The consolidated financial statements of Bombardier Inc. include the detailed effects of adding the accounts of the financial and real estate services activities to those of the Corporation's manufacturing operations. In order to provide a better understanding of the various data presented in the annual report, the Summary of Significant Accounting Policies contains a definition of the terms used to designate the overall operations of Bombardier Inc. (Bombardier Inc. consolidated), the manufacturing operations(Bombardier), as well as the financial and real estate services that fall under Bombardier Capital (BC). The application of this consolidation method has no impact on net income and shareholders' equity.

　BC's activities and financial position are fundamentally different from the manufacturing operations. Each of these two types of businesses are analyzed and measured using different performance indicators by the investment market. The discussion and analysis of operations which follow segregate these two types of businesses to better highlight their respective characteristics. The balance sheets are presented in an unclassified format because the Corporation carries out its operations in four distinct segments, each one characterized by a specific operating cycle.

　The operating cycle in the aerospace segment is based on the length of each program. The cycle of each program is variable, but usually extends over many years. The operating cycle for the recreational products segment is seasonal and based on cycles of less than one year. In the transportation segment, most manufacturing work performed relates to long-term contracts which extend for periods of one to three years.

　The operating cycle for BC depends on the underlying operations. This segment includes the real estate operations for which the operating cycle extends over many years, and the financing subsidiaries operations which, as is the case for most financial institutions, have operating cycles as short as a few months for short-term lending activities, and as long as several years for long-term financing and asset leasing activities. The accounting methods used for Bombardier's activities are explained in the Summary of Significant Accounting Policies that accompanies the consolidated financial statements.

　

This report includes "forward looking statements" that are subject to risks and uncertainties. For information identifying legislative or regulatory, economic, climatic, currency, technological, competitive and other important factors that could cause actual results to differ materially from those anticipated in the forward looking statements, see the heading "Risks and Uncertainties" on page 39 of this report.

　

The Corporation achieved another record year in terms of revenues and income before unusual items and income taxes for fiscal year 2000. Total consolidated revenues amounted to $13.6 billion for the year ended January 31, 2000, compared with $11.5 billion for the preceding year, a year-to-year increase of 18%mainly resulting from growth in the aerospace and transportation segments. Income before unusual items and income taxes increased by 36% for fiscal year 2000 to $1,124.0 million compared to $826.9 million for fiscal year 1999. This excellent performance was mainly the result of significant growth in aircraft deliveries and in the income before income tax margin in the aerospace segment as well as a return to profitability of the recreational products segment resulting mainly from the reorganization undertaken to adjust to market demand. The transportation segment increased its revenues by 16% and income before unusual items and income taxes by 18% compared to the previous year. The Bombardier Capital segment also showed record revenues for fiscal year 2000 due to continuous growth in assets under management. Bombardier Capital's income before income taxes for the year ended January 31, 2000 amounted to $28.0 million, down from$42.6 million recorded last year. The consolidated income statement items were also impacted by the progressive implementation of the Six Sigma program, which is discussed on pages 32 and 33 of this report.

　A net pre-tax unusual charge of $51.1 million ($33.6 million after tax), arising from the reduction of the transportation segment operational capacity in Europe to better align the production capacity to market demand and from downsizing the Corporation's activities in the defence services sector, was recorded in fiscal year 2000. The detailed components and the circumstances leading to the charge are discussed later in the segment reporting section.

　In fiscal 2000, the Corporation's income taxes totalled $354.1 million, as against$272.9 million in fiscal 1999. The effective average consolidated income tax rate for the Corporation's worldwide operations for the last two fiscal years remained constant at 33%. The details of the components of the income tax expense are provided in note 15 to the Consolidated Financial Statements.

