Category: CAE

CAE reports record fourth quarter and full fiscal year 2019 results

Provided by CAE Inc/CNW

  • Q4 revenue up 42% to $1.0 billion and annual revenue up 17% to $3.3 billion
  • Q4 and annual net income before specific items(1) up 55% and 13% vs. prior year periods
  • Q4 EPS of $0.46 ($0.48 before specific items(2)) up from $0.31 in prior year
  • Annual EPS of $1.23 ($1.25 before specific items) vs. $1.28 ($1.11 before specific items) in prior year
  • Record $4.0 billion annual order intake(3), including 78 Civil FFSs, and $9.5 billion order backlog(3)
  • Annual free cash flow(4) of $323.8 million for 98% cash conversion(5)
  • Return on capital employed(6) before specific items of 12.9% vs. 12.7% last year

MONTREAL, May 17, 2019 (GLOBE NEWSWIRE) — (NYSE: CAE; TSX: CAE) – CAE today reported revenue of $1.0 billion for the fourth quarter of fiscal year 2019, up 42% from the fourth quarter last year. Fourth quarter net income attributable to equity holders was $122.3 million ($0.46 per share) compared to $82.3 million ($0.31 per share) last year. Net income before specific items in the fourth quarter was $127.5 million ($0.48 per share), which represents a 55% EPS increase over the same period last year.

Annual fiscal 2019 revenue was $3.3 billion, up 17% from the prior year. Annual net income attributable to equity holders was $330.0 million ($1.23 per share) compared to $346.0 million ($1.28 per share) in fiscal year 2018. Before specific items, net income was $335.2 million ($1.25 per share) this year, compared to $297.9 million ($1.11 per share) last year, which represents a 13% EPS increase over the same period last year. All financial information is in Canadian dollars.

Summary of consolidated results

(amounts in millions, except operating margins and per share amounts) FY2019FY2018Variance %Q4-2019Q4-2018Variance %
   Restated*  Restated* 
Revenue$3,304.12,823.517%1,022.0720.942%
Operating profit(7)$480.6462.84%170.4117.545%
Operating margins%14.516.4 16.716.3 
Net income$340.1354.7(4%)125.485.646%
Net income attributable to equity holders of the Company$330.0346.0(5%)122.382.349%
Earnings per share (EPS)$1.231.28(4%)0.460.3148%
Net income before specific items$335.2297.913%127.582.355%
EPS before specific items$1.251.1113%0.480.3155%
Total backlog$9,494.98,068.318%9,494.98,068.318%

* Financial results reported were restated to reflect the accounting changes required by IFRS 15.

Specific items for fiscal 2019 include the costs arising from the acquisition and integration of Bombardier’s Business Aircraft Training (BAT) Business.

Specific items for fiscal 2018 include the net gains on disposal of our equity interest in the joint venture Zhuhai Xiang Yi Aviation Technology Company Limited (ZFTC) and the remeasurement of the previously held Asian Aviation Centre of Excellence Sdn. Bhd. (AACE) investment upon acquisition and the impacts of the enactment of the U.S. tax reform.

“We had a strong finish to fiscal year 2019, with fourth quarter revenue up 42% and earnings per share up 55% compared to last year; and for the year as a whole, CAE delivered a record performance, meeting our annual outlook, and further establishing itself as the worldwide leader in aviation training,” said Marc Parent, CAE’s President and Chief Executive Officer. “Annual revenue grew 17% and earnings per share grew 13% compared to last year, and we generated strong free cash flow. I am especially pleased with our record $4 billion in annual orders and $9.5 billion order backlog. Our continued success winning our customers’ trust further validates our training strategy and adds to the highly recurring profile of CAE’s business. In Civil, we delivered over one million hours of aviation training during the year and grew operating income by 13%. We also greatly expanded CAE’s position in business aviation training with the company’s largest-ever acquisition, making CAE the world’s leading provider of civil aviation training. Annual Civil orders totalled a record $2.8 billion, including additional airline training outsourcings and 78 full-flight simulator sales. In Defence, we grew annual operating income by 9% and booked $1.1 billion in orders, including training systems integration programs, for a record $4.5 billion Defence backlog. As well, we acquired AOCE, which together with our enhanced structure in the U.S., expands our market to include higher-level security programs. And in Healthcare, our new simulation products and expanded salesforce led to accelerated revenue growth toward the end of the fiscal year. We recently appointed a new Healthcare leader, with deep commercial experience in the healthcare field, to leverage our current progress and take the business to the next level of scale. As we look to the fiscal year ahead, we expect CAE to build on the positive momentum in training and to continue to deliver superior and profitable growth.”

