Company focuses exclusively on designing, building and servicing the world’s best business jets
Bombardier (TSX: BBD.B) today reported its fourth quarter and full year 2020 results, provided guidance for 2021 and outlined a number of actions to drive profitability and productivity as the Company focuses exclusively on designing, building and servicing the world’s best business jets.
“With our strategic repositioning now complete, we are very excited to embark on our journey as a pure-play business jet company,” said Éric Martel, President and Chief Executive Officer, Bombardier Inc. “Our unmatched product portfolio, world-class customer services network, and incredibly talented employees give us a strong foundation to build upon. We are encouraged by our momentum in the fourth quarter and are confident in the actions we are taking to navigate through the pandemic and better position the Company for a market recovery.”
Overview 2020 Financial Performance
Revenues from Business Aircraft activities reached $5.6 billion in 2020, reflecting a 3% year-over-year improvement, driven by the ramp up in Global 7500 deliveries, which reached a record 16 deliveries in the fourth quarter, partially offset by the significant impact of COVID-19 on other programs and services revenues.
Adjusted full year EBITDA and adjusted EBIT(1) for continuing operations of $200 million and $(211) million, respectively, reflect the impact of the COVID-19 pandemic on deliveries and services, as well as a lower contribution of early Global 7500 units. Reported EBIT of $0.9 billion reflects the accounting gains on disposals of the CRJ and aerostructures businesses.
Fourth quarter free cash flow generation from continuing operations before interest and taxes was $523 million. This was better than expected and notwithstanding a $160 million negative impact made in the quarter due to the winding down of the Company’s reverse factoring program. Full year free cash flow usage from continuing operations was $1.9 billion, reflecting pandemic-related disruptions, and including corporate and interest expenses, which will be lower in 2021 given the expected debt paydown and restructuring actions announced today.
Bombardier begins 2021 with pro forma cash and cash equivalents of approximately $5.4 billion, including the proceeds from the recently closed sale of Transportation and a pro forma net debt of approximately $4.7 billion.
Driving Profitability and Productivity
Bombardier has and will be launching a number of actions to improve profitability and cash generation. The goal is to make the organization more efficient and agile, capable of delivering stronger financial performance under the current market conditions, while also establishing a lower cost base to grow from, once the market recovers. With these actions, the Company aims to generate $400 million annually in recurring savings by 2023. Savings are expected to be approximately $100 million in 2021; the Company will take a one-time charge of $50 million this year to support its restructuring actions.
Specific actions include consolidating Bombardier’s Global aircraft completion work in Montréal; reviewing options for underutilized hangar and industrial space at our Québec facilities; and reducing its overall workforce by approximately 1,600 positions, including reductions associated with progress on the Global 7500 learning curve. These reductions, together with the completion of previously announced restructuring actions and the divestiture of the electrical wiring interconnection system business in Querétaro, Mexico, should bring the Corporation's global workforce to about 13,000 by year-end.
“Workforce reductions are always very difficult, and we regret seeing talented and dedicated employees leave the company for any reason,” said Martel. “But these reductions are absolutely necessary for us to rebuild our company while we continue to navigate through the pandemic.”
Bombardier also announced it will end production of Learjet aircraft later this year, allowing the Company to focus on its more profitable Challenger and Global aircraft families and accelerate the expansion of its customer services business.
“With more than 3,000 aircraft delivered since its entry-into-service in 1963, the iconic Learjet aircraft has had a remarkable and lasting impact on business aviation. Passengers all over the world love to fly this exceptional aircraft and count on its unmatched performance and reliability. However, given the increasingly challenging market dynamics, we have made this difficult decision to end Learjet production,” explained Martel.
Bombardier will continue to fully support the Learjet fleet well into the future, and to this end, today launched the Learjet RACER remanufacturing program for Learjet 40 and Learjet 45 aircraft. RACER program includes a bundled set of enhancements, including interior and exterior components, new avionics, high-speed connectivity, engine enhancements, and improved aircraft maintenance costs. The RACER remanufacturing program will be offered exclusively through Bombardier’s service centre in Wichita, Kansas.
Bombardier’s Wichita facility will continue to serve as the Company’s primary flight-test centre and be a key part of its global services network. In addition, Bombardier has designated Wichita as the Centre of Excellence for its specialized aircraft business and expects the facility will play a leading role in future special mission modification contracts.
2021 Guidance
With Bombardier’s repositioning to a pure-play business aviation company now complete, 2021 will be a transition year as the Company executes its productivity actions, further matures Global 7500 production and begins to address its capital structure.
Revenues from business aircraft activities in 2021 are expected to be better than 2020 based on a gradual economic recovery scenario.
Adjusted EBITDA is expected to increase to greater than $500 million, reflecting ongoing progress on the Global 7500 learning curve, growth in customer services and the partial impact of the cost reduction actions. Adjusted EBIT is expected to be greater than $100 million.
Free cash flow usage in 2021 is expected to be better than $500 million, including one-time outflows related to the closing of the reverse factoring program; residual value guarantees; and the previously mentioned restructuring charge, which collectively are estimated to be approximately $200 million.
Investor Day
Bombardier will host a virtual Investor Day on March 4, 2021, during which the Leadership team will provide updates on its market outlook, debt management strategy and cost reduction actions. Details will be provided in a separate media advisory and posted on the company’s website www.ir.bombardier.com at a later date in the near future.