　Net income before unusual items reached $752.4 million for the year ended January 31, 2000 or $1.06 per share on an average of 684.5 million shares outstanding for the year. Net income for the same period amounted to $718.8 million, or $1.02 per share, compared with a net income of $554.0 million, or $0.77 per share on an average of 680.4 million shares outstanding for the year ended January 31,1999. Fully diluted earnings per share for fiscal year 2000 reached $1.00 as compared to $0.76 in 1999, a year-to-year increase of 32%. The calculation of the fully diluted earnings per share gives effect to the exercice of all dilutive elements.

　

Management evaluates segment performance based on income or loss before unusual items and income taxes. Intersegment services are accounted for at current market prices, as if the services were provided to third parties. For all segments, interest costs are allocated to each segment based on its net assets. Most corporate office charges are allocated based on their respective revenues.

　For the manufacturing segments, net segmented assets are comprised of the assets of each segment except for investment in and advances to BC and cash and cash equivalents less accounts payable and accrued liabilities and advances and progress billings in excess of related costs.

　For BC, the net segmented assets correspond to the combined amount of BC's equity and subordinated debt which is maintained at a level to produce a debt to equity ratio, including subordinated debt, which approximates 9 to 1. Consequently, this amount is shown as net segmented assets for BC.

　The analysis of operating results that follows covers the activities of the Corporation's five groups: Bombardier Aerospace, Bombardier Transportation, Bombardier Recreational Products, Bombardier Capital and Bombardier International.

　

The operating results of Bombardier Recreational Products are generated by the activities described on page 79 of this report.

　For the year ended January 31, 2000, the revenues of Bombardier Recreational Products before intersegment eliminations amounted to $1.5 billion, compared with $1.6 billion for the year ended January 31, 1999. This decline in revenues, which is mainly attributable to lower watercraft and snowmobile sales for the 1999 season, the segment's two principal revenue generating products, was partially offset by initial sales of all-terrain vehicles (ATV).

　In spite of a 10% decrease in its revenues for fiscal year 2000, Bombardier Recreational Products returned to profitability as income before income taxes for 1999-2000 reached $17.7 million, compared with a loss of $45.5 million for 1998-1999. This was achieved through a major reorganization undertaken to eliminate redundancy and to encourage greater synergy in the context of reduced snowmobile and personal watercraft production.

　

　Continued investments in product development for the Bombardier ATV and for existing product lines reached $82.5 million for fiscal 2000 compared with investments of$83.0 million in 1999. The amount of investment related to product development shall remain approximately constant for the coming year.

　

Within the snowmobile industry, Bombardier Recreational Products is engaged in the development, design, manufacture and marketing of the Ski-Doo product line, and the Lynx line, which is designed specifically for the European market.

　

　Sales and Market (Canada and U.S.)

　Late snowfalls in North America led to a slight downturn in the snowmobile market in 1999-2000, with industry retail sales totalling 189,000 units for the selling season ended March 31, 2000, compared with 207,600 units for the season ended March 31, 1999.

　Despite this slight decrease in sales, Ski-Doo snowmobiles maintained a market share of 30% in Canada and the U.S.

　

　Sales and Market (Europe)

　In Europe, an estimated 21,500 snowmobiles were sold during the selling season ended March 31, 2000, compared with 20,774 units during the previous season. Bombardier Recreational Products maintained its leadership position, obtaining 42% of the European market with its Ski-Doo and Lynx snowmobiles, the same as in 1998-1999.

　

　Product Development

　For the 2000-2001 season, Bombardier Recreational Products is innovating once again with the introduction of the "Build your own sled" concept. Customers buying in the spring will be able to custom-build their snowmobile by selecting option packages, engines and colors. Ski-Doo snowmobiles will continue to lead in performance segments with a new 800cc twin Rotax engine. The sport touring models will also benefit from innovative technology, including an electronic shock absorber which allows the user to change the suspension calibration while riding. In addition, features such as leading edge braking systems and powerful dual-beam halogen headlights and safety promotions such as roving snowmobile safety teams and campaigns demonstrate Bombardier Recreational Products' ongoing commitment to consumer safety.

