(All amounts in this press release are in U.S. dollars unless otherwise indicated)
- Executing agreements to create direct sales channels and improve margins
- Assuming sales leadership through termination of select sales representative and distribution agreements as well as restructuring customer commercial agreements will result in charges of $278 million recorded as special items in Q4 2015
Bombardier Business Aircraft continues to restructure and enhance its business model to improve long-term profitability. To that end, the business segment has completed initiatives to increase the number of direct-to-market channels, including termination of third-party sales representative and distribution agreements, as well as the restructuring of customer commercial agreements. As a result of these agreements, Bombardier will incur pre-tax special charges of $278 million in the fourth quarter of 2015, of which approximately $145 million is non-cash. Of the cash impact, approximately $50 million was disbursed in Q4 2015 and the balance will be paid in 2016.
“We are changing our sales strategy to increase our focus on direct channels,” said David Coleal, President, Bombardier Business Aircraft. “This, coupled with our robust transformation plan, will increase our long-term profitability. Our overall business model enhancements will leverage our class-leading aircraft, which continue to be outstanding business tools for operators in all regions of the world.”
In line with this change in sales strategy, Bombardier terminated select sales representative and distribution agreements. Bombardier will become directly responsible for sales activities in the associated regions leveraging its existing sales teams allowing for increased direct relationships with operators.
Bombardier Business Aircraft has also completed a restructuring of certain customer commercial agreements. These agreements resulted in the cancellation of 24 firm orders, which had an aggregate value of $1.75 billion at 2015 list prices, with an additional cancellation of 30 optional orders. Bombardier expects to sell these positions at improved margins.
“Restructuring these commercial agreements will strengthen our business and solidify our long-term profitability,” added Coleal. “Our sales team is well equipped to increase our position in the marketplace, and ultimately, we expect our current industry-leading backlog to become even stronger.”
Bombardier will release consolidated results for the fourth quarter and 2015 fiscal year on February 18, 2016.
Bombardier is the world’s leading manufacturer of both planes and trains. Looking far ahead while delivering today, Bombardier is evolving mobility worldwide by answering the call for more efficient, sustainable and enjoyable transportation everywhere. Our vehicles, services and, most of all, our employees are what make us a global leader in transportation.
Bombardier is headquartered in Montréal, Canada. Our shares are traded on the Toronto Stock Exchange (BBD) and we are listed on the Dow Jones Sustainability North America Index. In the fiscal year ended December 31, 2014, we posted revenues of $20.1 billion. News and information are available at bombardier.com or follow us on Twitter @Bombardier.
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Certain factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, risks associated with general economic conditions, risks associated with our business environment (such as risks associated with the financial condition of the airline industry and rail industry, political instability and force majeure), operational risks (such as risks related to developing new products and services; fixed-price commitments and production and project execution; doing business with partners; product performance warranty and casualty claim losses; regulatory and legal proceedings; the environment; dependence on certain customers and suppliers; human resources), financing risks (such as risks related to liquidity and access to capital markets, retirement benefit plan risk, exposure to credit risk, certain restrictive debt covenants, financing support provided for the benefit of certain customers and reliance on government support), market risks (such as risks related to foreign currency fluctuations, changing interest rates, decreases in residual values and increases in commodity prices), the conditions to completion of the Investment not being satisfied, failure to receive third party, regulatory and other approvals, and changes in the terms of the Investment. For more details, see the Risks and uncertainties section in Other in the Management’s Discussion and Analysis (MD&A) of the Corporation’s financial report for the fiscal year ended December 31, 2014. Certain important assumptions by management in making forward-looking statements include, but are not limited to: the decision to launch an IPO or private placement of a minority stake and the timing, size and successful completion thereof; our ability to consummate an IPO or private placement of a minority stake in favourable market conditions, that ongoing due diligence investigations by the Government of Québec will not identify any materially adverse facts or circumstances; the satisfaction of all conditions to the completion of the Investment; the receipt of required third party, regulatory and other approvals, and our ability to consummate the Investment. For additional information with respect to the assumptions underlying the forward-looking statements made in this press release, refer to the Guidance and forward-looking statements sections in the MD&A of the Corporation’s financial report for the fiscal year ended December 31, 2014. There can be no assurance that any IPO or private placement of a minority stake, or the Investment or other transaction will be undertaken or completed in whole or in part or of the timing, size and proceeds of any such offering or transaction, which will depend on a number of factors, including prevailing market conditions.
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