Bombardier Inc BBD.B
Q4 2012 Earnings Call Transcript
Transcript Call Date 03/01/2012

Operator: Good morning ladies and gentlemen and welcome to the Bombardier Conference Call. Please be advised that this call is being recorded.

I would now like to turn the meeting over to Ms. Shirley Chenier, Senior Director, Investor Relations. Please go ahead Ms. Chenier.

Shirley Chenier - Director, IR: Thank you, operator. Good morning and welcome to Bombardier's Conference Call intended for investors and financial analysts.

I also welcome the media representatives who are with us today. You will have an opportunity to ask questions later during this call when we open the media question period.

Shortly Mr. Pierre Beaudoin, President and Chief Executive Officer, and Mr. Pierre Alary, Senior Vice President and Chief Financial Officer will discuss Bombardier's financial results for the fourth quarter and fiscal year ended December 31, 2011.

This conference call is broadcast live on the Internet and is also interpreted in French and in English.

You can access the broadcast on our website at and the webcast archive of the integral version of this call should be available within the next 24 hours. Slides for this presentation in English and French are equally available on our website. All dollar values expressed during this conference call are in U.S. dollars unless stated otherwise.

I also wish to remind you that during the course of this conference call we may make projections or other forward-looking statements regarding future events or the future financial performance of the corporation. Several assumptions were made by Bombardier in preparing these statements and we wish to emphasize that there are risks that actual events or results may differ materially from these statements. For additional information on such assumptions please refer to the MD&A released today. Please also note that I'm making these cautionary statements on behalf of each speaker whose remarks today will contain forward-looking statements.

Pierre Beaudoin will now begin the presentation.

Pierre Beaudoin - President and CEO: Hello and welcome to the conference call. Before we answer your questions I would like to make a few comments on our results.

As you have noted we delivered good financial results.

Revenues of $18.3 billion versus $18.9 billion, net income of $837 million versus $775 million and a great improvement in EPS of $0.47 versus $0.42 last year. We have strong EBITDA of $1.5 billion giving us a cash position of $3.4 billion and a total liquidity level of $4.1 billion.

This is all supported by a strong backlog of $53.9 billion giving us great visibility on our revenue. Now if we look more specifically at Aerospace, we had 249 orders last year versus 201 orders the year before and 245 total delivery, which gives us a book-to-bill of one in line with our guidance. For the 8th consecutive year, we attained market leadership in business aircraft in terms of revenue with 37% market share, which is an increase again this year.

If we look at the CSeries, we have now 300 orders, letters of intent and options with 138 firm orders giving us a skyline – four skylines for deliveries for the first two and a half year. On the regional front, we had low level of orders in 2011, but we are off to a good start in 2012 with 40 orders in option and many more campaigns in the pipeline.

From a Transportation perspective, revenues were at $9.8 billion versus $9.1 billion if we compare to the previous year and we had good profitability at 7.2% which is a record level which we attained now two years in a row. From a book-to-bill perspective we're at one – book-to-bill of one strong in the eurozone particularly in Western Europe with a backlog of $31.9 billion, which gives us 3.3 years of revenue.

Now, I would like to let Pierre Alary to review the results in more detail.

Pierre Alary - SVP and CFO: Thank you Pierre. Good morning. Q4 Aerospace revenues totaled $2 billion compared to $3.1 billion last year, mainly due to a lower volume as our fourth quarter is comprising only two months. Q4 EBIT margin is at 6.3% compared to 7.2% last year. The decrease is mostly attributable to a lower absorption of SG&A expenses due to lower volume. For the 11 months ended December 31, 2011, revenues totaled $8.6 billion, compared to $8.8 billion for 12 months last year. EBIT margin is 5.8% compared to 6.3% last year.

Q4 for Transportation shows revenue totaling $2.3 billion compared to $2.5 billion last year, and a slower level of revenue is mainly due to the phasing out of major project ahead of ramping up of production of new contracts. EBIT margin is at 7.2% compared to 8.2% last year as a result of higher SG&A and a lower gross margin due to execution issues in certain projects.

For the full year BT revenue totaled $9.8 billion and excluding foreign exchange impact of $500 million this represents an increase of $300 million over last year. EBIT margin is at 7.2% the same as last year.

On a consolidated basis, Q4 revenues totaled $4.3 billion while EBIT reached $293 million. Net financing expenses amount to $33 million and with an effective income tax rate of 17.7%, net income for the quarter totaled $214 million or $0.12 per share. For the full year net income $837 million or $0.47 per share compared to $775 million or $0.42 per share last year.

Now looking at free cash flow, the consolidated free cash flow of Q4 amounted to some $600 million and as a result we end up the year with a cash balance of $3.4 billion. For the full year Aerospace generated close to $900 million of cash flow from operating activities and invested $1.3 billion in our significant investment program.

Transportation free cash flow for Q4 was $564 million, while free cash flow usage for the year totaled $424 million. We have previously discussed the issue with some contracts where we have experienced delays in previous quarter. We have taken corrective measures and progression towards resolution has been made. As a result, we expect inventory to decrease gradually over the next few quarters.

