(NYSE: CAE; TSX: CAE) - CAE today reported revenue
of $816.3 million for the third quarter of fiscal year 2019,
compared with $828.2 million in the third quarter last year. Third
quarter net income attributable to equity holders was $77.6 million
($0.29 per share) compared to $143.8 million ($0.53 per share)
last year. Excluding the income tax recovery related to the US tax
reform and net gain on the fair valuation of CAE's prior investment
in the Asian Aviation Centre of Excellence (AACE), net income would
have been $102.7 million ($0.38 per share) last year. All financial
information is in Canadian dollars unless otherwise indicated.
“CAE had good market momentum in the third
quarter with orders of $882 million for a record $9 billion
backlog; and we generated over $155 million in free cash flow. As
we look to the remainder of the year, we continue to expect CAE to
deliver on its annual outlook,” said Marc Parent, CAE’s President
and Chief Executive Officer. “Operating income was lower year over
year in the third quarter, which is consistent with our expectation
that a disproportionate share of our annual growth outlook will be
driven by record simulator deliveries in the last quarter of the
fiscal year. Order activity for our Civil training solutions
remains strong with our Civil backlog reaching a new high $4.6
billion. We signed long-term training agreements with customers
including easyJet, and year-to-date, we have sold 64 full-flight
simulators, which already surpasses the annual industry record. In
Defence, performance for the quarter was mixed. We had strong
revenue growth, driven mainly by a higher level of services
activity on contracts in the early stages of profitability ramp up.
Additional timing related factors also contributed to lower Defence
operating income in the quarter, which we expect to mitigate in the
coming quarters."
Summary of
consolidated results |
|
|
|
|
|
|
(amounts
in millions, except operating margins and per share amounts) |
|
Q3-2019 |
|
Q3-2018 |
|
Variance % |
|
|
|
|
Restated* |
|
|
Revenue |
$ |
816.3 |
$ |
828.2 |
|
(1 |
%) |
Operating
profit(3) |
$ |
113.0 |
$ |
151.2 |
|
(25 |
%) |
Operating margins |
% |
13.8 |
% |
18.3 |
|
|
Operating profit
excluding the AACE net gain |
$ |
113.0 |
$ |
147.2 |
|
(23 |
%) |
Operating margins
excluding the AACE net gain |
% |
13.8 |
% |
17.8 |
|
|
Net income |
$ |
79.5 |
$ |
145.8 |
|
(45 |
%) |
Net income attributable
to equity holders of the Company |
$ |
77.6 |
$ |
143.8 |
|
(46 |
%) |
Earnings per share
(EPS) |
$ |
0.29 |
$ |
0.53 |
|
(45 |
%) |
Net income attributable
to equity holders excluding the |
|
|
|
|
|
|
US tax
reform impact and AACE net gain |
$ |
77.6 |
$ |
102.7 |
|
(24 |
%) |
EPS excluding the US
tax reform impact and AACE net gain |
$ |
0.29 |
$ |
0.38 |
|
(24 |
%) |
Total
backlog |
$ |
8,964.6 |
$ |
7,534.9 |
|
19 |
% |
*
Financial results reported were restated to reflect the accounting
changes required by IFRS 15. |
Civil Aviation Training Solutions
(Civil)Third quarter Civil revenue was $458.4 million,
down 15% compared to the same quarter last year. Segment operating
income(4) was $87.2 million (19.0% of revenue), down 24% compared
to the third quarter last year, excluding the AACE net gain. Third
quarter Civil training centre utilization(5) was 75%. Because of
the five-week work disruption last summer, as anticipated, Civil
had fewer simulator deliveries (simulators installed with customers
and ready for training) during the third quarter compared to the
third quarter last year. CAE successfully accelerated production to
mitigate the impact of this action and Civil is on track to deliver
a record 56 full-flight simulators (FFSs) for the year, with more
than 40 percent in the fourth quarter alone.
During the quarter, Civil signed training
solutions contracts valued at $586.6 million, including a 10-year
pilot training contract with easyJet whereby 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.
Civil also signed an exclusive pilot training contract with
Endeavor Air, as well as business aviation pilot training contracts
with Icon Aviation and Windsor Jet. Civil sold 16 FFSs during the
quarter to customers including Nippon Cargo Airlines, Aeroméxico,
Lufthansa Aviation Training, and Shanghai Eastern Flight Training
Company. These orders bring the total for the first nine months of
the fiscal year to 50 FFSs. Civil has sold another 14 FFSs since
the end of the quarter for 64 year-to-date, and now expects to sell
approximately 70 FFSs for the fiscal year.