Civil Aviation Training Solutions (Civil)
Fourth quarter Civil revenue was $593.4 million, up 50% compared to the same quarter last year, and segment operating income(8) was $115.5 million (19.5% of revenue) compared to $74.5 million in the fourth quarter last year. Fourth quarter Civil segment operating income before specific items(9) was $122.3 million (20.6% of revenue), up 64% compared to the fourth quarter last year. Fourth quarter Civil training centre utilization(10) was 75%.

Annual Civil revenue was $1.9 billion, up 15% compared to last year, and segment operating income was $344.3 million (18.4% of revenue). Annual segment operating income before specific items was $351.1 million (18.7% of revenue) this year and $311.8 million (19.2% of revenue) last year, representing a 13% increase. Annual Civil training centre utilization was 76%, reflecting continued strong usage of existing simulators and the recent deployment of additional simulator capacity to meet new demand from customers.

During the quarter, Civil signed training solutions contracts valued at a record $1.1 billion, including a 15-year exclusive pilot training contract with Avianca, and the sale of 28 full-flight simulators (FFSs). For the year, Civil booked orders for a record $2.8 billion, demonstrating CAE’s increased momentum as training partner of choice. These included 78 FFS sales and comprehensive, long-term training agreements with airlines including easyJet, CityJet, Endeavor, Air Asia and Volaris. In business aviation, Civil won long-term training contracts with customers worldwide, including OJets, Icon Aviation and Windsor Jets.

The Civil book-to-sales(3) ratio was 1.87x for the quarter and 1.48x for the last 12 months. The Civil backlog at the end of the year was a record $5.0 billion, which is up 22% from the prior year period.

Summary of Civil Aviation Training Solutions results

(amounts in millions except operating margins, SEU and FFSs deployed) FY2019FY2018Variance %Q4-2019Q4-2018Variance %
   Restated  Restated 
Revenue$1,875.81,625.315%593.4395.350%
Segment operating income (SOI)$344.3330.14%115.574.555%
Operating margins%18.420.3 19.518.8 
SOI before specific items$351.1311.813%122.374.564%
Operating margins%18.719.2 20.618.8 
Total backlog$5,039.64,131.122%5,039.64,131.122%
SEU(11) 2182066%2242126%
FFSs deployed 28625512%28625512%

Defence and Security (Defence)
Fourth quarter Defence revenue was $387.9 million, up 34% compared to the same quarter last year and segment operating income was $50.7 million (13.1% of revenue) compared to $36.3 million (12.5% of revenue) in the fourth quarter last year. Before expenses related to the acquisition and integration of Alpha-Omega Change Engineering (AOCE), Defence segment operating income for the quarter would have been $51.7 million (13.3% of revenue), up 42% compared to the fourth quarter last year. Annual Defence revenue was $1,306.7 million, up 21% over last year, and annual segment operating income was $131.5 million (10.1% of revenue). Before the AOCE-related expenses, annual Defence segment operating income would have been $134.8 million (10.3% of revenue), up 9% compared to last year.

During the quarter, Defence booked orders for $265.0 million. Notable wins include a contract with Boeing to provide a P-8A aircraft simulator for the Royal Air Force and simulator upgrade programs with the U.S. Navy as part of a U.S. foreign military sale on the Royal Australian Navy’s MH-60R helicopter training systems, the Royal Canadian Air Force for their C-130J simulators, the German Air Force for their Eurofighter simulators, and with Lockheed Martin for C-130J full-mission simulators for the U.S. Air Force.

