minimum Pensions between male and female for benefits earned during
specified periods (“GMP equalization”). The Corporation estimated the impact of the ruling on its pension
plans and recognized an additional obligation of $24 million as at December 31, 2018. The one-time P&L
impact was recognized in fiscal year 2018 as a past service cost under IAS 19 - Employee Benefits. In fiscal
year 2019, the Corporation adjusted the pension obligation related to equalization for an Aviation plan in the
U.K. The adjustments of $26 million was recorded as a past service cost under IAS 19 - Employee Benefits.

10. Represents a change in the estimates used to determine the provision related to tax litigation.

EBIT margin
Adjusted EBIT margin(1) for the fourth quarter decreased by 2.7 percentage points mainly due to:

•

lower contribution from business aircraft sales which includes higher amortization of aerospace program
tooling as a result of increased Global 7500 deliveries.

Partially offset by:

•

lower SG&A expenses.

Including the impact of special items (see explanation of special items above), the EBIT margin for the fourth
quarter decreased by 4.1 percentage points compared to the same period last year.

Adjusted EBIT margin(1) for the fiscal year increased by 0.7 percentage points mainly due to:

•
•

the net impact of the deconsolidation of C Series; and
lower SG&A expenses.

Partially offset by:

•

lower contribution from business aircraft sales which includes higher amortization of aerospace program
tooling.

Including the impact of special items (see explanation of special items above), the EBIT margin for the fiscal year
increased by 10.1 percentage points compared to last fiscal year.

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

66 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Product development

Investment in product development(1)

Program tooling(2)
R&D expense(3)

As a percentage of revenues

Fourth quarters
ended December 31
2018
2019
226
62
7
6
233
68
10.9%
2.8%

Fiscal years
ended December 31
2018
2019
876
280
25
24
901
304
12.3%
4.1%

(1) Figures are restated as a result of the formation of Bombardier Aviation, our new reportable segment. Refer to the Segment reporting

section in Overview for further details.

(2) Net amount capitalized in aerospace program tooling, as well as the amount that was paid to suppliers based on reception of parts or

delivery of the aircraft for acquired development costs carried out by them.

(3) Excluding amortization of aerospace program tooling of $59 million and $132 million, respectively, for the fourth quarter and fiscal year

ended December 31, 2019 ($29 million and $70 million, respectively, for the fourth quarter and fiscal year ended December 31, 2018), as
the related investments are already included in aerospace program tooling.

The decrease in aerospace program tooling investment is mainly due to the entry-into-service of the Global 7500
aircraft program in December 2018.

The carrying amount of aerospace program tooling(1) as at December 31, 2019 was $4.6 billion, compared to
$4.5 billion as at December 31, 2018. The net carrying value of aerospace program tooling remains stable due to
completion of major development programs.

The Global 5500 and Global 6500 aircraft program
The first Global 6500 business jet entered into service on September 30, 2019, on schedule. The Global 5500
and Global 6500 aircraft were awarded Transport Canada Type Certification on September 24, 2019, European
Aviation Safety Agency (EASA) certification on October 15, 2019, and U.S. Federal Aviation Administration (FAA)
certification on December 20, 2019.

The Global 5500 and Global 6500 jets are built on the success of the Global 5000 and Global 6000 aircraft
offering 700 and 600 nautical miles of additional range, respectively, for a class-leading 5,900 and 6,600 nautical
miles, top speeds of Mach 0.90 and Bombardier’s advanced wing design for a comfortable and smooth ride. The
two new business jets also provide an up to 13-per-cent fuel burn advantage in certain operating conditions,
contributing to highly favourable operating costs versus smaller competing aircraft with less range.

The Learjet 75 Liberty aircraft program(2)
Bombardier debuted the Learjet 75 Liberty mock-up on October 22, 2019 at National Business Aviation
Association Convention and Exhibition (NBAA-BACE) in Las Vegas following the launch of the business jet on
July 2, 2019. On January 20, 2020, Bombardier announced FAA certification of the Garmin G5000 avionics
upgrade, a standard feature on the Learjet 75 Liberty aircraft.

Building on the industry’s best light jet platform, the new Learjet 75 Liberty offers the largest cabin in its segment
with a new Executive six-seat configuration. Standard features not found on other light jets in this segment include
a flat floor and pocket door between the cockpit and Executive Suite for a quiet flight experience. With a lower
price point than previous Learjet aircraft, the Learjet 75 Liberty offers better performance at the same operating
costs as competitor aircraft.(3) First deliveries of the Learjet 75 Liberty aircraft are expected in 2020.

(1) Figures are restated as a result of the formation of Bombardier Aviation, our new reportable segment. Refer to the Segment reporting section

in Overview for further details.

(2) Currently under development. See the Global 8000 and Learjet 75 Liberty aircraft disclaimer at the end of this MD&A.
(3) Under certain operating conditions, when compared to aircraft currently in service.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / AVIATION 67

Aircraft deliveries and order backlog

Aircraft deliveries

(in units)
Business aircraft
Light
Medium
Large

Commercial aircraft(1)
Regional jets(2)
Turboprops(3)

Fourth quarters
ended December 31
2018

2019

Fiscal years

ended December 31
2018

2019

3
28
21
52

6
—
6
58

3
25
13
41

6
6
12
53

12
76
54
142

26
7
33
175

12
83
42
137

20
15
35
172

(1) Excluding 13 CS300 aircraft deliveries for the first six months of the fiscal year ended December 31, 2018. Subsequent to the C Series

Partnership closing on July 1, 2018, Airbus rebranded CS100 and CS300 as A220-100 and A220-300, respectively.

(2) The Corporation entered into a definitive agreement announced on June 25, 2019 whereby Mitsubishi Heavy Industries, Ltd (MHI) will

acquire the Corporation’s regional jet program. See section - Reshaping portfolio for more details in respect of the transaction.

Order backlog

(in billions of dollars)
Business aircraft
Other aviation(1)

December 31, 2019
14.4
1.9
16.3

As at
December 31, 2018
14.3
$
4.3
18.6

(1) Including 20 firm orders for CRJ900 as of December 31, 2019 and 45 firm orders for CRJ900 as of December 31, 2018.

For the three-year period ended December 31, 2019, we captured 26% of the market share based on business
aircraft units delivered. During this period, we were the market leader in terms of business aircraft units delivered.
This compares with a market share of 28% based on units delivered for the three-year period ended
December 31, 2018 during which we were also the market leader.(1)

(1) Based on our estimates, competitors’ public disclosure, the General Aviation Manufacturers Association (GAMA) shipment reports and

Ascend (by Cirium).

68 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Workforce

Total number of employees(1)

Permanent(2)
Contractual(3)

December 31, 2019
22,150
2,200
24,350

As at
December 31, 2018
24,900
2,050
26,950

Percentage of permanent employees covered by collective agreements

52%

48%

(1) Figures are restated as a result of the formation of Bombardier Aviation, our new reportable segment. Refer to the Segment reporting

section in Overview for further details.

(2) Including 750 inactive employees as at December 31, 2019 (800 inactive employees as at December 31, 2018).
(3) Including non-employees and sub-contractors personnel.

The workforce as at December 31, 2019 decreased by 2,600 employees, or 10%, when compared to the previous
year. This decrease is mainly related to previously-announced restructuring actions, consolidation of all three
aerospace segments into a single Aviation segment, the sale of the Q Series aircraft program assets and the sale
of Business Aircraft’s flight and technical training activities, partially offset by the acquisition of the Global 7500
aircraft wing program operations from Triumph Group Inc.

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 approximately
11,900 employees worldwide, or 54% of permanent employees, participate in the program. In 2019, as part of this
program, incentive-based compensation is linked to the achievement of targeted results, based on adjusted EBIT
and free cash flow.(1)

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

BOMBARDIER INC. / 2019 FINANCIAL REPORT / AVIATION 69

RESHAPING THE PORTFOLIO

Acquisition of the Global 7500 aircraft wing program from Triumph Group
Inc.

On February 6, 2019, the Corporation acquired the Global 7500 aircraft wing program operations and assets from
Triumph Group Inc., for a nominal cash consideration. This transaction enabled the company to leverage its
extensive technical expertise to support the ramp-up of the Global 7500 aircraft and secure its long-term success.
Bombardier continues to operate the production line and integrated the employees currently supporting the
program at Triumph’s Red Oak, Texas facility.

The Corporation acquired net assets valued at approximatively $100 million, consisting primarily of work in
progress inventory and PP&E, and settled certain preexisting relationships. No gain or goodwill was recorded on
the transaction. The assets acquired and liabilities assumed by the Corporation were measured at their estimated
fair value.

For more details, refer to Note 32 - Acquisition of a business, to our consolidated financial statements.

Conclusion of the sale of Business Aircraft’s flight and technical training
activities with CAE

On March 14, 2019, we concluded the sale of previously announced Business Aircraft’s flight and technical
training activities to CAE Inc. (CAE) for an enterprise value of $645 million, with net proceeds of $532 million after
the assumption of certain liabilities, fees, and closing adjustments. A gain of $516 million ($383 million after
deferred tax impact) was recognized in Special items.

Concurrently with the sale agreement, Bombardier and CAE also agreed to extend their Authorized Training
Provider (ATP) relationship whereby CAE agreed to prepay all royalties thereunder. This prepayment amounted to
$155 million and was received by Bombardier in the fourth quarter of 2018.

For more details, refer to Note 31 - Disposal of businesses, to our consolidated financial statements.

Conclusion of the sale of the Q Series aircraft program with De Havilland
Aircraft of Canada Limited

On May 31, 2019, we completed the previously announced sale of the Q Series aircraft program assets, including
aftermarket operations and assets, to De Havilland Aircraft of Canada Limited (formerly Longview Aircraft
Company of Canada Limited), an affiliate of Longview Aviation Capital Corp, for net proceeds of $285 million. The
sale includes all assets and intellectual property and Type Certificates associated with the Dash 8 Series 100, 200
and 300 as well as the Q400 program operations at the Downsview manufacturing facility in Ontario, Canada. A
gain of $210 million ($184 million after deferred tax impact) was recognized in Special items.

For more details, refer to Note 31 - Disposal of businesses, to our consolidated financial statements.

70 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Definitive agreement to sell our regional jet program to Mitsubishi Heavy
Industries, Ltd.

On June 25, 2019, the Corporation and Mitsubishi Heavy Industries, Ltd. (MHI), announced they have entered
into a definitive agreement, whereby MHI will acquire the Corporation’s regional jet program for a cash
consideration of $550 million, payable to the Corporation upon closing, and the assumption by MHI of liabilities
related to credit and residual value guarantees and lease subsidies amounting to approximately $200 million.
Under the agreement, the Corporation’s net beneficial interest in the Regional Aircraft Securitization Program
(RASPRO), which was valued at approximately $200 million will be transferred to MHI.

Pursuant to the agreement, MHI will acquire the maintenance, support, refurbishment, marketing, and sales
activities for the CRJ Series aircraft, including the related services and support network located in Montréal,
Québec, and Toronto, Ontario, and its service centres located in Bridgeport, West Virginia, and Tucson, Arizona,
as well as the type certificates.

The CRJ production facility in Mirabel, Québec will remain with Bombardier. Bombardier will continue to supply
components and spare parts and will assemble the current CRJ backlog on behalf of MHI. CRJ production is
expected to conclude in the second half of 2020, following the delivery of the current backlog of aircraft.

Bombardier will also retain certain liabilities representing a portion of the credit and residual value guarantees
totalling $378 million. Aside from the accrual of interest, this amount is fixed and not subject to future changes in
aircraft value, and is mainly payable by Bombardier over the next four years. The amount is included in other
financial liabilities. The agreement contemplates a reverse break fee payable by MHI under certain
circumstances.

The transaction is now expected to close by mid-year 2020 and remains subject to necessary approvals and
customary closing conditions.(1) The Corporation has received most of the regulatory approvals required.

For more details, refer to Note 30 - Assets held for sale, to our consolidated financial statements.

(1) See the forward-looking statements disclaimer.

Sale of Belfast and Casablanca aerostructures businesses and Dallas MRO
to Spirit AeroSystems Holding, Inc. (Spirit)

On October 31, 2019, the Corporation and Spirit AeroSystems Holding, Inc. (Spirit) announced that they have
entered into a definitive agreement, whereby Spirit will acquire Bombardier’s aerostructures activities and
aftermarket services operations in Belfast, U.K., and Casablanca, Morocco, and its aerostructures maintenance,
repair and overhaul (MRO) facility in Dallas, U.S., for a cash consideration of $500 million and the assumption of
liabilities, including government refundable advances and pension obligations. Following the transaction, Spirit will
continue to supply structural aircraft components and spare parts to support the production and in-service fleet of
Bombardier Aviation’s Learjet, Challenger and Global families of aircraft.

The transaction follows the formation of Bombardier Aviation earlier this year and streamlines its aerostructures
footprint to focus on its core capabilities in Montreal, Mexico and its Global 7500 wing operations in Texas. The
transaction is expected to close by mid-year 2020 and remains subject to regulatory approvals and customary
closing conditions.(1)

For more details, refer to Note 30 - Assets held for sale, to our consolidated financial statements.

(1) See the forward-looking statements disclaimer.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / AVIATION 71

TRANSPORTATION

Table of Contents

HIGHLIGHTS

KEY
PERFORMANCE
MEASURES AND
METRICS

PROFILE

GUIDANCE AND
FORWARD-
LOOKING
STATEMENTS

INDUSTRY AND
ECONOMIC
ENVIRONMENT

ANALYSIS OF
RESULTS

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.
• Book-to-bill ratio(1), as an indicator of future revenues.
• Revenues by product segments and the geographic diversification of revenues, as measures of

growth and sustainability of competitive positioning.

• Market position, as a measure of our competitive positioning.

PROFITABILITY

• EBIT, EBIT margin, adjusted EBIT(2) and adjusted EBIT margin(2), as measures of performance.

LIQUIDITY

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

CUSTOMER
SATISFACTION

• Various customer satisfaction metrics, focusing on the four main dimensions: sales and prices,

customer orientation, project execution and product offering.

EXECUTION

• Achievement of product development and delivery milestones, as a measure of flawless execution.

(1) Defined as new orders over revenues.
(2) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics and the

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

72 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Improving the backlog while working through challenging legacy projects

HIGHLIGHTS

RESULTS

For the fiscal years ended December 31
Revenues
Order intake (in billions of dollars)
Book-to-bill ratio(2)
Adjusted EBITDA(3)(4)
Adjusted EBITDA margin(3)(4)
Adjusted EBIT(3)(4)
Adjusted EBIT margin(3)(4)
EBIT(3)
EBIT margin(3)
Net additions to PP&E and intangible assets

As at December 31
Order backlog (in billions of dollars)

(1)

2019
8,269
10.0
1.2
212
2.6%
70
0.8%
22
0.3%
157

2019
35.8

$
$

2018
8,915
9.9
1.1
851
9.5%
750
8.4%
774
8.7%
108

2018
34.5

$
$

Variance
(7)%
1 %

0.1
(75)%
(690) bps
(91)%
(760) bps
(97)%
(840) bps
45 %

Variance
4 %

(1) Refer to Note 3 - Changes in accounting policies in our Consolidated financial statements, for the impact of the adoption of IFRS 16,

Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.

(2) Ratio of new orders over revenues.
(3) Including share of income from joint ventures and associates amounting to $94 million for the fiscal year ended December 31, 2019
($111 million for the fiscal year ended December 31, 2018).
(4) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics and the

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

KEY HIGHLIGHTS AND EVENTS

Full-year financial results reflect actions and initiatives undertaken to move forward and complete
challenging projects
• During the past year, Transportation continued to progress through its turnaround, by re-synchronizing

production and resetting certain project delivery schedules, while also investing to support in-service reliability
improvements and funding additional manufacturing and engineering capacity. The higher than anticipated
cost to implement these initiatives and to address late-stage legacy projects, mainly concentrated in the U.K.,
Switzerland and Germany, led to lower earnings and free cash flow(1) for the segment.

Over $500 million in contract estimate changes embedded in 2019 earnings

• Completed delivery of several large legacy projects, including Metropolitan Transportation Authority (MTA) in

New York City, Crossrail in the U.K. and Toronto Transit Commission (TTC) in Toronto.

• As Transportation exited the year, progress was also made in achieving key milestones on other major
projects, including significant in-service reliability improvement on Swiss Federal Railways (SBB) in
Switzerland and the homologation of the multi-unit software for LoTrain in the U.K., paving the way for the
delivery of trains on this project and subsequent AVENTRA contracts in the U.K.

Backlog Improvement Positions for Stronger Financial Results
• Transportation continued to grow and improve the quality of its backlog with $10.0 billion in new orders, and a

book-to-bill ratio(2) of 1.2 for the year. Backlog reached $35.8 billion at year end.

• Approximately 70% of 2019 orders coming from service contracts, signalling projects and options on rolling
stock projects, carrying lower execution risk. Backlog share of services and signalling contracts increased to
48% (42% a year ago).

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

of results section for reconciliations to the most comparable IFRS measure.

(2) Ratio of new orders over revenues.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / TRANSPORTATION 73

Focused on Stronger Project Execution to Drive Sustainable Financial Performance
• Appointment of Danny Di Perna as President, Bombardier Transportation, in February 2019 strengthened

focus on customer relationships and disciplined project execution.

Strengthened Transportation’s leadership team with appointments of new Head of Engineering and

new Regional Presidents to better deliver on customer commitments.

• Clear management priorities - focus on significant production ramp-up in the U.K. and France, reliability in

Germany, settlement of claims and acceptance of trains on the SBB project in Switzerland, and continuing to
drive efficiency across the organization.

CDPQ Investments in Transportation
• Transportation’s results for 2019 did not reach the performance targets underlying CDPQ’s investment in

BT Holdco. Accordingly, for the 12-month period starting on February 12, 2020, Bombardier’s percentage of
ownership on conversion of CDPQ’s shares will decrease by 2.5%, to 67.5%; and the preference return
entitlement rate on liquidation of its shares will increase from 9.5% to 12.0% for this period. Any dividends
paid by BT Holdco to its shareholders during this period will be distributed on the basis of each shareholder’s
percentage of ownership upon conversion, being 67.5% for Bombardier and 32.5% for CDPQ. These
adjustments will become effective once the audited consolidated financial statements of BT Holdco are duly
approved by its board of directors.

74 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

GUIDANCE

2019 guidance provided in our
2018 Financial Report(1)

Updated 2019
guidance(2)

2019 results

~ $9.5 billion

~ $8.75 billion

$8.3 billion

N/A

~ 9.0%

N/A

~ 5.0%

0.3%

0.8%

Revenues

EBIT margin

Adjusted EBIT margin(3)

2019 guidance

Revenue guidance was lowered to approximately $8.75 billion driven by slower production ramp-up and
unfavourable currency impact. 2019 revenues of $8.3 billion were lower as a result of revised estimates on certain
rail contracts in the fourth quarter.

On the earnings front, adjusted EBIT margin(3) guidance for the full year was revised from approximately 9.0% to
approximately 5.0%, mainly as we made additional investments and incurred additional costs to both complete
the legacy projects and to protect the delivery schedule for other projects. For 2019, adjusted EBIT margin(3) was
0.8% as a result of additional charges related to certain contracts in the U.K., Switzerland, and Germany. This
resulted in approximately 30% of 2019 revenues recorded with neutral or negative margins.

(1) Refer to our 2018 Financial Report for further details.
(2) Refer to our First Quarterly Report for the period ended March 31, 2019 and to our Second Quarterly Report for the period ended

June 30, 2019 for further details.

(3) Profitability guidance is based on adjusted EBIT margin. 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 measures.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / TRANSPORTATION 75

PROFILE

World-class products and services portfolio positioned for growth

Transportation offers a wide-ranging portfolio of innovative and efficient solutions in the rail industry. We cover the
full spectrum of rail solutions, ranging from global mobility solutions to a variety of trains and sub-systems,
services, system integration and signalling to meet the market’s needs and expectations. We have won orders
across all product segments and major geographies, underlining the competitiveness of our products and services
worldwide.

We have production, engineering and service centres around the world. The global headquarters is located in
Berlin, Germany.

MARKET SEGMENT: ROLLING STOCK AND SYSTEMS

HIGH-SPEED AND VERY HIGH-SPEED TRAINS
Application: Equipment for medium and long-distance
operations.

Major products: ZEFIRO family

Key features: Solutions offering very high operating
flexibility, high comfort and safety standards for
passengers in combination with high efficiency. Portfolio
covers the full spectrum of speed requirements: high-
speed (200-250 km/h) and very high-speed
(250-380 km/h).

COMMUTER, REGIONAL AND INTERCITY
TRAINS
Application: Suburban and regional rail transit for urban
centres and surrounding regions and medium speed
connections between cities.

Major products: AVENTRA, TALENT, OMNEO,
TWINDEXX Vario, BiLevel and MultiLevel families

Key features: Broad product line featuring electric, diesel,
dual mode and battery-powered multiple units, 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. The train operates
emission-free, thereby making a significant contribution
towards environmentally-friendly mobility.

ZEFIRO very high-speed train

AVENTRA single deck train

76 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

LIGHT RAIL VEHICLES
Application: Efficient surface transit in urban centres and
surrounding suburban areas.

Major products: FLEXITY family

Key features: Our broad portfolio of FLEXITY vehicles
feature innovative capabilities and performance while
offering low lifecycle costs. Based on adaptable modular
platforms, our vehicle range offers a full spectrum of smart
light rail solutions to enhance the connectivity and identity
of cities worldwide. Equipped with our award-winning
Obstacle Detection Assistance System, our trams and light
rail vehicles increase the safety of the driver, passengers
and all other traffic participants.

METROS
Application: Broad range of high capacity mobility
solutions for every urban environment

Major products: MOVIA and INNOVIA platforms (metros,
monorails and people movers)

Key features: Wide variety of urban mobility solutions
developed from proven and innovative technology.
Maximum system value for every capacity, in any type of
environment. Safety, lifecycle cost, passenger comfort and
smart city integration, to name a few, all drive the designs
and innovations of our portfolio, covering a wide range of
system needs. This includes quick-to-build and minimally
intrusive technology such as the INNOVIA Monorail 300.
Bombardier products have a long history of automation
and are serving numerous cities around the world with
driverless systems.

LOCOMOTIVES
Application: Electric and diesel 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 and low lifecycle costs.
Homologated in several countries in Europe, enabling
cross-border service. The TRAXX MS3 locomotive is the
most advanced multi-systems locomotive on the market
with the Last Mile function, letting it easily bridge non-
electrified track sections often found in ports or freight
terminals.

FLEXITY tram for Toronto Transit Commission (TTC)

MOVIA C30 metro car in Stockholm, Sweden

TRAXX MS3 locomotive in Kassel, Germany

BOMBARDIER INC. / 2019 FINANCIAL REPORT / TRANSPORTATION 77

PROPULSION AND CONTROLS
Application: Complete propulsion and control product
portfolio for all Bombardier and third-party rail vehicles and
e-mobility applications, delivering electric power with
strong reliability, power efficiency and high safety.

Major products: The MITRAC platform, which includes
traction and auxiliary converters for underframe, rooftop
and machine room mounting; drives (motors and gears),
train control management systems (TCMS), high voltage
equipment and complete system solutions. Innovative train
to wayside communication solutions round off the portfolio.

Key features: A leader in reliability, modular design,
energy safety (SIL 2 compliance), energy efficiency,
integration of new technologies and ease of maintenance,
which keep initial investments and lifecycle costs low.

BOGIES
Application: Complete spectrum of bogies, which match
the entire range of Bombardier vehicles.

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.

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, MOVIA metro system, FLEXITY
tram system

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.

MITRAC converter

FLEXX bogie built in Siegen, Germany

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.

INNOVIA APM system developed for LAX airport

78 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

MARKET SEGMENT: SIGNALLING

MASS TRANSIT SIGNALLING
Application: Rail control and signalling solutions for mass
transit systems such as metros, light rail or APMs.

Major products: CITYFLO solution

Key features: Complete portfolio of solutions ranging from
manual applications (GoA 0) to fully automated
Communication-Based Train Control (GoA 4), 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

CITYFLO 650 solution in Kuala Lumpur

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 and industrial freight industries.

Major products: INTERFLO 150 solution

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.

OPTIFLO - SERVICE SOLUTIONS FOR SIGNALLING
Application: Comprehensive portfolio of services for mass transit, mainline and industrial sector rail infrastructure and
signalling solutions.

Key features: Infrastructure management, technical support, cyber security assessment and other service solutions tailored
to ensure the highest levels of availability and reliability as well as cost effective maintenance of rail control signalling
solutions.

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 (ORBITA, AVIS, EMS, etc.) optimize availability, reliability,
punctuality, safety and cost over the whole life cycle of the fleet. Broad experience in operations and maintenance of
commuter and regional trains.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / TRANSPORTATION 79

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 our specialized facilities and customer sites.
We leverage our engineering and supply chain strength to bring operational performance and whole life cost advantages.

OPERATIONS AND MAINTENANCE OF SYSTEMS
Application: Complete 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.

INDUSTRY AND ECONOMIC ENVIRONMENT

Robust and positive growth outlook for the railway industry globally

The rail market remains strong with resilient growth opportunities and positive outlook mainly driven by long-term
favourable megatrends in the rail industry. Population growth, urbanization, digitalization and environmental
awareness are expected to lead to growing demand for sustainable public transportation, which requires long-term
public spending in infrastructures and mobility solutions.

The following key indicators are used to monitor the health of the rail market:

INDICATOR

POPULATION
GROWTH AND
MASS
URBANIZATION

ENVIRONMENTAL
AWARENESS

PUBLIC FUNDING

CURRENT SITUATION

STATUS

The worldwide population is expected to grow from approximately 7.7 billion in 2019 to
8.5 billion by 2030 (10% increase compared to 2019) and further to 9.7 billion in 2050 (26%
increase compared to 2019), together with the share of people living in urban areas growing
from 55% in 2018 to 68% by 2050.(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 green mobility solutions. Rail transport is among the most
energy efficient and eco-friendly modes of transport for freight and passengers with rail
operations accounting for only 2% of the transport sector energy use and is responsible for
only 0.3% of direct CO2 emissions.(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

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.

DIGITALIZATION

The rail industry is expecting positive change in the upcoming years due to the digital
industry revolution especially in signalling and maintenance services. Using disruptive
technologies such as Internet of things, automated trains and big data analytics, new
business models are expected to revolve especially towards more service-oriented
approach. To ensure that, original equipment manufacturers should monitor closely the
‘ecosystems’ they serve to meet their future’s needs.

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 United Nations: “World Population Prospects: The 2019 Revision” and “World Urbanization Prospects: The 2018 Revision”.
(2) According to the International Energy Agency IEA (2019), "Tracking Transport".

80 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

In September 2018, The Association of the European Rail Industry (UNIFE) confirmed its positive outlook for the
global rail industry based on expected orders in its World Rail Market Study published every two years. The study
expects the overall accessible rail market(1) to continue to grow with a CAGR of 2.6%.(2) Transportation’s relevant
and accessible market(1) is expected to grow even faster with a CAGR of 2.7%.(2)

Overall, the robust prospect of the rail industry is mainly driven by macroeconomics factors such as liberalization,
which opens markets to private operators and reduces government involvement leading to positive effects such as
cost reduction, increased traffic volumes and growth of rail supply.

Similarly, other initiatives of the European Union Commission such as the Fourth Railway Package in 2016 and
other regulations for technical standards have laid foundation for further improvement of the rail industry signalling
solutions. Other initiatives of the European Commission such as Shift2Rail are set to drive research and
development in all segments especially to enhance passenger experience, safety and interoperability of rail
transportation.

In December 2019, the European Commission introduced the European Green Deal; a growth strategy to achieve
climate neutrality by 2050 and reduce transport gas emissions by 90% through fostering the modal shift to
sustainable transport modes; mainly rail and increasing the efficiency of the transport system with connected
multimodal mobility.

The positive future market outlook is driven by large order volumes for rolling stock, which remains the largest
segment. In particular, consistent future investments in mature rail markets such as Western Europe and North
America are foreseen for modernization and replacement, as well as the expansion of existing rolling stock fleets.

In the signalling segment, the study expects further investments in Western Europe to upgrade and modernize
signalling systems through the European Train Control System (ETCS) national implementation plans across
different countries, which will positively contribute to the growth in this segment and the overall rail market.
Accessible rail control market is also expected to pursue high growth in Africa and Middle East as well as Latin
America, driven by a heavy investment in urban and interurban rail control solutions in response to rapid
urbanization and congestion issues.

The services market is expected to further grow driven by gradual liberalization through private rail operators,
particularly in mature markets. Unlike incumbents, who often perform maintenance and servicing in-house, private
rail operators tend to outsource their maintenance and services needs.

(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 relevant and accessible market also excludes the infrastructure, freight wagon and
shunter segments.

(2) Based on data from UNIFE World Rail Market Study “Forecast 2018 to 2023” published in September 2018, based on 60 countries

representing more than 95% of the world rail market. As large rail projects may significantly impact yearly volume, 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. UNIFE data is updated every two years and is published in euro. An exchange rate of
1€ = $1.1435, the average cumulative exchange rate over the 2017-19 period, was used to convert all figures. Figures for 2017-19 were
extrapolated based on UNIFE data for 2015-17 and 2018-20.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / TRANSPORTATION 81

Source: UNIFE World Rail Market Study “Forecast 2018 to 2023” and extrapolated figures.
*Transportation’s relevant and 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, and excluding the infrastructure, freight wagon and shunter segments.

82 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

awarded to local players without open-bid competition, and excluding the infrastructure, freight wagon and shunter segment.

In line with common industry practice, and the methodology used by UNIFE for the global rail market, our relevant
and accessible market is stated as the average of a three-year period. In certain years, large orders can be
awarded particularly in rolling stock based on the availability of public funding.

Year-over-year comparison by geographical area

Europe
The order volume in Europe during 2019 decreased compared to 2018, mainly due to large contracts awarded last
year for very high-speed trains in France and for signalling in Norway. During 2019, order volume was driven by
several contracts awarded across Western Europe for commuter, regional and intercity trains, primarily in
Germany, France, the U.K. and Italy. In addition, significant orders were awarded for metro trains in France. In
Eastern Europe, orders were mainly driven by investments in mainline mobility solutions, with major contracts for
regional and intercity trains in Poland, Czech Republic and Hungary. Furthermore, sizeable contracts were
awarded for light rail vehicles (LRVs) and metro trains in Poland. Many signalling and services contracts were
awarded across the region with the most significant in Italy and Poland for mainline signalling, and in Germany and
the U.K. primarily for asset life management and fleet management services.

A strong, positive outlook is expected for Europe with significant tenders foreseen for high-speed trains, as well as
commuter and regional trains, in Germany, Spain, the U.K. and France. Multiple large and medium-sized projects
are also foreseen for urban transit mobility solutions across the region, with the most sizeable opportunities
expected in Germany and Turkey for metro cars and France for LRVs. In addition, the services segment is
anticipated to grow with several opportunities for passenger fleet management and asset life management in
Germany, Spain and the U.K. In the signalling segment, mainline signalling is anticipated to be the driver for order
volume, specifically in Germany and Italy. In Eastern Europe, many opportunities are expected across all segments
driven by further investments in freight, urban and mainline infrastructure, particularly in Poland and Turkey.

North America
The North American order volume decreased in 2019 compared to 2018, mainly due to large contracts awarded last
year in the U.S. and Canada for metro trains. In 2019, rolling stock order volume in this region was primarily driven
by tenders awarded for regional and metro trains in the U.S. Several medium-sized signalling and services contracts
were awarded across the region with the most significant orders placed for passenger fleet management for automated
people mover (APM) trains in U.S. airports, as well as for urban signalling solutions for LRVs in Canada.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / TRANSPORTATION 83

Strong growth is forecast in the coming years for North America, fuelled by increasing needs for both urban and
mainline mobility solutions, especially in the U.S. In Canada, significant opportunities for commuter and regional
trains are expected, along with long-term services contracts. In Mexico, urban transit will remain the main driver of
order volume, with large investments expected for metro trains along with long-term services agreements.
Additionally, in Mexico, a sizeable tender is foreseen for very high-speed trains. In the U.S., orders are expected
across all solutions, especially in urban transit for APM trains, monorail and metro trains. Furthermore, large
contracts are anticipated for very-high speed trains, as well for regional and commuter trains. In the signalling and
services segments, several large and medium-sized projects are expected across the region.

Asia-Pacific
In Asia-Pacific, overall order volume in 2019 remained stable compared to 2018. In 2019, the major investments
driving the order volume were mainly rolling stock contracts for metro trains in China, Korea and Singapore, as well
as commuter and regional trains in Australia and Taiwan. Furthermore, many sizeable contracts were awarded for
intercity and very high-speed trains in China and significant signalling contracts were awarded in India and Australia.
In the services segment, Australia was the main driver for orders with many large and medium-sized agreements
awarded, particularly for passenger fleet management.

In the upcoming years, the level of activity in the region is forecast to be strong, with several tenders expected across
all segments, particularly for urban mobility solutions driven by increasing urbanization in the region. The most
significant orders are anticipated for metro trains in India, as well as for commuter and regional trains and LRVs in
Australia. Moreover, many opportunities are expected for metro trains in China, Malaysia and Singapore, as well as
for LRVs in Taiwan and Thailand. A noteworthy project is foreseen for commuter and regional trains in Indonesia.
Significant orders are anticipated to be placed in the signalling and services segments across the region, with the
most sizeable opportunities in Australia, India and Thailand.