The Civil book-to-sales(2) ratio was 1.28x for
the quarter and 1.31x for the last 12 months. The Civil backlog at
the end of the quarter was a record $4.6 billion.
On November 8, 2018, CAE agreed to monetize its
future royalty obligations under an Authorized Training Provider
(ATP) agreement with Bombardier and extend this agreement to 2038.
In December 2018, CAE concluded the monetization transaction which
resulted in a cash outlay of U.S. $155.0 million. CAE's acquisition
of Bombardier's Business Aircraft Training business (BAT) has
cleared regulatory hurdles under U.S. antitrust law and, pending
the receipt of the remaining regulatory approvals and third-party
consents, CAE now expects to conclude the acquisition of BAT by the
end of March 2019.
Since the end of the quarter, Civil acquired
Avianca’s share of its training joint venture, including Avianca's
training assets, as part of an exclusive 15-year training
outsourcing agreement.
Summary of Civil Aviation Training Solutions
results |
(amounts
in millions, except operating margins, SEU and FFSs deployed) |
|
Q3-2019 |
|
Q3-2018 |
|
Variance % |
|
|
|
|
Restated |
|
|
Revenue |
$ |
458.4 |
$ |
540.5 |
|
(15 |
%) |
Segment operating
income (SOI) |
$ |
87.2 |
$ |
119.4 |
|
(27 |
%) |
Operating margins |
% |
19.0 |
% |
22.1 |
|
|
SOI excluding the AACE
net gain |
$ |
87.2 |
$ |
115.4 |
|
(24 |
%) |
Operating margins
excluding the AACE net gain |
% |
19.0 |
% |
21.4 |
|
|
Total backlog |
$ |
4,566.1 |
$ |
3,925.6 |
|
16 |
% |
Simulator equivalent
unit (SEU)(6) |
|
219 |
|
205 |
|
7 |
% |
FFSs
deployed |
|
266 |
|
252 |
|
6 |
% |
Defence and Security
(Defence)Third quarter Defence revenue was $330.2 million,
up 27% compared to the same quarter last year and segment operating
income was $25.2 million (7.6% of revenue), down 17% compared to
the third quarter last year. Revenue growth was driven mainly by a
higher level of services activity, including contracts under
recently acquired AOCE, and the U.S. Navy Chief of Naval Air
Training contract, both of which are in the early stages of
profitability ramp-up. Additional timing related factors
contributed to lower Defence operating income and margins compared
to the third quarter last year: Defence experienced higher R&D
expenses related to recent development programs; and, it had delays
in the advancement of higher margin programs including the Canadian
Fixed-Wing Search and Rescue and the UAE Naval Training Centre. The
Company has already taken measures to mitigate these timing related
impacts in the coming quarters.
During the quarter, Defence booked orders for
$267.8 million, including the first increment of an eight-year,
more than $250 million contract with the U.S. Air Force to provide
comprehensive C-130H aircrew training services. Other notable
orders included a contract to provide the Eurofighter industry
consortium with a range of training device upgrades and maintenance
support services for Germany and Spain’s Eurofighter Pilot
Synthetic Training System program, and with Boeing to provide
concurrency upgrades on P-8A simulators. Defence also received an
order from the U.S. Navy for the next increment of a five-year
contract valued at more than $160 million to provide contract
instruction services for the Chief of Naval Air Training at five
naval air stations. In addition, under a U.S. foreign military sale
program the U.S. Navy awarded a contract to continue providing
maintenance and sustainment services for the Royal Australian
Navy’s MH-60R training systems.
The Defence book-to-sales ratio was 0.81x 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) |
|
Q3-2019 |
|
Q3-2018 |
|
Variance % |
|
|
|
|
Restated |
|
|
Revenue |
$ |
330.2 |
$ |
259.8 |
|
27 |
% |
Segment operating
income |
$ |
25.2 |
$ |
30.3 |
|
(17 |
%) |
Operating margins |
% |
7.6 |
% |
11.7 |
|
|
Total
backlog |
$ |
4,398.5 |
$ |
3,609.3 |
|
22 |
% |
HealthcareThird quarter
Healthcare revenue was $27.7 million compared to $27.9 million in
the same quarter last year, and third quarter segment operating
income was $0.6 million, compared to segment operating income of
$1.5 million in the third quarter last year.
