Bombardier, Inc.
Annual Report 2023

Plain-text annual report

Bombardier is a global leader in aviation, focused on designing, manufacturing and servicing the world's most exceptional business jets and specialized mission platforms. A VISIONARY INDUSTRY LEADER Headquartered in Greater Montréal, Québec, Bombardier is powered by a proud heritage and visionary innovation in the design, manufacture and support of world-class business aircraft. Its Challenger and Global aircraft families are renowned for their cutting-edge cabin design, performance and reliability. Bombardier is recognized for its leadership in sustainability, including its pledge to cover the totality of its flight operations with Sustainable Aviation Fuel (SAF) using the Book-and-Claim system. Revenues(1) $8.0 billion Order backlog(2) $14.2 billion Employees(3) 18,100 Bombardier has a worldwide fleet of more than 5,000 aircraft in service, with a wide variety of multinational corporations, charter and fractional ownership providers, governments and private individuals. Bombardier is also steadily growing its defense portfolio through Bombardier Defense, which designs, develops and delivers a diverse portfolio of proven and versatile specialized aircraft platforms to operators around the world. Bombardier boasts an extensive global network of aftermarket and support facilities, where it services the Global, Challenger and Learjet(4) families of aircraft. These facilities include service centers in the U.S., Europe and Asia-Pacific, as well as mobile response teams and dedicated aircraft parts availability sustained by parts facilities, including depots, hubs and repair facilities. All amounts in this financial report are in U.S. dollars unless otherwise indicated. For fiscal year 2023. (1) (2) As at December 31, 2023. (3) As at December 31, 2023, including contractual and inactive employees. (4) Bombardier delivered its last Learjet aircraft in the first quarter of 2022. Setting our sights higher and delivering on our commitments Bombardier’s excellent financial performance throughout 2023 clearly demonstrates the success of its refocused identity. The company showed consistent strength as it executed on its strategy, increasing profitability while decreasing debt. Bombardier’s leadership in product development was evident as sales remained strong across its portfolio of aircraft, and its aftermarket revenue reached new heights. Also in 2023, Bombardier grew its workforce beyond 18,100 employees and solidified its position as a business aviation industry leader in innovation and sustainability. Dear Shareholders, I’m extremely pleased to begin 2024 with Bombardier in such a strong position. Our leadership in the business aviation industry was a consistent theme throughout 2023, from excellent financial performance to product innovation to our efforts to build a greener future for business aviation. I credit our team members all over the world for Bombardier’s ongoing success. Bombardier turned in a strong financial performance in 2023, successfully building on our momentum from the two previous years. Thanks to the solid execution of our strategy, we achieved a step change in profitability while continuing to reduce our debt. We met our full-year delivery guidance despite a challenging supply chain environment. The financial community took notice of our progress, as both Moody’s and S&P announced ratings upgrades for Bombardier in 2023. In the fall, Bombardier was included in the 2023 TSX30 ranking presented by the Toronto Stock Exchange (TSX). This ranking recognized Bombardier for its outstanding stock performance over the three-year period ended on June 30, 2023. Of course, none of this happened by accident. While business aviation as a whole benefited from increased demand as a result of the pandemic, Bombardier’s strategic positioning was designed to not only capitalize on higher demand but to perform consistently and predictably when demand stabilizes, as expected and as we began to see in 2023. Bombardier’s refreshed portfolio sold well all year. Our focus on medium and large business jets was aligned with market demand, and our aircraft set themselves apart from the competition. Our Challenger platform was extremely popular – the Challenger 3500 aircraft, which entered service in 2022 with a fully redesigned cabin, was a big winner in 2023. Our large-cabin Global platform also shone bright as customers sought their outstanding range and smooth ride. The industry flagship Global 7500 aircraft flew past its milestone 150th delivery in 2023 with an excellent record of in-service performance. The Global 7500’s proven reliability speaks volumes as competitors attempt to enter this market segment created by Bombardier. Meanwhile, our Global 8000 development program progressed smoothly in 2023; this new industry flagship will offer everything the Global 7500 has and more when it enters service in 2025 as the only business jet certified to fly at Mach 0.94(1). Another pillar of Bombardier’s 2023 performance was our newly expanded service center network. If 2022 was the year of celebrating the openings and expansions of facilities in Melbourne, Singapore, Miami and London, then 2023 was the year of integrating these centers into the Bombardier family, allowing us to serve more customers than ever, to be closer to them than ever. The revenues from our services business in 2023 had an unprecedented benefit to our bottom line, playing a key role in Bombardier’s overall profitability. The realization of our expanded service network is a key accomplishment that will provide a predictable and consistent source of revenue that is an integral part of our strategic plan. Bombardier Defense was a key element of our growth in the last year. Officially launched in 2022, our defense business is built on decades of experience. The most important strategic win for Bombardier Defense in 2023 took place at the end of the year, when the United States Army chose the Global 6500 aircraft to serve as the prototype for the High Accuracy Detection and Exploitation System (HADES). This will be the first time the U.S. Army uses a large business jet for Intelligence, Surveillance and Reconnaissance (ISR) missions. This latest vote of confidence from the United States, where Global aircraft already support the U.S. Air Force, shows how well-suited our products are for surveillance missions, and positions Bombardier for future success. Meanwhile, we continue to progress work on aircraft for Germany at our Bombardier Defense headquarters in Wichita. Forward-looking governments around the world are turning to Bombardier as they redefine their airborne capabilities. The business aviation industry faced some headwinds in 2023, and I’m proud to say that Bombardier’s leadership again set us apart. Case in point: supply chain complexity persisted throughout the year, and Bombardier successfully met its full-year delivery commitments. Quarter after quarter, our success in this area has been marked by focusing on what we control. In some cases that meant sending our team members deeper within our BOMBARDIER INC. / 2023 FINANCIAL REPORT 1 supplier network or simply integrating components back to Bombardier where it made sense. For example, in 2023 we made the decision to retain electrical harness activities in our Mexico operations. We smoothly reacquired the business from Latécoère and welcomed the team members to Bombardier. In another example of our industry leadership, Bombardier in 2023 was at the forefront of innovation and thought leadership when it comes to sustainability. Faced with misconceptions from those outside our industry about our determination to build a greener future, Bombardier was front and center on this issue. We promoted the use of Sustainable Aviation Fuel (SAF) by covering all our flight operations with SAF via a book-and-claim system. We talked to students, media and anyone interested in innovation about our EcoJet research project, which is a blended-wing-body concept with the potential to dramatically reduce emissions. We took part in panels, roundtables and debates in order to better educate the public about our industry’s goal to reach net zero, and about how Bombardier is channeling our amazing research and development talent toward building greener aircraft. I’m sure you’ll agree that Bombardier delivered an impressive performance last year. Thanks to our solid foundation and our world-class team of 18,100 employees, I’m looking to the years ahead with optimism and confidence. Sincerely, Eric Martel President and Chief Executive Officer (1) See the forward-looking statements disclaimer in the overview section of Bombardier’s Management Discussion and Analysis for the fiscal year-ended 2023. 2 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS CONSOLIDATED FINANCIAL STATEMENTS For the fiscal year ended December 31, 2023 For the fiscal years ended December 31, 2023 and 2022 4 91 BOMBARDIER INC. / 2023 FINANCIAL REPORT 3 BOMBARDIER INC. MANAGEMENT’S DISCUSSION AND ANALYSIS For the fiscal year ended December 31, 2023 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” or “our” or “we”). 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 under one reportable segment: Bombardier, which is reflective of our organizational structure. IFRS and non-GAAP and other financial measures This MD&A contains both IFRS and non-GAAP and other financial measures. Non-GAAP and other financial measures are defined and reconciled to the most comparable IFRS measure (see the Non-GAAP and other financial measures 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 was omitted or misstated. Certain totals, subtotals and percentages may not agree due to rounding. The Financial Report for fiscal year 2023 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, 2023  The following table shows the abbreviations used in the MD&A and the consolidated financial statements. Term ACLP bps CCTD CGU DB DC DDHR DSU EBIT Description Airbus Canada Limited Partnership Basis points Cumulative currency translation difference Cash generating unit Defined benefit Defined contribution Derivative designated in a hedge relationship Deferred share unit Earnings (loss) before financing expense, financing income and income taxes EBITDA Earnings (loss) before financing expense, financing income, income taxes, amortization and impairment charges on PP&E and intangible assets Earnings (loss) before income taxes Entry-into-service Earnings (loss) per share attributable to equity holders of Bombardier Inc. EBT EIS EPS Fair value through other comprehensive income FVOCI FVTP&L Fair value through profit and loss GAAP Generally accepted accounting principles Term GDP IAS IASB IFRS MD&A MHI n/a NCI nmf OCI PP&E PSU R&D RSU SG&A SOFR U.A.E. U.K. U.S. Description Gross domestic product International Accounting Standard(s) International Accounting Standards Board International Financial Reporting Standard(s) Management’s discussion and analysis Mitsubishi Heavy Industries, Ltd Not applicable Non-controlling interests Information not meaningful Other comprehensive income (loss) Property, plant and equipment Performance share unit Research and development Restricted share unit Selling, general and administrative Secured Overnight Financing Rate United Arab Emirates United Kingdom United States of America BOMBARDIER INC. / 2023 FINANCIAL REPORT 5 OVERVIEW Table of Contents HIGHLIGHTS OF THE YEAR STRATEGIC PRIORITIES KEY PERFORMANCE MEASURES AND METRICS GUIDANCE AND FORWARD- LOOKING STATEMENTS PROFILE INDUSTRY AND ECONOMIC ENVIRONMENT CONSOLIDATED RESULTS OF OPERATIONS 7 10 11 14 19 24 28 CONSOLIDATED FINANCIAL POSITION LIQUIDITY AND CAPITAL RESOURCES CAPITAL STRUCTURE RETIREMENT BENEFITS RISK MANAGEMENT NON-GAAP AND OTHER FINANCIAL MEASURES 34 35 41 43 48 52 6 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 HIGHLIGHTS OF THE YEAR Bombardier 2023 Results Set New Highs on Earnings and Revenues, 2024 Guidance Reflects Further Growth RESULTS For the fiscal years ended December 31 Revenues Adjusted EBITDA(1) Adjusted EBITDA margin(2) Adjusted EBIT(1)(3) Adjusted EBIT margin(2) EBIT EBIT margin(4) Net income (loss) from continuing operations Net income (loss) from discontinued operations(5) Net income (loss) Diluted EPS from continuing operations (in dollars) Diluted EPS from discontinued operations (in dollars)(5) Adjusted net income(1)(3) Adjusted EPS (in dollars)(2)(3) Cash flows from operating activities(6) Net additions to PP&E and intangible assets(6) Free cash flow(1)(6) As at December 31 Cash and cash equivalents Available liquidity(1) Order backlog (in billions of dollars)(7) 2023 $ 8,046 $ 1,230 15.3 % 799 9.9 % 793 9.9 % 490 (45) 445 4.70 (0.46) 4.24 416 3.94 623 366 257 $ $ $ $ $ $ $ $ $ $ $ $ $ 2023 $ 1,594 $ 1,845 14.2 $ 2022 $ 6,913 930 $ 13.5 % 515 7.4 % 538 7.8 % $ $ (128) $ (20) $ (148) $ (1.67) $ (0.21) $ (1.88) $ $ 104 $ 0.77 $ 1,072 337 $ 735 $ 2022 $ 1,291 $ 1,499 $ 14.8 Variance 16 % 32 % 180 bps 55 % 250 bps 47 % 210 bps 618 (25) 593 6.37 (0.25) 6.12 312 3.17 (449) 29 (478) $ $ $ $ $ $ $ $ $ $ $ Variance 23 % $ 346 (4) % (1) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (2) Non-GAAP financial ratio. A non-GAAP financial ratio is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (3) Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination, and restructuring charges, including comparative figures. See Note 37 - Reclassification, to our Consolidated financial statements, for more information. (4) Supplementary financial measure. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics. (5) Discontinued operations are related to the sale of the Transportation business. The expenses recorded in discontinued operations for fiscal years 2023 and 2022 principally relate to change in estimates of a provision for professional fees. (6) Only from continuing operations. (7) Represents order backlog for both manufacturing and services. BOMBARDIER INC. / 2023 FINANCIAL REPORT 7 KEY HIGHLIGHTS AND EVENTS • • • • • • • 2023 revenues of $8.0 billion, up 16% year-over-year, driven by higher deliveries and record-setting business jet aftermarket revenues of $1.75 billion, up 16% year-over-year. 2023 adjusted EBITDA(1) reflects significant 32% year-over-year jump to $1.23 billion. Full-year reported EBIT reached $793 million. Adjusted EPS(2) up 412% year-over-year from $0.77 to $3.94. Diluted EPS from continuing operations reached $4.70. Net income from continuing operations and adjusted net income(1) were $490 million and $416 million respectively. Free cash flow(1) generation from continuing operations met 2023 guidance at $257 million, while cash flows from operating activities and net additions to PP&E and intangible assets were at $623 million and $366 million respectively. Full-year unit book-to-bill(3) of 1.0 follows year-over-year delivery growth curve, reflects strong demand. Backlog(4) stood healthy at $14.2 billion. Rapid and meaningful improvement in adjusted net debt to adjusted EBITDA ratio(2), seeing 28% year-over- year reduction from 4.6x to 3.3x. Available liquidity(1) remained strong at $1.8 billion; cash and cash equivalents were $1.6 billion as at December 31, 2023. After meeting or exceeding its 2023 guidance, the company is again guiding for growth in 2024(5). Investor Day 2023 On March 23, 2023, during its Investor Day, Bombardier unveiled enhanced 2025 objectives. The Corporation updated its strategies and financial objectives following the strong execution over 2021 and 2022. It also introduced the Bombardier Defense business, targeting revenues of more than $1 billion by the second half of the decade(5), and showcased the potential of its new Certified Pre-owned aircraft business aimed at expanding market share within the pre-owned aircraft market. These initiatives reflect Bombardier's commitment to strategic growth and revenue diversification. Continued focus on deleveraging and improving credit rating In 2023, Bombardier reduced its debt by $0.4 billion, resulting in a total debt reduction of $4.5 billion since December 31, 2020. The adjusted net debt to adjusted EBITDA ratio(2) decreased from 41.5 at the end of 2020 to 3.3 by December 31, 2023, marking a 92% reduction. Adjusted net debt(1) stands at $4.0 billion as at December 31, 2023 and Bombardier has no debt maturities up to June 2026. On April 5, 2023, Moody’s upgraded Bombardier’s rating to B2 from B3, on the back of continued progress in reducing debt, continued improvement in financial performance, improved earnings, margins and positive free cash flows. On May 2, 2023, S&P Global Ratings also upgraded Bombardier’s rating from B- to B, citing solid execution, successful deleveraging efforts, backlog stability and effective management of supply chain risks as contributing factors. (1) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (2) Non-GAAP financial ratio. A non-GAAP financial ratio is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (3) Defined as net new aircraft orders in units over aircraft deliveries in units. (4) Represents order backlog for both manufacturing and services. (5) See the forward-looking statements disclaimer in the Overview section of this MD&A. 8 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Aftermarket expansion In 2023, Bombardier continued enhancements to its worldwide customer service network, including the ramping up and operationalization of its global service centers. Bombardier’s aftermarket services achieved an impressive compounded annual growth rate (CAGR) of over 20% in revenues between 2020 and 2023, highlighting the strength of its expansion strategy. On October 3, 2023 Bombardier announced the expansion of its industry-defining cost-per-flight-hour offerings with the introduction of Smart Services Elite. This new Smart Services program complements Bombardier’s existing Smart Services portfolio, providing business aircraft customers with the most comprehensive, peace-of-mind cost-per-flight-hour program that brings budget predictability for essential aircraft parts and maintenance costs. Bombardier delivered 150th Global 7500 On October 16, 2023, Bombardier delivered its 150th Global 7500 aircraft, which marked another significant milestone for Bombardier’s industry-defining business jet. The Global 7500 fleet has surpassed 100,000 flight hours and boasts a fleet dispatch reliability of more than 99,8%, underscoring its status as the most reliable, productive business jet in service today. At the same time, the Global 7500 successor, the Global 8000 aircraft, development and testing is ongoing and progressing to plan, with an expected entry into service in 2025(1). Since its introduction in May 2022, the Global 8000 has been gathering positive customer interest. Bombardier continues growing its Defense business On October 23, 2023, Bombardier Defense delivered the seventh Global 6000 aircraft to the U.S. Air Force for the Battlefield Airborne Communications Node (BACN) program, Bombardier’s multi-year contract with the Air Force. The aircraft supports a unique and reliable airborne communications platform essential for critical missions around the world. On November 12, 2023, Bombardier Defense delivered the seventh Global aircraft to defense and security company Saab, ready to be transformed into Saab’s Airborne Early Warning and Control (AEW&C) solution known as GlobalEye. The 7 aircraft delivered by Bombardier to the GlobalEye program highlight a successful collaboration and echo Bombardier’s thriving, long-standing reputation in manufacturing specialized aircraft for the defense industry. Global business jets have become the go-to platforms for special missions around the world, thanks to their speed, payload capacity, reduced cost of maintenance, fuel efficiency, reliability, and endurance. Milestones in sustainable aviation On May 2, 2023, Bombardier published the Global 5500 and Global 6500 Environmental Product Declarations (EPDs®), which provide detailed information about the aircraft’s life cycle environmental footprint. The two aircraft join Bombardier’s Global 7500 and Challenger 3500 aircraft, the only other EPD® designated jets in business aviation at this time. On May 21, 2023, Bombardier presented the progress made on its initial flight-testing phase on its EcoJet research project, which aims to develop technologies with the goal of reducing aircraft emissions by up to 50% through a combination of advanced aerodynamics and propulsion enhancements(1). On October 16, 2023, Bombardier ramped up the testing with a second test phase of the project with a larger, 18-foot-wide prototype, contributing to the advancement of this pivotal project. On November 13, 2023, Bombardier reaffirmed its commitment to cover all its operational flights with sustainable aviation fuel (SAF), utilizing the Book-and-Claim system. One year after announcing its landmark agreement with Signature Aviation, Bombardier continues to demonstrate its firm engagement to drive lasting industry change by promoting the industry-wide adoption of SAF. (1) See the forward-looking statements disclaimer in the Overview section of this MD&A. BOMBARDIER INC. / 2023 FINANCIAL REPORT 9 STRATEGIC PRIORITIES(1) During its March 2023 Investor Day, Bombardier updated its strategic priorities and financial targets following the strong execution since it first released its strategic plan in March 2021, and the Corporation raised its key financial targets at the same time. These initiatives include maintaining a leadership position in the medium and large business aircraft categories, materially growing the Defense business, continuing to expand our aftermarket services and Certified Pre-owned aircraft program, and to finish repairing our balance sheet, all the while capturing the value associated with the Global 7500 program and delivering on the productivity and profitability initiatives. These strategic priorities support the Corporation's goals to generate sustainable cash flow, improve flexibility in capital allocation, and progress towards investment-grade metrics. Maintain leadership position Bombardier aims to maintain its leadership position in the medium and large business aircraft categories by leveraging its established fleet of more than 5,000 aircraft and relying on the expertise of its worldwide workforce. The Corporation’s continued commitment to innovation in its product portfolio, as demonstrated in recent years with the entry into service of the Challenger 3500 and announcement of the Global 8000, the diligent management of its intellectual property, and the improvement of its financial situation, are meaningful enablers to positioning it for sustained market leadership. Bombardier Defense In 2022, Bombardier announced the designation of its Wichita, Kansas site as the home to the newly renamed Bombardier Defense division, reflecting the company’s strategic expansion of its existing specialized aircraft division. Since then, Bombardier has been preparing its infrastructures, leveraging its longstanding and well- recognized expertise in specialized aircraft, the unique advantages of its Challenger and Global platforms, as well as its technical capabilities, world-class flight test center, and engineering know-how to enhance its participation in the segment, in an effort to compete and win defense specific campaigns. Bombardier anticipates tripling its revenues from defense sales and services to more than $1 billion in the second half of the decade(1). Aftermarket expansion and Certified Pre-owned business With respect to its aftermarket growth strategy, the Corporation completed the openings of all the previously announced service centers. In addition, Bombardier is ramping up and operationalizing its Certified Pre-owned program launched back in 2021. The program’s objective is to capture opportunities in the pre-owned aircraft market by actively participating in the secondary market and providing an OEM-enhanced option in this space. These initiatives are expected to play an important role in the diversification of the company’s revenues. Deleveraging balance sheet Bombardier has set out to substantially deleverage its balance sheet by 2025, by targeting an adjusted net debt to adjusted EBITDA ratio(2) range of ~2x to 2.5x as well as reducing annualized cash interest expense by more than $250 million(1) compared to the annualized interest cost for long-term debt as at December 31, 2020. Since December 2020, the Corporation reduced its long-term debt by approximately $4.5 billion resulting in a gross debt of approximately $5.6 billion as of December 31, 2023, which is expected to reduce its annualized interest charges by close to $330 million(1) compared to 2020. The Corporation intends to continue to opportunistically refinance or deploy excess liquidity towards debt pay down and continues to evaluate the most efficient debt reduction strategies, which for example could include redemptions, tenders or open market repurchases. Maturing Global 7500 contribution and improving profitability The Corporation will continue to work on unlocking the full potential of its flagship Global 7500 aircraft as the program transitions to Global 8000 aircraft. Development and testing is ongoing and progressing to plan, with an expected entry into service in 2025(1). In terms of profitability, the Corporation successfully completed its cost reduction plan launched in 2021 and is now focused on enhancing efficiency to deliver stronger financial performance. This involves improvements in labor productivity, reductions in corporate costs and indirect spending, and optimizing the manufacturing footprint. (1) See the forward-looking statements disclaimer in the Overview section of this MD&A. (2) Non-GAAP financial ratio. A non-GAAP financial ratio is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non- GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. 10 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 KEY PERFORMANCE MEASURES AND METRICS The table below summarizes key performance measures and associated metrics evaluated. KEY PERFORMANCE MEASURES AND ASSOCIATED METRICS GROWTH AND COMPETITIVE POSITIONING • Order backlog(1), as a measure of future revenues. • Revenues and delivery units, as measures of growth. • Market share (in terms of revenues and units delivered), as measure of our competitive positioning. PROFITABILITY • EBIT, EBIT margin(2), adjusted EBIT(3), adjusted EBIT margin(4), adjusted EBITDA(3), adjusted EBITDA margin(4), diluted EPS and adjusted EPS(4), as measures of performance. LIQUIDITY • Free cash flow(3), as a measure of liquidity generation. • Cash and cash equivalents, adjusted liquidity(3)(5), available liquidity(3)(5) and adjusted available liquidity(3)(5), as measures of liquidity adequacy. CAPITAL STRUCTURE • Adjusted net debt(3)(5). • Adjusted net debt to adjusted EBITDA ratio(4)(5). CUSTOMER SATISFACTION • On-time aircraft deliveries, as a measure of meeting our commitment to customers. • Fleet dispatch reliability, as a measure of our products’ reliability. • Regional availability of parts and technical expertise to support customer requests in a timely 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 measures of efficiency. EXECUTION • Achievement of program development milestones, as a measure of flawless execution. (1) Represents order backlog for both manufacturing and services. (2) Supplementary financial measure. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics. (3) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (4) Non-GAAP financial ratio. A non-GAAP financial ratio is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non- GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (5) Refer to Capital structure section of this MD&A for information on adjusted net debt and adjusted net debt to adjusted EBITDA ratio; refer to Liquidity and capital resources section of this MD&A for information on adjusted liquidity, available liquidity and adjusted available liquidity. BOMBARDIER INC. / 2023 FINANCIAL REPORT 11 For the fiscal years ended December 31 Profitability Revenues(1) Adjusted EBITDA(1)(2)(4) Adjusted EBITDA margin(1)(3)(4) Adjusted EBIT(1)(2)(4) Adjusted EBIT margin(1)(3)(4) EBIT(1) EBIT margin(1)(5) Net income (loss) from continuing operations Net income (loss) from discontinued operations(6) Net income (loss) Diluted EPS (in dollars) Adjusted net income (loss)(1)(2)(4) Adjusted EPS (in dollars)(1)(3)(4) $ $ $ $ $ $ $ $ FIVE-YEAR SUMMARY 2023 2022 2021 2020 2019 $ 8,046 $ 1,230 15.3 % 799 9.9 % 793 9.9 % $ 6,913 930 $ 13.5 % 515 7.4 % 538 7.8 % $ $ $ 6,085 639 $ 10.5 % 222 3.6 % 241 4.0 % $ $ $ 6,487 197 $ 3.0 % $ $ (214) (3.3) % 912 14.1 % $ 7,488 684 $ 9.1 % 401 5.4 % $ $ (520) (6.9) % 490 $ (128) $ (249) $ (170) $ (1,541) (45) 445 4.24 416 3.94 $ $ $ $ $ (20) $ 5,319 (148) (1.88) 104 0.77 $ 5,070 $ 50.54 $ $ (327) (3.67) $ $ $ (568) (9.19) $ (1,118) $ (11.79) $ (1,607) $ 19.05 $ $ (405) (4.47) (398) $ (66) (1) Only from continuing operations. (2) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (3) Non-GAAP financial ratio. A non-GAAP financial ratio is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non- GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (4) Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination, and restructuring charges, including comparative figures. See Note 37 - Reclassification, to our Consolidated financial statements, for more information. (5) Supplementary financial measure. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics. (6) Discontinued operations are related to the sale of the Transportation business. The expenses recorded in discontinued operations for fiscal years 2023 and 2022 principally relate to change in estimates of a provision for professional fees. 12 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 For the fiscal years ended and as at December 31 Liquidity Cash flows from operating activities Continuing operations Discontinued operations Net additions to PP&E and intangible assets Continuing operations Discontinued operations Free cash flow (usage)(1) Continuing operations Discontinued operations Cash and cash equivalents(2) Current portion of long-term debt Long-term debt FIVE-YEAR SUMMARY 2023 2022 2021 2020 2019 $ $ $ $ $ $ $ $ $ $ $ $ 623 — 623 366 — 366 257 — 257 1,594 — 5,607 $ 1,072 — $ $ 1,072 $ $ $ 337 — 337 735 $ — $ $ 735 $ 1,291 $ — $ 5,980 $ $ $ $ $ $ 332 (621) (289) 232 — 232 100 $ (621) $ $ (521) $ 1,675 $ — $ 7,047 $ (1,672) $ (1,149) $ (2,821) $ $ $ 221 133 354 $ (1,893) $ (1,282) $ (3,175) $ 2,450 $ 1,882 $ 8,193 $ $ $ $ $ $ (253) (427) (680) 366 157 523 (619) $ $ (584) $ (1,203) $ 2,629 $ 8 $ 9,325 (1) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (2) Includes cash and cash equivalents from Transportation of $671 million presented under Assets held for sale as of December 31, 2020, and $51 million from the aerostructures businesses as of December 31, 2019, respectively. BOMBARDIER INC. / 2023 FINANCIAL REPORT 13 GUIDANCE AND FORWARD-LOOKING STATEMENTS 2023 Guidance and Results Continuing operations only 2023 guidance provided in our 2022 Financial Report(1) Aircraft deliveries (in units) Revenues Adjusted EBITDA(2) Adjusted EBIT(2) EBIT Free cash flow(2) Cash flows from operating activities Net additions to PP&E and intangible assets > 138 > $7.6 billion > $1,125 million > $695 million n/a > $250 million n/a n/a 2023 results 138 $8.0 billion $1,230 million $799 million $793 million $257 million $623 million $366 million Revenues for the full year of $8.0 billion were above guidance mainly due to aircraft mix, improved pricing, and strong aftermarket performance. Full year adjusted EBITDA(2) and adjusted EBIT(2) were $1,230 million and $799 million respectively, and above guidance as a result of margin conversion on higher revenues than guidance and execution of the Corporation’s strategic priorities. Full year free cash flow(2) generation from continuing operations was in line with guidance at $257 million for 2023, including residual value guarantees payments of $124 million, driven by higher earnings generation, partly offset by working capital usage. (1) Refer to our 2022 Financial Report for further details. (2) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. 14 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 2024 Guidance(1) Aircraft deliveries (in units) Revenues Adjusted EBITDA(2) Adjusted EBIT(2) Free cash flow(2) 2024 Guidance 150 - 155 $8.4 billion - $8.6 billion $1.30 billion - $1.35 billion $850 million - $900 million $100 million - $400 million Aircraft deliveries in 2024 are expected to be between 150 and 155 aircraft compared to the 138 deliveries in 2023, with growth coming from the Challenger aircraft platform. Revenues are expected to increase to between $8.4 billion and $8.6 billion from 2023, based on higher aircraft deliveries, improved pricing, as well as continued growth in our aftermarket business as new service facilities continue to ramp-up their activities. Adjusted EBITDA(2) is expected to be between $1.30 billion and $1.35 billion in 2024. This growth is driven by margin conversion on increased revenues, net favorable pricing over inflation on new aircraft sales partly offset by certain strategic investments supporting our growth initiatives in Defense and Certified Pre-owned, as well as R&D and system implementation costs. Adjusted EBIT(2) is expected to be between $850 and $900 million. Free cash flow(2) in 2024 is expected to be between $100 and $400 million, including working-capital usage to support anticipated growth in deliveries in 2024 and 2025, as well as to support continued aftermarket growth. Expected net additions to PP&E and intangible assets are expected to be less than $300 million. (1) See the forward-looking statements disclaimer. (2) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. BOMBARDIER INC. / 2023 FINANCIAL REPORT 15 Forward-looking Statements Disclaimer 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, financial performance, 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; customer value; expected demand for products and services; growth strategy; 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 execution of orders in general; competitive position; expectations regarding revenue and backlog mix; the expected impact of the legislative and regulatory environment and legal proceedings; 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, cost reduction and restructuring initiatives, and anticipated costs, intended benefits and timing thereof; the ability to continue business growth and cash generation; expectations, objectives and strategies regarding debt repayment, refinancing of maturities and interest cost reduction; compliance with restrictive debt covenants; expectations regarding the declaration and payment of dividends on our preferred shares; intentions and objectives for our programs, assets and operations; expectations regarding the availability of government assistance programs; the impact of new, or exacerbation of existing global health, geopolitical or military events on the foregoing and the effectiveness of our plans and measures in response thereto; and expectations regarding the strength of markets, economic downturns or recession, and inflationary and supply chain pressures. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this MD&A. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements. 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, guidance, 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 include the following material assumptions: growth of the business aviation market and the Corporation’s share of such market; proper identification and continued management of recurring cost saving; optimization of our real estate portfolio; and access to working capital facilities on market terms. For additional information, including with respect to other assumptions underlying the forward-looking statements made in this MD&A, refer to the Forward-looking statements - Assumptions section hereinafter. Given the impact of the changing circumstances surrounding new or continuing global health, geopolitical and military events, and the related response from the Corporation, governments (federal, provincial and municipal, both domestic, foreign and multinational inter-governmental organizations), regulatory authorities, businesses, suppliers, customers, counterparties and third-party service providers, there is an inherently higher degree of uncertainty associated with the Corporation’s assumptions. Certain factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to: operational risks (such as risks related to business development and 16 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 growth; order backlog; deployment and execution of our strategy, including cost reductions and working capital improvements and manufacturing and productivity enhancement initiatives; developing new products and services, including technological innovation and disruption; the certification of products and services; pressures on cash flows and capital expenditures, including due to seasonality and cyclicality; doing business with partners; product performance warranty and casualty claim losses; environmental, health and safety concerns and regulations; dependence on limited number of contracts, customers and suppliers, including supply chain risks; human resources including the global availability of a skilled workforce; reliance on information systems (including technology vulnerabilities, cybersecurity threats and privacy breaches); reliance on and protection of intellectual property rights; reputation risks; scrutiny and perception gaps regarding environmental, social and governance matters; adequacy of insurance coverage; risk management; and tax matters); financing risks (such as risks related to liquidity and access to capital markets; substantial debt and interest payment requirements, including execution of debt management and interest cost reduction strategies; restrictive and financial debt covenants; retirement benefit plan risk; exposure to credit risk; and availability of government support); risks related to regulatory and legal proceedings; risks associated with general economic conditions and disruptions, both regionally and globally, that may impact our sales and operations; business environment risks (such as risks associated with the financial condition of business aircraft customers; trade policy; increased competition; political instability and geopolitical tensions; financial and economic sanctions and export control limitations; global climate change; and force majeure events); market risks (such as foreign currency fluctuations; changing interest rates; increases in commodity prices; and inflation rate fluctuations); and other unforeseen adverse events. For more details, see the Risks and uncertainties section in Other in this MD&A. Any one or more of the foregoing factors may be exacerbated by new or continuing global health, geopolitical or military events, which may have a significantly more severe impact on the Corporation’s business, results of operations and financial condition than in the absence of such events. 