For the year, Defence booked $1.1 billion in orders including a contract for the U.S. Air Force C-130H Aircrew Training Services program and the U.S. Navy CNATRA CIS program involving instruction at five Naval Air Stations to support primary, intermediate and advanced pilot training. Defence also won a contract to provide a comprehensive training solution and long-term training services for the Royal New Zealand Air Force NH90 helicopter program, and a contract from General Atomics to develop the synthetic training system for the UK Protector remotely piloted aircraft system. In addition, through CAE USA Mission Solutions and the acquisition of AOCE during the year, Defence obtained several U.S. Defense contracts to provide training and engineering support services on higher-level security programs.

The Defence book-to-sales ratio was 0.68x for the quarter and 0.83x for the last 12 months. Defence contracts often include contract options that extend beyond the initial funded year of these contracts. The Defence book-to-sales ratio including options was 1.28x for the quarter and 1.03x for the last 12 months. The Defence backlog, including options and CAE’s interest in joint ventures, at the end of the year was a record $4.5 billion.

Summary of Defence and Security results

(amounts in millions except operating margins) FY2019FY2018Variance %Q4-2019Q4-2018Variance %
   Restated  Restated 
Revenue$1,306.71,083.021%387.9290.534%
Segment operating income$131.5123.96%50.736.340%
Operating margins%10.111.4 13.112.5 
Total backlog$4,455.33,937.213%4,455.33,937.213%

Healthcare
Fourth quarter Healthcare revenue was a record $40.7 million, up 16% compared to the same quarter last year, and fourth quarter segment operating income was $4.2 million (10.3% of revenue), compared to $6.7 million (19.1% of revenue) in the fourth quarter last year. Annual Healthcare revenue was $121.6 million compared to $115.2 million last year, and annual segment operating income was $4.8 million (3.9% of revenue), compared to $8.8 million (7.6% of revenue) last year.

CAE Healthcare reached several strategic milestones during the year, strengthening its position as the innovation leader in simulation-based healthcare education and training. Innovative product launches include, CAE Ares, an emergency care manikin; Anesthesia SimSTAT Appendectomy and Robotic Surgery modules, screen-based simulation approved by the American Board of Anesthesiology for maintenance of certification credits; two new Blue Phantom skills trainers for ultrasound simulation training; and CAE Luna, an innovative infant simulator. Healthcare broadened its market reach by expanding its sales force and entered into several new distributor agreements across the U.S. and internationally. On April 1, 2019, CAE appointed Rekha Ranganathan, an experienced healthcare industry executive, as the new CAE Healthcare group president, to achieve greater scale and return on investment.

Summary of Healthcare results

(amounts in millions except operating margins) FY2019FY2018Variance %Q4-2019Q4-2018Variance %
   Restated  Restated 
Revenue$121.6115.26%40.735.116%
Segment operating income$4.88.8(45%)4.26.7(37%)
Operating margins%3.97.6 10.319.1 

Additional financial highlights
Free cash flow from continuing operations was $116.8 million for the quarter compared to $117.3 million in the fourth quarter last year. Free cash flow for the year was $323.8 million, compared to $288.9 million in the same period last year. The cash conversion ratio for fiscal year 2019 was 98%.

Income taxes this quarter were $19.3 million, representing an effective tax rate of 13%, compared to 8% for the fourth quarter last year. The tax rate this quarter was higher due to the change in the mix of income from various jurisdictions and due to a lower recognition of deferred tax assets in Europe. Also this quarter, the company recognized deferred tax assets in Canada that were mostly offset by tax audits. Excluding the effect of the net deferred tax assets and the tax audits in Canada, the income tax rate would have been 20% this quarter. On the same basis, the income tax rate for the year would have been 19%.

Growth and maintenance capital expenditures(12) totaled $96.2 million this quarter and $251.8 million for the year.

Net debt(13) at the end of the year was $1,882.2 million for a net debt-to-capital ratio(14) of 43.9%. This compares to net debt of $649.4 million and a net debt-to-total capital ratio of 22.0% at the end of the last year. CAE issued US$450 million of unsecured senior notes and US$150 million term loans to fund the acquisition of Bombardier’s BAT Business and to monetize its existing future royalty obligations to the aircraft manufacturer.

Return on capital employed was 11.9% or 12.9% before the impacts of the recently acquired Bombardier BAT Business, compared to 14.7% last year or 12.7% before specific items.