Having completed the year with a solid cash balance of $3.4 billion, our available short-term capital resources reached $4.1 billion. Our long-term debt maturity profile is such that we have no major debt repayment scheduled before 2016. As a result, our significant cash flow generated from operations together with our solid liquidity are ensuring financial flexibility to support our major investment program in Aerospace where we expect to invest approximately $2 billion in 2012.

Now, let me give you an update on our net retirement liability, which amounted to just below $2 billion at the beginning of the year. And as we can see on chart it would have reduced to $1.8 billion if it wasn't for a change in discount rate.

The various discount rates used to determine the benefit cost and obligation came down in average by about 100 basis point. Rates at the end of the year are at their lowest level over the past five years. This variation in discount rate caused the net retirement liability will increase to $3.2 billion.

Nevertheless the volatility of the net retirement liability has little impact on our cash contributions which will essentially be the same as last year.

Now to conclude, 2012 will be an exciting year and we are off to a good start. We look first at Aerospace and product development. We will assemble the two first flight test vehicle for the Lear85 and CSeries I mean one Lear85 and one CSeries, and we will accomplish the first life for both products. Also in 2012 we started to take advantage of a refocus of our commercial aircraft sales force in the emerging market. And we have good example already with Garuda buying the CRJ1000 in Indonesia, China Express with a CRJ900 and Ethiopian Airline with a Q400. So this increased focus in emerging market will give us better diversification.

In 2012 we will deliver approximately 180 business jet and 55 commercial aircraft our margin, EBIT margin will be 5% and it will be better in the second half of the year than it is in the first half of the year. This is essentially the same guidance as we gave last year and we expect significant cash flow from operations in order to fund our $2 billion in new program development.

Now, if we look at transport, we continue to drive towards our margin of 8% in 2013 and we anticipate free cash flow generally in line with profitability and a book-to-bill of one. As you can see at Bombardier, we're putting the pieces together to be a very different company in five years, with exciting new products and service, and increased revenues from emerging market. All of this supported by a solid execution every step of the way. Shirley?

Shirley Chenier - Director, IR: Thank you, Pierre. We will now start the question period for analysts and investors. In order to keep the duration of this call reasonable, I would ask you to limit yourselves to one question to give everyone a chance to participate. If you have any remaining questions at the end and if time permit, we can get back in queue, and if not, you can contact me after the conference call, and it will be my pleasure to answer all your questions. We can now start the first question. Operator?

Transcript Call Date 03/01/2012

Operator: Chris Parkins, Credit Suisse.

Chris Parkins - Credit Suisse: This is Chris Parkins in behalf of Hamzah. Just a quick question, can you give us a quick update on what the order pipeline looks like going forward in the commercial market, and how your efforts in emerging markets are evolving and how competitively you are finding you need to price your aircraft?

Pierre Beaudoin - President and CEO: I think the examples that I just gave give you a good sense of how its evolving. Our win in Indonesia, our win in Ethiopia, our win in China, and in China it's been a long time since we have placed some CRGs in China, so that's a good example of increased focus for us. I think we are very competitive and there is a good pipeline for both CRG and Q400 in emerging markets. It's a competitive market, but I think we know our competitor very well and we can be competitive in this business.

Operator: Cameron Doerksen, National Bank Financial.

Cameron Doerksen - National Bank Financial: My question is on the Aerospace margin guidance. It's a little bit lower than what I was expecting, I think where others were probably forecasting as well. Can you talk about what the headwinds are for this year? Obviously, we have lower regional aircraft production rates and it looks like maybe pension expense is a headwind, is there anything else in there that's not leading to the somewhat the lower margins than expected?

Pierre Beaudoin - President and CEO: I think there is a couple of things you should consider. First of all, it's going to be a more difficult beginning of the year, first of the year than second half of the year, given that we are introducing the Global with the vision (cost cut). We have some ramping up to do. As we spoke before we're increasing the Global, but introducing a new cockpit or new aircraft on the market, there's some ramping up with the Global with the completion center. Second we had some readjustment in the production of the regional aircraft with the Q400 and the CRJ and of course as you adjust this will affect again the deliveries at the beginning of the year rather than the second half. Third, if you look at the margins the biggest difference with last year is, of course, you pointed out to mix, but also you have to consider the Canadian dollar. This is a headwind of about $100 million, little bit more than a $100 million and you have some increased pension expense, the exact number on this year…

Pierre Alary - SVP and CFO: Is just about $100 million.

Pierre Beaudoin - President and CEO: $100 million for the Company, which if you look in terms of sales, maybe you can use sales as a proxy, but you got to think that Aerospace has got more employees in Canada and this is a pension which has a large deficit.

Operator: Joseph Nadol, JPMorgan.

Joseph Nadol - JPMorgan: My question is on the investments in Aerospace for 2012. The $2 billion is a little higher than I had expected and I am wondering if it's higher than you had previously expected. Is that the peak level as we think about how the profile of all these programs pencils out over the next several years? You expect $2 billion of cash from operations in Aerospace to pay for it, that's more than double 2011. How do you get there?