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. / 2023 FINANCIAL REPORT 17 Forward-looking statements — Assumptions Forward-looking statements(1) in this MD&A are based on and subject to, without limitation, the following material assumptions: • normal execution and delivery of current backlog; • the alignment of production rates to market demand, including the ability of the supply base to support product development and planned production rates on commercially acceptable terms in a timely manner; • continuing to mature margin contribution on the Global 7500 and executing the ongoing development of the Global 8000 on target; • continued deployment and execution of growth strategies, and continued growth of the aftermarket, Certified Pre-owned and Defense businesses; • 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 estimates and judgments regarding the duration, scope and impacts of new or continuing global health, geopolitical or military events, on the economy and financial markets, and on our business, operations, revenues, liquidity, financial condition, margins, cash flows, prospects and results in future periods; • the accuracy of our assessment of anticipated growth drivers and sector trends; • the accuracy of our assessment of pricing, supply chain and inflation trends; • new program aircraft prices, unit costs and ramp-up; • the ability to understand customer needs and portfolio of products and services to drive market demand and secure new orders and maintain the backlog level; • 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 our cost reduction plan, through restructurings and other initiatives addressing the direct and indirect cost structure, continued focusing on sustained cost reductions and operational improvements, while reducing working capital consumption; • the effectiveness of disciplined capital deployment measures in new programs and products to drive revenue growth; • our ability to effectively transition manufacturing operations to our new Toronto Pearson Airport manufacturing facility within projected timeframes and budget; • the ability to recruit and retain highly skilled resources; • the stability of the competitive global environment, global economic conditions and financial markets in the face of new or continuing global health, geopolitical or military events; • the stability of foreign exchange rates at current levels; • the ability to access the capital markets, on acceptable terms, as needed or opportunistically; • the ability to have sufficient liquidity to execute the strategic plan and to pay down long-term debt or refinance maturities; and • the ability to successfully defend ourselves against ongoing and future legal and regulatory proceedings. 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 financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. 18 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 PROFILE Best-selling jet portfolio fueling growing aftermarket service and Defense businesses We skillfully design, develop, manufacture and market two class-leading families of business jets, Global and Challenger. Besides our strongly positioned portfolio of industry-leading large and medium business jets, we are outfitting various aircraft platforms for specialized use through Bombardier Defense. Bombardier also boasts an extensive aftermarket facilities network that services more than 5,000 Global, Challenger and Learjet(1) aircraft across the U.S., Europe, Asia-Pacific and the Middle East, currently in service worldwide. After a significant expansion in 2022 that saw the opening of several new or newly expanded service centers around the world, Bombardier’s customers have been benefiting from these facilities becoming fully operational in 2023, with more skilled workforce joining their teams. Additional support is provided thanks to world-class depots, hubs, repair facilities and mobile response teams with available aircraft parts worldwide, ensuring a rapid and effective support to our customers wherever and whenever they need it. (1) Bombardier delivered its last Learjet aircraft in the first quarter of 2022 but continues to provide aftermarket support for the Learjet family of aircraft. MARKET SEGMENT: BUSINESS AIRCRAFT All products specifications and data hereafter are approximate, may change without notice and are subject to certain operating rules, assumptions and other conditions. LARGE BUSINESS JETS Models: Global 8000(1), Global 7500, Global 6500, Global 6000, Global 5500 and Global 5000 Market category: Large business jets Key highlights: Expertly designed to leave a lasting impression, the flagship Global aircraft family covers the large jet category with six aircraft models. In 2022, Bombardier unveiled its newest member, the Global 8000 aircraft. The jet, set to enter service in 2025, stands alone as the world’s fastest and longest-range purpose-built business jet, innovatively crafted with the industry’s smoothest ride, healthiest cabin and lowest cabin altitude. With a top speed of Mach 0.94, the Global 8000 is the fastest business jet in the skies. Global 8000 aircraft Since its entry into service in 2018, the segment-defining Global 7500 aircraft has proven to be the highest performing business aircraft in service today, boasting a fleet dispatch reliability of more than 99.8%. It is also the first business jet to receive an Environmental Product Declaration EPD®(2). As the only ultra-long range business jet on the market, it can link virtually any key city pair worldwide, non-stop. Its four-zone cabin includes a full crew-rest area and provides an unprecedented array of floor plans and furnishing options. Featuring a revolutionary wing design and efficient Rolls Royce Pearl engines, the Global 5500 and Global 6500 jets boast farthest-in-class ranges, offering unrivalled performance and unsurpassed passenger comfort, all at exceptional operating costs. In 2023, both aircraft received their EPD®. All Global aircraft are specially engineered to deliver the industry’s ultimate combination of speed and range, thanks in large part to the Smooth Flĕx Wing, engineered to provide the smoothest ride and uncompromising all-weather performance. The Global aircraft also come equipped with Bombardier’s Pũr Air system, with an advanced HEPA filter that captures up to 99.99% of allergens, bacteria and viruses while completely replacing the cabin air with 100% fresh air in as little as 90 seconds. In addition, the industry’s fastest in-flight internet connectivity, combined with comprehensive cabin management systems, keeps passengers entertained and connected at all times, while the revolutionary Nuage seating provides the optimal seating and resting positions. (1) The Global 8000 aircraft is in development, with testing and certifications proceeding on schedule towards the planned EIS in 2025. See the Global 8000 aircraft disclaimer at the end of this MD&A. (2) The International EPD® System is an environmental declaration program based in Sweden. It discloses fully transparent environmental information about the product’s life cycle, such as CO2 emissions, noise, water consumption and other key environmental impact indicators. BOMBARDIER INC. / 2023 FINANCIAL REPORT 19 MEDIUM BUSINESS JETS Models: Challenger 3500 and Challenger 650 Market category: Medium business jets Key highlights: A masterful expression of high-end craftsmanship and functionality, the Challenger aircraft feature productivity-enhancing business tools, with the most comfortable cabins in its category. All Challenger aircraft offer low operating costs, high reliability, and the ultimate in-flight experience with industry-leading connectivity with available Ka-band and 4G ATG internet, immersive sound system and a cabin management system that effortlessly brings it all together. Challenger 3500 aircraft The super-midsize Challenger 3500 aircraft, an update to Bombardier’s bestselling Challenger 350 platform, has proven to be the right answer to the customers evolving needs and continues the platform’s 9-year streak as the most delivered super mid-size aircraft. The aircraft, introduced in 2021, represents the ultimate combination of sustainability, performance and reliability. It features the most technologically advanced cabin in its class that introduces productivity enhancing features such as the industry’s first voice-controlled cabin, as well as superior connectivity with global coverage. Bombardier’s revolutionary Nuage seat adds to the in-flight comfort. The elegant and intuitively designed Challenger 3500 cabin received the 2022 Red Dot: “Best of the Best” Award: Product Design. The Challenger 3500 is the most sustainably designed jet in its class. It is the first super mid-size jet with an EPD® and the first business jet to achieve a carbon neutral flight test program. It also offers high-quality, sustainable cabin material options and introduces technology in the cockpit to help operators fly more efficiently and reduce carbon emissions. The luxurious, award-winning cabin of a Challenger 3500 aircraft The larger aircraft in Bombardier’s Challenger family, the Challenger 650, continues to be a popular choice with customers, particularly corporations and fleet operators. Its winning combination of peak reliability, worldwide reach, widest-in-class cabin and lowest direct operating costs has made it the best-selling platform in its category, with over 1,000 deliveries and counting. Customers appreciate its 4,000 nautical mile range and ability to operate even in challenging airports such as Aspen or London City. Its spacious, productivity-minded cabin offers available seating for up to 12 passengers. Challenger 650 aircraft are famous for their spacious and elegant cabins. The Challenger 600 series has been the most delivered business jet platform in its segment for the last decade. The platform is also in high demand for specialized missions: there are more specialized Challenger 600 series aircraft in operation than all direct competitors combined. 20 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 BOMBARDIER DEFENSE Models: Challenger and Global business jets Market category: Special-mission aircraft Key highlights: Bombardier Defense (previously Bombardier Specialized Aircraft) designs, develops and delivers a range of capabilities to operators around the world. More than 500 special-mission Learjet, Challenger and Global aircraft are currently in service with more than 160 operators in over 50 countries. Decades of experience working with special mission operators and its diverse fleet of business aircraft platforms make Bombardier the ideal provider of solutions for government missions, from surveillance and reconnaissance to urgent humanitarian assistance, medical evacuations and VIP transport. Solutions range from turnkey packages of complete design, building, testing and certification to specialized engineering support and technical oversight of customer projects. BOMBARDIER’S CERTIFIED PRE-OWNED AIRCRAFT PROGRAM Models: Learjet, Challenger and Global business jets Market category: Pre-owned aircraft Key highlights(1): Launched in 2021, Bombardier’s Certified Pre-owned (CPO) aircraft program provides a premium class of pre-owned aircraft, harnessing Bombardier’s product knowledge, as well as its world-renowned refurbishment capabilities and valuation know-how. For buyers seeking a “like-new” experience, Bombardier’s CPO aircraft program delivers aircraft equipped with the latest safety and cabin enhancements, all while providing the new aircraft delivery experience customers are looking for. Each available aircraft is meticulously selected, inspected and updated to adhere to Bombardier's highest quality and safety standards. A fresh coat of Matterhorn white provides an immaculate canvas for customers to apply their signature livery. Bombardier has most notably successfully delivered platforms of choice in the intelligence, surveillance, and reconnaissance (ISR) platform sphere and is becoming the service provider of choice for multiple armed forces and foreign allies. Every CPO aircraft is backed by an exclusive manufacturer one-year warranty(2) which extends to operational support during the first year, just like with any new Bombardier aircraft. (1) Excludes trade-in and resale sales. (2) One-year warranty on the airframe. Certain conditions apply. BOMBARDIER INC. / 2023 FINANCIAL REPORT 21 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 (OEM) expertise, a wide variety of services can be performed in house, as well as by dispatching mobile response teams to customers’ aircraft. Key highlights: Bombardier offers worldwide service and support through its service centers, line maintenance stations, Mobile Response Teams (MRT), network of authorized service facilities and aircraft worldwide to support customers through aircraft-on-ground (AOG) resolutions. In 2023, Bombardier and its customers have been benefiting from the considerable expansion and upgrades to its service center network in the previous year. SERVICES: OFFERING PEACE OF MIND THROUGH PARTS AND SMART SERVICES Services portfolio: Bombardier provides manufacturer-approved parts backed by an industry leading two-year warranty, as well as repairs to customer owned parts. A growing portfolio of innovative cost-per-flight-hour parts and maintenance plans are also 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. In 2023, Bombardier introduced Smart Services Elite, a new program that complements Bombardier’s existing Smart Services portfolio. Smart Services Elite is the only cost-per-fight-hour program that covers cabin system components, landing gear overhaul, scheduled and unscheduled maintenance and MRT support. Key highlights: Bombardier offers 24/7 parts support with parts facilities worldwide anchored by two major hubs in Chicago and Frankfurt, as well as five regional depots. A sophisticated inventory management system ensures worldwide parts availability throughout the depot and hub network, as well as the wholly-owned service centers. Repair facilities in North America and Europe provide repair services on customer-owned parts. A network of aircraft is available to shuttle parts in support of AOG requirements. From coverage on exchanges and repairs of airframe components, including flight deck avionics, Smart Services provides budget predictability and worldwide parts availability. CUSTOMER SUPPORT: 24/7 ASSISTANCE Services portfolio: Bombardier’s comprehensive portfolio of business aircraft customer support includes 24-hour customer response centers, enhanced online service tools, customer services engineering, MRT trucks, structural repair, technical publications and EIS support. Key highlights: Providing operators with a single point of contact, 24 hours a day, 365 days a year, for all critical and AOG requests and supporting all customer requirements from EIS throughout ownership of the aircraft by leveraging a global support network of strategically located teams. In 2022, Bombardier significantly enhanced its customer support footprint around the world with the inauguration of expanded service centers in Singapore and London - Biggin Hill, and the opening of new facilities in Miami - Opa Locka and Melbourne, Australia. In December 2022, Bombardier broke ground on a new service center in the U.A.E, which will become an important hub for Bombardier's customers in the region(1). This service support transformation underscores Bombardier’s ongoing commitment to providing the most comprehensive onsite, mobile and AOG resolution services in the industry. (1) See the forward-looking statements disclaimer in the Overview section of this MD&A. 22 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Information on this page reflects Bombardier’s worldwide presence at the end of Q4 2023. BOMBARDIER INC. / 2023 FINANCIAL REPORT 23 INDUSTRY AND ECONOMIC ENVIRONMENT Performant and resilient industry driven by strong activity despite worsened economic conditions and uncertainty In 2023, business aviation indicators normalized following the impressive recovery of the global pandemic, inventory level of aircraft in the pre-owned market grew but remained significantly below historical levels, flight activity for the industry remained comparable to 2022 and the industry continued to maintain a healthy backlog. Overall, business aviation remained favorable and resilient throughout 2023 despite a context of high inflation, high interest rates, economic and geopolitical uncertainty. On October 10, 2023, the International Monetary Fund shared its latest global economic outlook, projecting a global real GDP growth of 3.0% for 2023, down from 3.5% in 2022 and even lower growth for advanced economies, 1.5% for 2023 down from 2.6% in 2022(1). This outlook is a result of central bank’s policy rates reaching decade highs in an effort to slow down inflation across the globe. The effect of tight monetary policy is expected to drag down world demand for goods and services in 2024. Despite this economic slowdown in 2023, the industry backlog has remained healthy throughout 2023, aircraft activity remains high and higher inventory in the pre-owned market could encourage activity to ramp up in 2024. The pre-owned market and its stakeholders were affected by poorer economic conditions in the market. At the end of 2023, the total number of pre-owned aircraft available for sale, expressed as a percentage of the total in-service fleet, was estimated at 6.5% compared to 4.8% at the same period in 2022(2). While inventory increased gradually throughout the year by approximately two percentage points, the overall level remains well below the historical averages between 11-14%. Furthermore, inventory fell in December 2023 after peaking at 6.8% in November 2023(2). Industry confidence, measured by the Barclays Business Jet Indicator, settled at 38 points in its last survey of 2023(3). The survey results and commentary highlighted degrading economic conditions and uncertainty in the market as prime factors in lower transaction levels as many buyers remained on the fence(3). Industry business jet flight hours in 2023 decreased year-over-year by roughly 4% compared to 2022. Most of the decrease was driven by a fall in flight hours for aircraft departing the Americas but also for aircraft departing Europe, Middle East and Africa. On the other hand, flight hours of aircraft departing Asia Pacific increased by 24%, year-over-year. However, when compared to 2019, before the global pandemic, flight hours in 2023 increased by 21% overall, 22% for aircraft departing the Americas, 14% for aircraft departing Europe, Middle East and Africa and 38% for aircraft departing Asia Pacific(4). Finally, the industry delivered an estimated total of 538 units in 2023, up 2.3% year-over-year(5). For reference, in the last 10 years the industry delivered 545 aircraft on average, indicating potential for delivery growth in the short-term. The following key indicators are used to monitor the health of the business aviation market in the short-term: INDICATOR CURRENT SITUATION STATUS INDUSTRY CONFIDENCE In 2023, the Barclays Business Jet Indicator was below the 50-point threshold of market stability. As of Q4 2023, the index was at 38 points(3). CORPORATE PROFITS PRE-OWNED BUSINESS JETS INVENTORY LEVELS AIRCRAFT UTILIZATION RATES Forecasted U.S. corporate profits are expected to remain strong for the remainder of 2023, with Q3 profits increasing to $3.3 trillion for 2023, compared to $3.2 trillion at the end of 2022(6). The total number of pre-owned aircraft available for sale as a percentage of the total worldwide fleet has increased gradually throughout 2023, it remains below the industry historical average, now at 6.5%(2). December data suggests it peaked in November. Business jet flight hours departing the Americas decreased by 5%, departing Europe, Middle East and Africa decreased by 6% and departing Asia Pacific increased by 24% in 2023 compared to 2022(4). Compared to 2019, flight hours increased for all departure regions by about 21% on average. AIRCRAFT SHIPMENTS AND BILLINGS In the business aircraft market categories in which we compete, we estimate that business aircraft deliveries and revenues in 2023 increased by 2.3% and 1.3%, respectively, compared to 2022(5). ▼ ▲ ► ▲ ▲ ▲ ►▼ Identifies a favorable, neutral or negative status, respectively, in the market categories in which we compete, based on the current environment. 24 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 (1) According to the International Monetary Fund publication dated October 10, 2023. (2) According to JETNET and Ascend (by Cirium). (3) According to the Barclays Business Jet Survey dated December 11, 2023. (4) According to WingX data, excludes very light jets and large corporate airliners, as of January 8, 2024. (5) 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, as of January 31, 2024, excludes very light jets and large corporate airliners. (6) According to the U.S. Bureau of Economic Analysis News Release dated December 21, 2023. Source: Barclays. * 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. 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 historically normal range of total pre-owned business jet inventory available for sale, i.e. between 11% and 14%. Source: WingX, excludes very light jets and large corporate airliners, as of January 8, 2024. Source: WingX, excludes very light jets and large corporate airliners, as of January 8, 2024. BOMBARDIER INC. / 2023 FINANCIAL REPORT 25 BUSINESS JET INDICATOR*(for calendar quarters; average on a 100-point scale)648283837463545542394338IndexStability threshold = 50Q1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022Q1 2023Q2 2023Q3 2023Q4 2023FLIGHT HOURS FOR AIRCRAFT DEPARTING THE AMERICAS(for calendar years)3,6582,7494,1214,7124,475Thousands of flight hours for all business jets20192020202120222023PRE-OWNED BUSINESS JET INVENTORY* (for calendar years)6.5%6.8%6.0%6.5%LightMediumLargeTotal20142015201620172018201920202021202220230%2%4%6%8%10%12%14%FLIGHT HOURS FOR AIRCRAFT DEPARTING EUROPE, MIDDLE EAST AND AFRICA(for calendar years)9877361,0691,1991,127Thousands of flight hours for all business jets20192020202120222023Short-term outlook As per the latest data available, global GDP growth is expected to fall short at 2.7% in 2023 and 2.3% in 2024(1). Market expectations are that central banks have stopped increasing interest rates in the short-term as inflation has begun to cool worldwide. Many policy makers have warned that more time will take to reach 2% inflation targets, as such economic conditions will continue to shift in anticipation to the first reductions in policy rates from the Federal Reserve and European Central Bank. If interest rates remain higher for longer this will likely continue to weigh down on expectations for global output. Conversely, an early interest rate cut would drive market expectation upwards. Nevertheless, continued geopolitical risks from the military conflicts in Ukraine and in the Middle East will likely continue to feed economic uncertainty. The U.S. labor market remained resilient despite significantly higher interest rates, increasing the likelihood of a “soft-landing” for the U.S. economy. While pre- owned inventory levels have risen in 2023, they are unlikely to reach pre-pandemic levels in the short-term. Higher levels of inventory could also put downward pressure on pricing favoring activity in the pre-owned market. This coupled to a strong and balanced aircraft backlog for the industry will continue to support moderate growth. Continued high levels of flight activity will sustain growth in aftermarket services and demand for aircraft from fleet operators. Industry revenues are expected to continue to grow driven by the increasing contribution of large aircraft in the overall industry delivery mix. (1) According to Oxford Economics Databank dated January 25, 2024. 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 In 2023, as a result of its expansion of the service center network that allows customers to “bring their jet home, wherever home is”, Bombardier won the prestigious Mercure Award in the category of "International Market Development - Large Companies". Its Singapore Service Centre won two awards: Top Asia-MRO (Airframe) and OEM Service Provider of the Year. Bombardier also hosted industry events this year, such as maintenance and operations conferences in Budapest, Hungary and in Wichita, U.S., the Safety Standdown and the new Flight Attendant Safety Standdown launched this year. Bombardier continued to roll-out its Certified Pre-owned Program where used aircraft are refurbished and sold again to customers with the promise of value. The program has continued to gain attention from the industry. These initiatives and recognitions throughout 2023 are consistent and a positive indication of Bombardier’s success in continuously improving its customers satisfaction. Through its expansions, Bombardier is ensuring consistent and reliable access to aftermarket services for current and future customers across the globe. 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. Market indicators INDICATOR INSTALLED BASE YEARLY TOTAL FLIGHT HOURS AVERAGE AGE OF FLEET CURRENT SITUATION STATUS The installed base for Bombardier business aircraft increased by approximately 0.9% (or by 2.4% and 6.8% for medium and large categories, respectively) to 5,104 aircraft in 2023 when compared to 2022(1). Based on our estimates, Bombardier business aircraft fleet total flight hours decreased by approximately 2% in 2023 compared to 2022 but increased by about 18% compared to 2019(2). Yearly average flight hours per aircraft also decreased by about 4% in 2023 compared to 2022. Typically, aircraft direct maintenance costs increase as an aircraft age. 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 increased by 1.1% in 2023(1) compared to 2022. ► ▲ ▲ ▲ ►▼ Identifies a favorable, 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). (2) Based on yearly data from internal Bombardier FRACAS database, as of January 8, 2024. 26 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Short-term outlook Flight activity in 2023 is above pre-pandemic levels and roughly similar to activity seen in 2022. Strong flight activity will likely drive demand for aftermarket services and from fleet operators in the short-term. With the expansions and new builds accomplished in 2022 and the continued development of our customer centric approach throughout 2023, we will undoubtedly continue to improve access and reach of our services to our customers across the globe. We will also continue to actively evaluate strategic locations for additional expansions in order to continue the growth of the aftermarket service market share, move closer to customers to further improve response times and build stronger relationships around the globe. 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 continue to dominate in terms of market size, the business aircraft fleet growth in non-traditional markets should create new opportunities for aftermarket services. BOMBARDIER INC. / 2023 FINANCIAL REPORT 27 CONSOLIDATED RESULTS OF OPERATIONS Results of operations Revenues Business aircraft Manufacturing and Other(1) Services(2) Others(3) Total revenues Cost of sales Gross margin SG&A R&D Other expense (income)(4) Restructuring charges(4)(5) Loss (gain) related to disposal of business(4)(6) Impairment and program termination(4)(7) EBIT Financing expense Financing income EBT Income taxes expense (recovery) Net income (loss) from continuing operations Net income (loss) from discontinued operations(8) Net income (loss) EPS (in dollars) Basic Diluted EPS from continuing operations (in dollars) Basic Diluted As a percentage of total revenues Gross margin(9) EBIT margin(9) Fourth quarters ended December 31 2022 2023 Fiscal years ended December 31 2022 2023 $ $ $ $ $ $ $ 2,571 482 9 3,062 2,480 582 137 158 12 1 (19) 82 211 159 (170) 222 7 215 — 215 2.15 2.11 2.15 2.11 $ 2,226 416 13 2,655 2,195 460 122 127 (1) 7 2 (4) 207 146 (59) 120 (121) 241 — 241 $ $ $ 6,261 1,748 37 8,046 6,415 1,631 447 373 15 1 (81) 83 793 594 (202) 401 (89) 490 (45) 445 $ $ $ $ $ $ 2.48 2.40 2.48 2.40 $ $ $ $ 4.34 4.24 4.81 4.70 $ $ $ $ $ $ $ 5,345 1,508 60 6,913 5,656 1,257 395 360 (13) 8 (22) (9) 538 817 (33) (246) (118) (128) (20) (148) (1.88) (1.88) (1.67) (1.67) 19.0 % 6.9 % 17.3 % 7.8 % 20.3 % 9.9 % 18.2 % 7.8 % (1) Includes revenues from sale of new aircraft, specialized aircraft solutions and pre-owned aircraft. (2) Includes revenues from aftermarket services including parts, Smart Services, service centers, training and technical publications. (3) Includes revenues from sale of components related to commercial aircraft programs. (4) Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination, and restructuring charges, including comparative figures. See Note 37 - Reclassification, to our Consolidated financial statements, for more information. (5) Includes severance charges or related reversal as well as curtailment losses (gains), if any. (6) Includes changes in provisions related to past divestitures. (7) Includes impairment or reversal of impairment of PP&E and intangible assets, as well as provisions related to program termination or their related reversal, if any. For fiscal year 2023, includes impairment of $85 million related to an aircraft product upgrade, started in 2018 and paused in 2020. (8) Discontinued operations are related to the sale of the Transportation business. The expenses recorded in discontinued operations for fiscal years 2023 and 2022 principally relate to change in estimates of a provision for professional fees. (9) Supplementary financial measure. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics. 28 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Computation of diluted EPS(1) Net income (loss) 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) Only from continuing operations. $ $ $ Fourth quarters ended December 31 2023 215 (8) $ 2022 241 (7) $ Fiscal years ended December 31 2023 490 (31) $ 2022 (128) (29) 207 $ 234 $ 459 $ (157) 98,409 2.11 97,423 2.40 $ 97,721 4.70 $ 94,496 (1.67) $ Other non-GAAP financial measures, non-GAAP financial ratios and closest IFRS measures Fourth quarters ended December 31 Fiscal years ended December 31 $ $ EBIT Adjusted EBIT(1)(2) Adjusted EBIT margin(3) Adjusted EBITDA(1) Adjusted EBITDA margin(3) Net income (loss) from continuing operations Adjusted net income(1)(2)(4) Diluted EPS from continuing operations (in dollars) Adjusted EPS(2)(3)(4) (in dollars) (1) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2023 793 799 9.9 % 1,230 15.3 % 490 416 4.70 3.94 2023 211 278 9.1 % 458 15.0 % 215 143 2.11 1.37 2022 207 212 8.0 % 352 13.3 % 241 212 2.40 2.10 2022 538 515 7.4 % 930 13.5 % (128) 104 (1.67) 0.77 framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (2) Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination, and restructuring charges, including comparative figures. See Note 37 - Reclassification, to our Consolidated financial statements, for more information. (3) Non-GAAP financial ratio. A non-GAAP financial ratio is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non- GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (4) Only from continuing operations. Revenues Analysis of consolidated results Revenues for the three-month period ended December 31, 2023 increased by $407 million year-over-year mainly due to: • Manufacturing and other revenues increased by $345 million year-over-year mainly due to higher aircraft • deliveries and higher selling prices; and Services revenues increased by $66 million year-over-year mainly due to increased volume and continuing deployment of the expansion strategy. Revenues for the fiscal year ended December 31, 2023 increased by $1,133 million year-over-year mainly due to: • Manufacturing and other revenues increased by $916 million year-over-year mainly due to higher aircraft • deliveries and higher selling prices; and Services revenues increased by $240 million year-over-year mainly due to increased volume and continuing deployment of the expansion strategy. BOMBARDIER INC. / 2023 FINANCIAL REPORT 29 Gross margin(1) Gross margin(1) as a percentage of revenues for the fourth quarter and fiscal year ended December 31, 2023 increased year-over-year by 1.7 percentage points and 2.1 percentage points respectively, mainly as a result of incremental Global 7500 margins as well as favorable margin performance across the majority of other aircraft, and higher contributions from aftermarket. EBIT margin(1) and adjusted EBIT margin(2) Adjusted EBIT margin(2) for the fourth quarter increased by 1.1 percentage points, mainly as a result of incremental Global 7500 margins as well as favorable margin performance on certain aircraft; and higher contributions from aftermarket. • • Partially offset by: • higher R&D expense which includes amortization of aerospace program tooling and higher SG&A expenses. EBIT margin(1) decreased by 0.9 percentage point compared to the same period last year. EBIT includes certain amounts not included in adjusted EBIT(3) such as statement of income line items; gain related to disposal of business, impairment and program termination, restructuring charges and pension related items in other (income) expense(4). Adjusted EBIT margin(2) for the fiscal year 2023 increased by 2.5 percentage points, mainly as a result of: incremental Global 7500 margins as well as favorable margin performance on certain aircraft; and higher contributions from aftermarket. • • Partially offset by: • higher SG&A expenses and system implementation related costs. EBIT margin(1) increased by 2.1 percentage points compared to the same period last year. EBIT includes certain amounts not included in adjusted EBIT(3) such as statement of income line items; gain related to disposal of business, impairment and program termination, restructuring charges and pension related items in other (income) expense(4). (1) Supplementary financial measure. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics. (2) Non-GAAP financial ratio. A non-GAAP financial ratio is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non- GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (3) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (4) Includes the loss related to the purchase of pension annuities. See Note 21 - Retirement benefits, to our Consolidated financial statements, for more information. 30 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Net financing (income) expense Net financing (income) expense amounted to $(11) million and $392 million, respectively, for the fourth quarter and fiscal year ended December 31, 2023, compared to $87 million and $784 million for the corresponding periods last fiscal year. The $98 million decrease for the fourth quarter is mainly due to: • net change on certain financial instruments classified as FVTP&L, mainly due to a non-cash change in fair value of embedded derivatives related to call options on long-term debt ($118 million). Partially offset by: • losses related to the full repayment and/or partial repayment of certain Senior Notes ($13 million). The $392 million decrease for the fiscal year is mainly due to: • net change on certain financial instruments classified as FVTP&L, mainly due to a non-cash change in fair value of embedded derivatives related to call options on long-term debt ($388 million); lower interest on long-term debt, after the effect of hedges ($68 million); and higher interest earned on cash and cash equivalents ($17 million). losses related to the full repayment and/or partial repayment of certain Senior Notes ($55 million). • • Partially offset by: • Income taxes The effective income tax rate for the fourth quarter and fiscal year ended December 31, 2023 is lower than the statutory income tax rate in Canada of 26.5%. In the three-month period, the effective income tax rate is due to the positive impact of the permanent differences and the net recognition of previously unrecognized tax losses and temporary differences. For the fiscal year ended December 31, 2023, the effective income tax recovery rate is due to the positive impact of the net recognition of previously unrecognized tax losses and temporary differences and the permanent differences partially offset by the negative impact of the write-down of deferred income tax assets. The effective income tax rate for the fourth quarter and fiscal year ended December 31, 2022 is lower than the statutory income tax rate in Canada of 26.5%. In the three-month period and for the fiscal year ended December 31, 2022, the effective income tax rate is due to the positive impact of the net recognition of previously unrecognized tax losses and temporary differences partially offset by the negative impact of the permanent differences and the write-down of deferred income tax assets. Investment in product development Product development Additions to aerospace program tooling(1) R&D expense(2) As a percentage of revenues Fourth quarters ended December 31 Fiscal years ended December 31 $ $ 2023 33 9 42 1.4 % $ $ 2022 34 9 43 1.6 % 2023 $ 113 43 $ 156 $ 2022 92 31 $ 123 1.9 % 1.8 % (1) Represents the net amount capitalized in aerospace program tooling, as well as the amount that was paid to suppliers based on reception of parts for acquired development costs carried out by them. (2) Excludes amortization of aerospace program tooling of $149 million and $330 million, respectively, for the fourth quarter and fiscal year ended December 31, 2023 ($118 million and $329 million, respectively, for the fourth quarter and fiscal year ended December 31, 2022), as the related investments are already included in aerospace program tooling. BOMBARDIER INC. / 2023 FINANCIAL REPORT 31 The testing and certification of the company’s next flagship, the Global 8000, remained on track in 2023 for EIS in 2025(1). Announced in 2022, the Global 8000 aircraft will have a range of 8,000 nautical mile and, with a top speed of Mach 0.94(2), the fastest in the industry. Bombardier also celebrated this year the delivery of its 150th Global 7500 aircraft. The industry-defining business jet has surpassed 100,000 flight hours, underscoring its status as business aviation’s most reliable and productive business jet. The aircraft has also flown 20 speed record missions in 2023. Bombardier continued to prove its industry leadership in environmental accountability and sustainability. In May, the company published the Environmental Product Declarations® (EPD) for its Global 5500 and Global 6500 aircraft. They join the Global 7500 and Challenger 3500 aircraft as the world’s only business jets with a published EPD®. The company also continued industry-defining work on its EcoJet research platform, a test vehicle designed as a Blended Wing Body (BWB) aircraft. In 2023, Bombardier revealed it has completed the second phase of testing on a larger, 18-foot-wide test vehicle, gaining important new insights and data that allow Bombardier’s engineering team to perfect their knowledge of new aviation control laws that are adapted to the radically different BWB geometry, bound to be applied to more sustainable, future business aircraft. Throughout 2023, Bombardier continued to innovate and upgrade the systems and services it provides for its in-service aircraft. In April, Transport Canada, European Union Aviation Safety Agency and Federal Aviation Administration issued approvals for the installation of Bombardier’s Smart Link Plus system to all in-service Challenger 300, Challenger 350, Challenger 3500, Challenger 605 and Challenger 650, as well as Global 5000, Global 6000, Global Express and Global Express XRS aircraft. The Smart Link Plus connected aircraft system is an advanced health monitoring system that collects crucial aircraft data in-flight and enables flight and maintenance crews to proactively troubleshoot essential in-flight alerts, increasing an aircraft’s operational efficiency. It was first introduced on the Bombardier flagship Global 7500 aircraft, and a strong majority of Global 7500 customers are now enrolled in the program. The Smart Link Plus system will also be installed on the Global 8000 aircraft as a standard feature. With the introduction of Smart Services Elite announced in October, Bombardier expanded its industry-defining cost-per-flight-hour offerings. Smart Services Elite is the only cost-per-flight-hour program that covers cabin system components, landing gear overhaul, scheduled and unscheduled maintenance, and Mobile Response Team support. More than 1,600 Bombardier aircraft are currently enrolled in Smart Services programs, representing more than 10 million flight hours – and counting. In May, Bombardier launched Iridium Certus® services on its Challenger 3500 jets, allowing its customers to benefit from a truly global, pole-to-pole baseline connectivity with higher data speed and optimal efficiency for a seamless in-flight experience. Bombardier also introduced its new Advanced Avionics Upgrade (AAU) for the Bombardier Vision flight deck, a new avionics software and hardware enhancement that improves situational awareness and offers advanced visualization features. Powered by Collins Aerospace and available for in-service Global 5000, Global 5500, Global 6000 and Global 6500 aircraft equipped with the Bombardier Vision flight deck, the AAU is designed to take in-service Global aircraft to the next level by providing avionics features currently available on in-production Global 5500 and Global 6500 aircraft. (1) See the forward-looking statements disclaimer in the Overview section of this MD&A. (2) Under certain operating conditions, when compared to aircraft currently in service. 