Healthcare announced the release of CAE Luna in
January 2019, an innovative infant simulator designed to fulfill
clinical training requirements for neonatal and infant care. As
well, during the quarter, it developed two new CAE Blue Phantom
skills trainers for healthcare simulation training: the Pediatric
Regional Anesthesia Central Line and Cardio Echo ultrasound
training models. Healthcare released CAE Vimedix 2.0 for ultrasound
simulation, featuring new educational content and compatibility
with new augmented reality add-on modules.
Summary of Healthcare results |
(amounts
in millions, except operating margins) |
|
Q3-2019 |
|
Q3-2018 |
|
Variance % |
|
|
|
|
Restated |
|
|
Revenue |
$ |
27.7 |
$ |
27.9 |
|
(1 |
%) |
Segment operating
income |
$ |
0.6 |
$ |
1.5 |
|
(60 |
%) |
Operating
margins |
% |
2.2 |
% |
5.4 |
|
|
Additional financial
highlightsFree cash flow was $155.1 million for the
quarter compared to $146.0 million in the third quarter last
year. The increase in free cash flow results mainly from a lower
investment in non-cash working capital.
Income taxes this quarter were $14.2 million,
representing an effective tax rate of 15%, compared to a negative
effective tax rate of 9% for the third quarter last year. The
negative tax rate last year was mainly related to the U.S. Tax
Reform. The tax rate this quarter reflects the positive impact of
tax audits in Canada and a change in the mix of income from various
jurisdictions.
Growth and maintenance capital expenditures(7)
totaled $61.6 million this quarter.
Net debt(8) at the end of the quarter was $985.7
million for a net debt-to-total capital ratio(9) of 29.4%. This
compares to net debt of $795.1 million and a net debt-to-total
capital ratio of 25.8% at the end of the preceding quarter.
CAE entered an agreement to issue US $550
million senior unsecured notes, subject to customary closing
conditions. Proceeds will be used to fund CAE’s acquisition of
Bombardier’s BAT Business and to refinance some of CAE’s existing
debt and recent term loans announced on November 8, 2018. The notes
will be issued in several US dollar denominated tranches with fixed
interest rates ranging from 4.45 to 4.90 percent annually and
maturities ranging from 10 to 15 years. Note holders include 19
large institutional investors in the U.S. and Canada.
Return on capital employed(10) was 11.7%
compared to 11.9% 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.
CAE will pay a dividend of 10 cents per share
effective March 29, 2019 to shareholders of record at the close of
business on March 15, 2019.
During the three months ended December 31, 2018,
CAE repurchased and cancelled a total of 1,923,400 common shares
under the Normal Course Issuer Bid (NCIB), at a weighted average
price of $25.54 per common share, for a total consideration of
$49.1 million. On February 8, 2019, CAE received approval from its
Board of Directors for the renewal of its NCIB to purchase up to
5,300,613 of its issued and outstanding common shares
(approximately 2% of its outstanding shares) during the period from
February 25, 2019 to no later than February 24, 2020.
Management outlook for growth in fiscal
2019 (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 and to receive approximately 70 orders in
fiscal 2019. 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 with CAE’s manufacturing employees in Canada. The Company
has successfully accelerated production to mitigate the impact of
this action and expects to deliver a record number of simulators in
the last quarter of its fiscal year. 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.
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 December 31, 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 December 31, 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 Q3 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 220,000 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) 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
February 8, 2019 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 February 8,
2019. 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 February 8, 2019, 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) 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
(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).