CAE will pay a dividend of 10 cents per share effective June 28, 2019 to shareholders of record at the close of business on June 14, 2019. During fiscal year 2019, CAE paid $99.9 million in dividends to shareholders and repurchased and cancelled a total of 3,671,900 common shares at a weighted average price of $25.70 per common share for a total consideration of $94.4 million.

Management outlook for fiscal year 2020
CAE’s core markets benefit from secular growth and the Company expects to continue exceeding underlying market growth in fiscal year 2020. In Civil, the Company expects to continue building on its positive momentum in training, increasing market share and securing new customer partnerships with its innovative training solutions. Civil expects operating income to grow in the upper 20 percent range on continued strong demand for its training solutions, including maintaining a leading share of FFS sales, and the integration of the recently acquired Bombardier BAT Business. In Defence, the Company expects 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 achieve double-digit growth under its new leadership, expanded salesforce, and the continued launch of innovative products. 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. The Company 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. CAE currently expects total annual capital expenditures to increase modestly, by approximately 10 to 15 percent, in fiscal 2020, primarily to keep pace with growing demand for training services from its existing customers and to secure new long-term customer contracts. 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 2019 MD&A.

IFRS 15 – Revenue from Contracts with Customers
Effective 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 annual consolidated financial statements for the year ended March 31, 2019.

IFRS 16 – Leases
Effective April 1, 2019, CAE adopted IFRS 16 – Leases, which introduces a single lessee accounting model and eliminates the classification of leases as either operating or finance leases. The main impact of IFRS 16 to CAE is the recognition of a right-of-use asset and a lease liability for substantially all leases. This will result in a decrease of our operating lease expense and an increase of our finance and depreciation expenses. The financial results reported in the press release for fiscal years ended March 31, 2018 and 2019 do not reflect the accounting changes required by IFRS 16 as the Company adopted the standard as of April 1, 2019. For more detailed information, including the expected impacts of the transition to IFRS 16, refer to Note 2 of the annual consolidated financial statements for the year ended March 31, 2019, and Supplemental Q4 FY2019 Presentation.

Detailed information
Readers 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 year ended March 31, 2019 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 Q4 and full FY2019
Marc 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. The “Supplemental Q4 FY2019 Presentation” to accompany management’s discussion of CAE’s fourth quarter and full fiscal year 2019 results can be downloaded from our website at www.cae.com/investors.

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 10,000 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.

JetBlue Airways readies for new Airbus A220 entry-into-service with training partner CAE

Provided by CAE Inc

Montreal, Canada, April 30, 2019

CAE announced at the World Aviation Training Symposium the sale of two Airbus A220-300 CAE 7000XR Series full-flight simulators (FFSs) and two CAE 500XR flight training devices (FTDs) to JetBlue Airways, which is preparing the entry-into-service of its new aircraft.

“We are pleased to extend our long-standing partnership with CAE,” said Steve Forte, Vice President JetBlue University. “These state-of-the-art training devices will help us develop industry leading training programs to ensure a smooth launch of the A220.”

“The Airbus A220 is a key component of JetBlue’s growth strategy and we are thrilled to be part of this airline’s journey,” said Nick Leontidis, CAE’s Group President Civil Aviation Training Solutions. “We have been partners with JetBlue for over 15 years, and the purchase of these new FFSs and FTDs is yet another testament to the value CAE brings to its airline partners.”

The two CAE 7000XR Series FFSs will be equipped with the innovative CAE Tropos™ 6000XR visual system. The first FFS and FTD will be delivered in the first half of 2020 at JetBlue University, located in Orlando, Florida.

With this addition, CAE has sold a total of eight A220 full-flight simulators to operators worldwide.

CAE and JetBlue Airways share a training relationship with the Gateway Select pilot provisioning program. To date, more than 60 aspiring pilots have started training in the Gateway Select Program. CAE also holds an exclusive training centre operations services agreement to support the airline’s growth at JetBlue’s University in Orlando.

Bombardier Concludes Sale of its Business Aircraft Training Unit to CAE

Provided by Bombardier Inc/Globe Newswire

MONTRÉAL, March 14, 2019 (GLOBE NEWSWIRE) — Bombardier today confirmed the conclusion of the previously announced sale of its flight and technical training activities to CAE, for an enterprise value of $645 million. Net proceeds are expected to be approximately $500 million after the assumption of certain liabilities, fees, and closing adjustments.