32 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Aircraft deliveries and order backlog Aircraft deliveries (in units) Business aircraft Light(1) Medium Large (1) Bombardier delivered its last Learjet aircraft in the first quarter of 2022. Order backlog (in billions of dollars) Order backlog(1) (1) Represents order backlog for both manufacturing and services. Fourth quarters ended December 31 2022 2023 Fiscal years ended December 31 2022 2023 — 24 32 56 — 20 29 49 — 63 75 138 3 50 70 123 December 31, 2023 14.2 $ As at December 31, 2022 14.8 $ The order backlog decreased since the end of 2022. We finished the year with a strong order backlog at $14.2 billion. Management continuously monitors backlog length and production rates to balance with sales activities, market demand and aircraft lead time. Total number of employees Workforce December 31, 2023 Regular(1) 17,100 1,000 Contractual 18,100 47 % Percentage of regular employees covered by collective agreements (1) Including inactive employees as at December 31, 2023 and as at December 31, 2022. As at December 31, 2022 15,200 700 15,900 47 % The workforce as at December 31, 2023 increased by 2,200 employees, or 14%, when compared to the previous year. The increase is mainly in support of our production ramp-up, aftermarket growth and the acquisition of Latécoère’s Querétaro based Electrical Wiring Interconnection System (EWIS) during 2023. Our incentive-based compensation plan for employees across our sites rewards the collective efforts of our employees in achieving our objectives using performance indicator targets. A total of approximately 10,400 employees worldwide, or 61% of regular employees, participate in the program. In 2023, as part of this program, incentive-based compensation is linked to the achievement of targeted results, based on adjusted EBITDA(1) and free cash flow(1). Approximately 65% of the workforce as of December 31, 2023, or 11,700 employees, are located in Canada. (1) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. BOMBARDIER INC. / 2023 FINANCIAL REPORT 33 CONSOLIDATED FINANCIAL POSITION The $134 million increase in assets for the fiscal year is mainly explained by: • a $446 million increase in inventories primarily due to an increase to support higher deliveries; a $303 million increase in cash and cash equivalents. See the Free cash flow and the variation in cash and cash equivalents from continuing operations tables for details; and a $161 million increase in PP&E mainly due to additions to the new Global aircraft manufacturing center at the Toronto Pearson Airport. • • Partially offset by: • a $334 million decrease in other financial assets(1) principally due to reduction in restricted cash and the sale of investments in securities, partially offset by net change in fair value of embedded derivatives related to call options on long-term debt; and a $307 million decrease in aerospace program tooling as a result of amortization. • • The $134 million increase in total liabilities and deficit for the year ended is mainly explained by a $358 million increase in equity(2) partially offset by a $224 million decrease in liabilities, due to the below: a $534 million increase in trade and other • payables mainly due to timing as well as production rate increase; and a $205 million increase in retirement benefit liability mainly due to remeasurement of defined benefits plans. Partially offset by: • a $373 million decrease in long-term debt(3) obligations due to the partial and full repayment of certain Senior Notes partially offset by issuance of long-term debt; and a $247 million decrease in other financial liabilities(1). • (1) For the purpose of the consolidated financial position, explanations included in this section do not include the back-to-back agreements the Corporation has with ACLP related to certain government refundable advances and has with MHI related to certain assets and liabilities. Refer to Note 17 – Other financial assets and Note 24 – Other financial liabilities in our consolidated financial statements for more information. (2) Refer to the consolidated statements of changes in equity in our consolidated financial statements for more information. (3) Refer to Note 26 – Long-term debt in our consolidated financial statements for more information. 34 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 CONSOLIDATED ASSETS(as at December 31; in millions of dollars)12,32412,4585,5855,9346,7396,524Current assetsNon-current assets20222023CONSOLIDATED LIABILITIES AND DEFICIT(as at December 31; in millions of dollars)12,32412,4585,4375,9386,8876,520Current liabilitiesNon-current liabilities and deficit20222023LIQUIDITY AND CAPITAL RESOURCES Free cash flow from continuing operations(1) Free cash flow(1) Fourth quarters ended December 31 Fiscal years ended December 31 Net income (loss) from continuing operations Non-cash items Amortization Impairment charges on intangible assets Deferred income taxes (recovery) Loss (gain) on disposals of PP&E and intangibles Share-based expense Loss (gain) on repayment of long-term debt Net change in non-cash balances Cash flows from operating activities - continuing operations Net additions to PP&E and intangible assets Free cash flow from continuing operations(1) $ 2023 215 2022 241 $ 2023 490 $ $ $ 180 70 (4) 1 8 16 254 740 (94) 646 $ 140 1 (121) 1 7 3 39 311 (142) 169 $ 431 73 (105) 1 24 54 (345) 623 (366) 257 $ 2022 (128) 415 3 (123) (1) 18 (1) 889 1,072 (337) 735 (1) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. Cash flows from operating activities - continuing operations The $429 million increase in cash flows from operating activities for the fourth quarter is mainly due to: • • a positive period-over-period variation in net change in non-cash balances ($215 million) (see explanations below); and higher net income before non-cash items ($214 million). The $449 million decrease in cash flows from operating activities for the fiscal year is mainly due to: • a negative period-over-period variation in net change in non-cash balances ($1,234 million) (see explanations below). Partially offset by: • higher net income before non-cash items ($785 million). Net change in non-cash balances For the fourth quarter ended December 31, 2023, the $254 million inflow is mainly due to: a decrease in inventories mainly due to higher aircraft deliveries. a decrease in contract liabilities mainly due to aircraft deliveries; and an increase in net other financial assets and liabilities mainly due to a non cash change in fair value of embedded derivatives related to call options on long term debt. For the fourth quarter ended December 31, 2022, the $39 million inflow was mainly due to: a decrease in inventories mainly due to higher aircraft deliveries. a decrease in contract liabilities mainly due to aircraft deliveries; and a decrease in trade and other payables. • Partially offset by: • • • Partially offset by: • • BOMBARDIER INC. / 2023 FINANCIAL REPORT 35 For the fiscal year ended December 31, 2023, the $345 million outflow is mainly due to: • • an increase in inventories mainly to support higher deliveries; and a change in net other financial assets and liabilities partly due to residual value guarantee payments related to past business divestitures. Partially offset by: • an increase in trade and other payables mainly due to timing as well as production rate increase. For the fiscal year ended December 31, 2022, the $889 million inflow was mainly due to: • • • an increase in contract liabilities mainly due to customer progress payments as a result of order intake; a decrease in other financial assets mainly due to a non-cash change in fair value of embedded derivatives related to call options on long-term debt; and an increase in trade and other payables. Partially offset by: • • an increase in inventories mainly due to increase of production of aircraft; and a decrease in provisions. Net additions to PP&E and intangible assets(1) Additions to PP&E and intangible assets(1) Proceeds from disposals of PP&E and intangible assets(1) Net additions to PP&E and intangible assets(1) $ $ (1) Only from continuing operations. Fourth quarter ended December 31 2022 (144) 2023 (94) $ $ Fiscal years ended December 31 2022 (355) 2023 (366) $ — 2 — 18 (94) $ (142) $ (366) $ (337) For the fourth quarter ended December 31, 2023, net additions to PP&E and intangible assets decreased by $48 million. For the fiscal year ended December 31, 2023, net additions to PP&E and intangible assets were higher than 2022 by $29 million, principally as a result of additions to the new Toronto Pearson Airport manufacturing facility. 36 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Available liquidity(1) We continuously monitor our level of liquidity, including cash and cash equivalents and expected cash flows from operations, to meet expected requirements, including working capital needs, the support of product development initiatives and to ensure financial flexibility. In evaluating our liquidity requirements, we take into consideration historic volatility and seasonal needs, the maturity profile of long-term debt, the funding of product development programs, the level of customer advances, working capital requirements, the economic environment and access to capital markets. We use scenario analyses to evaluate cash flow projections. Variation in cash and cash equivalents from continuing operations Balance at the beginning of period/fiscal year Free cash flow from continuing operations(1) Changes to restricted cash(2) Sale of investments in securities Net proceeds from issuance of long-term debt Repayments of long-term debt Payment of lease liabilities Dividends paid - Preferred shares Repurchase of Class B shares Issuance of Class B shares Purchase of Class B shares held in trust under the PSU and RSU plans Effect of exchange rates on cash and cash equivalents Other Balance at the end of period/fiscal year Available liquidity and adjusted available liquidity(1) $ $ Fourth quarters ended December 31 2022 1,345 169 — — — (209) (5) (5) — 8 2023 987 646 (2) 3 739 (740) (11) (5) — 2 (14) — (11) 1,594 $ — 1 (13) 1,291 $ Cash and cash equivalents Undrawn amounts under available revolving credit facility(3) Available liquidity Certain restricted cash supporting various bank guarantees Adjusted available liquidity(1) $ $ $ December 31, 2023 1,594 251 1,845 — 1,845 $ Fiscal years ended December 31 2022 1,675 735 43 — — (1,058) (24) (20) (2) 10 2023 1,291 257 390 133 1,478 (1,903) (36) (22) (4) 69 (20) — (39) 1,594 $ (38) 1 (31) 1,291 As at December 31, 2022 1,291 208 1,499 391 1,890 $ $ $ $ $ As at December 31, 2023, the Corporation’s available liquidity(1) remains strong at approximately $1.8 billion, which includes cash and cash equivalents of $1.6 billion and $251 million under a committed secured revolving credit facility. This facility of $300 million which matures in 2027 is available for cash drawings for the ongoing working capital needs of the Corporation and for issuance of performance letters of credit. This facility was undrawn as at December 31, 2023 and the availability as at such date was $251 million based on the collateral, which may vary from time to time. On January 29, 2023, the two bank guarantees, in an aggregate amount of €350 million, which were issued in connection with the sale of Transportation to Alstom, expired without being drawn. Consequently, part of the restricted cash, namely an amount of approximately $400 million, which collateralized such bank guarantees, was released to the Corporation. (1) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (2) Includes cash collateral supporting various bank guarantees. (3) Based on collateral. BOMBARDIER INC. / 2023 FINANCIAL REPORT 37 Future liquidity requirements Our business operations require capital to develop industry-leading products and to seize strategic opportunities to increase competitiveness and execute growth strategies. On an on-going basis, we manage our liabilities by taking into consideration expected free cash flow, debt repayments and other material cash outlays expected to occur in the future. We take advantage of favorable capital market conditions when they materialize to extend debt maturity, reduce cost of funds and increase diversity of capital resources. Bombardier has reduced its long-term debt by approximately $4.5 billion since December 31, 2020 and has successfully repaid and refinanced its near term debt maturities, creating a runway to focus on its operations and stabilizing the Corporation’s need for liquidity. During the year ended December, 31 2023, the Corporation repaid certain Senior Notes using its cash and cash equivalents as follows: Repayments during the year Repayment quarter First quarter Fourth quarter Due date of Senior Notes 2024 and 2025 2025, 2026 and 2027 (1) Represents the notional amount of the long-term debt repaid during the year. Amount(1) $ $ $ 1,155 738 1,893 In January 2023, the Corporation completed the closing of its offering of $750 million aggregate principal amount of Senior Notes due 2029. The Senior Notes carry a coupon of 7.50% per annum and were sold at par. The Corporation used the net proceeds together with its cash and cash equivalents to finance repayment of the following Senior Notes. In February 2023, the Corporation completed the full repayment of Senior Notes due 2024 for an aggregate amount of $396 million, and the partial repayment of Senior Notes due 2025 for an aggregate amount of $259 million. In March 2023, the Corporation completed the partial repayment of Senior Notes due 2025 for an aggregate amount of $500 million. In November 2023, the Corporation completed the closing of its offering of $750 million aggregate principal amount of Senior Notes due 2030. The Senior Notes carry a coupon of 8.750% per annum and were sold at par. The Corporation used the net proceeds to finance the partial repayment of $199 million of Senior Notes due 2026, $159 million of Senior Notes due 2027 and in December 2023, the Corporation completed the full repayment of Senior Notes due 2025 for an aggregate amount of $380 million. The weighted-average long-term debt maturity was 4.6 years as at December 31, 2023. See Note 26 – Long-term debt, to the Consolidated financial statements, for more details. * Excludes other long-term debt amounting to $18 million as at December 31, 2023. See Note 26 – Long-term debt, to the Consolidated financial statements, for more information. 38 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 DEBT MATURITY PROFILE* (NOTIONAL AMOUNT)(as at December 31, 2023; in millions of dollars)1,1131,7327507507505102024-2025202620272028202920302031-20332034 We believe our available liquidity(1) of $1.8 billion is sufficient to execute our plan in the short-term. We currently anticipate that these resources will enable the development and upgrade of products and investments in PP&E 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(2). The Corporation intends to continue to opportunistically refinance or deploy excess liquidity towards debt pay down and continues to evaluate the most efficient debt reduction strategies, which for example could include redemptions, tenders or open market repurchases. The amounts involved may be material. (1) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (2) See the forward-looking statements disclaimer in the Overview section of this MD&A. Expected timing of future liquidity requirements(1) Long-term debt(1) Interest payments Purchase obligations(2) Trade and other payables Other financial liabilities(3) Derivative financial liabilities Total 5,625 1,968 5,029 1,820 795 8 15,245 $ $ $ Less than 1 year — 422 3,708 1,820 85 8 6,043 $ December 31, 2023 1 to 3 years 3 to 5 years Thereafter $ $ 1,132 805 1,264 — 106 — 3,307 $ $ 2,483 410 57 — 148 — 3,098 $ $ 2,010 331 — — 456 — 2,797 (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 carrying amount of other financial liabilities excludes derivative financial instruments, lease liabilities, and credit and residual value guarantees payable related to MHI. The table above presents the expected timing of contractual liquidity requirements. 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. 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. The Corporation leases buildings, equipment and land. The maturity analysis of undiscounted lease liabilities, was as follows: Within 1 year Between 1 to 5 years More than 5 years As at December 31, 2023 65 199 722 986 $ $ BOMBARDIER INC. / 2023 FINANCIAL REPORT 39 In April 2023, Moody’s Investors Service, Inc. upgraded Bombardier’s issuer rating from B3 to B2. In May 2023, S&P Global Ratings upgraded Bombardier’s issuer rating from B- to B. Creditworthiness Credit Ratings Moody’s Investors Service, Inc. S&P Global Ratings Bombardier Inc.’s issuer rating December 31, 2023 B2 B Over the long-term, the Corporation believes that it will be in a good position to continue improving its credit ratings and thereby approach a credit profile nearing investment-grade as it expects to continue to reduce debt while delivering positive free cash flow(1) generation and improved profitability(2). (1) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (2) See the forward-looking statements disclaimer in the Overview section of this MD&A. 40 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 CAPITAL STRUCTURE The Corporation analyzes its capital structure using established metrics, which are based on a broad economic view of the Corporation, in order to assess the creditworthiness of the Corporation. The Corporation has emphasized its plan to make deleveraging one of its key priorities and will execute on its plan through a phased approach. As the Corporation progressively reshapes its business and reaps the benefit from its various initiatives, it aims to lower adjusted net debt to adjusted EBITDA ratio(1) to approximately 2x - 2.5x by 2025(2). The Corporation’s objective is to achieve this by continuing to grow its adjusted EBITDA(3) towards its 2025 objective of greater than $1.625 billion and allocate excess available liquidity towards debt repayment(2). The Corporation aims at maintaining an adequate debt maturity runway by opportunistically refinancing or deploying excess liquidity towards debt pay down thereby building manageable and flexible debt maturity stacks while focusing on reducing its interest expense. (1) Non-GAAP financial ratio. A non-GAAP financial ratio is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non- GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (2) See the forward-looking statements disclaimer in the Overview section of this MD&A. (3) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. Global metrics – The following global metrics do not represent the ratios required for any covenants. Interest paid on long-term debt (1) Long-term debt Less: Cash and cash equivalents Certain restricted cash supporting various bank guarantees Adjusted net debt(2) EBIT Amortization Restructuring charges(3)(4) Gain related to disposal of business(3)(5) Impairment and program termination(3)(6) Pension related items(3)(7) Adjusted EBITDA(2) Adjusted net debt to adjusted EBITDA ratio(8) $ $ $ $ $ 2023 425 $ 5,607 $ 1,594 — 4,013 $ 793 $ 431 1 (81) 83 3 1,230 $ 3.3 2022 492 5,980 1,291 391 4,298 538 415 8 (22) (9) — 930 4.6 (1) Supplementary financial measure. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics. (2) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (3) Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination, and restructuring charges, including comparative figures. See Note 37 - Reclassification, to our Consolidated financial statements, for more information. (4) Includes severance charges or related reversal as well as curtailment losses (gains), if any. (5) Includes changes in provisions related to past divestitures. (6) Includes impairment or reversal of impairment of PP&E and intangible assets, as well as provisions related to program termination or their related reversal, if any. For fiscal year 2023, includes impairment of $85 million related to an aircraft product upgrade, started in 2018 and paused in 2020. (7) Includes the loss related to the purchase of pension annuities. See Note 21 - Retirement benefits, to our Consolidated financial statements, for more information. (8) Non-GAAP financial ratio. A non-GAAP financial ratio is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non- GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. BOMBARDIER INC. / 2023 FINANCIAL REPORT 41 Bombardier continues to evaluate various options to address other debt maturities in an opportunistic manner and to improve its capital structure and credit quality so as to support its operations and the future development of its business. Over the longer term, the Corporation’s capital allocation strategy will focus on deploying, in a disciplined manner, the excess cash generated from the business towards investments in the Corporation’s products and services, and to additional debt reduction. In order to adjust its capital structure, the Corporation may opportunistically 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. In addition, the Corporation separately monitors its net retirement benefit liability which amounted to $0.7 billion as at December 31, 2023 ($0.4 billion as at December 31, 2022). The measurement of this liability is dependent on numerous key long-term financial and actuarial 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 such as buying out annuities on behalf of pensioners. Refer to Note 21 – Retirement benefits, to our Consolidated financial statements, for more details. 42 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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). Employees who are members of a DB or hybrid plan closed to new members continue to accrue service in their original plan. Variation in net retirement benefit liability(1) Balance as at December 31, 2022 Changes in discount rates and other financial assumptions Employer contributions Changes in foreign exchange rates Actuarial gains on pension plan assets Current service cost Accretion on net retirement benefit obligations Settlement(3) Other Balance as at December 31, 2023 $ $ 418 (2) 325 (81) 9 (151) 58 25 3 54 660 (2) (1) Supplementary financial measure. Refer to the Non-GAAP and other financial measures section for definitions of these metrics. (2) Includes retirement benefit assets of $143 million as at December 31, 2023 ($180 million as at December 31, 2022). (3) Includes the loss related to the purchase of pension annuities. See note 21 – Retirement benefits to our Consolidated financial statements for more information. Evolution of weighted-average discount rate Canada U.S. 2023 4.60% 5.10% 2022 5.30% 5.40% 2021 3.20% 2.90% 2020 2.70% 2.60% 2019 3.19% 3.32% 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 2023, the actual gain on plan assets were $151 million and the net actuarial loss recognized in OCI was $217 million which is mainly due to changes in discount rates. Evolution of funding ratio of funded plans Funded 2023 89% 2022 94% 2021 87% 2020 78% 2019(1) 86% (1) Includes Transportation. BOMBARDIER INC. / 2023 FINANCIAL REPORT 43 Net retirement benefit liability Funded(1) Unfunded Other Plans Total Net retirement benefit liability 2023 419 $ 83 158 660 $ 2022 205 $ 72 141 418 $ 2021(2) 646 $ 101 201 948 $ 2020(3) 1,176 $ 112 243 1,531 $ 2019 1,191 788 273 2,252 $ $ (1) Includes liability arising from minimum funding requirement and impact of asset ceiling test, if any. (2) Excludes net retirement benefit liability amounting to $414 million related to the aerostructures businesses reclassified as liabilities directly associated with assets held for sale. (3) Excludes net retirement benefit liability amounting to $1,136 million related to Transportation reclassified as liabilities directly associated with assets held for sale. Retirement benefit contribution 2024(1) (Forecast) 2023 2022 2021 2020(2) 2019(2) DB DC Other Total retirement benefit contribution $ $ 114 $ 39 10 163 $ 71 $ 39 10 120 $ 83 $ 28 13 124 $ 108 $ 26 11 145 $ 112 $ 30 187 329 $ 147 34 191 372 (1) See the forward-looking statements disclaimer in the Overview section of this MD&A. (2) Includes DB other and Aerostructures and Transportation contributions. See Note 21 – Retirement benefits to our Consolidated financial statements for more information. The future level of contributions will be impacted by the evolution of market interest rates and the actual return on plan assets. 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, 2023, the asset allocation was as follows: • Canadian plans: 52% in fixed income securities, 41% in equity securities and cash, and 7% in real return assets securities; and • U.S. plans: 31% in fixed income securities, 56% in equity securities and cash, 3% in real return assets securities and 10% in others which include derivatives and private assets. In addition, a customized liability driven investment strategy (the “LDI strategy”) has been implemented for the U.S. plans to reduce the sensitivity of the plan financial position to variation of interest rates. The plan administrators have also established dynamic risk management strategies. As a result, asset allocation will likely become more conservative in the future as plan funding status and market conditions continue to improve and the plans become more mature. Under certain pension legislation, 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, 2019 and 2023, annuities were purchased for some pensioners, beneficiaries and deferred vested members of the Bombardier pension plans registered in Ontario. In 2022, annuities were purchased for some pensioners, beneficiaries and alternate payees of the 44 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Bombardier pension plan registered in the U.S. 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. The Corporation monitors the de-risking triggers on an ongoing basis to ensure timely and efficient implementation of these 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 by implementing LDI strategies. Inflation risk Inflation risk is the risk that benefits indexed to inflation increase as a result of changes in inflation rates. To manage this risk, the benefit indexation has been capped in certain plans and a portion of plan assets has been invested in real return asset securities. 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 limiting 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. / 2023 FINANCIAL REPORT 45 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 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 Retirement benefit cost Pension benefits Other benefits $ $ $ $ $ $ $ $ $ $ $ $ 79 39 118 71 8 39 100 18 $ $ 9 — 9 n/a 9 n/a 2 7 Pension benefits 114 28 142 $ $ $ Other benefits 9 — 9 $ $ $ $ $ $ $ $ 110 4 28 $ 117 25 $ $ n/a 9 n/a 3 6 2023 Total 88 39 127 71 17 39 102 25 2022 Total 123 28 151 110 13 28 120 31 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 46 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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 2024 (Forecast) Total(1) (9) — 1 $ $ $ (1) Net retirement benefit liability as at December 31, 2023 Total (137) 1 13 $ $ $ A one year increase in life expectancy for all DB plan beneficiaries would impact plans in major countries as follows: Increase Canada U.S. Retirement benefit cost for fiscal year 2024 (Forecast) 5 1 $ $ (1) Net retirement benefit liability as at December 31, 2023 $ $ 81 18 Details regarding assumptions used are provided in Note 21 – Retirement benefits to our Consolidated financial statements. (1) See the forward-looking statements disclaimer in the Overview section of this MD&A. BOMBARDIER INC. / 2023 FINANCIAL REPORT 47 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 function 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 function 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 Internal Audit 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 this duty principally through the Audit 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. 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 48 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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 management to identify all actual and potential foreign currency exposures arising from their operations. This information is communicated to the central treasury function, which has the responsibility to execute hedging transactions in accordance with policy requirements. In addition, the central treasury function manages balance sheet exposures to foreign currency movements by matching asset and liability positions. This program consists mainly in matching long-term debt in a foreign currency with assets denominated in the same currency. Foreign exchange management Hedged exposures Hedging policy(1) Risk-mitigation strategies Forecast cash outflows denominated in a currency other than the functional currency of the entity incurring the cash flows, mainly in Canadian dollars. Interest cash outflows in currencies other than the U.S. dollar, i.e. the Canadian dollar. Hedge 85% of the identified exposures for the first three months, 75% for the next 15 months and, 50% for the following six months. Additionally, optional hedges can be placed for up to 50% of the exposures identified further in the future. 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. Use of foreign exchange derivatives contracts, mainly to sell U.S. dollars and buy Canadian dollars. Use of foreign exchange derivatives contracts, mainly to sell U.S. dollars and buy Canadian dollars. Balance sheet exposures. Hedge 100% of the identified exposures affecting the Corporation’s net income. Asset/liability management techniques as well as foreign exchange derivatives contracts. (1) Deviations from the policy are allowed, subject to pre-authorization and maximum pre-determined risk limits as well as market conditions. BOMBARDIER INC. / 2023 FINANCIAL REPORT 49 As at December 31, 2023, the hedged portion of our significant foreign currency denominated costs for the fiscal years ending December 31, 2024 and 2025 was as follows: For fiscal years Expected costs denominated in foreign currency (in billions of dollars) Hedged portion of expected costs denominated in foreign currency Weighted-average hedge rates – foreign currency/USD 2024 $2.3 77 % 0.7468 Canadian dollars 2025 $2.3 61 % 0.7419 Sensitivity analysis A U.S. one-percent change in the value of the Canadian dollar compared to the U.S. dollar would impact the expected costs for the year ending December 31, 2024 by approximately $18 million, before giving effect to forward foreign exchange contracts (approximately $4 million, after giving effect to such contracts). 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. 50 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 EVOLUTION OF FOREIGN EXCHANGE RATES(as at December 31)0.770.780.780.740.76CAD / USD20192020202120222023 Credit risk management Key risks Risk mitigation measures initiated by management Through normal treasury activities, we are exposed to credit risk through derivative financial instruments and investing instruments. We are exposed to credit risk through trade receivables arising from normal commercial activities. 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. Credit risks are arising from normal commercial activities. 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 behavior. 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. Exposure to 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. 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 favorable terms and conditions with respect to its bank facilities. The Corporation also routinely reviews the terms and conditions of its financing arrangements. 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. For more details, refer to Note 32 - Financial Risk Management, to our Consolidated financial statements. We continually monitor any financing opportunities to optimize our capital structure and maintain appropriate financial flexibility. Exposure to interest rate risk 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 derivative financial instruments. 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 at December 31, 2023, the impact on EBT would have been a negative adjustment of $83 million as at December 31, 2023. BOMBARDIER INC. / 2023 FINANCIAL REPORT 51 NON-GAAP AND OTHER FINANCIAL MEASURES This MD&A is based on reported earnings in accordance with IFRS and on the following non-GAAP and other financial measures: Non-GAAP and other financial measures Non-GAAP Financial Measures Adjusted EBIT EBIT excluding certain items which do not reflect the Corporations 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 restructuring charges, (gain) loss related to disposal of business, impairment and program termination, certain one-time pension related items included in other (income) expense such as (gain) loss on pension annuity purchases, and non-commercial legal claims. Adjusted EBITDA Adjusted EBIT plus amortization charges on PP&E and intangible assets. Adjusted net income (loss) Net income (loss) from continuing operations excluding restructuring charges, (gain) loss related to disposal of business, impairment and program termination, certain one-time pension related items included in other (income) expense such as (gain) loss on pension annuity purchases, non- commercial legal claims, certain net gains and losses arising from changes in measurement of provisions and of financial instruments carried at FVTP&L, accretion on net retirement benefit obligation, losses (gains) on repayment of long-term debt, changes in discount rates of provisions and the related tax impacts of these items. Free cash flow (usage) Cash flows from operating activities - continued operations less net additions to PP&E and intangible assets. Available liquidity Cash and cash equivalents, plus undrawn amounts under credit facilities. Adjusted liquidity Cash and cash equivalents, plus certain restricted cash supporting various bank guarantees. Adjusted available liquidity Adjusted net debt Cash and cash equivalents, plus certain restricted cash supporting various bank guarantees and undrawn amounts under credit facilities. Long-term debt less cash and cash equivalents less certain restricted cash supporting various bank guarantees. Non-GAAP Financial Ratios Adjusted EPS EPS calculated based on adjusted net income attributable to equity holders of Bombardier Inc., using the treasury stock method, giving effect to the exercise of all dilutive elements. Adjusted EBIT margin Adjusted EBIT, as a percentage of total revenues. Adjusted EBITDA margin Adjusted EBITDA, as a percentage of total revenues. Adjusted net debt to adjusted EBITDA ratio Adjusted net debt divided by adjusted EBITDA. Supplementary Financial Measures Interest paid on long- term debt 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. EBIT margin Gross margin percentage Net retirement benefit liability EBIT, as a percentage of total revenues. Gross margin, as a percentage of total revenues. Retirement benefit liability less retirement benefit assets. Non-GAAP and other financial measures are measures mainly derived from the consolidated financial statements but are not standardized financial measures under the financial reporting framework used to prepare our financial statements. Therefore, these might not be comparable to similar non-GAAP and other financial measures used by other issuers. The exclusion of certain items from non-GAAP or other financial measures does not imply that these items are necessarily non-recurring. 