Rest of World(1)
In 2019, overall order volume in the Rest of World region increased significantly compared to the 2018 level. The
higher order activity was mainly driven by large contracts for regional and commuter trains awarded in Russia and
for LRVs in Israel. Additionally, a noteworthy large turnkey project was secured in Egypt for monorail trains along with
signalling and long-term services agreements. Significant signalling contracts were also awarded, mainly in Panama
for urban solutions and United Arab Emirates for mainline solutions. In the services segment, the most significant
agreements were awarded for intercity trains and fleet management in Russia and Kazakhstan.

The overall investment outlook in the Rest of Word region is expected to retain its positive trend with multiple
opportunities anticipated in the upcoming years for both mainline and urban mobility solutions to address growing
mobility needs. Large tenders are anticipated for metro trains in Egypt, Panama and Saudi Arabia. In addition, sizeable
contracts are expected to be tendered for LRVs in Israel and Russia. Noteworthy large contracts for commuter trains
are also foreseen to be issued in Colombia and Kenya. In the signalling segment large orders are forecast across the
region particularly in Brazil, Zambia and Egypt. Several services agreements are also expected to be signed with the
largest orders to be placed in Israel, Egypt and Peru.

(1) The Rest of World region includes South America, Central America, Africa, the Middle East and the CIS.

84 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

ANALYSIS OF RESULTS

Results of operations

Revenues
Rolling stock and systems(2)
Services(3)
Signalling(4)
Total revenues
Adjusted EBITDA(5)(6)
Amortization
Impairment charge on PP&E and intangible assets
Adjusted EBIT(5)(6)
Special items
EBIT(5)
Adjusted EBITDA margin(5)(6)
Adjusted EBIT margin(5)(6)
EBIT margin

Fourth quarters
ended December 31
2018
2019

(1)

Fiscal years
ended December 31
2018
2019

(1)

890
587
316
$ 1,793
(196)
$
38
—
(234)
2
(236)
(10.9)%
(13.1)%
(13.2)%

$
$

1,316
562
283
2,161
193
26
—
167
(69)
236
8.9%
7.7%
10.9%

$
$

5,192
2,140
937
8,269
212
139
3
70
48
22
2.6%
0.8%
0.3%

$
$

5,844
2,096
975
8,915
851
101
—
750
(24)
774
9.5%
8.4%
8.7%

(1) Refer to Note 3 - Changes in accounting policies in our Consolidated financial statements, for the impact of the adoption of IFRS 16,

Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.

(2) Comprised of revenues from light rail vehicles, metros, commuter and regional trains, intercity trains, high-speed and very high-speed

trains, locomotives, propulsion and controls, bogies, mass transit and airport systems, and mainline systems.

(3) Comprised of revenues from fleet management, asset life management, component re-engineering and overhaul, material solutions, and

operations and maintenance of systems.

(4) Comprised of signalling revenues from mass transit, mainline, industrial and OPTIFLO service solutions.
(5) Including share of income from joint ventures and associates amounting to $25 million and $94 million, respectively, for the fourth quarter
and fiscal year ended December 31, 2019 ($36 million and $111 million for the fourth quarter and fiscal year ended December 31, 2018).

(6) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics and the

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

Revenues by geographic region

Europe(1)
North America
Asia-Pacific(1)
Rest of World(1)(2)

Fourth quarters ended December 31
2018

2019

Fiscal years ended December 31
2018

2019

957
426
294
116
$ 1,793

53% $ 1,377
330
24%
363
16%
91
7%
100% $ 2,161

64% $ 4,929
15%
1,955
17%
986
4%
399
100% $ 8,269

59% $ 5,522
1,757
24%
1,137
12%
499
5%
100% $ 8,915

62%
20%
13%
5%
100%

(1) The decreases in Europe in the fourth quarter and fiscal year ended December 31, 2019 reflect negative currency impacts of $27 million
and $289 million, respectively. The decreases in Asia-Pacific and in the Rest of World region in the fiscal year reflect negative currency
impacts of $43 million and $13 million, respectively.

(2) The Rest of World region includes South America, Central America, Africa, the Middle East and the CIS.

Revenues
Total revenues for the fourth quarter and fiscal year ended December 31, 2019 have decreased by $368 million
and $646 million, respectively, compared to the same periods last fiscal year. Excluding a negative currency
impacts of $31 million for the fourth quarter and $345 million for the fiscal year, revenues for the fourth quarter
have decreased by $337 million, or 16%, while revenues for the fiscal year have decreased by $301 million, or
3%, compared to the same periods last fiscal year.

The $337-million decrease excluding currency impact for the fourth quarter is mainly explained by:

•

BOMBARDIER INC. / 2019 FINANCIAL REPORT / TRANSPORTATION 85

vehicles (LRVs), very high-speed trains, automated people movers (APMs), intercity trains and high-
speed trains in Europe.

Partially offset by:
•

higher activities in rolling stock and systems in North America, mostly due to ramp-up in production
related to some metro contracts, partially offset by some commuter and regional train contracts nearing
completion;
higher activities in signalling in Asia-Pacific and North America; and
higher activities in services in Europe and North America.

•
•

The $301-million decrease excluding currency impact for the fiscal year is mainly explained by:

•

revised estimates on certain contracts in the U.K., Switzerland and Germany that negatively affect
revenues of rolling stock in Europe in the current year; and
lower activities in rolling stock and systems mostly due to some contracts nearing completion. The
affected contracts mainly relate to commuter and regional trains in Europe and Asia-Pacific, mass transit
systems in the Rest of World region and Asia-Pacific, and intercity trains, very high-speed trains, LRVs
and APMs in Europe. The lower activities in Europe and Asia-Pacific are partially offset by ramp-up in
production related to some metro contracts.

Partially offset by:
•
•

higher activities in services in Europe, North America and Asia-Pacific; and
higher activities in rolling stock and systems in North America, mostly due to ramp-up in production
related to some LRV and metro contracts, partially offset by some APM contracts nearing completion.

The special items recorded as losses (gains) in EBIT were as follows:

Restructuring charges
Impairment of non-core operations
Purchase of pension annuities
Pension equalization
Gains on disposal of PP&E under sale and
leaseback transactions

EBIT margin impact

Ref
1
2
3
4

Fourth quarters
ended December 31
2018
2019
(6)
2
—
—
—
—
3
—

—
2
(0.1)%

(66)
(69)
3.2%

Fiscal years
ended December 31
2018
2019
10
48
17
—
12
—
3
—

—
48
(0.5)%

(66)
(24)
0.3%

1. Represents severance charges related to previously-announced restructuring actions of $61 million for the
fiscal year ended December 31, 2019, partially offset by curtailment gains of $5 million and reversals of
previously-recorded asset write-downs of $8 million recognized in previous quarters.

For the fiscal year ended December 31, 2018, represents severance charges of $6 million and asset write-
downs of $8 million, partially offset by curtailment gains of $4 million, all related to previously-announced
restructuring actions.

2. Represents an impairment charge related to non-core operations with respect to the sale of legal entities as

part of our transformation plan.

3. Represents the non-cash loss on the settlement of defined benefit pension plans resulting from the purchase
of annuities with insurance companies. As part of its ongoing de-risking strategies, the Corporation has an
initiative for the buy-out of annuities payable to pensioners or deferred pensioners for certain plans to the
extent they are fully funded on a buy-out basis, subject to compliance with certain conditions including
applicable pension legislations.

86 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

4. On October 26, 2018, the High Court in the United Kingdom ruled that pension schemes must equalize for the

effect of unequal Guaranteed Minimum Pensions between male and female for benefits earned during
specified periods (“GMP equalization”). The Corporation estimated the impact of the ruling on its pension
plans and recognized an additional obligation of $3 million for the fourth quarter and the fiscal year ended
December 31, 2018. The one-time P&L impact was recognized in the fourth quarter of 2018 as a past service
cost under IAS 19 - Employee Benefits.

5. Represents the impact from sale and leaseback of two facilities in line with our transformation plan.

EBIT margin
The adjusted EBIT margin(1) for the fourth quarter decreased by 20.8 percentage points, mainly as a result of:
lower margin in rolling stock and systems, mainly due to revised estimates on certain contracts in the
U.K., Switzerland and Germany; and
higher R&D expenses.

•

•
Partially offset by:
•

higher margin in services, mainly due to a positive impact from revised estimates on certain
contracts; and
higher margin in signalling, mainly due to a favourable contract mix.

Including the impact of special items (see explanation of special items above), the EBIT margin for the fourth
quarter decreased by 24.1 percentage points, compared to the same period last year.

The adjusted EBIT margin(1) for the fiscal year decreased by 7.6 percentage points, mainly as a result of:

lower margin in rolling stock and systems, mainly due to revised estimates on certain contracts in the
U.K., Switzerland and Germany in the fourth quarter;
lower margin in signalling, mainly due to revised estimates on certain contracts; and
higher R&D expenses.

•
•
Partially offset by:
•

a positive impact of a pension amendment related to past service recorded in the first quarter
of 2019; and
higher margin in services, mainly due to a positive impact from revised estimates on certain contracts.

•

Including the impact of special items (see explanation of special items above), the EBIT margin for the fiscal year
decreased by 8.4 percentage points, compared to the same period last year.

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

Significant orders in 2019 for all segments resulting in book-to-bill of 1.2

Order backlog

(in billions of dollars)
Balance at the beginning of period

Order intake
Revenues
Foreign currency impact and other adjustments

Balance at the end of period
Book-to-bill ratio(2)

Fourth quarters
ended December 31
2018
2019
33.9
35.1
3.3
1.8
(2.2)
(1.8)
(0.5)
0.7
34.5
35.8
1.5
1.0

Fiscal years
ended December 31
2018
2019
35.1 (1)
34.5
9.9
10.0
(8.9)
(8.3)
(1.6)
(0.4)
34.5
35.8
1.1
1.2

$
$
$
$
$

(1) Backlog as at December 31, 2017 was restated due to the adoption of IFRS 15, Revenue from contracts with customers.
(2) Ratio of new orders over revenues.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / TRANSPORTATION 87

ORDER INTAKE BY SEGMENT
(for fiscal years; in billions of dollars)

ORDER BACKLOG BY SEGMENT
(for fiscal years; in billions of dollars)

ORDER INTAKE BY REGION
(for fiscal years; in billions of dollars)

ORDER INTAKE AND BOOK-TO-BILL RATIO
(for fiscal years)

* Backlog as at December 31, 2017 was restated due to the adoption

of IFRS 15, Revenue from contracts with customers.

* 2017 revenue was restated during fiscal year ended

31 December 2018 due to the adoption of IFRS 15, Revenue from
contracts with customers.

We have obtained several significant orders during the year which resulted in a book-to-bill ratio(1) of 1.2. The
contribution of services and signalling to our order intake has increased over the past three years from 32% in
fiscal year ended December 31, 2017, to 61% in fiscal year ended December 31, 2019, improving the quality of
our backlog. We maintained a leading position(2) in our relevant and accessible rail market(3) with a cumulative
order intake of $30.1 billion over the past three years, including a higher share of orders in the Rest of World
region, mostly driven by the contract signed with National Authority of Tunnels (NAT) in Cairo, Egypt, in the third
quarter of 2019.

(1) Ratio of new orders over revenues.
(2) Based on a rolling 36-month order intake with latest data published by companies publishing order intake for at least 36 months.
(3) Our relevant and 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, and excluding the infrastructure, freight wagon and shunter segments.

88 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

The significant orders obtained during the fiscal year ended December 31, 2019 were as follows:

Customer

Country

Product or service

Number
of cars

Market
segment

Value

(1)

Fourth quarter

Port Authority of New York and
New Jersey (PANYNJ)

U.S.

Extension of operations and
maintenance (O&M) services

N/A Services

$ 309

Régie Autonome des Transports
Parisiens (RATP), on behalf of Île-
de-France Mobilités

France

Metro cars

105

Rolling stock

and systems

$ 280

(2)

Transport for London (TfL)

FirstGroup and Trenitalia

Third quarter

U.K.

Extension of Train Services
Agreement

N/A Services

Train Services Agreement

N/A Services

$ 240

$ 154

National Authority for Tunnels
(NAT)

Egypt

INNOVIA 300 Monorail system
and trains, CITYFLO 650
signalling and automatic train
control technology and O&M
services

Undisclosed

Asia-Pacific Undisclosed

North
America

Undisclosed

280

Rolling stock

and systems,
Signalling,
and Services

$ 2,640

(3)

N/A Rolling stock

and systems

$ 247

N/A Services

$ 247

Dresdner Verkehrsbetriebe (DVB) Germany

FLEXITY trams, FlexCare
maintenance management
system and Obstacle Detection

Rolling stock

and systems,
and Services

Abellio UK and
Eversholt Rail Ltd.

Undisclosed

Second quarter

U.K.

Train Services Agreement

N/A Services

Europe

North
America

Undisclosed

N/A Services

N/A

Rolling stock

and systems

$ 219

$ 161

$ 106

$ 104

Trenitalia

Italy

City and County of San Francisco U.S.

Israel Railways (ISR)

Israel

Frecciarossa 1000 very high-
speed trains (derived from
V300ZEFIRO platform) and
related maintenance services

O&M services for INNOVIA
Automated People Mover
(APM) 100 system

Exercise of a call-off for
TWINDEXX Vario double-deck
coaches

Undisclosed

First quarter

Asia-Pacific Undisclosed

112

Rolling stock

and systems,
and Services

$ 261

(4)

N/A Services

$ 220

Rolling stock

and systems

$ 166

N/A

Rolling stock

and systems

$ 101

New Jersey Transit Corporation
(NJ TRANSIT)

U.S.

Multilevel III commuter rail cars

113

Rolling stock

and systems

$ 669

Queensland Government

Australia

Modifications and redesign of
the New Generation
Rollingstock (NGR) trains and
related maintenance services

N/A

Rolling stock

and systems,
and Services

$ 255

Eurotunnel

France

Refurbishment services of nine
passenger shuttle trains

N/A Services

$ 171

(1) Contract values exclude price escalation.
(2) Contract signed as part of a consortium with Alstom. The total contract is valued at $593 million, and only our share of the contract is stated
above.
(3) Contract signed as part of a consortium with Orascom Construction PLC and Arab Contractors. The total contract is valued at $4.16 billion,
and only our share of the contract is stated above.
(4) Contract signed in partnership with Hitachi Rail SpA. The total contract is valued at $643 million, and only our share of the contract is stated
above.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / TRANSPORTATION 89

During the fourth quarter and fiscal year ended December 31, 2019, the following significant order was awarded
to our joint venture, which is not included in our backlog since it is a joint venture:

• Our Chinese joint venture Bombardier Sifang (Qingdao) Transportation Ltd. (BST), in which we own 50%
of the shares and which is consolidated by our partner CRRC Sifang Rolling Stock Co. Ltd., was awarded
a contract for the supply of 160 CR400AF new Chinese standard high-speed train cars from China State
Railway Group Co. Ltd., China, valued at $427 million.

Subsequent to the end of the fiscal year, our Chinese joint venture BST, in which we own 50% of the shares and
which is consolidated by our partner CRRC Sifang Rolling Stock Co. Ltd., was awarded a contract to provide
maintenance services for 656 high-speed train cars from China State Railway Group Co. Ltd., China, valued at
$357 million. This order is not included in our backlog since it is a joint venture.

Workforce

Total number of employees

Permanent(1)

Contractual

Percentage of permanent employees covered by collective agreements

December 31, 2019

December 31, 2018

As at

31,750

4,300

36,050

66%

35,050

5,600

40,650

62%

(1) Including 950 inactive employees as at December 31, 2019 (900 inactive employees as at December 31, 2018).

WORKFORCE BY GEOGRAPHIC REGION
(as at)

We continue to proceed with the deployment of our
transformation initiatives with the goal of delivering
increased value to customers and shareholders.
These initiatives aim at improving productivity,
setting up and exploring new partnerships and
optimising our production and engineering worldwide
footprint, while streamlining our administrative and
non-production functions across the organization.

In 2019, the overall number of employees has
decreased by 11%, or 4,600 employees, worldwide,
as a result of these initiatives.

Both our permanent and our contractual workforce
has decreased in all regions. While workforce in
Europe decreased mostly as a result of optimisation
and restructuring actions in line with our
transformation plan, the decrease in our workforce in
North America and Asia-Pacific also reflects the
impact from ramp-down of production following the
completion of some large contracts.

Our global incentive-based employee compensation rewards the collective and personal efforts of our employees
in achieving our objectives, using performance indicator targets. At the end of 2019, a total of 2,100 employees
worldwide, or 6.6% of permanent employees, were eligible to participate in the program. In 2019, as part of this
program, incentive-based compensation was linked to the achievement of targeted results, based on adjusted
EBIT and free cash flow.(1)

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

90 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

OTHER

Table of Contents

OFF-BALANCE
SHEET
ARRANGEMENTS

RISKS AND
UNCERTAINTIES

ACCOUNTING
AND REPORTING
DEVELOPMENTS

FINANCIAL
INSTRUMENTS

RELATED
PARTY
TRANSACTIONS

CRITICAL
JUDGMENTS
AND
ACCOUNTING
ESTIMATES

114

116

117

118

CONTROLS AND
PROCEDURES

FOREIGN
EXCHANGE
RATES

SHAREHOLDER
INFORMATION

SELECTED
FINANCIAL
INFORMATION

QUARTERLY
DATA
(UNAUDITED)

HISTORICAL
FINANCIAL
SUMMARY

124

125

126

127

128

129

OFF-BALANCE SHEET ARRANGEMENTS

Working capital financing initiatives

The Corporation engages in certain working capital financing initiatives which impact cash flows from operating
activities such as the sale of receivables (refer to Note 16 - Trade and other receivables, to the consolidated
financial statements, for more details), arrangements for advances from third parties (refer to Note 17 - Contract
balances, to the consolidated financial statements, for more details), and the negotiation of extended payment
terms with certain suppliers (refer to Note 25 - Trade and other payables, to the consolidated financial statements,
for more details).

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 6 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.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 91

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 8 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 43 – Commitments and contingencies, to the consolidated financial statements.

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. Aviation 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. The aircraft serve as collateral for
the entities’ long-term debt.

For more details, refer to Note 42 – Unconsolidated structured entities, to the consolidated financial statements.

92 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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, results of operations and reputation, 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, results of operations and reputation could be materially adversely
affected.

OPERATIONAL
RISK

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 awarding of
new contracts, book-to-bill ratio and order backlog, 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, productivity enhancements, operational efficiencies
and restructuring initiatives, and actions of business partners, our ability to move forward and complete
challenging Transportation projects and release working capital therefrom within the timeframe
anticipated, 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 and contracts, suppliers (including supply chain management) and
human resources. We are also subject to risks related to reliance on information systems, reliance on
and protection of intellectual property rights, reputation risks, risks of impairments and asset write-
downs, risk management, tax matters and adequacy of insurance coverage.

FINANCING 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.

GENERAL
ECONOMIC RISK

General economic risk is the risk of potential loss due to unfavourable economic conditions. These
factors include, but are not limited to, 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

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, global climate change,
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.

MARKET RISK

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.

Operational risk

Delays in achieving technical milestones and execution of production ramp-up on certain Transportation projects
resulted in charges in the fourth quarter of 2019; while the Corporation has undertaken actions and initiatives to
move forward and complete such projects (including having entered into commercial negotiations with customers
to reset schedules, resolve late delivery penalties, and address related provisions and costs), there can be no
assurances that it will be successful in these negotiations, or that the outcome of any such actions, initiatives or
negotiations will have the intended effect, within the anticipated timeframe or at all. The timing of cash inflows
from milestone payments on large Transportation projects and the later-than-anticipated closing of certain orders
and call-offs resulted in lower-than-anticipated free cash flow for the fourth quarter of 2019; there can be no
assurance that the free cash flow shortfall will be recovered, in part or at all, in 2020 or later, or that free cash flow
shortfalls will not be incurred again in the future; moreover, any recovery will be offset by the cash flow impact of

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 93

the incremental costs recognized in the fourth quarter adjustments at Transportation. Transportation’s ability to
move forward and complete such challenging projects within the anticipated timeframe is key to return to stronger
financial performance. Any subsequent failure by Transportation to meet delivery or other contractual schedules
or performance requirements or to execute projects efficiently may increase the volatility and unpredictability of
revenue and profitability.

The Pending Transactions may be delayed or may not be completed

Completion of each of the Pending Transactions is subject to the receipt of required regulatory approvals. There is
no certainty, nor can the Corporation provide any assurance, that these conditions will be satisfied or, if satisfied,
when they will be satisfied.

A substantial delay in obtaining regulatory or other approvals or the imposition of unfavourable terms or conditions
in the approvals could have a material adverse effect on the Corporation’s ability to complete the relevant Pending
Transactions. If closing of any of the Pending Transactions does not take place as contemplated, the Corporation
could suffer adverse consequences on its business, financial condition or results of operations, including the loss of
investor confidence in connection with the Corporation’s ability to execute its strategic plan. In addition, failure to
complete any of the Pending Transactions for any reason could materially negatively impact the market price of the
Corporation’s securities.

If one or more Pending Transactions are not completed, we may undertake various other financing initiatives intended
to solidify our liquidity position, and we plan to continue to explore various initiatives such as certain business activities’
potential participation in industry consolidation to strengthen our balance sheet and enhance shareholder value.

Developing new products and services

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, as
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.

94 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Business development and awarding of new contracts

Our businesses are dependent on obtaining new orders and customers, thus continuously replenishing our order
backlog. Our results may also 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. 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.

In addition, fluctuating demand cycles are common in the industries in which we operate and can have a
significant impact on the degree of competition for available projects and the awarding of new contracts. As such,
fluctuations in demand or the ability of the private and/or public sector to fund projects in a depressed economic
climate could adversely affect the awarding of new contracts and margin and thus our financial results.

A substantial portion of our revenue and profitability is generated from large-scale project awards. The timing of
when project awards will be made is unpredictable and outside of our control. We operate in highly competitive
markets where it is difficult to predict whether and when we will receive awards since these awards and projects
often involve complex and lengthy negotiations and bidding processes. These processes can be impacted by a
wide variety of factors including governmental approvals, financing contingencies, commodity prices,
environmental conditions and overall market and economic conditions. In addition, we may not win contracts that
we have bid upon due to price, a customer's perception of our reputation, ability to perform and/or perceived
technology or other advantages held by competitors. Our competitors may be more inclined to take greater or
unusual risks or accept terms and conditions in a contract that we might not otherwise deem market or
acceptable. Furthermore, we may incur significant costs in order to bid on certain projects that may not be
awarded to us, thus resulting in expenses that did not generate any profit for us.

Our estimates of future performance depend on, among other matters, whether and when we receive certain new
contracts, including the extent to which we utilize our workforce. The rate at which we utilize our workforce is
impacted by a variety of factors including: our ability to manage attrition; our ability to forecast our need for
services which in turn allows us to maintain an appropriately sized workforce; our ability to transition employees
from completed projects to new projects or between internal business groups; and our need to devote resources
to activities such as training or business development. While our estimates are based upon our good faith
judgment, these estimates can be unreliable and may frequently change based on newly available information. In
the case of large-scale projects where timing is often uncertain, it is particularly difficult to predict whether and
when we will receive a contract award. The uncertainty of contract award timing can present difficulties in
matching our workforce size with our contract needs. If an expected contract award is delayed or not received, or
if an ongoing contract is cancelled, we could incur costs resulting from reductions in staff or redundancy of
facilities that would have the effect of reducing our operational efficiency, margins and profits.

Our order book-to-bill ratio and our order backlog may not be indicative of future revenues

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. Backlog represents management’s estimate of the aggregate amount of the
revenues expected to be realized in the future from partially or fully unsatisfied performance obligations as at
December 31, 2019 as we perform under contracts at delivery or over time. Such orders may be subject to future
modifications that might impact the amount and/or timing of revenue recognition. Backlog does not include
constrained variable consideration, unexercised options or letters of intent. 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 and applicable construction and technical standards. The
termination, modification, delay, suspension or reduction in scope of any one or more major contracts may have a
material and adverse effect on future revenues and profitability. We cannot guarantee that the revenues initially
anticipated in our new orders will be realized in full, in a timely manner, or at all, or that, even if realized, such
revenues will result in profits or cash generation as expected, and any shortfall may be significant. The
materialisation of any of the risks described above could have a material adverse effect on our business, financial
condition, cash flows and results of operations.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 95

In addition, many of our contracts contain “termination for convenience” provisions, which permit the customer
terminate or cancel the contract at its convenience upon providing us with notice a specified period of time before
the termination date and/or paying us equitable compensation, depending on the specific contract terms. In the
event a significant number of customers were to avail themselves of such “termination for convenience”
provisions, or if one or more significant contracts were terminated for convenience, our reported backlog would be
adversely affected with a corresponding adverse impact on expected future revenues and profitability.

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 EIS 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. 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. Generally, we cannot terminate contracts unilaterally.
We are exposed to risks associated with these fixed-price contracts, including specification modifications and
change orders demanded by customers, increasing regulatory requirements in relation to certification or
homologation, unexpected technological problems, difficulties with partners, subcontractors and suppliers,
logistical difficulties and other execution issues that could lead to cost and time overruns, late delivery penalties
and liquidated damages payments, postponement or delays in contract execution or delays in receiving milestone
payments. 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 restructuring of milestones and milestone payments, 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, 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. 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-making contracts.

96 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Operational challenges impacting the production system for one or more of our programs could result in
production delays and/or failure to meet customer demands, which would adversely affect our revenues and
margins. Our production systems are extremely complex. Operational issues, including delays or defects in
supplier components, failure to meet internal performance plans, or delays or failures to achieve required
regulatory certifications or homologations, could result in significant out-of-sequence work and increased
production costs, as well as delayed deliveries to customers, impacts to product performance and/or increased
warranty or support costs. We may also incur late delivery penalties if we are unable to increase production rates
sufficiently quickly to meet our commitments.

Moreover, due to the nature of the bidding process, long-term contract revenues are based, in part, on significant
judgments and 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. Because of the significance of our judgments and estimates described above, materially different
revenues and profit margins could be recorded if we used different assumptions or if the underlying circumstances
were to change. Changes in underlying assumptions, circumstances or estimates may adversely affect our future
period financial performance.

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. However, the third-party advance providers could request repayment of these amounts if Transportation
fails to perform its contractual obligations, such as delivery by a specified date. In such a case, there can be no
assurance that Transportation will be successful in negotiating an extension with third-party advance providers.
These repayment obligations are secured by external guarantees.

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 and bonds. 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

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 97

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.

Seasonality and cyclicality of financial results

Our cash flows are, to a certain degree, subject to periodic fluctuations and we expect a disproportionate amount
of our cash flows from operations to be received or paid by us during our third and fourth quarter, and frequently
in the last weeks of a given 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 and annual results can be
affected by these periodic fluctuations, including as a result of timing variations that could push cash flows from
one quarter to another.

Because a significant portion of our revenue is generated from large, complex, long-term projects with sculpted
milestone payments, our results of operations can fluctuate significantly from quarter to quarter and year to year
depending on whether and when project awards occur and the commencement and progress of work under
awarded contracts. In addition, our customers may demand specification modifications, or change orders,
milestones, milestone payments or delivery schedules. Given the cyclical nature of the industries in which we
operate, our financial results, like others in such industries, may be impacted in any given period by a wide variety
of factors beyond our control, and as a result there may, from time to time, be significant and unpredictable
variations in our quarterly and annual financial results such that any historical results should not be considered
indicative of the results to be expected for any future period.

Deployment and execution of strategic initiatives related to cost reductions and working capital
improvement

In 2015, the Corporation launched its five-year turnaround 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 timing of the deployment and in the planned value to be achieved. In early 2020, consistent
with this plan, and following a comprehensive review of strategic alternatives, the Corporation indicated it was
actively pursuing options to strengthen its balance sheet and enhance shareholder value. The timing and
magnitude of the specific initiatives and associated benefits, if any, could be affected by a multitude of external
and internal factors including, but not limited to: the evolution of the demands and requirements of our
businesses, variations in planned production volumes and schedules, the outcome of negotiations with suppliers
and unions, changing legislation, changes in socio-economic conditions in the countries in which we operate,
evolutions in the labour 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 a material adverse
impact on our business activities, financial condition, profitability and outlook.

We may not be able to successfully execute our manufacturing strategy and productivity
enhancement initiatives

One of the priorities of the strategic plan and transformation initiatives established by management consists of
sustained efforts in the areas of cost reduction and productivity enhancement / operational efficiencies. This
priority aims in part at leveraging the strength of our engineering and manufacturing centres of excellence. In
addition, our cost reduction and operational efficiencies / productivity enhancement efforts also focus on further
implementing and leveraging our standardized product and service platforms. We believe that flexible

98 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

manufacturing is the key element to enable improvements in our ability to respond to customers in a cost-effective
manner. Our success in implementing this priority of our strategic plan is dependent on the involvement of
management, production employees and suppliers. Any failure to achieve cost reduction and operational
efficiencies / productivity enhancement priorities (including the anticipated levels of productivity and operational
efficiencies) in our manufacturing facilities, could have a material 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 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.

The failure by a business partner to comply with applicable laws, rules or regulations, or contract requirements,
could negatively impact our business and, in the case of government contracts, could result in fines, penalties,
suspension or even debarment being imposed on us, which could have a material adverse impact on our
reputation, business, financial condition and results of operations.

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, if possible, 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. 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.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 99

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.

Given our size, investigations, claims and lawsuits seeking damages and other relief are regularly threatened or
pending against us. We are, and 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. These matters may divert financial and management resources
that would otherwise be used to benefit our operations, and the cost to defend litigation may be significant.
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.
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. There also may be adverse publicity associated with
litigation, including without limitation litigation related to product safety, which could negatively affect the public
perception of our business or reputation, regardless of whether the allegations are valid or whether we are
ultimately found liable. As a result, litigation could materially adversely affect our business and financial results.

In addition, as part of the regulatory and legal environments in which we operate, we are subject to anti-bribery
laws that prohibit improper payments directly or indirectly to government officials, authorities or persons defined in
those anti-bribery laws in order to obtain business or other improper advantages in the conduct of business.
Notably, sales to foreign customers are subject to such laws. Pursuant to such laws, a company may be found
liable for violations resulting not only from actions of certain of its employees, but also in certain circumstances
from actions of its contractors and third party agents.

Our Code of Ethics and other corporate policies mandate compliance with these laws and regulations and we
have implemented training programs, internal monitoring and controls, and reviews and audits to ensure
compliance with such laws. However, there can be no assurance that our internal control policies and procedures
will protect us from recklessness, fraudulent behaviour, dishonesty or other inappropriate behaviour on the part of
our employees, contractors, suppliers, affiliates, consultants, agents, and/or partners. Misconduct or failure by our
employees, contractors, suppliers, affiliates, consultants, agents, and/or partners to comply with anti-bribery laws
and other applicable laws and regulations could impact Bombardier in various ways that include, but are not
limited to, criminal, civil and administrative legal sanctions, debarment from bidding for or performing government
contracts, and negative publicity, and could have a negative effect on our business, reputation, results of
operations, profitability, share price and financial condition. In recent years, there has been a general increase in
both the frequency of enforcement and the severity of penalties under such laws, resulting in greater scrutiny of
and punishment to companies convicted of violating anti-corruption and anti-bribery laws. See also “Supply chain
risks” below.

Also refer to Note 43 – Commitments and contingencies to our consolidated financial statements.

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 and safety risks arising
from the exposure to hazardous or toxic materials or defective products 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, including our disposal of hazardous wastes at third party
sites. These laws and regulations may cause us to incur costs, including fines, damages, criminal or civil
sanctions and remediation costs, or experience interruptions in our operations, and may negatively impact the
market for our products.

100 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Environmental, health and safety regulatory requirements, or enforcement thereof, may become more stringent in
the future and we may incur additional costs to be compliant with such future requirements or enforcement. 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 limited number of contracts and customers

In any given period, a limited number of contracts or customers may account for a significant portion of our
revenues and cash flows for some of our products. Although we constantly seek to expand our customer base, we
believe that revenues and results for any given period may continue to be significantly affected by a limited
number of contracts or customers due to the nature of some of our products. Consequently, the loss of such a
customer or changes to their orders, milestones, milestone payments, cancellation of all or a portion of their
contract, or significant operational risk materializing in one or several large contracts could result in fewer sales
and/or a lower market share, and may have a material adverse impact on our business, results, cash flows and
financial position. 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.

Supply chain risks

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. We may not be able to recover any costs or
liability we incur (including liability to our customers) as a result of any such failure from the applicable supplier,
which could have a material adverse effect on our financial condition and results of our operations.

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, if possible, could be costly and take a significant amount of time.

Our dependence on foreign suppliers and subcontractors and our global operations subject us to a variety of risks
and uncertainties. All of our direct suppliers must comply with our Supplier Code of Conduct, which formalizes our
expectations with respect to suppliers’ business standards, and is designed to ensure that each of our suppliers’
operations are conducted in a legal, ethical, and responsible manner. However, we do not control our independent
suppliers or those indirect suppliers and companies with whom they do business and cannot guarantee their
compliance with our Supplier Code of Conduct and with applicable laws and regulations or that violations will be
reported to us in a timely manner. Any violation of applicable laws and regulations or failure to use ethical
business practices by one or more third-party subcontractors or suppliers, including laws and regulations related
to, among other things, labour practices, health and safety, and environmental protection, could also materially
adversely affect our business and reputation and, in the case of government contracts, could result in fines,
penalties, suspension or even debarment being imposed on us.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 101

Human resources (including collective agreements)

Our senior executives have extensive experience in the industries in which we operate and with our business,
suppliers, products and customers. The loss of management knowledge, expertise and technical proficiency as a
result of the loss of one or more members of our core management team could result in a diversion of
management resources or a temporary executive gap, and negatively affect our ability to develop and pursue
other business strategies, which could materially adversely affect our business and financial results.