Contacts
Investor 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
|
December 31 |
March 31 |
April 1 |
(amounts
in millions of Canadian dollars) |
2018 |
2018 |
2017 |
|
|
Restated |
Restated |
Assets |
|
|
|
Cash and cash
equivalents |
$ |
361.7 |
|
$ |
611.5 |
|
$ |
504.7 |
Accounts
receivable |
577.3 |
452.0 |
450.1 |
Contract assets |
497.3 |
439.7 |
348.5 |
Inventories |
604.2 |
516.1 |
549.0 |
Prepayments |
63.7 |
50.0 |
63.8 |
Income taxes
recoverable |
63.9 |
40.7 |
25.6 |
Derivative financial assets |
7.7 |
13.3 |
23.4 |
Total current
assets |
$ |
2,175.8 |
|
$ |
2,123.3 |
|
$ |
1,965.1 |
Property, plant and
equipment |
1,947.6 |
1,803.9 |
1,582.6 |
Intangible assets |
1,318.0 |
1,055.6 |
944.0 |
Investment in equity
accounted investees |
297.8 |
242.7 |
375.8 |
Deferred tax
assets |
56.7 |
61.2 |
42.9 |
Derivative financial
assets |
11.2 |
11.5 |
16.0 |
Other assets |
487.4 |
482.0 |
471.3 |
Total assets |
$ |
6,294.5 |
|
$ |
5,780.2 |
|
$ |
5,397.7 |
|
|
|
|
Liabilities and
equity |
|
|
|
Accounts payable and
accrued liabilities |
$ |
893.5 |
|
$ |
666.9 |
|
$ |
686.1 |
Provisions |
28.4 |
32.1 |
43.2 |
Income taxes
payable |
17.8 |
15.3 |
9.6 |
Deferred revenue |
10.0 |
10.0 |
11.4 |
Contract
liabilities |
759.7 |
679.5 |
593.4 |
Current portion of
long-term debt |
230.6 |
52.2 |
51.9 |
Derivative financial liabilities |
42.3 |
18.1 |
15.5 |
Total current
liabilities |
$ |
1,982.3 |
|
$ |
1,474.1 |
|
$ |
1,411.1 |
Provisions |
35.6 |
39.5 |
39.1 |
Long-term debt |
1,116.8 |
1,208.7 |
1,203.5 |
Royalty
obligations |
137.0 |
140.8 |
138.5 |
Employee benefits
obligations |
194.0 |
200.6 |
157.7 |
Deferred gains and
other liabilities |
261.1 |
229.9 |
217.8 |
Deferred tax
liabilities |
194.2 |
184.7 |
213.0 |
Derivative financial
liabilities |
4.7 |
4.4 |
4.7 |
Total liabilities |
$ |
3,925.7 |
|
$ |
3,482.7 |
|
$ |
3,385.4 |
Equity |
|
|
|
Share capital |
$ |
640.9 |
|
$ |
633.2 |
|
$ |
615.4 |
Contributed
surplus |
25.2 |
21.3 |
19.4 |
Accumulated other
comprehensive income |
248.9 |
260.3 |
191.1 |
Retained
earnings |
1,374.2 |
1,314.3 |
1,126.2 |
Equity attributable to
equity holders of the Company |
$ |
2,289.2 |
|
$ |
2,229.1 |
|
$ |
1,952.1 |
Non-controlling
interests |
79.6 |
68.4 |
60.2 |
Total equity |
$ |
2,368.8 |
|
$ |
2,297.5 |
|
$ |
2,012.3 |
Total liabilities and equity |
$ |
6,294.5 |
|
$ |
5,780.2 |
|
$ |
5,397.7 |
Consolidated Income Statement
|
Three months ended December 31 |
|
|
Nine months ended December 31 |
|
(amounts
in millions of Canadian dollars, except per share amounts) |
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
Restated |
|
|
|
|
Restated |
|
|
|
|
|
|
|
|
|
Revenue |
$ |
816.3 |
|
|
$ |
828.2 |
|
|
$ |
2,282.1 |
|
|
$ |
2,102.6 |
|
Cost of
sales |
583.0 |
|
|
572.5 |
|
|
1,628.6 |
|
|
1,461.7 |
|
Gross
profit |
$ |
233.3 |
|
|
$ |
255.7 |
|
|
$ |
653.5 |
|
|
$ |
640.9 |
|
Research and
development expenses |
31.1 |
|
|
29.8 |
|
|
91.5 |
|
|
92.1 |
|
Selling, general and
administrative expenses |
101.4 |
|
|
98.6 |
|
|
292.0 |
|
|
268.5 |
|
Other gains – net |
(2.5 |
) |
|
(15.1 |
) |
|
(17.1 |
) |
|
(33.1 |
) |
After tax share in