52 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Adjusted EBIT Adjusted EBIT is defined as the EBIT excluding certain items which do not reflect the Corporations 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 restructuring charges(1)(2), (gain) loss related to disposal of business(1)(3), impairment and program termination(1)(4), certain one-time pension related items included in other (income) expense such as (gain) loss on pension annuity purchases(1), and non-commercial legal claims(1). Management uses adjusted EBIT for purposes of evaluating underlying business performance. Management believes presentation of this non-GAAP operating earnings measure in addition to IFRS measures provides 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. For these reasons, a significant number of users of the MD&A analyze our results based on this financial measure. Management believes this measure helps users of the MD&A to better analyze results, enabling better comparability of our results from one period to another and with peers. Adjusted EBITDA Adjusted EBITDA is defined as the EBIT excluding restructuring charges(1)(2), (gain) loss related to disposal of business(1)(3), impairment and program termination(1)(4), certain one-time pension related items included in other (income) expense such as (gain) loss on pension annuity purchases(1), and non-commercial legal claims(1), amortization charges on PP&E and intangible assets. Management uses adjusted EBITDA for purposes of evaluating underlying business performance. Management believes this non-GAAP operating earnings measure in addition to IFRS measures provides 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, since it excludes the effects of items that are usually associated with investing or financing activities and 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 this financial measure. Management believes this measure helps users of the MD&A to better analyze results, enabling better comparability of our results from one period to another and with peers. Adjusted net income (loss) Adjusted net income (loss) is defined as the net income (loss) from continuing operations adjusted for certain specific items that are significant but are not, based on management’s judgment, reflective of the Corporation’s underlying operations. These include adjustments related to restructuring charges(1)(2), (gain) loss related to disposal of business(1)(3), impairment and program termination(1)(4), certain one-time pension related items included in other (income) expense such as (gain) loss on pension annuity purchases(1), non-commercial legal claims(1), certain net gains and losses arising from changes in measurement of provisions and of financial instruments carried at FVTP&L, accretion on net retirement benefit obligation, losses (gains) on repayment of long-term debt, changes in discount rates of provisions and the related tax impacts of these items. Management uses adjusted net income (loss) for purposes of evaluating underlying business performance. Management believes this non- GAAP earnings measure in addition to IFRS measures provides users of our Financial Report with enhanced understanding of our results and related trends and increase the transparency and clarity of the core results of our business. Adjusted net income (loss) excludes 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 this financial measure. Management believes this measure helps users of the MD&A to better analyze results, enabling better comparability of our results from one period to another and with peers. (1) Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination, and restructuring charges, including comparative figures. See Note 37 - Reclassification, to our Consolidated financial statements, for more information. (2) Includes severance charges or related reversal as well as curtailment losses (gains), if any. (3) Includes changes in provisions related to past divestitures. (4) Includes impairment or reversal of impairment of PP&E and intangible assets, as well as provisions related to program termination or their related reversal, if any. For fiscal year 2023, includes impairment of $85 million related to an aircraft product upgrade, started in 2018 and paused in 2020. BOMBARDIER INC. / 2023 FINANCIAL REPORT 53 Adjusted EPS Adjusted EPS is defined as the adjusted net income (loss) attributable to equity shareholders of Bombardier Inc.,divided by the weighted-average diluted number of common shares for the period. Management uses adjusted EPS for purposes of evaluating underlying business performance. Management believes this non-GAAP financial ratio in addition to IFRS measures provides 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 EPS excludes 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 this financial measure. Management believes this measure helps users of the MD&A to better analyze results, enabling better comparability of our results from one period to another and with peers. Adjusted EBIT margin Adjusted EBIT margin is defined as the adjusted EBIT expressed as a percentage of total revenues. Management uses adjusted EBIT margin for purposes of evaluating underlying business performance. Management believes this non-GAAP financial ratio in addition to IFRS measures provides users of our Financial Report with enhanced understanding of our results and related trends and increase the transparency and clarity of the core results of our business. Adjusted EBIT margin excludes 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 this financial measure. Management believes this measure helps users of the MD&A to better analyze results, enabling better comparability of our results from one period to another and with peers. Adjusted EBITDA margin Adjusted EBITDA margin is defined as the adjusted EBITDA expressed as a percentage of total revenues. Management uses adjusted EBITDA margin for purposes of evaluating underlying business performance. Management believes this non-GAAP financial ratio in addition to IFRS measures provides users of our Financial Report with enhanced understanding of our results and related trends and increase the transparency and clarity of the core results of our business. Adjusted EBITDA margin excludes 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 this financial measure. Management believes this measure helps users of the MD&A to better analyze results, enabling better comparability of our results from one period to another and with peers. Reconciliation of adjusted EBIT to EBIT and computation of adjusted EBIT margin(1) EBIT Restructuring charges(2)(3) Loss (gain) related to disposal of business(2)(4) Impairment and program termination(2)(5) Pension related items(2)(6) Adjusted EBIT Total revenues Adjusted EBIT margin $ $ Fourth quarters ended December 31 2022 207 7 2 (4) — $ 212 $ 2,655 2023 211 1 (19) 82 3 $ 278 $ 3,062 $ $ Fiscal years ended December 31 2022 538 8 (22) (9) — $ 515 $ 6,913 2023 793 1 (81) 83 3 $ 799 $ 8,046 9.1 % 8.0 % 9.9 % 7.4 % (1) Only from continuing operations. (2) Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination, and restructuring charges, including comparative figures. See Note 37 - Reclassification, to our Consolidated financial statements, for more information. (3) Includes severance charges or related reversal as well as curtailment losses (gains), if any. (4) Includes changes in provisions related to past divestitures. (5) Includes impairment or reversal of impairment of PP&E and intangible assets, as well as provisions related to program termination or their related reversal, if any. For fiscal year 2023, includes impairment of $85 million related to an aircraft product upgrade, started in 2018 and paused in 2020. (6) Includes the loss related to the purchase of pension annuities. See Note 21 - Retirement benefits, to our Consolidated financial statements, for more information. 54 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Reconciliation of adjusted EBITDA to EBIT and computation of adjusted EBITDA margin(1) EBIT Amortization Restructuring charges(2)(3) Loss (gain) related to disposal of business(2)(4) Impairment and program termination(2)(5) Pension related items(2)(6) Adjusted EBITDA Total revenues Adjusted EBITDA margin $ $ Fourth quarters ended December 31 2022 207 140 7 2 (4) — $ 352 $ 2,655 13.3 % 2023 211 180 1 (19) 82 3 $ 458 $ 3,062 15.0 % $ $ Fiscal years ended December 31 2022 538 415 8 (22) (9) — $ 930 $ 6,913 13.5 % 2023 793 431 1 (81) 83 3 $ 1,230 $ 8,046 15.3 % Reconciliation of adjusted net income to net income and computation of adjusted EPS(1) Net income from continuing operations Adjustments to EBIT related to: Restructuring charges(2)(3) Loss (gain) related to disposal of business(2)(4) Impairment and program termination(2)(5) Pension related items(2)(6) Adjustments to net financing expense related to: Net gain on certain financial instruments Accretion on net retirement benefit obligations Losses on repayment of long-term debt Changes in discount rates of provisions Tax impact of adjusting items Adjusted net income Preferred share dividends, including taxes Adjusted net income attributable to equity holders of Bombardier Inc. Weighted-average adjusted diluted number of common shares (in thousands) Adjusted EPS (in dollars) Fourth quarters ended December 31 2022 (per share) 2023 (per share) $ 215 $ 241 0.01 (0.19) 0.83 0.03 (1.65) 0.06 0.16 0.01 — 1 (19) 82 3 (162) 6 16 1 — 143 (8) 0.07 0.02 (0.04) — (0.45) 0.08 0.03 — (0.01) 7 2 (4) — (44) 8 3 — (1) 212 (7) $ 135 98,409 1.37 $ $ 205 97,423 2.10 $ (1) Only from continuing operations. (2) Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination, and restructuring charges, including comparative figures. See Note 37 - Reclassification, to our Consolidated financial statements, for more information. (3) Includes severance charges or related reversal as well as curtailment losses (gains), if any. (4) Includes changes in provisions related to past divestitures. (5) Includes impairment or reversal of impairment of PP&E and intangible assets, as well as provisions related to program termination or their related reversal, if any. For fiscal year 2023, includes impairment of $85 million related to an aircraft product upgrade, started in 2018 and paused in 2020. (6) Includes the loss related to the purchase of pension annuities. See Note 21 - Retirement benefits, to our Consolidated financial statements, for more information. BOMBARDIER INC. / 2023 FINANCIAL REPORT 55 Reconciliation of adjusted EPS to diluted EPS (in dollars)(1) Diluted EPS from continuing operations Impact of adjustment to EBIT related to: Restructuring charges(2)(3) Loss (gain) related to disposal of business(2)(4) Impairment and program termination(2)(5) Pension related items(2)(6) Adjustments to net financing expense related to: Net gain on certain financial instruments Accretion on net retirement benefit obligations Losses on repayment of long-term debt Changes in discount rates of provisions Tax impact of adjusting items Adjusted EPS Fourth quarters ended December 31 2022 2.40 2023 2.11 $ $ 0.01 (0.19) 0.83 0.03 (1.65) 0.06 0.16 0.01 — 1.37 $ 0.07 0.02 (0.04) — (0.45) 0.08 0.03 — (0.01) 2.10 $ Reconciliation of adjusted net income (loss) to net income (loss) and computation of adjusted EPS(1) Net income (loss) from continuing operations Adjustments to EBIT related to: Restructuring charges(2)(3) Gain related to disposal of business(2)(4) Impairment and program termination(2)(5) Pension related items(2)(6) Adjustments to net financing expense related to: Net loss (gain) on certain financial instruments Accretion on net retirement benefit obligations Losses (gains) on repayment of long-term debt Changes in discount rates of provisions Effect of dilution Tax impact of adjusting items Adjusted net income Preferred share dividends, including taxes Adjusted net income attributable to equity holders of Bombardier Inc. Weighted-average adjusted diluted number of common shares (in thousands) Adjusted EPS (in dollars) Fiscal years ended December 31 2022 2023 (per share) (per share) $ 490 $ (128) 0.01 (0.83) 0.85 0.03 (1.64) 0.26 0.55 0.01 — — 1 (81) 83 3 (160) 25 54 1 — — 416 (31) 0.08 (0.23) (0.09) — 2.34 0.32 (0.01) (0.02) 0.06 (0.01) 8 (22) (9) — 228 31 (1) (2) — (1) 104 (29) $ 385 97,721 3.94 $ $ 75 97,642 0.77 $ (1) Only from continuing operations. (2) Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination, and restructuring charges, including comparative figures. See Note 37 - Reclassification, to our Consolidated financial statements, for more information. (3) Includes severance charges or related reversal as well as curtailment losses (gains), if any. (4) Includes changes in provisions related to past divestitures. (5) Includes impairment or reversal of impairment of PP&E and intangible assets, as well as provisions related to program termination or their related reversal, if any. For fiscal year 2023, includes impairment of $85 million related to an aircraft product upgrade, started in 2018 and paused in 2020. (6) Includes the loss related to the purchase of pension annuities. See Note 21 - Retirement benefits, to our Consolidated financial statements, for more information. 56 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Reconciliation of adjusted EPS to diluted EPS (in dollars)(1) Diluted EPS from continuing operations Impact of adjustment to EBIT related to: Restructuring charges(2)(3) Gain related to disposal of business(2)(4) Impairment and program termination(2)(5) Pension related items(2)(6) Adjustments to net financing expense related to: Net loss (gain) on certain financial instruments Accretion on net retirement benefit obligations Losses (gains) on repayment of long-term debt Changes in discount rates of provisions Effect of dilution Tax impact of adjusting items Adjusted EPS Fiscal years ended December 31 2022 2023 (1.67) 4.70 $ $ 0.01 (0.83) 0.85 0.03 (1.64) 0.26 0.55 0.01 — — 3.94 $ 0.08 (0.23) (0.09) — 2.34 0.32 (0.01) (0.02) 0.06 (0.01) 0.77 $ (1) Only from continuing operations. (2) Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination, and restructuring charges, including comparative figures. See Note 37 - Reclassification, to our Consolidated financial statements, for more information. (3) Includes severance charges or related reversal as well as curtailment losses (gains), if any. (4) Includes changes in provisions related to past divestitures. (5) Includes impairment or reversal of impairment of PP&E and intangible assets, as well as provisions related to program termination or their related reversal, if any. For fiscal year 2023, includes impairment of $85 million related to an aircraft product upgrade, started in 2018 and paused in 2020. (6) Includes the loss related to the purchase of pension annuities. See Note 21 - Retirement benefits, to our Consolidated financial statements, for more information. Free cash flow (usage) Free cash flow (usage) is defined as cash flows from operating activities - continued operations 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 (usage) as a measure to assess both business performance and overall liquidity generation. Reconciliation of free cash flow to cash flows from operating activities(1) Cash flows from operating activities - continuing operations $ Net additions to PP&E and intangible assets Free cash flow from continuing operations $ Fourth quarters ended December 31 2022 311 (142) 169 2023 740 (94) 646 $ $ Fiscal years ended December 31 2022 $ 1,072 (337) 735 2023 623 (366) 257 $ $ $ (1) Only from continuing operations. BOMBARDIER INC. / 2023 FINANCIAL REPORT 57 Available liquidity This measure was previously referred to as available short-term capital resources from continuing operations. Available liquidity is defined as cash and cash equivalents plus undrawn amounts under credit facilities. Management believes that this non-GAAP financial measure provides investors with an important perspective on the Corporation’s ability to meet expected liquidity requirements, including the support of product development initiatives and to ensure financial flexibility. This measure does not have any standardized meaning prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies. Reconciliation of available liquidity to cash and cash equivalents As at Cash and cash equivalents Undrawn amounts under available revolving credit facility(1) Available liquidity $ $ December 31, 2023 1,594 251 1,845 December 31, 2022 1,291 208 1,499 $ $ Adjusted liquidity Adjusted liquidity is defined as cash and cash equivalents, plus certain restricted cash supporting various bank guarantees. Management believes that this non-GAAP financial measure is a useful measure because it includes items in its results that management believes is a better reflection of the Corporation’s liquidity. This measure does not have any standardized meaning prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies. Reconciliation of adjusted liquidity to cash and cash equivalents As at Cash and cash equivalents Certain restricted cash supporting various bank guarantees Adjusted liquidity $ $ December 31, 2023 1,594 — 1,594 December 31, 2022 1,291 391 1,682 $ $ Adjusted available liquidity Adjusted available liquidity is defined as cash and cash equivalents, plus certain restricted cash supporting various bank guarantees and undrawn amounts under credit facilities. Management believes that this non-GAAP financial measure is a useful measure because it includes items in its results that management believes is a better reflection of the Corporation’s liquidity. This measure does not have any standardized meaning prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies. Reconciliation of adjusted available liquidity to cash and cash equivalents As at Cash and cash equivalents Undrawn amounts under available revolving credit facility(1) Certain restricted cash supporting various bank guarantees Adjusted available liquidity $ $ December 31, 2023 1,594 251 — 1,845 December 31, 2022 1,291 208 391 1,890 $ $ (1) A committed secured revolving credit facility of $300 million which matures in 2027 and is available for cash drawings for the ongoing working capital needs of the Corporation and for issuance of performance letters of credit. This facility was undrawn as at December 31, 2023 and the availability as at such date was $251 million based on the collateral, which may vary from time to time. Adjusted net debt Adjusted net debt is defined as long-term debt less cash and cash equivalents less certain restricted cash supporting various bank guarantees. Management believes that this non-GAAP financial measure is a useful measure because it reflects the Corporations ability to service its debt and other long term obligations. This measure does not have any standardized meaning prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies. 58 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Adjusted net debt to adjusted EBITDA ratio Management uses adjusted net debt to adjusted EBITDA ratio as a useful credit measure for purposes of measuring the Corporation’s ability to service its debt and other long-term obligations. This non-GAAP financial ratio does not have any standardized meaning prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies. Reconciliation of adjusted net debt to long-term debt and computation of adjusted net debt to adjusted EBITDA ratio Long-term debt Less: Cash and cash equivalents Certain restricted cash supporting various bank guarantees Adjusted net debt Adjusted EBITDA Adjusted net debt to adjusted EBITDA ratio Fiscal years ended December 31 2022 2023 $ 5,980 $ 5,607 1,291 1,594 391 — $ 4,298 $ 4,013 930 $ 1,230 $ 4.6 3.3 BOMBARDIER INC. / 2023 FINANCIAL REPORT 59 OTHER Table of Contents OFF-BALANCE SHEET ARRANGEMENTS RISKS AND UNCERTAINTIES FINANCIAL INSTRUMENTS RELATED PARTY TRANSACTIONS CRITICAL JUDGMENTS AND ACCOUNTING ESTIMATES CONTROLS AND PROCEDURES 61 62 79 80 81 83 OTHER FOREIGN EXCHANGE RATES SHAREHOLDER INFORMATION SELECTED FINANCIAL INFORMATION QUARTERLY DATA (UNAUDITED) HISTORICAL FINANCIAL SUMMARY 84 85 86 87 88 89 60 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 OFF-BALANCE SHEET ARRANGEMENTS Credit and residual value guarantees For more details, refer to Note 36 – Commitments and contingencies, to the consolidated financial statements. Financing structures related to the sale of commercial aircraft For more details, refer to Note 35 – Unconsolidated structured entities, to the consolidated financial statements. BOMBARDIER INC. / 2023 FINANCIAL REPORT 61 RISKS AND UNCERTAINTIES We operate in an industry segment which presents 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 is the risk of potential loss due to the nature of our operations. Sources of operational risk include development of new business and awarding of new contracts, order backlog, development of new products and services, and the complexity of obtaining certification of products and services. Furthermore, our cash flows are subject to pressures based on seasonality and cyclicality, and our business is capital intensive, which require that we regularly incur significant capital expenditures and investment over multi-year periods prior to realizing cash flows. Other sources of operational risk include our ability to successfully implement our strategy, manufacturing and productivity enhancements and operational efficiencies, and actions of business partners, product performance warranty and casualty claim losses, the use of estimates and judgments in accounting, regulatory and legal conditions, environmental, health and safety issues, as well as dependence on a limited number of 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, our environmental, social and governance (“ESG”) strategy and disclosures, risks of impairments and asset write-downs, risk management, tax matters and adequacy of insurance coverage. Financing risk is the risk of potential loss due to the liquidity of our financial assets including counterparty credit risk, access to capital markets, having substantial debt and interest payments (and being able to properly manage those), restrictive debt covenants, obligations under retirement benefit plans, financing support provided for the benefit of certain customers and government support. Regulatory and legal risk is the risk of potential loss due to legal claims, lawsuits and investigations in connection with our business operations and contractual arrangements. It includes the risk of material losses which may be incurred following adverse judgements or findings against us, the risk of reputational harm which may put us at a disadvantage for future orders and the risk that certain litigation could materially adversely affect our business, financial results and cash flows. General economic risk is the risk of potential loss due to unfavourable economic conditions. These factors include, but are not limited to, unfavourable political conditions, potential economic slowdowns or recession, and declining business confidence, which can result in slowdowns to our business, and those of our suppliers, customers and other counterparties. Business environment risk is the risk of potential loss due to external risk factors. These factors may include the financial condition of the business aircraft customers, trade policy, as well as increased competition from other businesses including new entrants in market segments in which we compete. In addition, political instability, geopolitical tensions and force majeure events, such as acts of terrorism, global climate change, global health risks, or the outbreak of military conflict 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, or prohibitions or impediments to expanding our business in certain regions of the world. OPERATIONAL RISK FINANCING RISK REGULATORY AND LEGAL RISK GENERAL ECONOMIC RISK BUSINESS ENVIRONMENT RISK MARKET RISK Market risk is the risk of potential loss due to adverse movements in market factors including foreign currency fluctuations, changing interest rates, increases in commodity prices and inflation rate fluctuations. 62 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Business development Operational risk Our business is 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 capture growth. 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. In addition, fluctuating demand cycles are common in the industry in which we operate and can have a significant impact on the volume of new aircraft orders. Our estimates of future performance depend on, among other matters, whether and when we receive new orders. Our order backlog may not be indicative of future revenues Backlog represents management’s estimate of the aggregate amount of the revenues expected to be realized in the future. The termination, modification, delay, or suspension 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. Deployment and execution of initiatives related to cost reductions and working capital improvement The Corporation has indicated that it was focusing on certain priorities, including improve cash generation, reduce costs and drive performance. As with any large, company-wide initiatives, there are inherent risks in the timing of the deployment and in the planned value to be achieved. 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 business, 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 initiatives, including as regards debt management and costs reduction, or if such measures prove insufficient, could have a material adverse impact on our business activities, financial condition, profitability and outlook. Executing our manufacturing strategy and productivity enhancement initiatives One of the priorities of the strategic plan 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 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. BOMBARDIER INC. / 2023 FINANCIAL REPORT 63 Developing new products and services Changes resulting from global trends such as climate change, volatile fuel prices, the growth of developing markets, population growth and demographic factors influence customer demands. To remain competitive and meet customers’ needs, we are required to anticipate these changes and must continuously develop and design new products and services, improve existing products and services and invest in and develop new technologies. Introducing new products, services or technologies, or expanding existing service offerings, requires a significant commitment to R&D, capital and other investment, including maintaining a significant level of highly skilled employees. Furthermore, our investments in new products, services or technologies, or expanding existing service offerings, may or may not be successful. Our results may be impacted if we invest in products or services 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 certification 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 or services we offer are not accepted by the market. Certification 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. Cash flows and capital expenditures Our business is cyclical and highly capital intensive due to its nature. In the ordinary course of our business, the structure and duration of our product development programs require us to invest significantly in engineering, development and production for many years before deliveries are made and the product begins to generate cash flow. In addition, we are regularly required to incur capital expenditures in order to, among other matters, maintain equipment, increase operating efficiency, develop and design new products, improve existing products and services, invest in and develop new technologies and maintain a significant level of highly skilled employees. Our ability to negotiate and collect customer advances and progress payments is therefore an important element of our cash flow and working capital management. Discrepancies between our disbursements and amounts received on orders placed, or even any reduction in the overall number and size of orders placed have an automatic adverse impact on the evolution in working capital requirements and results of operations. Similarly, delays in the delivery and final transfer of possession to purchasers of our aircraft may have an adverse impact on our working capital and results of operations. 64 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Seasonality and cyclicality of financial results Our cash flows are subject to periodic fluctuations and we expect a disproportionate amount of our cash flows to be received or paid by us during any given quarter. We expect this trend to continue. In particular, 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. Business partners The failure by a business partner to comply with applicable laws, rules or regulations, or contract requirements, could negatively impact our business and could even 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 or maintain insurance coverage at acceptable levels and costs or terms in the future. 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. BOMBARDIER INC. / 2023 FINANCIAL REPORT 65 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 business, 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, orders 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, orders or customers due to the nature of some of our products. Consequently, the loss of such a customer or changes to their orders, or cancellation of all or a portion of their contract 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. Supply chain risks Our manufacturing operations are dependent on a number of suppliers, located in numerous countries around the world, for the delivery of raw materials (mainly aluminum, advanced aluminum alloy and titanium) and parts and major systems (such as engines, wings, nacelles, hardware, landing gear, avionics, flight controls and fuselages). Certain of our suppliers are specialized in what they deliver with limited options for alternative suppliers. Recently, widening geopolitical fractures intensified global supply chain imbalances. Furthermore, conservative and protective behaviors from businesses and governments, such as increasing demand and hoarding, as well as increased competition for critical electrical components, products and commodities, and commodity-based products, have also intensified. 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, results of our operations and reputation. Some of our suppliers participate in the development of products such as aircraft or 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 subjects 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. Our suppliers are also required to flow down the requirements of the Supplier Code of Conduct to their supply chain. 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. 66 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Human resources (including collective agreements) Our senior executives have extensive experience in the industry 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 business and processes to reduce costs, 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 We rely on a number of technology and information systems to effectively manage all aspects of our business and operations. Like those of other large multinational companies, our technology and information systems may be vulnerable to a variety of sources of failure, interruption or misuse, including by reason of natural disasters, failure to effectively implement or transition to new systems, cyberattacks and cybersecurity threats, network communication failures, computer viruses and other security threats to the confidentiality, availability and integrity of our systems. More specifically, cybersecurity incidents may take the form of system failures and non-availability, software bugs or defects, cyber-attacks, cyber extortion (including ransomware), breaches of systems’ security, electronic crime, malware, unauthorized attempts to gain access to our proprietary and sensitive information, hacking, phishing, identity theft, theft of intellectual property and confidential information, denial-of-service attacks aimed at causing network failures and services interruption, and other cybersecurity threats to our information technology infrastructure and systems. Information security risks have increased in recent years due to the proliferation of new technologies and the increased sophistication of perpetrators of cyberattacks, which are further accentuated by increasing geopolitical tensions. 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, including the information of our customers’, employees’, suppliers’, shareholders’ or business contacts’ proprietary, confidential or personal data information, improper use of our systems, defective products, production BOMBARDIER INC. / 2023 FINANCIAL REPORT 67 downtimes, and supply shortages, and result in third-party claims against us, reputational harm, regulatory fines or financial loss. Our partners and suppliers also face risks of unauthorized access to their information systems which may contain our confidential information. If they are affected, it could also adversely affect Bombardier’s business, financial condition, results of operations or reputation. The Cyber Security team, under the direction of the Chief Information Security Officer, and reporting to the Audit 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 are or will be sufficient to counter any such unauthorized access to information systems, nor that our assessment and mitigation measures are or will be sufficient to avoid, or mitigate the impact of, a system failure. 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, excessive delays or disruptions in implementing or transitioning to new systems, 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. We may also be unable to maintain insurance to cover these risks at acceptable costs or terms, and may elect not to purchase insurance coverage against certain risks. 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 misuse or 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. We may be limited in our ability to acquire or enforce our intellectual property rights in some countries. Litigation related to our intellectual property rights could be lengthy and costly and could negatively affect our operations or financial results, whether or not we are successful in defending a claim. 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. 68 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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 perpetuate or 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 reflect negatively on us and materially adversely affect our image and reputation, which could in turn materially adversely affect our business and financial results. Scrutiny and perception gaps regarding environmental, social and governance (“ESG”) matters Evolving stakeholder expectations with respect to ESG matters may pose risks to our brand and reputation, ability to attract and retain talent, financial outlook, cost of capital, global supply chain and business continuity, which may impact our ability to achieve long-term business objectives. Increased public awareness and growing concerns about climate change and the global transition to a low carbon economy result in a broad range of impacts. We may fail to adequately monitor the emerging risks in a rapidly changing ecosystem and to sufficiently address evolving expectations related to corporate culture, business conduct and ethics, responsible management of our supply chain, transparency, respect for human rights, working and safety conditions, as well as diversity and inclusion, among other factors, which could affect corporate profitability and reputation. Additional ESG-related regulations, changes in reporting frameworks and guidance, emergence of ‘’greenwashing’’ legal actions by activist groups, increasing regulatory expectations, as well as continuing reforms pertaining to mandatory disclosure create new and evolving compliance risks. Gaps in perception and acceptability of how ESG factors into shareholder value also require increased vigilance when it comes to ESG reporting and communication. As ESG performance is assessed by proxy advisory agencies, we could also face governance issues if we do not meet their expectations. 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, may experience difficulties in obtaining or maintaining the insurance coverage we need at acceptable levels, costs or terms, and may elect not to purchase insurance coverage against some risks, 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. Moreover, any accident, failure of, or defect in our products or services, even if fully indemnified or insured, could significantly impact the cost and availability of adequate insurance in the future. 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 sufficiently 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 our business activities, focusing BOMBARDIER INC. / 2023 FINANCIAL REPORT 69 on all stages of the product development and manufacturing process. Risk management methods depend upon the evaluation and/or reporting of information regarding product development, manufacturing and 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. Liquidity and access to capital markets Financing risk Our business is 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, 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 favorable terms and conditions with respect to its financing arrangements. 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 favorable terms and timing or at all, and, if implemented, that such actions would have the planned results. 70 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 There can be no assurance that our expected cash flows from operating activities, combined with available liquidity will be sufficient to enable the development of new products to enhance competitiveness and support growth and will enable us to meet all other expected financial requirements or plans 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 our industry 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. Our right to access and use cash or other deposits, held in trust or in escrow arrangements to guarantee certain obligations, may be challenged or 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. 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: • • • • • • • • 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; we may be required to dedicate a substantial portion of our cash flows from operations to interest and 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 business and the industry 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 other covenants to which we are subject, among other things, our ability to borrow additional funds on commercially reasonable terms, or at all; we may be required to monetize assets on terms that are unfavourable to us; and we may be required to offer debt or equity securities on terms that are not favourable to us or our shareholders. We have various debt maturities ranging between 2026 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 26 – Long-term debt, to our Consolidated financial statements. Restrictive and financial debt covenants Restrictive covenants in certain agreements and instruments governing our indebtedness, including our outstanding senior notes and certain credit facilities, may materially restrict our financial flexibility or may have other material adverse effects on our business, results of operations, financial condition, liquidity, and cash flows. We are, and may be increasingly in the future, party to certain credit facilities and other asset-based and asset- backed financing arrangements which contain covenants that, among other things, restrict our and our BOMBARDIER INC. / 2023 FINANCIAL REPORT 71 subsidiaries’ ability to: (i) dispose or acquire assets or enter into mergers; (ii) incur additional indebtedness; (iii) incur guarantee obligations; (iv) declare dividends and distributions, prepay indebtedness, or amend certain financing arrangements; (v) create liens; (vi) make certain investments, loans, advances or capital expenditures; (vii) make changes to our business; and (viii) engage in certain transactions with affiliates. In addition, certain of these agreements and instruments may from time to time also include financial covenants which may be required to be met at all times or under specified circumstances. The breach of any of these restrictive covenants or financial covenants could result in draw limitations or default under the relevant agreement, which could, in turn, cause cross-acceleration or cross-defaults under our other financing arrangements. In such event, we may be unable to borrow under our financing arrangements and may not be able to repay the amounts due under such arrangements, which could have a material adverse effect on our business, results of operations, financial condition, liquidity, and cash flows. 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 financing arrangements, which would permit our banks to request immediate defeasance or cash cover of all outstanding letters of credit, and our bondholders and other lenders to declare amounts owed to them to be immediately payable. If any of these financing arrangements is accelerated, or we are subject to significant cash cover obligations, we may not be able to refinance such facilities on terms acceptable to us or at all. There can be no assurance that we would be able to obtain waivers or amendments of any such breaches or defaults or be able to cash cover or refinance such arrangements, on terms acceptable to us or at all. Although the terms of our credit facilities and certain of our other debt instruments contain or may from time-to- time contain restrictions on the incurrence of additional debt, including secured debt, or to enter into new senior secured facilities, these restrictions are subject to a number of exceptions provided certain conditions are met. If we incur additional debt in the future, we may be subject to additional or more restrictive covenants than those to which we are subject now. 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. 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. 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, financing arrangements, including letter of credit facilities, may become unavailable or we may not be able to extend such arrangements upon their maturity. 72 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Government support From time to time, we have or may receive various types of government financial support. 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 assumptions related to the development of aircraft 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. Regulatory and legal risk 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. Given our size, and current and historical operations, including in respect of the Transportation business which was divested on January 29, 2021, we are, and may become, in the normal course of business, party to lawsuits, investigations and claims seeking damages and other relief, including those involving allegations of late deliveries of goods or services, product liability, product defects, quality problems, intellectual property infringement, claims arising from divestiture or acquisition transactions, obligations under our financing arrangements, obligations to current or former employees, and general liability arising from applicable laws and regulations (see below for more details). In addition, while clients and subcontractors may agree under various contractual arrangements to indemnify us against certain liabilities, such third parties may refuse or be unable to pay. These matters may also divert financial and management resources that would otherwise be used to benefit our operations, and the cost to defend litigation or address investigations may be significant. Due to the inherent uncertainties of litigation and investigations, it is not possible to (a) predict the final outcome of these and other related proceedings generally or (b) determine the amount of potential losses, if any, that may be incurred in connection with any final judgment or decision on these matters. In connection with the settlement of litigations and investigations, a number of conditions may be imposed on Bombardier, and we may be required to undergo certain changes to our business practices which could impose additional costs and adversely affect our ability to pursue business opportunities. While we maintain insurance coverage for various aspects of our business and operations, our insurance programs have varying coverage limits and exceptions. 