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,
walkouts 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 and could adversely affect our financial condition and results.

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 affected facilities.

Reliance on information systems

Like those of other large multinational companies, our technology systems may be vulnerable to a variety of
sources of failure, interruption or misuse, including by reason of natural disasters, cyberattacks and cybersecurity
threats, network communication failures, computer viruses and other security threats to the confidentiality,
availability and integrity of our systems. Information security risks have increased in recent years due to the
proliferation of new technologies and the increased sophistication of perpetrators of cyberattacks.

Information contained in our systems include proprietary or sensitive information on our customers, suppliers,
partners, employees, business information, research and development activities and our intellectual property.
Unauthorized third parties may be able to penetrate our network security and misappropriate or compromise our
confidential information, deploy viruses, worms and other malware or phishing that would exploit any security
vulnerabilities in our management information systems, create system disruptions or cause machinery or plant
shutdowns. Such attacks could potentially lead to the publication, manipulation or leakage of information,
improper use of our systems, defective products, production downtimes, and supply shortages. Our partners and
suppliers also face risks of unauthorized access to their information systems which may contain our confidential
information. The Cyber Security, Risk and Compliance team, under the direction of the Global CIO, and reporting
to the Finance and Risk Management Committee of the Board of Bombardier, supervises and maintains technical
and process controls, enforcement and comprehensive monitoring of systems and networks designed to prevent,
detect and respond to unauthorized activity in our systems. Considering the complexity and evolving nature of the
threats, as well as the unpredictability of the timing, nature and scope of disruptions from such threats, we cannot
ensure that the measures taken will be sufficient to counter any such unauthorized access to information systems,
nor that our assessment and mitigation measures are sufficient to avoid, or mitigate the impact of, a system
failure.

102 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

The integrity, reliability and security of information in all forms are critical to our success. Inaccurate, incomplete or
unavailable information and/or inappropriate access to information could lead to incorrect financial and/or
operational reporting, poor decisions, delayed reaction times to the resolution of problems, privacy breaches and/
or inappropriate disclosure or leaking of sensitive information. Any system failure, cyberattack or a breach of
systems could result in disruption of activities and operational delays, information losses, significant remediation
costs, increased cyber security costs, lost revenues due to a disruption of activities, diminished competitive
advantage and/or litigation and reputational harm affecting customer and investor confidence, which could
materially adversely affect our business, financial condition, and results of our operations. Material losses may be
incurred related to the foregoing beyond the limits or outside the coverage of current insurance and existing
provisions for such losses may not be sufficient to cover the ultimate loss or expenditure. Furthermore, media or
other reports of perceived security vulnerabilities of our systems, even if no breach has been attempted or had
occurred, could adversely impact our brand and reputation and materially impact our business and financial
results.

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 the 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.

Reputation risks

Reputational risk may arise under many situations including, among others, quality or performance issues on our
projects, product safety issues, a poor health and safety record, failure to maintain ethically and socially
responsible operations, or alleged or proven non-compliance with laws or regulations by our employees, agents,
subcontractors, suppliers and/or partners. Any negative publicity about, or significant damage to, our image and
reputation could have an adverse impact on customer perception and confidence and may cause the cancellation
of current projects and influence our ability to obtain future projects, which could materially adversely affect our
business, results of operations and financial condition. Also, the pervasiveness and viral nature of social media
could exacerbate any negative publicity with respect to our business practices and products.

Furthermore, any unethical conduct by a supplier or subcontractor or any allegations, whether or not founded, of
unfair or illegal business practices by a supplier or subcontractor, including production methods, labour practices,
health and safety and environmental protection, could also materially adversely affect our image and reputation,
which could in turn materially adversely affect our business and financial results.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 103

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 at acceptable levels and costs in the future, which could materially and adversely affect our
business, financial condition and results of 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.

Risk management policies, procedures and strategies

We have devoted significant resources to develop our risk management policies, procedures and strategies and
expect to continue to do so in the future. Nonetheless, our policies, procedures and strategies may not be
comprehensive. Many of our methods for identifying, analyzing and managing risk and exposures are based upon
risk management processes that are embedded in governance and activities of each reportable segment,
focusing on all stages of the product development process. Risk management methods depend upon the
evaluation and/or reporting of information regarding product development, product management, industry
outlooks, markets, customers, project execution, catastrophe occurrence or other matters publicly available or
otherwise accessible to us. This information may not always be accurate, complete, up-to-date or properly
evaluated or reported.

Tax matters and changes in tax laws

As a multinational company conducting operations through subsidiaries in multiple jurisdictions, we are subject to
income and other taxes, tax laws and fiscal policies in numerous jurisdictions. Our effective income tax rate in the
future could be adversely affected as a result of a number of factors, including changes in the mix of earnings in
countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes
in tax laws, treaties or regulations or their interpretation, and the outcome of income tax audits in various
jurisdictions around the world.

We regularly assess all of these matters to determine the adequacy of our tax liabilities. In determining our
provisions for income taxes and our accounting for tax-related matters in general, we are required to exercise
judgment. We regularly make estimates where the ultimate tax determination is uncertain. There can be no
assurance that the final determination of any tax audit, appeal of the decision of a taxing authority, tax litigation or
similar proceedings will not be materially different from that reflected in our historical financial statements. The
assessment of additional taxes, interest and penalties could be materially adverse to our current and future
results of operations and financial condition.

Our Canadian and foreign entities undertake certain operations with other currently existing or new subsidiaries in
different jurisdictions around the world. The tax laws of these jurisdictions, including Canada, have detailed
transfer pricing rules that require that all transactions with non-resident related parties be priced using arm’s
length pricing principles. The taxation authorities in the jurisdictions where we carry on business could challenge
our arm’s length related party transfer pricing policies. International transfer pricing is a subjective area of taxation
and generally involves a significant degree of judgment. If any of these taxation authorities were to successfully
challenge our transfer pricing policies, our income tax expense may be adversely affected and we could also be
subjected to interest and penalties. Any such increase in our income tax expense and related interest and
penalties could have a material adverse effect on our business, results of operations or financial condition.

104 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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 certain working capital financing initiatives
such as the sale of receivables, arrangements for advances from third parties and the negotiation of extended
payment terms with certain suppliers 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.

The Corporation also routinely reviews its debt profile with a view to managing or extending maturities and/or
negotiating more favourable terms and conditions with respect to its bank facilities. The Corporation also routinely
reviews the terms and conditions of its bank facilities and seeks annual extensions of the availability periods
thereunder.

From time to time, we undertake various financing initiatives to solidify our liquidity position. We plan to continue
to explore various 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.

There can be no assurance that our expected cash flows from operating activities, combined with available short-
term capital resources 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.

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, changes in our outlook or guidance, significant changes in market interest rates or general economic
conditions or an adverse perception by banks 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, including any
announcement that our ratings are under further review for a downgrade, 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.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 105

Retirement benefit plan risk

We are required to make contributions to a number of pension plans, some 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.

Despite all of these risks, as a result of the risk mitigation measures we have implemented over the years, the
employer contributions to our pension plans have been very stable from one year to another (within $320 million -
$375 million range) since 2015. Refer to the Retirement benefits section in Overview of the MD&A for more
details.

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;

106 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

• 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.

We have various debt maturities ranging between 2021 and 2034, and we cannot provide assurance that this
indebtedness will be refinanced on favourable terms or at all.

For more information regarding our long-term debt, see Note 29 - Long-term debt, to our consolidated financial
statements.

Restrictive debt covenants

The indentures governing certain of our indebtedness, revolving credit facility and letter of credit facility 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.

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.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 107

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.

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. 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
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.

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, an 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.

Brexit

On June 23, 2016, a referendum took place whereby British citizens voted to exit the European Union, commonly
known as “Brexit”. On January 31, 2020, the U.K. formally left the European Union and has entered into a
transition or implementation period lasting until December 31, 2020.

Bombardier could be impacted by Brexit in both our aerospace and rail businesses. In 2019, 42% of our
revenues were generated in Europe, of which 22% was generated in the U.K. Brexit could result in increased
geopolitical and economic risks and could cause disruptions to and create uncertainty surrounding our
businesses, including affecting our relationships with existing and future customers, suppliers and employees,
which could in turn have an adverse effect on our financial results and operations. There could also be greater
restrictions on imports and exports between the U.K. and European Union countries and could also result in
increased regulatory complexities.

108 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

The announcement of Brexit caused significant currency exchange fluctuations. The U.S. dollar strengthened
against other currencies, particularly the pound sterling and the euro. Our revenues are denominated mainly in
U.S. dollars for aircraft sales and mainly in euro and other currencies for our rail business. The strengthening of
the U.S. dollar relative to these other currencies could adversely affect our results of operations, particularly in the
rail business, where a potential devaluation of the local currency or of the euro relative to the U.S. dollar coupled
with potential increased inflation risk, may expose us to losses and could impair our customers’ purchasing power.

Business environment risk

Financial condition of business aircraft customers and of the airline industry

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.

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.

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 fractional ownership or charter operator or
commercial airline 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.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 109

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, price or
exchange controls as well as potential changes to free trade arrangements 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

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. 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.

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 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, all of which could have a material adverse effect on our business, financial
condition, cash flows and results of operations.

110 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Force majeure

Force majeure events 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.

Global climate change

Global climate change could exacerbate certain of the threats facing our business, including the frequency and
severity of weather-related events, which can disrupt our operations, damage our infrastructure or properties,
create financial risk to our business or otherwise have a material adverse effect on our results of operations,
financial position or liquidity. These may result in substantial costs to respond during the event, to recover from
the event and possibly to modify existing or future infrastructure requirements to prevent recurrence. Climate
changes could also disrupt our operations by impacting the availability and cost of materials needed for
manufacturing and could increase insurance and other operating costs.

The potential physical impacts of climate change on our operations are highly uncertain, and could be particular to
the geographic circumstances in areas in which we operate and may include changes in rainfall and storm
patterns and intensities, water shortages, rising water levels and changing temperatures. These factors may
impact our decisions to construct new facilities or maintain existing facilities in areas most prone to physical
climate risks. We could also face indirect financial risks passed through the supply chain and process disruptions
due to physical climate changes could result in price modifications for our products and the resources needed to
produce them. These impacts may adversely impact the cost, production, and financial performance of our
operations. In addition, concerns about the environmental impacts of air travel and tendencies towards “green”
travel initiatives have contributed to higher levels of scrutiny with respect to emissions which could have the effect
of reducing demand for air travel and could materially adversely impact our Aviation business and reputation.

Global climate change also results in regulatory risks which vary according to the national and local requirements
implemented by each jurisdiction where we are present. Our products as well as our manufacturing and services
activities are subject to environmental regulations by federal, provincial and local authorities in Canada as well as
local regulatory authorities with jurisdiction over our operations outside of Canada. There continues to be a lack of
consistent climate legislation, which creates economic and regulatory uncertainty. Most countries where we carry
out manufacturing activities are at various stages of developing binding emission allocations and trading
schemes. During 2019, our regulatory risks associated with climate change mainly fell under our obligations to the
European Union Emission Trading Scheme, the United Kingdom Climate Change Agreement, the United
Kingdom's Carbon Reduction Commitment energy efficiency scheme (launched in April 2010), the Energy
Savings Opportunity Scheme and the Québec carbon market trading scheme. Increased public awareness and
concern regarding global climate change may result in more legislative and/or regulatory requirements to reduce
or mitigate the effects of greenhouse gas emissions. The impact to us and our industry from legislation and
increased regulation regarding climate change is likely to be adverse and could be significant, particularly if
regulators were to conclude that emissions from aircraft cause significant harm to the upper atmosphere or have
a greater impact on climate change than other industries. We may be directly exposed to such measures, which
could result in significant costs on us, on our customers and on our suppliers, including costs related to increased
energy requirements, capital equipment, environmental monitoring and reporting, and other costs necessary to
comply with such regulations that could adversely affect our business, financial condition, operating performance,
and ability to compete. In addition, such regulatory changes could necessitate us to develop new technologies,
requiring significant investments of capital and resources.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 111

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, Swedish krona and Mexican pesos. The Aviation segment has adopted a progressive hedging strategy
while Transportation aims to hedge all of its identified foreign currency exposures to limit the effect of currency
movements on their results. Such contracts hedge foreign-currency denominated transactions and any change in
the fair value of the contracts could be offset by changes in the underlying value of the transactions being hedged.
The use of forward foreign exchange contracts also contains an inherent credit risk related to default on
obligations by the counterparties to such contracts. Although we aim to have foreign-exchange hedging contracts
with respect to all currencies in which we do business, there may be situations where we do not have hedging
contracts or are not fully hedged for various reasons including regulation and market availability and accessibility.
As a result, there can be no assurance that our approach to managing our exposure to foreign-exchange rate
fluctuations will be effective in the future or that we will be able to enter into foreign-exchange hedging contracts
as deemed necessary on satisfactory terms. 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. Fluctuations in foreign
currency exchange rates could also have a material adverse effect on the relative competitive position of our
products in markets where they face competition from competitors who are less affected by such fluctuations in
exchange rates.

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, which includes marketability risks, through our financial instruments carried at fair value.
These financial instruments include certain aircraft loans and lease receivables, investments in securities,
investments in financing structures, lease subsidies and certain derivative financial instruments.

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.

112 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 113

ACCOUNTING AND REPORTING DEVELOPMENTS

Changes in accounting policies

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 was adopted effective January 1, 2019, and the Corporation elected to use the modified retrospective
approach whereby comparative periods were not restated. Under this method, the standard is applied
retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial
application.

The Corporation applied the standard to contracts that were previously identified as leases applying IAS 17 and
IFRIC 4 at the date of initial application and did not reassess contracts that were not previously identified as
containing a lease applying IAS 17 and IFRIC 4. In addition, the Corporation elected to apply recognition
exemptions available in the standard for lease contracts where the lease term ends within 12 months of the date
of initial application or lease commencement date and that do not contain a purchase option, and lease contracts
for which the underlying asset is of low value.

On initial application, the Corporation also applied the practical expedients to use a single discount rate to a
portfolio of leases with reasonably similar characteristics, to rely on its assessment of whether leases are onerous
immediately before the date of initial application instead of performing an impairment review and to exclude initial
direct costs from the measurement of the right-of-use asset.

Where the Corporation is a lessee, IFRS 16 resulted in on-balance sheet recognition of most of its leases that
were considered operating leases under IAS 17. This resulted in the gross-up of the balance sheet through the
recognition of a right-of-use asset, adjusted for lease incentives received and onerous contract provisions
previously recognized, and a lease liability for the present value of the remaining future lease payments,
discounted using the incremental borrowing rate at the date of initial application. Depreciation expense on the
right-of-use asset and interest expense on the lease liability replaced the previously recognized operating lease
expense. The impact of adopting this standard on the cash flow statement is neutral, however the principal
repayment of the lease liabilities will be presented in financing activities under IFRS 16, whereas previously it was
presented in operating activities.

Refer to Note 3 - Changes in accounting policies, to our annual consolidated financial statements, for further
details on the impact of adopting IFRS 16.

Income taxes

In June 2017, the IASB released IFRIC 23, Uncertainty over income tax treatments. IFRIC 23 clarifies the
application of recognition and measurement requirements in IAS 12, Income Taxes, when there is uncertainty
over income tax treatments. It specifically addresses whether an entity considers each tax treatment
independently or collectively, the assumptions an entity makes about the examination of tax treatments by
taxation authorities, how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax
credits and tax rates and how an entity considers changes in facts and circumstances. IFRIC 23 was adopted
effective January 1, 2019 and resulted in no significant adjustments.

114 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Retirement and other long-term employee benefits

In February 2018, the IASB released an amendment to IAS 19, Employee Benefits, effective on January 1, 2019.
The amendment relates to accounting for plan amendments, curtailments and settlements on defined benefit
plans. The amendment requires the use of updated actuarial assumptions to determine current service cost and
net interest for the period after a plan amendment, curtailment or settlement. This amendment was adopted
effective January 1, 2019, with no earlier application and resulted in no adjustments as of January 1, 2019. This
amendment will apply to plan amendments, curtailments or settlements occurring after January 1, 2019.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 115

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, ACLP non-voting units, receivables from related party, 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, short-term borrowings, lease
subsidies, government refundable advances, vendor non-recurring costs 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 and 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 38 – Financial risk management, to the consolidated financial
statements.

Fair value of financial instruments

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 FVTP&L, b) financial instruments designated as FVTP&L, c) FVOCI financial assets, or
d) amortised cost. Financial instruments are subsequently measured at amortized cost, unless they are classified
as FVOCI or FVTP&L or designated as FVTP&L, in which case they are subsequently measured at fair value. 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 39 - 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
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 39 – 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.

116 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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. In addition, we have
other level 3 financial instruments, including the conversion option, the funding commitments and ACLP non-
voting units. 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.
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. Refer to Note 39 - Fair
value of Financial instruments for detailed sensitivity analysis on those financial instruments.

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 38 – Financial risk
management and Note 39 – 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 41 – Transactions with related parties,
to the consolidated financial statements.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 117

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 4 – Use of estimates and judgment, to the consolidated financial
statements. The preparation of financial statements in conformity with IFRS requires the use of estimates and
judgment. Critical accounting estimates, which are evaluated on a regular ongoing basis and can change from
period to period, are described in this section. An accounting estimate is considered critical if:

•

the estimate requires 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.

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 Aviation
has some long-term maintenance service contracts, as well as design and development contracts for third parties.
Revenues and margins from long-term contracts relating to the designing, engineering or manufacturing of
specially designed products (including rail vehicles, vehicle overhaul and signalling contracts) and service
contracts are recognized over time. The long-term nature of these contracts requires estimates of total contract
costs and the transaction price. The measure of progress toward complete satisfaction of the performance
obligation 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.

The contract transaction price includes adjustments for change orders, claims, performance incentives, price
escalation clauses and other contract terms that provide for the adjustment of prices to the extent they represent
enforceable rights for the Corporation. Variable consideration such as assumptions for price escalation clauses,
performance incentives and claims is only included in the transaction price to the extent it is highly probable that a
significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty
associated with the variable consideration is subsequently resolved.

118 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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. 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, unless there is an
adjustment to the transaction price in which case it is recorded as a reduction of estimated revenues 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
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 2019 by approximately $110 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. 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 inputs used in the discounted
cash flow model are Level 3 inputs (inputs that are not based on observable market data).

The recoverable amounts of aerospace assets or CGUs are based on fair value less costs of disposal. The
recoverable amounts were established during the fourth quarter of 2019. 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 forecast future cash flows. 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 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, future labour costs, general market
conditions, foreign exchange rates and applicable long-range forecast income tax rates and a post-tax discount
rate of 9% 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.

An impairment test was prepared for the Global 7500 since it only entered into service in December 2018, and
following this assessment the Corporation concluded there was no impairment.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 119

Sensitivity analysis
The following analyses are presented in isolation from one another, i.e. all other estimates left unchanged:

A 10% decrease, evenly distributed over future periods, in the expected future net cash inflows for the
Global 7500 aircraft program would not have resulted in an impairment charge in fiscal year 2019.

An increase of 100-basis points in the discount rate used to perform the impairment tests would not have resulted
in an impairment charge in fiscal year 2019 for the Global 7500 aircraft program.

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. 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.

The recoverable amount of the Transportation operating segment, the group of CGUs at which level goodwill is
monitored by management, is based on fair value less costs of disposal using a discounted cash flow model.
During the fourth quarter of 2019, the Corporation completed its annual goodwill impairment test for the
Transportation segment and did not identify any impairment. The fair value measurement is categorized within
Level 3 of the fair value hierarchy.

Estimated future cash flows were based on the budget and strategic plan for the first 5 years and a growth rate of
1% was applied to derive a terminal value beyond the initial 5-year period. The post-tax discount rate is also a key
estimate in the discounted cash flow model and was based on a representative weighted average cost of capital.
The post-tax discount rate used to calculate the recoverable amount in fiscal year 2019 was 8.5%.

Sensitivity analysis
A 100-basis point change in the post-tax discount rate would not have resulted in an impairment charge in 2019.

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.

120 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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 10% in the residual value curves of all commercial aircraft as at December 31, 2019,
Aviation’s EBIT for 2019 would have been negatively impacted by $7 million.

Assuming an increase of 10% in the likelihood that residual value guarantees will be called upon at the expiry of
the financing arrangements as at December 31, 2019, Aviation’s EBIT for 2019 would have been negatively
impacted by $7 million.

Assuming a 100-basis point decrease in interest rates as at December 31, 2019, Aviation’s EBT for 2019 would
have been negatively impacted by $2 million. Assuming a 100-basis point increase in interest rates as at
December 31, 2019, Aviation’s EBT for 2019 would have been positively impacted by $2 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, the discount rate for the Corporation’s Canadian pension and other post-employment
plans is established by constructing a yield curve using three 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 term-based spread is extrapolated between a base
spread and a long spread. The base spread is based on the observed spreads between AA-rated corporate
bonds and AA-rated provincial bonds for the 5 to 10 years to maturity range. The long spread is determined as the
spread required at the point of average maturity of AA-rated provincial bonds in the 11 to 30 years to maturity
range such that the average AA-rated corporate bond spread above AA-rated provincial bonds is equal to the
extrapolated spread derived by applying the ratio of the observed spreads between A-rated corporate bonds and
AA-rated provincial bonds for the 11 to 30 years to maturity range over the 5 to 10 years to maturity range, to the

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 121

base spread. For maturities longer than the average maturity of AA-rated provincial bonds in the 11 to 30 years to
maturity range, the spread is assumed to remain constant at the level of the long spread.

As the U.K. high-quality corporate bond market, as defined under IFRS, includes relatively few long-term maturity
bonds, the discount rate for our U.K. pension and other post-employment plans is established by constructing a
yield curve. The yield curve is developed from corporate bond yield information for corporate bonds rated AA or
equivalent quality and excluding bonds which have a “corporate” BICS assignment but which have actual or
implied government backing. Target yields are developed from bonds across a range of maturity points, and a
curve is fitted to those targets. Spot rates (zero coupon bond yields) are developed from the yield curve and used
to discount benefit payment amounts associated with each future year. Since corporate bonds are generally not
available for very long maturities, an assumption is made that spot rates remain level beyond the term of the
longest data target point. The term of the longest data target point as at December 31, 2019 was 23 years.

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 24 – 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.
This evaluation includes the use of judgment to determine whether rights held by NCI, such as the CDPQ’s rights
in respect of Transportation, are protective in nature as opposed to substantive. 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.

Onerous contract provision

An onerous contract provision is recorded if it is more likely than not that the unavoidable costs of meeting the
obligations under a firm contract exceed the economic benefits expected to be received under it. In most cases
the economic benefits expected to be received under the contract consist of contract revenue. The calculation of
the unavoidable costs requires estimates of expected future costs, including anticipated future cost reductions
related to performance improvements and transformation initiatives, anticipated cost overruns, expected costs
associated with late delivery penalties and technological problems, as well as allocations of costs that relate
directly to the contract. The measurement of the provision is impacted by anticipated delivery schedules since for
new aircraft programs early production units require higher cost than units produced later in the process, and for
long term train manufacturing contracts delays result in penalties.

Sensitivity analysis
A 1% increase in the expected costs over the life of the contract would have decreased EBIT for fiscal year 2019
by approximately $184 million.

122 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

CDPQ investment equity and derivative liability components

The convertible shares issued to the CDPQ contain no obligation for the Corporation to deliver cash or other
financial assets to the CDPQ. Judgment was used to conclude that the CDPQ’s convertible share investment in
BT Holdco is considered a compound instrument comprised of an equity component, representing the
discretionary dividends and liquidation preference, and a liability component that reflects a derivative to settle the
instrument by delivering a variable number of common shares of BT Holdco, as opposed to the entire instrument
being characterized as a liability. The Corporation presents convertible shares in its equity (NCI) and derivative
component as a liability.

The fair value of the convertible shares at issuance was assigned to its respective equity and derivative liability
components so that no gain or loss arose from recognizing each component separately, the fair value of the
derivative liability being established first and the residual amount allocated to the equity component. The liability
component is remeasured quarterly using the Corporation’s best estimate of the present value of the settlement
amount, other than a scenario where the Corporation initiates a purchase of CDPQ’s interest. The Corporation
uses an internal valuation model to estimate the fair value of the conversion option embedded in the BT Holdco
convertible shares. The fair value of the embedded conversion option is based on the difference in the present
value between: the convertible shares’ accrued liquidation preference based on the minimum return entitlement;
and the fair value of the common shares on an as converted basis. This value is dependent on Transportation
meeting the performance incentives agreed upon with the CDPQ, the timing of exercise of the conversion rights
and the applicable conversion rate. Fair value of the shares on an as-converted basis is calculated using an EBIT
multiple, which is based on market data, to determine the enterprise value. The discount rate used is also
determined using market data. The Corporation uses internal assumptions to determine the term of the instrument
and the future performance of Transportation, derived from the budget and strategic plan.

See Note 39 - Fair value of financial instruments for a sensitivity analysis on the variability in the fair value of the
conversion option as a result of a reasonably likely change in the expected future performance of Transportation.

Investments in ACLP

On July 1, 2018 the Corporation recognized its equity investment in ACLP at $1,761 million which represented the
Corporation’s 33.55% interest in the July 1, 2018 estimated fair value of ACLP. The estimated fair value of ACLP
was determined using a discounted cash flow analysis following independent external professional advice and
consultations with the controlling partner. This valuation incorporated assumptions regarding potential synergies
from the procurement, sales and marketing and customer support expertise Airbus will bring to the program,
which involves a significant amount of judgment regarding the future operating performance of the program.

The Corporation performed an impairment test in the fourth quarter of 2019 on its investments in ACLP since
there were indicators of impairment. The Corporation determined that the carrying amount of its investment in
ACLP exceeded its recoverable amount, and accordingly recorded an impairment charge of $1,578 million. See
Note 40 - Investments in Joint ventures and Associates for more details.

See Note 39 - Fair value of financing instruments for information regarding the estimates used in determining the
fair value of the Corporation’s funding commitments toward ACLP and the fair value of the Corporation’s
investment in ACLP non-voting units.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 123

CONTROLS AND PROCEDURES

In compliance with the Canadian Securities Administrators’ Regulation 52 109, we have filed certificates signed
by the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) that, among other things, report on
the design and effectiveness of disclosure controls and procedures and the design and effectiveness of internal
controls over financial reporting.

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).

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, 2019 that have materially affected, or are reasonably likely to materially affect, our
internal controls over financial reporting.

Statement on Third-Party Review of Bombardier’s Compliance Policies

On August 1, 2019, Bombardier announced that it would, in partnership with Export Development Canada (EDC),
undergo a comprehensive third-party review of its ethics compliance policies and procedures. This review, which
was supported by an independent assessment by a leading Canadian law firm, has been completed. The review
noted that Bombardier’s leadership team has prioritized making compliance and ethics central to the company’s
culture and recognized the significant investments the company has made over the past few years to strengthen
its compliance and ethics program. A number of improvements and recommendations, primarily related to
strengthening the oversight role of its internal compliance function, were also identified during the review.
Consistent with its commitment to having a world-class risk management system, Bombardier has accepted these
recommendations and has begun to implement them. Bombardier has agreed to provide EDC with regular
updates on the implementation of these improvements, ensuring the most robust and comprehensive processes
are applied to future projects. The company thanks EDC for its continuing export financing support and for its
partnership in this review process.

124 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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, 2019

December 31, 2018

Increase (Decrease)

1.1234
0.7696
1.3204

1.1450
0.7337
1.2800

(2%)
5%
3%

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, 2019

December 31, 2018

Decrease

1.1069
0.7574
1.2849

1.1422
0.7582
1.2878

(3%)
0%
0%

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, 2019

December 31, 2018

Decrease

1.1200
0.7537
1.2763

1.1822
0.7729
1.3367

(5%)
(2%)
(5%)

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 125

SHAREHOLDER INFORMATION

Authorized, issued and outstanding share data, as at February 11, 2020

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

3,592,000,000
3,592,000,000
12,000,000
12,000,000
9,400,000

Issued and
outstanding

308,736,929
2,088,866,720
5,811,736
6,188,264
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 39,160,485 Class B Subordinate Voting Shares purchased and held in trust in connection with the PSU and RSU plans.

Warrant, share option, PSU and DSU data as at December 31, 2019

Warrants issued and outstanding
Options issued and outstanding under the share option plans
PSUs and DSUs issued and outstanding under the PSU and DSU plans
Class B Subordinate Voting Shares held in trust to satisfy PSU obligations

305,851,872
131,006,338
96,309,753
39,160,485

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 Global 8000 and Learjet 75 Liberty aircraft 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.

ALP, AVENTRA, BiLevel, Bombardier, Challenger, Challenger 300, Challenger 350, Challenger 600, Challenger 650, CITYFLO, CRJ, CRJ550,
CRJ700, CRJ900, CRJ1000, CRJ Series, EBI, FLEXITY, FLEXX, FlexCare, Global, Global 5000, Global 5500, Global 6000, Global 6500,
Global 7500, Global 8000, INNOVIA, INTERFLO, Learjet, Learjet 70, Learjet 75, Learjet 75 Liberty, Learjet 85, MITRAC, MOVIA, OMNEO,
OPTIFLO, Primove, Smart Services, TALENT, TRAXX, TWINDEXX, WAKO 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 11 mature trees, 499 kg of waste, 2,009 kg of CO2 emissions
(equivalent to 8,006 kilometres driven) and 10,000 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.

126 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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, 2019, 2018 and 2017.

The following table provides selected financial information for the last three fiscal years.

Fiscal years ended December 31

(1)

2019

2018

Revenues

Net income (loss) attributable to equity holders of Bombardier Inc.

EPS (in dollars)

Basic

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

15,757

(1,797)

(0.76)

—

0.99

1.00

1.56

16,236

232

0.10

0.09

—

0.90

1.00

1.56

2017

restated(2)
16,199

(494)

(0.24)

—

0.72

0.89

1.56

As at December 31

Total assets

Non-current financial liabilities

(1)

2019

2018

$ 24,972

$ 10,550

$ 24,958

$ 10,619

2017

restated(2)
$ 24,916

$ 10,165

(1) Refer to Note 3 - Changes in accounting policies, to our Consolidated financial statements, for the impact of the adoption of IFRS 16,

Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.

(2) Restated due to the adoption of IFRS 15, Revenue from contracts with customers.

The quarterly data table is shown hereafter.

February 12, 2020

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 127

BOMBARDIER INC.
QUARTERLY DATA (UNAUDITED)
(the quarterly data has been prepared in accordance with IAS 34, Interim financial reporting, except market price ranges)
(in millions of U.S. dollars, except per share amounts)

Total

Fourth
quarter

Third
quarter

Second
quarter

(1)

2019
First
quarter

Total

Fourth
quarter

Third
quarter

Second
quarter

Fiscal years

Revenues(2)
Aviation
Transportation
Corporate and Others

EBIT(2)

Aviation
Transportation
Corporate and Others

Financing expense(3)
Financing income(3)
EBT
Income taxes
Net income (loss)
Attributable to

7,501
8,269
(13)
$ 15,757

1,194
22
(1,714)
(498)
1,072
(230)
(1,340)
267

2,413
1,793
(1)
4,205

94
(236)
(1,554)
(1,696)
257
(106)
(1,847)
(128)

1,558
2,175
(11)
3,722

96
88
(41)
143
261
(28)
(90)
1

$ (1,607) $ (1,719) $

(91) $

2,120
2,194
—
4,314

1,410
2,107
(1)
3,516

7,324
8,915
(3)
$ 16,236

340
87
(56)
371
269
(22)
124
160
(36) $

(83) $
47
(36) $

664
83
(63)
684
311
(100)
473
234
239

195
44
239

0.08
0.08

$
$

424
774
(197)
1,001
712
(106)
395
77
318

232
86
318

0.10
0.09

$
$

2,142
2,161
—
4,303

171
236
(65)
342
261
(33)
114
59
55

15
40
55

0.02
0.02

$
$

1,504
2,140
(1)
3,643

132
184
(49)
267
147
(25)
145
(4)
149

111
38
149

0.04
0.04

$
$

2,003
2,259
—
4,262

69
163
(41)
191
163
(31)
59
(11)
70

68
2
70

0.03
0.02

Equity holders of Bombardier Inc.
NCI

$ (1,797) $ (1,770) $

(139) $

190

$ (1,607) $ (1,719) $

48
(91) $

EPS (in dollars)

Basic
Diluted

$
$

(0.76) $
(0.76) $

(0.74) $
(0.74) $

(0.06) $
(0.06) $

(0.04) $
(0.04) $

2018
First
quarter

1,675
2,355
(2)
4,028

52
191
(42)
201
162
(38)
77
33
44

38
6
44

0.01
0.01

$
$

Market price range of Class B Subordinate Voting Shares (in Canadian dollars)

High
Low

$
$

3.03
1.53

$
$

2.15
1.53

$
$

2.34
1.53

$
$

2.92
1.96

$
$

3.03
1.85

$
$

5.58
1.59

$
$

4.71
1.59

$
$

5.58
4.10

$
$

5.36
3.55

$
$

4.16
2.80

(1) Refer to Note 3 - Changes in accounting policies, to our Consolidated financial statements, for the impact of the adoption of IFRS 16, Leases. Under the modified retrospective approach

adopted by the Corporation, 2018 figures are not restated.

(2) Figures are restated as a result of the formation of Bombardier Aviation, our new reportable segment, and the reclassification of the Corporation’s interest in ACLP as a corporately held

investment and therefore is included in Corporate and Others. Refer to the Segment reporting section in Overview for further details.

