AIRBUS - 2019 Universal Registration Document

Management’s Discussion and Analysis of Financial Condition and Results of Operations /

2.1 Operating and Financial Review

2.1.6.1 Cash Flows The Company generally finances its manufacturing activities and product development programmes, and in particular the development of new commercial aircraft, through a combination of flows generated by operating activities, customer advances, risk-sharing partnerships with subcontractors and European governments’ refundable advances. In addition, the Company’s military activities benefit from government-financed research and development contracts. If necessary, the Company may raise funds in the capital markets. The following table sets forth the variation of the Company’s consolidated net cash position over the periods indicated.

2

2019

2018

2017

(In € million)

Net Cash position at 1 January

13,281

13,391

11,113

Initial application impact of IFRS 16

(1,352)

0

0

3,391

5,515

4,451

Gross cash flow from operations (1)

2,176

(633)

266

Changes in other operating assets and liabilities (working capital) (2)

thereof customer financing

58

79

(100)

(2,092)

(1,377)

(982)

Cash used for investing activities (3)

thereof industrial capital expenditures

(2,340)

(2,285)

(2,558)

3,475

3,505

3,735

Free Cash Flow (4)

thereof M&A transactions

(92)

514

886

3,567

2,991

2,849

Free Cash Flow before M&A (5)

Cash flow from customer financing (net)

58

79

(100)

3,417

3,426

3,835

Free Cash Flow before customer financing

3,509

2,912

2,949

Free Cash Flow before M&A and customer financing

(1,280)

(1,161)

(1,046)

Cash distribution to shareholders / non-controlling interests

(1,752)

(2,519)

(458)

Contribution to plan assets of pension schemes

194

117

83

Changes in capital and non-controlling interests

(31)

(49)

0

Change in treasury shares / share buyback

(1)

(3)

(36)

Others

Net Cash position at 31 December

12,534

13,281

13,391

(1) Represents cash provided by operating activities, excluding (i) changes in other operating assets and liabilities (working capital), (ii) contribution to plan assets of pension schemes and (iii) realised foreign exchange results on treasury swaps (€102 million in 2019, €-45 million in 2018, €185 million in 2017). It is an alternative performance measure and an indicator used to measure its operating cash performance before changes in other operating assets and liabilities (working capital). (2) Excluding reclassification of certain trade liabilities and some perimeter change impacts from changes in consolidation. (3) Does not reflect change in securities (net investment of €-397 million in 2019, net investment of €-93 million in 2018, net investment of €-1,233 million in 2017), which are classified as cash and not as investments solely for the purposes of this net cash presentation. Excluding bank activities. (4) Does not reflect change of securities, change in cash from changes in consolidation, contribution to plan assets of pension schemes and realised foreign exchange results on treasury swaps. Excluding bank activities. Free Cash Flow is an alternative performance measure and indicator that reflects the amount of cash flow generated from operations after cash used in investing activities. (5) Free Cash Flow before M&A refers to Free Cash Flow adjusted for net proceeds from disposals and acquisitions. It is an alternative performance measure and indicator that reflects Free Cash Flow excluding those cash flows from the disposal and acquisition of businesses.

Changes in Other Operating Assets and Liabilities (Working Capital)

The net cash position as of 31 December 2019 was €12.5 billion, a 5.6% decrease from 31 December 2018. Please see further details below. Gross Cash Flow from Operations Gross cash flow from operations is an alternative performance measure and an indicator used by the Company to measure its operating cash performance before changes in working capital. Gross cash flow from operations decreased to €3.4 billion for 2019, which reflects the EBIT Adjusted, record deliveries and the impact of the recognition of compliance related penalties amounting to €-3.6 billion. The negative impact from recognising these penalties was neutralised by a corresponding increase in current liabilities included in changes in other operating assets and liabilities (working capital).

Changes in other operating assets and liabilities (working capital), is comprised of inventories, trade receivables, contract assets and contract liabilities (including customer advances), trade liabilities, and other assets and other liabilities and others. They resulted in a positive working capital variation of €2.2 billion for 2019, versus a negative impact of € -0.6 billion for 2018. In 2019, the positive working capital variation reflects the change in other assets and liabilities and others (€+3.1 billion), mainly due to the positive impact of the recognition of penalties (see “Gross Cash Flow from Operations” above), the change in contract assets and contract liabilities (€+2.0 billion), the change in trade receivables (€+0.9 billion), and the change in inventories (€+0.8 billion). This was partially compensated by the decrease in trade liabilities (€ -3.9 billion).

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Airbus / Annual Report – Registration Document 2019