Pierre Beaudoin - President and CEO: I'll let Pierre give you more specific on the numbers. But it is the year where if you look at airplane program. It is the year where we spend the most because we are assembling first flight test vehicles for two products, they tend to be very expensive and of course that means we are assembling others because these flight test programs will not be only with one aircraft as you know. And then we put the airplane into flight that also means that we are doing all of the component testing and integrated testing this year. So it's a large expense I do expect it to be a peak. But maybe Pierre you want to give more colors on the numbers.

Pierre Alary - SVP and CFO: Well effectively this year, 2012 is expected to be peak year. So 2012 and carrying on to 2013 more so in relation to the two program that Pierre referred to. In terms of the generation of cash flow from operations in addition obviously to the profitability or the EBITDA level. So what we are expecting is, we are expecting a book-to-bill above one for both business aircraft and commercial aircraft. So therefore we expect generation of cash coming from the increase in the level of advances from customer year-over-year.

Pierre Beaudoin - President and CEO: Just a comment on the level of expense. As you have noticed we've been very prudent with our investments in the past year particularly with the CSeries for example in (fixed asset) trying to delay that as much as possible. Of course now that we are getting close to production we got to start building, buildings. We got to start investing in fixed assets more than I guess we had planned that earlier now it just has to happen. So there is one reason why this number is big.

Operator: Walter Spracklin, RBC Capital Markets.

Walter Spracklin - RBC Capital Markets: My question is on the free cash flow guidance that you provided for Transportation, and I guess this is for Pierre Alary. As you mentioned the first part that 2011 saw some challenges with certain programs that were – or certain deliveries will be pushed into 2012. Now, your guidance to be in line with EBIT, however, is consistent with what you've said every year. It was our expectation that some of that pushed forward would lead to a bigger free cash flow year for 2012 in your Transportation division. Can you give us some color on that?

Pierre Alary - SVP and CFO: I think there are very similar guidance from year-to-year and we're seeing generally in line, and that means four to six quarters is not specifically a year and we effectively expect the reversal of the issue we had last year, so therefore, a cash flow generation and those contracts which has been delayed. On the other side, we are ramping up on contracts for which we signed orders this year and last year, remember that calendar 2010 we had book-to-bill of 1.6. So therefore, that we are going to ramp up in terms of that building goals that was trained. So there is a ramp up coming up, which will offset a portion of the realization of the inventory of last year. We expect level of advances on lot of the new order that we are expecting this year are also option where the level of advances are not necessarily as significant. So, we do expect good free cash flow in Transportation, again generally in line with profitability.

Operator: Turan Quettawala, Scotia Capital.

Turan Quettawala - Scotia Capital: As a quick follow-up to that. Pierre it should be also assumed that the cash flow seasonality will be a little bit less weighted towards Q4 this year, just because of the fact that you've had some of these delays? Just really quickly can you give us some guidance on ex-currency revenue for Transportation for 2012?

Pierre Alary - SVP and CFO: Sorry on your second part of the question?

Turan Quettawala - Scotia Capital: Revenue guidance ex-currency I guess for Transportation, what should we be looking at?

Pierre Alary - SVP and CFO: On the first one, the seasonality, we do have our usual seasonality, and it is towards the end of the year, the recovery on the contract where we had seen delay will be gradual over the year and its going to be a number of quarters. So, you can expect effectively to have the seasonality in the free cash flow for Transportation.

Turan Quettawala - Scotia Capital: So, it will be the same as every year?

Pierre Alary - SVP and CFO: Similar to every year. It moves a real lot depending on the contract that we sign, and so on, but typically there is more generation towards the end of the year.

Operator: Noah Poponak, Goldman Sachs.

Noah Poponak - Goldman Sachs: I wanted to ask for some more color on CSeries development. Can you first just speak broadly to how you feel? I guess the comments from some leaders three to six months ago were fairly cautious now. It sounds more or like you feel inline. Can you just say how you feel in terms of whether or not you close the GAAP, how you feel versus 3 to 6 months ago and then any color you can give on milestones we should be looking for, when do you have to actually have the first test vehicle hardware completed on to be on track and what's done between now and then and then between that and the actual first flight?

Pierre Beaudoin - President and CEO: First of all I'll answer your question of how we feel? We feel quite enthusiastic about 2012 because we're seeing components now. The last week I was (indiscernible) our plant. I saw several cockpits that were advanced. I saw rear fuse. We go to Mirabel, we're starting to see components come to this CIASTA. Our team was in Belfast and we see a wing being advanced in the center fuse. So it's exciting because we see their components coming together and that gives us confidence the we are making the right progress. Now I am going to caveat this with the fact that what we have to do this year is very complex, because all these parts have to come together, they have to work together and we are doing the flight – the fly-by-wire for the first time for a full aircraft of Bombardier. I don't want you to read into this that I'm questioning whether we're able to do all this year. We have a good plan. I am excited about it. I am starting to see components. I want to say what we're doing is very complex and we're going to need to follow it like Guy says, day-by-day. At the same time, we what we're giving you as a target for us is to fly at the end of the year. We haven't decided as a team to give additional guidance and I think really we're going to leave it at that for now. As we build the confidence in the program, we will aim to communicate to give you more view on how we are making progress and really to try to give you some substantial news when we try to give it to you because it's one thing to show a component. It's another thing to have an aircraft, so good progress 2012 will be exciting.

