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Executives

Shirley Chenier - IR

Pierre Beaudoin - President and CEO

Pierre Alary - SVP and CFO

Analyst

Walter Spracklin - RBC Capital Markets

Fadi Chamoun - BMO Capital Markets

Joe Nadol - JPMorgan

Cameron Doerksen - National Bank Financial

Ron Epstein - BofA Merrill Lynch

Benoit Poirier - Desjardins Capital Markets

David Tyerman - Canaccord Genuity

Turan Quettawala - Scotiabank

Deepak Kaushal - GMP Securities

Darryl Genovesi - UBS Securities LLC

Stephen Trent - Citigroup

Peter Arment - Sterne, Agee & Leach

Steve Hansen - Raymond James

Anthony Scilipoti - Veritas Investments

Tim James - TDNewcrest/Waterhouse Securities

Hilda Maraachlian - Cormark Securities

Matthew Thurber - Aviation International News

Graham Warwick - Aviation Week

Jon Hemmerdinger - Flightglobal

Bombardier Inc.A (OTCPK:BDRAF) Q4 2013 Earnings Conference Call February 13, 2014 8:00 AM ET

Operator

Good morning ladies and gentlemen. 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 Miss Chenier.

Shirley Chenier

Thank you operator. Good morning and welcome to Bombardier’s conference call intended for investors and financial analysts. This is a pretty early call so I hope you all had time for coffee before we start.

Operator

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.

Shirley Chenier

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, 2013.

Operator

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

Shirley Chenier

You can access the broadcast on our website at www.bombardier.com; and the webcast archive of the integral version of this call will be available later today. Slides for this presentation in English and French are equally available on our website. All dollar values expressed during this conference call are in US 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 emphasise 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 that we released today. Please also note that I am making this cautionary statement on behalf of each speaker whose remarks today will contain forward-looking statement. Pierre Beaudoin will now begin the presentation.

Pierre Beaudoin

Good morning and welcome to this conference call. As usual, Pierre will walk you through the 2013 results in detail. But before he does I must say that we have accomplished quite a lot over the past year and major milestones were reached in our development program.

The CSeries flew for the first time in September. The Lear 70 and 75 entered into service at the end of the year and our very high-speed train, the ZEFIRO 380 and 300 are progressing well towards their homologation; and all of this while garnering an important share of new orders which brought our backlog to a record level of close to $70 billion.

2014 is off to a great start with approximately $5 billion of orders, already one since the beginning of the year for both groups. A few examples; Al Qahtani from the Kingdom of Saudi Arabia, ordering 16 CS300 valued at approximately $1.2 billion, an undisclosed customer placing an order for a mix of Global 6000, 7000, and 8000 for a value of $537 million; The State of Queensland awarding us a $ 2.7 billion order for 75EMUs, a maintenance center and 30 years of maintenance; and BART, the San Francisco Bay Area Rapid Transit District, exercising an option for 365 additional railcars for a total of $639 million. And that doesn’t include cross rail in London or the Chicago metro which both notified us that we had achieved preferred bidder status.

2014 will be another growth year for Bombardier. We expect to deliver 280 aircrafts in 2014 compared to 238 last year, and transportation will see its revenue increase in the mid-single digit range over the same period. We expect therefore any reason revenue of approximately $2 billion which will take our annual revenue to over $20 billion. This growth will translate into improved profitability compared to 2013. Our investment in new product will also decrease significantly over the next two years as the C series and the Lear 85 enter into service.

And now I will let Pierre Alary go over our results in more details.

Pierre Alary

Thank you Pierre. Good morning. Both groups are reporting increased revenues for the quarter and the full year. Revenues for the fourth quarter total $5.3 billion compared to $4.6 million last year. This represents an increase of 11% for aerospace and 16% for transportation.

For the full-year revenues totalled $18.2 billion, an increase of $1.7 billion over last year. Aerospace revenues were at $9.4 billion, 9% higher than last year while transportation revenues were at 8.8 billion an increase of 11%.

The combined EBIT before special items totalled 186 million for the quarter and 893 million for the full year as compared to 164 million and 806 million respectively last year. Both groups at an EBIT margin percentage had a similar level as last year. For the full year, aerospace EBIT margin is at 4.1% in line with guidance while transportation is up 5.8%.

Net financing expenses for the quarter amounted to 45 million compared to 49 last year and with an effective income tax rate of 30.7% the adjusted net income for the quarter totalled 129 million or $0.07 per share. For the full year, adjusted net income totalled 608 million or $0.33 per share compared to 671 million or $0.36 per share last year.

Consolidated free cash flow for Q4 amounted to 771 million, compared to 854 million last year. As a result, we ended the year with a strong cash balance of 3.4 billion. For the full year, aerospace generated 1 billion of cash flow from operating activities and invested 2.2 billion in product development. For the full year transportation free cash flow generation was very good and exceeded profitability. Free cash flow totalled 668 million. Our cash flow generated from operation together with our good level of liquidity amounting to 4.8 billion will ensure our financial flexibility to support our major investment programs in aerospace.

Now, let me review our net retirement benefit liability. As we continue to implement our de-risking strategy in relation to our retirement plan, we have made significant progress during the year. Our net retirement benefit liability decreased from 3 billion to 2 billion mainly due to strong return on plan asset and an increase in discount rates. The net retirement benefit liability is comprised of the funded and confounded pension plan and post-retirement benefits. The last two components are always by structure and a deficit position as they are on funded. During the year the funded pension plan deficit was reduced from 1.8 billion to 900 million. Our total retirement benefit cash contributions are expected to reduce by 50 million to reach 518 million for 2014.

Now, let’s look at our guidance and outlook for 2014. For aerospace we expect the EBIT margin to be approximately 5%, we expect cash flow from operation activities to between 1.2 billion and 1.6 billion while our investment in program are expected to be between 1.6 billion and 1.9 billion. It is worth noting that we expect the investment for 2015 to be between 1.2 billion and 1.5 billion and to be below 1 billion in 2016. In terms of deliveries we expect approximately 200 business aircraft and 80 commercial aircrafts for 2014.

Now, in transportation, while 8% remain our target, we expect an EBIT margin of approximately 6% for 2014. Free cash flow to be generally in line with EBIT and we expect our revenue grow in the mid-single digit range over 2013 that is excluding foreign change impact. And we expect a book-to-bill to be above 1. Now I’ll let Pierre conclude.

Pierre Beaudoin

Over the last five years we’ve made large investments in game changing mobility solutions and their entry into service is just around the corner. We’re entering an era of even stronger revenue generation and this combined with our commitment to sustain growth and profit and revenues will transform our company. The potential is enormous and we're excited about our future. Our investments are about to payoff. Thank you.