(3) The amounts presented on a yearly basis may not correspond to the sum of the four quarters as certain reclassifications to quarterly figures to or from financing income and financing expense

may be required on a cumulative basis.

128 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

BOMBARDIER INC.
HISTORICAL FINANCIAL SUMMARY
(in millions of U.S. dollars, except per share amounts and number of common shares)

For the fiscal years ended December 31

(1)

2019

2018

2017

2016

2015

Revenues
Adjusted EBIT(3)
Special items
EBIT
Financing expense
Financing income
EBT
Income taxes
Net income (loss)
Attributable to

$ 15,757
470
$
968
(498)
1,072
(230)
(1,340)
267
(1,607)

$ 16,236
1,029
$
28
1,001
712
(106)
395
77
318

restated(2)
$ 16,199
725
$
426
299
801
(56)
(446)
79
(525)

$ 16,339
427
$
485
(58)
819
(70)
(807)
174
(981)

$ 18,172
554
$
5,392
(4,838)
418
(70)
(5,186)
154
(5,340)

Equity holders of Bombardier Inc.
NCI

Adjusted net income (loss)(3)
EPS (in dollars)

Basic
Diluted
Adjusted(3)

$
$
$

General information
Export revenues from Canada
Net additions to PP&E and intangible assets
Amortization
Impairment charges (reversals) 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)

$
$
$

(1,797)
190
(396)

(0.76)
(0.76)
(0.25)

5,187
523
422

(4)

0.00
0.00

0.99
1.00
1.56

3.08
1.57
1.94

3.03
1.53
1.93

2,398
(3.49)

$
$
$

$
$

$
$
$

232
86
438

0.10
0.09
0.14

5,803
415
272

0.00
0.00

0.90
1.00
1.56

5.60
1.70
2.08

5.58
1.59
2.03

2,373
(2.63)

$
$
$

$
$

$
$
$

(494)
31
91

(0.24)
(0.24)
0.04

6,498
1,317
314

0.00
0.00

0.72
0.89
1.56

3.25
1.87
3.05

3.24
1.96
3.03
restated(2)
2,194
(3.20)

$
$
$

$
$

$
$
$

(1,022)
41
(268)

(0.48)
(0.48)
(0.15)

6,383
1,201
371

0.00
0.00

0.68
0.78
1.56

3.35
0.89
2.33

2.28
0.72
2.16
restated(2)
2,193
(2.95)

$
$
$

$
$

$
$
$

(5,347)
7
326

(2.58)
(2.58)
0.14

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)

(1) Refer to Note 3 - Changes in accounting policies, to our Consolidated financial statements, for the impact of the adoption of IFRS 16,

Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.

(2) Restated due to the adoption of IFRS 15, Revenue from contracts with customers.
(3) 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 2019 and 2018.

BOMBARDIER INC. / 2019 FINANCIAL REPORT / OTHER 129

BOMBARDIER INC.
HISTORICAL FINANCIAL SUMMARY (CONTINUED)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at December 31

(1)

2019

2018

2017

2016

2015

restated(2)

Assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Inventories
Other financial assets
Other assets
Assets held for sale
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
Contract liabilities
Advances and progress billings in excess of
long-term contract inventories
Advances on aerospace programs
Other financial liabilities
Other liabilities
Liabilities directly associated with assets
held for sale
Current liabilities

Provisions
Contract liabilities
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

2,578
1,844
2,485
4,599
195
473
1,309
13,483

1,781
4,616
1,936
546

1,059
989
562
11,489
24,972

4,682
1,060
5,739

—
—
518
1,548

1,768
15,315

311
1,417
—
9,325
2,445
1,225
845
15,568
30,883

3,187
1,575
2,617
4,402
210
357
—
12,348

1,557
4,519
1,948
746

2,211
1,030
599
12,610
24,958

4,634
1,390
4,262

—
—
607
1,499

—
12,392

1,110
1,933
—
9,093
2,381
1,526
537
16,580
28,972

2,988
1,174
2,460
3,429
415
427
4,150
15,043

1,696
3,581
2,042
595

491
825
643
9,873
24,916

3,964
1,630
3,820

—
—
342
1,723

2,686
14,165

781
1,272
—
9,200
2,633
965
595
15,446
29,611

3,384
1,220
1,631
4,286
336
427
—
11,284

1,949
5,174
1,855
698

332
915
588
11,511
22,795

3,045
1,542
3,840

—
—
608
1,634

—
10,669

1,561
1,673
—
8,738
2,647
999
891
16,509
27,178

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

(7,667)
1,756
(5,911)
24,972

(5,563)
1,549
(4,014)
24,958

(6,608)
1,913
(4,695)
24,916

(6,054)
1,671
(4,383)
22,795

(4,067)
13
(4,054)
22,903

(1) Refer to Note 3 - Changes in accounting policies, to our Consolidated financial statements, for the impact of the adoption of IFRS 16,

Leases. Under the modified retrospective approach adopted by the Corporation, 2018 figures are not restated.

(2) Restated due to the adoption of IFRS 15, Revenue from contracts with customers.

130 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

BOMBARDIER INC.

CONSOLIDATED FINANCIAL STATEMENTS

For the fiscal years ended
December 31, 2019 and 2018

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 - FINANCIAL STATEMENTS 131

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 2019. 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 2019. 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 12, 2020

132 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

INDEPENDENT AUDITOR’S REPORT

TO THE SHAREHOLDERS OF BOMBARDIER INC.

Opinion
We have audited the consolidated financial statements of Bombardier Inc. and its subsidiaries (the Group), which
comprise the consolidated statements of financial position as at December 31, 2019, 2018 and January 1, 2018,
and the consolidated statements of income, consolidated statements of comprehensive income, consolidated
statements of changes in equity and consolidated statements of cash flows for the years ended December 31,
2019 and 2018, and notes to the consolidated financial statements, including a summary of significant accounting
policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Group as at December 31, 2019, 2018 and January 1, 2018, and its
consolidated financial performance and its consolidated cash flows for the years ended December 31, 2019 and
2018 in accordance with International Financial Reporting Standards (IFRSs).

Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report. We are independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Information
Management is responsible for the other information. The other information comprises:

• Management’s Discussion and Analysis
• The information, other than the consolidated financial statements and our auditor’s report thereon, in the

Financial Report

Our opinion on the consolidated financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information, and in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.

We obtained Management’s Discussion & Analysis and the Financial Report prior to the date of this auditor’s
report. If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRSs, 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.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or
has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 - AUDITORS’ REPORT 133

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:

•

Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the
related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to continue as a
going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements,

including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business

activities within the Group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor’s report is Zahid Fazal.

(1)

Ernst & Young LLP
Montréal, Canada
February 12, 2020
(1) CPA auditor, CA, public accountancy permit no. A122227

134 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

CONSOLIDATED FINANCIAL STATEMENTS

For fiscal years 2019 and 2018
(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
41
42
43
44

BASIS OF PREPARATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CHANGES IN ACCOUNTING POLICIES
USE OF ESTIMATES AND JUDGMENT
SEGMENT DISCLOSURE
RESEARCH AND DEVELOPMENT
OTHER INCOME
SPECIAL ITEMS
FINANCING EXPENSE AND FINANCING INCOME
NON-CONTROLLING INTEREST
EMPLOYEE BENEFITS COSTS
INCOME TAXES
EARNINGS PER SHARE
FINANCIAL INSTRUMENTS
CASH AND CASH EQUIVALENTS
TRADE AND OTHER RECEIVABLES
CONTRACT BALANCES
INVENTORIES
BACKLOG
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
ASSETS HELD FOR SALE
DISPOSAL OF BUSINESSES
ACQUISITION OF A BUSINESS
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
EVENT AFTER THE REPORTING DATE

137
142
142
142
155
157
162
166
166
167
169
170
172
172
175
175
178
178
180
181
181
182
182
183
185
186
196
197
198
198
199
200
202
203
203
206
208
209
210
211
216
220
221
222
223
229

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 - FINANCIAL STATEMENTS 135

The following table shows the abbreviations used in the consolidated financial statements.

Term
ACLP

Description
Airbus Canada Limited Partnership (formerly
CSALP)

AFS
BICS
bps
BT Holdco Bombardier Transportation (Investment) UK

Available for sale
Bloomberg Industry Classification System
Basis points

Limited

CCTD
CDPQ
CGU
CSALP
DB
DC
DDHR
DSU
EBIT

EBITDA

Cumulative currency translation difference
Caisse de dépôt et placement du Québec
Cash generating unit
C Series Aircraft Limited Partnership
Defined benefit
Defined contribution
Derivative designated in a hedge relationship
Deferred share unit
Earnings (loss) before financing expense, financing
income and income taxes

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

EBT

Earnings (loss) before income taxes

Term
EPS

FVOCI

Description
Earnings (loss) per share attributable to equity
holders of Bombardier Inc.

Fair value through other comprehensive income
(loss)

FVTP&L Fair value through profit and loss
HFT
IAS
IASB
IFRIC

Held for trading
International Accounting Standard(s)
International Accounting Standards Board
International Financial Reporting Interpretation
Committee

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

International Financial Reporting Standard(s)
Management’s discussion and analysis
Non-controlling interests
Other comprehensive income (loss)
Property, plant and equipment
Performance share unit
Research and development
Restricted share unit
Selling, general and administrative
United Kingdom
United States of America

136 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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 income
Special items
EBIT
Financing expense
Financing income
EBT
Income taxes
Net income (loss)
Attributable to

Equity holders of Bombardier Inc.
NCI

EPS (in dollars)

Basic
Diluted

Notes

6
40
7
8

9
9

2019
15,757
14,157
1,600
1,013
292
(128)
(47)
968
(498)
1,072
(230)
(1,340)
267
(1,607)

(1,797)
190
(1,607)

(0.76)
(0.76)

$
$

(1)

$
$

2018
16,236
13,958
2,278
1,156
217
(66)
(58)
28
1,001
712
(106)
395
77
318

232
86
318

0.10
0.09

(1) Refer to Note 3 - Changes in accounting policies for the impact of the adoption of IFRS 16, Leases.

The notes are an integral part of these consolidated financial statements.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 - FINANCIAL STATEMENTS 137

BOMBARDIER INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the fiscal years ended December 31
(in millions of U.S. dollars)

Net income (loss)
OCI

Items that may be reclassified to net income

Net change in cash flow hedges(1)
Foreign exchange re-evaluation
Net loss on derivative financial instruments
Reclassification to income or to the related non-financial asset(2)(3)
Income taxes

FVOCI financial assets

Net unrealized gain

CCTD

Net investments in foreign operations

Items that are never reclassified to net income

FVOCI equity instruments
Net unrealized gain (loss)

Retirement benefits(1)

Remeasurement of defined benefit plans
Income taxes

Total OCI
Total comprehensive income (loss)
Attributable to

Equity holders of Bombardier Inc.
NCI

Notes

2019
(1,607)

2018
318

24
12

(4)
(1)
39
(17)
17

(520)
50
(465)
(348)
(1,955)

(2,117)
162
(1,955)

(3)
(263)
10
55
(201)

(6)

278
(6)
266
99
417

413
4
417

(1) Includes $2 million of gain related to cash flow hedges and $2 million of loss related to retirement benefits related to our share of income of

joint ventures and associates for fiscal year 2019 (losses of $1 million and $7 million respectively for fiscal year 2018).

(2) Includes $56 million of loss reclassified to the related non-financial asset for fiscal year 2019 ($15 million of gain for fiscal year 2018).
(3) $1 million of net deferred gain is expected to be reclassified from OCI to the carrying amount of the related non-financial asset or to income

during fiscal year 2020.

The notes are an integral part of these consolidated financial statements.

138 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

BOMBARDIER INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at
(in millions of U.S. dollars)

Assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Inventories
Other financial assets
Other assets
Assets held for sale
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
Contract liabilities
Other financial liabilities
Other liabilities
Liabilities directly associated with assets held for sale
Current liabilities
Provisions
Contract liabilities
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

Commitments and contingencies

December 31 December 31
(1)
2018

2019

Notes

January 1
2018

15
16
17
18
20
21
30

22
23
23
12
40
20
21

25
26
17
27
28
30

26
17
29
24
27
28

2,578
1,844
2,485
4,599
195
473
1,309
13,483
1,781
4,616
1,936
546
1,059
989
562
11,489
24,972

4,682
1,060
5,739
518
1,548
1,768
15,315
311
1,417
9,325
2,445
1,225
845
15,568
30,883

3,187
1,575
2,617
4,402
210
357
—
12,348
1,557
4,519
1,948
746
2,211
1,030
599
12,610
24,958

4,634
1,390
4,262
607
1,499
—
12,392
1,110
1,933
9,093
2,381
1,526
537
16,580
28,972

2,988
1,174
2,460
3,429
415
427
4,150
15,043
1,696
3,581
2,042
595
491
825
643
9,873
24,916

3,964
1,630
3,820
342
1,723
2,686
14,165
781
1,272
9,200
2,633
965
595
15,446
29,611

(7,667)
1,756
(5,911)
24,972

(5,563)
1,549
(4,014)
24,958

(6,608)
1,913
(4,695)
24,916

(1) Refer to Note 3 - Changes in accounting policies for the impact of the adoption of IFRS 16, Leases.

The notes are an integral part of these consolidated financial statements.

On behalf of the Board of Directors

Pierre Beaudoin
Director

Diane Giard
Director

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 - FINANCIAL STATEMENTS 139

BOMBARDIER INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the fiscal years ended

(in millions of U.S. dollars)

Attributable to equity holders of Bombardier Inc.

Share capital

Preferred
shares

Common

shares Warrants

Retained earnings
(deficit)

Other
retained
earnings
(deficit)

Remea-
surement
losses

Accumulated OCI

Contributed
surplus

FVOCI

Cash
flow
hedges

CCTD

Total

NCI

Total
equity
(deficit)

As at January 1, 2018

347

$ 2,154

$ (6,414) $

(2,577)

$ 171

127

$ (493) $ (6,608) $ 1,913

$ (4,695)

Total comprehensive income

Net income

OCI

Issuance of warrants(1)
Issuance of share capital

Options exercised

Dividends - preferred shares, net of
taxes
Dividends to NCI

Shares purchased - PSU plans

Shares distributed - PSU plans
Change in NCI(2)
Share-based expense

—

As at December 31, 2018

347

Total comprehensive income

Net income (loss)

OCI

Options exercised
Issuance of NCI(3)
Dividends - preferred shares, net of
taxes
Dividends to NCI

Share-based expense

—

As at December 31, 2019

347

—

475
42

—

(97)
49

—

—
$ 2,623

—

—
$ 2,628

—

270

—

232

—
232

—

—
(116)
—

—
272

272

—

(11)

—

(49)

—

(5)

—

(195)

—

109

—

232

181

413

270

475

—

(97)

—

(116)

(82)

—

(93)

—

(275)

—

318

417

270

475

(93)

(97)

—

(391)

343

$ (6,294) $

(2,305)

$ 176

(1) $

(68) $ (384) $ (5,563) $ 1,549

$ (4,014)

—

(1,797)

—

(1,797)

—

(21)

—

—
(470)
(470)
—

—

(1)

—

343

$ (8,112) $

(2,775)

$ 205

—

123

—

(1,797)

(320)

(2,117)

—

(21)

—

190

(28)

162

—

(4)

—

(1,607)

(348)

(1,955)

(21)

(4)

(51) $ (261) $ (7,667) $ 1,756

$ (5,911)

(1) Related to the convertible shares issued to Airbus on July 1, 2018 in relation to the sale of a majority stake in ACLP.
(2) Includes $391 million for the derecognition of the non-controlling interest related to the disposal of ACLP.
(3) Refer to Note 10 - Non-controlling interest for more information.

The notes are an integral part of these consolidated financial statements.

140 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

BOMBARDIER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the fiscal years ended December 31
(in millions of U.S. dollars)

Operating activities
Net income (loss)
Non-cash items
Amortization(2)
Impairment charges on ACLP investments
Impairment charges (reversals) on PP&E and intangible assets
Deferred income taxes
Gains on disposals of PP&E and intangible assets
Losses (gains) on disposals of businesses
Share of income of joint ventures and associates
Share-based expense
Loss on repurchase of long-term debt
Loss on sale of long-term contract receivables

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
Deconsolidation of cash and cash equivalents of ACLP
Outflows related to a disposal of business
Investments in non-voting units of ACLP
Net proceeds from disposal of businesses
Capital injection in ACLP
Sale of investments in securities
Other
Cash flows from investing activities
Financing activities
Net proceeds from issuance of long-term debt
Repayments of long-term debt
Payment of lease liabilities(3)
Purchase of Class B shares held in trust under the PSU plans
Dividends paid - preferred shares
Issuance of Class B shares
Issuance of NCI
Dividends to NCI
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(4)
Cash and cash equivalents at end of year(4)
Supplemental information(5)(6)

Cash paid for

Interest
Income taxes
Cash received for

Interest
Income taxes

Notes

(1)

2019

2018

(1,607)

318

22, 23
8
7, 8, 22, 23
12
7, 8
7, 8, 31
40
34
8, 9
8

40
31
40

29
29

422
1,578
(4)
113
(10)
(730)
(128)
30
84
—
49
(477)
(680)

(552)
29
—
—
(350)
826
(64)
—
(7)
(118)

1,956
(1,762)
(112)
—
(20)
—
49
(4)
3
110
130
(558)
3,187

2,629

732
172

25
7

$
$

272
—
11
(74)
(636)
616
(66)
65
—
31
72
(12)
597

(1,164)
749
(151)
(36)
(225)
—
—
133
(7)
(701)

—
(15)
—
(97)
(20)
506
—
(93)
(60)
221
13
130
3,057

3,187

674
147

32
5

$
$

(1) Refer to Note 3 - Changes in accounting policies for the impact of the adoption of IFRS 16, Leases.
(2) Includes $109 million representing amortization charge related to right-of-use of assets for fiscal year 2019.
(3) Lease payments related to the interest portion, short term leases, low value assets and variable lease payments not included in lease liabilities are classified as

cash outflows from operating activities. The total cash outflows for fiscal year 2019 amounted to $168 million.

(4) For the purpose of the statement of cash flows, cash and cash equivalents comprise the cash reclassified as asset held for sale. Refer to Note 30 - Assets held

for sale for more information.

(5) 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.

(6) 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 paid on lease liabilities and interest paid on extended payment terms for trade payables. Interest received comprises interest received related
to cash and cash equivalents, investments in securities, loans and lease receivables after the effect of hedges and the interest portion related to the settlement
of an interest-rate swap, if any.

The notes are an integral part of these consolidated financial statements.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 - FINANCIAL STATEMENTS 141

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the fiscal years ended December 31, 2019 and 2018
(Tabular figures are in millions of U.S. dollars, unless otherwise indicated)

BASIS OF PREPARATION

Bombardier Inc. (“the Corporation” or “our” or “we”) is incorporated under the laws of Canada. 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 two distinct segments since July 1, 2019: Aviation and Transportation.
Previously, the Corporation was carrying out its operations in four distinct segments: Business Aircraft,
Commercial Aircraft, Aerostructures and Engineering Services and Transportation. See Note 5 - Segment
disclosure for restated figures.

The Corporation’s consolidated financial statements for fiscal years 2019 and 2018 were authorized for issuance
by the Board of Directors on February 12, 2020.

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 or assets represent more than 10% of total revenues or
more than 10% of total assets of Aviation or Transportation segments, are as follows:

Subsidiary
Bombardier Transportation GmbH
Bombardier Transportation (Holdings) UK Ltd
Bombardier Transportation Canada Inc.
Bombardier Transportation France S.A.S.
Learjet Inc.

Location
Germany
U.K.
Canada
France
U.S.

Revenues and assets of these subsidiaries combined with those of Bombardier Inc. totalled 72% of consolidated
revenues and 78% of consolidated assets for fiscal year 2019 (71% and 79% for fiscal year 2018).

142 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Joint ventures – Joint ventures are those entities over which the Corporation exercises joint control, requiring
unanimous consent of the parties sharing control of relevant activities such as, strategic financial and operating
decision making and where the parties have rights to the net assets of the arrangement. The Corporation
recognizes its interest in joint ventures using the equity method of accounting.

Associates – Associates are entities in which the Corporation has the ability to exercise significant influence over
the financial and operating policies. Investments in associates are accounted for using the equity method of
accounting.

Foreign currency translation
The consolidated financial statements are expressed in U.S. dollars, the functional currency of Bombardier Inc.
The functional currency is the currency of the primary economic environment in which an entity operates. The
functional currency of most foreign subsidiaries is their local currency, mainly the euro, Pound sterling, various
other European currencies and the U.S. dollar in Transportation, and mainly the U.S. dollar in Aviation.

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
2019
1.1234
0.7696
1.3204

December 31
2018
1.1450
0.7337
1.2800

Exchange rates
as at
January 1
2018
1.1993
0.7975
1.3517

Average exchange rates
for fiscal years

2019
1.1200
0.7537
1.2763

2018
1.1822
0.7729
1.3367

Revenue recognition
Long-term contracts – Revenues from long-term contracts related to designing, engineering or manufacturing
specifically designed products (including rail vehicles, vehicles overhaul and signalling contracts) and service
contracts are generally recognized over time. The measure of progress toward complete satisfaction of the
performance obligation 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. The
contract transaction price is adjusted for change orders, claims, performance incentives and other contract terms
that provide for the adjustment of prices to the extent they represent enforceable rights for the Corporation.
Variable considerations such as assumptions for price escalation clauses, performance incentives and claims are
only included in the transaction price to the extent that it is highly probable that a significant reversal in the
amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable
consideration is subsequently resolved. Customer options are only included in the transaction price of the contract
when they become legally enforceable as a result of the customer exercising its right to purchase the additional
goods or services. If a contract review indicates the expected costs to fulfill the contract exceed the expected

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 143

economic benefits expected to be received under it, the entire expected loss on the contract is recognized as an
onerous contract provision with the corresponding expense recorded in cost of sales. The expected benefits to be
received are generally limited to the revenues from the associated contract.

Options or variation orders for additional assets are treated as contract modifications when exercised.
Modifications of the Corporation’s long term contracts in Transportation are generally accounted as part of the
existing contract to the extent the remaining goods and services are considered to form part of a single
performance obligation that is partially satisfied at the date of contract modification. The effect that the contract
modification has on the transaction price and the existing progress toward satisfaction of the single performance
obligation is recognized as an adjustment to revenue at the date of the contract modification on a cumulative
catch-up basis.

Aerospace programs – Revenues from the sale of new aircraft are considered a single performance obligation
and are recognized at delivery, which is the point in time when the customer has obtained control of the aircraft
and the Corporation has satisfied its performance obligation. 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.

For the bill-and-hold arrangements in respect of new aircraft, revenue is recognized when the customer has
obtained control of the aircraft and the customer has requested the arrangement, the aircraft is separately
identified as belonging to the customer, the aircraft is ready for physical transfer to the customer and the
Corporation does not have the ability to use the product or direct it to another customer.

Other – Revenues from the sale of pre-owned aircraft and spare parts are recognized at the point in time when
the customer has obtained control of the promised asset and the Corporation has satisfied the performance
obligation. Aftermarket services are generally recorded over time.

Revenues earned by the Aviation market segment on its contract with ACLP for the A220 program are recognized
at delivery.

The Corporation accounts for a significant financing component on orders where timing of cash receipts and
revenue recognition differ substantially. Most of the Corporation’s contracts do not have a significant financing
component. However, there are certain orders in the Aviation market segment where advances were received well
before expected delivery and therefore a financing component has been accounted for separately. The result is
that interest expense is accrued during the advance period and the transaction price will be increased by a
corresponding amount.

Contract balances
Contract related balances comprise of contract assets and contract liabilities presented separately in the
consolidated statements of financial position.

Contract assets – Are recognized when goods or services are transferred to customers before consideration is
received or before the Corporation has an unconditional right to payment for performance completed to date.
Contract assets are subsequently transferred to receivables when the right of payment becomes unconditional.
Contract assets comprise cost incurred and recorded margins in excess of advances and progress billings on
long-term production and service contracts.

Contract liabilities – Are recognized when amounts are received from customers in advance of transfer of
goods or services. Contract liabilities are subsequently recognized in revenue as or when the Corporation
performs under contracts. Contract liabilities comprise advances on aerospace programs, advances and progress
billings in excess of long-term contract cost incurred and recorded margin, and other deferred revenues related to
operation and maintenance of systems.

A net position of contract asset or contract liability is determined for each contract. The cash flows in respect of
advances and progress billings, including amounts received from third party advance providers, are classified as
cash flows from operating activities.

144 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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. Government refundable advances are adjusted if there is a change in the number of
aircraft to be delivered and the timing of delivery of aircraft. Government refundable advances provided to the
Corporation to finance research and development activities on a risk-sharing basis are considered part of the
Corporation’s operating activities and are therefore presented as cash flows from operating activities in the
statement of cash flows.

Special items
Special items comprise items which do not reflect the Corporation’s core performance or where their separate
presentation will assist users of the consolidated financial statements in understanding the Corporation’s results
for the period. Such items include, among others, the impact of restructuring charges and significant impairment
charges and reversals.

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.

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.
CDPQ’s convertible share investment in BT Holdco is factored into diluted EPS by adjusting net income
attributable to equity holders of Bombardier Inc. to reflect their share of Transportation’s earnings on an as
converted basis. See Note 10 – Non-controlling interest for more details.

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, ACLP non-voting units,
receivables from related party, 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, short-term borrowings, lease subsidies, government refundable advances,
vendor non-recurring costs and derivative financial instruments with a negative fair value.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 145

instruments are measured according to the category to which they are classified, which are: a) financial
instruments classified as FVTP&L, b) financial instruments designated as FVTP&L, c) FVOCI financial assets, or
d) amortised cost. Financial instruments are subsequently measured at amortized cost, unless they are classified
as FVOCI or FVTP&L 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.

When the transfer of a customer receivable results in the derecognition of the asset, the corresponding cash
proceeds are classified as cash flows from operating activities.

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 at amortized cost

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.

Other Financial instruments – Trade and other receivables, restricted cash, certain aircraft loans and
lease receivables, and certain other financial assets are all financial assets measured at amortized cost
using the effective interest rate method less any impairment losses. Trade and other payables, short-term
borrowings, long-term debt, certain government refundable advances, vendor non-recurring costs and
certain other financial liabilities are measured at amortized cost using the effective interest rate method.

Trade receivables as well as other financial assets are subject to impairment review. Trade receivables,
contract assets and lease receivables are reviewed for impairment based on the simplified approach
which measures the loss allowance at an amount equal to the lifetime expected credit losses. For other
financial assets for which the credit risk has not increased significantly since initial recognition, the loss
allowance is measured at an amount equal to 12-month expected credit losses. For other financial assets
for which the credit risk has increased significantly since initial recognition, the loss allowance is
measured at an amount equal to the lifetime expected credit losses.

b) Financial instruments designated as FVTP&L

Financial instruments may be designated on initial recognition as FVTP&L if either of the following criteria
are met: (i) 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 (ii) a group of financial liabilities or financial assets and
financial liabilities 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,
trade-in commitments, lease subsidies and certain Government refundable advances.

146 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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) Financial instruments classified as FVTP&L

Receivables from related party, investments in financing structures, long-term contract receivables, ACLP
non-voting units, and certain aircraft loans and leases receivables are all required to be classified as
FVTP&L.

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 or when the instrument is held for
investing purposes which are recorded in financing expense or financing income.

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 and interest rate swap agreements. Derivative financial instruments include
derivatives that are embedded in financial or non-financial contracts that are not closely related to the
host contracts.

Derivative financial instruments are classified as FVTP&L, 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, CDPQ’s conversion
option as well as foreign exchange and other derivative instruments not closely related to 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.

d) FVOCI financial assets

Investments in securities are classified as FVOCI. Investments in securities, excluding equity instruments,
are accounted for at fair value with unrealized gains and losses included in OCI, except for impairment
gains or losses and foreign exchange gains and losses on monetary investments, such as fixed income
investments, which are recognized in income. Equity instruments, included in investments in securities,
were designated, on initial recognition, at FVOCI, where the subsequent changes in the fair value are
recognized in OCI with no recycling to net income. Dividend income is recognized in financing income.

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 effective in offsetting the changes in the fair value or cash flows of the hedged items. There are
three permitted hedging strategies.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 147

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.

Aviation hedges its foreign currency exposure using foreign exchange contracts. There is an economic
relationship between the hedged items and the hedging instruments as the terms of the foreign exchange
contracts match the terms of the expected highly probable forecast transaction (i.e. notional amount and expected
payment date). For Transportation, 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. There is an economic relationship between the hedged items and the hedging instruments as the
critical terms, under a spot designation, are closely aligned. The critical terms are the nominal amount and the
currency.

To test the hedge effectiveness, the Corporation uses the hypothetical derivative method and compares the
changes in the fair value of the hedging instruments against the changes in the fair value of the hedged items
attributable to the hedged risks. The hedge ineffectiveness can arise due to the time value of money, under a spot
designation, as the expected timing between the forecasted transaction and the forward contract are not aligned,
due to different indexes, and changes to the forecasted amount of cash flow of hedged items and hedging
instruments. The Corporation has established a hedge ratio of 1:1.

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 accounting policies applicable starting January 1, 2019 following adoption of IFRS 16 -
Leases. See Note 3 - Changes in accounting policies for more details.

When the Corporation is the lessee - Leases are recognized as a right-of-use asset in PP&E and a
corresponding lease liability in Other liabilities at the date at which the leased asset is available for use by the
Corporation. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs
incurred, and lease payments made at or before the commencement date less any lease incentives received. The

148 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Right-of-use assets are subject to impairment.

The lease liability is measured at the present value of lease payments to be made over the lease term, discounted
using the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not
readily available. Lease payments include fixed payments less any lease incentives receivable, variable lease
payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees. The
lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the
Corporation and payment of penalties for termination of a lease when the lease term reflects the lessee exercising a
termination option. Each lease payment is allocated between the repayment of the principal portion of lease liability
and the interest portion. The interest expense is charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability for each period and is recorded in financing
expense. Payments associated with short-term leases and leases of low-value assets are recognized on a straight-
line basis as an expense in the consolidated statement of income.

The Corporation periodically enters into sale and leaseback transactions, typically for aircraft, whereby the
Corporation sells an asset to a lessor and immediately leases it back. In a sale and leaseback transaction the
transfer of an asset is recognized as a sale when the customer has obtained control of the aircraft, which is
aligned with the Corporation’s revenue recognition policy, otherwise the Corporation continues to recognize the
transferred asset on the balance sheet and records a financial liability equal to the proceeds transferred. When
the transfer of an asset satisfies the Corporation’s revenue recognition policy to be accounted for as a sale, a
partial recognition of the profit from the sale is recorded in revenue immediately after the sale, which is equivalent
to the proportion of the asset not retained by the Corporation through the lease. The proportion of the asset
retained by the Corporation through the lease is recognized as a right-of-use asset and the lease liability is
generally measured as the present value of future lease payments. The portion of the proceeds related to the
retained interest is classified as cash flow related to financing activities whereas the remainder is treated either as
cash flow from operating activities or cash flow from investing activities depending on the nature of the asset sold.

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.

Leases accounting policies applicable prior to January 1, 2019, when the Corporation was
following IAS 17 and IFRIC 4.
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.

The Corporation periodically enters into sale and leaseback transactions, typically for aircraft, flight simulators and
properties, whereby the Corporation sells an asset to a lessor and immediately leases it back. These leases are
generally accounted for as operating leases based on the above accounting policy for lease classification. In the
case of aircraft, the sale is recorded in revenues and the cash proceeds are classified as cash flows from
operating activities. In the case of flight simulators and properties, the sale is treated as a disposal of PP&E with
recognition of a corresponding gain or loss on sale, and the cash proceeds are classified as disposals of PP&E
within cash flows from investing activities.

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.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 149

Inventory valuation
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
period on high quality corporate fixed-income investments consistent with the currency and the estimated terms of
the related retirement benefit liability. Past service costs are recognized in income at the earlier of i) the date of
the plan amendment or curtailment or ii) the date that the Corporation recognized the restructuring costs. Effective
January 1, 2019, when plan amendments, curtailments and settlements occur, the Corporation uses updated
actuarial assumptions to determine current service cost and net interest for the period after the plan amendment,
curtailment or settlement.

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.

150 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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 (such as aircraft prototype design and testing
costs for Aviation, and platform development costs for Transportation) and internally developed or modified
application software. These costs are capitalized when certain criteria 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 and exclude costs which were not necessary to create the asset, such as
identified inefficiencies.

Acquired intangible assets include the cost of development activities carried out by vendors for which the
Corporation controls the underlying output from the usage of the technology, as well as the cost related to
externally acquired licences, patents and trademarks.

Intangible assets are recorded at cost less accumulated amortization and impairment losses and include goodwill,
aerospace program tooling, as well as other intangible assets such as licenses, patents and trademarks. Other
intangible assets are included in other assets.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 151

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 8 years

(1) As at December 31, 2019, the remaining number of units to fully amortize the aerospace program tooling is expected to be produced over

the next 13 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 for aerospace program tooling and
Transportation platform development costs is recorded in R&D expense and for other intangible assets is
recorded in cost of sales, SG&A or R&D expense based on the function of the underlying asset.

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 an item of 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
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. A reversal of an impairment loss reflects an
increase in the estimated service potential of an asset. The reversal of impairment losses is limited to the amount

152 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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 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.

Impairment of investments in joint ventures and associates
The Corporation’s investments in its joint ventures and associates are accounted for using the equity method
subsequent to initial recognition. The carrying amount of the investment is adjusted to recognize changes in the
Corporation’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to
the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment
separately.