“Bombardier and CAE share a deep commitment to providing outstanding support to their customers,” said Jean-Christophe Gallagher, Vice President and General Manager, Customer Experience, Bombardier Business Aircraft. “Bombardier’s talented employees and strong relationships with clients, combined with CAE’s network and expertise, will elevate the customer experience. As CAE grows its core training business, Bombardier continues to expand its service offerings and dedicated support, each to the benefit of Bombardier Business Aircraft customers around the world.”

Bombardier and CAE also agreed to continue their Authorized Training Provider (ATP) relationship pursuant to which CAE carries out the training activities for Bombardier Business Aircraft, including from the training centres located in Montréal and Dallas.

Air Baltic to buy A220 simulator for pilot training needs

News provided by FlightGlobal.com

12 MArch 2019 by Michael Gubisch, London for FlightGlobal.com

Latvian carrier Air Baltic has ordered an Airbus A220 full-flight simulator from CAE for installation at the operator’s training centre in Riga.

The Level D device from CAE’s 7000XR series is Air Baltic‘s first directly purchased simulator and is scheduled for delivery by year-end, Air Baltic says.

Noting a plan to move to an expanded, all-A220 fleet, chief executive Martin Gauss states that its own simulator will provide “much desired training simplicity and cost reductions”. The carrier will require capacity to train hundreds of new and existing pilots.

So far, Air Baltic has trained its crews on an A220 simulator in Frankfurt, which is operated by CAE-Lufthansa joint venture Flight Training Alliance.

Asset Image
Air Baltic plans to operate an all-A220 fleet from 2023, from Air Baltic

ASwiss has an A220 simulator at its home base in Zurich. But while Air Baltic‘s A220s are equipped with head-up displays, Swiss opted not to install the equipment on its aircraft.

Another A220 simulator is available near the aircraft’s Canadian assembly line in Mirabel, Quebec.

Air Baltic‘s simulator will be the third such device in Europe, and feature “the most modern visual system… for unprecedented realism”, the airline says.

Cirium’s Fleets Analyzer shows that Air Baltic has 14 A220-300s in service, another 36 on order, and further commitments for up to 30 more.

The carrier also operates 737-300/500s and Bombardier Q400 turboprops, but plans to retire these aircraft in 2019 and 2023, respectively.

CAE 7000XR Series full-flight simulator wins additional qualifications for Extended Envelope and Adverse Weather Training

Provided by CAE

 FAA grants Extended Envelope and Adverse Weather Training qualifications to CAE 7000XR Series Airbus A330 full-flight simulator.

Montreal, Canada, March 4, 2019 (NYSE: CAE; TSX: CAE)

CAE announced today that the Federal Aviation Administration (FAA) has qualified the first CAE 7000XR Series Airbus A330 full-flight simulator (FFS) for Extended Envelope and Adverse Weather Training. The qualification was obtained in October 2018 and CAE has already completed similar qualifications for Airbus A320 and Boeing 737NG, 777 and 787 platforms, in compliance with FAA regulations.  

“We are committed to providing best-in-class full-flight simulators to our customers, and these qualifications will enable us to better prepare pilots for real-life situations,” said Nick Leontidis, CAE’s Group President, Civil Aviation Training Solutions. “Among other maneuvers, flight crews can now train for full stalls, upset prevention and recovery training on the CAE 7000 XR Series Airbus A330 as well as other Airbus and Boeing aircraft types. We will continue to work closely with regulatory authorities and original equipment manufacturers to complete theses qualifications on simulators of all commercial aircraft types.”

With these latest qualifications, flight crews can train for full stalls, upset prevention and recovery training (UPRT), icing conditions, gusting crosswind landings and bounced landing on CAE’s 7000XR Series Airbus A330 full-flight simulator based on Airbus modelling and flight test data.

According to the International Civil Aviation Organization (ICAO), Loss of control In-Flight (LOC-I) is the number one cause of fatalities in commercial operations over the past decade. The Extended Envelope and Adverse Weather Training will become a mandatory training requirement by the FAA this month. CAE expects to obtain qualifications for the Airbus A350 and Boeing 737MAX in the first half of 2019.