Shirley Chénie

Thank you, Pierre. We will now start the question period for analysts and investors. So in order to keep the duration of this call reasonable I would ask you to limit yourself to one question to give everyone a chance to participate. If you have any remaining questions at the end and if time permits you can get back in queue and if not, you can contact me or Yana after this conference call. We can now start with the first question. Operator?

Question-and-Answer Session

Operator

[Foreign language]. [Operator Instructions] Our first question is from Walter Spracklin from RBC Capital Markets. Please go ahead.

Walter Spracklin - RBC Capital Markets

Thank you very much. Good morning, everyone. So I want to start my question I guess on to Pierre Alary; it looks like your CapEx now, you're guiding about $100 million to $400 million more for this year and then higher for the next year versus your prior guidance. You'd always indicated into us that your cash requirements or total liquidity requirements at the beginning of each year, you wanted them to be about $3 billion. My question I guess is, is that $3 billion, given where you are in the investment cycle, is $3 billion still the right number to use? And if you are to go toward the higher end or the worse end of your cash flow expectations, are you comfortable that you'll be able to maintain that $3 billion or whatever the new number is at the beginning of each year over the next couple of years?

Pierre Alary

Well the answer is that the 3 billion yes, is the right figures and if you look at the past two years we were above 3 billion or the past few years we were about 2 billion to start the year and we’ve been going through a significant investment period. Yes being at 3.4 billion and having access to credit facility of 1.4 billion that’s providing us with 4.8 billion of liquidity which we feel are adequate given the investment program we have.

Pierre Beaudoin

At the same time Pierre I would add that we’re reducing our investment in new program in a significant way all the way down to 1 billion, so when we have reduced step-by-step year-by-year of course our cash requirements will be less or the requirements of our cash.

Pierre Alary

And you might remember that we used to talk about 2 billion and that was in the situation where we were in the normal investment period, it should be a little different.

Operator

Thank you. The following question is from Fadi Chamoun from BMO Capital Markets. Please go ahead.

Fadi Chamoun - BMO Capital Markets

Good morning. I wonder if you can help us understand little bit what the CSeries cash flow requirements are going to be this year in terms of working capital -- the dilution effect on the margin that you're expecting from the CSeries in 2014 as well. Thanks.

Pierre Alary

Okay. So one -- we’ve added one guideline if you’d like and it’s in the detail of the MD&A so I can guide you to which page it is, on page 55 where we're specifying that the entry into service of the CS300, we anticipate to add to the program tooling or we expect to increase the CSeries aircraft tooling by 750 million in relation to development spending and that is to enter into service of the CS300 and to that we will add about approximately 300 million in relation to capitalized borrowing cost.

Fadi Chamoun - BMO Capital Markets

Okay.

Pierre Alary

So in 2014 the dilution and it’s mostly in relation to the net realisable value provision that we will have to take as we start building the inventory, it is expected to be about 1%.

Pierre Beaudoin

And of course that doesn’t include SG&A as it relates to the CSeries.

Pierre Alary

Exactly, it’s really in relation to the NRV, mostly in relation to the NRV.

Fadi Chamoun - BMO Capital Markets

Okay, so that's 1% on EBIT margin in aero in 2014 from CSeries. But then if I take that into consideration, it doesn't seem like your profitability in aerospace is improving concurrent with the strong revenue growth we've had in the last three years. Can you elaborate on why these incremental margins are somewhat low at this stage still?

Pierre Alary

I guess considering a 1% dilution that means that when I say that the EBIT is expected to be at around 5% and excluding that dilution would be 6% and that compared to 4.1% this year, so that’s a significant increase, that’s 50% increase.

Fadi Chamoun - BMO Capital Markets

Right, but a year ago you were more in the line of thought that it will be going up to close to 8% and before dilution of this CSeries. So it is still tracking materially below that.

Pierre Alary

Well we haven’t seen any significant recovery in the business aircraft, so the business aircraft markets have remained pretty much the same for the past couple of years and as part of [the] guidance, we were expecting a recovery in the business aircrafts, a higher recovery than what we were expecting.

Pierre Beaudoin

And we were delivering CSeries in 2014.

Operator

The following question is from Joe Nadol from JPMorgan; please go ahead.

Joe Nadol - JPMorgan

Pierre, on the CSeries, I'm just wondering if you could take a step back here and just give us a little more detail on how it's going. What are really some of the specific drivers behind the delay? It hasn't been flying much, I don't think. And so, what's behind that? And maybe just big picture, your confidence level in the adjusted schedule?

Pierre Beaudoin

When we gave you the adjusted schedule we took into consideration the flying since the first flight. And of course each airplane has their specific mission. FTV3 should fly in the coming weeks. So the way I monitor it, we have a curve that we call the earn value curve for airplane. And we’re on track to the new schedule with this earn value curve. There's a lot of technical activities happening behind the scene, but yes, the flying hours will need to come up. But they're progressing quite well as we speak right now.

Joe Nadol - JPMorgan

Is there a show-stopper from a systems standpoint or is it software, or just what exactly -- I mean the reason you guys have given for the delays have been a little bit vague. And I was just wondering if you could give it a little bit more.

Pierre Beaudoin

Yes we gave a lot of details on the website of CSeries and Rob Dewar goes up and makes a video once in a while to give you updates. Really, it more about when we expect different software drop in the airplane not only related to fly by wire, there’s a lot of different software in an airplane, and when we expect the maturity of different systems to come in the various airplanes, we have a schedule with milestones to meet and the things are progressing as per plan. And we will keep you informed, like I said right now, we are on earn value curve that we plan for the delivery in the second half of [2015].

Operator

The following question is from Cameron Doerksen from National Bank Financial; please go ahead.

Cameron Doerksen - National Bank Financial

My question is on the transportation margin. It was pretty weak in the fourth quarter. I'm just wondering if you can give a little more detail as to what was really impacting the margin there. Was this another sort of re-evaluation of various contracts that impacted the margin? And I'm also wondering if you can give us some kind of timeline on when you think you can hit the 8% target? Is it a 2015 goal or is it something beyond that?

Pierre Alary

In terms of margin, effectively in the fourth quarter there was an adjustment on a few contracts which did impact the fourth quarter margin more specifically. In terms of the 8% as we mentioned, it remains our target. But we're focusing on specific contracts and resolving the issues, and that will be in the near future I guess.

Pierre Beaudoin

What I want to say about 8%, we feel very confident that we can achieve 8% in the near future -- so we’ve put back that target twice and I'd rather that we show you our confident progress before we give a specific date. At the same time, we are reorganizing a transport under [indiscernible] leadership and we call it 1BT where we focus very much on putting more emphasis on project management, on global procurement and on our engineering process, but more standardisation. And I want to feel confident that this reorganization is in place before I give you a specific date. What I would tell you today is let’s -- we'll show you progress through next year. And then we’ll be able to view more visibility.