Noah Poponak - Goldman Sachs: Can you say when you need to have a structural aircraft essentially complete before filling in systems and software in order to be on track.

Pierre Beaudoin - President and CEO: We don't want to give additional guidance at this point.

Operator: Benoit Poirier, Desjardin Securities.

Benoit Poirier - Desjardin Securities: My question is related to Transportation I was wondering whether you could provide an update on the Transportation issues in France, Germany, Switzerland and also with the one with CTA if you could give an update that would be great.

Pierre Beaudoin - President and CEO: That's quite a broad question but let me answer it step-by-step on. Let's start with rails. We made good progress towards the end of the year at delivering another 20 trains that gave us a total of 40 trains. In mutual agreement with the customer in January we decided to stop the delivery again to really focus on making sure that the trains we're sending SNCF were at all the modifications than rather them trying to modification and service. And I also stabilized the reliability of the train. So we felt that with the customer, we could do that in a more efficient way while having them in our full (process) if I can say it this way. So that being done right now, we are monitoring this week-to-week on (average) put a very large scheme on this. We've taken experts from the transport from across the world some people at the group level even some consultants in specific areas. We have the necessary focus to make progress, but there is still some work to do before we start delivery again (indiscernible). On TALENT 2, we are delivering, we're up to 39 trains in service are delivered to Deutsche Bahn. We need to deliver about 120 this year and the team is very focused on that. There is still some certification to obtain in some different configuration then the full train configuration, but I think we have a good plan and we need to execute on it. On the Sweden at REGINA, I think you were referring too. These trains are being delivered and we expect to deliver in the first and second quarter the trains in accordance with agreement with the customer. You ask about Chicago, I think you're referring to the fact that we had stopped delivering the metro because of an issue with ferocity and casting. We have done. That's a fact. We have now new castings in places and we've began retrofit program that is planned with the customer and we would expect to start delivery again early, I would say second quarter.

Operator: David Newman, Cormark Securities.

David Newman - Cormark Securities: Just on attribution behind your CapEx spend, you've got $2 billion so far for BA this year. Where are you on the total CapEx spend with this on the various programs that you've got the Lear85, Global 7000 and 8000, and the CSeries, and are you concerned at all down the road with any solvency deficit issues that might lead to higher contributions post-2012?

Shirley Chenier - Director, IR: That's two questions.

David Newman - Cormark Securities: Okay. Let's go with the first one then. Basically, a status update on where you are on the total spend in the program I guess is where I am getting at.

Pierre Alary - SVP and CFO: I guess the color we can give is that, 2012 is kind of the peak year, next year will also be an important year in terms of spending and as we anticipate enter into service in 2013, that's the color we can give around the Lear85 and the CSeries.

Pierre Beaudoin - President and CEO: The challenge we have to give specific numbers on nonrecurring constantly is that during an airplane program we make choice between nonrecurring and recurring. Sometimes we will invest more in nonrecurring to get a better recurring cost, and sometimes the other way around, so it would be very hard to keep track. So, what I can tell you in terms of business case, we have two good business case with the CSeries and the Lear85.

David Newman - Cormark Securities: Are you in line with you initial budgets of what the total CapEx spend you might have on these various programs or seeing any sort of inflation in the total amount?

Pierre Beaudoin - President and CEO: What I would answer to this is what I just to you. We have two good business case in place and because these things vary much during a program, so I don't want to refer to a number at the beginning and the number now. We look at the business case constantly.

Operator: David Tyerman, Canaccord Genuity.

David Tyerman - Canaccord Genuity: My question is on Bombardier Aerospace and the margins in 2011. They came in at 5.8%. As late as December I think you were saying 5%. So, I am wondering what happened and you were ahead all the way through the year and kind of related to that is whatever happened in 2011 can that recur in 2012 with respect to your margin guidance?

Pierre Beaudoin - President and CEO: We're giving you the same guidance as we gave you last year. I think in 2011 we had to be prudent because there was a lot of movement in the skyline of regional particularly you know that we had to slow down production. I think if you look at 2012 we have some headwinds that the team needs to address. We just spoke about it, the Canadian dollar, the pension. The Canadian dollar alone is $100 million. Now as you know we will aim to meet first the guidance and if we can we'll try to do better, but there's some headwind that pension and Canadian dollars are two headwind that we have to deal with.

David Tyerman - Canaccord Genuity: So why didn't you beat in 2011?

Pierre Beaudoin - President and CEO: Well, because there's a few areas we did better and probably there was a mix that was a little bit different and maybe some pricings came in a little bit different. Sometimes we replace one aircraft by the other and it makes a huge difference.

Pierre Alary - SVP and CFO: Better execution in general. There's not anything specific, it's just that we're focused and prudent all the time.

Pierre Beaudoin - President and CEO: If we can improve our unit costs we do keep ourselves some maneuvering space in our unit cost and this team has been executing very well. So there is probably some gain there as an example.

Operator: Ronald Epstein, Bank of America-Merrill Lynch.