The Corporation’s share of net income of joint ventures and associates is included in the consolidated statement
of income.

After application of the equity method, the Corporation determines whether it is necessary to recognize an
impairment loss on its investment in its associate or joint venture. At each reporting date, the Corporation
determines whether there is objective evidence that the investment in joint venture or associate is impaired. If
there is such evidence, the Corporation calculates the amount of impairment as the difference between the
recoverable amount of the joint venture or associate and its carrying value, and then recognizes the loss in
income.

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 assurance type warranties 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

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 153

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
firm 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 the costs that relate directly to the contract such as anticipated cost overruns, expected costs
associated with late delivery penalties and technological problems, as well as allocations of costs that relate
directly to the contract. Provisions for onerous contracts are measured at the lower of the expected cost of
fulfilling the contract and the expected cost of terminating the contract.

Termination benefits – Termination benefits are usually paid when employment is terminated before the normal
retirement date or when an employee accepts voluntary redundancy in exchange for these benefits. The
Corporation recognizes termination benefits when it is demonstrably committed, through a detailed formal plan
without possibility of withdrawal, to terminate the employment of current employees.

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 PSUs, 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 PSUs, 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.

154 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

CHANGES IN ACCOUNTING POLICIES

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.

Where the Corporation is a lessee, IFRS 16 resulted in on-balance sheet recognition of most of its leases that were
considered operating leases under IAS 17. This resulted in the gross-up of the balance sheet through the
recognition of a right-of-use asset, adjusted for lease incentives received and onerous contract provisions
previously recognized, and a lease liability for the present value of the remaining future lease payments,
discounted using the incremental borrowing rate at the date of initial application. Depreciation expense on the
right-of-use asset and interest expense on the lease liability replaced the previously recognized operating lease
expense. The impact of adopting this standard on the cash flow statement is neutral, however the principal
repayment of the lease liabilities will be presented in financing activities under IFRS 16, whereas previously it was
presented in operating activities.

This change in policy resulted in the recognition of right-of-use assets, in PP&E, and lease liabilities, in Other
liabilities, amounting to $554 million and $568 million, respectively as of January 1, 2019. See Note 22 - PP&E and
Note 28 - Other liabilities for more details. In addition, the Corporation had existing capital leases amounting to
$41 million that were recorded in long-term debt and that were reclassified to lease liabilities on January 1, 2019
with the corresponding cost of assets and accumulated amortization of $121 million and $61 million, respectively,
being reclassified to right-of-use assets. The weighted average incremental borrowing rate applied to lease
liabilities recognised at the date of initial application was 6.03%.

The undiscounted operating lease commitments of the Corporation as of December 31, 2018 amounted to
$875 million, as presented in the audited consolidated financial statements and notes thereto included in the
Corporation’s Financial Report for the fiscal year ended December 31, 2018. The undiscounted value of lease
liabilities as at January 1, 2019 (excluding the $41 million of reclassified capital leases) was $844 million
(discounted to $568 million as at January 1, 2019). The difference between the previously disclosed $875 million
undiscounted operating lease commitments and the $844 million undiscounted value of lease liabilities as at
January 1, 2019 is due to short term leases and low value leases which are excluded from lease liability, but were
part of the operating lease commitments.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 155

Income taxes
In June 2017, the IASB released IFRIC 23, Uncertainty over income tax treatments. IFRIC 23 clarifies the
application of recognition and measurement requirements in IAS 12, Income Taxes, when there is uncertainty over
income tax treatments. It specifically addresses whether an entity considers each tax treatment independently or
collectively, the assumptions an entity makes about the examination of tax treatments by taxation authorities, how
an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates and
how an entity considers changes in facts and circumstances. IFRIC 23 was adopted effective January 1, 2019 and
resulted in no significant adjustments.

Retirement and other long-term employee benefits
In February 2018, the IASB released an amendment to IAS 19, Employee Benefits, effective on January 1, 2019.
The amendment relates to accounting for plan amendments, curtailments and settlements on defined benefit plans.
The amendment requires the use of updated actuarial assumptions to determine current service cost and net
interest for the period after a plan amendment, curtailment or settlement. This amendment was adopted effective
January 1, 2019, with no earlier application and resulted in no adjustments as of January 1, 2019. This amendment
will apply to plan amendments, curtailments or settlements occurring after January 1, 2019.

156 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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 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. 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 Aviation has some long-term maintenance service contracts, as well as design and development
contracts for third parties. Revenues and margins from long-term contracts relating to the designing, engineering
or manufacturing of specially designed products (including rail vehicles, vehicle overhaul and signalling contracts)
and service contracts are recognized over time. The long-term nature of these contracts requires estimates of
total contract costs and the transaction price. The measure of progress toward complete satisfaction of the
performance obligation 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.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 157

penalties, and such costs, if probable, are included in estimated costs at completion, unless there is an
adjustment to the transaction price in which case it is recorded as a reduction of estimated revenues at
completion.

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. 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 inputs used in the discounted cash flow model are Level 3 inputs (inputs that are not based on
observable market data).

An impairment test was prepared for the Global 7500 since it only entered into service in December 2018, and
following this assessment the Corporation concluded there was no impairment.

Sensitivity analysis
The following analyses are presented in isolation from one another, i.e. all other estimates left unchanged:

An increase of 100-basis points in the discount rate used to perform the impairment tests would not have resulted
in an impairment charge in fiscal year 2019 for the Global 7500 aircraft program.

Goodwill – The recoverable amount of the Transportation operating segment, the group of CGUs at which level
goodwill is monitored by management, is based on fair value less costs of disposal using a discounted cash flow
model. During the fourth quarter of 2019, the Corporation completed its annual goodwill impairment test for the

158 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Transportation segment and did not identify any impairment. The fair value measurement is categorized within
Level 3 of the fair value hierarchy.

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 or recovery 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.

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 10% in the residual value curves of all commercial aircraft as at December 31, 2019,
Aviation’s EBIT for 2019 would have been negatively impacted by $7 million.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 159

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 three
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 term-
based spread is extrapolated between a base spread and a long spread. The base spread is based on the
observed spreads between AA-rated corporate bonds and AA-rated provincial bonds for the 5 to 10 years to
maturity range. The long spread is determined as the spread required at the point of average maturity of AA-rated
provincial bonds in the 11 to 30 years to maturity range such that the average AA-rated corporate bond spread
above AA-rated provincial bonds is equal to the extrapolated spread derived by applying the ratio of the observed
spreads between A-rated corporate bonds and AA-rated provincial bonds for the 11 to 30 years to maturity range
over the 5 to 10 years to maturity range, to the base spread. For maturities longer than the average maturity of
AA-rated provincial bonds in the 11 to 30 years to maturity range, the spread is assumed to remain constant at the
level of the long spread.

As the U.K. high-quality corporate bond market, as defined under IFRS, includes relatively few long-term maturity
bonds, the discount rate for the Corporation’s U.K. pension and other post-employment plans is established by
constructing a yield curve. The yield curve is developed from corporate bond yield information for corporate bonds
rated AA or equivalent quality and excluding bonds which have a “corporate” BICS assignment but which have
actual or implied government backing. Target yields are developed from bonds across a range of maturity points,
and a curve is fitted to those targets. Spot rates (zero coupon bond yields) are developed from the yield curve and
used to discount benefit payment amounts associated with each future year. Since corporate bonds are generally
not available for very long maturities, an assumption is made that spot rates remain level beyond the term of the
longest data target point. The term of the longest data target point as at December 31, 2019 was 23 years.

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 24 - Retirement benefits for further details regarding assumptions used and sensitivity analysis to
changes in critical actuarial assumptions.

Onerous contract provision – An onerous contract provision is recorded if it is more likely than not that the
unavoidable costs of meeting the obligations under a firm contract exceed the economic benefits expected to be
received under it. In most cases the economic benefits expected to be received under the contract consist of
contract revenue. The calculation of the unavoidable costs requires estimates of expected future costs, including
anticipated future cost reductions related to performance improvements and transformation initiatives, anticipated
cost overruns, expected costs associated with late delivery penalties and technological problems, as well as
allocations of costs that relate directly to the contract. The measurement of the provision is impacted by
anticipated delivery schedules since for new aircraft programs early production units require higher cost than units
produced later in the process, and for long term train manufacturing contracts delays result in penalties.

Sensitivity analysis
A 1% increase in the expected costs over the life of the contract would have decreased EBIT for fiscal year 2019
by approximately $184 million.

160 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

CDPQ investments equity and derivative liability components – The convertible shares issued to the CDPQ
contain no obligation for the Corporation to deliver cash or other financial assets to the CDPQ. Judgment was
used to conclude that the CDPQ’s convertible share investment in BT Holdco is considered a compound
instrument comprised of an equity component, representing the discretionary dividends and liquidation
preference, and a liability component that reflects a derivative to settle the instrument by delivering a variable
number of common shares of BT Holdco, as opposed to the entire instrument being characterized as a liability.
The Corporation presents convertible shares in its equity (NCI) and derivative component as a liability.

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.

Also, the Corporation uses judgment to determine whether rights held by NCI, such as the CDPQ’s rights in
respect of Transportation, are protective in nature as opposed to substantive. The Corporation reassesses the
initial determination of control if facts or circumstances indicate that there may be changes to one or more
elements of control.

Investments in ACLP – On July 1, 2018 the Corporation recognized its equity investment in ACLP at $1,761
million which represented the Corporation’s 33.55% interest in the July 1, 2018 estimated fair value of ACLP. The
estimated fair value of ACLP was determined using a discounted cash flow analysis following independent
external professional advice and consultations with the controlling partner. This valuation incorporated
assumptions regarding potential synergies from the procurement, sales and marketing and customer support
expertise Airbus will bring to the program, which involves a significant amount of judgment regarding the future
operating performance of the program.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 161

The assets are reported in Bombardier Corporate and Others segment.

SEGMENT DISCLOSURE

The Corporation has two reportable segments: Aviation and Transportation. Each reportable segment offers
different products and services and mostly requires different technology and marketing strategies.

Aviation
Aviation designs, manufactures, markets and provides aftermarket support for three families of business jets
(Learjet, Challenger and Global), spanning from the light to large categories; designs, manufactures and provides
aftermarket support for a broad portfolio of commercial aircraft in the 50- to 100-seat categories, including the
CRJ550, CRJ700, CRJ900 and CRJ1000 regional jets and the Q400 turboprop until disposal of the business; and
designs, develops 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. Refer to Note 30 - Assets held for sale and Note 31 - Disposal of business for
additional information.

Transportation
Transportation offers a wide-ranging portfolio of innovative and efficient solutions in the rail industry and cover the
full spectrum of rail solutions, ranging from global mobility solutions to a variety of trains and sub-systems,
services, system integration and signalling to meet the market’s needs and expectations.

Corporate and Others
Corporate and Others comprise corporate charges that are not allocated to segments, elimination of profit on
intercompany transactions between the segments, participation in a partnership with Airbus on the A220 Family
aircraft and other adjustments.

The segmented information is prepared using the accounting policies described in Note 2 – Summary of
significant accounting policies.

162 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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:

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)
Share of loss (income) of
joint ventures and associates(6)
Net additions (proceeds) to
PP&E and intangible assets(3)
Amortization

Impairment charges on ACLP
investments(1)
Impairment charges (reversals)
on PP&E(4)
Impairment charges (reversals)
on intangible assets(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 income
Other information
R&D(2)
Share of loss (income) of
joint ventures and associates(6)
Net additions (proceeds) to
PP&E and intangible assets(3)
Amortization
Impairment charges (reversals)
on PP&E(4)

Transportation

Aviation

Corporate and
Others

8,266
3
8,269
70
48
22

136

(94)

157

139

—

(8)

7,491
10
7,501
531
(663)
1,194

156

373

282

—

(1)

—

— $
(13)
(13)
(131)
1,583
(1,714)

(37)

(7)

1,578

— $

292

Transportation

Aviation

Corporate and
Others

8,910
5
8,915
750
(24)
774

122

(111)

108

101

7,323
1
7,324
472
48
424

303

171

—

3
(6)
(3)
(193)
4
(197)

—

2019

Total

15,757
—
15,757
470
968
(498)
1,072
(230)
(1,340)
267
(1,607)

(128)

523

422

1,578

(7)

2018

Total

16,236
—
16,236
1,029
28
1,001
712
(106)
395
77
318

217

(66)

415

272

(1) See Note 8 – Special items for more details.
(2) Includes tooling amortization. See Note 6 – Research and development for more details.
(3) As per the consolidated statements of cash flows.
(4) See Note 22 – Property, plant and equipment for more details.
(5) See Note 23 – Intangibles assets for more details.
(6) See Note 40 - Investments in joint ventures and associates.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 163

The reconciliation of total assets and total liabilities to segmented assets and liabilities is as follows, as at:

December 31, 2019

December 31, 2018

January 1, 2018

24,972

24,958

24,916

Assets
Total assets
Assets not allocated to segments
Cash and cash equivalents(1)
Income tax receivable(2)
Deferred income taxes(6)

Segmented assets
Liabilities
Total liabilities
Liabilities not allocated to segments

Interest payable(3)
Income taxes payable(4)
Long-term debt(5)
Segmented liabilities
Net segmented assets

Transportation
Aviation
Corporate and Others

2,629
90
677
21,576

30,883

150
202
9,333
21,198

(385)
577
186

$
$
$

(1) Refer to Note 15 – Cash and cash equivalents.
(2) Included in other assets.
(3) Included in trade and other payables.
(4) Included in other liabilities.
(5) The current portion of long-term debt is included in other financial liabilities.
(6) Refer to Note 12 - Income taxes for more details.

The Corporation’s revenues by market segment were as follows:

Aviation

Business Aircraft
Manufacturing and Other(1)
Services(2)
Commercial Aircraft(3)
Aerostructures and Engineering Services

Transportation
Rolling stock and systems(4)
Services(5)
Signalling(6)

Corporate and Others

3,187
49
746
20,976

28,972

138
173
9,102
19,559

(412)
848
981

$
$
$

3,057
60
595
21,204

29,611

139
187
9,218
20,067

(1,106)
2,681
(438)

2019

2018

4,163
1,254
1,227
857
7,501

5,192
2,140
937
8,269
(13)
15,757

3,794
1,200
1,756
574
7,324

5,844
2,096
975
8,915
(3)
16,236

$
$
$

(1) Includes revenues from sale of new aircraft, specialized aircraft solutions and pre-owned aircraft.
(2) Includes revenues from aftermarket services including parts, Smarts Services, service centres, training and technical publication.
(3) Includes manufacturing, services and other.
(4) Comprised of revenues from light rail vehicles, metros, commuter and regional trains, intercity trains, high speed and very high speed trains,

locomotives, propulsion and controls, bogies, mass transit and airport systems, and mainline systems.

(5) Comprised of revenues from fleet management, asset life management, component re-engineering and overhaul, material solutions, and

operations and maintenance of systems.

(6) Comprised of signalling revenues from mass transit, mainline, industrial and OPTIFLO service solutions.

164 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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
Australia
China
India
Other

Revenues for fiscal years(1)

2019

2018

4,566
1,831
35
6,432

1,650
1,449
943
422
2,105
6,569

533
170
289
620
1,612

3,989
1,553
141
5,683

1,795
1,598
1,137
797
2,098
7,425

719
375
165
873
2,132

PP&E and intangible assets as at(2)
January 1

December 31 December 31
2018

2019

229
5,137
33
5,399

1,058
428
34
392
725
2,637

11
—
20
3
34

239
5,057
40
5,336

1,045
658
32
381
708
2,824

11
2
21
1
35

2018 (3)

258
4,077
38
4,373

1,048
807
35
379
717
2,986

23
3
23
3
52

Other

1,144
1,144
$ 15,757
(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

996
996
$ 16,236

6
6
8,076

24
24
8,219

28
28
7,439

countries based on the Corporation’s allocation of the related purchase price. PP&E is excluding right-of-use assets.

(3) Comprises the assets held for sale reclassification related to the disposal of ACLP.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 165

6. RESEARCH AND DEVELOPMENT

R&D expense, net of government assistance, was as follows, for fiscal years:

R&D expenditures
Less: development expenditures capitalized to aerospace program tooling

Add: amortization of aerospace program tooling

OTHER INCOME

Other income was as follows, for fiscal years:

Changes in estimates and fair value(1)
Gains on disposals of intangible assets and PP&E(2)
Impairment of PP&E and intangible assets(2)
Gain on sale of a business(2)
Severance and other involuntary termination costs (including changes in estimates)(2)
Other

2019
435
(275)
160
132
292

2018
1,136
(989)
147
70
217

2019
(40)
(10)
4
(4)
1
2
(47)

2018
(55)
(9)
3
—
3
—
(58)

(1) Includes net loss (gain) on certain financial instruments measured at fair value and changes in estimates related to certain provisions or

certain financial instruments, excluding losses (gains) arising from changes in interest rates.

(2) Excludes those presented in special items.

166 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

SPECIAL ITEMS

Special items comprise items which do not reflect the Corporation’s core performance or where their separate
presentation will assist users of the consolidated financial statements in understanding the Corporation’s results
for the period. Such items include, among others, the impact of restructuring charges and significant impairment
charges and reversals.

Special items were as follows, for fiscal years:

Impairment on ACLP investments(1)
Gain on disposal of a business - Training business(2)
Gain on disposal of a business - Q Series business(3)
Restructuring charges(4)
Loss on repurchase of long-term debt(5)
Pension adjustments(6)
Reversal of Learjet 85 aircraft program cancellation provisions(7)
Primove impairment and other costs(8)
Purchase of pension annuities(9)
C Series transaction with Airbus(10)
Gain on disposal of PP&E(11)
Gains on disposal of PP&E under sale and leaseback transactions(12)
Tax litigation(13)
Changes in credit and residual value guarantees(14)
Loss on sale of long-term contract receivables(15)
Impairment of non-core operations(16)
Income taxes

Of which is presented in
Special items in EBIT
Financing expense - loss on repurchase of long-term debt(5)
Financing expense - loss on sale of long-term contract receivables(15)
Financing income - interest related to tax litigation(13)
Income taxes

2019
1,578
(516)
(210)
99
84
26
(18)
5
4
—
—
—
—
—
—
—
217
1,269

968
84
—
—
217
1,269

2018
—
—
—
41
—
28
(29)
4
32
616
(561)
(66)
(35)
(34)
31
17
(23)
21

28
—
31
(15)
(23)
21

1. The Corporation performed an impairment test in the fourth quarter of 2019 on its investments in ACLP since
there were indicators of impairment. The Corporation determined that the carrying amount of its investment in
ACLP exceeded its recoverable amount, and accordingly recorded an impairment charge of $1,578 million.
See Note 40 - Investments in Joint ventures and Associates for more details.

2. The sale of Business Aircraft’s flight and technical training activities for a total net consideration of

$532 million resulted in a pre-tax accounting gain of $516 million ($383 million after deferred tax impact of
$133 million). See Note 31 - Disposal of businesses.

3. The sale of the Q Series Aircraft program assets for net proceeds of $285 million resulted in a pre-tax
accounting gain of $210 million ($184 million after tax impact). See Note 31 - Disposal of businesses.
4. For fiscal year 2019, represents severance charges of $86 million partially offset by curtailment gains of $7
million and by the reversal of previously-recorded impairment charges of $8 million, related to previously-
announced restructuring actions. For fiscal year 2018, represents severance charges of $43 million partially
offset by curtailment gains of $10 million, and impairment charges of PP&E of $8 million, all related to
previously-announced restructuring actions.

Following the announcement that the CRJ production is expected to conclude in the second half of 2020,
following the delivery of the current backlog of aircraft, the Corporation has recorded severance charges of
$7 million partially offset by curtailment gains of $3 million, and has recorded $24 million of other related
charges for fiscal year 2019. In addition, the Corporation has recorded a write down of deferred tax assets of
$87 million to reflect the expected impact of the conclusion of the CRJ announcement.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 167

5. Represents the loss related to the redemption of the $850-million Senior Notes due 2020, and the partial
redemption of the €780-million Senior Notes due 2021 and $1,400-million Senior Notes due 2021. See
Note 29 - Long-term debt.

6. On October 26, 2018, the High Court in the United Kingdom ruled that pension schemes must equalize for the

effect of unequal Guaranteed Minimum Pensions between male and female for benefits earned during
specified periods (“GMP equalization”). The Corporation estimated the impact of the ruling on its pension
plans and recognized an additional obligation of $28 million as at December 31, 2018. The one-time P&L
impact was recognized in fiscal year 2018 as a past service cost under IAS 19 - Employee Benefits. In fiscal
year 2019, the Corporation adjusted the pension obligation related to equalization for an Aviation plan in the
U.K. The adjustments of $26 million was recorded as a past service cost under IAS 19 - Employee Benefits.

7. Based on the ongoing activities with respect to the cancellation of the Learjet 85 aircraft program, the

Corporation reduced the related provisions by $18 million for fiscal year 2019 ($29 million for fiscal year
2018). The reduction in provisions is treated as a special item since the original provisions were also recorded
as special items in 2014 and 2015.

8. Following a reassessment of the value of the Primove e-mobility technology and the status of existing

contractual obligations, the Corporation recorded in fiscal year 2019 an additional contract provision of $5
million ($4 million for fiscal year 2018).

9. Represents the non-cash loss on the settlement of defined benefit pension plans resulting from the purchase
of annuities with insurance companies. As part of its ongoing de-risking strategies, the Corporation has an
initiative for the buy-out of annuities payable to pensioners or deferred pensioners for certain plans to the
extent they are fully funded on a buy-out basis, subject to compliance with certain conditions including
applicable pension legislations.

10. The acquisition by Airbus of 50.01% of ACLP, the entity that manufactures and sells the C Series aircraft

(rebranded A220) resulted in a pre-tax accounting charge of $616 million ($552 million after tax). The pre-tax
accounting charge reflects all elements of the transaction, including: (i) the $270 million fair value of warrants
issued by Bombardier to Airbus on July 1, 2018, (ii) a $310 million derivative liability which is associated with
the expected off-market return on units to be issued to Bombardier by ACLP under Bombardier’s funding
commitments, and iii) other Bombardier obligations towards ACLP, which mainly comprise supply chain
obligations for Aerostructures and Engineering Services.

11. Related to the sale of the Downsview property to the Public Sector Pension Investment Board (PSP

Investments).

12. The Corporation sold and leased back two facilities in Transportation in line with our transformation plan.
13. Represents a change in the estimates used to determine the provision related to tax litigation.
14. The provisions for credit and residual value guarantees were reduced following a change in credit risk

assumption for an airline. The reduction of the provisions was treated as a special item since the original
provisions were recorded as special items in 2015.

15. For fiscal year 2018, the Corporation sold long-term contract receivables in Transportation, which resulted in a

loss of $31 million recorded in financing expense.

16. An impairment charge related to non-core operations of $17 million recorded in the fiscal year 2018 with

respect to the expected sale of legal entities, as part of the Transportation transformation plan.

168 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

FINANCING EXPENSE AND FINANCING INCOME

Financing expense and financing income were as follows, for fiscal years:

Financing expense

Loss on repurchase of long-term debt(1)
Accretion on net retirement benefit obligations
Accretion on other financial liabilities
Accretion on advances(2)
Changes in discount rates of provisions
Interest expense on lease liabilities(3)
Amortization of letter of credit facility costs
Accretion on provisions
Net loss on certain financial instruments(4)
Loss on sale of long-term contract receivables(5)
Other

Interest on long-term debt, after effect of hedges

Financing income

Net gain on certain financial instruments(4)
Changes in discount rates of provisions
Tax litigation(7)
Other

Interest on cash and cash equivalents
Income from investment in securities
Interest on loans and lease receivables, after effect of hedges

2019

2018

84
73
56
37
19
32
25
14
—
—
95
435
637

1,072 (6) $

(149)
—
—
(34)

(183)
(35)
(9)
(3)
(47)
(230) (8) $

—
65
58
18
—
—
16
27
53
31
91
359
353
712 (6)

—
(17)
(15)
(37)

(69)
(25)
(8)
(4)
(37)
(106) (8)

(1) Represents the loss related to the redemption of the $850-million Senior Notes due 2020, and the partial redemption of the €780-million

Senior Notes due 2021 and $1,400-million Senior Notes due 2021, which was recorded as a special item. See Note 8 – Special items and
see Note 29 – Long-term debt for more details.

(2) Represents adjustments to transaction prices for certain orders with a significant financing component due to a significant delay between

timing of cash receipt and revenue recognition.

(3) Following the adoption of IFRS 16 - Leases, effective January 1, 2019, the Corporation presented the interest expense on lease liabilities as

part of financing expense. See Note 3 - Changes in accounting policies for more details.

(4) Net losses (gains) on certain financial instruments classified as FVTP&L, including losses (gains) arising from changes in interest rates.
(5) Represents the loss related to the sale of long-term contract receivables in Transportation. See Note 8 – Special items for more details.
(6) Of which $713 million representing the interest expense calculated using the effective interest rate method for financial liabilities classified

as amortized cost, respectively for fiscal year 2019 ($431 million for fiscal year 2018).

(7) Represents a change in the estimates used to determine the provision related to tax litigation.
(8) Of which $35 million representing the interest income calculated using the effective interest rate method for financial assets classified as

amortized cost and FVOCI, for fiscal year 2019 ($32 million for fiscal year 2018).

Borrowing costs capitalized to PP&E and intangible assets totalled $13 million for fiscal year 2019, using an
average capitalization rate of 6.76% ($247 million and 6.65% for fiscal year 2018). 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).

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 169

10. NON-CONTROLLING INTEREST

The summarized statement of financial position for BT Holdco, which has significant NCI, was as follows, as at:

Current assets(1)
Non-current assets
Total assets

Current liabilities
Non-current liabilities
Total liabilities
Net assets

December 31, 2019

December 31, 2018

$
$

4,794
4,295
9,089

7,403
1,700
9,103
(14)

$
$

4,929
3,916
8,845

7,246
1,448
8,694
151

(1) Includes cash and cash equivalents amounting to €481 million ($540 million) and €662 million ($758 million) as at December 31, 2019 and

2018.

The selected income and cash flow information for BT Holdco, which has significant NCI, was as follows, for fiscal
years:

Revenues
Net income (loss)
Comprehensive income (loss)

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities(1)

$
$
$

2019
8,269
(142)
(183)

(428)
(128)
222

$
$
$

2018
8,915
325
79

(6)
(107)
(328)

(1) Includes nil of dividend paid, $164 million (€150 million) of capital injection made by the Corporation and CDPQ, and $1 12 million (€100

million) of subordinated loan made by the Corporation to BT Holdco for fiscal year 2019 ($326 million (€270 million), nil and nil, respectively
for fiscal year 2018).

The changes to the accumulated NCI for BT Holdco, which has significant NCI, were as follows:

Balance as at January 1, 2018
Minimum return entitlement
OCI
Dividends

Balance as at December 31, 2018

Minimum return entitlement
OCI
Issuance of NCI

Balance as at December 31, 2019

BT Holdco
1,548
155
(75)
(90)
1,538
183
(27)
49
1,743

CDPQ investment in BT Holdco
On February 11, 2016, Bombardier closed the sale to the CDPQ of a $1.5-billion convertible share investment in
Bombardier Transportation’s newly-created holding company, Bombardier Transportation (Investment) UK Limited
(BT Holdco). 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.

BT Holdco owns essentially all of the assets and liabilities of Bombardier’s Transportation business segment, its
operational headquarters remains in Germany and continues to be consolidated in Bombardier’s financial results.

170 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Key terms of the investment
The CDPQ is entitled to its pro-rata portion (on an as-converted basis, initially equal to 30% of BT Holdco
common shares) of any dividends declared, once the Corporation and CDPQ approved the declaration of
dividends, as required.

Dividends are 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 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 performance targets jointly agreed to as part of Transportation’s
business plan.

If 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 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%.

In 2019, Transportation did not meet the performance targets underlying CDPQ’s investment in BT Holdco.
Accordingly, for the 12-month period starting on February 12, 2020, CDPQ’s percentage of ownership on
conversion of its shares will increase by 2.5%, up from 30% to 32.5%, and the preference return entitlement rate
on liquidation of its shares will increase from 9.5% to 12% for this period. Any dividends paid by BT Holdco to its
shareholders during this period will be distributed on the basis of each shareholder’s percentage of ownership on
conversion, being 67.5% for Bombardier and 32.5% for the CDPQ. These adjustments will become effective once
the audited consolidated financial statements of BT Holdco are duly approved by its Board of Directors.

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 February 11, 2021, and provided that Bombardier has not exercised its right to buy back
the 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.

In the case of an IPO, the conversion ratio of the CDPQ’s shares will be adjusted so that, immediately prior to the
IPO, the CDPQ receives shares having a value equal to the higher of: (i) the value of its shares, on an as-
converted basis, based on the implied value of the IPO; or (ii) the minimum return adjusted for any distributions, in
both cases taking into account changes, if any, resulting from the effect of the performance incentives. The
CDPQ’s shares would be sold in priority to Bombardier’s shares as part of the secondary IPO.

In the case of a sale of 100% of the BT Holdco shares, the CDPQ will have the right to receive an amount equal
to the higher of: (i) the value of its shares, on an as-converted basis, based on the implied value of the sale to a
third party; or (ii) the minimum return adjusted for any distributions, in both cases taking into account changes, if
any, resulting from the effect of the performance incentives.

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: (i) 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

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 171

third party, as discussed above; or (ii) 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, as defined in the agreement, at the end of
each quarter of at least $1.25 billion. This condition was met on a quarterly basis and as at December 31, 2019
and 2018. 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.

Capital injection
On September 26, 2019, the Corporation and CDPQ (through its affiliates) made a capital injection of €105 million
($115 million) and €45 million ($49 million) in BT Holdco. The cash infusion supports Transportation’s production
ramp up and associated working capital investment. The Corporation and CDPQ participated at their current pro
rata share in the capital injection and under the same terms as their original investments. As such, the equity
ownership percentage of the Corporation and of CDPQ in Transportation remain the same.

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

24
34
7, 8

2019
4,520
343
30
94
4,987

2018
4,919
464
74
46
5,503

(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.

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

2019
154
113
267

2018
151
(74)
77

172 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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 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

2019

$(1,340)

26.6 %
(356)

538
121

(96)
90
5
(35)
267
(19.9)%

2018
395
26.7%
105

166
132
21
(171)
(135)
2
(43)
77
19.5%

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 (recovery) 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

2019
538
(455)
121
(96)
5
113

2018
166
(203)
132
(171)
2
(74)

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
Contract liabilities
Inventories
Provisions
Other financial assets and other assets
Investment in affiliate equity
PP&E
Other financial liabilities and other
liabilities
Intangible assets
Contract assets
Other

Unrecognized deferred tax assets

December 31, 2019
Liability

Asset
2,712
591
416
394
609
244
53
(4)

1
1
79
19
5,115
(4,438)
677

— $
—
—
—
—
—
—
—

—
—

—
—
—
— $

December 31 2018
Asset
Liability
2,247
547
179
705
754
264
(131)
6

— $
—
—
—
—
—
—
—

January 1, 2018
Liability
—
—
—
—
—
—
—
—

Asset
2,433
501
87
673
1,106
118
—
(3)

6
16
157
39
4,789
(4,043)
746

—
—

—
—
—
— $

(3)
(161)
(161)
36
4,626
(4,031)
595

Reclassified as assets
held for sale(1)

$
$
(1) Includes deferred income tax asset of $131 million related to retirement benefits amounting to $64 million, operating tax losses carried

— $
— $

— $
$

(131)
546

595

746

$
$

forward amounting to $61 million and other amounting to $6 million, which is presented under assets held for sale as at December 31, 2019.
See Note 30 - Assets held for sale for more details.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 173

—
—

—
—
—
—

—
—

The changes in the net deferred income tax asset were as follows for the fiscal years:

Balance at beginning of year, net

In net (loss) income
In OCI

Retirement benefits
Cash flow hedges

Reclassified as assets held for sale
Other(1)
Balance at end of year, net

2019
746
(113)

2018
595
74

50
(17)
(131)
11
546

(6)
55
—
28
746

(1) Includes deferred income tax impact recorded in equity amounting to $7 million and foreign exchange rate effects as at December 31, 2019

($31 million and foreign exchange rate effects as at December 31, 2018).

The net operating losses carried forward and deductible temporary differences for which deferred tax assets have
not been recognized amounted to $17,264 million as at December 31, 2019, of which $1,538 million relates to
retirement benefits that will reverse through OCI ($15,315 million as at December 31, 2018 of which $1,297
million relates to retirement benefits that will reverse through OCI and $16,677 million as at January 1, 2018 of
which $1,482 million relates to retirement benefits that will reverse through OCI). Of these amounts, approximately
$10,477 million as at December 31, 2019 has no expiration date ($10,015 million as at December 31, 2018 and
$11,326 million as at January 1, 2018) and approximately $3,295 million relates to the Corporation’s operations in
Germany where a minimum income tax is payable on 40% of taxable income ($3,087 million as at December 31,
2018 and $2,917 million as at January 1, 2018) and $553 million relate to the Corporation’s operations in France
where a minimum income tax is payable on 50% of taxable income ($437 million as at December 31, 2018 and
$522 million as at January 1, 2018).

In addition, the Corporation has $1,621 million of unused investment tax credits, most of which can be carried
forward for 20 years and $47 million of net capital losses carried forward for which deferred tax assets have not
been recognized ($1,614 million and $43 million as at December 31, 2018 and $1,620 million and $117 million as
at January 1, 2018). Net capital losses can be carried forward indefinitely and can only be used against future
taxable capital gains.