Cameron Doerksen - National Bank Financial

Okay. Will the restructuring and reorganization activities be largely complete by the end of 2014?

Pierre Beaudoin

Yes I would say so. Yes we’re doing this as fast as possible, given the context and where we are reorganizing, but definitely 2014 will be essentially done.

Operator

The following question is from Ron Epstein of Bank of America Merrill Lynch; please go ahead.

Ron Epstein - BofA Merrill Lynch

Just turning back to the Bombardier aerospace question, so you're guiding I guess what about a 20% increase in aircraft deliveries in 2014.

Shirley Chenier

Ron, we can’t hear you. Are you on a speaker phone or?

Ron Epstein - BofA Merrill Lynch

Hello, can you hear me now?

Shirley Chenier

Yes. Thank you.

Ron Epstein - Bank of America Merrill Lynch

Yes, sorry about that, that was some telephone malfunction. So again, thank you for taking my call. So maybe just going back to Bombardier aerospace quickly, so for 2014 you're guiding something like a 20% increase in aircraft deliveries, but your margin guidance is only 5% and I get you're factoring in some CSeries dilution. But when I look at some of your competitors, particularly in the large business jet marketplace, right? Demand that looks like for Gulfstream G550 is doing really well. [Indiscernible] seems to be doing pretty well. If you look at the margins that those guys have reported and the mix of airplanes that you guys have, the Global wonderful product right, there’s a lot demand for it. You would think that your margins should be higher, right? Why aren’t you getting more accretion from the Global family in your results in aerospace? And then one follow on. I’m going to keep it to one question, sort of, out of respect. Can you tell us actually how many hours the CSeries have flown to date?

Pierre Alary

Let me start with the CSeries question. We give regular update on the site, I would refer you to there, I look more at earned value but I would tell you that the overall flight is about 100 hours. But specifics you’ll see on the CSeries site.

As far as the aerospace margin, we have a much boarder portfolio than the manufactured that you referred to and some of the sectors are more difficult right now like the smaller business jet. And I would say when we talk about dilution of the CSeries 1% this is only one part, we also have some effect of having more SG&A. We have a bigger sales force, for example to make sure that the CSeries is sold worldwide and supported. So, because we’re investing for growth it has further effect on our margin but if you look -- if I just take the dilution of the CSeries for adjustments in contract, this 1% so that takes you to 6% from where we are today that’s a big growth of almost 60%. So, we’re making progress but in the context we have a broader portfolio.

Ron Epstein - BofA Merrill Lynch

But when I think about programs like your Globals and the demand form and that size aircraft and how their market's been doing; one would think that your margins on those programs should be mid-to-high teens, right? And it is a lot of revenue and I understand that Lear is in a hard space in the market right and that's just kind of how it is and you've got your turbo props and you've got a much broader portfolio. But -- and maybe I'm just thinking about it too simply. But you would think that the profitability on those big planes could really help out that segment more than we're seeing.

Pierre Alary

Well, I think Ron, I already answered this question. We are investing into our future which will create a lot of growth for our company and of course temporally it has some effect on our margin, the dilution of the CSeries a little bit more expense to make sure that we have the right team in place to be ready for all of that growth and it’s a little bit the same thing, a business aircraft with the development of the Lear 85 and the Global 7000 and 8000. Most of the costs are capitalized but there is other costs that are expense at business aircraft to be ready for that growth.

Operator

The following question is from Benoit Poirier from Desjardins Capital Markets. Please go ahead.

Benoit Poirier - Desjardins Capital Markets

Thank you very much and good morning. My question, just to come back on the aerospace margin; how should the aerospace margin and CSeries 1% dilution should evolve in 2015 and beyond, as you get closer and you start deliver the plane?

Pierre Beaudoin

We expect the first two years of [indiscernible] service of the CSeries to be dilutive and at this point in time that's as much as we will get into the detail, 2015, 2016 -- 2015 will be -- in second half of 2015. So, it’s getting far away to give precise guidance.

Operator

Thank you. The following question is from David Tyerman from Canaccord Genuity. Please go ahead.

David Tyerman - Canaccord Genuity

Yes, good morning. My question is on the CSeries working capital requirements. I was wondering if you could give us some idea over the next couple of years how we should be thinking about this. You've obviously got inventory build. You're going to be getting deposits and so on. I'm just wondering how all this nets out.

Pierre Alary

Well, we’re going to gradually increase the inventory, so we’ve already started in fact and as you pointed out the advances from customers that is growing and there is also contribution from suppliers and so on. So that kind of balanced it out and when we will look at our liquidity overall and I’m referring to the 3 billion of cash to as a minimum to start the year we’re pretty comfortable with the level of cash we have to cover the working capital variation.

David Tyerman - Canaccord Genuity

Okay, but Pierre, there is a lot of anxiety in the investor base about this issue and your answer doesn't give us any way to really put a specificity to the working capital changes here. Like, is it zero, is it something or is there some way we can think about this because investors are sitting here trying to figure out like what impact is this? You’re just saying trust us.

Pierre Alary

Well, you’re asking me guidance for 2015-16. Typically you’ve seen it over the past few years the working capital, the variation of working capital for the full year are not significant, that is in fact the cash flow from operation has been above the EBITDA and that’s a good indication of how we are able to manage and balance the inflows and outflows. And we don’t expect that to change in a significant way so that is that the working capital -- the effect of the working capital is close to neutral.

Operator

Thank you. The following question is from Turan Quettawala from Scotiabank. Please go ahead.

Turan Quettawala - Scotiabank

Yes, good morning. I guess my question is on the BT margin. Lutz has talked about a significant increase in R&D expenses here just as he sort of changes the business a little bit. I am wondering if you can comment a little bit on how soon you think you can sort of get that back and just in the context of the 8% margin, presumably that obviously has a negative impact on the margin here in the near term. And I guess you need to probably get that back from SG&A. So maybe you can talk a little bit about how soon you can do that. Thank you.

Pierre Beaudoin

We all want to increase investment upfront in R&D but we have to earn that with reduction in SG&A on the other side. So this will not always be perfectly timed because sometimes we start a project before we’ve implemented the overhead reduction but it’s very clear with Lutz and his team that he wants to -- when he make significant saving in efficiency part of it will go back to R&D, how he is focusing and delivering the 8%.

Turan Quettawala - Scotiabank

So I guess the 6% margin guidance then for 2014, is that mainly due to execution issues on some of the contracts that you're facing?

Pierre Beaudoin

It’s mainly due to contracts that are not delivering the margin that was anticipated and that’s why we’re very focused on fixing the process fees that I spoke about before.

Pierre Alary

When we are just margin on contract it has an impact in the quarter that we adjust in March but it also has an impact on the margin on that contract going forward, the margin is lower. So, until we complete the initial phase of that contract it continues to put pressure on the margin.

