page 40 Bombardier Inc. Annual Report 2003-04 Management’s discussion and analysis ALL AMOUNTS IN THIS REPORT ARE IN CANADIAN DOLLARS AND TABULAR FIGURES  ARE IN MILLIONS OF CANADIAN DOLLARS, UNLESS OTHERWISE INDICATED. Overview This Management’s Discussion and Analysis (MD&A) has been prepared to provide a meaningful understanding of the Corporation’s  operations, performance and financial condition for the year ended January 31, 2004. The MD&A is presented in the following sections: LIQUIDITY AND OFF-BALANCE  OVERVIEW SEGMENTS CAPITAL RESOURCES SHEET ARRANGEMENTS OTHER 40 Highlights 46 Bombardier 67 Financial 72 Financial 75 Pension Aerospace position arrangements 41 Basis of presentation  55 Bombardier  67 Cash flows 73 Derivative  76 Environment Transportation instruments  41 Effect of currency  63 Bombardier  69 Capital  73 Financing  76 Risks and uncertainties fluctuations Capital resources commitments 42 Effect of change in  70 Liquidity 74 Commitments and  78 Critical accounting  reporting currency contingencies estimates  42 Selected annual information 72 Credit support 80 Accounting and reporting developments 43 Analysis of results 72 Credit events 81 Share data 81 Quarterly information This MD&A includes “forward-looking  statements” that are subject to risks and uncertainties. For information identifying legislative or regulatory, economic, currency, technological, competitive and other important factors that could cause actual results to  differ materially from those anticipated in  the forward-looking statements, see “Risks and uncertainties.” fiscal year. The reduction of these portfolios  is proceeding as planned at Bombardier Capital (BC). stock, signalling, maintenance and project management for the modernization of the London Underground. - Net proceeds of $1.2 billion were generated on April 17, 2003 from the issue of 370 million Class B Shares (Subordinate Voting). - Net proceeds of $740 million, net of cash  disposed, were generated on December 18, 2003 from the sale of the recreational prod- ucts segment, resulting in an after-tax gain of $101 million. - Net proceeds of $85 million US ($112 million) were generated on October 31, 2003 from the sale of Military Aviation Services (MAS), resulting in a gain of $98 million. - Net proceeds of £35 million ($78 million) were generated on May 22, 2003 from the sale of the Belfast City Airport (BCA), resulting in a gain of $3 million. - The wind-down portfolios were reduced  by $3.0 billion, or 71%, during the current  - On April 4, 2003, Bombardier Transportation signed contracts amounting to approximately £3.4 billion ($7.9 billion) as part of the Metronet consortia for the supply, over 15 years, of rolling - The total costs of the restructuring initiative are estimated at $777 million, $457 million of which was recorded during the fourth quar- ter of fiscal year 2004, with the remainder to be recorded in fiscal years 2005 and 2006. - On March 16, 2004, the Board of Directors approved a restructuring initiative in the trans- portation segment. The initiative proposes to reduce the global workforce of Bombardier Transportation by approximately 6,600 posi- tions and contemplates the closure of seven production sites in five European countries. The restructuring initiative also contemplates operational efficiency measures at five other European locations and other cost reduction programs. The Corporation is also targeting procurement and supplier base as areas offer- ing significant opportunities for cost savings and efficiency improvements. - On May 12, 2003, Bombardier Aerospace received an order from US Airways for the delivery of 60 Bombardier * CRJ200 * and 25 Bombardier * CRJ700 * aircraft, for a total value of approximately $2.2 billion US ($3.2 bil- lion). The 85 firm orders include the transfer of 36 Bombardier * CRJ * aircraft firm orders held by GE Capital Aviation Services, for a net backlog increase of 49 aircraft. - On September 15, 2003, Bombardier Aero- space received an order from SkyWest  Airlines for 30 Bombardier CRJ700 aircraft, for a total value of approximately $862 mil- lion US ($1.2 billion). - Effective February 1, 2004, the Corporation changed its functional currencies from the Canadian dollar and the sterling pound to the U.S. dollar for the Canadian and U.K. opera- tions in the aerospace segment and from  the Canadian dollar and the Mexican peso to  the U.S. dollar for the Canadian and Mexican operations in the transportation segment.  In addition, effective the first quarter of fiscal year 2005, the Corporation will change its reporting currency to the U.S. dollar. Change of functional and reporting currencies Major orders in fiscal year 2004 Highlights Recapitalization program Restructuring initiative