Net deferred tax assets of $161 million were recognized as at December 31, 2019 ($321 million as at
December 31, 2018 and $492 million as at January 1, 2018) 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 4 – Use of estimates and
judgment for more information on how the Corporation determines the extent to which deferred income tax assets
are recognized.

No deferred tax liabilities have been recognized on undistributed earnings of the Corporation’s foreign subsidiaries,
joint ventures and associates when they are considered to be indefinitely reinvested, 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 $664 million as at December 31, 2019 ($682 million as at December 31, 2018
and $588 million as at January 1, 2018).

174 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

13. EARNINGS PER SHARE

Basic and diluted EPS were computed as follows, for fiscal years:

(Number of shares, stock options, PSUs, DSUs, RSUs and warrants in thousands)
Net income (loss) attributable to equity holders of Bombardier Inc.
Preferred share dividends, including taxes
Net income (loss) attributable to common equity holders of Bombardier Inc.
Weighted-average number of common shares outstanding
Net effect of stock options, PSUs, DSUs, RSUs, warrants and conversion option
Weighted-average diluted number of common shares
EPS (in dollars)

Basic
Diluted

2019

2018

(1,797)
(21)
$
(1,818)
2,383,987
—
2,383,987

232
4
$
236
2,316,824
184,223
2,501,047

$
$

(0.76)
(0.76)

$
$

0.10
0.09

The effect of the exercise of stock options, PSUs, DSUs, RSUs and warrants was included in the calculation of
diluted EPS in the above table, except for 524,442,736 for fiscal year 2019 (53,477,802 for fiscal year 2018) 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.
The calculation of diluted EPS did not include the impact of the CDPQ conversion option for fiscal year 2019 as
this was antidilutive. This is because CDPQ’s minimum return entitlement was greater than their share of the BT
Holdco net income on an as converted basis assuming the maximum CDPQ ownership on conversion if
Transportation does not achieve its performance targets.

14.

FINANCIAL INSTRUMENTS

Net gains (losses) on financial instruments recognized in income were as follows, for fiscal years:

Financial instruments measured at amortized cost

Financial assets - expected credit loss allowance (impairment charges)
Interest on cash and cash equivalents

Financial instruments measured at fair value

FVTP&L - changes in fair value

Designated as FVTP&L

Financial liabilities

Required to be classified as FVTP&L

Financial assets(1)
Derivatives not designated in hedging relationships(2)
Other

2019

2018

$
$

$
$
$

(19)
35

(2)

(389)
91
116

$
$

$
$
$

(30)
25

(45)
(39)
25

(1) Includes loss recorded on ACLP non-voting units related to the impairment charges of ACLP investments for fiscal year 2019 and includes

loss on sale of long-term contract receivable for fiscal year 2018, see Note 8 – Special items for more details.

(2) Includes a gain recorded on funding commitments related to the impairment charges of ACLP investments for fiscal year 2019, see Note 8

– Special items for more details.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 175

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:

FVTP&L

FVTP&L Designated

FVOCI(1)

Amortized
cost

DDHR

Total
carrying

value Fair value

December 31, 2019
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, 2018
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

— $
—
723
723

— $
—
378
378

— $
—
—
— $

— $ 2,578
1,844
—
101
250
$ 4,523
250

—
—
468
468

n/a
n/a
n/a
n/a

$ 4,682
9,333
732
$ 14,747

— $
—
—
— $

— $ 3,187
1,575
—
35
230
$ 4,797
230

—
—
438
438

n/a
n/a
n/a
n/a

$ 4,634
9,102
801
$ 14,537

— $
—
846
846

— $
—
597
597

FVTP&L

— $ 2,578
1,844
—
1,184
110
$ 5,606
110

— $ 4,682
9,333
—
1,735
157
$ 15,750
157

— $ 3,187
1,575
—
1,240
129
$ 6,002
129

— $ 4,634
9,102
—
2,124
288
$ 15,860
288

$ 2,578
1,844
1,184
$ 5,606

$ 4,682
9,660
1,752
$ 16,094

$ 3,187
1,575
1,237
$ 5,999

$ 4,634
8,750
2,412
$ 15,796

HFT Designated

Amortized
cost

AFS

DDHR

Total
carrying

value Fair value

January 1, 2018

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

$ 2,988
—
79
$ 3,067

— $
—
216
216

— $
—
361
361

1,174
331
$ 1,505

— $

— $
—
354
354

6
—
74
80

n/a
n/a
n/a
n/a

$ 3,958
9,218
677
$ 13,853

— $ 2,988
1,174
—
1,240
253
$ 5,402
253

— $ 3,964
9,218
—
1,289
184
$ 14,471
184

$ 2,988
1,174
1,278
$ 5,440

$ 3,964
9,354
1,329
$ 14,647

(1) Includes investments in equity instruments designated at FVOCI.
(2) Includes the current portion of long-term debt.
n/a: Not applicable

176 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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, 2019

Derivative financial instruments - assets
Derivative financial instruments - liabilities
Cash and cash equivalents

December 31, 2018

Derivative financial instruments - assets
Derivative financial instruments - liabilities
Cash and cash equivalents

January 1, 2018

Derivative financial instruments - assets
Derivative financial instruments - liabilities
Cash and cash equivalents

$
$
$

287
(535)
2,629

168
(885)
3,187

332
(538)
3,057

$
$
$

(97)
117
(19)

(104)
232
(127)

(135)
176
(41)

$
$
$

190
(418)
2,610

64
(653)
3,060

197
(362)
3,016

Derivatives and hedging activities
The carrying amounts of all derivative and non-derivative financial instruments in a hedge relationship were as
follows, as at:

Derivative financial instruments
designated as fair value hedges

Interest-rate swaps

— $

—

December 31, 2019
Liabilities

Assets

December 31, 2018
Liabilities

Assets

January 1, 2018
Liabilities

Assets

Derivative financial instruments
designated as cash flow hedges(1)
Forward foreign exchange contracts

Derivative financial instruments
classified as FVTP&L(2)

Forward foreign exchange contracts
Funding commitments
Embedded derivative financial instruments

Conversion option
Call options on long-term debt
Other

18
—

—
158
1
177

Total derivative financial
instruments
Non-derivative financial instruments
designated as hedges of net investment

287

103

157

129

33
—

—
4
2
39

168

50
—

325
—
3
378

535

287

48
235

314
—
—
597

885

248

57
—

—
21
1
79

332

184

50
—

304
—
—
354

538

— $

Long-term debt

— $

355

— $

526

(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 18 months as at December 31, 2019.

(2) Held as economic hedges, except for embedded derivative financial instruments and funding commitments.

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 $7 million and $7 million
respectively for fiscal year 2019 (net losses of $4 million and net gains of $4 million respectively for fiscal year 2018).
The ineffectiveness recognized in net income that relates to cash flow hedges, amounted to net losses of $1 million
for fiscal year 2019 (net losses of $4 million for fiscal year 2018). The methods and assumptions used to measure
the fair value of financial instruments are described in Note 39 – Fair value of financial instruments.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 177

15. CASH AND CASH EQUIVALENTS

Cash and cash equivalents were as follows, as at:

December 31, 2019
1,306

December 31, 2018
1,296

January 1, 2018
1,382

Cash
Cash equivalents
Term deposits
Money market funds

547
776
2,629
51
2,578

892
999
3,187
—
3,187

449
1,226
3,057
69
2,988

Cash and cash equivalents(1)
Reclassified as assets held for sale
Cash and cash equivalents
(1) For purpose of the statement of cash flows, cash and cash equivalents comprise the cash reclassified as asset held for sale. See Note 30 -

Assets held for sale for more details.

See Note 36 – Credit facilities for details on covenants related to cash and cash equivalents.
See Note 10 – Non-controlling interest for details on the agreement with CDPQ related to a consolidated
Bombardier cash position of at least $1.25 billion at the end of each quarter.

16.

TRADE AND OTHER RECEIVABLES

Trade and other receivables were as follows, as at:

December 31, 2019(1)(2)

Trade receivables, gross
Allowance for doubtful accounts

Other
Total

December 31, 2018(1)(2)

Trade receivables, gross
Allowance for doubtful accounts

Other
Total

January 1, 2018(1)(2)

Trade receivables, gross
Allowance for doubtful accounts

Other
Total

Total

1,773
(49)
1,724
120
1,844

1,508
(42)
1,466
109
1,575

1,149
(70)
1,079
95
1,174

Not past
due

1,176
—
1,176

764
—
764

669
—
669

Past due but not impaired (3)
less than
90 days

more than
90 days

Impaired (4)

146
—
146

339
—
339

195
—
195

231
—
231

245
—
245

171
—
171

220
(49)
171

160
(42)
118

114
(70)
44

(1) Of which $506 million and $574 million are denominated in euros and other foreign currencies, respectively, as at December 31, 2019

($334 million and $564 million, respectively, as at December 31, 2018 and $254 million and $443 million, respectively, as at
January 1, 2018).

(2) Of which $485 million represents customer retentions relating to long-term contracts as at December 31, 2019 based on normal terms and

conditions ($400 million as at December 31, 2018 and $287 million as at January 1, 2018).

(3) Of which $186 million of trade receivables relates to Transportation long-term contracts as at December 31, 2019, of which $179 million
were more than 90 days past due ($464 million as at December 31, 2018, of which $229 million were more than 90 days past due and
$225 million as at January 1, 2018, of which $144 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 $52 million of trade receivables are individually impaired as at December 31, 2019 ($40 million as at

December 31, 2018 and $73 million as at January 1, 2018).

178 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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 38 – Financial risk management.

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
Reclassified as assets held for sale(1)
Effect of foreign currency exchange rate changes

Balance at end of year

(1) See Note 30 – Assets held for sale for more details.

2019
(42)
(19)
7
7
(2)
(49)

2018
(70)
(30)
56
—
2
(42)

Off-balance sheet sale of receivables
In the normal course of its business, Transportation has facilities, to which it can sell, without credit recourse,
qualifying receivables. Receivables of € 809 million ($909 million) were outstanding under such facilities as at
December 31, 2019 (€ 799 million ($914 million) as at December 31, 2018 and € 907 million ($1,088 million) as at
January 1, 2018). Receivables of € 1,691 million ($1,894 million) were sold to these facilities during fiscal year
2019 (€ 1,590 million ($1,880 million) during fiscal year 2018).

In addition, in fiscal year 2018, the Corporation sold a long-term contract receivable, previously recorded in other
financial assets, for proceeds of $133 million, refer to Note 8 - Special items and Note 20 - Other financial assets
for more details.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 179

17. CONTRACT BALANCES

Contract assets were as follows, as at:

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

Contract liabilities were as follows, as at:

Advances on aerospace programs
Advances and progress billings in excess of long-
term contract cost incurred and recorded margin
Other deferred revenues

Of which current
Of which non-current

December 31, 2019

December 31, 2018

January 1, 2018

9,930
(7,983)
1,947

674
(136)
538
2,485

8,882
(6,707)
2,175

506
(64)
442
2,617

8,306
(6,171)
2,135

367
(42)
325
2,460

December 31, 2019
4,018

December 31, 2018
3,075

January 1, 2018
2,120

2,286
852
7,156
5,739
1,417
7,156

$
$

2,124
996
6,195
4,262
1,933
6,195

$
$

1,981
991
5,092
3,820
1,272
5,092

$
$

Under certain contracts, title to contract balances 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.

Advances and progress billings received on long-term contracts in progress were $10,405 million as at
December 31, 2019 ($8,895 million as at December 31, 2018 and $8,194 million as at January 1, 2018).
Revenues include revenues from Transportation long-term contracts, which amounted to $6,766 million for fiscal
year 2019 ($7,388 million for fiscal year 2018).

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) in contract assets and amounted to € 503 million
($565 million) as at December 31, 2019 (€ 624 million ($714 million) as at December 31, 2018 and € 434 million
($520 million) as at January 1, 2018). The third-party advance providers could request repayment of these
amounts if Transportation fails to perform its contractual obligations such as delivery by a specified date.

180 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Revenues recognized were as follows for fiscal years:

Revenue recognized from:
Contract liability balance at the beginning of the period
Long term production contracts and service contracts
Advances on aerospace programs

Performance obligations satisfied (partially satisfied) in previous periods(1)

Long term production contracts
Long term service contracts

(1) Includes changes in transaction price such as penalties and escalation.

Impairment losses recognized were as follows for fiscal years:

Impairment losses recognized on:
Receivables arising from:
Production contracts
Service contracts

18.

INVENTORIES

Inventories were as follows, as at:

Aerospace programs
Finished products(1)
Other

2019

2018

1,345
822

(104)
(4)
2,059

1,796
729

174
(23)
2,676

2019

2018

(15)
—
(15)

(22)
(1)
(23)

December 31, 2019
3,990
468
141
4,599

December 31, 2018
3,546
733
123
4,402

January 1, 2018
2,472
749
208
3,429

(1) Finished products include $58 million of new aircraft not associated with a firm order and pre-owned aircraft as at December 31, 2019 ($53

million as at December 31, 2018 and $93 million as at January 1, 2018).

The amount of inventories recognized as cost of sales totalled $5,632 million for fiscal year 2019
($5,422 million for fiscal year 2018). These amounts include $180 million of write-downs for fiscal year 2019
($249 million for fiscal year 2018). Reversal of write-down of $7 million is recognized for fiscal year 2019
($19 million for fiscal year 2018).

19. BACKLOG

The following table presents the aggregate amount of the revenues expected to be realized in the future from
partially or fully unsatisfied performance obligations as we perform under contracts at delivery or recognized over
time. The amounts disclosed below represent the value of firm orders only. Such orders may be subject to future
modifications that might impact the amount and/or timing of revenue recognition. The amounts disclosed below do
not include constrained variable consideration, unexercised options or letters of intent.

Revenues expected to be recognized in:

(In billions of $)

Less than 24 months
Thereafter

Total

December 31, 2019
28.2
23.9
52.1

December 31, 2018
26.8
26.3
53.1

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 181

20. OTHER FINANCIAL ASSETS

Other financial assets were as follows, as at:

Receivables from related party(1)
ACLP non-voting units(2)
Derivative financial instruments(3)
Investments in securities(4)(7)
Long-term contract receivables(5)(8)
Restricted cash
Aircraft loans and lease receivables(6)
Investments in financing structures
Other

Of which current
Of which non-current

December 31, 2019
468
—
287
250
99
62
2
—
16
1,184
195
989
1,184

$
$

December 31, 2018
385
150
168
230
75
21
26
173
12
1,240
210
1,030
1,240

$
$

January 1, 2018
—
—
332
361
253
12
49
219
14
1,240
415
825
1,240

$
$

(1) This receivable from ACLP represents a back-to-back agreement that the Corporation has with ACLP related to certain government

refundable advances. See Note 27 - Other financial liabilities for more information.

(2) See Note 8 - Special items for more details on the impairment charges on ACLP investments.
(3) See Note 14 - Financial instruments.
(4) Includes nil 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, 2019 ($16 million as at December 31, 2018 and $51 million as at January 1, 2018).

(5) See Note 38 - Financial risk management.
(6) 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.

(7) Includes $35 million of equity instruments designated as FVOCI as at December 31, 2019 ($28 million as at December 31, 2018).
(8) See Note 8 - Special items for more details on the sale of long-term contract receivables.

21. OTHER ASSETS

Other assets were as follows, as at:

Sales tax and other taxes
Intangible assets other than aerospace program
tooling and goodwill(1)
Retirement benefits(2)
Prepaid expenses
Prepaid sales concessions and deferred contract
costs
Income taxes receivable
Deferred financing charges
Other

Of which current
Of which non-current

(1) See Note 23 – Intangible assets.
(2) See Note 24 – Retirement benefits.

December 31, 2019
249

December 31, 2018
212

January 1, 2018
262

217
193
141

105
90
27
13
1,035
473
562
1,035

$
$

195
200
107

131
49
38
24
956
357
599
956

$
$

120
290
107

174
60
40
17
1,070
427
643
1,070

182 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

22. PROPERTY, PLANT AND EQUIPMENT

PP&E were as follows, as at:

Cost

Balance as at
December 31, 2018

Change in accounting
policy(1)
Additions
Disposals
Transfers
Reclassified as assets
held for sale(2)
Effect of foreign currency
exchange rate changes

Balance as at
December 31, 2019

Land

Buildings

Equipment

in progress Other

Total

Construction

Right-of-
use
assets

Total

2,140

1,330

184

$ 359

$ 4,092

n/a

$ 4,092

—

2
(8)
—

(8)

—

(73)

24
(20)
44

(329)

(13)

(48)

75
(165)
62

(374)

(1)

—

137
(1)
(105)

(47)

—

—
(12)
4

(16)

(121)

238
(206)
5

(774)

—

(14)

675

103
(95)
(5)

(69)

(3)

554

341
(301)
—

(843)

(17)

1,773

879

168

$ 335

$ 3,220

606

$ 3,826

Accumulated amortization and impairment

Balance as at
December 31, 2018

Change in accounting
policy(1)
Amortization
Reversals (impairments)
Disposals
Transfers
Reclassified as assets
held for sale(2)
Effect of foreign currency
exchange rate changes

Balance as at
December 31, 2019
Net carrying value

(18) $

(1,238) $

(989) $

(11) $ (279) $ (2,535)

n/a

$ (2,535)

—

—
1
—
—

—

(56)
2
21
(2)

162

(99)
5
155
(3)

362

(2)

—

—
(2)
—
—

—

(6)
1
3
—

(1)

(161)
7
179
(5)

533

(61)

(109)
—
12
5

—

(270)
7
191
—

554

(17) $

(1,061) $

712

(549) $

330

(13) $ (273) $ (1,913) $

155

$ 1,307

(132)

474

$ (2,045)

$ 1,781

Cost

Balance as at January 1, 2018(3)

Additions
Disposals
Transfers
Disposal of ACLP business
Effect of foreign currency
exchange rate changes

Balance as at December 31, 2018

Accumulated amortization and impairment

Balance as at January 1, 2018(3)

Amortization
Impairment
Disposals
Transfers
Disposal of ACLP business
Effect of foreign currency
exchange rate changes

Balance as at December 31, 2018
Net carrying value

$
$

Land

Buildings

Equipment

Construction
in progress

Other

Total

83
—
(1)
—
—

(3)

2,538
13
(155)
95
(304)

(47)

1,442
47
(130)
54
(64)

(19)

173
128
—
(100)
(13)

(4)

415
3
(8)
(49)
—

(2)

$ 4,651
191
(294)
—
(381)

(75)

2,140

1,330

184

359

$ 4,092

(18) $
—
—
—
—
—

(1,377) $
(65)
(1)
100
—
74

—

(18) $
$
61

(1,238) $
$
902

(993) $
(103)
(6)
100
(18)
23

(989) $
$
341

(7) $
—
(4)
—
—
—

(291) $ (2,686)
(181)
(11)
202
—
97

(13)
—
2
18
—

—

(11) $
$
173

(279) $ (2,535)
$ 1,557

(1) Represents the initial recognition of right-of-use assets as at January 1, 2019 following the adoption of IFRS 16, Leases. Refer to Note 3 -

Changes in accounting policies for more details.
(2) See Note 30 – Assets held for sale for more details.
(3) Opening balances are before the assets held for sale reclassification related to the disposal of ACLP.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 183

The carrying value of right-of-use assets was as follows, as at:

Buildings
Equipment
Land
Others

December 31, 2019
332
85
50
7
474

January 1, 2019
405
156
42
11
614

Depreciation expense of right-of-use assets was as follows, for fiscal year 2019:

Land Buildings Equipment

Other

Total

Depreciation expense of right-of-use assets

(2) $

(58) $

(39) $

(10) $

(109)

The expense related to short term leases and low value leases amounted to $27 million for fiscal year 2019.

184 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

23.

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, 2018

Additions
Disposals
Reclassified as assets held for sale(4)
Effect of foreign currency
exchange rate changes

Balance as at December 31, 2019

Accumulated amortization and impairment

1,930
112
(13)
(287)

—
1,742

8,999
163
(8)
(1,352)

$ 10,929
275
(21)
(1,639)

—
7,802

—
$ 9,544

Balance as at December 31, 2018

(981) $

Amortization
Impairment
Disposals
Reclassified as assets held for sale(4)
Effect of foreign currency
exchange rate changes

Balance as at December 31, 2019
Net carrying value

Cost

Balance as at January 1, 2018(6)

Additions
Disposals
Disposals of ACLP business
Effect of foreign currency
exchange rate changes

$
$

Balance as at December 31, 2018

Accumulated amortization and impairment

(18)
—

281

(5,429) $ (6,410)
(132)
—
15
1,599

(114)
—
15
1,318

—
(718) $
$
1,024

—

—
(4,210) $ (4,928)
$ 4,616
3,592

2,743
362
—
(1,175)

$ 12,868
627
(13)
(4,483)

$ 15,611
989
(13)
(5,658)

—
1,930

—
8,999

—
$ 10,929

Balance as at January 1, 2018(6)

Amortization
Impairment
Disposals
Disposals of ACLP business
Effect of foreign currency
exchange rate changes

Balance as at December 31, 2018
Net carrying value

$
$

(1,460) $
(1)
—
—
480

(7,987) $ (9,447)
(70)
—
—
3,107

(69)
—
—
2,627

—
(981) $
$
949

—

—
(5,429) $ (6,410)
$ 4,519
3,570

$
$

1,948
—
—
—

(12)
1,936

— $
—
—
—
—

891
83
(50)
(66)

(8)
850

(696)
(20)
(3)
43
38

—
— $
$

1,936

5
(633)
217 (5)

$ 13,768
358
(71)
(1,705)

(20)
$ 12,330

$ (7,106)
(152)
(3)
58
1,637

5
$ (5,561)
6,769
$

$
$

2,042
—
—
—

(94)
1,948

— $
—
—
—
—

837
85
(15)
(3)

(13)
891

(701)
(21)
—
7
3

—
— $
$

1,948

16
(696)
195 (5)

$ 18,490
1,074
(28)
(5,661)

(107)
$ 13,768

$ (10,148)
(91)
—
7
3,110

16
$ (7,106)
6,662
$

Aerospace program tooling

Goodwill

Other (1)(2)

Total

Acquired

Internally
generated

Total

(3)

(1) Presented in Note 21 – Other assets.
(2) Includes internally generated intangible assets with a cost and accumulated amortization of $552 million and $306 million, respectively, as

at December 31, 2019 ($511 million and $324 million, respectively, as at December 31, 2018 and $429 million and $324 million,
respectively, as at January 1, 2018).

(3) Includes intangible assets under development with a cost of nil million as at December 31, 2019 (nil as at December 31, 2018 and $3,390

million as at January 1, 2018).

(4) See Note 30 – Assets held for sale for more details.
(5) Includes Transportation platform development costs amounting to $103 million as at December 31, 2019 ($109 million as at
December 31, 2018).
(6) Opening balances are before the assets held for sale reclassification related to the disposal of ACLP.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 185

Goodwill
Goodwill is related primarily 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 2019, the Corporation completed an impairment test. The Corporation did not identify any impairment.
See Note 4 – Use of estimates and judgment for more details.

24. 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 a 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.’s 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.

186 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Benefit Policy

DB plan benefits are usually 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., all DB plans are closed to new members. New employees join DC plans. Pension entitlements are
indexed to inflation according to pension legislation and plan rules.

Funding requirements

Actuarial valuations are conducted by independent firms hired by the Corporation or the administrators, as required
by pension legislation. The purpose of the valuations is to determine the plans’ financial position and the annual
contributions to be made by the Corporation to fund both benefits accruing in the year (normal cost) and deficits
accumulated over prior years. Minimum funding requirements are set out by applicable pension legislations.

Pension plans in Canada are notably governed under the Supplemental Pension Plans Act in Québec, the Pension
Benefits Act in Ontario 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 future service costs and deficits, as prescribed
by laws and actuarial practices.

For Quebec pension plans, minimum contributions are required to amortize the going-concern deficits (established
under the assumption that the plan will continue to be in force) over a period up to fifteen years (which is gradually
decreasing to 10 years as of December 31, 2020). Funding is based on an “enhanced” going-concern valuation,
including a stabilization provision. This provision is funded by special amortization and current service
contributions, and by actuarial gains.

For Ontario pension plans, minimum contributions are required to amortize the going-concern deficits (established
under the assumption that the plan will continue to be in force) over a period up to ten years. Solvency deficiencies
up to 85% of solvency liabilities are required to be funded over a period of 5 years. An explicit margin called a
provision for adverse deviations (PFAD) is added to both the going concern liabilities and future service cost when
determining minimum contributions.

Pension plans in the U.S. are mainly governed under the Employee Retirement Income Security Act, the Internal
Revenue Code and the Pension Protection Act of 2006. Actuarial valuations are required annually. Contributions
are determined by appointed actuaries and cover future service costs and deficits, as prescribed by law. Funding
deficits are generally amortized over a period of seven years.

Pension plans in the U.K. are notably 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 and de-risking strategies

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 187

As at December 31, 2019, the average target asset allocation was as follows:

- 54%, 60% and 50% in fixed income securities, for Canadian, U.K. and U.S. plans, respectively;
38%, 31% and 50% in equity securities, for Canadian, U.K. and U.S. plans, respectively; and
-
8% and 9% in real return asset securities, for Canadian and U.K. plans, respectively.
-

The plan administrators have also established dynamic risk management 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 and the plans become more mature.
Under certain pension legislations, and subject to compliance with certain conditions, the buy-out of annuities with
insurance companies would discharge the Corporation and administrators of their respective obligations.
Accordingly, in 2018, annuities were purchased for pensioners of seven pension plans registered in Ontario, the
U.K. and the U.S. Also, in 2019, annuities were purchased for pensioners of the three Bombardier Aviation pension
plans registered in Ontario. Overall, in 2018 and 2019, annuities were purchased for 4,690 pensioners with total
premiums paid to insurers by the pension funds of approximately $676 million. The buy-out of annuities payable to
pensioners of other pension plans will be contemplated in the coming years when these plans become fully funded
on a buy-out basis.

Bombardier Inc.’s Pension Asset Management Services monitors the de-risking triggers on an ongoing basis to
ensure timely and efficient implementation of these strategies. The Corporation and administrators periodically
undertake asset and liability studies to determine the appropriateness of the investment policies and de-risking
strategies.

Risk management initiatives

The Corporation’s pension plans are exposed to various risks, including equity, interest rate, inflation, foreign
exchange, liquidity and longevity risks. Several risk 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.

188 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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.
The buy-out of annuities with insurance companies transfers all of the risks listed above to insurers for the
annuities purchased.

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 two thirds of the German unfunded DB plan liability relate to former plan members who no longer accrue
future service benefits. 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,
U.S. and U.K. New non-unionized hires are generally no longer offered post-retirement health care.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 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 costs(1)
Curtailment(2)
Settlement(3)

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

Pension
benefits
227
63
10
(40)
5
265
86
351

231
34
86

288
63

$
$
$

$
$

Other
benefits
4
10
—
(22)
—
(8)
—
(8)

n/a
(8)
n/a

(18)
10

$
$

$
$
$

$
$

2019

Total
231
73
10
(62)
5
257
86
343

231
26
86

270
73

Pension
benefits
264
55
28
(22)
32
357
91
448

321
36
91

393
55

$
$
$

$
$

Other
benefits
6
10
—
—
—
16
—
16

n/a
16
n/a

6
10

$
$

$
$
$

$
$

2018

Total
270
65
28
(22)
32
373
91
464

321
52
91

399
65

(1) Includes loss related to the pension adjustments of $26 million for fiscal year 2019 ($28 million for fiscal year 2018). See Note 8 – Special

items for more details.

(2) Includes $10 million of curtailment gain related to previously-announced restructuring actions for fiscal year 2019 ($10 million for fiscal year
2018). Also, includes $23 million of curtailment gain related to the gain on disposition of a business - Q Series business. See Note 31 –
Disposal of businesses for more details.

(3) Includes the loss related to the purchase of pension annuities. See Note 8 – Special items for more details.
n/a: Not applicable

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, 2018

Impact of asset ceiling and minimum liability
Actuarial gains, net
Effect of exchange rate changes
Income taxes

Balance as at December 31, 2018

Actuarial losses, net
Effect of exchange rate changes
Income taxes

Balance as at December 31, 2019

(2,577)
18
171
89
(6)
(2,305)
(453)
(67)
50
(2,775)

190 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

The following tables present the changes in the defined benefit obligation and fair value of pension plan assets, for
fiscal years:

Pension
benefits

Other
benefits

Pension
benefits

Other
benefits

2019

Total

$ 10,077
335
231
23
10

1,477

(3)

$ 11,742
340
264
26
28

Change in benefit obligation
Obligation at beginning of year
Accretion
Current service cost
Plan participants’ contributions
Past service costs(1)
Actuarial (gains) losses - changes in
financial assumptions
Actuarial (gains) losses - changes in
experience adjustments
Actuarial gains - changes in
demographic assumptions
Benefits paid
Curtailment
Settlement
Disposal of ACLP business

Reclassified as liabilities directly
associated with assets held for
sale(2)

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
Disposal of ACLP business

Reclassified as liabilities directly
associated with assets held for
sale(2)

Effect of exchange rate changes
Fair value at end of year

9,817
325
227
23
10

1,447

(66)
(354)
(40)
(14)
—

(2,421)
341
9,301

3,217
1,785
4,299
9,301

7,896
275
23
262
954
(354)
(19)
(20)
—

260
10
4
—
—

(9)

(1)
(11)
(22)
—
—

—
12
273

117
—
156
273

— $
11
—
—
—
(11)
—
—
—

(3)

(67)
(365)
(62)
(14)
—

(2,421)
353
9,574

3,334
1,785
4,455
9,574

7,896
286
23
262
954
(365)
(19)
(20)
—

(2,007)
312
7,322

—
—
— $

(2,007)
312
7,322

(620)

(21)

(88)
(377)
(22)
(484)
(327)

—
(644)
9,817

4,928
1,460
3,429
9,817

9,633
217
26
285
(586)
(377)
(516)
(15)
(231)

—
(540)
7,896

(3)

2018

Total

(3)

$ 12,057
350
270
26
28

(634)

(33)

(90)
(390)
(22)
(484)
(335)

—
(666)
$ 10,077

5,067
1,460
3,550
$ 10,077

(3)

9,633
230
26
285
(586)
(390)
(516)
(15)
(231)

—
(540)
7,896

315
10
6
—
—

(14)

(12)

(2)
(13)
—
—
(8)

—
(22)
260

139
—
121
260

—
13
—
—
—
(13)
—
—
—

—
—
—

(1) Includes loss related to the pension adjustments of $26 million for fiscal year 2019 ($28 million for fiscal year 2018). See note 8 – Special

items for more details.

(2) See Note 30 – Assets held for sale for more details.
(3) Opening balances are before the assets held for sale reclassification related to the disposal of ACLP.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 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 and minimum
liability(1)
Net amount recognized
Amounts included in:
Retirement benefit

Liability
Asset(2)
Net liability

December 31, 2019
Other
benefits

Pension
benefits

December 31, 2018
Other
benefits

Pension
benefits

January 1, 2018
Other
benefits

Pension
benefits

9,301
(7,322)
1,979

—
1,979

2,172
(193)
1,979

273
—
273

—
273

273
—
273

9,817
(7,896)
1,921

—
1,921

2,121
(200)
1,921

260
—
260

—
260

260
—
260

$ 11,432
(9,415)
2,017

18
2,035

2,325
(290)
2,035

308
—
308

—
308

308
—
308

(1) Comprises the effect of exchange rate changes.
(2) Presented in Note 21 – 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, 2019
Other
benefits

Pension
benefits

December 31, 2018
Other
benefits

Pension
benefits

January 1, 2018
Other
benefits

Pension
benefits

783
370
(10)
48
1,191

571
27
41
149
788
1,979

— $
—
—
—
—

—
245
16
12
273
273

695
332
102
72
1,201

526
24
35
135
720
1,921

— $
—
—
—
—

—
232
18
10
260
260

639
366
162
81
1,248

575
28
37
147
787
2,035

—
—
—
—
—

—
276
20
12
308
308

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, 2019
Plan
Benefit
assets
obligation

December 31, 2018
Plan
Benefit
assets
obligation

January 1, 2018
Plan
assets

Benefit
obligation

4,822
2,235
1,081
375
8,513
1,061
9,574

4,039
2,245
711
327
7,322
—
7,322

4,069
3,752
891
385
9,097
980
$ 10,077

3,374
3,650
559
313
7,896
—
7,896

5,030
4,215
1,000
400
10,645
1,095
$ 11,740

4,409
4,053
634
319
9,415
—
9,415

192 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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
618

873
215
334
1,071
2,493

853
2,536
17
3,406
682
123
7,322

Total
707

832
228
259
1,089
2,408

1,038
2,766
22
3,826
895
60
7,896

Total
732

1,007
300
419
1,240
2,966

1,335
3,139
29
4,503
994
220
9,415

Level 1
471

867
207
334
1,068
2,476

—
—
—
—
622
—
3,569

Level 1
513

826
220
259
1,086
2,391

—
—
—
—
840
—
3,744

Level 1
551

1,001
291
419
1,238
2,949

—
—
—
—
934
—
4,434

December 31, 2019
Level 3
—

Level 2
147

—
8
—
—
8

853
2,536
17
3,406
—
123
3,684

6
—
—
3
9

—
—
—
—
60
—
69

December 31, 2018
Level 3
—

Level 2
194

—
8
—
—
8

1,038
2,766
22
3,826
—
60
4,088

6
—
—
3
9

—
—
—
—
55
—
64

Level 2
181

January 1, 2018
Level 3
—

—
9
—
—
9

1,335
3,139
29
4,503
—
220
4,913

6
—
—
2
8

—
—
—
—
60
—
68

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, 2019, 2018 and January 1, 2018.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 193

The following table presents the contributions made for fiscal year 2019 and 2018 as well as the estimated
contributions for fiscal year 2020:

Contribution to

Funded pension plans
Unfunded pension plans
Other benefits
Total defined benefits plans
DC pension plans
Total contributions

2020
Estimated

2019

2018

239
25
12
276
97
373 (1)

248
27
11
286
86
372

190
27
13
230
91
321

(1) The estimated total contribution for the Aerostructure business is approximately $48 million for 2020.