Pierre Beaudoin

But we’re entering a different phase with BT, if you look at the orders we’ve got recently there is options in there or there is metros, for example, in Chicago that’s very similar to the one we’ve built before. So the level of risk in front of us is less in what we face in last few years because we said that many times, we have developed platform that now are linked to very long option venture.

Turan Quettawala - Scotiabank

Okay, and if I may just really quickly on the BT free cash flow, Pierre; the last time you had problems on the execution and it impacted free cash flow as well. It seems from your guidance that you're not expecting to see that much of an issue this time around, is that a reasonable assumption?

Pierre Alary

Yes, it is reasonable assumption. In fact the assumption is that the free cash flow generation to be in line with profitability.

Operator

Thank you. The following question is from Deepak Kaushal from GMP Securities. Please go ahead.

Deepak Kaushal - GMP Securities

Hi, just a quick couple accounting questions. On the extra program costs for CSeries, the $750 million for a program and the $300 million capitalized interest costs, are both of those buckets amortized over the number of aircraft?

And then just to follow on that on the inventory write-downs for CSeries in the quarter are you able to quantify that impact and quantify how that would impact on a per-aircraft basis over the next year?

Pierre Beaudoin

Well, in relation to the tooling, the 750 million increase in relation to development on planning for the CSeries on the entrance of service of the CS300 and the capitalization of interest, effectively that will be amortized on a per-aircraft basis as it’s part of the tooling and that is amortized on a per-aircraft basis so as we start delivery we’ll start to amortize. And your second question was?

Shirley Chenier

Inventory write-down

Pierre Beaudoin

On inventory write-down. Well, the indication we’ve given is that for 2014 the dilution of the -- from the CSeries is in relation mostly to the NRV and for the inventory write-down and we’ve talked about 1%.

Deepak Kaushal - GMP Securities

Okay. And in the past when you talked about the 2% dilution for CSeries when you're in production; is that incremental to the NRV write-downs or is that part of -- is that built into that dilution impact?

Pierre Alary

It’s built in.

Operator

The following question is from Darryl Genovesi from UBS Securities LLC; please go ahead.

Darryl Genovesi - UBS Securities LLC

Just to get back to aerospace working capital for a minute, but I'll focus on ‘14. It looks like the gap between essentially your implied EBIT guidance and your cash flow from operations guidance at aerospace looks to include a big working capital benefit, after already you having gotten a big working capital benefit in 2013. Can you just explain what's built into that; what kind of order activity you need to actually get that and to the extent that it's based more on an expectation for higher deliveries in 2015, rather than coming orders? Thank you.

Pierre Alary

First of all it takes into account the level of advances from customer that we expect and you should look at the past two years, we had a significant book-to-bill, well above 1.72, in the past two years, so that is 2012-2013. And with those signatures, there's the advances upon signature but after that there’s advances like 18 months, prior to delivery, 12 months prior to deliveries; so there a number of advances that are contractually due in 2014. And we also expect a good level of new orders and there is also contribution from suppliers, in our various development programs and normal advances from customer as we signed up. So that’s why you’ve seen the past couple of years and we’re continuing to see in 2014 that the working capital is a net improved -- net cash generation from the working capital variation.

Darryl Genovesi - UBS Securities LLC

So I guess it looks like there's about $700 million or $800 million implied working capital benefits. I guess can you just bucket the percentage of that I guess that you think is sort of locked in as opposed to what's dependent on new orders?

Pierre Alary

Your 700, that's your calculation. It depends on what you've -- what you're expecting in terms of cash flow from operating activities it depends what you’ve factored in.

Darryl Genovesi - UBS Securities LLC

Yes, I mean I was just using the midpoint of your guidance, where you had the $1.4 billion to $1.6 billion.

Pierre Alary

Just look at the current year result where we have 4.1% of EBIT compared to the EBIT to the cash flow generated from operation; that gives you a good idea -- the kind of contribution we can get from working capital improvement.

Operator

The following question is from Stephen Trent from Citi; please go ahead.

Stephen Trent - Citigroup

And just from me, I was wondering if you could give us some broad color on where you are with marketing campaigns, specifically for the CSeries and on transportation contracts in key countries and kind of how are you looking in terms of advanced discussions versus preliminary discussions; if you could offer any insight there?

Pierre Beaudoin

Like we spoke before on many of the calls, there's some customers in the CSeries that have been following us for several years, and now we're into flight test and getting more and more data and they’re coming to decision time. So we have a lot of active customers that are in advanced discussion with us. I cannot tell you when they will make a decision because that’s their call, but really right now since we've announced the new schedule, it’s about finding positions for them because as you understand we have 200 firm, we have about 450 with the options and I guess overall commitment. So right now it’s more a battle of finding the right positions for the customers as they make decisions this year. But I think we have quite a few exciting opportunities in front of us.

Operator

The following question is from Peter Arment from Sterne, Agee; please go ahead.

Peter Arment - Sterne, Agee & Leach

Pierre, just a quick question on I guess it's related to CSeries, but there's reports earlier in January about kind of because of the delay reducing kind of some of the employee levels; is that also tied to some of the operations with the -- in the Biz Jet also; or is it all just encapsulated with the C Series delay? Thank you.

Pierre Beaudoin

Yes. It’s not related to the CSeries delay, its overall aerospace, we grew our employee base by about 4,000 since 2008 and we and his team thought there was time to make an adjustment to make sure that we were competitive and to deal with the fact that business aircraft did not grow as fast. The market did not came back as fast as anticipated and it was in a company of 35,000 employees for aerospace, this is an adjustment of 1,700. So, it’s really going after areas and making sure -- different areas in the company making sure we have the right over head to be competitive. So, it’s an overall adjustment, not focused on CSeries.

Operator

Thank you. The following question is from Steve Hansen with Raymond James. Please go ahead.

Steve Hansen - Raymond James

Yes, good morning, everyone. Just to circle back on the revised CSeries timeline here; I was just hoping you could give us some added granularity on some of the key milestones to expect over the next six months beyond just the FTV3 commentary. And perhaps a broader subjective question to some degree; I was hoping you could help us understand or help us characterize the revised timeline as whether you think it's a realistic timeline or a conservative timeline. Just trying to get a sense for what kind of buffer you might have built into this new timeline and how realistic it is. Thanks.

Pierre Alary

Well, first of all its about really putting into flight that we’re going to have seven aircraft in the flight test of the CSeries, five of them are CS100, two will be CS300. So its phasing in these aircraft with the various systems that are coming in. In some case we have preliminary assistance that are in the airplanes today and will get different level of maturity through the year, we’ve looked at that schedule very, very carefully as you can imagine we feel very confident about this schedule. We also were not precise on a specific date. We said second half of 2015 and we feel good that we’re making progress towards the entry of the service on the schedule that we announced.