profit of equity accounted investees |
(9.7 |
) |
|
(8.8 |
) |
|
(23.1 |
) |
|
(31.9 |
) |
Operating profit |
$ |
113.0 |
|
|
$ |
151.2 |
|
|
$ |
310.2 |
|
|
$ |
345.3 |
|
Finance
expense – net |
19.3 |
|
|
17.2 |
|
|
55.2 |
|
|
53.0 |
|
Earnings before
income taxes |
$ |
93.7 |
|
|
$ |
134.0 |
|
|
$ |
255.0 |
|
|
$ |
292.3 |
|
Income
tax expense (recovery) |
14.2 |
|
|
(11.8 |
) |
|
40.3 |
|
|
23.2 |
|
Net
income |
$ |
79.5 |
|
|
$ |
145.8 |
|
|
$ |
214.7 |
|
|
$ |
269.1 |
|
Attributable to: |
|
|
|
|
|
|
|
Equity holders of the
Company |
$ |
77.6 |
|
|
$ |
143.8 |
|
|
$ |
207.7 |
|
|
$ |
263.7 |
|
Non-controlling interests |
1.9 |
|
|
2.0 |
|
|
7.0 |
|
|
5.4 |
|
Earnings per
share attributable to equity holders of the Company |
|
|
|
|
|
|
|
Basic |
$ |
0.29 |
|
|
$ |
0.54 |
|
|
$ |
0.78 |
|
|
$ |
0.98 |
|
Diluted |
$ |
0.29 |
|
|
$ |
0.53 |
|
|
$ |
0.77 |
|
|
$ |
0.98 |
|
Consolidated Statement of Comprehensive
Income
|
Three months ended December 31 |
|
|
Nine months ended December 31 |
|
(amounts
in millions of Canadian dollars) |
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
Restated |
|
|
|
|
Restated |
|
|
|
|
|
|
|
|
|
Net
income |
$ |
79.5 |
|
|
$ |
145.8 |
|
|
$ |
214.7 |
|
|
$ |
269.1 |
|
Items that may
be reclassified to net income |
|
|
|
|
|
|
|
Foreign
currency differences on translation of foreign operations |
$ |
137.9 |
|
|
$ |
32.3 |
|
|
$ |
51.8 |
|
|
$ |
(41.1 |
) |
Reclassification to income of foreign currency differences |
(2.0 |
) |
|
(4.3 |
) |
|
(17.9 |
) |
|
(24.3 |
) |
Net
(loss) gain on cash flow hedges |
(27.0 |
) |
|
(4.2 |
) |
|
(22.7 |
) |
|
20.3 |
|
Reclassification to income of gains (loss) on cash flow hedges |
0.1 |
|
|
4.0 |
|
|
0.7 |
|
|
(6.1 |
) |
Net
(loss) gain on hedges of net investment in foreign operations |
(26.3 |
) |
|
(2.9 |
) |
|
(27.7 |
) |
|
28.5 |
|
Income taxes |
3.9 |
|
|
2.6 |
|
|
8.6 |
|
|
2.5 |
|
|
$ |
86.6 |
|
|
$ |
27.5 |
|
|
$ |
(7.2 |
) |
|
$ |
(20.2 |
) |
Items that will
never be reclassified to net income |
|
|
|
|
|
|
|
Remeasurement of defined benefit pension plan obligations |
$ |
(14.6 |
) |
|
$ |
(44.3 |
) |
|
$ |
18.5 |
|
|
$ |
(44.0 |
) |
Net gain
on financial assets carried at fair value through OCI |
0.1 |
|
|
— |
|
|
— |
|
|
— |
|
Income
taxes |
3.9 |
|
|
11.9 |
|
|
(4.9 |
) |
|
11.8 |
|
|
$ |
(10.6 |
) |
|
$ |
(32.4 |
) |
|
$ |
13.6 |
|
|
$ |
(32.2 |
) |
Other
comprehensive income (loss) |
$ |
76.0 |
|
|
$ |
(4.9 |
) |
|
$ |
6.4 |
|
|
$ |
(52.4 |
) |
Total comprehensive income |
$ |
155.5 |
|
|
$ |
140.9 |
|
|
$ |
221.1 |
|
|
$ |
216.7 |
|
Attributable to: |
|
|
|
|
|
|
|
Equity holders of the
Company |
$ |
150.6 |
|
|
$ |
138.9 |
|
|
$ |
209.9 |
|
|
$ |
213.5 |
|
Non-controlling interests |
4.9 |
|
|
2.0 |
|
|
11.2 |
|
|
3.2 |
|
Consolidated Statement of Changes in Equity
|
Attributable to equity holders of the Company |
|
|
|
|
|
Nine months ended
December 31, 2018 |
Common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in
millions of Canadian dollars, except number of shares) |
Number ofshares |
|
|
Statedvalue |
|
|
Contributedsurplus |
|
|
|
Accumulated othercomprehensiveincome |
|
|
|
Retainedearnings |
|
|