Highest fidelity simulator ever developed for Predator RPA enters service for Italian Air Force

Provided by CAE

Amendola Air Base, Foggia, Italy, February 5, 2019

The Predator Mission Trainer developed by CAE and GA-ASI for the Italian Air Force is capable of delivering zero flight time training.

The world’s highest fidelity simulator for the Predator remotely piloted aircraft is now ready-for-training to support the Italian Air Force.

CAE today announced that the Italian Ministry of Defence and Italian Air Force have formally qualified the CAE-built Predator Mission Trainer for zero flight time training on the Predator B/MQ-9 variant and the simulator has been accepted as ready-for-training at the Amendola Air Base in Italy. The Predator Mission Trainer (PMT) is the highest fidelity simulator ever developed and fielded for the Predator family of remotely piloted aircraft (RPA) systems developed by General Atomics Aeronautical Systems, Inc.

Officials from the Italian Air Force and executives from CAE and GA-ASI celebrated the milestone during a ceremony today at the Amendola Air Base.

“The incredible realism of the Predator Mission Trainer gives us a critical training capability to efficiently produce the highly skilled Predator crews we need to conduct a range of operational missions,” said an Italian Air Staff Representative. “Having the world’s highest fidelity Predator Mission Trainer as part of our unmanned systems centre of excellence in Italy gives us unmatched training flexibility and the ability to leverage simulation-based virtual training throughout our curriculum.”

The Predator Mission Trainer was jointly developed by CAE and GA-ASI. Earlier in 2018, the Italian Air Force began training on the Predator A variant of the Predator Mission Trainer.

“The development of the Predator Mission Trainer for the Italian Air Force represents a new level of fidelity and capability in the use of simulation-based training for remotely piloted aircraft pilots and sensor operators,” said Gene Colabatistto, Group President, Defence & Security, CAE. “We have leveraged our decades of experience developing the highest fidelity flight simulators for commercial and military aircraft, and applied the same discipline to this ‘zero flight time’ Predator Mission Trainer so that aircrews could potentially conduct all training in the simulator without necessarily requiring further training on the actual aircraft. We believe this Predator Mission Trainer is the first Level D equivalent simulator for an unmanned aircraft.”

The Predator Mission Trainer was formally qualified by the Italian Ministry of Defence’s Directorate of Air Armaments and Airworthiness (DAAA).

As prime contractor on the program, CAE collaborated with GA-ASI and the Italian Air Force to perform flight testing on an actual Italian Air Force Predator aircraft to gather the required flight data used in the development of the Predator Mission Trainer. The use of actual flight data specific to an individual aircraft, which is required when developing Level D simulators – the highest qualification for flight simulators – is a first for the Predator family of RPAs.  For the physical hardware, CAE used an actual Block 15 Mobile Ground Control Station (MGCS) provided by the Italian Air Force to ensure the highest level of fidelity and realism. The Predator Mission Trainer also features CAE’s high-fidelity sensor simulation, fully interactive synthetic and tactical environment for enhanced mission training, and use of the Open Geospatial Consortium Common Database (OGC CDB) architecture for interoperable and networked training capabilities.

“GA-ASI was pleased to collaborate with CAE to develop this advanced simulator for the Predator, and we expect this training capability will be highly desired by militaries acquiring our family of remotely piloted aircraft systems,” said David R. Alexander, president, GA-ASI. “The Predator Mission Trainer will play a key role helping the Italian Air Force develop highly skilled and well-trained aircrews who are prepared and ready to operate the proven Predator RPA systems.”

CAE awarded contract by GA-ASI to develop synthetic training system for United Kingdom’s Protector remotely piloted aircraft

Provided by CAE

Montreal, Canada, January 24, 2019

CAE will develop a comprehensive synthetic training system for the UK Protector program

The high-fidelity Protector mission trainers developed by CAE will be based on the General Atomics certifiable ground control station. Images courtesy of GA-ASI.

CAE today announced the company has been awarded a contract from General Atomics Aeronautical Systems, Inc. (GA-ASI) to develop a comprehensive synthetic training system for the United Kingdom’s Protector RG Mk1 remotely piloted aircraft system (RPAS) program.