It’s a question of also balancing when we bring in inventory to build the new aircraft, if we’re too aggressive in the flight test with the work that needs to be done and we started building in inventory and we don’t deliver aircraft that’s not the right recipe from a business perspective. So, once we’ve balanced out of this we feel very good about second half of 2015.

Steve Hansen - Raymond James

Okay. Is there a timeline or approximate window where we should expect all of the flight test vehicles for the 100 to be in the air?

Pierre Beaudoin

That I would let Rob Dewar and his regular update on the CSeries website to give more color as he’s ready to do it. Right now we’re focused about talking about the FTV3 but we also give you on the site good visibility on the state of advancement of FTV4, FTV5 and we’re starting to talk about this CS300. But because this website constantly gets updated and its really Rob’s responsibility to do that, I would let you go there and refer to that.

Operator

Thank you. The following question is from Anthony Scilipoti from Veritas Investments. Please go ahead.

Anthony Scilipoti - Veritas Investments

Thank you and good morning. I just wanted to go quickly back to that question that was asked about the inventory write-down. I noticed that there was a pretty significant one this quarter; I guess about $44 million in Q4. And I noticed that I was happy to see the used planes going down, etc. Maybe you can explain how that write-down comes about and what we can expect going forward in that regard. Thanks.

Pierre Alary

So, your question is on the write-down in relation to the -- or the provision we’re taking for the net realisable value on the CSeries.

Anthony Scilipoti - Veritas Investments

Perhaps the write-down that was shown in the note on inventory.

Pierre Alary

The -- what we’re showing there is an increase of about -- we had 147 million of write-down in 2013 versus 104 last year. So, the variance is mostly attributable to the CSeries and what we do is that we use aircrafts that we have on hand; we do revise them on a quarterly basis and adjust for the net realisable value.

Anthony Scilipoti - Veritas Investments

So you take the inventory of CSeries that are -- I mean because they're not really going to be sold yet, so.

Pierre Alary

So, on the CSeries more specifically, the first aircraft that we deliver, they’re typically the lower price, it’s a launch price as you know and then the first unit that we built are much more expensive to build. So quite typically that that’s what you see in the whole industry, the first unit are negative in terms of contribution. So, as you start building the inventory, you have to question yourself on to -- as to the realisable value and it's in relation to the units that are negative in terms of a contribution, then the first dollar that you spend, you have to presume that it’s for the excess inventory. So, therefore you have to pay to a net realisable value. So that’s IFRS and that’s how we have to account for it. So as we start spending on the first unit we need to provide 100% on the first few dollars that we spend and then at some point we get to the net realisable value and then that’s over for those units. Okay that’s why we need to record net realisable value provision even if we haven’t start delivering on the program.

Operator

Thank you. The following question is from Tim James from TD Securities. Please go ahead.

Tim James - TDNewcrest/Waterhouse Securities

Thank you. I'm wondering if you could provide what the approximate dilution impact was from the CSeries in 2013. And I'm thinking of the comparable value to the 1% dilution that you provide for 2014 in your guidance.

Pierre Alary

I guess just referring to the previous answer when I was giving the variants in terms of the write down for the full year I was referring to variance of maybe between 40 million to 50 million.

Tim James - TDNewcrest/Waterhouse Securities

Is it related to the CSeries?

Pierre Alary

Right, you’re absolutely right.

Operator

Thank you. The following question is from David Newman from Cormark Securities. Please go ahead.

Hilda Maraachlian - Cormark Securities

Hi. It’s Hilda on behalf of David. My question is on the CapEx.

Shirley Chenier

Hi Hilda.

Hilda Maraachlian – Cormark Securities

Hi. It would appear that the increase in the CapEx for the delays around 600 million or so but you comment in your release that you may receive funding from the government suppliers. Have you engaged in any discussions to share the same on that? Thanks.

Pierre Alary

If I understood you well you wanted to know if the governments will participate in the additional cost, the answer to this is no.

Hilda Maraachlian – Cormark Securities

Okay, thank you.

Pierre Alary

What that what your question?

Hilda Maraachlian – Cormark Securities

Yes.

Shirley Chenier

Okay. So...

Pierre Beaudoin

The contribution we’re getting in terms of refundable advances are as per the original contract that we signed back in 2007 or so.

Pierre Alary

Yes, sometimes people track the exact amount but given that they’re maturing, where the governments are and we report everything in US dollars the exact amount may vary from what we knew in US dollar but it’s the same as the original agreed amount.

Shirley Chenier

So that’s where the government contribution the suppliers deal. Hilda? Okay. Do we have any more questions operator?

Operator

Thank you. The following question is from David Tyerman from Canaccord Genuity. Please go ahead.

David Tyerman - Canaccord Genuity

Yes, just to follow up on the Bombardier aerospace margins. I think you're getting a sense here that a lot of people are trying to figure out why they're so low and I'm one of them, too. You're talking about investing in products being part of this. You mentioned 1% for the CSeries. Is there a very large additional percent in investing and if there is if you can give us some idea of that?

And then just beyond that I mean you're still only at 6% even if you take the 1%. That's an improvement and a big one, but it's still very, very low versus history. So I'm wondering like, why is it so low? Is it very low absorption? It seems unusual that it would be if several of your really important lines are actually running quite well and quite at high levels or is pricing really low? What is really driving the low margins?

Pierre Alary

Well, there is a number of thing that drives the margin overall. When you look at business aircraft the high end do very well, medium end do okay and the small end are struggling and that has been the case for a number of years now. So that has -- the lower end has an impact on the margin on the business aircraft side. On the commercial aircraft side it’s very competitive and on the existing and we’ve been -- we were at a very low level although we’re going to increase on the large side in 2014 in terms of volume. Now when we see the investment, there is a number of thing in the investment is the SG&A as we have teams that are getting prepared for the increased volume in relation to for example the CSeries.

And all the marketing it’s on if you look at the backlog we’ve been increasing significantly the backlog, in that there is cost attached to that in terms of SG&A for which we don’t have the benefit yet. And the benefit is coming up. It’s in front of us. So that’s a number of things that explain why the margin is not -- it is growing significantly as you pointed out, but not maybe as high as you would have expect if we were to deliver only the large end of the business aircraft.

David Tyerman - Canaccord Genuity

So with the biggest part of whatever margin decrease you’re getting from these things be coming from the Learjets and the commercial aircraft?

Pierre Beaudoin

Yes. And as you know the dilution on the CSeries, that’s really the NRV, so it doesn’t take again into account the whole team that we have there managing the evolution of the CSeries, the marketing team around and so on.

David Tyerman - Canaccord Genuity

Okay. Could you quantify any of this?