Ronald Epstein - Bank of America-Merrill Lynch: First question, I guess on the commercial aerospace. So, plan is to do 55 commercial jets in 2012, right, have I understood that right.

Pierre Beaudoin - President and CEO: Exactly.

Ronald Epstein - Bank of America-Merrill Lynch: Currently you have got what 64 RJs in backlog and 30 Dash 8 and five (indiscernible). I mean was that running through a lot of your backlog this year. I mean how are you thinking about that.

Pierre Beaudoin - President and CEO: I didn't hear your question. I am sorry.

Ronald Epstein - Bank of America-Merrill Lynch: If I got the numbers right, right now you have about 64 regional jets in backlog, 30 Dash 8, 30 Triple Tops and five amphibious planes. So if you delivered 55 commercial jets. I mean it's going to, if you just look at the regional jet backlog I am going to run through most of your backlog this year. How do we think about that and are you planning to have a book-to-bill on that business of at least one to replace those that you are going to deliver and if so where is that order activity coming from.

Pierre Beaudoin - President and CEO: Well that's a good question and I think you answered it yourself. We are planning to have a book-to-bill of above one and we are off to a very good start. We already have 40 orders and options. They are coming from emerging markets and I think one of the thing that was mentioned many times last year is we needed to increase our sales force in new markets where in the past we didn't need to go there for our regional airplanes. But today's that's the reality and we are being very aggressive at making sure we don't miss any opportunity so that's one thing. The other one is I do think there is key opportunities in North America and Europe. But particularly in North America there are some programs that have been announced that we think could come true this year.

Ronald Epstein - Bank of America-Merrill Lynch: Can you elaborate on that where in North America.

Pierre Beaudoin - President and CEO: Well it's hard for me to elaborate, because that's decided by the customer, but I'll just give you one example. WestJet announces, they're looking for turboprop and we think we have the absolutely the right aircraft for them, but we'll need to win the campaign.

Operator: Michael Willemse, CIBC.

Michael Willemse - CIBC: Just another follow-up question on margins in Aerospace, sorry, but even if we look at second half of 2011, if you look at the average Aerospace margin, you had about almost 6%. So, just wondering what's happening in the first quarter 2012 versus the fourth quarter, is it a lot of the global vision introduction, just some color there. I think dollar wouldn't be much of an issue there either?

Pierre Beaudoin - President and CEO: Well, you answered it also partly. The transition to the global vision, remember we now move from green aircraft to completed aircraft, and the transition has to do with how fast we can complete these new aircrafts as we transition from classic, if you want the vision and that's happening in the first quarter. So, definitely Globals will be affected in the first quarter now ramping up after that. Also the remix we did in regional last year by reducing production, we were able to implement the new customers into our skyline, but later on in the year. So, sometime the aircraft with be already build, but by the time we can put it in the configuration of the new customer, it comes later on. So some of the orders came later than anticipated last year and early this year giving us some challenging configuration. So, it does give us some headwind for Q1 and Q2.

Operator: Scott Rattee, Stonecap Securities.

Scott Rattee - Stonecap Securities: Just a question with the backlog in the Learjet. I see that it's standing at about two months right now. With the target of six to nine, I guess what I was wondering here is, is that program on – order activity sort of on a spot basis, where we may not actually see it moving too, too much, implying that you could keep production rates where they are or should we be expecting some more cuts there in that program?

Pierre Beaudoin - President and CEO: I don't anticipate that we need to cut the Learjet, we put it at a level that we think is adequate. Given the demand today, the light segment has not really come back as strong as what we would see in the upper end as you know. Yes, we have some challenge in this industry, but we think we have enough prospects to deliver the aircraft that are planned. As you know, as the Lear85 will come into production I think then it will give momentum to the Lear brand.

Operator: Noah Poponak, Goldman Sachs.

Noah Poponak - Goldman Sachs: Just a couple of follow-ups. What is the new 2013 Aerospace margin target?

Pierre Beaudoin - President and CEO: Given the current economic condition, given that business aircraft and particularly regional has not come back in volume that we had expected. We decided that it was prudent to stay with the guidance only for 2012, and when the market comes back, when the economy backs, then we will decide if we should give longer term guidance.

Noah Poponak - Goldman Sachs: Your net interest expense was down in the fourth quarter versus the run rate of the year. I am assuming that was the 11 month affect. Is that true and then what if the net interest expense number to look forward in '12?

Pierre Alary - SVP and CFO: Yes in fact we had two months definitely had an effect and it mostly explain the variation. Looking forward next year, you could expect the net interest expense to be at a similar level than what we had experienced for the full year this year.

Operator: David Newman, Cormark Securities.

David Newman - Cormark Securities: Just a quick follow-up on the CSeries. We haven't really talked about the campaigns in a while and how are you doing there and obviously trying and you are getting closer and closer to them, but what point does this covert? I think you had mentioned like 2013, overall globally where you stand and in particular China how is it going there?

Pierre Beaudoin - President and CEO: First of all with 138 firm orders, we already covered skyline like I mentioned for the first 2.5 year. Now we have some good opportunities and there is some customers that tend to order more as closer to production, so we have I think 45 LOI that we're looking at converting, and we're working hard on that. Then we have new customers that we're working on. China typically orders closer to productions. I think we're getting into that window.