The Protector will be operated by the Royal Air Force and is the UK-specific variant of GA-ASI’s certifiable MQ-9B SkyGuardian RPAS, which can meet the most stringent certification requirements of aviation authorities.

Under terms of the contract, CAE will design and develop a comprehensive synthetic training system that will include desktop and high-fidelity mission trainers specific to the Protector RPAS. The high-fidelity Protector mission trainers will be based on GA-ASI’s certifiable ground control station (CGCS) and will be the first simulators developed for this advanced CGCS. CAE will also provide brief/debrief and scenario generation stations as part of the overall synthetic training system. 

“We are pleased to continue our global training partnership with GA-ASI to support the UK Protector program,” said Gene Colabatistto, CAE’s Group President, Defence & Security. “Protector will offer a new level of capability in an unmanned air system and will require well-trained aircrews. We will leverage developments we have made over the past several years creating the highest fidelity training devices for the Predator family of remotely piloted aircraft to produce a world-class synthetic training system for the Protector program.”

Initial deliveries of the synthetic training system will be targeted for delivery in 2020 to RAF Waddington, the hub of UK Intelligence, Surveillance, Target Acquisition and Reconnaissance (ISTAR) that will be the main operating base for the Protector.

“MQ-9B SkyGuardian, which Protector is based on, represents the next-generation of remotely piloted aircraft capabilities, including longer endurance and automatic take-off and landing,” said David R. Alexander, president, Aircraft Systems, GA-ASI. “The Protector synthetic training system will play a key role helping the Royal Air Force develop skilled aircrews and we are pleased to collaborate with CAE as our training partner on this critical program.”

CAE to issue US$550 million of senior unsecured notes in private placement and concludes monetization of future royalty obligations with Bombardier

Provided by CAE Inc/Globe Newswire

MONTREAL, Dec. 21, 2018 (GLOBE NEWSWIRE) — (NYSE: CAE; TSX: CAE) – CAE today announced that it has entered into an agreement to issue a series of unsecured senior notes through a private placement. The company also announced the conclusion of its previously disclosed transaction to monetize its existing future royalty obligations to Bombardier.

Issuance of US$550 million senior unsecured notes
The notes issuance is subject to customary closing conditions and proceeds will be used to fund CAE’s acquisition of Bombardier’s Business Aircraft Training 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 United States and Canada.

“We are pleased with the market’s response to our notes offering and to have secured CAE’s borrowing costs at attractive interest rates for up to fifteen years,” said Sonya Branco, CAE’s Vice President, Finance and Chief Financial Officer. “The private placement includes several new institutional investors in addition to long-time note holders, reflecting the high degree of confidence in CAE.  The financing aligns well with CAE’s capital allocation strategy, which balances growth investments, current shareholder returns, and the maintenance of a solid financial position. CAE’s debt structure and strong free cash flow profile provide good flexibility to continue funding profitable growth while further strengthening our balance sheet. ” 

TD Securities is acting as agent on this transaction.

Conclusion of monetization transaction
CAE also announced that it has concluded its previously disclosed monetization of existing future royalty obligations to Bombardier for US$155 million, which was financed separately using a combination of cash and its existing credit facility. CAE’s acquisition of Bombardier’s Business Aircraft Training (BAT) for an enterprise value of US$645 million is subject to regulatory approvals and is expected to close by the second half of calendar year 2019 (please refer to our cautionary note regarding forward-looking statements included in the November 8, 2018 press release announcing the transaction).

CAE reports second quarter fiscal 2019 results

Source: CAE Inc
  • Revenue of $743.8 million up 20% vs. $618.2 million in prior year
  • EPS of $0.23 up from $0.22 (up 15% from $0.20 excluding ZFTC gain) in prior year
  • Free cash flow $137.7 million vs. $63.5 million in prior year
  • Order intake of $985.9 million for a record $8.7 billion backlog(1)
  • Announced agreement to acquire Bombardier Business Aircraft Training (BAT) post quarter

MONTREAL, Nov. 13, 2018 (GLOBE NEWSWIRE) — (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%