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 may also be adverse publicity associated with litigation, including, without limitation, litigation related to product safety, which could negatively affect our clients and our ability to attract new clients, the public perception of our business or our 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 and we face risks relating to non-compliance with local and foreign laws, regulations, rules and other current, new or changing legal requirements enforced by governments or other authorities, including with respect to export controls, tariffs, embargoes, international sanctions and other trade restrictions, lobbying or similar activities, securities, antitrust, data privacy, domestic and international taxes, environmental and labour relations, as well as laws related to corruption, anti-competitive acts, bribery, and ethics-related issues, which could have a significant adverse impact on our business. Notably, sales to customers are subject to such laws and regulations. Under some of these, 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 representatives or agents. Our Code of Ethics and other corporate policies mandate compliance with laws and regulations regarding anti- bribery and anti-corruption, insider trading and tipping, fraud, money-laundering, competition and anti-trust, sanctions and export controls, lobbying and others, 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 BOMBARDIER INC. / 2023 FINANCIAL REPORT 73 assurance that our internal control policies and procedures will allow us to timely detect and protect us from recklessness, fraudulent behaviour, dishonesty or other inappropriate behaviour on the part of our employees, contractors, suppliers, affiliates, consultants, representatives, agents, and/or partners. Misconduct or failure by our employees, contractors, suppliers, affiliates, consultants, representatives, agents, and/or partners to comply with applicable laws and regulations, and notably anti-bribery and anti-corruption laws, 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 significant negative effect on our business, results of operations, profitability, share price, financial condition, the public perception of our business, reputation, expansion efforts, and ability to attract and retain employees and clients. 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 the subsection “Operational Risks—Supply chain risks” hereinabove. Also refer to our Risk Factor on “Financing Risks” and our Note 36 – Commitments and contingencies, to our consolidated financial statements. 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, we may be directly or indirectly affected by unfavorable political conditions or economic slowdowns occurring within these geographic zones and our business may be exposed to a number of related risks. 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 or fall into recession, 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. Epidemics, Pandemics, Including COVID-19, and Other Global Health Crises Effects and changes to the economy and markets since the COVID-19 pandemic continue to negatively impact the global economy, disrupt global supply chains, significantly increase inflation, impact workforce availability and demands, and create economic uncertainty and disruption of financial markets. While emergency measures that were enacted by governments worldwide to contain the spread of the virus during earlier periods of the COVID-19 pandemic, including the implementation of travel bans, self-imposed quarantine periods, self-isolation, physical and social distancing and the closure of non-essential businesses, have been lifted or eased, an increase in new infections or the spread of new variants of COVID-19 could cause some governments to reinstate such measures. In addition, any other significant outbreak, epidemic or pandemic of contagious diseases in any geographic area in which we operate could result in a similar, or worse, public health and safety crisis that could significantly disrupt global health, economic, market and labour conditions, and create varying degrees of slowdowns in the global economy and recessions. Any of the foregoing could bring about new or exacerbate existing disruptions to businesses in Canada and globally, resulting in uncertainty and a challenging economic environment, which could in turn have a material negative impact on the Corporation’s business activities, financial condition, cash flows, profitability, prospects and results of operations in future periods. A global health crisis of a similar scale or scope as the COVID-19 pandemic may also have the effect of heightening other risks and uncertainties disclosed and described below in this MD&A. 74 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Counterparty risks Uncertainties in the global economy have an adverse affect on the economies and financial markets of many countries, which increases the risk of defaults from our suppliers, customers and other counterparties, delays in deliveries of goods or services or payments by such counterparties, and difficulties in enforcing our agreements and collecting receivables. In such an economic environment, our suppliers, customers and other counterparties may seek to terminate or to amend their agreements for the supply or purchase of products or services as a result of distress on their operational or financial situation (including bankruptcy, operational shutdowns or failures, lack of liquidity or funding, or other reasons). If we or any of the third parties with whom we engage, including suppliers, service providers, customers and other third parties with whom we conduct business, were to experience long-term effects such as prolonged or permanent shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted, including the impairment of our product development activities for a period of time, which could also lead to loss of customers, as well as reputational, competitive, or business harm. Heightened impact of other risks Several of the other risks and uncertainties disclosed in this Financial Report for the fiscal year ended December 31, 2023 could be particularly exacerbated by extraordinary externalities, including, but not limited to, risks described under “Our order backlog may not be indicative of future revenues”, “Cash flows and capital expenditures”, “Seasonality and cyclicality of financial results”, “Environmental, health and safety risks”, “Dependence on limited number of contracts and customers”, “Supply chain risks”, “Liquidity and access to capital markets”, “Credit risk”, “Substantial debt and significant interest payment requirements”, “General economic risk”, “Business environment risk”, and “Market Risk”. Mitigation measures While we make efforts to manage and mitigate existing or reasonably foreseeable risks to the markets in which we operate, the effectiveness of these efforts and the extent to which economic slowdowns or global health, geopolitical or military events in various parts of the world affects the Corporation’s business will depend on factors beyond our control. The Corporation may experience material adverse effects to its business, operations, financial condition, cash flows, margins, prospects and results of operations as a result of prolonged or new disruptions in the global economy and any resulting recession. Financial condition of business aircraft customers Business environment risk The purchase of aviation 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 aviation products and services. The availability of financing is also an important factor and credit scarcity can cause customers to either defer deliveries or cancel orders. An increased supply of used aircraft as companies restructure, downsize or discontinue operations could also add downward pressure on the selling price of new and used business and commercial aircraft. We could then be faced with the challenge of finding ways to further reduce costs and improve productivity to sustain a favourable market position at acceptable profit margins. The loss of any major fractional ownership or charter operator as a customer or the termination of a contract could significantly impact our financial results. BOMBARDIER INC. / 2023 FINANCIAL REPORT 75 Trade policy As a globally operating organization, our business is 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 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 markets and geographies 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. Political instability and geopolitical tension Political instability, which may result from various factors, including social or economic factors, in certain regions of the world may be prolonged and unpredictable. Geopolitical tensions, including between nations in which we operate, do business or seek to do business, or where our clients or potential clients reside, have been rising globally and can arise suddenly and with limited foreseeability. In some parts of the world, political instability has become more pronounced, protracted and unpredictable. Any new or increased geopolitical tensions, or prolonged political instability, in regions or markets in which we participate could lead to delays or cancellation of orders for our products or services, or prohibit or impede our ability to expand our business in such regions. It is possible that in the markets we serve, unanticipated political instability could impact our operating results and financial position. Geopolitical and economic risks, including from existing or threatened military conflicts and volatility in the energy markets, have raised concerns in international economies. Beyond any immediate impact, these developments may also negatively affect the evolution of the global economy. The Ukraine-Russia military conflict and financial and economic sanctions and export control limitations Following Russia’s February 2022 military invasion of Ukraine, Canada, the U.S., the United Kingdom, Europe and various other countries around the world imposed broad financial and economic sanctions and export control limitations against Russia and against certain persons and entities (collectively, “Sanctions and Export Control Limitations”). As a result of the foregoing, Bombardier is abiding by all Sanctions and Export Control Limitations. When such Sanctions and Export Control Limitations may be eased or lifted is not known at this time. As of December 31, 2023, we have not been materially adversely impacted by the Ukraine-Russia military conflict and the Sanctions and Export Control Limitations; however, we are continuously monitoring developments to assess any potential future impact that may arise. If there is an escalation of the conflict, or if the sanctions and other retaliatory measures imposed by the global community are expanded, we cannot provide assurance that this may not adversely impact the Corporation’s overall business activities, financial condition, cash flows, profitability, prospects and results of operations in future periods. 76 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Global climate change Global climate change could exacerbate certain of the threats facing our business which can be categorized as physical risks or transition risks. • • Physical risks: Physical risks include the increase in 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. Transition risks: In addition, concerns about the environmental impacts of air travel and tendencies towards “green” travel initiatives, and in particular social media movements drawing negative attention to business jet travel by executives and celebrities, 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 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 or services activities are at various stages of developing emission allocations and trading schemes. During 2023, 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-California trading scheme as part of the Western Climate Initiative. 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. 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. 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. BOMBARDIER INC. / 2023 FINANCIAL REPORT 77 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 Canadian dollars, Mexican pesos and euros. We have adopted a progressive hedging strategy to limit the effect of currency movements on our 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 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 derivative financial instruments. 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, without limitation, consumer demand, supply, market conditions, geopolitical factors, climate change and costs of raw materials. In particular, raw materials required for our operations, may be subject to pricing cyclicality and periodic shortages from time to time. We cannot guarantee that corresponding variations in cost will be fully reflected in contract prices, and we may be unable to recoup these raw material price increases, which could affect the profitability of such contracts. Inflation risk Global economies in which we and our suppliers operate, and in which our customers reside, have experienced broad significant inflationary pressures over the past two years, and future inflationary pressures remains fluid and uncertain. Our business is exposed to inflation risk relating to fluctuations in costs and revenue for aircraft orders received but for which the delivery of the aircraft will take place several years in the future. Revenues for these orders are adjusted for price escalation clauses linked to inflation. 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. Our inability to recover, in whole or in part, the increase in costs from inflationary pressures may have a material adverse impact on our business, financial condition and results of operations. 78 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 FINANCIAL INSTRUMENTS An important portion of the consolidated balance sheets is composed of financial instruments. Financial assets of the Corporation include cash and cash equivalents, trade and other receivables, investments in securities, receivable from MHI, receivable from ACLP, restricted cash and derivative financial instruments with a positive fair value. Financial liabilities of the Corporation include trade and other payables, long-term debt, lease liabilities, government refundable advances, credit and residual value guarantees payable, vendor non-recurring costs and derivative financial instruments with a negative fair value. Derivative financial instruments are mainly used to manage the Corporation’s exposure to foreign exchange market risks, generally through forward foreign exchange contracts. Derivative financial instruments include derivatives that are embedded in financial or non-financial contracts that are not closely related to the host contracts. 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 32 – 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 issuance 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) amortized 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 11 – Financial instruments, to the consolidated financial statements. Note 33 – Fair value of financial instruments, to the consolidated financial statements, provides a detailed description of the methods and assumptions used to determine the fair values of financial instruments. These values are point-in-time estimates that may change in subsequent reporting periods due to market conditions or other factors. Fair value is determined by reference to quoted prices in the principal market for that instrument to which 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 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, 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 33 – Fair value of financial instruments, to the consolidated financial statements, also provides a three-level fair value hierarchy, categorizing financial instruments by the inputs used to measure their fair value. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). In cases where the inputs used to measure fair value are categorized within different levels of hierarchy, the fair value measurement is reported at the lowest level of the input that is significant to the entire measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, taking into account factors specific to the asset or liability. The fair value hierarchy is not meant to provide insight on the liquidity characteristics of a particular asset or on the degree of sensitivity of an asset or liability to other market inputs or factors. BOMBARDIER INC. / 2023 FINANCIAL REPORT 79 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 (loss) 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 receivable from ACLP and government refundable advance. 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. Sensitivity analysis Our main exposures to changes in fair value of financial instruments are related to changes in foreign exchange, and interest rates. Note 32 – Financial risk management, to the consolidated financial statements, presents 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 34 – Transactions with related parties, to the consolidated financial statements. 80 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 CRITICAL JUDGMENTS AND ACCOUNTING ESTIMATES Our material accounting policies and use of estimates and judgment are described in Note 2 – Summary of material accounting policies and Note 3 – Use of estimates and judgment, to our 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. 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 could 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 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. 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. Aerospace program tooling The Corporation assesses at each reporting date whether there are any indicators that Aerospace program tooling may be impaired. If any indicators of impairment exist, the Corporation estimates the recoverable amount of the relevant CGU. The assessment of indicators of impairment, and the calculation of recoverable amounts, when indicators exist, requires judgements, which are reviewed in detail as part of the budget and strategic plan process during the fourth quarter of 2023. For purposes of impairment testing, management also exercises judgment to identify independent cash inflows to identify CGUs by family of aircraft. In addition, estimation is required in the determination of the amortization of the Aerospace program tooling. Internal and external factors are considered in assessing whether indicators of impairment exist. If indicators of impairment exist, the recoverable amounts of the relevant CGUs are determined on fair value less costs of disposal, which are determined using forecasted future cash flows. The fair value measurements are categorized within Level 3 of the fair value hierarchy since the inputs used in the discounted cash flow model are Level 3 inputs (inputs that are not based on observable market data). The estimated future cash flows for the first five years are based on the budget and strategic plan. After the initial five years, long-range forecasts prepared by management are used. Internal and external factors are considered by management in exercising judgment in assessing whether indicators of impairment are present that would necessitate a quantitative impairment test. Factors include 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 aftermarket activities, procurement costs based on existing contracts with suppliers, future labor costs, general market conditions, foreign exchange rates, costs to BOMBARDIER INC. / 2023 FINANCIAL REPORT 81 complete the development activities, if any, potential upgrades and derivatives expected over the life of the program based on past experience with previous programs, and applicable long-range forecast income tax rates and a post-tax discount rate based on a weighted average cost of capital calculated using market-based inputs, available directly from financial markets or based on a benchmark sampling of representative publicly-traded companies in the aerospace sector. The same factors are used to determine the recoverable amount, when there are indicators of impairment. An impairment test was performed for the Global 7500 in the fourth quarter of 2023, 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: 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 2023. An increase of 100-basis points in the discount rate used to perform the impairment test would not have resulted in an impairment charge in fiscal year 2023 for the Global 7500 aircraft program. 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 profits and availability of prudent tax planning strategies. See Note 9 – Income taxes, to our Consolidated financial statements, 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. 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 such as 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. 82 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 As the Canadian high-quality corporate bond market, as defined under IFRS, includes relatively few medium-term 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 five 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 4 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 4 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. Expected rates of compensation increases are determined considering the current salary structure, as well as historical and anticipated wage increases, in the context of current economic conditions. See Note 21 – Retirement benefits, to the consolidated financial statements, for further details regarding assumptions used and sensitivity analysis to changes in critical actuarial assumptions. 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). BOMBARDIER INC. / 2023 FINANCIAL REPORT 83 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, 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. OTHER On May 18, 2023 the Corporation confirmed that it had received approval from the Toronto Stock Exchange for its new normal course issuer bid (NCIB) to purchase, from May 23, 2023 to May 22, 2024, up to 600,000 Class B shares (subordinate voting). Class B shares (subordinate voting) purchased under the NCIB will be cancelled if purchased in order to mitigate the dilutive effect of granting stock options under the Corporation’s stock option plan, or will be placed in trust and eventually be used to settle the Corporation’s obligations under certain of its employee share-based incentive plans, including its PSU and RSU plans. For more details, refer to Consolidated statements of changes in equity and Note 27 – Share capital, to our Consolidated financial statements. 84 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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, and from transactions denominated in foreign currencies, mainly the Canadian dollar. The foreign exchange rates used to translate assets and liabilities into U.S. dollars were as follows, as at: Euro Canadian dollar December 31, 2023 December 31, 2022 1.1062 0.7559 1.0662 0.7381 Increase 4% 2% 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 December 31, 2023 December 31, 2022 1.0759 0.7346 1.0204 0.7366 Increase 5% —% 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 December 31, 2023 December 31, 2022 Increase (Decrease) 1.0813 0.7411 1.0544 0.7691 2% (4%) BOMBARDIER INC. / 2023 FINANCIAL REPORT 85 SHAREHOLDER INFORMATION Authorized, issued and outstanding share data, as at February 6, 2024 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 143,680,000 143,680,000 12,000,000 12,000,000 9,400,000 Issued and outstanding 12,349,370 85,307,628 (3) 2,684,527 9,315,473 9,400,000 (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 1,993,445 Class B Subordinate Voting Shares purchased and held in trust in connection with the PSU and RSU plans. Warrant, share option, PSU, DSU, RSU, data as at December 31, 2023 Warrants issued and outstanding Options issued and outstanding under the share option plans PSUs, DSUs and RSUs issued and outstanding under the PSU, DSU and RSU plans Class B Subordinate Voting Shares held in trust to satisfy PSU and RSU obligations — 1,325,668 1,811,608 1,993,445 Information Bombardier Inc. Investor Relations 400 Côte-Vertu Road West Dorval, Québec, Canada H4S 1Y9 Telephone: +1 514 240-9649 Email: investors@bombardier.com Additional information relating to the Corporation, including the financial report and annual information form, are available on SEDAR+ at sedarplus.ca or on Bombardier’s dedicated investor relations website at ir.bombardier.com. The Global 8000 aircraft is currently under development and remains to be finalized and certified. It is expected to enter service in 2025(1). All specifications and data are approximate, may change without notice and are subject to certain operating rules, assumptions and other conditions. Bombardier, Bombardier Pũr Air, Bombardier Vision Flight Deck, Chaise, Challenger, Challenger 300, Challenger 350, Challenger 3500, Challenger 600, Challenger 601, Challenger 604, Challenger 605, Challenger 650, Exceptional by Design, Executive, Global, Global 5000, Global 5500, Global 6000, Global 6500, Global 7500, Global 8000, Global Express, Global Express XRS, Global Vision, Global XRS, Learjet, Learjet 40, Learjet 45, Learjet 70, Learjet 75, Learjet 75 Liberty, L’Opéra, Nuage, Nuage Cube, PrecisionPlus, Smart Parts, Smart Parts Maintenance Plus, Smart Parts Plus, Smart Parts Preferred, Smart Services, Smart Services Elite, Smartfix, Smartfix Plus, Smartlink, Smartlink Plus, Smooth Flĕx Wing, Soleil and Touch are trademarks of Bombardier Inc. or its subsidiaries. The printed version of this financial report uses Rolland Opaque paper, containing 30% sustainable recycled fiber. Using this paper, instead of virgin paper, saves the equivalent of 5 mature trees, 328 kg of CO2 emissions (equivalent to 1,307 kilometres driven) and 2,000 litres of water. Bombardier Inc., 400 Côte-Vertu Road West, Dorval, Québec, Canada H4S 1Y9 Telephone: +1 514 855 5001; 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. (1) See the forward-looking statements disclaimer in the Overview section of this MD&A. 86 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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, 2023, 2022 and 2021. The following table provides selected financial information for the last three fiscal years. Fiscal years ended December 31 Revenues Net income (loss) attributable to equity holders of Bombardier Inc. Continuing operations Discontinued operations(1) Total EPS (in dollars) Continuing operations - basic Continuing operations - diluted Discontinued operations - basic(1) Discontinued operations - diluted(1) Total basic Total diluted Cash dividends declared per share (in Canadian dollars) Class A Shares (multiple voting) Class B Shares (subordinate voting) Series 2 Preferred Shares Series 3 Preferred Shares Series 4 Preferred Shares As at December 31 Total assets Non-current financial liabilities 2023 2022 2021 $ 8,046 $ 6,913 $ 6,085 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 490 (45) 445 4.81 4.70 (0.47) (0.46) 4.34 4.24 — — 1.74 1.15 1.56 $ $ $ $ $ $ $ $ $ $ $ $ $ $ (128) (20) (148) (1.67) (1.67) (0.21) (0.21) (1.88) (1.88) — — 1.03 1.07 1.56 $ $ $ $ $ $ $ $ $ $ $ $ $ $ (249) 5,290 5,041 (2.87) (2.87) 54.92 53.41 52.05 50.54 — — 0.61 1.00 1.56 2023 2022 2021 $ 12,458 6,579 $ $ 12,324 7,187 $ $ 12,764 8,299 $ (1) Transportation business was classified as discontinued operations. On January 29, 2021, the Corporation closed the sale of the Transportation business to Alstom. The quarterly data table is shown hereafter. This MD&A for the three- and twelve-month periods ended December 31, 2023 was authorized for issuance by the Board of Directors on February 7, 2024. BOMBARDIER INC. / 2023 FINANCIAL REPORT 87 BOMBARDIER INC. QUARTERLY DATA (UNAUDITED) (the quarterly data has been prepared in accordance with IAS 34, Interim financial reporting, except market price ranges) (in millions of U.S. dollars, except per share amounts) Fiscal years Revenues EBIT Financing expense(1) Financing income(1) EBT Income taxes (recovery) Net income (loss) Continuing operations Discontinued operations Total EPS (in dollars)(2) Continuing operations - basic Continuing operations - diluted Discontinued operations - basic Discontinued operations - diluted Market price range of Class B Subordinate Voting Shares (in Canadian dollars) Total $ 8,046 793 $ 594 (202) 401 (89) Third Fourth quarter quarter $ 3,062 $ 1,856 197 $ 240 (4) (39) (2) 211 $ 159 (170) 222 7 Second quarter $ 1,675 245 $ 253 (9) 1 (9) Total 2023 First quarter $ 1,453 $ 6,913 538 $ 817 (33) (246) (118) 140 $ 176 (253) 217 (85) Fourth quarter $ 2,655 207 $ 146 (59) 120 (121) Third quarter $ 1,455 145 $ 142 (25) 28 1 Second quarter $ 1,557 101 $ 233 (25) (107) 2 2022 First quarter $ 1,246 85 $ 376 (4) (287) — $ $ $ $ $ $ 490 (45) 445 $ 215 $ — $ 215 $ (37) $ — (37) $ $ 10 (45) (35) $ 302 $ (128) $ — (20) 302 $ (148) $ 241 — 241 $ $ 27 — 27 $ (109) $ (20) $ (129) $ (287) — (287) $ 2.15 $ (0.47) $ 0.03 $ 2.11 $ (0.47) $ 0.03 4.81 4.70 (0.47) $ 0.00 $ 0.00 (0.46) $ 0.00 $ 0.00 $ 3.10 $ $ 2.98 $ $ (0.47) $ 0.00 $ $ (0.47) $ 0.00 $ (1.67) $ 2.48 (1.67) $ 2.40 (0.21) $ 0.00 (0.21) $ 0.00 $ 0.20 $ 0.20 $ 0.00 $ 0.00 (3.09) $ (1.22) $ $ (1.22) $ (3.09) $ (0.21) $ 0.00 $ (0.21) $ 0.00 High Low $ 74.43 $ 39.87 $ 53.95 $ 68.79 $ 39.87 $ 44.44 $ 74.43 $ 52.60 $ 73.87 $ 55.50 $ 51.40 $ 18.30 $ 55.50 $ 24.39 $ 35.09 $ 18.30 $ 37.25 $ 18.67 $ 46.00 $ 29.00 (1) The amounts presented on a yearly basis may not correspond to the sum of the four quarters as certain reclassifications to quarterly figures to or from financing income and financing expense may be required on a cumulative basis. (2) The amounts presented on a yearly basis may not correspond to the sum of the four quarters as certain share repurchases and dilutive potential shares on an interim basis may not be applicable on an annual basis. 88 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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 Revenues EBIT Financing expense Financing income EBT Income taxes (recovery) Net income (loss) from continuing operations Net income (loss) from discontinued operations(1) Net income (loss) Attributable to 2023 8,046 793 594 (202) 401 (89) 490 (45) 445 2022 6,913 538 817 (33) (246) (118) (128) (20) (148) $ $ $ $ $ $ Equity holders of Bombardier Inc. NCI Adjusted EBIT(2)(3) Adjusted net income (loss) from continuing operations(2)(3) EPS (in dollars) Continuing operations - basic Continuing operations - diluted Discontinued operations - basic(1) Discontinued operations - diluted(1) Continuing operations - adjusted(3)(4) General information Export revenues from Canada Net additions to PP&E and intangible assets(6) 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) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 445 — 799 416 4.81 4.70 (0.47) (0.46) 3.94 6,160 366 431 73 0.00 0.00 1.74 1.15 1.56 74.99 40.44 53.43 74.43 39.87 53.21 98 (28.17) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (148) — 515 104 (1.67) (1.67) (0.21) (0.21) 0.77 5,256 337 415 3 0.00 0.00 1.03 1.07 1.56 56.03 21.46 52.92 55.50 18.30 52.27 94 (33.16) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2021 6,085 241 936 (324) (371) (122) (249) 5,319 5,070 5,041 29 222 (327) (2.87) (2.87) 54.92 53.41 (3.67) 4,575 232 417 3 0.00 0.00 0.61 1.00 1.56 58.25 19.00 43.25 57.00 11.50 42.00 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2020 (1) 6,487 912 1,060 (27) (121) 49 (170) (398) (568) (868) 300 (214) (1,118) (1.95) (1.95) (7.24) (7.24) (11.79) $ $ $ $ $ $ $ $ $ $ $ 2019 (1) 7,488 (520) 996 (226) (1,290) 251 (1,541) (66) (1,607) (1,797) 190 401 (405) (16.37) (16.37) (2.68) (2.68) (4.47) 5,182 (5) $ $ $ 354 510 5,187 (5) 523 422 42 0.00 0.00 0.72 1.00 1.56 50.50 9.50 20.50 49.25 6.50 12.00 $ $ $ $ $ $ $ $ $ $ $ $ $ (4) 0.00 0.00 0.99 1.00 1.56 77.00 39.25 48.50 75.75 38.25 48.25 96 (87.14) 96 (36.09) 97 $ (100.68) (1) Transportation was classified as discontinued operations as of December 31, 2020. As a result, the results of operations have been restated for comparative periods. On January 29, 2021, the Corporation closed the sale of the Transportation business to Alstom. (2) Non-GAAP financial measure. A non-GAAP financial measure is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non-GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (3) Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination, and restructuring charges, including comparative figures. See Note 37 - Reclassification, to our Consolidated financial statements, for more information. (4) Non-GAAP financial ratio. A non-GAAP financial ratio is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures used by other issuers. Refer to the Non- GAAP and other financial measures section of this MD&A for definitions of these metrics and reconciliations to the most comparable IFRS measures. (5) Includes Transportation. (6) As per the consolidated statement of cash flows of our Consolidated financial statements. BOMBARDIER INC. / 2023 FINANCIAL REPORT 89 BOMBARDIER INC. HISTORICAL FINANCIAL SUMMARY (CONTINUED) CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at December 31 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 Current portion of long-term debt 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 2023 2022 2021 2020 (1) 2019 (1) $ 1,594 258 84 3,768 97 133 — 5,934 1,375 3,566 — 455 — $ 1,291 252 67 3,322 472 181 — 5,585 1,214 3,873 — 381 — $ 1,675 269 55 3,242 76 164 — 5,481 837 4,129 — 250 — $ 1,779 294 61 3,650 227 218 10,417 16,646 668 4,396 — 111 — $ 2,578 1,844 2,485 4,599 195 473 1,309 13,483 1,781 4,616 1,936 546 1,059 757 371 6,524 $ 12,458 899 372 6,739 $ 12,324 1,680 387 7,283 $ 12,764 912 357 6,444 $ 23,090 989 562 11,489 $ 24,972 $ 1,820 78 3,455 — 148 437 — 5,938 90 1,209 5,607 803 972 243 8,924 14,862 $ 1,286 82 3,290 — 345 434 — 5,437 152 1,444 5,980 598 1,207 268 9,649 15,086 $ 1,164 101 2,853 — 216 434 — 4,768 229 1,156 7,047 1,100 1,252 301 11,085 15,853 $ 1,611 146 2,356 1,882 239 447 10,146 16,827 289 1,219 8,193 1,606 1,225 388 12,920 29,747 $ 4,682 1,060 5,739 8 617 1,441 1,768 15,315 311 1,417 9,325 2,445 1,605 465 15,568 30,883 (2,404) (2,762) (3,089) (9,325) (7,667) — (2,404) $ 12,458 — (2,762) $ 12,324 — (3,089) $ 12,764 2,668 (6,657) $ 23,090 1,756 (5,911) $ 24,972 (1) Transportation was classified as discontinued operations as of December 31, 2020. As a result, the results of operations have been restated for comparative periods. On January 29, 2021, the Corporation closed the sale of the Transportation business to Alstom. 90 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 BOMBARDIER INC. CONSOLIDATED FINANCIAL STATEMENTS For the fiscal years ended December 31, 2023 and 2022 BOMBARDIER INC. / 2023 FINANCIAL REPORT 91 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 2023. 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 2023. 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, to approve the fees of the independent auditors and to review and make recommendations to the Board of Directors with respect to the independence 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. Eric Martel President and Chief Executive Officer Bart Demosky Executive Vice President and Chief Financial Officer February 7, 2024 92 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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, 2023 and 2022, 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 then ended, and notes to the consolidated financial statements, including material accounting policy information. 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, 2023 and 2022, and its consolidated financial performance and its consolidated cash flows for the years then ended 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. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the consolidated financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements. BOMBARDIER INC. / 2023 FINANCIAL REPORT 93 Key audit matter How our audit addressed the key audit matter Valuation of Global 7500 aircraft program tooling As at December 31, 2023, the net carrying value of aerospace program tooling amounted to $3,566 million, of which a significant portion related to the Global 7500 CGU. As stated in Note 3 of the notes to the consolidated financial statements, the recoverable amount of the Global 7500 CGU is based on its fair value less costs of disposal. The fair value measurement is categorized within Level 3 of the fair value hierarchy and is determined using forecasted future cash flows. We believe that the determination of the recoverable amount of the Global 7500 aircraft program tooling is a key audit matter given management’s estimates and judgments required in estimating the fair value less costs of disposal of the balances recorded in the consolidated financial statements. The key drivers of the forecasted 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, potential upgrades and post-tax discount rate. Other information To evaluate the appropriateness of the valuation of the Global 7500 CGU, our audit procedures included the following, among others: • • • • • • Reviewed the impairment model prepared by management and assessed key assumptions used with internally or externally available evidence with the focus on 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 and potential upgrades; Evaluated the Group’s post-tax discount rate with the assistance of our valuation specialists; Agreed the underlying cash flows to the budget and strategic plan approved by the Board of Directors; Evaluated the changes in the above-mentioned key assumptions, compared to the previous impairment assessment, as well as evaluated the absence of such changes; Evaluated the historical accuracy of management's estimates by comparing them to actual performance; Evaluated the information presented in Note 3 of the notes to the consolidated financial statements. 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 in this auditor’s report. We have nothing to report in this regard. 94 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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. 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. BOMBARDIER INC. / 2023 FINANCIAL REPORT 95 • 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. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor’s report is Zahid Fazal. (1) Ernst & Young LLP Montréal, Canada February 7, 2024 (1) CPA auditor, public accountancy permit no. A122227 96 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 CONSOLIDATED FINANCIAL STATEMENTS For fiscal years 2023 and 2022 (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 BASIS OF PREPARATION SUMMARY OF MATERIAL ACCOUNTING POLICIES USE OF ESTIMATES AND JUDGMENT SEGMENT DISCLOSURE RESEARCH AND DEVELOPMENT OTHER EXPENSE (INCOME) FINANCING EXPENSE AND FINANCING INCOME 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 SHARE CAPITAL SHARE-BASED PLANS NET CHANGE IN NON-CASH BALANCES CREDIT FACILITIES CAPITAL MANAGEMENT FINANCIAL RISK MANAGEMENT FAIR VALUE OF FINANCIAL INSTRUMENTS TRANSACTIONS WITH RELATED PARTIES UNCONSOLIDATED STRUCTURED ENTITIES COMMITMENTS AND CONTINGENCIES RECLASSIFICATION 99 104 104 105 115 118 120 120 121 121 122 124 125 127 127 128 128 128 129 129 130 131 132 141 142 143 143 144 145 148 150 151 151 152 156 159 159 160 164 BOMBARDIER INC. / 2023 FINANCIAL REPORT 97 The following table shows the abbreviations used in the consolidated financial statements. Term ACLP CCTD CDPQ CGU DB DC DDHR DSU EBIT EBITDA EBT EPS Description Airbus Canada Limited Partnership Cumulative currency translation difference Caisse de dépôt et placement du Québec Cash generating unit 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 Earnings (loss) before income taxes Earnings (loss) per share attributable to equity holders of Bombardier Inc. Description Fair value through other comprehensive income Term FVOCI FVTP&L Fair value through profit and loss IAS IASB IFRS MHI n/a OCI PP&E PSU R&D RSU SG&A SOFR U.K. U.S. International Accounting Standard(s) International Accounting Standards Board International Financial Reporting Standard(s) Mitsubishi Heavy Industries, Ltd Not applicable Other comprehensive income (loss) Property, plant and equipment Performance share unit Research and development Restricted share unit Selling, general and administrative Secured Overnight Financing Rate United Kingdom United States of America 98 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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 Other expense (income)(1) Restructuring charges(1)(2) Gain related to disposal of business(1)(3) Impairment and program termination(1)(4) EBIT Financing expense Financing income EBT Income taxes (recovery) Net income (loss) from continuing operations Net income (loss) from discontinued operations(5) Net income (loss) EPS (in dollars) Continuing operations - basic Continuing operations - diluted Discontinued operations - basic(5) Discontinued operations - diluted(5) Total basic Total diluted Notes 4 15 $ 5 6 7 7 9 10 $ $ $ $ $ $ $ 2023 8,046 6,415 1,631 447 373 15 1 (81) 83 793 594 (202) 401 (89) 490 (45) 445 4.81 4.70 (0.47) (0.46) 4.34 4.24 $ $ $ $ $ $ $ $ 2022 6,913 5,656 1,257 395 360 (13) 8 (22) (9) 538 817 (33) (246) (118) (128) (20) (148) (1.67) (1.67) (0.21) (0.21) (1.88) (1.88) (1) Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination, and restructuring charges, including comparative figures. See Note 37 - Reclassification for more information. (2) Includes severance charges or related reversal as well as curtailment losses (gains), if any. (3) Includes changes in provisions related to past divestitures. (4) Includes impairment or reversal of impairment of PP&E and intangible assets, as well as provisions related to program termination or their related reversal, if any. For fiscal year 2023, includes impairment of $85 million related to an aircraft product upgrade, started in 2018 and paused in 2020. (5) Discontinued operations are related to the sale of the Transportation business. The expenses recorded in discontinued operations for fiscal years 2023 and 2022 principally relate to change in estimates of a provision for professional fees. The notes are an integral part of these consolidated financial statements. BOMBARDIER INC. / 2023 FINANCIAL REPORT 99 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 Net gain (loss) on derivative financial instruments Reclassification to income or to the related non-financial asset(1)(2) Income taxes recovery (expense) FVOCI financial assets Net unrealized gain (loss) CCTD Net investments in foreign operations Items that are never reclassified to net income FVOCI equity instruments Net unrealized loss Retirement benefits Remeasurement of defined benefit plans Total OCI Total comprehensive income Total comprehensive income (loss) Continuing operations Discontinued operations(3) Notes 2023 445 $ 2022 (148) $ 9 21 63 52 (31) 84 22 — (4) (227) (125) 320 365 (45) 320 $ $ $ (93) 62 8 (23) (19) — (7) 565 516 368 388 (20) 368 $ $ $ (1) Includes $44 million of gain reclassified to the related non-financial asset for fiscal year 2023 ($27 million of loss for fiscal year 2022). (2) Includes $29 million of net deferred gain that is expected to be reclassified from OCI to the carrying amount of the related non-financial asset or to expense during fiscal year 2024. (3) Discontinued operations are related to the sale of the Transportation business. The expenses recorded in discontinued operations for fiscal years 2023 and 2022 principally relate to change in estimates of a provision for professional fees. The notes are an integral part of these consolidated financial statements. 100 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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 Current assets PP&E Aerospace program tooling Deferred income taxes Other financial assets Other assets Non-current assets Liabilities Trade and other payables Provisions Contract liabilities Other financial liabilities Other liabilities 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. Commitments and contingencies The notes are an integral part of these consolidated financial statements. On behalf of the Board of Directors Pierre Beaudoin Director Diane Giard Director December 31 December 31 2022 2023 Notes 12 13 14 15 17 18 19 20 9 17 18 22 23 14 24 25 23 14 26 21 24 25 36 $ 1,594 258 84 3,768 97 133 5,934 1,375 3,566 455 757 371 6,524 $ 12,458 $ 1,291 252 67 3,322 472 181 5,585 1,214 3,873 381 899 372 6,739 $ 12,324 $ 1,820 78 3,455 148 437 5,938 90 1,209 5,607 803 972 243 8,924 14,862 $ 1,286 82 3,290 345 434 5,437 152 1,444 5,980 598 1,207 268 9,649 15,086 (2,404) $ 12,458 (2,762) $ 12,324 BOMBARDIER INC. / 2023 FINANCIAL REPORT 101 BOMBARDIER INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the fiscal years ended (in millions of U.S. dollars) As at January 1, 2022 Total comprehensive income (loss) Net loss OCI Dividends - preferred shares, including taxes Shares purchased - PSU/RSU plans(1) Shares distributed - PSU plan Cancellation of Class B shares Options exercised Share-based expense As at December 31, 2022 Total comprehensive income (loss) Net income OCI Dividends - preferred shares, including taxes Shares purchased - PSU/RSU plans(1) Shares distributed - RSU plan Cancellation of Class B shares Options exercised Share-based expense Expiration of warrants(2) As at December 31, 2023 Attributable to equity holders of Bombardier Inc. Share capital Preferred shares Common shares Warrants Retained earnings (deficit) Other retained earnings (deficit) Remea- surement gains (losses) Accumulated OCI Contributed surplus FVOCI Cash flow hedges CCTD Total equity (deficit) $ 347 $ 2,643 $ 11 $ (3,984) $ (2,557) $ 475 $ 13 $ (22) $ (15) $ (3,089) — — — — — — — — $ — 3 347 4 7 — — — — (38) 1 (5) 14 — — — — — — — — — — (148) — (148) (29) — — — — — — 565 565 — — — — — — — — — — — (1) 3 (4) 18 — (26) (26) — — — — — — — — (23) — (23) — — — — — — — — — — — — — (148) 516 368 (29) (38) — (2) 10 18 $ 2,615 $ 11 $ (4,161) $ (1,992) $ 491 $ (13) $ (45) $ (15) $ (2,762) — — — — — — — — — — — — — — (20) 12 (3) 103 — — — — — — — — — — — (11) 445 — 445 (31) — — — — — — — (227) (227) — — — — — — — — — — — — (12) (1) (34) 24 11 — 18 18 — — — — — — — — 84 84 — — — — — — — — — — — — — — — — — 445 (125) 320 (31) (20) — (4) 69 24 — $ 347 $ 2,707 $ — $ (3,747) $ (2,219) $ 479 $ 5 $ 39 $ (15) $ (2,404) (1) In fiscal year 2023, the Corporation purchased 0.5 million (1.6 million in fiscal year 2022) of Class B shares (subordinate voting) in order to satisfy future obligations under the Corporation’s employee PSU and RSU plans. Refer to Note 27 – Share capital. (2) In February 2023, 4 million of warrants held by CDPQ expired. Refer to Note 27 – Share capital. The notes are an integral part of these consolidated financial statements. 102 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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) from continuing operations Net income (loss) from discontinued operations(1) Non-cash items Amortization(2) Impairment charges on intangible assets Deferred income taxes (recovery) Losses (gains) on disposals of PP&E and intangible assets Share-based expense Losses (gains) on repayment of long-term debt Net change in non-cash balances Cash flows from operating activities - total Cash flows from operating activities - discontinued operations(1) Cash flows from operating activities - continuing operations Investing activities Additions to PP&E and intangible assets Proceeds from disposals of PP&E and intangible assets Changes to restricted cash Sale of investments in securities Other Cash flows from investing activities - total Cash flows from investing activities - discontinued operations(1) Cash flows from investing activities - continuing operations Financing activities Net proceeds from issuance of long-term debt Repayments of long-term debt Payment of lease liabilities(3) Dividends paid - Preferred shares Repurchase of Class B shares Issuance of Class B shares Purchase of Class B shares held in trust under the PSU and RSU plans Cash flows from financing activities - total Cash flows from financing activities - discontinued operations(1) Cash flows from financing activities - continuing operations Effect of exchange rates on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental information(4)(5) Cash paid for Interest Income taxes Cash received for Interest Income taxes Notes 2023 2022 $ $ 490 (45) (128) (20) 19,20 20 9 6 28 7 29 17 26 26 27 27 27,28 12 12 431 73 (105) 1 24 54 (300) 623 — 623 (366) — 390 133 (39) 118 (38) 156 1,478 (1,903) (36) (22) (4) 69 (20) (438) — (438) — 303 1,291 1,594 462 13 39 1 $ $ $ $ $ 415 3 (123) (1) 18 (1) 909 1,072 — 1,072 (355) 18 43 — (31) (325) (21) (304) — (1,058) (24) (20) (2) 10 (38) (1,132) — (1,132) 1 (384) 1,675 1,291 521 10 23 — $ $ $ $ $ (1) Discontinued operations are related to the sale of the Transportation business. The expenses recorded in discontinued operations for fiscal years 2023 and 2022 principally relate to change in estimates of a provision for professional fees. (2) Includes $31 million of amortization charge related to right-of-use of assets for fiscal year 2023 ($28 million for fiscal year 2022). (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 2023 amounted to $76 million ($53 million for fiscal year 2022). (4) 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. (5) Interest paid comprises interest on long-term debt 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 and investments in securities. The notes are an integral part of these consolidated financial statements. BOMBARDIER INC. / 2023 FINANCIAL REPORT 103 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the fiscal years ended December 31, 2023 and 2022 (Tabular figures are in millions of U.S. dollars, unless otherwise indicated) 1. BASIS OF PREPARATION Bombardier Inc. (“the Corporation” or “our” or “we”) is incorporated under the laws of Canada. The Corporation is a manufacturer of business aircraft, as well as certain major aircraft structural components, and is a provider of related services. The Corporation’s consolidated financial statements for fiscal years 2023 and 2022 were authorized for issuance by the Board of Directors on February 7, 2024. 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. 104 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 2. SUMMARY OF MATERIAL 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 subsidiary, whose revenues or assets represent more than 10% of the revenues or more than 10% of the assets, is Learjet Inc. (located in U.S.). Revenues and assets of this subsidiary combined with those of Bombardier Inc. totaled 93% of consolidated revenues and 93% of consolidated assets for fiscal year 2023 (92% and 90% for fiscal year 2022, respectively). 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 mainly the U.S. dollar. 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. BOMBARDIER INC. / 2023 FINANCIAL REPORT 105 The exchange rates for the major currencies used in the preparation of the consolidated financial statements were as follows: Euro Canadian dollar Exchange rates as at December 31 2022 1.0662 0.7381 December 31 2023 1.1062 0.7559 Average exchange rates for fiscal years 2023 1.0813 0.7411 2022 1.0544 0.7691 Revenue recognition Manufacturing and Other – 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, if any, 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. The Corporation accounts for a significant financing component on orders where timing of cash receipts and revenue recognition differ substantially. There are certain orders related to aircraft 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. Revenues from the sale of pre-owned aircraft 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. Services – Aftermarket services are generally recorded 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. The expected benefits to be received are generally limited to the revenues from the associated contract. 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. Other – Revenues earned by the Corporation on the sale of components related to commercial aircraft programs are recognized at delivery. 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 progress billings on 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 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 are classified as cash flows from operating activities. 106 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Government assistance and refundable advances Government assistance, including wage subsidies and 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 incurred expenses is recorded as a reduction of the related expenses. Wage subsidies are recorded as a reduction of inventories or the related wage 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. 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 is computed using the treasury stock method, giving effect to the exercise of all dilutive elements. Financial instruments A financial instrument is any contract that gives rise to a financial asset of one party and a financial liability or equity instrument of another party. Financial assets of the Corporation include cash and cash equivalents, trade and other receivables, investments in securities, receivable from MHI, receivable from ACLP, restricted cash and derivative financial instruments with a positive fair value. Financial liabilities of the Corporation include trade and other payables, long-term debt, lease liabilities, government refundable advances, credit and residual value guarantees payable, vendor non-recurring costs and derivative financial instruments with a negative fair value. Financial instruments are recognized in the consolidated statement of financial position when the Corporation becomes a party to the contractual obligations of the instrument. On initial recognition, financial instruments are recognized at their fair value plus, in the case of financial instruments not at FVTP&L, transaction costs that are directly attributable to the acquisition or issuance 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) amortized 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. BOMBARDIER INC. / 2023 FINANCIAL REPORT 107 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, 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, receivable from MHI 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, long-term debt, certain government refundable advances, lease liabilities, 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 and contract assets 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 and certain government refundable advances. 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 Receivable from ACLP is 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. 108 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Derivative financial instruments – Derivative financial instruments are mainly used to manage the Corporation’s exposure to foreign exchange market risks, generally through forward foreign exchange contracts. 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. Call options 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. The Corporation applies the below hedging strategies. Cash flow hedges – The Corporation generally applies cash flow hedge accounting to forward foreign exchange contracts 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. The Corporation 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). 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 BOMBARDIER INC. / 2023 FINANCIAL REPORT 109 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 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 financial 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 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 testing. 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 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 asset, otherwise the Corporation continues to recognize the transferred asset on the statement of financial position 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. 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 110 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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 recognized on the consolidated statement of financial position is measured as 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 most of the plans using the projected unit credit method, and management’s best estimate of assumptions such as salary escalation, retirement ages, life expectancy, inflation, discount rates and health care costs, as applicable. 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 (recoveries) are generally recognized in income at the latest of i) the date of the plan amendment or curtailment or ii) the date that the Corporation recognized the restructuring costs. 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. 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 labor 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 labor costs based on the function of the employee accruing the benefits. Defined contribution plans Contributions to defined contribution plans are either recognized in net income as incurred or are capitalized as part of labor 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 labor 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. BOMBARDIER INC. / 2023 FINANCIAL REPORT 111 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 40 years 2 to 20 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 impairment and program termination. 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) 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. Intangible assets are recorded at cost less accumulated amortization and impairment losses and include aerospace program tooling, as well as other intangible assets such as goodwill, software and courseware. Other intangible assets are included in other assets. Amortization of aerospace program tooling begins at the date of completion of the first aircraft of the program. Amortization of other intangibles begins when the asset is ready for its intended use. Amortization expense is recognized as follows: Aerospace program tooling Other intangible assets Method Unit of production Straight-line Estimated useful life Expected number of aircraft to be produced(1) 3 to 5 years (1) As at December 31, 2023, 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 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. 112 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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 capitalized as part of the cost of that asset and are deducted from the financing expense to which they relate. The Corporation suspends the capitalization 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, right-of-use assets and intangible assets The Corporation assesses at each reporting date whether there are indicators that an item of PP&E, right-of-use asset or intangible asset may be impaired. If any indication exists based on internal and external factors, 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 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. Provisions Provisions are recognized 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 BOMBARDIER INC. / 2023 FINANCIAL REPORT 113 from third parties are recorded if their realization is virtually certain. Product warranties typically range from one to five years. Credit and residual value guarantees – Credit and residual value guarantees related to the sale of commercial 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. In connection with the sale of the CRJ business, credit and residual value guarantees provisions are included in a back-to-back agreement with MHI. Credit guarantees provide support through contractually limited payments to the guaranteed party to mitigate default-related losses. Credit guarantees are triggered if customers do not perform during the term of the financing. Residual value guarantees provide protection, through contractually limited payments, to the guaranteed parties in cases where the market value of the underlying asset falls below the guaranteed value. In most cases, these guarantees are provided as part of a financing arrangement. Restructuring provisions – Restructuring provisions are recognized only when the Corporation has an actual or a constructive obligation. The Corporation has a constructive obligation when a detailed formal plan identifies the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs and an appropriate timeline. Furthermore, the affected employees or worker councils must have been notified of the plan’s main features. Onerous contracts – If it is more likely than not that the unavoidable costs of meeting the obligations under a 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. Non-current assets (or disposal group) held for sale and discontinued operations Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. The criteria for held for sale classification is regarded as met only when the sale is highly probable, and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the plan to sell the asset and the sale expected to be completed within one year from the date of the classification. 114 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Non-current assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset or a disposal group, excluding finance costs and income tax expense. Property, plant and equipment and intangible assets are not depreciated or amortized once classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognized. The assets and liabilities of a disposal group classified as held for sale are presented separately as current items in the statement of financial position. A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co- ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as net income (loss) after tax from discontinued operations in the consolidated statements of income. 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 recognized 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. 3. 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. An accounting estimate and judgment is considered critical if: • the estimate requires us to make assumptions about matters that are highly uncertain at the time the estimate is made; and • we could have reasonably used different estimates in the current period, or changes in the estimate are reasonably likely to occur from period to period that would have a material impact on our financial condition, our changes in financial condition or our results of operations. BOMBARDIER INC. / 2023 FINANCIAL REPORT 115 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 could 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 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. 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. Aerospace program tooling – The Corporation assesses at each reporting date whether there are any indicators that Aerospace program tooling may be impaired. If any indicators of impairment exist, the Corporation estimates the recoverable amount of the relevant CGU. The assessment of indicators of impairment, and the calculation of recoverable amounts, when indicators exist, requires judgements, which are reviewed in detail as part of the budget and strategic plan process during the fourth quarter of 2023. For purposes of impairment testing, management also exercises judgment to identify independent cash inflows to identify CGUs by family of aircraft. In addition, estimation is required in the determination of the amortization of the Aerospace program tooling. Internal and external factors are considered in assessing whether indicators of impairment exist. If indicators of impairment exist, the recoverable amounts of the relevant CGUs are determined on fair value less costs of disposal, which are determined using forecasted future cash flows. The fair value measurements are categorized within Level 3 of the fair value hierarchy since the inputs used in the discounted cash flow model are Level 3 inputs (inputs that are not based on observable market data). The estimated future cash flows for the first five years are based on the budget and strategic plan. After the initial five years, long-range forecasts prepared by management are used. Internal and external factors are considered by management in exercising judgment in assessing whether indicators of impairment are present that would necessitate a quantitative impairment test. Factors include 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 aftermarket activities, procurement costs based on existing contracts with suppliers, future labor costs, general market conditions, foreign exchange rates, costs to complete the development activities, if any, potential upgrades and derivatives expected over the life of the program based on past experience with previous programs, and applicable long-range forecast income tax rates and a post-tax discount rate based on a weighted average cost of capital calculated using market-based inputs, available directly from financial markets or based on a benchmark sampling of representative publicly-traded companies in the aerospace sector. The same factors are used to determine the recoverable amount, when there are indicators of impairment. An impairment test was performed for the Global 7500 in the fourth quarter of 2023, 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: 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 2023. 116 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 An increase of 100-basis points in the discount rate used to perform the impairment test would not have resulted in an impairment charge in fiscal year 2023 for the Global 7500 aircraft program. 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 profits and availability of prudent tax planning strategies. See Note 9 - 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. 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 such as 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-term 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 five 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 4 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 4 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. Expected rates of compensation increases are determined considering the current salary structure, as well as historical and anticipated wage increases, in the context of current economic conditions. See Note 21 – Retirement benefits for further details regarding assumptions used and sensitivity analysis to changes in critical actuarial assumptions. BOMBARDIER INC. / 2023 FINANCIAL REPORT 117 4. SEGMENT DISCLOSURE The Corporation is structured under one reportable segment that designs, develops, manufactures and markets two families of business jets (Challenger and Global), spanning from the mid-size to large categories. The Corporation also provides aftermarket support for both of these aircraft, as well as for the Learjet family of aircraft(1). The Corporation has developed an aftermarket and support network of service facilities, including wholly-owned service centers, mobile response teams, and provides dedicated aircraft parts availability sustained by parts facilities, including depots, hubs and repair facilities worldwide. The Corporation’s revenues by categories were as follows, for fiscal years: Business Aircraft Manufacturing and Other(2) Services(3) Others(4) 2023 6,261 1,748 37 8,046 $ $ 2022 5,345 1,508 60 6,913 $ $ (1) The Corporation delivered its last Learjet aircraft in the first quarter of 2022. (2) Includes revenues from sale of new aircraft, specialized aircraft solutions and pre-owned aircraft. (3) Includes revenues from aftermarket services including parts, Smart Services, service centers, training and technical publications. (4) Includes revenues from sale of components related to commercial aircraft programs. 118 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 The Corporation’s revenues are allocated to countries based on the location of the customer, as follows for fiscal years: North America United States Canada Mexico Europe Isle of Man Germany United Kingdom France Sweden Malta Switzerland Other Asia-Pacific Australia India China Other Other Africa Central America Middle East Other Total 2023 2022 $ $ 5,089 567 64 5,720 265 201 184 149 94 76 20 463 1,452 202 95 20 148 465 223 126 28 32 409 8,046 $ $ 3,386 346 90 3,822 99 327 156 8 3 49 633 258 1,533 20 199 86 470 775 127 135 469 52 783 6,913 The Corporation’s PP&E, right-of-use assets and intangible assets are allocated(1) to countries, as follows: North America Canada United States Mexico Europe United Kingdom Germany Other Asia-Pacific Other December 31 December 31 2022 2023 $ 4,499 289 45 4,833 78 34 4 116 $ 4,656 274 37 4,967 80 34 6 120 70 5,019 $ 75 5,162 $ (1) PP&E, right-of-use assets and intangible assets, excluding goodwill, are attributed to countries based on the location of the assets. Goodwill is attributed to countries based on the Corporation’s allocation of the related purchase price. BOMBARDIER INC. / 2023 FINANCIAL REPORT 119 5. 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 6. OTHER EXPENSE (INCOME) Other expense (income)(1) was as follows, for fiscal years: System implementation related costs Pension related items(2) Losses (gains) on disposals of PP&E and intangible assets Sale of assets Other 2023 139 (96) 43 330 373 2023 20 3 1 — (9) 15 $ $ $ $ $ $ $ $ 2022 104 (73) 31 329 360 2022 — — (1) (7) (5) (13) (1) Special items and certain items of other expense (income) were mainly reclassified to gain related to disposal of business, impairment and program termination, and restructuring charges, including comparative figures. See Note 37 - Reclassification for more information. (2) Includes the loss related to the purchase of pension annuities. See Note 21 – Retirement benefits for more information. 120 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 7. FINANCING EXPENSE AND FINANCING INCOME Financing expense and financing income were as follows, for fiscal years: Financing expense Losses on repayments of long-term debt(1) Interest expense on lease liabilities Accretion on advances Accretion on other financial liabilities Accretion on net retirement benefit obligations Accretion on provisions Changes in discount rates of provisions Net loss on certain financial instruments(2) Other Interest on long-term debt Financing income Net gain on certain financial instruments(2) Changes in discount rates of provisions Gains on repayment of long-term debt(1) Other 2023 2022 $ $ $ $ 54 40 32 26 25 2 1 — 19 199 395 594 (3) $ $ (160) — — (2) (162) — 32 26 31 31 2 — 228 4 354 463 817 (3) — (2) (1) (9) (12) Interest on cash and cash equivalents Income from investments in securities (18) (3) (21) (33) (4) (1) Represents the losses related to the full repayment of the Senior Notes due 2024 and 2025 and the partial repayment of the Senior Notes due 2026 and 2027 for fiscal year 2023 (the gains related to the partial repayment of the Senior Notes due 2024, 2025 and 2027 for fiscal year 2022). Refer to Note 26 – Long-term debt for more information. (35) (5) (40) (202) (4) $ $ (2) Net losses (gains) on certain financial instruments classified as FVTP&L, which includes call options on long-term debt. (3) Of which $421 million represents the interest expense calculated using the effective interest rate method for financial liabilities classified as amortized cost for fiscal year 2023 ($494 million for fiscal year 2022). (4) Of which $35 million represents the interest income calculated using the effective interest rate method for financial assets classified as amortized cost and FVOCI for fiscal year 2023 ($18 million for fiscal year 2022). Borrowing costs capitalized to PP&E and intangible assets totaled $37 million for fiscal year 2023, using an average capitalization rate of 7.48% ($28 million and 7.52% for fiscal year 2022). Capitalized borrowing costs are deducted from the related interest on long-term debt or accretion on other financial liabilities, if any. 8. 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 Notes 21 28 2023 1,539 127 24 1,690 $ $ 2022 1,362 151 19 1,532 $ $ (1) Employee benefit costs include costs capitalized as part of the cost of inventories and other self-constructed assets and exclude the impact of the wage subsidies. (2) Includes defined benefit and defined contribution plans. BOMBARDIER INC. / 2023 FINANCIAL REPORT 121 9. INCOME TAXES Analysis of income tax expense (recovery) Details of income tax expense (recovery) were as follows, for fiscal years: Current income taxes Deferred income taxes 2023 16 (105) (89) $ $ 2022 5 (123) (118) $ $ The reconciliation of income taxes, computed at the Canadian statutory rates, to income tax recovery was as follows, for fiscal years: EBT Canadian statutory tax rate Income tax expense (recovery) at statutory rate Increase (decrease) resulting from: Recognition of previously unrecognized tax losses or temporary differences Permanent differences Write-down of deferred income tax assets Non-recognition of tax benefits related to tax losses and temporary differences Other Income tax recovery Effective tax rate $ $ 2023 401 26.5 % 106 (237) (34) 62 7 7 (89) (22.2) % $ $ 2022 (246) 26.5 % (65) (189) 117 11 10 (2) (118) 48.0 % 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: Recognition of previously unrecognized tax losses or temporary differences Write-down of deferred income tax assets Origination and reversal of temporary differences Non-recognition of tax benefits related to tax losses and temporary differences 2023 (237) 62 63 7 (105) $ $ 2022 (189) 11 45 10 (123) $ $ 122 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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 Inventories Intangible assets Retirement benefits Provisions Contract liabilities Other financial liabilities and other liabilities PP&E Other financial assets and other assets Other Unrecognized deferred tax assets $ $ $ December 31, 2023 Liability — — — — — — — — — — — — — Asset 2,253 591 270 155 123 80 13 8 (9) 16 3,500 (3,045) 455 $ The changes in the net deferred income tax asset were as follows, for the fiscal years: Balance at beginning of year, net In net income In OCI Cash flow hedges Balance at end of year, net $ December 31, 2022 Liability — — — — — — — — — — — — — Asset 2,325 581 212 97 135 37 33 10 12 38 3,480 (3,099) 381 $ 2023 381 105 (31) 455 $ $ 2022 250 123 8 381 $ $ $ $ The net operating losses carried forward and deductible temporary differences for which deferred tax assets have not been recognized amounted to $11,614 million as at December 31, 2023, of which $565 million relates to retirement benefits that will reverse through OCI ($11,623 million as at December 31, 2022 of which $342 million relates to retirement benefits that will reverse through OCI). Of these amounts, approximately $3,098 million as at December 31, 2023 has no expiration date ($3,519 million as at December 31, 2022) and approximately $151 million relates to the Corporation’s operations in U.K. where a minimum income tax is payable on 50% of taxable income ($136 million as at December 31, 2022), $137 million relates to the Corporation’s operations in Germany where a minimum income tax is payable on 40% of taxable income ($131 million as at December 31, 2022) and $9 million relates to the Corporation’s operations in France where a minimum income tax is payable on 50% of taxable income ($7 million as at December 31, 2022). In addition, the Corporation has $1,072 million of unused investment tax credits which has not been recognized, most of which can be carried forward for 20 years and $1,047 million of net capital losses carried forward for which deferred tax assets have not been recognized ($1,076 million and $1,115 million as at December 31, 2022). Net capital losses can be carried forward indefinitely and can only be used against future taxable capital gains. Net deferred tax assets of $359 million were recognized as at December 31, 2023 ($356 million as at December 31, 2022) in jurisdictions that incurred losses this fiscal year or the preceding fiscal year. Based upon the level of historical income, projections for future 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 3 – 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 BOMBARDIER INC. / 2023 FINANCIAL REPORT 123 liability was not recognized amount to approximately $10 million as at December 31, 2023 and as at December 31, 2022. International Tax Reform - Pillar two model rules In May 2023, the IASB amended IAS 12, Income taxes, for the International tax reform - Pillar two Model Rules. The amendments to IAS 12 have been introduced in response to the Organization for Economic Co-operation and Development’s BEPS Pillar Two rules and include a mandatory temporary exception to the recognition and disclosure of deferred taxes arising from the jurisdictional implementation of the Pillar Two model rules and disclosure requirements for affected entities. The mandatory temporary exception and disclosure requirements apply immediately for annual reporting periods beginning on or after January 1, 2023, which have been adopted by the Corporation as at December 31, 2023. The adoption of this amendment, the enactment of the Pillar Two legislation in the UK and the proposed Pillar Two legislation in certain jurisdictions the Corporation operates in is not expected to have a significant impact on the consolidated financial statements of the Corporation. 10. 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) Continuing operations Discontinued operations(1) 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 and warrants Weighted-average diluted number of common shares EPS (in dollars) Continuing operations - basic Continuing operations - diluted Discontinued operations - basic(1) Discontinued operations - diluted(1) Total basic Total diluted 2023 2022 $ $ $ $ $ $ $ $ 490 (45) (31) 414 95,531 2,190 97,721 4.81 4.70 (0.47) (0.46) 4.34 4.24 $ $ $ $ $ $ $ $ (128) (20) (29) (177) 94,496 — 94,496 (1.67) (1.67) (0.21) (0.21) (1.88) (1.88) (1) Discontinued operations are related to the sale of the Transportation business. The expenses recorded in discontinued operations for fiscal years 2023 and 2022 principally relate to change in estimates of a provision for professional fees. 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 2,668,784 for fiscal year 2023 (12,056,358 for fiscal year 2022) 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. 124 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 11. 