David Newman - Cormark Securities: Is it also the same numbers that given the past where it was a handful that were very hot and then behind that I think its 70 or 80 I think in the past kind of the numbers, is it sort of the same metrics?

Pierre Beaudoin - President and CEO: Yeah, I would say so. There's a lot of active discussion on the CSeries right now.

Operator: David Tyerman, Canaccord Genuity.

David Tyerman - Canaccord Genuity: Two other follow-ups, the tax rate for 2012 any thoughts you have on that Pierre and also pension financing expenses, it's likely to change much from 2011?

Pierre Alary - SVP and CFO: Well in terms of the tax rate, tax rate guidance is something it could be between 20% and 25%. Last two or three years overall we worked closer to 20% than to 25%. But that can vary from quarter-to-quarter also.

Operator: Joseph Nadol, JPMorgan.

Joseph Nadol - JPMorgan: Pierre could you update us on the MOU with COMAC and how things are progressing there. And for the other Pierre can you tell us about liquidated damages. I know you don't want to quantify those probably the impact of that on margin in 2011. But you didn't indicate that as a headwind for 2012. And I am wondering if you could give us a little more color there.

Pierre Beaudoin - President and CEO: We'll update you on COMAC we have active discussion with COMAC we are discussing the framework that we explained a year ago. We'd like to convert this into firm agreement as soon as possible. But I know that one year seems like a long time. But this is a kind of agreement that will be with us for 20 years, because we have airplanes that will be in production on both sides for that long. So we need to make sure that it's a win, win on both sides and I think this is why it's taking time we are really getting into the details looking at how it can benefit the C19 and the CSeries. So, little bit of patience there, but I think our team are in active discussion and hopefully we can come to conclusion shortly.

Operator: Michael Willemse, CIBC.

Michael Willemse - CIBC: Pierre, I just wanted to follow-up on the comment about LOIs. I think you said you had 45 LOIs. Can you talk about how that would compare to say, six months ago or year ago?

Pierre Beaudoin - President and CEO: I don't remember how many LOI we had six months ago, today we have LOI, I think with – I can give you precision on which customer, but that's a normal evolution. We go from discussion to signing a letter of intent. Some customers want to do that, others want to go to PA directly, and then from the letter of intent for some customers you open the authority to put all of their staff on to get through purchase agreement, but we can give you precision on that I would have to look back at the numbers.

Michael Willemse - CIBC: The 45 LOIs, that includes the customers that have signed purchase agreements already as well?

Pierre Beaudoin - President and CEO: No, no. An LOI is a customer that has gone from being in discussion to signing a letter of intent if you want, and then what it goes firm, it's a purchase agreement. So we've announced a few. I'm just going to give you precision on that, I don't know which one are the ones that we have announced.

Shirley Chenier - Director, IR: I'll give you a call offline, okay, Mike. Operator, do we have any more questions?

Operator: There are no further questions at this time.

Shirley Chenier - Director, IR: Thank you, operator. We will now begin the question period for the media representative.

Operator: (Marie Tijau, The Press).

Marie Tijau - The Press: Yes, I would like to talk about the line rates at Mirabel and Toronto as well? I think that you talked about a reduction in the line rate. I would like to know if that is in fact the case and if there might be other reductions in the months to come?

Guy C. Hachey - President and COO, Bombardier Aerospace: Yes, the changes were put in place last year and we are not expecting any other changes.

Operator: (Silvay Leroux, Canadian Press).

Silvay Leroux - Canadian Press: I would like to just go back to the CSeries and the Learjet. Mr. Beaudoin you were little bit vague when the question was asked whether this was according to your agreement and terms of the level of investment. I would like to know if there is a cost overrun in this particular program with regard to investments.

Pierre Beaudoin - President and CEO: What I explained was that these investments – this is always a decision that is made in nonrecurring investment and also with regard to equipment, we also try to make adjustments and that's why we don't give any specific information during the development phase. But what I can say about this new program is that the business case is very solid for the Series and for the Learjet 85 question. Did you invest more than you indented to at the beginning Mr. Beaudoin?

Pierre Beaudoin - President and CEO: To repeat I can't compare things because the decisions were made based on business case. If we change our business case by investing more in retooling, that of course will depend on our understanding of a specific program. I can't give a very specific answer to your question unfortunately.

Silvay Leroux - Canadian Press: Comment of two leaders of Korea Republic, it seems to put into doubt the realistic nature of regarding the CSeries. Do you think that you have managed to convince them? I don't know whether Mr. Hachey has spoken with them on the phone, but have you managed to convince them about the CSeries Mr. Hachey?

Guy C. Hachey - President and COO, Bombardier Aerospace: When a client buys a product for its airline, they buy a relationship with us. So we are constantly in discussion, whether it's Korean Republic or Lufthansa and what these clients say is that they're very excited with the developments and they are impressed with the performance, they understand the progress we are making in the programs, and that they are committed because they have a firm agreement with us. I can't really react to these comments that are made by other people, but I can tell you that these clients the leaders, but the whole team are very often here in Montreal are very committed and they support the development of the CSeries.