　Bombardier Recreational Products teams are working continuously at developing light, economical, more environmentally friendly and high-performance Rotax engines that respond to public and consumers'expectations in an environment which evolves constantly.

　In Europe, Bombardier Recreational Products has capitalized on its position as the only European manufacturer of snowmobiles by consolidating and building its market leadership position with the introduction of 12 new models, mainly in the sport and touring categories, for the 2001 season. These models have been very well received by the Lynx dealers.

　

　Prospects

　For the third consecutive winter, late snowfalls have led to a slowdown in the North American snowmobile market, while the European market experienced a slight increase.

　Snowmobile markets are typically affected by climatic and economic conditions and tend to regain vitality when favorable conditions prevail.

　

The activities of Bombardier Recreational Products in the watercraft industry encompass the development, design, manufacture and marketing of Sea-Doo watercraft.

　

　Sales and Market

　Unit sales for the 1999-2000 fiscal year were lower than in 1998-1999, mostly as a result of a continued slowdown in the industry.

　For comparison purposes, fiscal year unit sales figures include 1999 models (sold between February 1, 1999 and the end of the selling season on September 30, 1999), as well as 2000 and prior years models (sold between October 1, 1999 and January 31, 2000).

　For the third consecutive year, the North American watercraft market experienced a slowdown, typically associated with cyclical consumer products. Consequently, North American retail sales totalled 112,000 units for the selling season ended September 30, 1999, a 17.6% decline from the 136,000 units sold during the previous year. Retail sales in the international market were estimated at 22,000 units for the selling season ended September 30, 1999, a 12.0% decrease compared with the 25,000 units sold in the previous season.

　For the 1999 season, Bombardier maintained its leadership with a world market share of 42%, compared with 45% in 1998.

　

　Product Development

　To mark the beginning of the new millennium, Bombardier Recreational Products created an innovative watercraft, the 2000 RX* DI. Along with the GTX^† DI model, they are the first to be equipped with Bombardier Recreational Products' exclusive Orbital^†† Direct Injection technology. The 2000 RX DI has been named "Watercraft of the Year" and designated "the Benchmark for the 21st Century" by Watercraft World magazine. The XP^* model was named "Watercraft of the Century" by the same magazine. In 1999, Bombardier Recreational Products also introduced the four-seater Sea-Doo LRV^*model which is the world's largest personal watercraft built as the first-ever "familycraft".

　All models now come with the D-Sea-Bel^*sound reduction system, which results in up to 50% less sound pressure compared to traditional watercraft. All 2000 Sea-Doo models also come with a digitally encoded theftdeterrence system called the D.E.S.S^*. Sea-Doo watercraft earned Bombardier Recreational Products the prestigious "Design of the Decade" bronze award in the transportation category from the Industrial Designers Society of America and Business Week magazine.

　

　Prospects

　Bombardier Recreational Products expects the watercraft market to stabilize and regain vitality over time.

　Bombardier Recreational Products has always been active at sponsoring safe and smart watercraft use, thus helping to maintain the sport's image as a good, clean, fun, family activity. One of its latest initiatives is the introduction of the "Sea-Doo Learning Key" lanyard, which enables less experienced riders and rental operators to limit the speed of their watercraft to a maximum of 55 kilometers per hour while gaining needed confidence and practice. The dedication of Bombardier Recreational Products to safety promotion was praised by many government bodies during the year, both in Canada and in the U.S.

　Within the context of more stringent environmental regulations, Bombardier Recreational Products expects to maintain its product leadership by continuing the development of high quality watercraft equipped with technologies that reduce hydrocarbon emissions and sound level.

　

　ALL-TERRAIN VEHICLES

Bombardier Recreational Products is active in the ATV industry, developing, designing, manufacturing and marketing an expanding line of Bombardier all-terrain vehicles.