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 Required to be classified as FVTP&L Embedded derivatives and other 2023 2022 $ $ (5) 35 $ $ (5) 18 $ 160 $ (228) Carrying amounts and fair value of financial instruments The classification of financial instruments and their carrying amounts and fair value were as follows, as at: December 31, 2023 Financial assets Cash and cash equivalents Trade and other receivables Other financial assets Financial liabilities Trade and other payables Long-term debt Other financial liabilities December 31, 2022 Financial assets Cash and cash equivalents Trade and other receivables Other financial assets Financial liabilities Trade and other payables Long-term debt Other financial liabilities FVTP&L FVTP&L Designated FVOCI(1) Amortized cost Total carrying DDHR value Fair value $ $ $ $ $ $ $ $ — — 575 575 — — 1 1 — — 606 606 — — 1 1 $ $ $ $ $ $ $ $ — — — — — — 359 359 — — — — — — 547 547 $ $ $ $ — — 109 109 n/a n/a n/a n/a — — 235 235 n/a n/a n/a n/a $ 1,594 258 112 $ 1,964 $ 1,820 5,607 753 $ 8,180 $ — — 58 58 $ $ — — 7 7 $ $ 1,594 258 854 $ 2,706 $ 1,820 5,607 1,120 $ 8,547 $ 1,291 252 522 $ 2,065 $ 1,286 5,980 917 $ 8,183 $ — — 8 8 $ $ — — 87 87 $ $ 1,291 252 1,371 $ 2,914 $ 1,286 5,980 1,552 $ 8,818 $ 1,594 258 854 $ 2,706 $ 1,820 5,746 1,129 $ 8,695 $ 1,291 252 1,371 $ 2,914 $ 1,286 5,875 1,558 $ 8,719 (1) Includes investments in equity instruments designated at FVOCI. BOMBARDIER INC. / 2023 FINANCIAL REPORT 125 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: Amount recognized in the financial statements Amounts subject to master netting agreements Net amount not subject to master netting agreements Description of recognized financial assets and liabilities December 31, 2023 Derivative financial instruments - assets Derivative financial instruments - liabilities Cash and cash equivalents December 31, 2022 Derivative financial instruments - assets Derivative financial instruments - liabilities Cash and cash equivalents $ $ $ $ $ $ Derivatives and hedging activities The carrying amounts of all derivative were as follows, as at: 274 (8) 1,594 69 (88) 1,291 $ $ $ $ $ $ (8) 8 — (13) 43 (30) $ $ $ $ $ $ 266 — 1,594 56 (45) 1,261 December 31, 2023 Liabilities Assets December 31, 2022 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 Embedded derivative financial instruments Call options on long-term debt Total derivative financial instruments $ $ 58 $ 12 204 216 274 $ 7 1 — 1 8 $ $ 8 5 56 61 69 $ $ 87 1 — 1 88 (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 24 months as at December 31, 2023. (2) Held as economic hedges, except for embedded derivative financial instruments. The methods and assumptions used to measure the fair value of financial instruments are described in Note 33 – Fair value of financial instruments. 126 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 12. CASH AND CASH EQUIVALENTS Cash and cash equivalents were as follows, as at: Cash Cash equivalents Money market funds Term deposits Cash and cash equivalents 13. TRADE AND OTHER RECEIVABLES Trade and other receivables were as follows, as at: December 31, 2023 264 $ December 31, 2022 693 $ 1,319 11 1,594 $ 598 — 1,291 $ Total Not past due Past due but not impaired more than less than 90 days 90 days Impaired (2) December 31, 2023(1) Trade receivables, gross Allowance for doubtful accounts $ Other Total December 31, 2022(1) Trade receivables, gross Allowance for doubtful accounts Other Total $ $ $ $ $ $ $ 256 (5) 251 7 258 257 (12) 245 7 252 183 — 183 190 — 190 $ $ $ $ 51 — 51 43 — 43 $ $ $ $ 5 — 5 9 — 9 $ $ $ $ 17 (5) 12 15 (12) 3 (1) Of which $21 million and $13 million are denominated in Euros and other foreign currencies, respectively, as at December 31, 2023 ($14 million and $18 million, respectively, as at December 31, 2022). (2) Of which a gross amount of $2 million of trade receivables are individually impaired as at December 31, 2023 ($10 million as at December 31, 2022). The factors that the Corporation considers to classify trade receivables as impaired are as follows: the customer is in bankruptcy or under administration, payments are in dispute, or payments are in arrears. Further information on financial risk is provided in Note 32 – Financial risk management. Allowance for doubtful accounts – Changes in the allowance for doubtful accounts were as follows, for fiscal years: Balance at beginning of year Provision for doubtful accounts Amounts written-off Recoveries Balance at end of year 2023 (12) (5) 10 2 (5) $ $ 2022 (22) (5) 6 9 (12) $ $ BOMBARDIER INC. / 2023 FINANCIAL REPORT 127 14. CONTRACT BALANCES Contract assets represent cost incurred and recorded margins on service contracts in the amount of $84 million and $67 million as at December 31, 2023 and December 31, 2022, respectively. Contract liabilities were as follows, as at: Advances on aerospace programs Long-term service contracts deferred revenues Other deferred revenues Of which current Of which non-current Revenues recognized were as follows, for fiscal years: Revenue recognized from: Contract liability balance at the beginning of the year Advances on aerospace programs 15. INVENTORIES Inventories were as follows, as at: Aerospace programs Finished products $ December 31, 2023 4,225 277 162 4,664 3,455 1,209 4,664 $ $ $ December 31, 2022 4,306 $ 265 163 4,734 3,290 1,444 4,734 $ $ $ 2023 2022 $ $ 3,138 3,138 $ $ 2,467 2,467 $ December 31, 2023 3,159 609 3,768 $ December 31, 2022 2,826 $ 496 3,322 $ The amount of inventories recognized as cost of sales totaled $5,644 million for fiscal year 2023 ($4,898 million for fiscal year 2022). This amount includes $41 million of write-downs for fiscal year 2023 ($27 million for fiscal year 2022) and $1 million of reversal of write-downs for fiscal year 2023 ($7 million for fiscal year 2022). 16. 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 unexercised options or letters of intent. Revenues from continuing operations expected to be recognized in: (In billions of $) Less than 24 months Thereafter Total $ December 31, 2023 10.0 4.2 14.2 $ December 31, 2022 10.5 $ 4.3 14.8 $ 128 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 17. OTHER FINANCIAL ASSETS Other financial assets were as follows, as at: Receivable from ACLP(1) Derivative financial instruments(2) Investments in securities(3) Restricted cash(4) Receivable from MHI(5) Investments in financing structures(6) Other Of which current Of which non-current $ December 31, 2023 359 274 109 77 29 — 6 854 97 757 854 $ $ $ $ December 31, 2022 341 69 235 478 26 204 18 1,371 472 899 1,371 $ $ $ (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 24 – Other financial liabilities for more information. (2) See Note 11 – Financial instruments. (3) Includes nil of equity instruments designated at FVOCI as at December 31, 2023 ($38 million as at December 31, 2022). (4) Includes cash collateral supporting various bank guarantees. In January 2023, the bank guarantees issued in connection with the sale of Transportation to Alstom expired without being drawn and the restricted cash collateralized against these guarantees was released to the Corporation. (5) This receivable represents a back-to-back agreement that the Corporation has with MHI on credit and residual value guarantees payable of $29 million as at December 31, 2023 ($26 million as at December 31, 2022). See Note 24 – Other financial liabilities for more information. (6) Following the sale of the CRJ business, the Corporation had previously retained a portion of these other financial assets and had a back-to- back agreement with MHI. In fiscal year 2023, the Corporation has transferred the legal title of these assets and MHI has assumed the related liabilities. See Note 24 – Other financial liabilities for more information. 18. OTHER ASSETS Other assets were as follows, as at: Prepaid expenses Retirement benefits(1) Sales tax and other taxes Intangible assets other than aerospace program tooling(2) Prepaid sales concessions and deferred contract costs Other(3) Of which current Of which non-current $ December 31, 2023 175 143 87 78 8 13 504 133 371 504 $ $ $ $ December 31, 2022 131 180 90 75 15 62 553 181 372 553 $ $ $ (1) See Note 21 – Retirement benefits. (2) See Note 20 – Intangible assets. (3) Includes $2 million of receivable from MHI that represents a back-to-back agreement that the Corporation has with MHI on credit and residual value guarantees provisions as at December 31, 2023 ($1 million as at December 31, 2022). See Note 23 – Provisions. BOMBARDIER INC. / 2023 FINANCIAL REPORT 129 19. PROPERTY, PLANT AND EQUIPMENT PP&E were as follows, as at: Land Buildings Equipment Construction in progress Other Total Right-of- use assets Total Cost Balance as at December 31, 2022 Additions Disposals Transfers Effect of foreign currency exchange rate changes — $ 18 $ — — (2) 809 $ 586 $ — (1) 392 — 81 (130) 96 — 392 $ 240 — (486) 32 — 1 9 $ 1,814 $ 353 (131) 1 545 $ 2,359 381 (142) — 28 (11) (1) — — — 1 1 Balance as at December 31, 2023 $ 16 $ 1,200 $ 633 $ 146 $ 42 $ 2,037 $ 562 $ 2,599 Accumulated amortization and impairment Balance as at December 31, 2022 $ — $ — — — (495) $ (24) 1 (3) Amortization Disposals Transfers Balance as at December 31, 2023 Net carrying value $ — $ $ 16 $ (521) $ 679 $ (492) $ (36) 8 5 (515) $ 118 $ (8) $ (995) $ (4) — $ — — — — (2) (64) 9 — (150) $ (1,145) (95) 16 — (31) 7 — — $ 146 $ (14) $ (1,050) $ 28 $ 987 $ (174) $ (1,224) 388 $ 1,375 Cost Balance as at January 1, 2022 Land Buildings Equipment Construction in progress Other Total Right-of- use assets Total $ 13 $ 798 $ 589 $ 180 $ 9 $ 1,589 $ 345 $ 1,934 Additions Disposals Transfers Effect of foreign currency exchange rate changes — 5 — — Balance as at 5 (24) 30 — 165 (179) 11 — — 247 — — (35) — 422 (203) 6 214 (7) (6) 636 (210) — — — — (1) (1) December 31, 2022 $ 18 $ 809 $ 586 $ 392 $ 9 $ 1,814 $ 545 $ 2,359 Accumulated amortization and impairment Balance as at January 1, 2022 Amortization Disposals Transfers Balance as at — — — $ — $ (486) $ (474) $ — $ (8) $ (968) $ (129) $ (1,097) (19) 12 (2) (35) 18 (1) — — — — — — (54) 30 (3) (28) 4 3 (82) 34 — December 31, 2022 Net carrying value $ — $ $ 18 $ (495) $ 314 $ (492) $ 94 $ — $ 392 $ (8) $ (995) $ 1 $ 819 $ (150) $ (1,145) 395 $ 1,214 The net carrying value of right-of-use assets was as follows, as at: Buildings Land Equipment $ December 31, 2023 December 31, 2022 342 53 — 395 329 50 9 388 $ $ $ 130 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Amortization expense and impairment of right-of-use assets were as follows, for fiscal years: Buildings Land $ $ 2023 26 5 31 $ $ 2022 25 3 28 The expense related to short-term leases and low value leases amounted to $4 million for fiscal year 2023 ($3 million for fiscal year 2022). 20. INTANGIBLE ASSETS Intangible assets were as follows, as at: Aerospace program tooling Other (1)(2) Total Cost Balance as at December 31, 2022 Additions Acquired Internally generated Total $ 1,632 $ 5,461 $ 7,093 $ 11 85 96 Balance as at December 31, 2023 $ 1,643 $ 5,546 $ 7,189 $ Accumulated amortization and impairment Balance as at December 31, 2022 $ (803) $ (2,417) $ (3,220) $ Amortization Impairment Balance as at December 31, 2023 Net carrying value (77) — (253) (73) (330) (73) $ $ (880) $ (2,743) $ (3,623) $ 763 $ 2,803 $ 3,566 $ 262 9 271 (187) (6) — (193) 78 $ 7,355 105 $ 7,460 $ (3,407) (336) (73) $ (3,816) $ 3,644 Aerospace program tooling Other (1)(2) Total Acquired Internally generated Total Cost Balance as at January 1, 2022 $ 1,762 $ 7,914 $ 9,676 $ Additions Disposals Effect of foreign currency exchange rate changes — (130) — 73 (2,526) — 73 (2,656) — Balance as at December 31, 2022 $ 1,632 $ 5,461 $ 7,093 $ Accumulated amortization and impairment Balance as at January 1, 2022 $ (854) $ (4,693) $ (5,547) $ Amortization Impairment Disposals Balance as at December 31, 2022 Net carrying value $ $ (250) — 2,526 (79) — 130 (803) $ (2,417) $ (3,220) $ 829 $ 3,044 $ 3,873 $ (329) — 2,656 316 11 (64) (1) 262 (244) (4) (3) 64 (187) 75 $ 9,992 84 (2,720) (1) $ 7,355 $ (5,791) (333) (3) 2,720 $ (3,407) $ 3,948 (1) Presented in Note 18 – Other assets. (2) Includes internally generated intangible assets with a cost and accumulated amortization of $180 million and $135 million, respectively, as at December 31, 2023 ($180 million and $130 million, respectively, as at December 31, 2022). BOMBARDIER INC. / 2023 FINANCIAL REPORT 131 21. RETIREMENT BENEFITS The Corporation sponsors several funded and unfunded defined benefit pension plans as well as defined contribution pension plans in Canada, U.S., 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 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 two countries. Governance Under applicable pension legislation, 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 in the case of plans registered in Québec. 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. With respect to the plans registered in Québec, the pension committees have delegated the management of plan assets to the Corporation. The Corporation has selected an outsourced investment management firm (the “OCIO Provider”) for the management of the assets for each plan. Assets of each plan are invested in common investment funds (the “CIF”) offered by the OCIO Provider. The CIF are unitized multi-manager funds organized by asset class. This allows each plan to have its own target asset allocation as determined by the plan administrators. Daily administration of the plans is delegated to external pension administration service providers. The plan administrators and the Corporation also rely on the expertise of external legal advisors, actuaries, and investment consultants. 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. 132 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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 legislation. 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 in Canada. 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 Québec 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 10 years. Funding is based on 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 10 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 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, the Pension Protection Act of 2006 and subsequent legislation including the American Rescue Plan Act, which was passed in 2021. 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 15 years (funding deficits were amortized over 7 years before the American Rescue Plan Act). 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, 2023, the asset allocation was as follows: - Canadian plans: 52% in fixed income securities, 41% in equity securities and cash, and 7% in real return assets securities; and - U.S. plans: 31% in fixed income securities, 56% in equity securities and cash, 3% in real return assets securities and 10% in others which include derivatives and private assets. In addition, a customized liability driven investment strategy (the “LDI strategy”) has been implemented for the U.S. plans to reduce the sensitivity of the plan financial position to variation of interest rates. BOMBARDIER INC. / 2023 FINANCIAL REPORT 133 The plan administrators have also established dynamic risk management strategies. As a result, asset allocation will likely become more conservative in the future as plan funding status and market conditions continue to improve and the plans become more mature. Under certain pension legislation, 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, 2019 and 2023, annuities were purchased for some pensioners, beneficiaries and deferred vested members of the Bombardier pension plans registered in Ontario. In 2022, annuities were purchased for some pensioners, beneficiaries and alternate payees of the Bombardier pension plan registered in the U.S. 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. 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 by implementing LDI strategies. Inflation risk Inflation risk is the risk that benefits indexed to inflation increase as a result of changes in inflation rates. To manage this risk, the benefit indexation has been capped in certain plans and a portion of plan assets has been invested in real return asset securities. 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 limiting 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. 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. 134 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 DC PLANS A growing proportion of employees are participating in DC plans. The largest DC plans are located in Canada and in the U.S. The plan administrators and the investment committee 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 and in the U.S. New non-unionized hires are generally no longer offered post-retirement health care. 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 Settlement(1) 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 56 $ 18 2 3 79 39 118 $ $ $ $ $ $ 71 8 39 100 18 Other benefits 2 7 — — 9 — 9 $ $ n/a 9 n/a 2 7 $ $ $ 2023 Total Pension benefits 82 25 7 — 114 28 142 58 $ 25 2 3 88 39 127 $ 71 $ 17 $ 39 $ 110 4 28 102 $ 25 $ 117 25 $ $ $ $ $ $ $ Other benefits 3 6 — — 9 — 9 n/a 9 n/a 3 6 $ $ $ $ $ $ $ $ $ $ $ $ 2022 Total 85 31 7 — 123 28 151 110 13 28 120 31 (1) Includes the loss related to the purchase of pension annuities presented in Note 6 - Other expense (income). Represents the non-cash loss on the settlement of defined benefit pension plans resulting from the purchase of annuities with insurance companies. 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, 2022 Actuarial gains, net Effect of exchange rate changes Income taxes Balance as at December 31, 2022 Actuarial losses, net Effect of exchange rate changes Income taxes Balance as at December 31, 2023 $ $ (2,557) 540 25 — (1,992) (217) (10) — (2,219) BOMBARDIER INC. / 2023 FINANCIAL REPORT 135 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 2023 Total Pension benefits Other benefits 2022 Total Change in benefit obligation Obligation at beginning of year Accretion Current service cost Plan participants’ contributions Past service cost Actuarial (gains) losses - changes in financial assumptions Actuarial (gains) losses - changes in experience adjustments Actuarial (gains) losses - changes in demographic assumptions Benefits paid Settlement Other Effect of exchange rate changes Obligation at end of year Obligation is attributable to Active members Deferred members Retirees Change in plan assets Fair value at beginning of year Employer contributions Plan participants’ contributions Interest income on plan assets Actuarial gains (losses) Benefits paid Settlement Administration costs Other Effect of exchange rate changes Fair value at end of year $ 3,656 196 56 12 2 311 43 — (192) (207) (1) (1) 76 $ 3,952 $ 1,789 348 1,815 $ 3,952 $ 3,379 71 12 178 151 (192) (210) (1) (9) (1) 71 $ 3,450 $ $ $ $ $ $ 141 7 2 — — 14 — — (10) — — 4 158 59 — 99 158 — 10 — — — (10) — — — — — $ $ 3,797 203 58 12 2 $ 5,189 165 82 11 7 201 6 3 — — $ 5,390 171 85 11 7 (1,360) (48) (1,408) 325 43 5 — (202) (207) (1) 80 $ 4,110 10 (200) (35) — (218) $ 3,656 $ 1,848 348 1,914 $ 4,110 $ 1,571 357 1,728 $ 3,656 $ 3,379 81 12 178 151 (202) (210) (9) (1) 71 $ 3,450 $ 4,442 83 11 140 (852) (200) (35) (10) — (200) $ 3,379 $ $ $ $ $ 1 — (13) — — (9) 141 56 — 85 141 — 13 — — — (13) — — — — — 6 10 (213) (35) — (227) $ 3,797 $ 1,627 357 1,813 $ 3,797 $ 4,442 96 11 140 (852) (213) (35) (10) — (200) $ 3,379 (1) Includes the loss related to the purchase of pension annuities presented in Note 6 - Other expense (income). Represents the non-cash loss on the settlement of defined benefit pension plans resulting from the purchase of annuities with insurance companies. 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 Net amount recognized Amounts included in: Retirement benefit Liability Asset(1) Net liability (1) Presented in Note 18 – Other assets. $ $ $ $ December 31, 2023 Other benefits 158 — 158 Pension benefits 3,952 (3,450) 502 $ $ 645 (143) 502 $ $ 158 — 158 December 31, 2022 Other benefits 141 — 141 Pension benefits 3,656 (3,379) 277 $ $ 457 (180) 277 $ $ 141 — 141 $ $ $ $ 136 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 The following table presents the allocation of the net retirement benefit liability by major countries, as at: Funded pension plans Canada U.S. Unfunded pension plans Canada U.S. Germany Other Net liability December 31, 2023 Other benefits Pension benefits December 31, 2022 Other benefits Pension benefits $ $ 234 185 419 20 26 28 9 83 502 $ $ — — — 154 4 — — 158 158 $ $ 52 153 205 19 25 24 4 72 277 $ $ — — — 136 5 — — 141 141 The following table presents the allocation of benefit obligation and plan assets by major countries, as at: Funded pension plans Canada U.S. Unfunded pension plans December 31, 2023 Plan assets Benefit obligation December 31, 2022 Benefit obligation Plan assets $ $ 3,234 635 3,869 241 4,110 $ $ 3,000 450 3,450 — 3,450 $ $ 3,008 576 3,584 213 3,797 $ $ 2,956 423 3,379 — 3,379 BOMBARDIER INC. / 2023 FINANCIAL REPORT 137 The fair value of plan assets by level of hierarchy was as follows, as at: Cash and cash equivalents Equity Funds Canada U.S. Fixed-income Funds and securities Canada U.S. Real return assets equity Funds Canada U.S. Private Investment Other Cash and cash equivalents Equity Funds Canada U.S. Fixed-income Funds Canada U.S. Real return assets equity Funds Canada U.S. Other Total 72 Level 1 — $ $ $ 1,091 189 1,280 1,516 137 1,653 193 14 207 11 227 3,450 Total 197 949 176 1,125 1,514 133 1,647 208 14 222 188 3,379 — — — — — — — — — — — — Level 1 — — — — — — — — — — — — $ $ $ $ $ $ $ $ $ December 31, 2023 Level 3 — Level 2 72 $ 1,091 189 1,280 1,516 137 1,653 193 14 207 — 227 3,439 $ — — — — — — — — — 11 — 11 December 31, 2022 Level 3 — Level 2 197 $ 949 176 1,125 1,514 133 1,647 208 14 222 188 3,379 $ — — — — — — — — — — — 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, 2023, and December 31, 2022. The following table presents the contributions made for fiscal years 2023 and 2022 as well as the estimated contributions for fiscal year 2024: Contributions to: Funded pension plans Unfunded pension plans Other benefits Total defined benefits plans DC pension plans Total contributions 2024 Estimated 2023 2022 $ $ 111 3 10 124 39 163 $ $ 67 4 10 81 39 120 $ $ 80 3 13 96 28 124 138 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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, 2023 $ $ 190 833 1,251 1,450 1,543 5,267 The following table provides the weighted-average duration of the defined benefit obligation related to pension plans, as at: Duration in years Funded pension plans Canada U.S. Unfunded pension plans Germany Mexico U.S. Canada December 31, 2023 14.1 12.2 21.0 12.9 12.3 11.1 The following table provides the expected payments to be made under the unfunded plans, as at December 31, 2023: 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 Canada Other Total $ $ 8 37 54 56 54 209 $ $ 3 13 20 27 39 102 $ $ 11 50 74 83 93 311 BOMBARDIER INC. / 2023 FINANCIAL REPORT 139 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 December 31, 2023 Other benefits Pension benefits December 31, 2022 Other benefits Pension benefits 5.31 % 3.10 % 2.13 % n/a 4.68 % 3.09 % 2.13 % n/a n/a 5.30 % 3.00 % n/a 5.02 % 4.61 % 3.00 % n/a 5.09 % 5.03 % 3.14 % 3.04 % 2.08 % n/a 5.31 % 3.10 % 2.13 % n/a n/a 3.19 % 3.00 % n/a 5.03 % 5.30 % 3.00 % n/a 5.12 % 5.02 % 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") with adjustment U.S. Pri-2012 mortality table projected generationally using the MP-2021 improvement scale Germany Dr. K Heubeck 2018 G without any adjustment Life expectancy over 65 for a male member currently Aged 45 on December 2022 Aged 65 on December 2022 2023 2023 22.2 20.7 20.9 22.2 20.6 20.8 23.2 22.2 23.6 23.2 22.1 23.5 Life expectancy over 65 for a female member currently Country Canada Mortality tables 2014 Private Sector Mortality Table ("CPM2014Priv") projected generationally using CPM Improvement Scale B ("CPM-B") with adjustment U.S. Pri-2012 mortality table projected generationally using the MP-2021 improvement scale Germany Dr. K Heubeck 2018 G without any adjustment Aged 65 on December 2022 2023 Aged 45 on December 2022 2023 24.6 22.7 24.3 24.5 22.6 24.2 25.5 24.1 26.5 25.5 24.0 26.4 A 0.25 percentage point increase in one of the following actuarial assumptions would have the following effects, all other actuarial assumptions remaining unchanged, for the fiscal year 2023 and as at December 31, 2023: Assumption Discount rate Rate of compensation increase Rate of price inflation Retirement benefit cost Net retirement benefit liability $ $ $ (11) 1 — $ $ $ (137) 13 1 A one year additional life expectancy as at December 31, 2023 for all DB plans would increase the net retirement benefit liability by $7 million and the retirement benefit cost by $100 million. As at December 31, 2023, 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 5.09% and to decrease progressively to 5.03% by calendar year 2031 and then remain at that level for all participants. 140 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 A one percentage point change in assumed health care cost trend rates would have the following effects, for the fiscal year 2023 and as at December 31, 2023: One percentage point increase One percentage point decrease 22. TRADE AND OTHER PAYABLES Trade and other payables were as follows, as at: Trade payables Accrued liabilities Interest payable Other Retirement benefit cost 1 (1) $ $ Net retirement benefit liability 10 (9) $ $ December 31, 2023 1,554 $ 37 88 141 1,820 $ $ December 31, 2022 1,040 38 88 120 1,286 $ BOMBARDIER INC. / 2023 FINANCIAL REPORT 141 23. PROVISIONS Changes in provisions were as follows, for fiscal years 2023 and 2022: Balance as at December 31, 2022 Additions Utilization Reversals Accretion expense Effect of changes in discount rates Balance as at December 31, 2023 Of which current Of which non-current Balance as at January 1, 2022 Additions Utilization Reversals Accretion expense Effect of changes in discount rates Balance as at December 31, 2022 Of which current Of which non-current $ Product warranties 184 84 (41) (89) (2) 1 1 140 66 74 140 $ $ $ $ Product warranties 166 83 (35) (29) 1 (2) 184 63 121 184 $ $ $ $ Credit and residual value guarantees 1 $ 2 — (1) — — 2 (4) $ — $ 2 2 Onerous contracts 36 2 (13) (12) (2)(3) 1 — 14 2 12 14 $ $ $ $ Credit and residual value guarantees 52 $ — (1) (50) — — 1 (4) $ 1 $ — 1 Onerous contracts 70 $ 14 (37) (12) (3) 1 — 36 7 29 36 $ $ $ $ Other (1) 13 3 (2) (2) — — 12 10 2 12 Other (1) 42 5 (9) (25) (2) — — 13 11 2 13 $ $ $ $ $ $ $ $ Total 234 91 (56) (104) 2 1 168 78 90 168 Total 330 102 (82) (116) 2 (2) 234 82 152 234 $ $ $ $ $ $ $ $ (1) Mainly comprised of claims and litigation. (2) Includes changes in divestitures provisions. (3) Includes reversal of Learjet 85 aircraft program cancellation provisions. (4) Following the sale of the CRJ business, the Corporation retains those provisions and has a back-to-back agreement with MHI. See Note 18 – Other assets. 142 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 24. OTHER FINANCIAL LIABILITIES Other financial liabilities were as follows, as at: Government refundable advances(1) Lease liabilities Credit and residual value guarantees payable(2) Derivative financial instruments(3) Vendor non-recurring costs Liabilities related to RASPRO assets(4) Other(5) Of which current Of which non-current December 31, 2023 520 $ 448 48 8 3 — 93 1,120 148 972 1,120 $ $ $ $ December 31, 2022 507 448 164 88 20 206 119 1,552 345 1,207 1,552 $ $ $ (1) Of which $359 million has a back-to-back agreement with ACLP as at December 31, 2023 ($341 million as at December 31, 2022). Refer to Note 17 – Other financial assets for the receivable from ACLP. The Corporation is required to pay amounts to governments based on the number of deliveries of aircraft. (2) Of which $29 million has a back-to-back agreement with MHI as at December 31, 2023 ($26 million as at December 31, 2022). Refer to Note 17 – Other financial assets for more information. (3) See Note 11 – Financial instruments. (4) The Corporation had previously retained the regional aircraft securitization program assets (RASPRO) for which the Corporation transferred the net beneficial interest through a back-to-back agreement with MHI. In fiscal year 2023, the Corporation has transferred the legal title of RASPRO assets and MHI has assumed the related liabilities. Refer to Note 17 – Other financial assets. (5) Mainly represent liabilities related to various divestitures. The Corporation has entered into leases for which the asset is still under construction, and therefore the right-of- use assets and the lease liabilities related to these leases are not recorded as at December 31, 2023, since the lease has not yet commenced. The Corporation’s undiscounted lease commitments were as follows, as at: Less than 1 year From 1 to 3 years Thereafter 25. OTHER LIABILITIES Other liabilities were as follows, as at: Employee benefits(1) Supplier contributions to aerospace programs Sales incentive and customer credit notes Income taxes payable Other Of which current Of which non-current December 31, 2023 287 $ 198 72 36 87 680 437 243 680 $ $ $ December 31, 2023 — $ 1 53 54 $ $ December 31, 2022 281 228 73 32 88 702 434 268 702 $ $ $ (1) Comprises all employee benefits excluding those related to retirement benefits, which are reported in the line items Retirement benefits and in Other assets, refer to Note 21 – Retirement benefits. BOMBARDIER INC. / 2023 FINANCIAL REPORT 143 26. LONG-TERM DEBT Long-term debt was as follows, as at: Senior Notes Debentures Other Of which current Of which non-current Amount in currency of origin Currency Contractual interest rate (1) December 31 2023 December 31 2022 Maturity Amount Amount 1,001 1,733 750 750 750 510 396 1,139 150 18 USD USD USD USD USD USD USD USD CAD USD 7.13 % (2) 7.88 % (2) 6.00 % 7.50 % 8.75 % 7.45 % 7.50 % (2) 7.50 % (2) 7.35 % Jun. 2026 $ Apr. 2027 Feb. 2028 Feb. 2029 Nov. 2030 May 2034 n/a n/a Dec. 2026 7.95 % Apr. 2026 996 $ 1,724 744 748 757 507 — — 113 18 1,191 1,880 743 — — 507 395 1,136 110 18 $ $ $ 5,607 $ 5,980 — $ 5,607 5,607 $ — 5,980 5,980 (1) Interest on long-term debt as at December 31, 2023 is payable semi-annually. (2) The Corporation completed full repayment of the Senior Notes due 2024, 2025 and partial repayment of the Senior Notes due 2026, 2027 during fiscal year 2023 (partial repayment of the Senior Notes due 2024, 2025 and 2027 during fiscal year 2022). All Senior Notes rank pari-passu and are unsecured. The carrying value of long-term debt includes principal repayments, transaction costs and unamortized discounts. 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 $ December 31, 2023 December 31, 2022 — 4,756 1,260 6,016 — 3,615 2,010 5,625 $ $ $ 144 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 27. SHARE CAPITAL Preferred shares The preferred shares authorized were as follows, as at December 31, 2023 and 2022: 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: Series 2 Cumulative Redeemable Preferred Shares Series 3 Cumulative Redeemable Preferred Shares Series 4 Cumulative Redeemable Preferred Shares Series 2 Cumulative Redeemable Preferred Shares Authorized for the specific series 12,000,000 12,000,000 9,400,000 December 31, 2023 December 31, 2022 2,684,527 2,684,527 9,315,473 9,400,000 9,315,473 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, 2027 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 September 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: Series 3 Cumulative Redeemable Preferred Shares Redemption: Redeemable, at the Corporation’s option, at $25.00 Cdn per share on August 1, 2027 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, 2027 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, 2022 and including July 31, 2027, the Series 3 Cumulative Redeemable Preferred Shares carry fixed cumulative preferential cash dividends at a rate of 4.588% or $1.147 Cdn per share per annum, payable quarterly on the last day of January, April, July and October of each year at a rate of $0.28675 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: BOMBARDIER INC. / 2023 FINANCIAL REPORT 145 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 for cash the Series 4 Cumulative Redeemable Preferred Shares at $25.00 Cdn. Conversion: 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. Dividend: 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. 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 (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. Dividend: 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 at the rate of $0.0390625 Cdn per share, payable quarterly on the last day of March, June, September and December of each year at a rate of $0.00976562 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 December 31, 2023 December 31, 2022 12,349,370 — 12,349,370 143,680,000 12,349,370 — 12,349,370 143,680,000 146 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 Class B Shares (subordinate voting) Issued and fully paid Balance at beginning of year Issuance of shares Cancellation of shares Held in trust under the PSU and RSU plans Balance at beginning of year Purchased Distributed Balance at end of year Authorized December 31, 2023 December 31, 2022 85,450,731 1,936,142 (85,800) 87,301,073 (3,704,417) (514,200) 2,225,172 (1,993,445) 85,307,628 143,680,000 85,311,960 288,363 (149,592) 85,450,731 (2,150,001) (1,578,085) 23,669 (3,704,417) 81,746,314 143,680,000 On May 18, 2023, the Corporation confirmed that it had received approval from the Toronto Stock Exchange for its new normal course issuer bid to purchase, from May 23, 2023 to May 22, 2024, up to 600,000 Class B shares (subordinate voting) (880,000 Class B shares (subordinate voting) in 2022). All Class B shares (subordinate voting) are being purchased either for cancellation or to satisfy future obligations under the Corporation’s employee PSU and RSU plans and are being delivered to a trustee for the benefit of the participants to such plans. As of December 31, 2023, the Corporation had purchased $20 million of Class B shares (subordinate voting) ($38 million as at December 31, 2022). The change in the number of warrants exercisable was as follows as at: Balance at beginning of year Expiration of warrants(1) Balance at end of year (1) In February 2023, 4 million of warrants held by CDPQ expired. Dividends Dividends declared were as follows: December 31, 2023 December 31, 2022 4,234,074 — 4,234,074 4,234,074 (4,234,074) — Class A common shares Class B common shares Series 2 Preferred Shares Series 3 Preferred Shares Series 4 Preferred Shares Per share (Cdn$) Per share (Cdn$) Dividends declared for fiscal years 2022 Total (in millions of U.S.$) — — — 3 6 11 20 20 2023 Total (in millions of U.S.$) — — — 3 8 11 22 22 1.03 1.07 1.56 — $ — $ $ — $ — 1.74 1.15 1.56 — $ — Per share (Cdn$) Dividends declared after December 31, 2023 Total (in millions of U.S.$) — — — — 2 3 5 5 0.15 0.29 0.39 $ BOMBARDIER INC. / 2023 FINANCIAL REPORT 147 28. 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 PSUs or 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 2023, a combined value of $19 million of DSUs, PSUs and RSUs were authorized for issuance ($16 million during fiscal year 2022). The number of PSUs, DSUs and RSUs has varied as follows, for fiscal years: PSU DSU 2023 RSU PSU DSU 2022 RSU Balance at beginning of year Granted Vested Forfeited Balance at end of year 738,403 215,489 — (22,216) 931,676 38,609 2,953,698 1,161,453 38,609 2,676,482 — — — 38,609 (1) 202,172 (2,277,279) (37,268) 841,323 377,686 (23,669) (777,067) 738,403 — — — 38,609 (1) 363,754 — (86,538) 2,953,698 (1) Of which 38,609 DSUs are vested as at December 31, 2023 (38,609 as at December 31, 2022). PSUs and DSUs granted will vest if a financial performance threshold is met. The conversion ratio for vested PSUs and DSUs ranges from 0% to 200%. PSUs and DSUs generally vest three years following the grant date if the financial performance thresholds are met. RSUs generally vest three years following the grant date regardless of the performance. For grants issued and outstanding between January 1, 2021 and December 31, 2023, the vesting dates range from June 2024 to May 2026. The weighted-average grant date fair value of PSUs and RSUs granted during fiscal year 2023 was $40.08 (for PSUs and RSUs was $23.32 during fiscal year 2022). The fair value of each PSUs and RSUs granted was measured based on the closing price of a Class B Share (subordinate voting) of the Corporation on the Toronto Stock Exchange at the grant date. From time to time, the Corporation provides instructions to a trustee or a broker, under the terms of a Trust Agreement or normal course issuer bid, as the case may be, to purchase Class B Shares (subordinate voting) of the Corporation in the open market (see Note 27 – 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. The compensation expense with respect to the PSU, DSU and RSU plans amounted to $22 million during the fiscal year 2023 ($15 million during fiscal year 2022). Share option plan Under share option plan, options are granted to key employees to purchase Class B Shares (subordinate voting). Of the 8,985,648 Class B Shares (subordinate voting) reserved for issuance, 2,574,276 were available for issuance under these share option plans, as at December 31, 2023. The most significant terms and conditions of the plan are as follows: • the exercise price is equal to the weighted-average trading prices on the stock exchange during the five trading days preceding the date on which the options were granted; the options vest at the expiration of the third year following the grant date; and the options expire no later than seven years after the grant date. • • 148 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 The summarized information on the current share option plan is as follows as at December 31, 2023: Exercise price range (Cdn$) 0 to 50 50 to 100 100 to 200 Number of options 363,769 740,862 221,037 1,325,668 Issued and outstanding Weighted- average exercise price (Cdn$) 27.94 60.05 103.86 Weighted- average remaining life (years) 4.81 2.11 1.36 Exercisable Weighted- average exercise price (Cdn$) — 60.08 103.86 Number of options — 647,499 221,037 868,536 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 2023 Weighted- average exercise price (Cdn$) 56.52 60.20 48.18 84.24 49.40 58.54 71.22 Number of options 3,683,172 89,830 (1,936,142) (499,934) (11,258) 1,325,668 868,536 Number of options 4,922,748 149,592 (288,363) (348,601) (752,204) 3,683,172 3,030,875 2022 Weighted- average exercise price (Cdn$) 55.50 29.75 46.20 63.36 45.33 56.52 63.53 Share-based compensation expense for options The weighted-average grant date fair value of stock options granted during fiscal year 2023 was $27.67 per option ($13.69 per option for fiscal year 2022). 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 2023 2.90 % 5 years 74.31 % 0.00 % 2022 2.73 % 5 years 70.72 % 0.00 % A compensation expense of $2 million was recorded during fiscal year 2023 with respect to share option plan ($4 million during fiscal year 2022). BOMBARDIER INC. / 2023 FINANCIAL REPORT 149 29. 