Silvay Leroux - Canadian Press: A final question regarding Bombardier (J) Transportation. There were calls for a tender that were pushed back and in 2012. Is there a possibility that there will be some very significant contracts.

Pierre Beaudoin - President and CEO: We can't obviously say when the contracts will be signed but we are hopeful that it will be soon. If there was a call for bids -- there are some good opportunities coming our way in 2012.

Silvay Leroux - Canadian Press: With Crossrail do you have any possibilities.

Pierre Beaudoin - President and CEO: Yes we can be very competitive we have a team in the U.K we have participated in a lot of calls for bids. We are well positioned, but of course it's always a competition and we have to make sure that we have the best bid.

Operator: (indiscernible) Aviation International.

Unidentified Analyst: Can you guys go over the backlog in terms of months for the Learjet, Challenger and Global Lines targets.

Pierre Beaudoin - President and CEO: It's in our MD&A and I'll just flip to the page to make sure that. so in Learjet its, we have two months of backlog and our target is six to nine. In Challengers we have 12 months of backlog in our target is 15 to 18. And in Global we have 34 months of backlog and our target is 24 to 30.

Unidentified Analyst: How much of the Global backlog is international, specifically China or Asia?

Pierre Beaudoin - President and CEO: I can't answer exactly for the global, while we'll tell you that business aircraft in general is 60% international. I presume that you're asking outside of the U.S.?

Unidentified Analyst: Yes. One more question. When were the first completed Global be delivered two NetJets?

Pierre Beaudoin - President and CEO: We'll have to get back to you on that.

Pierre Alary - SVP and CFO: The first greener has been delivered just recently.

Pierre Beaudoin - President and CEO: The first green, but completed, so let's say, a year after that, but we can give you – we can get back to you if we release this date or if NetJets wants us to – is okay with us releasing these dates.

Operator: (Francois Pouliot), (indiscernible)

Francois Pouliot: I'd like to understand a little bit better the business relationship that you have with COMAC in China. I was wondering, if there have been any echoes in the media, whether there might be a type of amalgamation between the business claim divisions? I'd like to know a little bit more about that.

Pierre Beaudoin - President and CEO: We can talk to you about our framework. We did have a press release on this that gives you some detail, but we never spoke about an amalgamation or a merger. These were rumors in the media that we corrected, that it was a misinterpretation in the German media or perhaps a poor translation. But I can assure you that there has been no talk of any sort of merger. This is work that we're doing together to figure out how our two businesses might have things in common with regard to planes, with after sales service. So, we can send you a copy of the press release that was distributed last year.

Francois Pouliot: This business relationship, if it goes ahead will this help you with your market penetration in China, and if it doesn't go ahead, could that be harmful?

Pierre Beaudoin - President and CEO: I think it's very positive to have a plane. They have 150 seaters and the CSeries is between 100 and 149, if we work together when we approach a client, obviously, this is very good for entry into the Chinese market and also for our planes in China and COMAC wins outside of China. If things don't go forward, it doesn't affect the CSeries in China.

Francois Pouliot: So, do you think that you could combine your sales approach?

Pierre Beaudoin - President and CEO: We didn't talk about our sales force, but we were talking about after sales, about technical publications, for example. We were talking about working together for the purchase of certain components, if we both buy the same components perhaps we can have better price by joining forces in that way. We were talking about common systems that there might be in the planes, but we do sketch this out in the framework agreement and the press release.

Francois Pouliot: I have perhaps misunderstood, but before the assembly of the CSeries in Montreal, I thought I understood, but you were not certain that all of this could be done. Did I perhaps misunderstand Mr. Beaudoin?

Pierre Beaudoin - President and CEO: No, I think you have misunderstood. No, what we said was that it is complicated assembling a plane. Things are going well. We're starting to receive components and we're very excited about what's going to happen in 2012. But putting all of these components together to have a plane that flies at the end of year, there's a lot of work involved.

Operator: Francois Shalom, Montreal Gazette.

Francois Shalom - Montreal Gazette: You mentioned campaign opportunities in North America and I think you said this year. I am wondering if you are in the bidding or if you are in the running for the United Airlines, the United Continental order and related to that, I am wondering what you make of the U.S. administration's, pretty strong comments last week by President Obama about unfair subsidies coming from, and I am quoting here, give American companies a fair shot by matching the unfair export financing that Boeing's competitors receive from other countries. Do you feel targeted there because Boeing is not or United Airlines is not looking to order from India and China and Russia or anywhere else, it's Bombardier and Airbus and Boeing. So do you feel targeted by that comment?

Pierre Beaudoin - President and CEO: Maybe I'll get to that part of the question. As you know the aircraft industry came to an understanding which is called the ASU, the Aircraft Sector Understanding which essentially did away with home country rule. We were never in favor of that. This was a rule where U.S. aircraft companies would not finance -- U.S. government would not finance airplanes in Europe and Europe would not finance airplanes in North America. Bombardier we always promoted a level playing field, meaning that we have an understanding as how aircraft would be financed, under what terms and that's really the agreement that happened last year and in that agreement it permit export credit agency and competitive setting to support their local airline and I think that's what those comments were all about. The EXIM Bank in some case may participate at financing U.S. airline like we would expect the same thing in Canada, we do see in a competitive setting. We thought the outcome of these discussions at the country level for the Aircraft Sector Understanding, we thought those were a good agreement that give access to a level playing field and we think that what we were looking for from the beginning.

Francois Shalom - Montreal Gazette: Are you in the running for that United Airlines contract?

Pierre Beaudoin - President and CEO: Well, I don't know about this specific campaign. You'd have to give me more detail about this specific campaign for me to answer you.

Francois Shalom - Montreal Gazette: I think it's fairly large order that they talked about and it was unclear at one point whether or not they were going ahead with a second slice of that order, but I am wondering if you guys are bidding for it?

Pierre Beaudoin - President and CEO: Yeah, at one point they were talking about a narrow body of 160 passengers plus and then they needed to look at smaller airplanes also, but I am not aware that they're going to add with an RFP, a request for proposal.

Operator: (Daniel Bodallu, Audio Canada).

Daniel Bodallu - Audio Canada: I'm sorry. I'm asking a question that you have maybe answered already, but I just joined the teleconference. I'd like you to talk to me a little bit about the sales of the CRJs and the Q400s. Embraer, ATR had good years. Why is it that your results were so poor?

Guy C. Hachey - President and COO, Bombardier Aerospace: Sometimes you have to look at who the clients are that have bought planes. Did Bombardier have an opportunity in certain cases? The opportunity wasn't there because it was an option, but for our competitors, we also said that we didn't necessarily have the sales team to sell products outside of North America. We spoke about the importance of doubling our sales team outside of North America and Europe. We also have a product that is very competitive against the Embraer 190. We started production last year and now we can compete with the 190. This is the plane that Embraer sold the most of last year. The CRJ-1000 is competing with the Embraer 190 and we won out with Garuda. Unfortunately, last year it was a difficult year for us, but we think that if we look at the opportunities that are in front of us, we think that 2012 should be better.

Daniel Bodallu - Audio Canada: Do you think that you're going to be able to maintain production of the CRJs and the Q400 at the level that you've announced?

Guy C. Hachey - President and COO, Bombardier Aerospace: Yes. We have to reduce it in both cases last year, but we think we're going to be able to maintain our objective by having an increase in sales in the future.

Daniel Bodallu - Audio Canada: You mentioned earlier the investment of $2 billion in 2012. Can you give us any details?

Guy C. Hachey - President and COO, Bombardier Aerospace: These are aircraft programs that are advanced like the CSeries or the Learjet 85. This will require a great deal of investment because we are going to have the first test flights at the end of the year, but this requires a significant investment. We are also working on the Global family, the 7000 and 8000. This program is beginning to require increased investment as we look at 2016. So, we have a number of aircraft programs that do require investment.

Daniel Bodallu - Audio Canada: So, you are sticking to your guidance for 2012-2013 for the delivery?

Guy C. Hachey - President and COO, Bombardier Aerospace: Absolutely.

Operator: (indiscernible).

Unidentified Analyst: You just said or perhaps repeated that the line rate for the CRJs and the Q400s should stay what it is currently, have I understood?

Pierre Beaudoin - President and CEO: Yes.

Unidentified Analyst: Will there be a point at which you will need to revisit that line rate given the backlog?

Guy C. Hachey - President and COO, Bombardier Aerospace: We think we are going to – we hope we have the opportunity to increase it. We don't think we are going to have to reduce.

Unidentified Analyst: In 2012?

Guy C. Hachey - President and COO, Bombardier Aerospace: Yes, for 2012 we have a good plan.

Unidentified Analyst: For the CSeries if I have understood correctly, you are not unveiling anything new with regard to timelines?

Guy C. Hachey - President and COO, Bombardier Aerospace: No, we have the goal of a flight at the end of 2012 and we hope that things will fall into place so that we are able to meet that objective.

Unidentified Analyst: A flight at the end of 2012 and then a first delivery in 2013?

Guy C. Hachey - President and COO, Bombardier Aerospace: Yes.

Unidentified Analyst: You have really developed your after sales and service recently in many places in the world. Is that leading to new sales for you?

Guy C. Hachey - President and COO, Bombardier Aerospace: I think it's to support the clients who have already ordered our aircraft. We are trying to put in place a global network and it's easier to convince clients to come over to Bombardier. We have a very good reputation at the international level. We are going to continue to our growth because our plans are increasingly international.

Unidentified Analyst: This is my last one. There was talk about the Montreal subway, where are things at?

Pierre Beaudoin - President and CEO: We are according to schedule and we are making progress with the client.

Unidentified Analyst: What does that mean exactly the schedule?

Pierre Beaudoin - President and CEO: We don't have any specific information, but we have spoken about our first delivery. What we can give you is what we have already said in public, with regard to the Montreal subway, but nothing has changed.

Operator: At this time we have no further questions.

Shirley Chenier - Director, IR: Thank you all for being with us today. Have a good day.

Operator: The conference has now ended you may disconnect your lines at this time.