page 97 Bombardier Inc. Annual Report 2003-04 On December 18, 2003, the Corporation sold its recreational products segment for $960 million, $910 million of which was paid in cash, and $50 million of which was paid through the issuance of preferred shares of the purchaser’s parent company. The preferred shares, which carry a cumulative 6% dividend and are redeemable under certain conditions, were recorded at their fair value of $40 million. Net proceeds at closing were impacted by adjustments totalling $153 million for variations in working capital, pension plan funding, transaction costs and other items. As a result, net cash proceeds were $740 million, net of cash disposed of $17 million. Net cash proceeds will be further adjusted during the fiscal year ending January 31, 2005 for the Corporation’s commitments towards pension plan funding and other adjustments. This transaction resulted in a gain of $155 million ($101 million after tax). The results of operations, cash flows and financial position of this segment have been segregated in the accompanying Consolidated Financial Statements. In connection with this sale, the Corporation and the Corporation’s former recreational product segment (referred to as BRP in these Consolidated Financial Statements – see note 9) entered into a trademark licence agreement under which Bombardier licensed to BRP certain trademarks owned by Bombardier. The results of discontinued operations (up to December 18, 2003 for fiscal year 2004) presented in the accompanying consolidated statements of income were as follows: 2004 2003 (321-DAY (365-DAY PERIOD) PERIOD) Revenues $2,147 $2,476 Cost of sales and operating expenses (1) 2,062 2,247 Depreciation and amortization 46 57 Interest expense, net 30 33 2,138 2,337 Income before income taxes 9 139 Income tax expense 4 45 5 94 Gain on sale of the recreational products segment, net of tax 101 – Income from discontinued operations $ 106 $ 94 (1) Includes selling, general and administrative and research and development expenses. The cash flows from discontinued operations presented in the accompanying consolidated statements of cash flows were as follows: 2004 2003 (321-DAY (365-DAY PERIOD) PERIOD) Operating activities $( 214) $ 155 Investing activities (30) (46) Financing activities 1 (3) Effect of exchange rate changes on cash and cash equivalents  16 19 Cash flows from discontinued operations $( 227) $ 125 On May 22, 2003, the Corporation sold the Belfast City Airport unit for net proceeds of £35 million ($78 million), resulting in a pre-tax gain of $3 million. On October 31, 2003, the Corporation sold Military Aviation Services (MAS) for net proceeds of $85 million US ($112 million), resulting in a pre-tax gain of $98 million. These activities were part of the aerospace segment. The assets and liabilities of these units, as well as the recreational products segment, were segregated in the accompanying consolidated balance sheets and were reported as Assets held for sale and Liabilities related to assets held for sale. 2 DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE