(NYSE: CAE; TSX: CAE) - CAE today reported revenue
of $743.8 million for the second quarter of fiscal year 2019,
compared with $618.2 million in the second quarter last year.
Second quarter net income attributable to equity holders was $60.7
million ($0.23 per share) compared to $60.3 million ($0.22 per
share) last year. Excluding the gain on divestiture of the Zhuhai
Flight Training Centre (ZFTC), net income would have been $53.3
million ($0.20 per share) last year. All financial information is
in Canadian dollars unless otherwise indicated.
“CAE had a good performance in the second
quarter with double-digit earnings growth, strong free cash flow,
and a record order backlog,” said Marc Parent, CAE’s President and
Chief Executive Officer. “I am especially pleased with the
continued progress of our training strategy as demonstrated by $986
million in orders in the quarter and two important announcements
last week, involving the acquisition of Bombardier Business
Aircraft Training to expand our position in the business aviation
training market, and a major airline outsourcing with easyJet. In
Civil, we generated double-digit growth, booked $575 million in
training solutions orders, and reached 34 FFS sales in the first
half of the year. In Defence, we delivered high single digit growth
and booked orders for $380 million. We have good momentum in all
our markets and we are on track to deliver on our growth
outlook."
Summary of
consolidated results |
|
|
|
|
|
(amounts
in millions, except operating margins and per share amounts) |
|
Q2-2019 |
|
Q2-2018 |
Variance % |
|
|
|
|
Restated* |
|
Revenue |
$ |
743.8 |
$ |
618.2 |
20% |
Operating
profit(2) |
$ |
98.7 |
$ |
102.8 |
(4)% |
Operating margins |
% |
13.3 |
% |
16.6 |
|
Operating profit
excluding the gain from disposal of ZFTC |
$ |
98.7 |
$ |
88.5 |
12% |
Operating margins
excluding the gain from disposal of ZFTC |
% |
13.3 |
% |
14.3 |
|
Net income |
$ |
63.6 |
$ |
62.1 |
2% |
Net income attributable
to equity holders of the Company |
$ |
60.7 |
$ |
60.3 |
1% |
Earnings per share
(EPS) |
$ |
0.23 |
$ |
0.22 |
5% |
Net income attributable
to equity holders excluding the gain from disposal of ZFTC |
$ |
60.7 |
$ |
53.3 |
14% |
EPS excluding the gain
from disposal of ZFTC |
$ |
0.23 |
$ |
0.20 |
15% |
Total
backlog |
$ |
8,667.6 |
$ |
7,004.3 |
24% |
* Financial
results reported were restated to reflect the accounting changes
required by IFRS 15. |
Civil Aviation Training Solutions
(Civil)Second quarter Civil revenue was $393.1 million, up
24% compared to the same quarter last year. Segment operating
income(3) was $63.3 million (16.1% of revenue), up 19% compared to
the second quarter last year, excluding the gain on ZFTC
divestiture. Second quarter Civil training centre utilization(4)
was 72%.
During the quarter, Civil signed training
solutions contracts valued at $575.3 million, plus additional
contracts involving joint ventures, including a new 5-year
Multi-Crew Pilot License cadet training program with Air Asia,
exclusive pilot training contracts with CityJet, OceanAir, LOT
Polish Airlines and Air Busan, and a long-term pilot training
contract with Starspeed. Civil sold 16 full-flight simulators
(FFSs) during the quarter to customers in all regions, bringing the
total for the first half of the year to 34 FFSs.
The Civil book-to-sales(1) ratio was 1.46x for
the quarter and 1.49x for the last 12 months. The Civil backlog at
the end of the quarter was a record $4.3 billion.
CAE announced two important developments
following the end of the second quarter.CAE announced on
November 8, 2018 that it has agreed to acquire Bombardier’s BAT
business for an enterprise value of US$645 million, expanding its
ability to address the training market for customers operating
Bombardier business jets which, at more than 4,800 aircraft, is one
of the largest and most valuable in-service fleets of business
aircraft in the world. The acquisition will also serve to expand
CAE’s position in the largest and fastest growing segment of the
business aviation training market, involving medium- and
large-cabin business jets. The acquisition provides CAE with
talented people, a portfolio of customers, and an established
recurring training business which is highly complementary to CAE’s
network. The Bombardier BAT business includes a modern fleet of
FFSs and training devices covering the Learjet, Challenger and
Global product lines, including the latest large cabin Global 5500,
6500 and 7500 business jets. The acquisition of Bombardier’s BAT
business is subject to regulatory approvals and is expected to
close by the second half of calendar year 2019. In its first full
year following the closing of the transaction, the acquisition will
provide CAE high single-digit percentage earnings accretion and
will be accretive to free cash flow(5).
In addition to the agreement to acquire
Bombardier’s BAT business, CAE has agreed to pay US$155 million to
Bombardier to monetize its existing future royalty obligations
under the current Authorized Training Provider (ATP) agreement with
the business jet manufacturer. This also involves the extension of
CAE’s ATP agreement with Bombardier to 2038. The monetization
represents the discounted sum of royalties payable by CAE over the
next 20 years, and the monetization transaction is expected to
close by the end of CAE’s current fiscal year. In view of the
expected timing of both elements of this transaction, CAE’s outlook
for its current fiscal year 2019 remains unchanged.
The second important development since the end
of the quarter involves a long-term training outsourcing agreement
with easyJet, valued at more than $170 million. Under the
agreement, all easyJet pilots will train at CAE in three European
pilot training locations, including a new state-of-the-art training
centre in London-Gatwick with a dedicated wing for easyJet. The
centres will be ready for training starting in the second half of
calendar 2019.
Summary of Civil Aviation Training Solutions
results |
(amounts in
millions, except operating margins, SEU and FFSs deployed) |
|
Q2-2019 |
|
Q2-2018 |
Variance % |
|
|
|
|
Restated |
|
Revenue |
$ |
393.1 |
$ |
317.9 |
24% |
Segment operating
income (SOI) |
$ |
63.3 |
$ |
67.3 |
(6%) |
Operating margins |
% |
16.1 |
% |
21.2 |
|
SOI excluding the gain
from disposal of ZFTC |
$ |
63.3 |
$ |
53.0 |
19% |
Operating margins
excluding the gain from disposal of ZFTC |
% |
16.1 |
% |
16.7 |
|
Total backlog |
$ |
4,310.8 |
$ |
3,337.4 |
29% |
Simulator equivalent
unit (SEU)(6) |
|
215 |
|
199 |
8% |
FFSs
deployed |
|
264 |
|
249 |
6% |
Defence and Security
(Defence)Second quarter Defence revenue was $320.3
million, up 18% compared to the same quarter last year and segment
operating income was $34.1 million (10.6% of revenue), up 2%
compared to the second quarter last year. Excluding the impact of
reorganizational and integration costs related to the purchase of
AOCE, segment operating income would have been $36.1 million (11.3%
of revenue), up 8% compared to the second quarter last year.
During the quarter, Defence booked orders for
$380.2 million. Notable wins include a contract to provide the
Royal New Zealand Air Force with CAE’s new 700MR Series flight
training device for the NH90 helicopter and with the U.S. Air Force
to provide comprehensive C-130H aircrew training services, and
orders for additional C-130J simulators. Defence also received an
order to continue providing T-44C aircrew training services to the
U.S. Navy and a contract from the U.S. Air Force to continue
providing KC-135 aircrew training services. The latter also
involves the provision of simulator upgrades and modifications on
the Air Force’s existing KC-135 training devices. Additionally, CAE
will continue to provide the U.S. Army with fixed-wing flight
training and support services at the CAE Dothan Training Centre.
During the quarter, Defence acquired AOCE to enhance CAE USA’s core
capabilities as a training systems integrator (TSI), grow its
position on enduring platforms such as fighter aircraft, and expand
the ability for CAE USA to pursue higher-level security programs in
the United States. The integration of AOCE is progressing well and
we are beginning to see benefits from our expanded access to higher
security markets.
The Defence book-to-sales ratio was 1.19x for
the quarter and 1.03x for the last 12 months (excluding contract
options). The Defence backlog, including options and CAE’s interest
in joint ventures, at the end of the quarter was a record $4.4
billion.
Summary of Defence and Security results |
(amounts in
millions, except operating margins) |
|
Q2-2019 |
|
Q2-2018 |
Variance % |
|
|
|
|
Restated |
|
Revenue |
$ |
320.3 |
$ |
272.0 |
18% |
Segment operating
income |
$ |
34.1 |
$ |
33.3 |
2% |
Operating margins |
% |
10.6 |
% |
12.2 |
|
Total
backlog |
$ |
4,356.8 |
$ |
3,666.9 |
19% |
HealthcareSecond quarter
Healthcare revenue was $30.4 million compared to $28.3 million in
the same quarter last year, and second quarter segment operating
income was $1.3 million, compared to segment operating income of
$2.2 million in the second quarter last year.
Healthcare launched a redesigned CAE CathLabVR
interventional simulator for endovascular diagnostic and procedures
that is modular and fully portable. As well, Healthcare, together
with the American Society of Anesthesiologists (ASA) launched the
Anesthesia SimSTAT - Robotic Surgery module, the latest in a series
of interactive screen-based modules approved for Maintenance of
Certification in Anesthesiology credits.
Summary of Healthcare results |
(amounts in
millions, except operating margins) |
|
Q2-2019 |
|
Q2-2018 |
Variance % |
|
|
|
|
Restated |
|
Revenue |
$ |
30.4 |
$ |
28.3 |
7% |
Segment operating
income |
$ |
1.3 |
$ |
2.2 |
(41%) |
Operating
margins |
% |
4.3 |
% |
7.8 |
|
Additional financial
highlightsFree cash flow was $137.7 million for the
quarter compared to $63.5 million in the second quarter last
year. The increase in free cash flow results mainly from a lower
investment in non-cash working capital and an increase in cash
provided by operating activities, partially offset by a decrease in
proceeds from the disposal of property, plant and equipment.
Income taxes this quarter were $15.2 million,
representing an effective tax rate of 19%, compared to 27% for the
second quarter last year. The tax rate this quarter was lower due
to the sale of our equity interest in ZFTC and negative impacts of
tax audits in Canada last year, partially offset by a change in the
mix of income from various jurisdictions. Excluding the impact of
the sale of our equity interest in ZFTC, the income tax rate would
have been 23% in the second quarter of fiscal 2018.
Growth and maintenance capital expenditures(7)
totaled $40.9 million this quarter.
Net debt(8) at the end of the quarter was $795.1
million for a net debt-to-total capital ratio(9) of 25.8%. This
compares to net debt of $811.5 million and a net debt-to-total
capital ratio of 26.0% at the end of the preceding quarter.
Return on capital employed(10) was 14.5%
compared to 11.1% last year. Excluding the impacts of fiscal 2018
income tax recovery related to the U.S. tax reform and net gains on
strategic transactions relating to our Asian joint-ventures, ROCE
would have been 12.8% this quarter.
CAE will pay a dividend of 10 cents per share
effective December 31, 2018 to shareholders of record at the close
of business on December 14, 2018.
During the three months ended September 30,
2018, CAE repurchased and cancelled a total of 1,419,600 common
shares under the Normal Course Issuer Bid (NCIB), at a weighted
average price of $26.17 per common share, for a total consideration
of $37.2 million.
Management outlook for growth in fiscal
2019 unchanged; capital expenditures updated (IFRS 15 adjusted
basis)CAE’s core markets benefit from secular growth and
the Company expects to exceed underlying market growth in fiscal
year 2019. In Civil, the Company expects to continue generating low
double-digit percentage operating income growth as current momentum
for its innovative training solutions translates into market share
gains and new training customer partnerships. As well, Civil
expects to maintain its leadership position in FFS sales. In
Defence, the Company continues to expect mid to high single-digit
percentage operating income growth as it delivers from backlog and
continues to win opportunities from a large pipeline. CAE expects
Healthcare to resume double-digit growth this year with its broader
market reach, expanded offering, and the continued launch of
innovative products. The Company expects revenue and profit to be
weighted to the second half of the fiscal year, owing to the impact
of the adoption of IFRS 15 as it relates to simulator product
deliveries, and a five-week work disruption which preceded the
successful negotiation of a new collective agreement of a four-year
term and one-year option with CAE’s manufacturing employees in
Canada. The Company is currently working to accelerate production
to mitigate the impact of this action. Funding growth opportunities
remains CAE’s top capital allocation priority and continues to be
driven by and supportive of growing customer training
outsourcings in its large core markets. CAE currently expects total
annual capital expenditures to reach approximately $250 million in
fiscal 2019. CAE prioritizes market-led capital investments that
offer sustainable and profitable growth and accretive returns, and
support its strategy to be the recognized worldwide training
partner of choice. Management’s expectations are based on the
prevailing positive market conditions and customer receptivity to
CAE’s training solutions as well as material assumptions contained
in this press release, quarterly MD&A and in CAE’s fiscal year
2018 MD&A.
In view of the expected timing of the
transactions related to CAE’s BAT acquisition, CAE’s outlook for
its current fiscal year 2019 remains unchanged.
IFRS 15 - Revenue from Contracts with
CustomersEffective April 1, 2018, CAE adopted IFRS 15 -
Revenue from Contracts with Customers, which changes the way the
Company recognizes revenue for certain of its customer contracts.
The main impact of IFRS 15 to CAE is the timing of revenue
recognized for certain training devices that were previously
accounted for using the percentage-of-completion method that no
longer meet the requirements for revenue recognition over time.
Revenue for these training devices are instead recognized upon
completion. While this change impacts the timing of contract
revenue and profit recognition, there are no changes to cash flows
from the contract. The financial results reported in the press
release for the fiscal year ended March 31, 2018 have been restated
to reflect the accounting changes required by IFRS 15 as the
Company adopted the standard retrospectively this fiscal year. For
more detailed information, including the impact on CAE’s fiscal
2018 results, refer to Note 2 of the interim consolidated financial
statements for the quarter ended September 30, 2018.
Detailed informationReaders are
strongly advised to view a more detailed discussion of our results
by segment in the Management’s Discussion and Analysis (MD&A)
and CAE’s consolidated financial statements which are posted on our
website at www.cae.com/investors.
CAE’s consolidated financial statements and
MD&A for the quarter ended September 30, 2018 have been filed
with the Canadian Securities Administrators on SEDAR
(www.sedar.com) and are available on our website (www.cae.com).
They have also been filed with the U.S. Securities and Exchange
Commission and are available on their website (www.sec.gov).
Holders of CAE’s securities may also request a printed copy of the
Company's consolidated financial statements and MD&A free of
charge by contacting Investor Relations
(investor.relations@cae.com).
Conference call Q2 FY2019Marc
Parent, CAE President and CEO; Sonya Branco, Vice President,
Finance, and CFO; and Andrew Arnovitz, Vice President, Strategy and
Investor Relations will conduct an earnings conference call today
at 1:00 p.m. ET. The call is intended for analysts, institutional
investors and the media. Participants can listen to the conference
by dialling + 1 877 586 3392 or +1 416 981 9024. The
conference call will also be audio webcast live for the public at
www.cae.com.
CAE is a global leader in training for the civil
aviation, defence and security, and healthcare markets. Backed by a
record of more than 70 years of industry firsts, we continue to
help define global training standards with our innovative
virtual-to-live training solutions to make flying safer, maintain
defence force readiness and enhance patient safety. We have the
broadest global presence in the industry, with over 9,000
employees, 160 sites and training locations in over 35 countries.
Each year, we train more than 180,000 civil and defence
crewmembers, including more than 135,000 pilots, and thousands of
healthcare professionals worldwide.
Caution concerning limitations of
summary earnings press releaseThis summary earnings press
release contains limited information meant to assist the reader in
assessing CAE’s performance but it is not a suitable source of
information for readers who are unfamiliar with CAE and is not in
any way a substitute for the Company’s financial statements, notes
to the financial statements, and MD&A reports.
Caution concerning forward-looking
statementsCertain statements made in this press release
are forward-looking statements. These statements include, without
limitation, statements relating to our fiscal 2019 financial
guidance (including revenues, capital investment and margins),
statements relating to the acquisition of Bombardier’s BAT business
including expectations with respect to same and other statements
that are not historical facts. Forward-looking statements describe
future expectations, plans, results or strategies and can often be
identified by the use of words such as “may,” “will,” “intend,”
“believe,” “expect,” “anticipate,” and similar references which are
intended to identify forward-looking statements.. All such
forward-looking statements are made pursuant to the 'safe harbour'
provisions of applicable Canadian securities laws and of the United
States Private Securities Litigation Reform Act of 1995.
Forward-looking statements, by their very nature, are subject to
inherent risks and uncertainties and are based on several
assumptions, both general and specific, which give rise to the
possibility that actual results or events could differ materially
from our expectations expressed in or implied by such
forward-looking statements and that our business outlook,
objectives, plans and strategic priorities may not be achieved. As
a result, we cannot guarantee that any forward-looking statement
will materialize and we caution you against relying on any of these
forward-looking statements. The forward-looking statements
contained in this press release describe our expectations as of
November 13, 2018 and, accordingly, are subject to change after
such date. Except as may be required by applicable securities laws,
we do not undertake any obligation to update or revise any
forward-looking statements contained in this news release, whether
as a result of new information, future events or otherwise. Except
as otherwise indicated by CAE, forward-looking statements do not
reflect the potential impact of any special items or of any
dispositions, monetizations, mergers, acquisitions, other business
combinations or other transactions that may occur after November
13, 2018. The financial impact of these transactions and special
items can be complex and depends on the facts particular to each of
them. We therefore cannot describe the expected impact in a
meaningful way or in the same way we present known risks affecting
our business. Forward-looking statements are presented in this
press release for the purpose of assisting investors and others in
understanding certain key elements of our expected fiscal 2019
financial results and in obtaining a better understanding of our
anticipated operating environment. Readers are cautioned that such
information may not be appropriate for other purposes. The value of
capital investments expected to be made by CAE in fiscal 2019
assumes that capital investments will be made in accordance with
our current annual plan. However, there can be no assurance that
such investment levels will be maintained with the result that the
value of actual capital investments made by CAE during such period
could materially differ from current expectations.
Material assumptionsA number of
economic, market, operational and financial assumptions were made
by CAE in preparing its forward-looking statements for fiscal 2019
contained in this news release, including, but not limited to
certain economic and market assumptions including: modest economic
growth and moderately rising interest rates in fiscal 2019; a
sustained level of competition in civil, defence & healthcare
markets; no material financial, operational or competitive
consequences of changes in regulations affecting our business; and
a continued positive defence market.
Assumptions concerning our
businessesA number of assumptions concerning CAE’s
business were also made in the preparation of its forward-looking
statements for fiscal 2019 contained in this news release,
including, but not limited to factors including: maintenance of
CAE’s market share in civil simulator sales in the face of price
competition and CAE’s ability to increase market share in
training.
The foregoing assumptions, although considered
reasonable by CAE on November 13, 2018, may prove to be inaccurate.
Accordingly, our actual results could differ materially from our
expectations as set forth in this news release.
Material risksImportant risk
factors that could cause our assumptions and estimates to be
inaccurate and actual results or events to differ materially from
those expressed in or implied by our forward-looking statements,
including our fiscal 2019 financial guidance, are set out in CAE’s
MD&A for the year ended March 31, 2018 filed by CAE with the
Canadian Securities Administrators (available at www.sedar.com) and
with the U.S. Securities and Exchange Commission (available at
www.sec.gov). The fiscal year 2018 MD&A is also available at
www.cae.com. The realization of our forward-looking statements,
including our ability to meet our fiscal 2019 outlook, essentially
depends on our business performance which, in turn, is subject to
many risks. Accordingly, readers are cautioned that any of the
disclosed risks could have a material adverse effect on our
forward-looking statements. We caution that the disclosed list of
risk factors is not exhaustive and other factors could also
adversely affect our results.
Non-GAAP and other financial
measuresThis press release includes non-GAAP and other
financial measures. Non-GAAP measures are useful supplemental
information but may not have a standardized meaning according to
GAAP. These measures should not be confused with, or used as an
alternative for, performance measures calculated according to GAAP.
They should also not be used to compare with similar measures from
other companies. Management believes that providing certain
non-GAAP measures provides users with a better understanding of our
results and trends and provides additional information on our
financial and operating performance.
(1) Order Intake and BacklogOrder intake is a
non-GAAP measure that represents the expected value of orders we
have received:
- For the Civil Aviation Training Solutions segment, we consider
an item part of our order intake when we have a legally binding
commercial agreement with a client that includes enough detail
about each party’s obligations to form the basis for a contract.
Additionally, expected future revenues from customers under
short-term and long-term training contracts are included when these
customers commit to pay us training fees, or when we reasonably
expect the revenue to be generated;
- For the Defence and Security segment, we consider an item part
of our order intake when we have a legally binding commercial
agreement with a client that includes enough detail about each
party’s obligations to form the basis for a contract. Defence and
Security contracts are usually executed over a long-term period but
some of them must be renewed each year. For this segment, we only
include a contract item in order intake when the customer has
authorized the contract item and has received funding for it;
- For the Healthcare segment, order intake is typically converted
into revenue within one year, therefore we assume that order intake
is equal to revenue.
The book-to-sales ratio is the total orders
divided by total revenue in a given period.
Total backlog is a non-GAAP measure that
represents expected future revenues and includes obligated backlog,
joint venture backlog and unfunded backlog and options.
- Obligated backlog represents the value of our order intake not
yet executed and is calculated by adding the order intake of the
current period to the balance of the obligated backlog at the end
of the previous fiscal year, subtracting the revenue recognized in
the current period and adding or subtracting backlog adjustments.
If the amount of an order already recognized in a previous fiscal
year is modified, the backlog is revised through
adjustments.
- Joint venture backlog is obligated backlog that represents the
expected value of our share of orders that our joint ventures have
received but have not yet executed. Joint venture backlog is
determined on the same basis as obligated backlog described
above.
- Unfunded backlog represents firm Defence and Security orders we
have received but have not yet executed and for which funding
authorization has not yet been obtained. Options are included in
backlog when there is a high probability of being exercised, but
indefinite-delivery/indefinite-quantity (IDIQ) contracts are
excluded. When an option is exercised, it is considered order
intake in that period and it is removed from unfunded backlog and
options.
(2) Operating profit is an additional GAAP
measure that shows us how we have performed before the effects of
certain financing decisions, tax structures and discontinued
operations. We track it because we believe it makes it easier to
compare our performance with previous periods, and with companies
and industries that do not have the same capital structure or tax
laws.
(3) Segment operating income (SOI) is a non-GAAP
measure and is our key indicator of each segment’s financial
performance. Segment operating income gives us an indication of the
profitability of each segment because it does not include the
impact of any items not specifically related to the segment’s
performance. We calculate total segment operating income by taking
the operating profit and excluding the impact of restructuring,
integration and acquisition costs.
(4) Utilization rate is one of the
operating measures we use to assess the performance of our Civil
simulator training network. While utilization rate does not
directly correlate to revenue recognized, we track it, together
with other measures, because we believe it is an indicator of our
operating performance. We calculate it by taking the number of
training hours sold on our simulators during the period divided by
the practical training capacity available for the same period.
(5) Free cash flow is a non-GAAP measure that
shows us how much cash we have available to invest in growth
opportunities, repay debt and meet ongoing financial obligations.
We use it as an indicator of our financial strength and liquidity.
We calculate it by taking the net cash generated by our continuing
operating activities, subtracting maintenance capital expenditures,
investment in other assets not related to growth and dividends paid
and adding proceeds from the disposal of property, plant and
equipment, dividends received from equity accounted investees and
proceeds, net of payments, from equity accounted investees.
(6) Simulator equivalent unit (SEU) is an
operating measure we use to show the total average number of FFSs
available to generate earnings during the period.
(7) Maintenance capital expenditure is a
non-GAAP measure we use to calculate the investment needed to
sustain the current level of economic activity. Growth capital
expenditure is a non-GAAP measure we use to calculate the
investment needed to increase the current level of economic
activity.
(8) Net debt is a non-GAAP measure we use to
monitor how much debt we have after taking into account liquid
assets such as cash and cash equivalents. We use it as an indicator
of our overall financial position, and calculate it by taking our
total long-term debt, including the current portion of long-term
debt, and subtracting cash and cash equivalents.
(9) Net debt-to-capital is calculated as net
debt divided by the sum of total equity plus net debt.
(10) Return on capital employed (ROCE) is a
non-GAAP measure we use to evaluate the profitability of our
invested capital. We calculate this ratio over a rolling
four-quarter period by taking net income attributable to equity
holders of the Company excluding net finance expense, after tax,
divided by the average capital employed.
For non-GAAP and other financial measures
monitored by CAE, please refer to CAE’s MD&A filed with the
Canadian Securities Administrators available on our website
(www.cae.com) and on SEDAR (www.sedar.com).
ContactsInvestor
Relations:Andrew Arnovitz, Vice President, Strategy and
Investor Relations 1-514-734-5760, andrew.arnovitz@cae.com
Media:Hélène V. Gagnon, Vice
President, Public Affairs and Global Communications 1-514-340-5536,
helene.v.gagnon@cae.com
Consolidated Statement of Financial Position |
|
|
September
30 |
|
|
March 31 |
|
|
April 1 |
(amounts
in millions of Canadian dollars) |
|
2018 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
Restated |
|
|
Restated |
Assets |
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
$ |
504.3 |
|
$ |
611.5 |
|
$ |
504.7 |
Accounts
receivable |
|
480.8 |
|
|
452.0 |
|
|
450.1 |
Contract assets |
|
466.7 |
|
|
439.7 |
|
|
348.5 |
Inventories |
|
574.5 |
|
|
516.1 |
|
|
549.0 |
Prepayments |
|
56.0 |
|
|
50.0 |
|
|
63.8 |
Income taxes
recoverable |
|
54.4 |
|
|
40.7 |
|
|
25.6 |
Derivative financial assets |
|
12.8 |
|
|
13.3 |
|
|
23.4 |
Total current
assets |
$ |
2,149.5 |
|
$ |
2,123.3 |
|
$ |
1,965.1 |
Property, plant and
equipment |
|
1,782.8 |
|
|
1,803.9 |
|
|
1,582.6 |
Intangible assets |
|
1,104.3 |
|
|
1,055.6 |
|
|
944.0 |
Investment in equity
accounted investees |
|
252.7 |
|
|
242.7 |
|
|
375.8 |
Deferred tax
assets |
|
53.7 |
|
|
61.2 |
|
|
42.9 |
Derivative financial
assets |
|
11.0 |
|
|
11.5 |
|
|
16.0 |
Other assets |
|
475.7 |
|
|
482.0 |
|
|
471.3 |
Total assets |
$ |
5,829.7 |
|
$ |
5,780.2 |
|
$ |
5,397.7 |
|
|
|
|
|
|
|
|
|
Liabilities and
equity |
|
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities |
$ |
732.3 |
|
$ |
666.9 |
|
$ |
686.1 |
Provisions |
|
28.9 |
|
|
32.1 |
|
|
43.2 |
Income taxes
payable |
|
15.5 |
|
|
15.3 |
|
|
9.6 |
Deferred revenue |
|
9.6 |
|
|
10.0 |
|
|
11.4 |
Contract
liabilities |
|
667.2 |
|
|
679.5 |
|
|
593.4 |
Current portion of
long-term debt |
|
129.8 |
|
|
52.2 |
|
|
51.9 |
Derivative financial liabilities |
|
9.1 |
|
|
18.1 |
|
|
15.5 |
Total current
liabilities |
$ |
1,592.4 |
|
$ |
1,474.1 |
|
$ |
1,411.1 |
Provisions |
|
37.3 |
|
|
39.5 |
|
|
39.1 |
Long-term debt |
|
1,169.6 |
|
|
1,208.7 |
|
|
1,203.5 |
Royalty
obligations |
|
136.3 |
|
|
140.8 |
|
|
138.5 |
Employee benefits
obligations |
|
175.8 |
|
|
200.6 |
|
|
157.7 |
Deferred gains and
other liabilities |
|
247.3 |
|
|
229.9 |
|
|
217.8 |
Deferred tax
liabilities |
|
186.5 |
|
|
184.7 |
|
|
213 |
Derivative financial
liabilities |
|
1.9 |
|
|
4.4 |
|
|
4.7 |
Total liabilities |
$ |
3,547.1 |
|
$ |
3,482.7 |
|
$ |
3,385.4 |
Equity |
|
|
|
|
|
|
|
|
Share capital |
$ |
639.3 |
|
$ |
633.2 |
|
$ |
615.4 |
Contributed
surplus |
|
25.2 |
|
|
21.3 |
|
|
19.4 |
Accumulated other
comprehensive income |
|
165.2 |
|
|
260.3 |
|
|
191.1 |
Retained
earnings |
|
1,378.2 |
|
|
1,314.3 |
|
|
1,126.2 |
Equity attributable to
equity holders of the Company |
$ |
2,207.9 |
|
$ |
2,229.1 |
|
$ |
1,952.1 |
Non-controlling
interests |
|
74.7 |
|
|
68.4 |
|
|
60.2 |
Total equity |
$ |
2,282.6 |
|
$ |
2,297.5 |
|
$ |
2,012.3 |
Total liabilities and equity |
$ |
5,829.7 |
|
$ |
5,780.2 |
|
$ |
5,397.7 |
Consolidated Income Statement |
|
Three months
ended |
|
|
|
Six months ended |
|
|
September
30 |
|
|
|
September 30 |
|
(amounts in
millions of Canadian dollars, except per share amounts) |
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
Restated |
|
|
|
|
|
|
|
Restated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
743.8 |
|
|
$ |
618.2 |
|
|
$ |
1,465.8 |
|
|
$ |
1,274.4 |
|
Cost of
sales |
|
542.3 |
|
|
|
436.7 |
|
|
|
1,045.6 |
|
|
|
889.2 |
|
Gross
profit |
$ |
201.5 |
|
|
$ |
181.5 |
|
|
$ |
420.2 |
|
|
$ |
385.2 |
|
Research and
development expenses |
|
29.1 |
|
|
|
30.0 |
|
|
|
60.4 |
|
|
|
62.3 |
|
Selling, general and
administrative expenses |
|
87.9 |
|
|
|
75.1 |
|
|
|
190.6 |
|
|
|
169.9 |
|
Other gains – net |
|
(9.4 |
) |
|
|
(18.3 |
) |
|
|
(14.6 |
) |
|
|
(18.0 |
) |
After tax share in
profit of equity accounted investees |
|
(4.8 |
) |
|
|
(8.1 |
) |
|
|
(13.4 |
) |
|
|
(23.1 |
) |
Operating profit |
$ |
98.7 |
|
|
$ |
102.8 |
|
|
$ |
197.2 |
|
|
$ |
194.1 |
|
Finance
expense – net |
|
19.9 |
|
|
|
17.6 |
|
|
|
35.9 |
|
|
|
35.8 |
|
Earnings before
income taxes |
$ |
78.8 |
|
|
$ |
85.2 |
|
|
$ |
161.3 |
|
|
$ |
158.3 |
|
Income
tax expense |
|
15.2 |
|
|
|
23.1 |
|
|
|
26.1 |
|
|
|
35.0 |
|
Net
income |
$ |
63.6 |
|
|
$ |
62.1 |
|
|
$ |
135.2 |
|
|
$ |
123.3 |
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the
Company |
$ |
60.7 |
|
|
$ |
60.3 |
|
|
$ |
130.1 |
|
|
$ |
119.9 |
|
Non-controlling interests |
|
2.9 |
|
|
|
1.8 |
|
|
|
5.1 |
|
|
|
3.4 |
|
Earnings per share attributable to equity holders of the
Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.23 |
|
|
$ |
0.22 |
|
|
$ |
0.49 |
|
|
$ |
0.45 |
|
Diluted |
$ |
0.23 |
|
|
$ |
0.22 |
|
|
$ |
0.48 |
|
|
$ |
0.44 |
|
Consolidated
Statement of Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
September
30 |
|
|
September
30 |
|
(amounts
in millions of Canadian dollars) |
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
Restated |
|
|
|
|
|
|
|
Restated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
63.6 |
|
|
$ |
62.1 |
|
|
$ |
135.2 |
|
|
$ |
123.3 |
|
Items that may
be reclassified to net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency differences on translation of foreign operations |
$ |
(65.3 |
) |
|
$ |
(64.6 |
) |
|
$ |
(86.1 |
) |
|
$ |
(73.4 |
) |
Reclassification to income of foreign currency differences |
|
(12.6 |
) |
|
|
(19.3 |
) |
|
|
(15.9 |
) |
|
|
(20.0 |
) |
Net gain
on cash flow hedges |
|
12.7 |
|
|
|
16.8 |
|
|
|
4.3 |
|
|
|
24.5 |
|
Reclassification to income of gains on cash flow hedges |
|
(1.8 |
) |
|
|
(11.3 |
) |
|
|
0.6 |
|
|
|
(10.1 |
) |
Net gain
(loss) on hedges of net investment in foreign operations |
|
8.3 |
|
|
|
19.2 |
|
|
|
(1.4 |
) |
|
|
31.4 |
|
Income taxes |
|
0.8 |
|
|
|
1.0 |
|
|
|
4.7 |
|
|
|
(0.1 |
) |
|
$ |
(57.9 |
) |
|
$ |
(58.2 |
) |
|
$ |
(93.8 |
) |
|
$ |
(47.7 |
) |
Items that will
never be reclassified to net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remeasurement of defined benefit pension plan obligations |
$ |
28.9 |
|
|
$ |
27.5 |
|
|
$ |
33.1 |
|
|
$ |
0.3 |
|
Net loss
on financial assets carried at fair value through OCI |
|
(0.1 |
) |
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
Income
taxes |
|
(7.7 |
) |
|
|
(7.3 |
) |
|
|
(8.8 |
) |
|
|
(0.1 |
) |
|
$ |
21.1 |
|
|
$ |
20.2 |
|
|
$ |
24.2 |
|
|
$ |
0.2 |
|
Other
comprehensive loss |
$ |
(36.8 |
) |
|
$ |
(38.0 |
) |
|
$ |
(69.6 |
) |
|
$ |
(47.5 |
) |
Total comprehensive income |
$ |
26.8 |
|
|
$ |
24.1 |
|
|
$ |
65.6 |
|
|
$ |
75.8 |
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the
Company |
$ |
25.1 |
|
|
$ |
23.4 |
|
|
$ |
59.3 |
|
|
$ |
74.6 |
|
Non-controlling interests |
|
1.7 |
|
|
|
0.7 |
|
|
|
6.3 |
|
|
|
1.2 |
|
Consolidated Statement of Changes in Equity |
|
Attributable to equity holders of the Company |
|
|
|
|
|
|
|
Six months ended
September 30, 2018 |
Common shares |
|
|
|
|
|
Accumulated other |
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in millions of
Canadian dollars, |
Number of |
|
|
Stated |
|
|
Contributed |
|
|
comprehensive |
|
|
Retained |
|
|
|
|
|
Non-controlling |
|
|
Total |
|
except
number of shares) |
shares |
|
|
value |
|
|
surplus |
|
|
income |
|
|
earnings |
|
|
Total |
|
|
interest |
|
|
equity |
|
Balances, beginning of period (Restated) |
267,738,530 |
|
$ |
633.2 |
|
$ |
21.3 |
|
$ |
260.3 |
|
$ |
1,314.3 |
|
$ |
2,229.1 |
|
$ |
68.4 |
|
$ |
2,297.5 |
|
Net income |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
130.1 |
|
$ |
130.1 |
|
$ |
5.1 |
|
$ |
135.2 |
|
Other
comprehensive (loss) income |
— |
|
|
— |
|
|
— |
|
|
(95.1 |
) |
|
24.3 |
|
|
(70.8 |
) |
|
1.2 |
|
|
(69.6 |
) |
Total comprehensive (loss) income |
— |
|
$ |
— |
|
$ |
— |
|
$ |
(95.1 |
) |
$ |
154.4 |
|
$ |
59.3 |
|
$ |
6.3 |
|
$ |
65.6 |
|
Stock options
exercised |
447,050 |
|
|
8.1 |
|
|
(1.1 |
) |
|
— |
|
|
— |
|
|
7.0 |
|
|
— |
|
|
7.0 |
|
Optional cash purchase
of shares |
1,326 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Common shares
repurchased and cancelled |
(1,686,700 |
) |
|
(4.0 |
) |
|
— |
|
|
— |
|
|
(39.7 |
) |
|
(43.7 |
) |
|
— |
|
|
(43.7 |
) |
Share-based
compensation expense |
— |
|
|
— |
|
|
5.0 |
|
|
— |
|
|
— |
|
|
5.0 |
|
|
— |
|
|
5.0 |
|
Stock dividends |
74,783 |
|
|
2.0 |
|
|
— |
|
|
— |
|
|
(2.0 |
) |
|
— |
|
|
— |
|
|
— |
|
Cash
dividends |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(48.8 |
) |
|
(48.8 |
) |
|
— |
|
|
(48.8 |
) |
Balances, end of period |
266,574,989 |
|
$ |
639.3 |
|
$ |
25.2 |
|
$ |
165.2 |
|
$ |
1,378.2 |
|
$ |
2,207.9 |
|
$ |
74.7 |
|
$ |
2,282.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to equity holders of the Company |
|
|
|
|
|
|
|
Six months ended
September 30, 2017 |
Common shares |
|
|
|
|
|
Accumulated other |
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in millions of
Canadian dollars, |
Number
of |
|
|
Stated |
|
|
Contributed |
|
|
comprehensive |
|
|
Retained |
|
|
|
|
|
Non-controlling |
|
|
Total |
|
except
number of shares) |
shares |
|
|
value |
|
|
surplus |
|
|
income |
|
|
earnings |
|
|
Total |
|
|
interest |
|
|
equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, beginning of period (Restated) |
268,397,224 |
|
$ |
615.4 |
|
$ |
19.4 |
|
$ |
191.1 |
|
$ |
1,126.2 |
|
$ |
1,952.1 |
|
$ |
60.2 |
|
$ |
2,012.3 |
|
Net income |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
119.9 |
|
$ |
119.9 |
|
$ |
3.4 |
|
$ |
123.3 |
|
Other
comprehensive (loss) income |
— |
|
|
— |
|
|
— |
|
|
(45.5 |
) |
|
0.2 |
|
|
(45.3 |
) |
|
(2.2 |
) |
|
(47.5 |
) |
Total comprehensive
(loss) income |
— |
|
$ |
— |
|
$ |
— |
|
$ |
(45.5 |
) |
$ |
120.1 |
|
$ |
74.6 |
|
$ |
1.2 |
|
$ |
75.8 |
|
Stock options
exercised |
902,400 |
|
|
13.5 |
|
|
(2.1 |
) |
|
— |
|
|
— |
|
|
11.4 |
|
|
— |
|
|
11.4 |
|
Optional cash purchase
of shares |
1,082 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Common shares
repurchased and cancelled |
(1,077,400 |
) |
|
(2.5 |
) |
|
— |
|
|
— |
|
|
(20.1 |
) |
|
(22.6 |
) |
|
— |
|
|
(22.6 |
) |
Share-based
compensation expense |
— |
|
|
— |
|
|
3.7 |
|
|
— |
|
|
— |
|
|
3.7 |
|
|
— |
|
|
3.7 |
|
Stock dividends |
69,245 |
|
|
1.5 |
|
|
— |
|
|
— |
|
|
(1.5 |
) |
|
— |
|
|
— |
|
|
— |
|
Cash dividends |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(44.2 |
) |
|
(44.2 |
) |
|
— |
|
|
(44.2 |
) |
Balances, end of period (Restated) |
268,292,551 |
|
$ |
627.9 |
|
$ |
21.0 |
|
$ |
145.6 |
|
$ |
1,180.5 |
|
$ |
1,975.0 |
|
$ |
61.4 |
|
$ |
2,036.4 |
|
Consolidated
Statement of Cash Flows |
|
|
|
|
|
|
|
Six months ended
September 30 |
|
|
|
|
|
|
|
(amounts
in millions of Canadian dollars) |
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
Restated |
|
Operating
activities |
|
|
|
|
|
|
|
Net income |
$ |
135.2 |
|
|
$ |
123.3 |
|
Adjustments for: |
|
|
|
|
|
|
|
Depreciation of property, plant and equipment |
|
63.6 |
|
|
|
59.8 |
|
Amortization of intangible and other assets |
|
37.2 |
|
|
|
42.7 |
|
After tax
share in profit of equity accounted investees |
|
(13.4 |
) |
|
|
(23.1 |
) |
Deferred
income taxes |
|
15.4 |
|
|
|
2.0 |
|
Investment tax credits |
|
(1.9 |
) |
|
|
(5.5 |
) |
Share-based compensation |
|
3.0 |
|
|
|
2.0 |
|
Defined
benefit pension plans |
|
9.4 |
|
|
|
4.7 |
|
Amortization of other non-current liabilities |
|
(12.6 |
) |
|
|
(20.0 |
) |
Derivative financial assets and liabilities – net |
|
(6.7 |
) |
|
|
1.9 |
|
Other |
|
11.0 |
|
|
|
(3.5 |
) |
Changes
in non-cash working capital |
|
(93.7 |
) |
|
|
(106.4 |
) |
Net cash provided by operating activities |
$ |
146.5 |
|
|
$ |
77.9 |
|
Investing
activities |
|
|
|
|
|
|
|
Business combinations,
net of cash and cash equivalents acquired |
$ |
(33.5 |
) |
|
$ |
(24.7 |
) |
Net proceeds from
disposal of interest in investment |
|
— |
|
|
|
114.0 |
|
Capital expenditures
for property, plant and equipment |
|
(94.0 |
) |
|
|
(73.5 |
) |
Proceeds from disposal
of property, plant and equipment |
|
2.3 |
|
|
|
15.9 |
|
Additions to
intangibles |
|
(37.6 |
) |
|
|
(20.5 |
) |
Net payments to equity
accounted investees |
|
(9.7 |
) |
|
|
(4.0 |
) |
Dividends received from
equity accounted investees |
|
7.1 |
|
|
|
17.1 |
|
Other |
|
4.0 |
|
|
|
— |
|
Net cash (used in) provided by investing
activities |
$ |
(161.4 |
) |
|
$ |
24.3 |
|
Financing
activities |
|
|
|
|
|
|
|
Proceeds from borrowing
under revolving unsecured credit facilities |
$ |
125.0 |
|
|
$ |
96.0 |
|
Repayment of borrowing
under revolving unsecured credit facilities |
|
(125.0 |
) |
|
|
(96.0 |
) |
Proceeds from long-term
debt |
|
75.1 |
|
|
|
17.9 |
|
Repayment of long-term
debt |
|
(61.2 |
) |
|
|
(15.1 |
) |
Repayment of finance
lease |
|
(5.6 |
) |
|
|
(7.0 |
) |
Dividends paid |
|
(48.8 |
) |
|
|
(44.2 |
) |
Issuance of common
shares |
|
7.0 |
|
|
|
11.4 |
|
Repurchase of common
shares |
|
(43.7 |
) |
|
|
(22.6 |
) |
Other |
|
(0.3 |
) |
|
|
(1.9 |
) |
Net cash used in financing activities |
$ |
(77.5 |
) |
|
$ |
(61.5 |
) |
Effect of foreign exchange rate changes on cash and cash
equivalents |
$ |
(14.8 |
) |
|
$ |
(4.4 |
) |
Net (decrease)
increase in cash and cash equivalents |
$ |
(107.2 |
) |
|
$ |
36.3 |
|
Cash and cash
equivalents, beginning of period |
|
611.5 |
|
|
|
504.7 |
|
Cash and cash equivalents, end of period |
$ |
504.3 |
|
|
$ |
541 |
|
Supplemental
information: |
|
|
|
|
|
|
|
Interest
paid |
$ |
30.2 |
|
|
$ |
32.5 |
|
Interest
received |
|
7.9 |
|
|
|
5.8 |
|
Income taxes paid |
|
17.2 |
|
|
|
22.2 |
|
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