- C Series financials to be de-consolidated from Bombardier’s results starting July 1, 2018
- Consolidated EBIT(1) guidance increased to a range of $900M to $1.0B, and revenue guidance reduced to a range of $16.5B to $17.0B, mainly reflecting de-consolidation of C Series results for the remainder of 2018
- Full-year consolidated free cash flow(1) guidance is reaffirmed
- Full year guidance for Commercial Aircraft segment is withdrawn; Regional aircraft delivery guidance of approximately 35 aircraft for 2018 is reaffirmed
Montreal 08 June 2018. Bombardier and Airbus have agreed to close the C Series partnership on July 1, 2018 after having received all required regulatory approvals.
“Closing the Airbus partnership ahead of the original schedule positions us to accelerate value creation for our shareholders as we combine the innovative C Series aircraft with the global scale and reach of Airbus,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “With this milestone achieved, we are focused on capturing growth opportunities across the portfolio and delivering our remaining turnaround plan objectives.”
The partnership with Airbus will close and be effective July 1, 2018. Consequently, Bombardier will de-consolidate C Series financial results starting July 1, 2018. As a result of closing earlier than originally expected, Bombardier is withdrawing its full year guidance for its Commercial Aircraft segment. However, the company reaffirms its regional aircraft delivery guidance of approximately 35 aircraft for 2018 and expects to provide updated 2018 segment guidance for revenue and EBIT when it announces second quarter results on August 2, 2018.
Closing ahead of schedule will result in expected revenues for 2018 in a range of $16.5 billion to $17 billion, as C Series revenues from and after July 1, 2018 will no longer be consolidated in Bombardier’s financial results and sales from Aerostructures and Engineering Services to CSALP will no longer be inter-segment. Full year consolidated EBIT for Bombardier Inc. is expected to increase to a range of $900 million to $1.0 billion as C Series program results will no longer be fully recognized after closing. Further adjustments to the equity pick-up of CSALP’s results included in our EBIT guidance may be required based on CSALP’s future results.
Free cash flow expectations for the year remain unchanged at breakeven plus or minus $150 million, excluding the proceeds of the sale of the Downsview property. Further, Bombardier’s cash commitments towards the C Series program under the Airbus partnership will be recognized as investing activities, reflecting the receipt of non-voting participating units of CSALP, if any.
As previously announced, Bombardier will continue with its current funding plan of CSALP. Due to the early closing of the partnership, the terms of this plan are updated according to the following schedule: Bombardier will fund the cash shortfalls of CSALP, if required, during the second half of 2018, up to a maximum of $225 million; during 2019, up to a maximum of $350 million; and up to a maximum aggregate amount of $350 million over the following two years, in consideration for non-voting participating shares of CSALP with cumulative annual dividends of 2%. Any excess shortfall during such periods will be shared proportionately amongst CSALP’s Class A shareholders.
The Company remains on track to achieve its 2020 turnaround plan objectives, which already reflect the de-consolidation of the C Series results. The transaction will be accounted for as a disposal of CSALP in exchange for an equity interest in the new partnership measured at fair market value. In addition, the transaction is expected to result in a net accounting charge of approximately $500 million. The net charge is largely triggered by the fair market value of warrants to be issued by Bombardier to Airbus on July 1, 2018, and a derivative liability associated with the expected off-market return on non-voting participating units to be issued to Bombardier by CSALP under Bombardier’s funding commitments. The net charge will be treated as a special item in the second quarter.