Bombardier Inc. Annual Report 2003-04 page 57 Backlog Market and prospects Bombardier Transportation’s order backlog was as follows as at January 31: Order intake during the year ended January 31, 2004 totalled $15.7 billion. The increase in the value of the backlog as at January 31, 2004 compared to January 31, 2003 reflects an excess of order intake over revenues of $6.1 billion and a negative foreign exchange adjustment of approximately $400 million. Bombardier Transportation recognizes rev- enues using the percentage-of-completion method. This method of accounting recognizes revenue proportionately with the degree  of completion of goods or services under a contract. Backlog expressed in percentage  of completion of contracts was as follows: The worldwide rail equipment and services market is comprised of rolling stock, total trans- it systems, services and rail control solutions. The value of the orders awarded in the worldwide market accessible to competition in the supply industry was  € 38.4 billion ($60.7 bil- lion) in calendar year 2003. Bombardier Transportation has a 26% share of this market. Bombardier Transportation has expanded its definition of the market to include rail-related telecommunications in the rail equipment  and services market, consistent with industry practice. The growth of the accessible market is dependent upon demand for rolling stock, the outsourcing of services, the availability of financing, government spending, the financial condition of operators and the pace of the  liberalization of public transit systems. Europe remained the largest market with a 61% share of the worldwide accessible market, while North America represented approximately 20% and Asia-Pacific 12%. The worldwide accessible market is expected to grow by 3% to 5% annually over the next five years. The increase in the 0 to 25% category of the manufacturing and services backlog is mainly due to the order for the modernization of  the London Underground. The year-end backlog provides for a stable inflow of revenues over the coming years. Management anticipates that with the expected growth of the rail equipment and services market, Bombardier Transportation will main- tain its leadership position in market share. However, Bombardier Transportation operates in an industry characterized by relatively low margins, compensated by low investment in net assets. The design and manufacture of complex equipment under time and budget constraints, and its introduction into service in often difficult circumstances can constitute significant execution and pricing risks. Bombardier Transportation operates in a con- tract-based business with major fluctuations in the size, timing and location of orders. Therefore, this has an impact on the utilization of specific facilities and resources. Considerable efforts and resources have been and are being devoted to the devel- opment of a common process to improve controls over bidding processes. As part of this process, the early identification and manage- ment of risks have been enhanced. In addition, the strengthening of project management and further training and empowerment of person- nel are expected to lead to greater stability of results and improved margins. Bombardier Transportation has two main competitors in the field of rail transport,  Alstom SA and Siemens AG, both of which also offer a full range of products. There are also some smaller and niche players, mainly in Europe and, to a limited extent, in the  United States. Japanese suppliers are also competitors for projects in Asia and in the United States.  (BILLIONS OF CANADIAN DOLLARS) MANUFACTURING 2004 2003 0 to 25% $14.8 $11.1 26% to 50% 3.3 3.6 51% to 75% 5.5 1.9 76% to 100% 1.3 3.6 $24.9 $20.2 (BILLIONS OF CANADIAN DOLLARS) SERVICES 2004 2003 0 to 25% $4.5 $3 . 3 26% to 50% 1.6 2.1 51% to 75% 0.4 0.1 76% to 100% – – $6.5 $5 . 5 (BILLIONS OF CANADIAN DOLLARS) 2004 2003 Manufacturing operations $ 24.9 $20.2 Service businesses  6.5 5.5 $ 31.4 $25.7