Healthcare
Second 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 highlights
Free 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 Customers
Effective 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 information
Readers 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 http://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 (http://www.sedar.com) and are available on our website (http://www.cae.com). They have also been filed with the U.S. Securities and Exchange Commission and are available on their website (http://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 FY2019
Marc 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 http://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 release
This 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 statements
Certain 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 assumptions
A 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 businesses
A 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 risks
Important 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 http://www.sedar.com) and with the U.S. Securities and Exchange Commission (available at http://www.sec.gov). The fiscal year 2018 MD&A is also available at http://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 measures
This 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 Backlog
Order 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 (http://www.cae.com) and on SEDAR (http://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
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

CAE poised to revolutionize pilot, aircrew and healthcare professional training by investing C$1 billion over five years in innovation

CAEIncLogoMontréal, Québec, August 8, 2018 –  CAE today announced that it will be investing C$1 billion over the next five years in innovation to stay at the forefront of the training industry. One of the main objectives of the investment is to fund Project Digital Intelligence, a digital transformation project to develop the next generation training solutions for aviation, defence & security and healthcare. In partnership with the Government of Canada and the Government of Québec, the project will allow CAE to continue to play a key role in making air travel safer, defence forces mission ready, and helping medical personnel save lives. Other benefits include reducing aviation’s environmental footprint and addressing the worldwide demand for aircrews. The Government of Canada and the Government of Québec will provide a combined investment of close to C$200 million over the next five years (C$150 million for Canada and C$47.5 million for Québec).

Executives and employees of CAE were joined by Canadian Prime Minister Justin Trudeau and Premier of Québec Philippe Couillard for the announcement which signals one of the most significant investments in innovation in the aviation training industry globally.

“As a powerhouse of innovation, CAE has been at the forefront of the training industry, including digital technology, for years. This strategic investment will take our company to the next level,” said Marc Parent, President and Chief Executive Officer of CAE. “By seizing new technologies such as artificial intelligence, big data, or augmented reality, as well as many others, and applying them to the science of learning, we will revolutionize the training experience of pilots, aircrews and healthcare professionals, as well as improve safety. We are committed to investing C$1 billion over the next five years to help position CAE, Québec and Canada as leaders in digital technology.”

Project Digital Intelligence will transform CAE’s products and services to leverage digital technologies, ranging from big data to artificial intelligence, cloud-computing, cybersecurity and augmented/virtual reality. CAE will develop its next-generation training technologies for aviation, defence & security, and healthcare, while making use of its extensive training network and data ecosystem. The project includes three major activity areas: advanced digital technology development, digital transformation of the training and user experience, as well as CAE innovation and collaboration facilities.

CAE will carry out Project Digital Intelligence in Canada, utilizing its R&D laboratories, as well as its test and integration facilities. As part of the project, CAE will develop an innovation campus in its Montréal site by transforming its workspaces, laboratories and processes to allow for greater innovation and collaboration. Throughout Project Digital Intelligence, CAE will collaborate and codevelop technology solutions with small and medium companies from across Canada and will qualify more than 150 new innovative suppliers across the country. CAE will also work with over 50 post-secondary institutions and research centres. The project is expected to create and maintain thousands of highly skilled jobs at CAE in Canada and in CAE’s Canadian-based supply chain. CAE employs approximately 4,000 people in 18 locations across Canada and more than 5,000 in the rest of the world.

The government investments are subject to the finalization of definitive agreements.

Quotes

“Today’s announcement is about creating high-skilled jobs in Canada today, while making sure Canada’s next generation of pilots, engineers, doctors, and nurses have access to some of the most advanced simulation tools and training programs in the world. With this funding, CAE will continue to raise the bar for training standards, from the cockpit to the operating room, and help drive the success of Canada’s aerospace industry.”

—The Rt. Hon. Justin Trudeau, Prime Minister of Canada

“CAE has today chosen to invest in the talent of Quebeckers to help it ensure its continuation as a leader in its sector. We have turned Québec into the best place to invest and prosper by creating a climate of confidence for businesspeople. We have made the know-how of Quebeckers into our greatest asset. Over the past four years we have provided Québec with a genuine boost. Through careful management of our public finances and the economy, we have given ourselves the means to make our aerospace industry more competitive, to speed up our shift to digital, to bolster Montréal’s expertise in artificial intelligence so as to make Québec a go-to destination for innovation.”

—Philippe Couillard, Premier of Québec