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, 2019

333
1,556
2,475
2,966
3,284
10,614

The following table provides the weighted average duration of the defined benefit obligations related to pension
plans, as at:

December 31, 2019

Duration in years as at

Funded pension plans
Canada
U.S.
U.K.
Other
Unfunded pension plans
Germany
Canada
U.S.
Other

The following table provides the expected payments to be made under the unfunded plans, as at
December 31, 2019:

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

22
93
133
146
127
521

17
81
120
134
141
493

194 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

17.3
15.7
20.4
17.3

15.9
13.6
13.0
15.8

Total

39
174
253
280
268
1,014

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, 2019
Other
benefits

Pension
benefits

December 31, 2018
Other
benefits

Pension
benefits

January 1, 2018
Other
benefits

Pension
benefits

3.29%
2.99%
2.28%
n/a

2.51%
2.91%
2.23%
n/a
n/a

3.88%
3.00%
2.20%
5.08%

3.15%
2.75%
2.10%
5.21%
5.07%

3.03%
3.00%
2.28%
n/a

3.29%
2.99%
2.28%
n/a
n/a

3.56%
3.00%
2.20%
5.08%

3.88%
3.00%
2.20%
5.24%
5.08%

3.22%
3.00%
2.30%
n/a

3.03%
3.00%
2.28%
n/a
n/a

3.95%
3.00%
2.25%
5.07%

3.56%
3.00%
2.20%
5.25%
5.08%

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")
projected generationally using CPM Improvement
Scale B ("CPM-B")

U.K.

U.S.

SNA07M_CMI 2016 and S2P(M/F)A CMI 2016(1)

Pri-2012 mortality table projected generationally

using the MP-2019 improvement scale(2)

Germany Dr. K Heubeck 2018

Country

Canada

U.K.

U.S.

Mortality tables
2014 Private Sector Mortality Table ("CPM2014Priv")
projected generationally using CPM Improvement
Scale B ("CPM-B")

SNA07M_CMI 2016 and S2P(M/F)A CMI 2016(1)

Pri-2012 mortality table projected generationally

using the MP-2019 improvement scale(2)

Germany Dr. K Heubeck 2018

Life expectancy over 65 for a male member currently
Aged 45 on December
2018

Aged 65 on December
2018

2019

21.9

21.6

20.6

20.3

21.8

21.9

20.7

19.9

22.9

23.1

22.2

23.1

22.8

23.6

22.3

22.7

Life expectancy over 65 for a female member currently
Aged 45 on December
2018

Aged 65 on December
2018

2019

24.3

23.4

22.6

23.8

24.2

23.9

22.7

23.5

25.2

25.0

24.2

26.0

25.1

25.6

24.3

25.7

(1) SNA07M_CMI 2013 and S2P(M/F)A CMI 2016 as at December 31, 2018
(2) RP-2014 mortality table projected generationally using the MP-2018 improvement scale as at December 31, 2018

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
2019
(25)
6
4

$
$
$

Net retirement benefit
liability as at
December 31, 2019
(514)
83
126

$
$
$

A one year additional life expectancy as at December 31, 2019 for all DB plans would increase the net retirement
benefit liability by $322 million and the retirement benefit cost for fiscal year 2019 by $18 million, all other actuarial
assumptions remaining unchanged.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 195

As at December 31, 2019, 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 5.21% and to decrease progressively to 5.07% by calendar year 2027 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, 2019 and for fiscal year 2019:

Effect on the net retirement benefit liability
Effect on the retirement benefit cost

25.

TRADE AND OTHER PAYABLES

Trade and other payables were as follows, as at:

Trade payables
Accrued liabilities
Interest payable
Other

One percentage point
increase
18
1

$
$

One percentage point
decrease
(16)
1

$
$

December 31, 2019
3,259
813
150
460
4,682

December 31, 2018
3,502
756
138
238
4,634

January 1, 2018
2,710
815
139
300
3,964

The Corporation negotiated extended payment terms of 240 to 360 days after delivery with certain of its suppliers.
Trade payables with these extended terms totalled $856 million and bore interest at a weighted average rate of
6.40% as at December 31, 2019 ($839 million and 3.83%, respectively, as at December 31, 2018 and $575
million and 1.96%, respectively, as at January 1, 2018). Suppliers generally have the right to return to original
payment terms for future payables upon providing a minimum notice period.

196 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

26. PROVISIONS

Changes in provisions were as follows, for fiscal years 2019 and 2018:

Onerous
contracts
$ 1,146

Other(1)
157
$

Total
$ 2,500

Product
warranties
515
$

Credit and
residual
value
guarantees
456

Balance as at December 31, 2018

Additions
Utilization
Reversals
Accretion expense
Effect of changes in
discount rates
Reclassified as liabilities
directly associated with
assets held for sale(6)
Effect of foreign currency
exchange rate changes

Balance as at December 31, 2019 $
$

Of which current
Of which non-current

180
(182)
(78)
1

(7)

(5)
425
343
82
425

—
(336)
(39)
7

(90)

—
—
—
—
—

$
$

Restructuring,
severance
and other
termination
benefits
226
120 (2)
(185)
(26)
—

(4)

(2)

242 (3)
(333)
(76)
6

(3)(5)

—

(3)

(1)
131
130
1
131

(304)

7
704
495
209
704

$
$

44
(50)
(20)
—

—

(19)

(1)
111
92
19
111

586
(1,086)
(239)
14

(423)

—
$ 1,371
$ 1,060
311
$ 1,371

Credit and
residual
value
guarantees

Restructuring,
severance
and other
termination
benefits

Product
warranties

Balance as at January 1, 2018(11)

Additions
Utilization
Reversals
Accretion expense
Effect of changes in
discount rates
Disposal of ACLP business(10)
Effect of foreign currency
exchange rate changes

Balance as at December 31, 2018

Of which current
Of which non-current

$
$

672
206
(223)
(106)
2

(1)
(15)

(20)

515
403
112
515

(7)

$
$

554
39
(103)
(41)
12

(5)
—

—

456
99
357
456

(4)

(8)

$
$

277
73
(80)
(33)
—

—
—

(11)

226
178
48
226

Onerous
contracts

$ 1,420

(2)

712 (3)(7)
(480)
(119)
13

(5)

(11)
(378)

(11)

$ 1,146
576
$
570
$ 1,146

Other(1)

$
$

196
26
(24)
(37)
—

—
—

(4)

157
134
23
157

Total

$ 3,119
1,056
(910)
(336)
27

(9)

(17)
(393)

(46)

$ 2,500
$ 1,390
1,110
$ 2,500

(1) Mainly comprised of claims and litigations.
(2) See Note 8 – Special items for more details on additions and reversals related to restructuring charges.
(3) See Note 8 – Special items for more details on the addition and reversals related to the Primove impairment and other costs.
(4) When Credit and residual value guarantees become due, the respective amounts are re-classified to Credit and residual value guarantees

payable within other financial liabilities.

(5) See Note 8 – Special items for more details on the reversal of Learjet 85 aircraft program cancellation provisions.
(6) See Note 30 – Assets held for sale for more details.
(7) Includes the additional obligations the Corporation’s had recorded related to the disposal of ACLP.
(8) See Note 8 – Special items for more details on reversals related to credit and residual value guarantees.
(9) See Note 8 – Special items for more details on the reversal of tax litigation provision.
(10) Represents liabilities disposed related to the sale of ACLP. See Note 8 – Special items for more details.
(11) Opening balances are before the assets held for sale reclassification related to the disposal of ACLP.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 197

27. OTHER FINANCIAL LIABILITIES

Other financial liabilities were as follows, as at:

Derivative financial instruments(1)
Government refundable advances(2)
Credit and residual value guarantees payable
Vendor non-recurring costs
Lease subsidies(3)
Current portion of long-term debt(4)
Other

Of which current
Of which non-current

December 31, 2019
535
585
378
112
—
8
125
1,743
518
1,225
1,743

$
$

December 31, 2018
885
759
172
136
53
9
119
2,133
607
1,526
2,133

$
$

January 1, 2018
538
550
53
13
74
18
61
1,307
342
965
1,307

$
$

(1) See Note 14 – Financial instruments.
(2) Of which $468 million has a back-to-back agreement with ACLP ($385 million as at December 31, 2018). Refer to Note 20 - Other financial
assets for the receivables from related party. The Corporation is required to pay amounts to governments based on the number of delivery
of aircraft.

(3) Lease subsidies are after the reclassification of liabilities directly associated with assets held for sale. The amount contractually required to

be paid is $50 million as at December 31, 2019 ($64 million as at December 31, 2018 and $88 million as at January 1, 2018).

(4) See Note 29 – Long-term debt.

28. OTHER LIABILITIES

Other liabilities were as follows, as at:

Employee benefits(1)
Lease liabilities(2)
Accruals for long-term contract costs
Supplier contributions to aerospace programs
Income taxes payable
Other taxes payable
Other

Of which current
Of which non-current

December 31, 2019
532
487
398
389
202
165
220
2,393
1,548
845
2,393

$
$

December 31, 2018
643
—
443
389
173
181
207
2,036
1,499
537
2,036

$
$

January 1, 2018
690
—
640
388
187
234
179
2,318
1,723
595
2,318

$
$

(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 24 – Retirement benefits).

(2) Following the adoption of IFRS 16 - Leases, effective January 1, 2019, the Corporation presented lease liabilities under the line item “Other
liabilities”. Lease liabilities as at January 1, 2019 amounted to $609 million. See Note 3 – Changes in accounting policies for more details.

198 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

29.

LONG-TERM DEBT

Long-term debt was as follows, as at:

Amount in
currency of

origin Currency Contractual (1)

Interest rate

After effect
of fair value
hedges

Maturity

Amount

December 31
2019

December 31
2018

January 1
2018

850(2)
414(2)
1018(2)
500

USD

EUR

USD

7.75%

6.13%
8.75%
5.75%

1,200

USD

6.00%

1,250

USD

6.13%

1,000
1,500

2,000

250

150
Various(5)

USD
USD

USD

CAD

Various

7.50%
7.50%

7.88%

7.45%
7.35%
Various(5)

Senior notes

Notes

Debentures
Other(4)

Of which current(6)

Of which non-current

n/a

n/a $

— $

869 $

885

n/a May 2021

n/a Dec. 2021

3-month
Libor + 3.36(3)

3-month
Libor + 3.57(3)

3-month
Libor + 3.48(3)

Mar. 2022

Oct. 2022

Jan. 2023

n/a Dec. 2024
n/a Mar. 2025

n/a

Apr. 2027

n/a May 2034

n/a Dec. 2026

n/a

2020-2026

483

1,008

504

1,215

1,272

992

1,492

1,978

248

115

952

1,380

504

1,019

1,373

506

1,217

1,223

1,273

1,281

990
1,491

—

248

110

990
1,490

—

248

119

9,333 $

9,102 $

9,218

8 $

9,325
9,333 $

9 $

9,093
9,102 $

9,200
9,218

(1) Interest on long-term debt as at December 31, 2019 is payable semi-annually, except for the other debts for which the timing of interest

payments is variable.

(2) The Corporation redeemed all of its outstanding 7.75% Senior Notes due 2020 of $850 million. In addition, the Corporation redeemed
€366 million aggregate principal amount of the 6.13% Notes due 2021 of €780 million and $382 million aggregate principal amount of the
8.75% Notes due 2021 of $1,400 million, in fiscal year 2019.

(3) The interest-rate swap agreement related to these Senior Notes were partially settled in prior fiscal years. As these interest-rate swaps

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.

(4) Includes obligations under finance leases prior to December 31, 2018.
(5) The notional amount of other long-term debt is $26 million as at December 31, 2019 ($68 million as at December 31, 2018 and $84 million
as at January 1, 2018). The contractual interest rate, which represents a weighted average rate, is 7.8% as at December 31, 2019 (6.23%
as at December 31, 2018 and 5.99% as at January 1, 2018).

(6) See Note 27 – 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 facility and the unsecured revolving credit facility, which must be met on a
quarterly basis, see Note 36 - Credit facilities for more details. A breach of any of these agreements or the inability
to comply with these covenants could result in a default under these facilities, which would permit the
Corporation’s banks to request immediate defeasance or cash cover of all outstanding letters of credit, and bond
holders and other lenders to declare amounts owed to them to be immediately payable. These conditions were all
met as at December 31, 2019 and 2018 and January 1, 2018.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 199

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

30.

ASSETS HELD FOR SALE

December 31, 2019
8
5,433
3,883
9,324

December 31, 2018
9
6,135
2,878
9,022

January 1, 2018
18
4,934
4,137
9,089

CRJ
On June 25, 2019, the Corporation and Mitsubishi Heavy Industries, Ltd. (MHI), announced they have entered
into a definitive agreement, whereby MHI will acquire the Corporation’s regional jet program for a cash
consideration of $550 million, payable to the Corporation upon closing, and the assumption by MHI of liabilities
related to credit and residual value guarantees and lease subsidies amounting to approximately $200 million.
Under the agreement, the Corporation’s net beneficial interest in the Regional Aircraft Securitization Program
(RASPRO), which was valued at approximately $200 million will be transferred to MHI.

The transaction is now expected to close by mid-year 2020 and remains subject to necessary approvals and
customary closing conditions. The Corporation has received most of the regulatory approvals required.

Assets held for sale
The major class of assets held for sale or liabilities directly associated with assets held for sale was as follows, as
at:

Current assets(1)
Non-current assets(2)
Total assets

Current liabilities(3)
Non-current liabilities(4)
Total liabilities

December 31, 2019

236
240
476

319
128
447

(1) Mainly comprised of inventories and trade and other receivables.
(2) Mainly comprised of RASPRO assets.
(3) Mainly comprised of trade and other payables and contract liabilities.
(4) Mainly comprised of credit and residual value guarantees provisions, lease subsidies, credit and residual value guarantees payable as well

as contract liabilities and other financial liabilities.

These assets and liabilities are reported in the Bombardier Aviation reportable segment.

200 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Aerostructure Business
On October 31, 2019, the Corporation and Spirit AeroSystems Holding, Inc. (Spirit) announced that they have
entered into a definitive agreement, whereby Spirit will acquire Bombardier’s aerostructures activities and
aftermarket services operations in Belfast, U.K., and Casablanca, Morocco, and its aerostructures maintenance,
repair and overhaul (MRO) facility in Dallas, U.S., for a cash consideration of $500 million and the assumption of
liabilities, including government refundable advances and pension obligations. Following the transaction, Spirit will
continue to supply structural aircraft components and spare parts to support the production and in-service fleet of
Bombardier Aviation’s Learjet, Challenger and Global families of aircraft.

Assets held for sale
The major class of assets held for sale or liabilities directly associated with assets held for sale was as follows, as
at:

Current assets(1)
Non-current assets(2)
Total assets

Current liabilities(3)
Non-current liabilities(4)
Total liabilities

December 31, 2019

385
448
833

320
1,001
1,321

(1) Mainly comprised of inventories, trade and other receivables and cash.
(2) Mainly comprised of PP&E.
(3) Mainly comprised of trade and other payables and onerous contracts provision.
(4) Mainly comprised of onerous contracts provision, retirement benefits liabilities amounting to $414 million and government refundable

advances amounting to $294 million.

These assets and liabilities are reported in the Bombardier Aviation reportable segment.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 201

31. DISPOSAL OF BUSINESSES

Training business
On November 7, 2018, the Corporation entered into a definitive agreement to sell Business Aircraft’s flight and
technical training activities carried out principally in training centres located in Montréal, Québec, and Dallas,
Texas to CAE, a long-time Bombardier training partner. This transaction provides Bombardier’s Business Aircraft
customers the benefit of CAE’s training expertise, while Bombardier focuses on aircraft development and
services.

On March 14, 2019, the Corporation completed the sale of the main assets of the Business Aircraft’s flight and
technical training activities to CAE for an enterprise value of $645 million. These non-core assets were previously
reported in Bombardier Aviation segment.

The net proceeds received were $532 million. A gain of $516 million ($383 million after deferred tax impact) was
recognized in Special items, see Note 8 - Special items.

Q400
On November 7, 2018, the Corporation entered into a definitive agreement for the sale of the Q Series Aircraft
program assets, including aftermarket operations and assets, to De Havilland Aircraft of Canada Limited (formerly
Longview Aircraft Company of Canada Limited), an affiliate of Longview Aviation Capital Corp. The agreement
covers all assets and intellectual property and Type Certificates associated with the Dash 8 Series 100, 200 and
300 as well as the Q400 program operations at the Downsview manufacturing facility in Ontario, Canada.

On May 31, 2019, the Corporation completed the sale of the Q Series Aircraft program assets, including
aftermarket operations and assets to De Havilland Aircraft of Canada Limited (DHA). These non-core assets were
previously reported in Bombardier Aviation segment.

The details of the impact of the transaction with DHA at closing were as follows:

Proceeds received at closing(1)
Transaction costs
Net proceeds at closing

Bombardier obligations(2)
Curtailment gains
Carrying value of net assets disposed

Pre-tax gain

Tax impact

After-tax gain

93
(23)
5
75

289
4
285

210

(26)

184

(1) Reflects final working capital adjustments amounting to $9 million, which will be paid in the first quarter of 2020.
(2) Furthermore, upon closing of the transaction, the Corporation recorded net liabilities of $93 million in respect of obligations resulting from the

transaction.

202 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

32. ACQUISITION OF A BUSINESS

33. SHARE CAPITAL

Preferred shares
The preferred shares authorized were as follows, as at December 31, 2019, and 2018 and January 1, 2018:

Series 2 Cumulative Redeemable Preferred Shares
Series 3 Cumulative Redeemable Preferred Shares
Series 4 Cumulative Redeemable Preferred Shares

The preferred shares issued and fully paid were as follows, as at:

Authorized for the
specific series
12,000,000
12,000,000
9,400,000

Series 2 Cumulative Redeemable Preferred Shares
Series 3 Cumulative Redeemable Preferred Shares
Series 4 Cumulative Redeemable Preferred Shares

Series 2 Cumulative Redeemable Preferred Shares

December 31, 2019
5,811,736
6,188,264
9,400,000

December 31, 2018
5,811,736
6,188,264
9,400,000

January 1, 2018
5,811,736
6,188,264
9,400,000

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, 2022 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:

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 203

Series 3 Cumulative Redeemable Preferred Shares
Redemption: Redeemable, at the Corporation’s option, at $25.00 Cdn per share on August 1, 2022 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, 2022 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, 2017 and including July 31, 2022, the Series 3 Cumulative
Redeemable Preferred Shares carry fixed cumulative preferential cash dividends at a rate of 3.983% or
$0.99575 Cdn per share per annum, payable quarterly on the last day of January, April, July and October of
each year at a rate of $0.2489375 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 Restated Articles of Incorporation.

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.

204 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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
Distributed

Balance at end of year
Authorized

The change in the number of warrants exercisable was as follows as at:

Balance at beginning of year

Issuance of warrants
Balance at end of year

December 31, 2019 December 31, 2018

308,750,749
(3,820)
308,746,929
3,592,000,000

313,898,549
(5,147,800)
308,750,749
3,592,000,000

December 31, 2019 December 31, 2018

2,125,232,847
2,780,538
3,820
2,128,017,205

(60,541,394)
—
21,380,909
(39,160,485)
2,088,856,720
3,592,000,000

1,932,782,764
187,302,283
5,147,800
2,125,232,847

(52,983,051)
(9,293,684)
1,735,341
(60,541,394)
2,064,691,453
3,592,000,000

December 31, 2019 December 31, 2018
205,851,872
100,000,000
305,851,872

305,851,872
—
305,851,872

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 205

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, 2019
Total
(in millions
of U.S.$)
—
—
—
4
5
11
20
20

Dividends declared for fiscal years
December 31, 2018
Total
(in millions
of U.S.$)
—
—
—
4
5
11
20
20

0.00 $
0.00

0.90
1.00
1.56

0.99
1.00
1.56

Per share
(Cdn$)

0.00 $
0.00

Dividends declared after
December 31, 2019
Total
(in millions
of U.S.$)
—
—
—
1
1
3
5
5

0.08
0.25
0.39

34. 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 PSUs and
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 2019, a combined value of $44 million of PSUs were authorized for
issuance ($48 million during fiscal year 2018).

The number of PSUs, DSUs and RSUs has varied as follows, for fiscal years:

Balance at beginning
of year
Granted
Exercised
Forfeited

Balance at end of year

PSU

DSU

88,243,098
40,885,619
(22,773,124)
(11,147,689)
95,207,904

1,101,849
—
—
—

1,101,849 (1)

2019
RSU

—
—
—
—
—

PSU

DSU

2018
RSU

67,131,352
25,564,745
—
(4,452,999)
88,243,098

1,154,381
—
(52,532)
—

1,101,849 (1)

20,798,101
—
(20,460,527)
(337,574)
—

(1) Of which 1,101,849 DSUs are vested as at December 31, 2019 (1,101,849 as at December 31, 2018).

PSUs and DSUs granted will vest if a financial performance threshold is met. The conversion ratio for vested
PSUs and DSUs ranges from 50% to 100%. PSUs and DSUs generally vest three years following the grant date if
the financial performance thresholds are met. For grants issued between January 1, 2017 and
December 31, 2019, the vesting dates range from August 2020 to May 2022.

The weighted-average grant date fair value of PSUs granted during fiscal year 2019 was $1.53 ($3.58 during
fiscal year 2018). The fair value of each PSUs 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 33 – Share
capital) in connection with the PSU and/or RSU plan. These shares are held in trust for the benefit of the
beneficiaries until the PSUs and RSUs become vested or are cancelled. The cost of these purchases has been
deducted from share capital.

206 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

A compensation expense of $7 million was recorded during fiscal year 2019 with respect to the PSU, DSU and
RSU plans (a compensation expense of $52 million during fiscal year 2018).

Share option plans
Under share option plans, options are granted to key employees to purchase Class B Shares (subordinate
voting). Of the 224,641,195 Class B Shares (subordinate voting) reserved for issuance, 26,035,564 were
available for issuance under these share option plans, as at December 31, 2019.

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, 2019:

Exercise price range (Cdn$)

1 to 2
2 to 4
4 to 6

Issued and outstanding
Weighted-
average
exercise
price (Cdn$)
1.77
1.43
4.23

Weighted-
average
remaining
life (years)
4.14
2.75
5.82

Exercisable
Weighted-
average
exercise
price (Cdn$)
1.77
3.16
4.87

Number of
options
49,917,584
6,909,433
1,875,457
58,702,474

Number of
options
49,917,584
64,691,469
16,397,285
131,006,338

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

2019
Weighted-
average
exercise
price (Cdn$)
2.52
2.20
1.62
3.20
3.63
1.91

Number of
options
116,307,725
19,180,420
(19,267,290)
(1,607,456)
(3,068,109)
111,545,290

2018
Weighted-
average
exercise
price (Cdn$)
2.32
3.88
2.10
2.99
5.95
2.52

2.03

38,505,099

2.26

Number of
options
111,545,290
31,012,132
(2,780,538)
(6,872,398)
(1,898,148)
131,006,338

58,702,474

Share-based compensation expense for options
The weighted-average grant date fair value of stock options granted during fiscal year 2019 was $0.86 per option
($1.39 per option for fiscal year 2018). 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

2019
1.54%
5 years
60.82%
0%

2018
2.21%
5 years
51.99%
0%

A compensation expense of $ 23 million was recorded during fiscal year 2019 with respect to share option plans
($22 million during fiscal year 2018).

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 207

35. NET CHANGE IN NON-CASH BALANCES

Net change in non-cash balances was as follows, for fiscal years:

Trade and other receivables
Inventories
Contract assets
Contract liabilities
Other financial assets and liabilities, net
Other assets
Trade and other payables
Provisions
Retirement benefits liability
Other liabilities

2019
(345)
(976)
141
1,186
(11)
(75)
414
(707)
53
(157)
(477)

2018
(317)
(841)
(306)
1,222
380
183
759
(579)
69
(582)
(12)

The following table presents the reconciliation of movements of liabilities to cash flows arising from financing
activities:

Balance as at January 1, 2018
Changes from financing cash flows
Repayment of long-term debt

Total changes from financing cash flows

The effect of changes in foreign exchange rates

Other
Balance as at December 31, 2018
Changes from financing cash flows
Proceeds from long-term debt
Repayment of long-term debt
Transaction costs

Total changes from financing cash flows

The effect of changes in foreign exchange rates
Leases obligations reclassification(1)

Other
Balance as at December 31, 2019

Long-term debt
9,218

(15)
(15)
(53)
(48)
9,102

2,000
(1,647)
(45)
308
(8)
(41)
(28)
9,333

(1) Obligations under finance leases reclassified to lease liabilities under IFRS 16 on January 1, 2019. See Note 3 - Changes in accounting

policies for more details.

208 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

36. CREDIT FACILITIES

Letter of credit facilities
The letter of credit facilities and their maturities were as follows, as at:

December 31, 2019

Transportation facility
Corporation excluding Transportation facility

December 31, 2018

Transportation facility
Corporation excluding Transportation facility

January 1, 2018

Transportation facility
Corporation excluding Transportation facility

Amount
committed

Letters of
credit issued

Amount
available

Maturity

5,052 (1) $
n/a
5,052

(1)

4,511
361
4,872

4,270
400
4,670

4,846 $

n/a

4,846 $

4,024 $
188
4,212 $

4,013 $
169
4,182 $

206
n/a
206

487
173
660

257
231
488

2023 (2)
n/a

2022
2021

2021
2020

(1) € 4,498 million as at December 31, 2019 (€ 3,940 million as at December 31, 2018 and € 3,560 million as at January 1, 2018).
(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
2023.

Revolving credit facilities
The Corporation voluntarily cancelled the $397 million unsecured revolving credit facility, in the third quarter of
2019, which was available for the Corporation excluding Transportation.

The Corporation has an unsecured revolving credit facility (“Transportation revolving credit facility”) amounting to
€1,154 million ($1,296 million) , available to Transportation for cash drawings. The facility matures in May 2022
and bears interest at Euribor plus a margin. That facility was unused as of December 31, 2019.

Uncommitted Short Term credit facilities
The Corporation has a €75 million ($84 million) uncommitted Short Term credit facility. This facility is available to
Transportation for cash drawings. This facility was unused as of December 31, 2019.

Financial covenants
The Corporation is subject to various financial covenants under the Transportation letter of credit facility and the
Transportation revolving credit facility, which must be met on a quarterly basis. Those 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 37 – Capital management or to the
specific terms used in the MD&A. In addition, the Corporation must maintain a minimum Transportation liquidity of
€750 million ($843 million). Minimum liquidity required is not defined as comprising only cash and cash

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 209

equivalents as presented in the consolidated statement of financial position. These conditions were all met on a
quarterly basis and as at December 31, 2019 and 2018 and January 1, 2018.

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.

37. 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.

As a result of adopting IFRS 16, Leases, we changed the definitions and naming of adjusted interest, adjusted
debt, EBIT before special items and EBITDA before special items, all of which are used in our global metrics.

The Corporation’s objectives with regard to its global metrics are as follows:

• EBIT before special items to adjusted interest ratio greater than 5.0; and
adjusted debt to EBITDA before special items ratio lower than 2.5.
•

Global metrics – The following global metrics do not represent the ratios required for bank covenants.

EBIT before special items(1)
Adjusted interest(2)
Adjusted EBIT to adjusted interest ratio
Adjusted debt(3)
EBITDA before special items(4)
Adjusted debt to adjusted EBITDA ratio

$
$

2019
470
732
0.6
9,744
896
10.9

(1) Represents EBIT before special items.
(2) Represents interest paid as per the supplemental information provided in the consolidated statements of cash flows.
(3) Represents long-term debt adjusted for the fair value of derivatives (or settled derivatives) designated in related hedge relationships plus

short-term borrowings and lease liabilities.

(4) Represents EBIT before special items plus amortization and impairment charges of PP&E and intangible assets.

In addition to the above global level metrics, the Corporation separately monitors its net retirement benefit liability
which amounted to $2.3 billion as at December 31, 2019 ($2.2 billion as at December 31, 2018). 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.
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 36 – Credit facilities for a description of bank covenants.

210 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

38.

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 Policy (the “Policy”).
The objective of the policy is to minimize the Corporation’s exposure to credit risk from its treasury activities by
ensuring that the Corporation transacts strictly with investment-grade financial institutions and money market
funds based on pre-established consolidated counterparty risk limits per financial institution and fund.

Credit risks arising from the Corporation’s normal commercial activities, lending activities and under indirect
financing support are managed and controlled by the two reportable segments, Aviation 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
Investments in financing structures
Derivative financial instruments
ACLP non-voting rights
Investments in securities

December 31, 2019
2
—
128
—
210

$
$
$
$
$

December 31, 2018
26
93
162
—
196

$
$
$
$
$

January 1, 2018
29
193
310
n/a
306

$
$
$

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 211

Credit quality – The credit quality, using external and internal credit rating systems, of financial assets that are
neither past due nor impaired is usually investment grade, except for Aviation’s receivables, aircraft loans and
lease receivables and certain investments in financing structures. Aviation’s receivables are 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 43 – 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 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 which involves the
application of judgment, 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, availability of letter of
credit and similar facilities, working capital requirements, the availability of working capital financing initiatives and
the funding of product development and other financial commitments. Based on this analysis, the Corporation
currently anticipates that its year-end cash and cash equivalents of approximately $2.6 billion, the Transportation
revolving credit facility of approximately $1.3 billion, as well as expected proceeds of approximately $1.6 billion
upon closing of the previously announced sales of the CRJ program and the aerostructures business as well as
ACLP, will enable it to meet currently anticipated financial requirements for a period of more than 12 months. The
Corporation is actively pursuing alternatives to accelerate debt paydown in order to position the business for long-
term success with greater operating and financial flexibility.

The Corporation engages in certain working capital financing initiatives which impact cash flow from operating
activities such as the sale of receivables (Refer Note 16 – Trade and other receivables ), arrangements for
advances from third parties (Refer to Note 17 – Contract balances) and the negotiation of extended payment
terms with certain suppliers (Refer to Note 25 – Trade and other payables). These initiatives generally rely on the
ongoing provision of credit by financial institutions to the parties involved in the arrangement.

The Corporation monitors any financing opportunities to optimize its capital structure and maintain appropriate
financial flexibility. The Corporation also routinely reviews its debt profile with a view to managing or extending
maturities and/or negotiating more favourable terms and conditions with respect to its bank facilities. The
Corporation also routinely reviews the terms and conditions of its bank facilities and seeks annual extensions of
the availability periods thereunder. These amendments are subject to prevailing market and other conditions that
are beyond its control and there can be no assurance that the Corporation will be able to successfully negotiate
such amendments on commercially reasonable terms, or at all.

212 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Maturity analysis –The maturity analysis of financial assets and financial liabilities, excluding derivative financial
instruments, was as follows, as at December 31, 2019:

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

Less
than 1
year
2,578 $
1,648
87
4,313
4,682
444

$
$
$

$
$

2,578 $
1,844
897

4,682
1,200

9,333

1 to 3
years

3 to 5
years

5 to 10
years

Over 10
years

With no
specific
maturity

— $

157
54
211
—
347

— $
27
474
501
—
367

— $
12
389
401
—
611

— $
—
266
266
—
371

250
113
734
(468) $

Total

2,578
1,844
1,331
5,753
4,682
2,140

— $
—
61
61
—
—

9,324
—
3,297
—
— 19,443
61 $ (13,690)

8
668
5,802

3,183
1,187
4,717

2,250
785
3,402

3,633
544
4,788

$ (1,489) $ (4,506) $ (2,901) $ (4,387) $

(1) The carrying amount of other financial assets excludes derivative financial instruments and the carrying amount of other financial liabilities

excludes derivative financial instruments and the current portion of long-term debt.

Other financial assets include long-term contract receivables maturing in March 2033. Under the respective
agreements, the Corporation will receive incentive payments. Due to future variations in the relevant index the
amounts shown in the table above may vary.

Other financial assets include a back-to-back agreement that the Corporation has with ACLP related to certain
government refundable advances. 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, 2019:

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 swaps

Derivative financial liabilities

Forward foreign exchange contracts

Net amount

$
$

7,456 $
300
7,756 $

109 $
2
111 $

11 $ — $ — $ — $

3
14 $

2
2 $

—

1
1 $ — $

120
8
128

(8,953) $
(8,953) $
$

(202) $
(202) $
(91) $

(3) $ — $ — $ — $ (205)
(3) $ — $ — $ — $ (205)
(77)
11 $

1 $ — $

2 $

(1) Amounts denominated in foreign currency are translated at the period end exchange rate.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 213

Lease liabilities
The Corporation leases buildings and equipment.

Maturity analysis –The maturity analysis of lease liabilities, was as follows, as at:

Within 1 year
Between 1 to 5 years
More than 5 years

December 31, 2019
129
148
243
520

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 identified by the segments and covered by the central
treasury function. Foreign currency exposures are mitigated 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 Board authorized 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. Aviation has 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.

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. These programs are reviewed annually and amended as necessary to reflect
current market conditions or practices.