Pierre Beaudoin

Yes, it’s very hard when you start to do that because now you’re starting to split expense like the expense of a salesman; how much does he work for CRJ, Q400, and to start to do this publicly I think it would be a mistake. We look at it internally, we are building a $5 billion - $8 billion business with the CSeries, and we need to be ready for not only from a customer relation and sales force perspective but also after sales, the entry into service is crucial in this program, so we have quite a bit of overhead related to this $5 billion - $8 billion business that’s just in front of us.

Pierre Alary

We will then get into cost allocation in between models or programs and we don’t want to start. We look at it internally but I don’t think that’s a good thing to start allocating people in this way in our MD&A.

David Tyerman - Canaccord Genuity

You might want to think about it for your Investor Day because it's obviously a big question out in the investor base. Thank you.

Operator

The following question is from Deepak Kaushal from GMP Securities; please go ahead.

Deepak Kaushal - GMP Securities

I was wondering if you could touch maybe a little bit on the Learjet 85 program and the Global 7000-8000 program. And on the Learjet 85 you've had some delays in first flight. Are you seeing an impact to these programs because of the CSeries delays? Have you slowed down investment in these programs to manage cash? If you can just give some color on the CSeries impact and how it relates to the aerospace programs that are coming, thank you.

Pierre Beaudoin

They are not being impacted by the CSeries, so to let me start with the Lear 85. The first flight is very close. It's been difficult. Obviously it’s not on the schedule that we had anticipated. But now we are going to get into the flight program very shortly, and then once we're into the flight program, we’ll do like the CSeries. Once we had a few weeks of flying, we’ll see if we need to take a couple of months, but then we’ll issue a schedule for the flight test and then the entry into service. I think it’s going to be an exceptional aircraft. It was a little bit challenging to get all the components done and producible, but that’s behind us now. We feel very confident about our capacity to manufacture this aircraft as anticipated. But now it’s really about getting it into flight and moving forward and that’s coming very shortly.

As for as the Global 7000-8000, really good commercial success, we have significant orders for this program. And the technical aspects and the performance of the aircraft are progressing well. We do share some of the technology with the CSeries, so the teams are working very closely together as an example, on fly by wire. But one is not holding the other on the contrary, we benefit from the learning of the other. So I feel very good about the progress we are making on the two Global the 7000 and 8000.

Operator

The following question comes is from Steve Hansen from Raymond James; please go ahead.

Steve Hansen - Raymond James

Yes, just one last one if I may; just wanted to follow up on some of the changes we've seen in your sales force lately on the aerospace side. There have been a number of notable changes at the relatively senior levels here over the past year and a half. Just wondering if you think you've got the right team in place now to push ahead with your current plan. Thanks.

Pierre Beaudoin

And you’re referring to commercial aircrafts?

Steve Hansen - Raymond James

Yes, that’s correct.

Pierre Beaudoin

I suppose, yes; because we have of course a sales team on the private side also, the business aircraft. Our commercial aircraft, I feel that, yes, we made some changes lately; it’s a question of making sure that we have the most competitive sales force as possible. I’m impressed with the job that has been done so far, but it's only been a few months. We are seeing good traction, good motivation from our team and the customer comments are very good. So we will judge with results.

Shirley Chenier

Operator, do we have any more questions?

Operator

There are no further questions registered at this time.

Shirley Chenier

So this concludes a question period intended for investors and analysts. We will now begin the question period for media representatives. Operator?

Operator

(Operator Instructions). The first question is from [indiscernible]. Please go ahead.

Unidentified Analyst

Yes. Thank you good morning. You mentioned the software issues for the CSeries. I’m wondering and it’s not only fly by wire, I’m wondering what are the software issues you’re referring to and how much of that is due to the fly by wire. Thanks.

Pierre Alary

Yes. I don’t know that I mentioned issues, I said software drops, normal than the development that you asked several level of maturity in the software so you start with a basic and that you get more refined through time. There is no specific issue to point to. All of these systems talk together of course so one influences the other but overall things are progressing well on the software front.

Unidentified Analyst

Can you address them the broader issues of the causes for the delay if it’s not the software, what is it?

Pierre Alary

Well, you know it’s a development program so there is a different system that will come to maturity and we’ll get the latest component production part on a very determined schedule through the flight test and we need all these systems of course to certify the airplane. So, things are all planned and progressing well, I don’t think I can give you any more color than what we do on the CSeries.com update, I guess website.

Unidentified Analyst

One last if I may, you’ve got about 100 hours under your belt you need about 2,400 hours flight, I’m wondering how many of those 2,400 can be translated into the ground testing that you’ve had or do you need 2,400 actual flight hours.

Pierre Alary

That 2,400 hours is referring to the flight hour.

Unidentified Analyst

Okay. So you do need the 2,400, you can’t write-off some of the ground testing you have and just credit it to…

Pierre Alary

Well, let’s be careful here this is a discussion that will happen between transport Canada and our team. They may in the end give us some credit for the great work that’s being done on the ground. what we said initially is 2,400 hours of flying but if -- and I think our team is conservative in this way, if we get credit for work that has been done in the [indiscernible] it will go against it and that’s why it’s very hard to constantly measure this from a specific hours of flying, I look at earned value curve work we have to do before certification and we’re doing well on that curve. For more specific on flying hours, I think we give more update than anybody else on our website.

Operator

The next question is from [indiscernible].

Unidentified Analyst

Good morning. I’d like to address two aspects, first liquidity, if I understand the cost overrun for the CSeries amount to a little over 1 billion, okay so far. You’re referring to $550 million in tooling costs and then about 300 and some million in interest that you’ll be capitalizing.

Pierre Alary

Well, the reference that to what have yet to invest until entry at the service of the CS300. So, this is to give investors an idea of how much we have yet to invest. We haven’t said that these will cost over runs. If this were the case, it would mean that we would have already have delivered the aircraft. So, it's rather what we have yet to invest, we have the 650 -- $550 million yet to invest in development and in that same calculation where we’re consolidating our capitalizing other the development cost so that also includes or that will include 300 million in capitalized interest cost.

Pierre Beaudoin

We’re were getting a lot of questions about the development of the CSeries, that’s why we decided to be really transparent about how much the development will cost. Now, at the same time the business case we set up for the CSeries is sorted and we’ll meet our expectation.

Unidentified Analyst

So, are you still within your $3.4 billion to $3.9 billion or -- I was never clear about that.

Pierre Alary

It's because the 3.4 billion was under different accounting standards, the Canadian GAAP, now we're under IFRS standards, the figures aren’t comparable. That’s why we decided to be really transparent and say, okay we invested 3.3 billion so far in the CSeries we’re going to be investing another $1 billion to get to 4.365 and by the end of the program.

Unidentified Analyst

Under GAAP, there is a GAAP measure?

Pierre Alary

This is an IFRS measure.