　

　

　Product Development

　Following the successful 1998-1999 introduction of a first ATV in the utility category, the Bombardier Traxter^*, a second model targeted at experienced sport ATV riders, the DS 650^*, was launched during 1999-2000. With new features including a four-stroke 653-cc four-valve Rotax engine, the Bombardier DS 650 obtained positive reviews from both the specialized press and users. During the first quarter of 2000-2001, Bombardier Recreational Products launched the Traxter XT^*. Its combination of attractive design features and functional elements were well received by dealers and consumers alike.

　

　Market and Prospects

　The ATV market grew by 27% in 1999 in the U.S., with estimated retail sales of 550,000 vehicles, compared with 433,000 for 1998. By carefully monitoring the needs of this growing market, Bombardier Recreational Products was able to ensure that its new utility and sport category entries were well positioned and clearly differentiated from competitors, thus establishing a solid foundation for the brand. Bombardier Recreational Products manufactured 6,000 vehicles during the first year of production. New models, complementing the current offering, will be developed over the next few years following the same successful innovation and differentiation strategy.

　

Rotax engines are designed and built at Bombardier Recreational Products' Austrian facilities. They are used in Ski-Doo and Lynx snowmobiles, in Sea-Doo watercraft and some sport boats, in Bombardier ATVs and in other manufacturers' motorcycles, scooters and small and ultra-light aircraft.

　

　Sales

　In 1999-2000, reduced Bombardier Recreational Products snowmobile and watercraft sales led to a decrease in deliveries of Rotax engines for these products. Initial production for Bombardier ATVs, together with a substantial growth in the supply of scooter and motorcycle engines, partly offset the decrease in overall production.

　

　Product Development

　During the year, Bombardier Recreational Products introduced a Rotax two-stroke engine, equipped with Orbital Direct Injection technology, for two Sea-Doo watercraft models. This engine offers reduced hydrocarbon emissions of up to 75%⁽¹⁾ and fuel economy of up to 30%⁽²⁾ during a typical day of use compared with traditional carbureted two-stroke engines. In line with its objective of always offering environmentally friendly products, Bombardier Recreational Products is developing at its Austrian facilities a new generation, of Rotax engines with even cleaner technologies.

　

　Prospects

　It is expected that growth in the Rotax engine market will be primarily driven by the Bombardier ATV, and the high performance motorcycle engine segment.

　

Consistent with its product diversification strategy, Bombardier Recreational Products now offers Sea-Doo sport boats with two different types of propulsion. The 14-foot models are powered by Rotax engines, while 16-foot and longer models are equipped with a new line of jet drive engines jointly developed with Mercury Marine (M²)^†††. The new 22-foot Islandia^*, the first and only jet-propelled deck boat introduced for the 2000 season has already won the annual innovation award from Motor Boating & Sailing magazine. With the addition of the Challenger^* 2000, a 20-foot runabout, Bombardier Recreational Products now offers a lineup ranging from 14- to 22-foot boats and engines that go from 130 to 240 horsepower.

　

Bombardier Recreational Products designs, manufactures, sells and services specialized tracked vehicles mainly used for grooming alpine ski hills, as well as snowmobile and cross-country ski trails.

　Within a mature and relatively steady replacement market, the past year's introduction of the innovative BR 2000 alpine ski hills snowgroomer enabled Bombardier Recreational Products to maintain its North American market leadership and enhance its position in the European market, which is the world's largest. Bombardier Recreational Products' global market share was 34% for 1999-2000.

　Bombardier Recreational Products continues to hold a strong position in the utility vehicles market through a wide range of vehicles, and customer services such as technical training and grooming advice.

　

†	Registered trademark of Castrol Limited used under license
††	Registered trademark of Orbital Engine Corporation Limited and/or its subsidiaries
†††	Registered trademark of Brunswick Corporation
(1)	According to EPA (united States Environmental Protection Agency) standards
(2)	ICOMIA (International Council of Marine Industry Associations) cycle method
*	Trademark of Bombardier Inc.