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

214 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Corporation’s financial instruments recorded in its statement of financial position. The following impact on EBT for
fiscal year 2019 is before giving effect to cash flow hedge relationships.

Gain (loss)

Variation CAD/USD GBP/USD EUR/USD EUR/GBP GBP/EUR
(6) $

+10% $

(11) $

9 $

2 $

Effect on EBT
Other
221

72 $

The following impact on OCI for fiscal year 2019 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

+10% $

212 $

19 $

4 $

27 $

22 $

Variation CAD/USD GBP/USD EUR/USD EUR/GBP GBP/EUR

Other

173

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 fixed-rate long-term debt synthetically converted to
variable interest rates (see Note 29 – Long-term debt). 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.

In addition, the Corporation is exposed to gains and losses arising from changes in interest rates, which includes
marketability risks, through its financial instruments carried at fair value. These financial instruments include
certain aircraft loans and lease receivables, investments in securities, investments in financing structures, 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. These
programs are reviewed annually and amended as necessary to reflect current market conditions or practices.

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, 2019, the impact on EBT would have been a negative
adjustment of $108 million as at December 31, 2019 ($36 million as at December 31, 2018).

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 215

39.

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 FVOCI 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.

Long-term contract receivables – The Corporation uses discounted cash flow analyses to estimate the fair value
using market data for interest rates.

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.

Government refundable advances – The Corporation uses discounted cash flow analysis to estimate the fair
value using market data for interest rates and credit spreads.

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 analysis and market data such as
interest rates, credit spreads and foreign exchange spot rate to estimate the fair value of forward agreements and
interest-rate derivatives.

The Corporation uses option-pricing models and discounted cash flow models to estimate the fair value of
embedded derivatives using applicable market data.

Conversion option - The Corporation uses an internal valuation model to estimate the fair value of the conversion
option embedded in the BT Holdco convertible shares. The fair value of the embedded conversion option is based

216 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

on the difference in present value between: the convertible shares’ accrued liquidation preference based on the
minimum return entitlement; and the fair value of the common shares on an as converted basis. This value is
dependent on the Transportation segment meeting the performance incentives agreed upon with the CDPQ, the
timing of exercise of the conversion rights and the applicable conversion rate. Fair value of the shares on a
converted basis is calculated using an EBIT multiple, which is based on market data, to determine the enterprise
value. The discount rate used is also determined using market data. The Corporation uses internal assumptions to
determine the term of the instrument and the future performance of the Transportation segment.

Funding commitments - The cap on the Corporation’s return from any future investments in non-voting units of
ACLP represents a derivative liability which is accounted for at fair value and is re-measured each period through
financing expense. To estimate the fair value of the derivative liability the Corporation uses an internal valuation
model based on stochastic simulations considering Bombardier’s expected investments in non-voting units due to
ACLP cash shortfalls, the timing of such investments, the fair value of ACLP, expected volatility of ACLP’s fair value
and the relative values of different classes of ACLP units.

ACLP non-voting units - The Corporation’s investment in ACLP non-voting units is accounted for at fair value and
re-measured each period through financing income. The fair value reflects the Corporation’s return on the units
being capped at 2% and Airbus’ call right thereon. To estimate the fair value of the non-voting units the Corporation
uses an internal valuation model based on stochastic simulations considering the fair value of ACLP, expected
volatility of ACLP’s fair value and the relative values of different classes of ACLP units.

As at December 31, 2019, the Corporation performed an impairment test in the fourth quarter of 2019 on its
investments in ACLP. The Corporation valued all of its interests in ACLP together, comprising of its investment in
associate, the funding commitments and the ACLP non-voting units, and reflected the remaining value in its
Investments in Joint Ventures and Associates. See Note 40 - Investment in Joint Ventures and Associates for more
details.

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 cash and cash
equivalents, trade and other receivables, certain aircraft loans and lease receivables, restricted cash and trade and
other payables 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 debt – The fair value of long-term debt is estimated using public quotations, when available, or
discounted cash flow analysis, 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 analysis to estimate the fair value using market data for interest rates and credit spreads.

Fair value hierarchy
The following table presents 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.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 217

The fair value of financial assets and liabilities by level of hierarchy was as follows, as at December 31, 2019:

Financial assets
Derivative financial instruments(1)
Investments in securities
Receivable from related party(2)
ACLP non-voting rights
Long-term contract receivable

Financial liabilities
Government refundable advance(2)
Derivative financial instruments(1)

Total

Level 1

Level 2

Level 3

287
250
468
—
78
1,083

(468)
(535)
$ (1,003)

—
35
—
—
—
35

—
—
—

287
215
—
—
78
580

—
(210)
(210)

—
—
468
—
—
468

(468)
(325)
(793)

(1) Derivative financial instruments consist of forward foreign exchange contracts, interest-rate swap agreements and embedded derivatives.
(2) The receivable from related party represents a back-to-back agreement that the Corporation has with ACLP related to certain government

refundable advances.

Changes in the fair value of Level 3 financial instruments were as follows, for fiscal years 2019 and 2018:

Aircraft
loans
and lease
receivables

ACLP non-
voting
units

Investments
in financing
structures

Lease
Subsidies

Trade and
Other
payables

Conversion
option

Funding
commit-
ments

—

219

(122)

(6)

$ (304)

—

(2)
—
(21)

—

3
—
—

—

(27)

— $

—
150
—

—

150

(385) (2)
235
—

11
—
(57)

—

173

27
—
(3)

(2)
—
23

—

(53)

(4)
—
16

—

197

(41)

(197)

—

— $

—
—
6

—

—
—
—

—

(23)
—
—

—

—
(310)
75

—

(314)

(235)

—
—
—

(11)

$ (325)

—

$ (325)

120 (2)
—
115

—

Balance as at
January 1, 2018

Net gains (losses)
and interest
included in net
income
Issuances
Settlements
Disposal of ACLP
business
Effect of foreign
currency
exchange rate
changes
Balance as at
December 31, 2018
Net gains (losses)
and interest
included in net
income
Issuances
Settlements
Effect of foreign
currency
exchange rate
changes
Balance as at
December 31, 2019
Reclassified as
assets held for
sale(1)
Balance as at
December 31, 2019

(1) Represents assets and liabilities reclassified as held for sale related to the sale of CRJ program and Aerostructure business. See Note 30 –

Assets held for sale for more details.

(2) See Note 8 - Special items and Note 40 - Investments in Joint Ventures and Associates for more details on the impairment charges related to

ACLP investments.

218 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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 for Aviation’s level 3 financial instruments 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, 2019:

Main assumptions
(weighted average)

Aircraft loans and
lease receivables

Investments in financing
structures

Lease subsidies

Internally assigned credit rating

Between B- to CCC+ (B-)

Between BB- to CCC+ (B)

Between BB- to B- (BB-)

Discount rate adjustments

for marketability

11.13%

From 2.14% to 9.99%
(6.70%)

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.

The projected future performance of the Transportation segment is an important input for the determination of the
fair value of the embedded derivative option in the convertible shares issued to the CDPQ. The projected future
performance of the Transportation segment is prepared by management based on budget and strategic plan.

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, 2019:

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 2019

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

— $

(2)

(1)

(5)

n/a

(2)

(9)

(1)

(7)

n/a

Conversion option
Sensitivity analysis
A 5% decrease in the expected future performance of the Transportation segment would have resulted in a
decrease in the fair value with a corresponding gain recognized in EBT for fiscal year 2019 of $82 million.

A 5% increase in the expected future performance of the Transportation segment would have resulted in an
increase in the fair value with a corresponding loss recognized in EBT for fiscal year 2019 of $83 million.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 219

Fair value hierarchy for items recorded at amortized cost
The following table presents financial assets and financial liabilities measured at amortized cost 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, 2019:

Financial assets
Trade and other receivables
Other financial assets

Financial liabilities
Trade and other payables
Long-term debt
Other financial liabilities
Government refundable advances
Other

Total

Level 1

Level 2

Level 3

1,844
101
1,945

$ (4,682)
(9,660)

(125)
(624)
$ (15,091)

—
—
—

—
—

—
—
—

1,844
101
1,945

$ (4,682)
(9,660)

—
—
$ (14,342)

—
—
—

—
—

(125)
(624)
(749)

40.

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.

The corporation’s aggregate pro rata shares of assets and liabilities of its joint ventures and associates was as
follows, for fiscal year 2019:

Cash and cash equivalents
Other current assets
Non-current assets
Current liabilities
Non-current liabilities

$
$
$
$
$

ACLP (1)
4
264
1,486
(464)
(1,057)

$
$
$
$
$

Other
417
819
395
(920)
(176)

$
$
$
$
$

Total
421
1,083
1,881
(1,384)
(1,233)

(1) As of December 31, 2019, the Corporation invested $575 million in ACLP in exchange for non-voting units of ACLP. In addition, the

Corporation invested $64 million in Class A units of ACLP.

The Corporation’s pro rata share of net income of its joint ventures and associates was as follows, for fiscal years:

ACLP

Other

2019

Total

ACLP

Other

2018

Total

Net income (loss)

37 (1) $

128

(40)

106

(1) The share of net gains from ACLP in the fiscal year 2019 includes certain provision reversals within ACLP amounting to approximately $60

million.

220 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

ACLP investments
On February 12, 2020, the Corporation concluded the sale of its remaining interests in Airbus Canada Limited
Partnership (ACLP) to Airbus and Investissement Québec, supporting the Corporation’s strategic decision to focus
on its Business Aviation franchise while improving the Corporation’s liquidity.

With this transaction, the Corporation will receive proceeds of $591 million from Airbus, net of adjustments, of
which $531 million was paid upon closing. In addition, the Corporation is released from all future funding
obligations related to the partnership for 2020 and 2021. The agreement also provides for the cancellation of
100,000,000 Bombardier warrants owned by Airbus.

Further to this, the Corporation will transfer aerostructures activities supporting A220 and A330 in St-Laurent,
Québec to Airbus subsidiary Stelia Aerospace. No workforce reduction is expected out of this transaction.

Considering the terms of the transaction, and contributions of $100 million that the Corporation made to ACLP in
January 2020, the Corporation revalued its interests in ACLP as at December 31, 2019 to $525 million, which
resulted in an impairment charge of $1,578 million that was recorded in the fourth quarter of 2019 as a special
item.

As at December 31, 2019, the Corporation had committed to fund the cash shortfalls of ACLP, if required, up to a
maximum aggregate amount of $350 million over 2020 and 2021, the whole in consideration for non-voting units
of ACLP with cumulative annual dividends of 2%. As of December 31, 2019, the Corporation invested $575 million
in ACLP of the original $925 million commitment in exchange for non-voting units of ACLP. As of December 2019,
the Corporation invested $64 million in Class A units of ACLP and effective December 31, 2019, Airbus owns
50.26%, Investissement Québec owns 16.02% and the Corporation owns 33.72%. In January 2020, the
Corporation further contributed $100 million in ACLP in exchange for non-voting units of ACLP, for a total of $675
million. Following the sale by the Corporation of its remaining interest in ACLP, the Corporation is no longer
committed to fund the cash shortfalls of ACLP.

41.

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 transactions with joint ventures
and associates in which the Corporation has an interest, for fiscal years:

2019

2018

Sales of products and services, and other income
Purchase of products and services, and other expenses

$
$

Joint

ventures Associates
665
10

64 $
52 $

Joint

ventures Associates
313
12

38 $
24 $

$
$

The following table presents the Corporation’s outstanding balances with joint ventures and associates, as at:

December 31, 2019

December 31, 2018

January 1, 2018

Receivables
Receivables from related party(1)
Contract assets
Payables
Contract liabilities

Other financial liabilities

$
$
$
$
$

(1) See Note 20 - Other financial assets.

Joint

ventures Associates
$
203
$
468
$
77
$
59
— $

25 $
— $
— $
14 $
6 $

Joint

ventures Associates
$
129
$
385
$
23
$
28
— $

16 $
— $
— $
4 $
11 $

Joint

ventures Associates
12
—
—
2
—

20 $
— $
— $
11 $
8 $

— $

—

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 221

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 of Aviation 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

2019
20
14
1
35

2018
25
23
—
48

42. 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

2,101 $

739

3,552 $

1,587

4,760 $

2,315

December 31, 2019

December 31, 2018

January 1, 2018

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.
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 $0.8 billion, of which $108 million was recorded as provisions
and related liabilities as at December 31, 2019 ($1.2 billion and $409 million, respectively, as at December 31,
2018 and $1.5 billion and $370 million, respectively, as at January 1, 2018). The Corporation’s maximum
exposure under these guarantees is included in Note 43 – Commitments and contingencies. All recorded
provisions are included in the assets held for sale related to the CRJ announcement as at December 31, 2019,
however, the Corporation’s will still have exposure to some of those unconsolidated structured entities after the
closing of the CRJ business.

The Corporation concluded that it did not control these structured entities.

222 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

43. 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 42 –
Unconsolidated structured 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)

December 31, 2019

December 31, 2018

January 1, 2018

$
$
$

163
734
(128)
769
998
73

$
$
$

695
1,034
(473)
1,256
1,165
100

$
$
$

1,060
1,221
(540)
1,741
1,437
143

(1) Some of the residual value guarantees can only be exercised once the credit guarantees have expired without exercise. Therefore, the

guarantees must not be added together to calculate the combined maximum exposure for the Corporation.

(2) The Corporation has also provided other guarantees (see section f) below).

The Corporation’s maximum exposure in connection with credit and residual value guarantees related to the sale
of aircraft represents the face value of the guarantees before giving effect to the net benefit expected from the
estimated value of the aircraft and other assets available to mitigate the Corporation’s exposure under these
guarantees. Provisions for anticipated losses amounting to $90 million as at December 31, 2019 ($456 million as
at December 31, 2018 and $554 million as at January 1, 2018) 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
balanced market in the medium and long-term, and the anticipated proceeds from other assets covering such
exposures. When credit and residual value guarantees become due the respective amounts are re-classified from
provision to credit and residual value guarantees payable within other financial liabilities. Credit and residual value
guarantees payable amounted to $435 million as at December 31, 2019 ($172 million as at December 31, 2018
and $53 million as at January 1, 2018). In addition, lease subsidies, which would be extinguished in the event of
credit default by certain customers, amounted to $41 million as at December 31, 2019 ($53 million as at
December 31, 2018 and $122 million as at January 1, 2018). 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. All of
the above are included in the assets held for sale related to the CRJ announcement, except for $378 million of
credit and residual value guarantees payable, as at December 31, 2019.

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 2026.
Substantially all financial support involving potential credit risk lies with regional airline customers. The credit risk
relating to three regional airline customers accounted for 74% of the total maximum credit risk as at
December 31, 2019 (71% as at December 31, 2018 and 73% as at January 1, 2018).

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

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 223

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, 2019
13
142
8
—
163

December 31, 2018
97
528
70
—
695

January 1, 2018
106
856
98
—
1,060

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, 2019
496
475
27
998

December 31, 2018
305
622
238
1,165

January 1, 2018
102
863
472
1,437

c) Conditional repurchase obligations - In connection with the sale of new aircraft, the Corporation enters into
conditional repurchase obligations with certain customers. Under these obligations, the Corporation agrees to
repurchase the initial aircraft at predetermined prices, during predetermined periods or at predetermined dates,
conditional upon mutually acceptable agreement for the sale of a new aircraft. At the time the Corporation enters
into an agreement for the sale of a subsequent aircraft and the customer exercises its right to partially pay for the
subsequent aircraft by trading-in the initial aircraft to the Corporation, a conditional repurchase obligation is
accounted for as a trade-in commitment.

The Corporation’s conditional repurchase obligations, as at the earliest exercise date, were as follows, as at:

Less than 1 year
From 1 to 3 years
Thereafter

Other guarantees

December 31, 2019
73
—
—
73

December 31, 2018
26
74
—
100

January 1, 2018
96
47
—
143

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, 2019 ($48 million as at December 31, 2018 and $52 million as at January 1, 2018). 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 is capped, 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

224 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

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.

ACLP funding commitments
See Notes 40 - Investments in joint ventures and associates for information.

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, 2019
8,589
4,539
6
13,134

The purchase obligations of the Corporation include capital commitments for the purchase of PP&E and intangible
assets amounting to $219 million and $84 million, respectively, as at December 31, 2019 .

Litigation
In the normal course of operations, the Corporation is a defendant in certain legal proceedings before various
courts or other tribunals including in relation to product liability and contractual disputes with customers and other
third parties. The Corporation’s approach is 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, 2019,
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.

Sweden
Since the fourth quarter of 2016, the Swedish police authorities have been conducting an investigation in relation
to allegations concerning a 2013 contract for the supply of signalling equipment and services to Azerbaijan
Railways ADY (the “ADY Contract”). In October 2016, the Corporation launched an internal review into the
allegations which is conducted by external forensic advisors, under the supervision of the General Counsel and
external counsel. Both the investigation and the internal review are on-going. On August 18, 2017, charges were
laid against a then employee of the Swedish subsidiary of the Corporation for aggravated bribery and,
alternatively, influence trafficking. The trial on these charges took place from August 29 to September 20, 2017.
No charges were laid against the subsidiary of the Corporation. In a decision rendered on October 11, 2017, the
then employee was acquitted of all charges. The decision was appealed regarding all charges on October 25,
2017 by the Prosecution Authority. On June 19, 2019, the Prosecution Authority confirmed that the acquittal on
charge of influence trafficking is no longer being appealed; accordingly, this acquittal on this charge stands as a
final judgment. The case is still pending with the Swedish Court of Appeal with a likely scenario that the Swedish
Court of Appeal will set a date for the appeal trial.

The ADY Contract is being audited by the World Bank Group pursuant to its contractual audit rights. The audit is
on-going. The Corporation’s policy is to comply with all applicable laws and it is cooperating to the extent possible
with the investigation and the audit.

On November 15, 2018, the World Bank Integrity Vice Presidency (“INT”) issued a ‘show cause’ letter to
Bombardier, outlining INT’s position regarding alleged collusion, corruption, fraud and obstruction in the ADY
Contract. The Corporation was invited to respond to these preliminary findings and has done so. As the World
Bank’s audit process is governed by strict confidentiality requirements, the Corporation can only reiterate that it
strongly disagrees with the allegations and preliminary conclusions contained in the letter.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 225

The Corporation’s internal review about the reported allegations is on-going but based on information known to
the Corporation at this time, there is no evidence that suggests a corrupt payment was made or offered to a public
official or that any other criminal activity involving Bombardier took place.

In connection with this on-going review, the Corporation has requested information and documents from the World
Bank’s audit and continues to wait for such information and documents.

Investigation in Brazil
On March 20, 2014, Bombardier Transportation Brasil Ltda (“BT Brazil”), a 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
unsuccessfully contested before the courts both the decision to detach the proceedings against these 43
individuals and decisions by CADE restricting physical access to some of the forensic evidence.

As a result of the administrative proceedings initiated by CADE in 2014, BT Brazil 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 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.

In December 2018, the Superintendent-General of CADE filed a formal opinion finding BT Brazil had engaged in
anti-competitive behaviour. On February 18, 2019, CADE’s Attorney General issued its opinion, substantially
supporting the General Superintendence’s recommendations. On June 20, 2019, the Brazil Superior Court of
Justice granted an extraordinary recourse brought by CADE to overcome the effects of certain injunctions
instituted by the defendants (including BT Brazil) and the matter was added to the following plenary session of the
CADE Board, a quasi-judicial competition tribunal. On July 8, 2019, the CADE Board issued a bench ruling
supporting the Superintendent-General of CADE’s formal opinion filed in December 2018. This opinion found all
the defendants (including BT Brazil) had engaged in anti-competitive behaviour and recommended the conviction
of all the investigated parties. In the case of BT Brazil, the conviction includes a fine of 22 million Brazilian Real
($6 million), but no debarment. BT Brazil was not declared ineligible to participate in future public bids.

In parallel with the proceedings described above, the Corporation conducted an internal review to determine
whether any kind of anti-competitive conduct had occurred. This review did not reveal any evidence of
participation in an illicit agreement to allocate markets and influence the outcome of competitive bidding
procedures as alleged by the competition authority.

The Corporation strongly disagrees with the conclusions of the CADE Board and BT Brazil has commenced the
requisite steps to contest its decision before tribunals of competent jurisdiction and continues to vigorously defend
itself against the allegations.

226 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

Transnet
The Corporation learned through various media reports of the appointment of a Judicial Commission of Inquiry
into Allegations of State Capture, Corruption and Fraud in the Public Sector, including organs of state (the “Zondo
Commission”) for which the terms of reference were published by presidential proclamation on January 25, 2018.
Before and after the creation of the Zondo Commission, the media reported allegations of irregularities with
respect to multiple procurements regarding the supply of 1,064 locomotives by South African train operator
Transnet Freight Rail. On September 7, 2018, Bombardier Transportation South Africa (Pty.) Ltd. (“BTSA”) was
informed that the Special Investigation Unit (“SIU”), a forensic investigation agency under the Department of
Justice in South Africa, had opened an investigation with respect to the relocation, in 2014, of the manufacturing
site from Pretoria to Durban and the costs claimed in regard to this relocation. The Corporation strongly disagrees
with these allegations and will continue to vigorously defend itself.

On February 4, 2019, at the request of the head legal advisor to the Zondo Commission, BTSA submitted a
confidential written statement with supporting documents that sets out its position on public allegations and
requested the opportunity to publicly present evidence to the Zondo Commission. The Zondo Commission has
reviewed the submission and related documents. In June 2019, BTSA was requested by SIU to provide
information and explanation about the costs of the relocation to Durban. Although the written statement previously
communicated to the Zondo Commission could not be shared with SIU, BTSA did provide SIU with the
information in its possession regarding the relocation as well as explanation about the costs for same.

The Corporation is conducting an internal review into the allegations by external advisors under the supervision of
counsel. The review is still ongoing but based on information known to the Corporation at this time, there is no
reason to believe that the Corporation has been involved in any wrongdoing with respect to the procurement by
Transnet of 240 TRAXX locomotives from Bombardier Transportation. Contrary to what has been reported by the
media, the contract is still in full force and continues to be executed.

Spain
In December 2017, the Spanish Competition Authority (“CNMC”) conducted an inspection at the offices of
Bombardier European Investments, S.L.U. (“BEI”) in Madrid. According to the Inspection Order, CNMC’s
inspection follows information it learned about possible irregularities in public tenders with the Railway
Infrastructures Administrator (“ADIF”). On January 2, 2018, BEI received an information request from the CNMC
regarding the legal and operational organization of BEI. BEI is cooperating with the authorities to the extent
possible and responded to the information request. There are currently no charges nor formal accusations that
BEI breached any law.

On August 28, 2018, BEI was informed that the CNMC was opening formal proceedings against eight competing
companies active on the Spanish signalling equipment market and four directors, including BEI and its parent
company, Bombardier Transportation (Global Holding) UK Limited. No Bombardier directors were named. The
inclusion of the parent company is typical of European competition authorities at the early stage of the
proceedings. The delays for CNMC to adopt a final decision on the case are currently suspended pending various
appeals (including by BEI) filed in relation to various decisions rendered by CNMC regarding the involvement into
the file of the public client ADIF.

The Corporation's policy is to comply with all applicable laws, including antitrust and competition laws. In light of
the early stage of the preliminary investigation, management is unable to predict its duration or outcome, including
whether any operating division of the Corporation could be found liable for any violation of law or the extent of any
fine, if found to be liable.

Review by the Autorité des marchés financiers (Québec)
In August 2018, following the release by Bombardier of its financial results for the second quarter ended June 30,
2018, Bombardier announced the establishment of an Automatic Securities Disposition Plan (“ASDP”) allowing for
the orderly exercise and sale over a two-year period of vested securities earned by certain senior executives. The
purpose of the ASDP (similar to a 10b5-1 plan) was to allow senior executives who would otherwise have limited

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 227

trading windows to sell securities and realize earned long-term incentive compensation in an orderly manner.
Eligible senior executives are those most likely to have restrictions on trading due to trading restrictions under
applicable securities laws and Bombardier’s internal trading guidelines.

The ASDP was established in accordance with applicable Canadian securities legislation and guidance, at a time
when (i) no blackout period was in effect regarding trading in securities of Bombardier, and (ii) participants under
the ASDP were not in possession of any material undisclosed information with respect to Bombardier or its
securities and, as such, were permitted to trade in securities of Bombardier in accordance with applicable laws
and Bombardier’s trading policies. Trading did not commence under the ASDP until at least 30 days had elapsed
after the ASDP was established.

On November 15, 2018, Bombardier publicly acknowledged the announcement by the Autorité des marchés
financiers (Québec) (AMF) confirming that it was reviewing matters surrounding the establishment of the ASDP
and subsequent announcements by Bombardier.

Bombardier and its employees (including the participants under the ASDP) fully cooperated with the AMF in its
review.

On April 26, 2019, the AMF issued a further press release announcing that it had concluded its review and found
that Bombardier and its senior executives participating in the ASDP had not violated or breached securities laws
in the context of the establishment of the ASDP. The AMF noted the cooperation and transparency offered by
Bombardier throughout its review.

In establishing the ASDP, Bombardier was assisted by external counsel and sought to ensure that the ASDP was
based on best practices and sound corporate governance principles and consistent with applicable securities laws
and guidance. Nonetheless, in light of the rapid evolution of Bombardier’s situation following the establishment of
the ASDP, the AMF recommended that Bombardier reconsider the merit of maintaining the ASDP in effect. Further
to this recommendation, the Board of Directors of Bombardier, upon the recommendation of its Human Resources
and Compensation Committee, has terminated the ASDP in accordance with its terms.

Class action
On February 15, 2019, the Corporation was served with a Motion for authorization to bring an action pursuant to
Section 225.4 of the Québec Securities Act and application for authorization to institute a class action before the
Superior Court of Québec in the district of Montréal against Bombardier Inc. and Messrs. Alain Bellemare and
John Di Bert (“Motion”) to claim monetary damages in an unspecified amount in connection with alleged false and
misleading representations about the Corporation’s business, operations, revenues and free cash flow, including
an alleged failure to make timely disclosure of material facts concerning its guidance for 2018. In the class action
component of the Motion, the Plaintiff Denis Gauthier seeks to represent all persons and entities who have
purchased or acquired Bombardier’s securities during the period of August 2, 2018 to November 8, 2018,
inclusively and held all or some of these securities until November 8, 2018. Both the action pursuant to the
Québec Securities Act and the class action require an authorization from the Court before they can move forward.
Until they are authorized, there are no monetary claims pending against the defendants in the context of these
Court proceedings.

Bombardier Inc. and Messrs. Bellemare and Di Bert are contesting this Motion. The Corporation’s preliminary
view at this juncture is that the possibility that these Court proceedings will cause the Corporation to incur material
monetary liability appears to be remote.

228 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

44. EVENT AFTER THE REPORTING DATE

ACLP investments
On February 12, 2020, the Corporation concluded the sale of its remaining interests in Airbus Canada Limited
Partnership (ACLP) to Airbus and Investissement Québec. Further to this, the Corporation will transfer
aerostructures activities supporting A220 and A330 in St-Laurent, Québec to Airbus subsidiary Stelia Aerospace.
No workforce reduction is expected out of this transaction.

Refer to Note 40 - Investments in Joint Ventures and Associates for more details.

Bombardier, Challenger, CRJ, CRJ Series, CRJ550, CRJ700, CRJ900, CRJ1000, Global, Global 7500, Learjet, Learjet 85, OPTIFLO,
Primove, Smart Services and TRAXX are trademarks of Bombardier Inc. or its subsidiaries.

BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019 229

INVESTOR INFORMATION

Our Board of Directors

BOARD MEMBERS(1)

Pierre Beaudoin
Alain Bellemare
Joanne Bissonnette

Charles Bombardier

Chairman of the Board of Directors of Bombardier
President and Chief Executive Officer of Bombardier
Corporate Director
Founder and President of Imaginactive (non-profit organization that creates concepts on
the future of mobility and conducts research to improve new product feedback)
Corporate Director
Vice President and Portfolio Manager of RBC Dominion Securities Inc.
Corporate Director
Chairman and Chief Executive Officer of Sumarria Inc. (an investment holding company)
Corporate Director
President of Nexcap Inc. (a private investment company)

Martha Finn Brooks
Diane Fontaine
Diane Giard
Anthony R. Graham
August W. Henningsen
Pierre Marcouiller
Douglas (Doug) R. Oberhelman Corporate Director

Vikram Pandit

Antony N. Tyler

Beatrice Weder di Mauro

BOARD COMMITTEES

Lead Director
Chairman and Chief Executive Officer of The Orogen Group (a company investing in the
financial services industry)
Corporate Director
Professor of International Macroeconomics, The Graduate Institute of International and
Development Studies

Board
committees

Board representation(1) Responsibilities

Audit Committee

Diane Giard (Chair)
Martha Finn Brooks
Anthony R. Graham
Pierre Marcouiller
Beatrice Weder di Mauro

• Help the directors meet their responsibilities with respect to accountability
• Assist in maintaining good communication between the directors and the
independent auditors of Bombardier, Ernst & Young
• Assist in maintaining the independence of Ernst & Young
• Maintain the credibility and objectivity of the financial reports of Bombardier
• Investigate and assess any issue that raises significant concerns with the
Audit Committee

Finance and
Risk
Management
Committee

Martha Finn Brooks
(Co-Chair)
August W. Henningsen
(Co-Chair)
Antony N. Tyler
Beatrice Weder di Mauro

Corporate
Governance and
Nominating
Committee

Human
Resources and
Compensation
Committee

Douglas (Doug) R.
Oberhelman (Chair)
Diane Giard
Anthony R. Graham
Vikram Pandit
Antony N. Tyler

Vikram Pandit (Chair)
August W. Henningsen
Pierre Marcouiller
Douglas (Doug) R.
Oberhelman

• 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) As at December 31, 2019. Supplemental information regarding our Board of Directors can be found on our website at bombardier.com.

230 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

STOCK EXCHANGE LISTINGS

FISCAL YEAR 2020 FINANCIAL RESULTS

Class A Shares (Multiple
Voting) and Class B
Subordinate Voting Shares
Preferred Shares, Series 2,
Series 3 and Series 4

Stock listing ticker

First Quarterly Report

Toronto (Canada)

Second Quarterly Report

May 7, 2020

August 6, 2020

Toronto (Canada)

BBD (Toronto)

Third Quarterly Report

November 5, 2020

2020 Annual Financial Report

February 10, 2021

PREFERRED DIVIDEND PAYMENT DATES

Payment subject to approval by the Board of Directors

Series 2

Record date

Payment date

Record date

Payment date

2019-12-31

2020-01-31

2020-02-28

2020-03-31

2020-04-30

2020-05-29

Series 3

2020-01-15

2020-02-15

2020-03-15

2020-04-15

2020-05-15

2020-06-15

2020-06-30

2020-07-31

2020-08-31

2020-09-30

2020-10-30

2020-11-30

Series 4

2020-07-15

2020-08-15

2020-09-15

2020-10-15

2020-11-15

2020-12-15

Record date

Payment date

Record date

Payment date

2020-01-17

2020-04-10

2020-07-10

2020-10-16

2020-01-31

2020-04-30

2020-07-31

2020-10-31

2020-01-17

2020-04-10

2020-07-10

2020-10-16

2020-01-31

2020-04-30

2020-07-31

2020-10-31

Please note that unless stated otherwise, all dividends paid by Bombardier since January 2006 on all of its
common and preferred shares are considered “eligible dividends” as per the Canadian Income Tax Act and any
corresponding provincial or territorial legislation. The same designation applies under the Quebec Taxation Act for
dividends declared after March 23, 2006.

BOMBARDIER INC. / 2019 FINANCIAL REPORT 231

Bombardier Inc.
800 René-Lévesque Blvd. West
Montréal, Québec
Canada H3B 1Y8
Investor relations
Tel.: +1 514 861 9481, extension 13273
Fax: +1 514 861 2420
Email: investors@bombardier.com
Communications
Tel.: +1 514 861 9481, extension 13390
Fax: +1 514 861 2420

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

Contact Information

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-Bourassa 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
900 de Maisonneuve Blvd. West
Suite 2300
Montréal, Québec
Canada H3A 0A8

ANNUAL MEETING
The annual meeting of shareholders will be held on
Thursday, May 7, 2020, at 10:30 a.m. at the following
address:

Centre des Sciences de Montréal
2, rue de la Commune Ouest
Montréal, QC, Canada H2Y 4B2

The annual meeting will also be broadcast live on our
website at bombardier.com.

232 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2019

The Global 8000 and Learjet 75 Liberty aircraft 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.

ALP, AVENTRA, BiLevel, Bombardier, Challenger,
Challenger 300, Challenger 350, Challenger 600,
Challenger 650, CITYFLO, CRJ, CRJ550, CRJ700,
CRJ900, CRJ1000, CRJ Series, EBI, FLEXITY,
FLEXX, FlexCare, Global, Global 5000, Global 5500,
Global 6000, Global 6500, Global 7500, Global 8000,
INNOVIA, INTERFLO, Learjet, Learjet 70, Learjet 75,
Learjet 75 Liberty, Learjet 85, MITRAC, MOVIA,
OMNEO, OPTIFLO, Primove, Smart Services,
TALENT, TRAXX, TWINDEXX, WAKO 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(1):

mature trees,
equivalent to 2
metric tons of
wood

499 kg

of waste, or the
contents of 10
garbage cans

2,009 kg
of CO2,
equivalent to

8,006 kilometres
driven

10,000 liters

of water, equal to
109 10-minute
showers
consumption in
Northern America

(1) Data issued by the paper manufacturer.

Completely recyclable -
the responsible choice

FSC® is not responsible for calculating
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