Unidentified Analyst

So, how much is the delay costing you extra, how much extra is the delay costing you?

Pierre Alary

Well, there is an additional cost, but it’s always hard to compare to go back to past figures. So, what we’re telling you is the program will cost 4.4 and we’re still comfortable that we’ve got a solid business case.

Unidentified Analyst

Okay, so two more quick questions about -- how -- what will be the impact on your future margin for CSeries of this delay? How much -- what was the margin you were expecting and what would the percentage impact of the delay?

Pierre Alary

What I can tell you is that the business case is met for the CSeries. There is lots of factors ahead aside from development cost that are taken into account. There is material cost, the labor costs, the volumes, the selling prices, and we don’t want to give transparency on each of these items that are competitive but what we’re saying is the business case procedures will be met.

Unidentified Analyst

And about your liquidity, we have concerns about that, about the extract costs that would be generated by the delay. What I understanding is you have about $3.4 billion in liquidity right now plus credit facilities? But looking forward looking ahead you have to keep I think 2 million in the [kitty] at all times are we getting close to that threshold or do you have a cushion of how much minimum as looking ahead to 2014-2015?

Pierre Alary

The $2 billion you referred to is to cover fluctuations and the various balance sheet items within a period or within fiscal year. So whereas since we’re in a major investment phase that’s why we started off the year very well with more than 3 billion. And as you said we’re at 3.4 billion without taking into account our facilities under our credit agreements of 1.4 billion. So our total liquidity 4.8 billion this is a level that we feel is adequate given the investment we have to make.

Unidentified Analyst

And one last question, I understand that the CSeries the first deliveries would dilute the margin. So if you take your 6% margin taking into account the fact that or taking into account or taking it from the extra cost, would the 6% go down once the CSeries goes into service?

Pierre Alary

When we say that we’ve brought 1% dilution the impact of the CSeries is already felt in 2014. So -- and the CSeries will continue to have an impact. The impact that the dilution, what we call the dilution, the negative impact on margin is during the first two years essentially.

Unidentified Analyst

And it will be in that order of magnitude?

Pierre Alary

It could vary but yes you could say it’s a net order of magnitude.

Operator

The following question is from Matthew Thurber from Aviation International News. Please go ahead.

Matthew Thurber - Aviation International News

Yes. Thank you. And my question is what is the specific reason for the Learjet 85 delay and is it because of composites construction or the electrical system design or something else? And can you provide a life of time for entry into service after first flight and can you confirm that the FTV 1 was built using a different composites construction technique than the technique for the conforming flight test articles? Thank you.

Pierre Beaudoin

Okay, so you have several questions here. The delay right now it’s really more system integration, the aircraft is the first flight as the equivalent of essentially completed and it’s really the typical thing before we go to first flight is making sure that all of the system in the aircraft are responding the way that they should and there has been some adjustments here and there that we had to do before we present the aircraft to the FA. Now we’re very close to presenting the aircraft and then after that its a few days or few weeks before we go to first flight because after that it’s a question of completing a few tests.

Once we get there we’ll fly for a period and like the CSeries after we’ve flowing for a period and the CSeries we took two months we’ll come out with a schedule that will give you exactly when we expect the interim to serve.

Your question was, there was a question related to the composite. I feel that we’ve made significant progress on the composites and that we understand exactly what needs to be done for production and we feel that this is a technology that we understand and we can move forward towards production at this point. There is still some to be done and yes there will be different configuration which is typical from one flight test vehicle to the other. But I don’t think the composite will be the major issue. Did I answer all your questions?

Matthew Thurber - Aviation International News

Yes, just to clarify the -- so the electrical system design is not part of the delay?

Pierre Beaudoin

Not specifically, no.

Shirley Chenier

Okay thank you Mr. Thurber

Operator

The following question is from Graham Warwick from Aviation Weekly; please go ahead.

Graham Warwick - Aviation Week

Could I just -- sorry to go on about this but can we just make sure we understand the development costs correctly that, I think as previously stated, you said it was $3.4 billion and then if you added in under IFRS, you add in the borrowing costs that took it to $3.9 billion. We are now talking about 4 billion, can you just tell us what the development cost is, but also make sure that you -- if you make it clear to me what is development spending and what is capitalized borrowing costs and then what total is versus what it was before?

Pierre Alary

The total cost is 4.4, reference to previous numbers and the only official number before is 3.4 and now it is in Canadian GAAP. So you should put that aside, we give you a lot of transparency on the overall costs, its 4.4 billion and a part of this, and Pierre I'll let you give the split but there is some capitalized interest. Because that’s the way it’s done in IFRS. And then Pierre if you will.

Pierre Beaudoin

So in terms of capitalized interest, the disclosure we have is what we call the aerospace program tooling, we have 3.3 billion at the end of 2013 for the C series, and when I considered all the development for all aircrafts, we have 6.6. So half of it is roughly the C series and as part of that 6.6 we have got 609 million of capitalized interest. So you can say roughly half is for the C series.

And coming up the 750 of development spending on say all the entry into service of this CS300; and in addition this will be about approximately 200 million of additional capitalized borrowing cost.

Pierre Alary

And Pierre, because there is lot of numbers, maybe we can say which page it refers to and --

Pierre Beaudoin

It would be page 54 and 55 of MD&A. And when you refer to capitalized cost, that’s one difference; between Canadian GAAP and IFRS has many of the differences. And also the last amount that we have mentioned, that is an amount that’s based back to 2007, 2008, and a number of things have changed in the way we’ve addressed the program and the way we work with or suppliers, partners. So there was a lot of variation influence. That’s why we are saying it’s not comparable, but what kind of really important look at is the overall business case and that we -- as Pierre has mentioned as we confirmed concerned a number of times, we are in line with our business case.

Pierre Alary

So to avoid any confusion we have referred to the tooling on the CSeries, we had 3.3 and we'll be at 4.4 by the time we deliver the CS300.

Graham Warwick - Aviation Week

And that tooling cost includes the capitalized borrowing is built into that tooling cost, that tooling figure?

Pierre Alary

Yes.

Graham Warwick - Aviation Week

And what is the product development expenditure for CSeries in ’14; its 1.98 in ’13. Is it more or less in ’14?

Pierre Beaudoin

We’ll just give you the amount on the entry into service.

Graham Warwick - Aviation Week

So that probably 750 goes on, is the total spending on development spending through ‘14 and into the ‘15 entry into service or is it on top of what was already planned?

Pierre Alary

And going into ‘16 because it's all the way to the certification of the CS300, which comes six months later than the CS100.

Graham Warwick - Aviation Week

But that 750 is on top of what you already would have spent in ’14 and ’15?

Pierre Alary

No.

Graham Warwick - Aviation Week

That is the spending in ’14, '15, and into ’16 on product development for the CSeries.