|
|
|
Non-controllinginterest |
|
|
|
Totalequity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
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 |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
207.7 |
|
|
$ |
207.7 |
|
|
$ |
7.0 |
|
|
$ |
214.7 |
|
Other comprehensive
(loss) income |
— |
|
|
— |
|
|
— |
|
|
(11.4 |
) |
|
13.6 |
|
|
2.2 |
|
|
4.2 |
|
|
6.4 |
|
Total comprehensive (loss) income |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(11.4 |
) |
|
$ |
221.3 |
|
|
$ |
209.9 |
|
|
$ |
11.2 |
|
|
$ |
221.1 |
|
Stock options
exercised |
771,825 |
|
|
13.3 |
|
|
(1.8 |
) |
|
— |
|
|
— |
|
|
11.5 |
|
|
— |
|
|
11.5 |
|
Optional cash purchase
of shares |
1,873 |
|
|
0.1 |
|
|
— |
|
|
— |
|
|
— |
|
|
0.1 |
|
|
— |
|
|
0.1 |
|
Common shares
repurchased and cancelled |
(3,610,100 |
) |
|
(8.7 |
) |
|
— |
|
|
— |
|
|
(84.1 |
) |
|
(92.8 |
) |
|
— |
|
|
(92.8 |
) |
Share-based
compensation expense |
— |
|
|
— |
|
|
5.7 |
|
|
— |
|
|
— |
|
|
5.7 |
|
|
— |
|
|
5.7 |
|
Stock dividends |
113,600 |
|
|
3.0 |
|
|
— |
|
|
— |
|
|
(3.0 |
) |
|
— |
|
|
— |
|
|
— |
|
Cash dividends |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(74.3 |
) |
|
(74.3 |
) |
|
— |
|
|
(74.3 |
) |
Balances, end of period |
265,015,728 |
|
|
$ |
640.9 |
|
|
$ |
25.2 |
|
|
$ |
248.9 |
|
|
$ |
1,374.2 |
|
|
$ |
2,289.2 |
|
|
$ |
79.6 |
|
|
$ |
2,368.8 |
|
|
Attributable to equity holders of the Company |
|
|
|
|
|
Nine months ended
December 31, 2017 |
Common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in millions of Canadian dollars,except number
of shares) |
Number ofshares |
|
|
Statedvalue |
|
|
Contributedsurplus |
|
|
|
Accumulatedothercomprehensiveincome |
|
|
|
Retainedearnings |
|
|
|
|
|
|
|
Non-controllinginterest |
|
|
|
Totalequity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
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 |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
263.7 |
|
|
$ |
263.7 |
|
|
$ |
5.4 |
|
|
$ |
269.1 |
|
Other
comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
(18.0 |
) |
|
(32.2 |
) |
|
(50.2 |
) |
|
(2.2 |
) |
|
(52.4 |
) |
Total comprehensive
(loss) income |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(18.0 |
) |
|
$ |
231.5 |
|
|
$ |
213.5 |
|
|
$ |
3.2 |
|
|
$ |
216.7 |
|
Stock options
exercised |
1,002,300 |
|
|
15.2 |
|
|
(2.4 |
) |
|
— |
|
|
— |
|
|
12.8 |
|
|
— |
|
|
12.8 |
|
Optional cash purchase
of shares |
1,496 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Common shares
repurchased and cancelled |
(2,061,500 |
) |
|
(4.8 |
) |
|
— |
|
|
— |
|
|
(39.6 |
) |
|
(44.4 |
) |
|
— |
|
|
(44.4 |
) |
Share-based
compensation expense |
— |
|
|
— |
|
|
4.4 |
|
|
— |
|
|
— |
|
|
4.4 |
|
|
— |
|
|
4.4 |
|
Additions to
non-controlling interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3.3 |
|
|
3.3 |
|
Dividends to
non-controlling interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2.5 |
) |
|
(2.5 |
) |
Stock dividends |
108,899 |
|
|
2.4 |
|
|
— |
|
|
— |
|
|
(2.4 |
) |
|
— |
|
|
— |
|
|
— |
|
Cash dividends |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(67.4 |
) |
|
(67.4 |
) |
|
— |
|
|
(67.4 |
) |
