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On Aug. 6, Bombardier announced its financial results for the second quarter of 2020 and provided an update on the actions the company is taking to manage the business through the COVID-19 pandemic. Bombardier also provided an update on the status of the previously announced divestitures undertaken to reshape the company’s capital structure.
“Bombardier continues to take the right actions to manage the impact of the ongoing public health crisis while protecting the business for the long-term,” said Éric Martel, president and CEO, Bombardier Inc. “We begin the second half of the year with our global operations safely and successfully resumed and our production rates and workforce realigned to current market conditions and customer requirements. We’ve also improved our liquidity position with solid cash management, cost reduction actions and a new secured credit facility, providing additional flexibility as we work to address our balance sheet challenges and close the sale of Bombardier Transportation and our aerostructure business.”
On July 31, 2020, the European Commission provided conditional approval of the sale of Bombardier Transportation to Alstom, a significant milestone in obtaining the necessary regulatory approvals to complete the transaction. Bombardier and Alstom continue to work together to obtain the remaining approvals and complete the Works Councils consultations required prior to executing the definitive sale and purchase agreement. Bombardier expects the sale of its aerostructure business to Spirit AeroSystems Holdings, Inc. to close this fall.
Bombardier began the third quarter with pro-forma liquidity of approximately US$3.5 billion. This includes approximately US$1.7 billion of cash on hand, access to the undrawn amount of US$738 million on Transportation’s revolving credit facility as of June 30, 2020, and the new US$1.0 billion senior secured credit facility announced on July 22, 2020 and expected to close in the third quarter.
Revenues of US$2.7 billion during the second quarter reflect a lower level of production activity and deliveries in the quarter as operations at key Aviation and Transportation sites across North America and Europe were temporarily suspended for several weeks due to the global COVID-19 pandemic.
Adjusted EBITDA loss and adjusted EBIT loss were US$319 million and US$427 million, respectively, for the quarter. These results reflect an additional charge of US$435 million at Transportation, largely related to incremental engineering, certification and retrofit costs associated with a number of late-stage projects mainly in the U.K. and Germany. At Aviation, earnings were lower year-over-year, primarily as a result of disruptions from the global COVID-19 pandemic. Reported EBIT was US$26 million for the quarter and reflects the US$496 million accounting gain on the disposal of the CRJ program to Mitsubishi Heavy Industries, Ltd. closed on June 1, 2020.
Free cash flow usage and cash usage from operating activities were US$1.0 billion for the quarter. This was better than anticipated as the company resumed operations faster than expected and took additional actions to mitigate the full COVID-19 impact. These actions resulted in higher than expected customer deliveries both at Aviation and Transportation, lower inventory intake as production rates were realigned with market conditions and reduced discretionary spending across the business. The impact on free cash flows of the COVID-19 pandemic during the quarter is estimated at US$700 to US$900 million.
While we are seeing some early encouraging trends in our end markets, including new interest in private air travel and the enhanced safety it provides, the continuing uncertainty surrounding the duration of the pandemic and the shape of the recovery continues to preclude us from providing financial guidance at this time. However, based on our backlogs and the near-term production and delivery outlook, we currently expect business activity to gradually recover in the second half of the year with improving cash usage in the third quarter and with the seasonal release of working capital in the fourth quarter.
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