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 2023 (6) (413) (17) (71) (256) 54 532 (66) (26) (31) (300) $ $ 2022 12 (87) (13) 726 214 — 125 (97) 70 (41) 909 $ $ The following table presents the reconciliation of movements of liabilities to cash flows arising from financing activities: Balance as at January 1, 2022 Changes from financing cash flows Repayment of long-term debt Total changes from financing cash flows Effect of changes in foreign exchange rates Other Balance as at December 31, 2022 Changes from financing cash flows Proceeds from long-term debt Repayment of long-term debt Transaction costs Total changes from financing cash flows Effect of changes in foreign exchange rates Other Balance as at December 31, 2023 Long-term debt 7,047 $ (1,073) (1,073) (7) 13 5,980 1,500 (1,893) (22) (415) 3 39 5,607 $ 150 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 30. CREDIT FACILITIES Revolving credit facility The Corporation has a committed secured revolving credit facility of $300 million (the “Revolving Credit Facility”). The Revolving Credit Facility matures in November 2027 and drawings will bear interest at SOFR plus a margin. This facility is available for cash drawings for the ongoing working capital needs of the Corporation and for the issuance of performance letters of credit. This facility was undrawn both for cash and letters of credit as at December 31, 2023 and the availability, which is based on the collateral (which may vary from time to time), was $251 million as at December 31, 2023. Financial covenants The Revolving Credit Facility includes financial covenants, among which a minimum liquidity to be maintained at all times. The terms are defined in the credit agreement and do not correspond to the Corporation’s global metrics as described in Note 31 – Capital management. Minimum liquidity required is not defined as comprising only cash and cash equivalents as presented in the consolidated statement of financial position. The Corporation regularly monitors financial covenants and has controls in place to ensure that such covenants are met. The Corporation was in compliance with such covenants as at December 31, 2023. Letter of credit facilities Letters of credit of $29 million were outstanding under various bilateral agreements as at December 31, 2023 ($426 million as at December 31, 2022). In addition, the Corporation also uses bilateral bonding facilities with insurance companies to support its operations. An amount of $460 million was outstanding under such facilities as at December 31, 2023 ($318 million as at December 31, 2022). 31. CAPITAL MANAGEMENT The Corporation analyzes its capital structure using established metrics, which are based on a broad economic view of the Corporation, in order to assess the creditworthiness of the Corporation. The Corporation has emphasized its plan to make deleveraging one of its key priorities and will execute on its plan through a phased approach. As the Corporation progressively reshapes its business and reaps the benefits from its various initiatives, it aims to lower its adjusted net debt to adjusted EBITDA ratio to approximately 2x - 2.5x by 2025. The Corporation’s objective is to achieve this by continuing to grow its adjusted EBITDA towards its 2025 objective of greater than $1.625 billion and allocate excess available liquidity towards debt repayment. The Corporation aims at maintaining an adequate debt maturity runway by opportunistically refinancing or deploying excess liquidity towards debt pay down thereby building manageable and flexible debt maturity stacks while focusing on reducing its interest expense. Global metrics – The following global metrics do not represent the ratios required for any covenants. Interest paid(1) Adjusted Net debt(2) Adjusted EBITDA(3) Adjusted net debt to adjusted EBITDA ratio $ $ $ 2023 425 4,013 1,230 3.3 $ $ $ 2022 492 4,298 930 4.6 (1) Interest paid comprises interest on long-term debt excluding up-front costs paid related to the negotiation of debts or credit facilities. (2) Represents long-term debt less cash and cash equivalent and certain restricted cash supporting various bank guarantees. (3) Represents EBIT plus amortization and some adjustments including restructuring charges, loss (gain) related to disposal of business, impairment and program termination and loss (gain) on pension related items. BOMBARDIER INC. / 2023 FINANCIAL REPORT 151 Bombardier continues to evaluate various options to address other debt maturities in an opportunistic manner and to improve its capital structure and credit quality so as to support its operations and the future development of its business. Over the longer term, the Corporation’s capital allocation strategy will focus on deploying, in a disciplined manner, the excess cash generated from the business towards investments in the Corporation’s products and services, and to additional debt reduction. In order to adjust its capital structure, the Corporation may opportunistically 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. For debt reduction, the Corporation will continue to evaluate the most efficient debt reduction strategies, which for example could include redemptions, tenders or open market repurchases. The amount involved may be material. In addition, the Corporation separately monitors its net retirement benefit liability which amounted to $0.7 billion as at December 31, 2023 ($0.4 billion as at December 31, 2022). The measurement of this liability is dependent on numerous key long-term financial and actuarial 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 such as buying out annuities on behalf of pensioners. Refer to Note 21 – Retirement benefits for more details. 32. FINANCIAL RISK MANAGEMENT The Corporation is primarily exposed to credit risk, liquidity risk and market risk as a result of holding financial instruments. Credit risk Risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Liquidity risk Risk that an entity will encounter difficulty in meeting its obligations associated with financial liabilities. Market risk 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. 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 are arising from the Corporation’s normal commercial activities. The main credit exposure 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 behavior. 152 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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 and other direct financings. Maximum exposure to credit risk – The maximum exposure to credit risk for financial instruments is usually equivalent to their carrying value, as presented in Note 11 – Financial instruments, except for the financial instruments in the table below, for which the maximum exposures were as follows, as at: Investments in financing structures(1) Derivative financial instruments Investments in securities December 31, 2023 December 31, 2022 — 13 197 n/a 70 109 $ $ $ $ $ (1) Following the sale of the CRJ business, the Corporation has retained those other financial assets and has a back-to-back agreement with MHI as such there is no credit risk arising from other financial assets as at December 31, 2022. During fiscal year 2023, the Corporation has transferred the legal title of these assets and MHI has assumed the related liabilities. See Note 24 – Other financial liabilities. 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 receivables. 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 behavior. Refer to Note 36 – Commitment and contingencies for the Corporation’s off-balance sheet credit risk, including credit risk related to support provided for sale of commercial 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. 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 favorable terms and conditions with respect to its bank facilities. The Corporation also routinely reviews the terms and conditions of its financing arrangements. 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. BOMBARDIER INC. / 2023 FINANCIAL REPORT 153 Maturity analysis – The maturity analysis of financial assets and financial liabilities, excluding derivative financial instruments, was as follows, as at December 31, 2023: Carrying amount Undiscounted cash flows (before giving effect to the related hedging instruments) Less than 1 year 1 to 3 years 3 to 5 years 5 to 10 years Over 10 years With no specific maturity 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 $ 1,594 $ 1,594 $ 258 551 258 29 1,881 $ 1,820 $ 1,820 $ 635 85 — $ — 167 167 — $ 106 — $ — 105 105 — $ 148 — $ — 233 233 — $ 317 5,607 — 422 2,327 1,132 805 2,043 2,483 410 3,041 1,500 318 2,135 $ (446) $ (1,876) $ (2,936) $ (1,902) $ — $ — 143 143 — $ 139 510 13 662 (519) $ Total — $ 1,594 258 — 693 16 16 2,545 — $ 1,820 795 — — 5,625 1,968 — — 10,208 16 $ (7,663) (1) The carrying amount of other financial assets excludes derivative financial instruments and the back-to-back agreement that the Corporation has with MHI related to credit and residual value guarantees payable. The carrying amount of other financial liabilities excludes derivative financial instruments, lease liabilities, and credit and residual value guarantees payable related to MHI. 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, 2023: 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 Derivative financial liabilities Forward foreign exchange contracts $ $ Net amount 2,809 $ 46 $ 26 $ — $ — $ — $ 72 398 $ $ (8) $ 38 $ — $ 26 $ — $ — $ — $ — $ — $ — $ (8) 64 (1) Amounts denominated in foreign currency are translated at the year end exchange rate. Lease liabilities The Corporation leases buildings, equipment and land. Maturity analysis – The maturity analysis of lease liabilities (undiscounted cash flows) was as follows, as at: Within 1 year Between 1 to 5 years More than 5 years 154 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 $ December 31, 2023 65 199 722 986 $ 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, Euro and Mexican Peso. 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 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 reduce the impact of foreign exchange movements on the Corporation’s consolidated financial statements to acceptable levels. Under the FX Policy, potential losses caused by adverse movements in foreign exchange rates on deviations from progressive policy hedge percentages should not exceed Board authorized pre-set limits. Potential loss is defined as the maximum expected loss that could occur if an over-or under hedged foreign currency exposure was exposed to an adverse change of foreign exchange rates over a one-month period. Additionally, any trade that is increasing the overall currency risk of the Corporation is prohibited. Under the FX Policy, it is the responsibility of the Corporation’s management to identify all actual and potential foreign exchange exposures arising from the operations. Initially, the Corporation mitigates foreign currency risks by maximizing transactions in its functional currency for operations such as material procurement, sale contracts and financing activities. Secondly, the Corporation maintains long-term cash flow forecasts in each currency, which are communicated to the central treasury group, which has the responsibility to execute the hedge transactions in accordance with the FX Policy for hedge implementation. The Corporation has adopted a progressive hedging strategy to limit the effect of currency movements on the results. The Corporation mainly uses forward foreign exchange contracts to manage the Corporation’s exposure in foreign currencies. The Corporation applies hedge accounting for a significant portion of anticipated transactions and firm commitments denominated in foreign currencies, designated as cash flow hedges. Cash flow hedges are meant to reduce the variability of future cash flows resulting from forecasted sales and purchases and firm commitments. In addition, the Corporation manages balance sheet exposures to foreign currency movements by matching asset and liability positions. This program consists mainly in matching the long-term liabilities in foreign currency with long-term assets denominated in the same currency. 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 Corporation’s financial instruments recorded in its statement of financial position. The following impact on EBT for fiscal year 2023 is before giving effect to cash flow hedge relationships. Gain (loss) +10 % $ (29) $ Variation CAD/USD EUR/USD Effect on EBT Other (2) (1) $ BOMBARDIER INC. / 2023 FINANCIAL REPORT 155 The following impact on OCI for fiscal year 2023 is for derivatives designated in a cash flow hedge relationship. For these derivatives, any change in fair value is mostly offset by the re-measurement of the underlying exposure. Gain (loss) Effect on OCI before income taxes Variation CAD/USD EUR/USD Other +10 % $ (171) $ (3) $ (15) Interest rate risk 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 derivative financial instruments. 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 at December 31, 2023, the impact on EBT would have been a negative adjustment of $83 million as at December 31, 2023 (negative adjustment of $38 million as at December 31, 2022). 33. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value amounts disclosed in these consolidated financial statements represent the Corporation’s estimate of the price at which a financial instrument could be exchanged in a market in an arm’s length transaction between knowledgeable, willing parties who are under no compulsion to act. They are point-in-time estimates that may change in subsequent reporting periods due to market conditions or other factors. Fair value is determined by reference to quoted prices in the principal market for that instrument to which the Corporation has immediate access. However, there is no active market for most of the Corporation’s financial instruments. In the absence of an active market, the Corporation determines fair value based on internal or external valuation models, such as 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, 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: 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 rates. Receivable from ACLP and the related 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 favorable contracts i.e. taking into consideration the counterparty credit risk, or pay to transfer unfavorable 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 the foreign exchange spot rate to estimate the fair value of forward agreements. The Corporation uses option-pricing models and discounted cash flow models to estimate the fair value of embedded derivatives using applicable market data. 156 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 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, restricted cash, certain receivable from MHI 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 analyses, based on the current corresponding borrowing rate for similar types of borrowing arrangements. Government refundable advances and vendor non-recurring costs – The Corporation uses discounted cash flow 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 assets or liabilities that are not based on observable market data (Level 3). • Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment. The fair value of financial assets and liabilities by level of hierarchy was as follows, as at December 31, 2023: Financial assets Receivable from ACLP(1) Investments in securities Derivative financial instruments(2) Financial liabilities Government refundable advances(1) Derivative financial instruments(2) Total Level 1 Level 2 Level 3 $ $ $ $ 359 109 274 742 359 8 367 $ $ $ $ — — — — — — — $ $ $ $ — 109 274 383 — 8 8 $ $ $ $ 359 — — 359 359 — 359 (1) This receivable represents a back-to-back agreement that the Corporation has with ACLP related to certain government refundable advances. (2) Derivative financial instruments consist of forward foreign exchange contracts and embedded derivatives. Level 3 financial instruments include only assets and liabilities with a back-to-back agreement and their corresponding back-to-back assets and liabilities. BOMBARDIER INC. / 2023 FINANCIAL REPORT 157 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: • • • 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 assets or liabilities that are not based on observable market data (Level 3). The fair value of financial assets and liabilities by level of hierarchy was as follows, as at December 31, 2023: Financial assets Trade and other receivables Other financial assets(1) Financial liabilities Trade and other payables Long-term debt Other financial liabilities Government refundable advances Other(1) Total Level 1 Level 2 Level 3 $ $ $ $ 258 112 370 1,820 5,746 169 593 8,328 $ $ $ $ — — — — — — — — $ $ $ $ 258 112 370 1,820 5,746 — — 7,566 $ $ $ $ — — — — — 169 593 762 (1) Of which $29 million represents a back-to-back agreement that the Corporation has with MHI related to credit and residual value guarantees payable. 158 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 34. TRANSACTIONS WITH RELATED PARTIES The Corporation’s related parties are its joint ventures, associates and key management personnel. Associates and Joint ventures There were no material transactions or outstanding balances with associates and joint ventures for fiscal years 2023 and 2022 and as at December 31, 2023 and December 31, 2022. 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., and the Senior/Executive Vice Presidents of Bombardier Inc., were as follows, for fiscal years: Salaries, bonuses and other short-term benefits Share-based benefits Retirement benefits Termination and other long-term benefits 2023 15 13 1 1 30 $ $ 2022 16 11 1 — 28 $ $ 35. 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 December 31, 2023 December 31, 2022 Assets Liabilities 7 7 $ $ Assets $ 749 $ Liabilities 129 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 was holding investments in financing structure amounting to $204 million as at December 31, 2022. Following the sale of the CRJ business, the Corporation had previously retained a portion of the investments in financing structure and had a back-to-back agreement with MHI. In fiscal year 2023, the Corporation has transferred the legal title of those investments and MHI has assumed the related liabilities. The Corporation’s maximum potential exposure was $2 million, of which $2 million was recorded as provisions and related liabilities as at December 31, 2023 ($8 million and $1 million, respectively, as at December 31, 2022). The Corporation’s maximum exposure under these guarantees is included in Note 36 – Commitments and contingencies. In connection with the sale of the CRJ business, all of the above are included in a back-to-back agreement with MHI. The Corporation concluded that it did not control these structured entities. BOMBARDIER INC. / 2023 FINANCIAL REPORT 159 36. COMMITMENTS AND CONTINGENCIES The Corporation enters into various sale support arrangements. 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 35 – 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) December 31, 2023 December 31, 2022 $ $ $ $ 2 2 (2) 2 277 — $ $ $ $ 8 8 (8) 8 428 62 (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 (d) 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 $2 million as at December 31, 2023 ($1 million as at December 31, 2022) 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. 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. In connection with the sale of the CRJ business, all of the above are included in a back-to-back agreement with MHI. 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 commercial aircraft. These guarantees, which are mainly issued for the benefit of providers of financing to customers, mature in 2025. Substantially all financial support involving potential credit risk lies with regional commercial airline customers. In addition, the Corporation had provided guarantees for the residual value of commercial aircraft at an agreed- upon date, generally at the expiry date of related financing and lease arrangements. The arrangements generally include operating restrictions such as maximum usage and minimum maintenance requirements. The guarantee provides for a contractually limited payment to the guaranteed party, which is typically a percentage of the first loss from a guaranteed value. In most circumstances, a claim under such guarantees may be made only upon resale of the underlying aircraft to a third party. The following table summarizes the outstanding residual value guarantees, at the earliest exercisable date, and the period in which they can be exercised, as at: Less than 1 year From 1 to 5 years $ December 31, 2023 December 31, 2022 6 2 8 — 2 2 $ $ $ 160 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 In connection with the sale of the CRJ business, all of the above are included in a back-to-back agreement with MHI. 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, 2023 December 31, 2022 294 114 20 428 227 50 — 277 $ $ $ 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 Other guarantees December 31, 2023 December 31, 2022 62 — $ $ d) 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. In connection with the disposal of businesses and the disposal of investment in associate, the Corporation has entered into arrangements that include indemnities and guarantees which are typically limited as to their duration and maximum potential financial exposure to the Corporation. 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 December 31, 2023: Within 1 year Between 1 to 5 years Total 3,708 1,321 5,029 $ $ The purchase obligations of the Corporation include capital commitments for the purchase of PP&E amounting to $98 million as at December 31, 2023. Legal proceedings 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, contractual disputes with customers or suppliers, claims and disputes arising from divestiture or acquisition transactions, and other legal proceedings with third parties. The Corporation’s approach is to vigorously defend its position in these matters. BOMBARDIER INC. / 2023 FINANCIAL REPORT 161 While the Corporation cannot predict the final outcome of all legal proceedings pending as at December 31, 2023, based on information currently available and known by the Corporation, management believes that the resolution of these legal proceedings will not have a material adverse effect on its financial position. Sweden While this matter relates to the Transportation business, which has been divested as part of the sale to Alstom on January 29, 2021, the Corporation remains involved in this legal proceeding and remains liable to Alstom, as acquirer of Transportation, in the event of any damage suffered in connection thereof. 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 signaling 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. The internal review is still 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 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. On June 9, 2021, charges were laid against a different former employee of the former Swedish subsidiary of the Corporation for aggravated bribery. The trial took place from November 11 to November 24, 2021. On December 22, 2021, the former employee was acquitted by the Swedish District Court. A notice of appeal was filed by the Prosecution Authority on January 12, 2022. The trial in appeal with the Swedish Court of Appeal took place in April 2023. In May 2023, the Court of Appeal confirmed the verdict of acquittal rendered in December 2021. This decision is now final and non-appealable. World Bank 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. As reported in the media, 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. U.S. Department of Justice On February 10, 2020, Bombardier received a letter from the U.S. Department of Justice (the “DOJ”) requesting the communication of documents and information regarding the ADY Contract. 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. The DOJ also made requests regarding contracts in South Africa and Indonesia (see below), as well as requests with respect to other sales of aircraft and services. Bombardier is cooperating with the DOJ’s requests. South Africa (Transnet) While this matter relates to the Transportation business, which has been divested as part of the sale to Alstom on January 29, 2021, the Corporation remains involved in this matter and remains liable to Alstom, as acquirer of Transportation, under certain circumstances. 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. The media reported allegations of irregularities with respect to multiple procurements regarding the supply of 162 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 1,064 locomotives by South African train operator Transnet Freight Rail in 2014. 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 acquisition of the 1,064 locomotives by Transnet. The Corporation conducted an internal review into the allegations by external advisors under the supervision of counsel. 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. Following the sale of the Transportation business to Alstom, Alstom has been managing the Zondo Commission and SIU related aspects of the matter. While the National Prosecution Agency (“NPA”) of South Africa has not communicated any request to the Corporation, the Corporation understands that the NPA is investigating the Transnet contracts. U.K. Serious Fraud Office (“SFO”) (Indonesia) In May 2020, the Indonesian Corruption Court convicted the former CEO of Garuda Indonesia (Persero) TBK (“Garuda”) and his associate of corruption and money laundering in connection with five procurement processes involving different manufacturers, including the 2011-2012 acquisition and lease of Bombardier CRJ1000 aircraft by Garuda (the “Garuda Transactions”). No charges were laid against the Corporation or any of its directors, officers or employees. Shortly thereafter, the Corporation launched an internal review into the Garuda Transactions, which is being conducted by external counsel. The SFO commenced a formal investigation into the Garuda Transactions. The Corporation has communicated with the SFO regarding the Corporation’s internal review and its potential assistance with the SFO investigation on a voluntary basis. RCMP In 2021, Bombardier also received a communication from the RCMP’s Sensitive and International Investigation Unit advising that it would be undertaking an investigation on the Garuda Transactions, and requested communication of documents from the Corporation. The various regulators’ investigations here above mentioned and internal reviews are on-going. Claim from Certain Holders of Senior Notes due 2034 On January 31, 2022, the Corporation received a letter (the “Letter”) from counsel to certain holders of 7.450% Senior Notes due 2034 (the “2034 Notes”), and has learned that such holders also filed a complaint before the Supreme Court of the State of New York (the “Action”), reiterating claims made in a letter addressed to the Corporation in April 2021 (the “April 2021 Letter”) substantially to the effect that the Corporation’s divestitures of non-core assets, including its transportation business, regional jet program and aerostructures division, constitute a breach of certain covenants under the indenture governing the 2034 Notes and further alleging that the actions of the Corporation in May 2021, addressing the matters raised in the April 2021 Letter, breached the rights of such holders. The Corporation believes that these allegations are without merit and intends to vigorously defend itself against the Action. 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 Quebec 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”) (formerly the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer, respectively, of Bombardier) 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 Quebec Securities Act and the class action require an authorization from the Court before they BOMBARDIER INC. / 2023 FINANCIAL REPORT 163 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. Alstom Request for Arbitration The Corporation received a notice from Alstom S.A. requesting arbitration before the International Chamber of Commerce pursuant to the agreement relating to the sale by Bombardier of its Transportation business on January 29, 2021 (the “Transaction”). In its request for arbitration, Alstom is alleging that the Corporation is in breach of certain contractual provisions. While litigation proceedings inherently carry uncertainties, the Corporation has good grounds to defend itself against Alstom’s claim and intends to do so vigorously. The Corporation also intends to challenge certain purchase price adjustments which resulted in proceeds from the Transaction being lower than initially estimated. Evidentiary hearing on the arbitration is currently expected in late 2025 and proceedings are subject to confidentiality provisions. RSU Class Action On April 21, 2023, a motion for authorization to institute a class action was filed with the Superior Court of Québec in the district of Montréal against Bombardier Inc. and Messrs. Pierre Beaudoin, Éric Martel and Alain Bellemare (“Motion”) (respectively the Chairman of the Board of Directors, the President and Chief Executive Officer and the former President and Chief Executive Officer of Bombardier Inc.). The Motion seeks permission to represent all persons who received, in November 2020, Restricted Share Units vesting in November 2023 (the RSUs) and to claim on their behalf an unspecified amount equal to the value of the RSUs which were canceled when they were prorated at the closing of the sale of the Transportation segment on January 29, 2021. Plaintiff alleges that the defendants engaged in fraudulent omissions and manoeuvres in not sharing their interpretation of the RSU plan pursuant to which former employees would not get the benefit of RSUs vesting after the closing date of a transaction leading to the end of their employment with Bombardier. The class action requires an authorization from the Court before it can move forward. Until it is authorized, there are no monetary claims pending against any of the defendants in the context of this Court proceeding. Bombardier Inc. and the other defendants are contesting this Motion. The Corporation’s preliminary view at this juncture is that the proposed class action is without merit, that the inclusion of Messrs. Beaudoin, Martel and Bellemare as defendants is unfounded and that the possibility that these Court proceedings will cause the Corporation to incur material monetary liability appears to be remote. 37. RECLASSIFICATION Certain comparative figures in the consolidated statements of income have been reclassified to conform to the presentation adopted in the current period, mainly a reclassification from special items and other expense (income) to gain related to disposal of business, impairment and program termination, and restructuring charges. 164 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 INVESTOR INFORMATION Our Board of Directors BOARD MEMBERS(1) Pierre Beaudoin Éric Martel Joanne Bissonnette Charles Bombardier Rose Damen Diane Fontaine Ji-Xun Foo Diane Giard Anthony R. Graham Chair of the Board of Directors and director since 2004 President and Chief Executive Officer and director since 2020 Corporate Director and a director of Bombardier since 2012 Corporate Director and a director of Bombardier since 2019 Managing Director, Damen Yachting and director of Bombardier since 2023 Senior Portfolio Manager and Investment Advisor of RBC Dominion Securities Inc. and a director of Bombardier since 2019 Managing Partner of GGV Capital Asia and a director of Bombardier since 2022 Corporate Director and a director of Bombardier since 2017 Chair, President and Chief Executive Officer of Sumarria Inc. (an investment holding company) and a director of Bombardier since 2019 Douglas (Doug) R. Oberhelman Corporate Director and a director of Bombardier since 2017 Melinda Rogers-Hixon Eric Sprunk Antony N. Tyler Deputy Chair, Rogers Communications Inc. and a director of Bombardier since 2021 Corporate Director and a director of Bombardier since 2021 Corporate Director and a director of Bombardier since 2017 (1) As at December 31, 2023. Supplemental information regarding our Board of Directors can be found on our website at bombardier.com. BOMBARDIER INC. / 2023 FINANCIAL REPORT 165 BOARD COMMITTEES Board committees Board representation(1) Key responsibilities(2) Audit Committee Diane Giard (Chair) Rose Damen Ji-Xun Foo Anthony R. Graham Eric Sprunk Corporate Governance and Nominating Committee (“CGNC”) Douglas (Doug) R. Oberhelman (Chair) Diane Giard Melinda Rogers- Hixon Antony N. Tyler Human Resources and Compensation Committee (“HRCC”) Anthony R. Graham (Chair) Douglas (Doug) R. Oberhelman Melinda Rogers- Hixon Antony N. Tyler The Audit Committee assists the Board of Directors in fulfilling its obligations for overseeing financial reporting and audit matters, as well as monitoring risk management matters, of the Corporation. Some of the key responsibilities of the Audit Committee are to: • oversee the integrity of our financial statements and financial reporting process, including the Corporate Audit Services and Risk Assessment, and financing activities of the Corporation; • oversee the qualifications and independence of our external auditors, Ernst & Young, and the work of our financial management team and external auditors; • provide an open avenue of communication between the external auditors and the Board of Directors; • reviewing financial disclosures and monitoring policies regarding disclosures and communications with the public; • ensure that an appropriate system of internal accounting and financial controls, and appropriate risk management frameworks, are maintained in view the risks and exposures facing the Corporation; • monitor risks related to financing activities of the Corporation and retirement plan fund management; • oversee risks related to environmental matters, and ensuring adequate procedures are in place for any ESG-related metrics that are disclosed in Bombardier’s ESG Report or otherwise; and • monitor the adequacy and effectiveness of the disclosure controls and systems of internal control of the Corporation through the reports provided by management or Ernst & Young, as the case may be. The CGNC assists the Board in fulfilling its oversight responsibility by monitoring the composition of the Board of Directors and its Committees, and monitoring corporate governance. Some of the key responsibilities of the CGNC are to: • monitor the size, independence and composition of the Board of Directors and its Committees to ensure effective decision-making, including the competencies, skills, personal attributes and diversity (gender and other characteristics), and recommending director nominees for the annual meeting of shareholders; • oversee the process for assessing the effectiveness of our Board of Directors as a whole, each Committee and the contribution of each director; • recommend director share (or similar equity) ownership guidelines, and remuneration of non-executive directors; • oversee director development programs, including orientation and continuing education; • oversee ESG matters, including our annual ESG Report, in conjunction with the Audit Committee’s responsibilities regarding ESG-related metrics; and • review our corporate governance policies and practices, including our Code of Ethics, and recommend any new principles or best practices to the Board of Directors. The HRCC supports the Board’s supervision of human resources and compensation matters and procedures. Some of the key responsibilities of the HRCC are to oversee: • CEO and executive officer appointments, succession planning, and leadership development; • total senior executive compensation policies, and executive share ownership guidelines; • the CEO’s total compensation; • the CEO’s objectives and performance assessment against those objectives; • the CEO’s performance assessment of the other senior executives and compensation recommendations; • compensation governance to ensure the Corporation is able to attract, motivate and retained qualified personnel in order to meet Bombardier’s business objectives; • incentive compensation and equity-based plans and bonus payouts; • our executive compensation disclosure; • occupational health and safety matters; • adequacy of policies and procedures regarding social issues, including employment equity, harassment and discrimination, and compliance therewith; and • workplace diversity, and monitoring progress towards diversity goals and targets. (1) As at December 31, 2023. Supplemental information regarding our Board of Directors can be found on our website at bombardier.com. (2) Full details of the responsibilities of each of the Board Committees are described in their respective Charters, which can be found on our website at bombardier.com. 166 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 STOCK EXCHANGE LISTINGS Class A Shares (Multiple Voting) and Class B Subordinate Voting Shares Preferred Shares, Series 2, Series 3 and Series 4 Stock listing ticker Toronto (Canada) Toronto (Canada) BBD (Toronto) FISCAL YEAR 2024 FINANCIAL RESULTS First Quarterly Report Second Quarterly Report April 25, 2024 July 25, 2024 Third Quarterly Report November 7, 2024 2024 Annual Financial Report February 6, 2025 PREFERRED DIVIDEND PAYMENT DATES Payment subject to approval by the Board of Directors Series 2 Record date Payment date Record date Payment date 2023-12-29 2024-01-31 2024-02-29 2024-03-28 2024-04-30 2024-05-31 Series 3 2024-01-15 2024-02-15 2024-03-15 2024-04-15 2024-05-15 2024-06-15 2024-06-28 2024-07-31 2024-08-30 2024-09-30 2024-10-31 2024-11-29 Series 4 2024-07-15 2024-08-15 2024-09-15 2024-10-15 2024-11-15 2024-12-15 Record date Payment date Record date Payment date 2024-01-15 2024-04-15 2024-07-15 2024-10-15 2024-01-31 2024-04-30 2024-07-31 2024-10-31 2024-01-15 2024-04-15 2024-07-15 2024-10-15 2024-01-31 2024-04-30 2024-07-31 2024-10-31 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. / 2023 FINANCIAL REPORT 167 Contact Information Bombardier Inc. Investor Relations 400 Côte-Vertu Road West Dorval, Québec, Canada H4S 1Y9 Telephone: +1 514 240-9649 Email: investors@bombardier.com DUPLICATION Although Bombardier strives to ensure that registered shareholders receive only one copy of corporate documents, duplication is unavoidable if securities are registered under different names and addresses. If this is the case, please call Computershare Investor Services at one of the following numbers: +1 514 982 7555 or +1 800 564 6253 (toll-free, North America only) or send an email to service@computershare.com. ONLINE INFORMATION For additional information, we invite you to visit our websites at: bombardier.com and ir.bombardier.com TRANSFER AGENT AND REGISTRAR Shareholders with inquiries concerning their shares should contact: Computershare Investor Services Inc. 100 University Avenue, 8th Floor Toronto, Ontario Canada M5J 2Y1 or 650 de Maisonneuve West, 7th floor Montréal, Québec Canada H3A 3T2 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, April 25, 2024, at 10:30 a.m. (Montréal time). 168 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2023 The Global 8000 aircraft is currently under development and remains to be finalized and certified. It is expected to enter service in 2025(1). All specifications and data are approximate, may change without notice and are subject to certain operating rules, assumptions and other conditions. Bombardier, Bombardier Pũr Air, Bombardier Vision Flight Deck, Chaise, Challenger, Challenger 300, Challenger 350, Challenger 3500, Challenger 600, Challenger 601, Challenger 604, Challenger 605, Challenger 650, Exceptional by Design, Executive, Global, Global 5000, Global 5500, Global 6000, Global 6500, Global 7500, Global 8000, Global Express, Global Express XRS, Global Vision, Global XRS, Learjet, Learjet 40, Learjet 45, Learjet 70, Learjet 75, Learjet 75 Liberty, L’Opéra, Nuage, Nuage Cube, PrecisionPlus, Smart Parts, Smart Parts Maintenance Plus, Smart Parts Plus, Smart Parts Preferred, Smart Services, Smart Services Elite, Smartfix, Smartfix Plus, Smartlink, Smartlink Plus, Smooth Flĕx Wing, Soleil and Touch are trademarks of Bombardier Inc. or its subsidiaries. The printed version of this annual report uses paper containing 30% sustainable recycled fiber. Using this paper, instead of virgin paper, saves(2): 5 mature tree, equivalent to 1 metric ton of wood 328 kg of CO2, equivalent to 1,307 kilometres driven 2,000 liters of water, equal to 15 10-minute showers consumption in Northern America Completely recyclable - the responsible choice Printed in Canada 978-2-923797-65-6 Legal deposit, Bibliothèque et Archives nationales du Québec All rights reserved. © 2023 Bombardier Inc. or its subsidiaries FSC® is not responsible for calculating resources saved when using this paper. (1) See the forward-looking statements disclaimer in the overview section of Bombardier’s Management Discussion and Analysis for the fiscal year-ended 2023. (2) Data issued by the paper manufacturer. 

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