Pierre Alary

Into all the way to the certification of the CS300 which we anticipate to be six months after the entry into service of the CS100.

Operator

The following question is from Ross Marowits from the Canadian Press; please go ahead.

Ross Marowits - Canadian Press

First I wanted to ask you about your delivery forecast of 280 aircrafts, can you break that down by aircraft or type and also how would that affect your production rate?

Pierre Beaudoin

It’s 200 business aircrafts and 80 commercial aircrafts.

Ross Marowits - Canadian Press

And is there any breakdown by aircraft, Q400 versus CRJ?

Pierre Alary

Way too much information for a competition.

Ross Marowits - Canadian Press

Okay, and will you be increasing production of CRJs?

Pierre Beaudoin

We are -- we've signed, as you know a significant order last year and the year before. So we are effectively increasing.

Ross Marowits - Canadian Press

Any details on that?

Pierre Beaudoin

Now, again it’s very competitive, so no. Wwe're delivering according to contract we’ve signed.

Ross Marowits - Canadian Press

And the second thing was I’m wondering about the few fuselage that’s supposed to built in China, what’s the update on that? I think it was taken back. Will that be fully developed, built China by entry into service or what’s happening with that?

Pierre Beaudoin

Well there is a whole -- first of all its not the whole fuselage that was not -- that was taken out in China part of it and right now we’re bringing back the components step by step and it's going to be a gradual process over a few years. It’s going very well, they’re unscheduled, in fact they’re doing very well on the schedule our partner SEC, so, its progressing well, they transferred -- the transfer back is progressing well.

Ross Marowits - Canadian Press

So, will it be fully built in China by entry into service of the CS300 or CS100 or what?

Pierre Beaudoin

A big part of the transfer will have happened. I can’t tell you if it will be fully done by then.

Ross Marowits - Canadian Press

And one last thing I’m wondering with the delay in the deliveries, are you concerned that your key advantage, the window of opportunity versus your competition is narrowed and not may affect or limit your ability to orders.

Pierre Beaudoin

None at all. We have a unique airplane in the category where we’ll be all alone. One of our competitor is doing a large regional which is nowhere near the performance of the CSeries, the reengineered planes and then the other two manufactures are focused on bigger aircraft and again reengineered. So, we’re the only one with enough new airplane and we have significant competitive advantage. As far as I’m aware there is nobody developing a new airplane.

Operator

Thank you. The following question is from Jon Hemmerdinger from Flightglobal. Please go ahead.

Jon Hemmerdinger - Flightglobal

Hi, guys. Thanks for taking my question. I actually you answered most of it in Graham Warwick's question, but I was wondering if you might be able to give me any indication of how the increase in cost would affect your ability to breakeven on the aircraft and how many aircraft you might have to produce to breakeven?

Pierre Beaudoin

What I said on this is that with the investments that we are showing you on this series, we feel very good about the business case of this picture. All the other information is that we feel are competitively sensitive.

Operator

The next question is from [indiscernible].

Unidentified Analyst

Hi. Just a simple question, the delay in the first deliveries of the CS100, did you push it back to the second half of 2013 to make sure there wouldn’t be any further delays or could it be if there are problems that there will be been further delays?

Pierre Beaudoin

We’ve got a schedule in place that we’re very comfortable with. We’ve gone through the schedule quite thoroughly before announcing it. Now the reason we do flight test is to make sure that we’ve got the right system and are reliable and entry into service and I’m very confident entry into service will take place in the second half of 2015.

Unidentified Analyst

But it's not out of the question that it would be pushed back again.

Pierre Beaudoin

I’m confident that we’ll have entry into service in the second half of 2015.

Operator

The following question is from [indiscernible]. Please go ahead.

Unidentified Analyst

Just two clarification. When you gave us the number of $3.4 billion development cost, that was Canadian GAAP in $3.9 billion and ended up in IFRS. Was that until the certification of the CS300?

Pierre Beaudoin

The number you should focus on today is the 4.4 billion…

Unidentified Analyst

Right, and that’s why I’m asking that, I am focusing on that, I’m just wondering if the numbers are comparable.

Pierre Alary

They’re not, that’s what we’re saying.

Pierre Beaudoin

They’re not because a lot of standards have changed and you know we looked at making a comparison but you really can’t. So, the number is 4.4 billion.

Unidentified Analyst

Okay. But was the 3.9 billion up to certification of the 3.9 billion, I mean regardless whether or not you can compare the numbers.

Pierre Alary

The 3.9 is two numbers. 3.4 was the original in 2008 timeframe that’s already five or six years ago, that was under Canadian GAAP on the certain assumption as to how we work to develop and partner with our various suppliers and so on. That has changed significantly or a lot during that period of time. What we think today, the number is we have 3.3 billion of development cost that is reported at the end of 2013 and there 750 million to come entry into service of the CS300 in terms of spending on development and 300 million to be add in relation to capitalize borrowing cost. So that is the number and that is the number that we’ll be reporting on a quarterly basis as we’ve been doing in terms of our tooling -- aerospace program tooling.

Unidentified Analyst

No, I get all that, it’s -- I’m just wondering if the original number was comparable to the one that you’ve given now, in other words it’s a 3.4 billion and/or 3.9 billion included we’re into the certification of the CS300.

Pierre Alary

Yes, it was for the overall program to start with.

Pierre Beaudoin

Exactly.

Operator

Thank you.

The next question is from [indiscernible].

Unidentified Analyst

Hi. If I understand correctly so one question was asked about government participation, government assistance for CSeries development and I think you said that there would be no increase in government assistance but that your supplier partners would pitch in more. Did I get that right?

Pierre Beaudoin

Government's participation will not increase, as far as suppliers the work package can have changed so the amount clearly have changed depending on the word package, but essentially the cost of development of the aircraft is 4.4 billion in tooling.

Unidentified Analyst

When you say that the supplier contribution could increase or may have increased, you’re saying at the same time that development cost increased over what had been decided at the beginning?

Pierre Beaudoin

What I am telling you about suppliers is that the work they were intended to do on the program may have changed so a supplier may have maybe more content to contribute or less content so that’s why there may be a variation. But I would set that aside because that just complicates but the program cost is 4.4.

Unidentified Analyst

Okay. And another point, there has been 1,700 staff adjustment. Can you break down the various areas where cutbacks have been made few weeks ago?

Pierre Beaudoin

No. We’re progressing and they are processed but I can’t give you a breakdown.

Operator

At this time, we have no further questions. I would like to turn the meeting back over to Miss Shirley.

Shirley Chenier

Thank you operator. Thank you all for being with us today. Have a great day.

Operator

The conference call has now ended. Please disconnect your lines at this time and we thank you for your participation.

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Source: Bombardier Inc.A CEO Discusses Q4 2013 Results - Earnings Call Transcript
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