Balances, end of period (Restated) |
267,448,419 |
|
|
$ |
628.2 |
|
|
$ |
21.4 |
|
|
$ |
173.1 |
|
|
$ |
1,248.3 |
|
|
$ |
2,071.0 |
|
|
$ |
64.2 |
|
|
$ |
2,135.2 |
|
Consolidated Statement of Cash Flows
Nine months ended
December 31 |
|
|
|
(amounts
in millions of Canadian dollars) |
2018 |
|
|
2017 |
|
|
|
|
Restated |
|
Operating
activities |
|
|
|
Net income |
$ |
214.7 |
|
|
$ |
269.1 |
|
Adjustments for: |
|
|
|
Depreciation of property, plant and equipment |
97.3 |
|
|
90.8 |
|
Amortization of intangible and other assets |
56.4 |
|
|
61.1 |
|
After tax
share in profit of equity accounted investees |
(23.1 |
) |
|
(31.9 |
) |
Deferred
income taxes |
24.9 |
|
|
(9.8 |
) |
Investment tax credits |
(8.0 |
) |
|
(14.4 |
) |
Share-based compensation |
3.4 |
|
|
7.9 |
|
Defined
benefit pension plans |
12.4 |
|
|
6.0 |
|
Amortization of other non-current liabilities |
(22.1 |
) |
|
(24.0 |
) |
Derivative financial assets and liabilities – net |
4.4 |
|
|
4.8 |
|
Remeasurement of investment, net of reorganization and other
costs |
— |
|
|
(4.0 |
) |
Other |
3.5 |
|
|
(15.1 |
) |
Changes in non-cash
working capital |
0.3 |
|
|
(75.0 |
) |
Net cash provided by operating activities |
$ |
364.1 |
|
|
$ |
265.5 |
|
Investing
activities |
|
|
|
Business combinations,
net of cash and cash equivalents acquired |
$ |
(33.5 |
) |
|
$ |
(124.4 |
) |
Net proceeds from
disposal of interests in investment |
— |
|
|
117.8 |
|
Addition of assets
through the monetization of royalties |
(202.7 |
) |
|
— |
|
Capital expenditures
for property, plant and equipment |
(155.6 |
) |
|
(116.5 |
) |
Proceeds from disposal
of property, plant and equipment |
2.5 |
|
|
16.4 |
|
Additions to
intangibles |
(62.1 |
) |
|
(31.9 |
) |
Net payments to equity
accounted investees |
(27.0 |
) |
|
(11.7 |
) |
Dividends received from
equity accounted investees |
7.1 |
|
|
23.6 |
|
Other |
2.9 |
|
|
0.7 |
|
Net cash used in investing activities |
$ |
(468.4 |
) |
|
$ |
(126.0 |
) |
Financing
activities |
|
|
|
Proceeds from borrowing
under revolving unsecured credit facilities |
$ |
237.0 |
|
|
$ |
106.0 |
|
Repayment of borrowing
under revolving unsecured credit facilities |
(237.0 |
) |
|
(106.0 |
) |
Proceeds from long-term
debt |
84.3 |
|
|
27.3 |
|
Repayment of long-term
debt |
(66.6 |
) |
|
(23.8 |
) |
Repayment of finance
lease |
(8.3 |
) |
|
(15.6 |
) |
Dividends paid |
(74.3 |
) |
|
(67.4 |
) |
Issuance of common
shares |
11.6 |
|
|
12.8 |
|
Repurchase of common
shares |
(92.8 |
) |
|
(44.4 |
) |
Other |
— |
|
|
(1.9 |
) |
Net cash used in financing activities |
$ |
(146.1 |
) |
|
$ |
(113.0 |
) |
Effect of foreign exchange rate changes on cash and cash
equivalents |
$ |
0.6 |
|
|
$ |
(0.4 |
) |
Net (decrease)
increase in cash and cash equivalents |
$ |
(249.8 |
) |
|
$ |
26.1 |
|
Cash and cash
equivalents, beginning of period |
611.5 |
|
|
504.7 |
|
Cash and cash equivalents, end of period |
$ |
361.7 |
|
|
$ |
530.8 |
|
Supplemental
information: |
|
|
|
Interest
paid |
$ |
38.0 |
|
|
$ |
38.8 |
|
Interest
received |
10.5 |
|
|
9.5 |
|
Income taxes paid |
23.4 |
|
|
30.6 |
|
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