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Press release from Marketwire

CAE reports fourth quarter and full-year financial results for fiscal year 2011

Thursday, May 19, 2011

CAE reports fourth quarter and full-year financial results for fiscal year 201108:50 EDT Thursday, May 19, 2011MONTREAL, CANADA--(Marketwire - May 19, 2011) -(NYSE:CAE)(TSX:CAE) – Fourth quarter revenue and net earnings up 17% and 23% compared to prior yearAnnual revenue and net earnings up 7% and 18% compared to prior year Annual free cash flow at C$147.1 millionRecord C$3.4 billion order backlog and 1.14x annual book-to-sales CAE today reported financial results for the fourth quarter and full-year ended March 31, 2011. Net earnings were C$49.7 million (C$0.19 per share) this quarter, compared to C$40.5 million (C$0.16 per share) last year. Net earnings for the year were C$169.8 million ($0.66 per share), compared to C$144.5 million (C$0.56 per share) last year. All financial information is in Canadian dollars.Excluding the impact of last year's restructuring, earnings were $48.9 million ($0.19 per share) this quarter compared to $42.3 million ($0.16 per share) last year. On the same basis, net earnings for the year were $169.0 million ($0.66 per share) compared to $168.6 million ($0.66 per share) last year. Revenue for the quarter was $464.4 million, 17% higher than $395.9 million in the fourth quarter last year. For the full year, revenue was $1,629.0 million, up 7% over $1,526.3 million last year."We performed well in the fourth quarter and full-year with higher revenue and good cash flow more than offsetting the impact of a strong Canadian dollar," said Marc Parent, CAE's President and Chief Executive Officer. "In civil aerospace, we benefited from increased market recovery and strong demand in the emerging markets where we maintained our leading position. In defence, we had another year of solid order intake and a sizable revenue pick-up in the last quarter. For CAE overall, we had 18% higher orders this year compared to last and a record $3.4 billion backlog. Economic factors like oil prices, currency rates, and government spending remain volatile; however we take confidence from our solid backlog, expanded pipeline of opportunities, and established global position, all of which point to continued growth for CAE." Fourth quarter earnings before interest and taxes(1) (EBIT) were $70.4 million, or 15.2% of revenue. For the year, EBIT was $259.3 million, or 15.9% of revenue. Summary of consolidated results(amounts in millions, except operating margins)FY2011FY2010Q4-2011Q3-2011Q2-2011Q1-2011Q4-2010Revenue$1,629.01,526.3464.4411.3386.6366.7395.9Earnings before interest and income taxes (EBIT)$259.3230.070.464.861.962.263.0As a % of revenue%15.915.115.215.816.017.015.9Earnings from continuing operations$169.8144.549.740.740.039.440.5Net earnings$169.8144.549.740.740.039.440.5Backlog$3,440.53,042.83,440.53,215.33,190.93,106.13,042.8Civil segmentsRevenue for our combined Civil segments increased 17% in the fourth quarter to $208.0 million compared to $178.1 million last year. For the year, revenue was $763.9 million, up 6% from $717.6 million last year. Our New Core Markets initiatives of Healthcare, Mining and Energy are reported in the training and services segment. Excluding it, operating income in training and services was $23.2 million (19.2% of revenue) for the quarter and $87.3 million (19.2% of revenue) for the year. On the same basis, the combined Civil segments margin was 15.8% for the quarter and 16.2% for the year.Civil market activity during the fourth quarter continued to be strong with seven more full-flight simulator orders, nearly all from customers in the emerging markets. These orders bring the total order intake for the year to 29 compared to 20 last year. Also during the quarter, we renewed and added a range of training contracts expected to generate $168.3 million in future revenue. We signed a multi-year agreement with Virgin America to develop and support a new training centre in San Francisco, USA, and we signed contracts to provide Asian and European customers with more than 150 pilots. During the year, we strengthened and expanded CAE's civil market position on a number of fronts: We won 100% share of contracts awarded to provide training solutions in support of new aircraft programs including the Airbus A350, Bombardier C-Series and Learjet 85, ATR-600, and Mitsubishi MRJ; We expanded our helicopter training initiative by acquiring CHC Helicopter's flight training operation, the world's leading offshore helicopter services provider, thereby outsourcing the operation to CAE; We formed a joint venture with Líder Aviação, the largest helicopter operator in Brazil; and CAE and the Airports Authority of India launched a new helicopter pilot ab initio training program at the CAE Global Academy in Gondia, India; We strengthened our position in South America with new long-term training agreements with TAM Airlines and LAN Airlines and announced the addition of a new location in Peru; We broadened our relationship with China Southern Airlines, the largest airline in China, to include an equity interest in the airline's ab initio pilot training school in Perth, Australia, which CAE now manages as part of the CAE Global Academy; and We reached an important milestone with CAE's new multi-crew pilots licence (MPL) program with AirAsia cadets having successfully completed the Core and Basic phases of the program. We received $226.0 million in combined civil segment orders this quarter representing a book-to-sales ratio of 1.09x. Orders were $915.7 million for the year for a book-to-sales ratio of 1.20x.Training & Services/Civil (TS/C)(amounts in millions except operating margins, RSEU and FFSs deployed)FY2011FY2010Q4-2011Q3-2011Q2-2011Q1-2011Q4-2010Revenue$492.0433.5132.1124.3118.0117.6113.6Segment operating income$80.475.120.618.718.922.221.0Operating margins%16.317.315.615.016.018.918.5Backlog$986.5728.7986.5774.2695.3706.8728.7RSEU131129132132131132131FFS Deployed156148156152151150148Simulation Products/Civil (SP/C)(amounts in millions except operating margins)FY2011FY2010Q4-2011Q3-2011Q2-2011Q1-2011Q4-2010Revenue$271.9284.175.966.362.866.964.5Segment operating income$30.349.48.07.36.88.28.9Operating margins%11.117.410.511.010.812.313.8Backlog$305.1252.4305.1325.3305.3251.7252.4Military segmentsRevenue for CAE's combined Military segments increased 18% in the fourth quarter to $256.4 million compared to $217.8 million last year. For the year, revenue was $865.1 million, up 7% from $808.7 million last year. Before the negative impact of foreign currency translation our revenue for the year would have been up approximately 12%.Combined Military operating income was $40.8 million (15.9% of revenue) for the quarter, compared to $35.0 million (16.1% of revenue) last year. For the full year, operating income was $147.6 million (17.1% of revenue), compared to $139.6 million (17.3% of revenue) last year.We booked a major upgrade order during the fourth quarter for a US Navy MH-60S Seahawk helicopter flight trainer. We also received a contract from the US Navy for a suite of P-3C Orion anti-submarine aircraft training devices for the Taiwan Navy. Also in products, we were contracted to provide an AgustaWestland AW139 helicopter simulator to Rotorsim, a joint venture equally owned by CAE and the OEM. We continued to grow Military services in the quarter with a contract from Canada's Department of National Defence for simulator support services; a contract with Lockheed Martin to provide support services for the U.K. Royal Navy's Merlin Training System; a contract with IGTEC to provide maintenance and support services in Malaysia; and a contract with the United States Army to continue database development services on the Synthetic Environment Core program. Market activity continued to be robust for CAE on the C-130J Hercules transport aircraft with services contracts awarded by the OEM in support of the US Air Force, Italian Air Force and the UK Royal Air Force. During the year, we announced a number of other strategic wins and developments:We were awarded the prime contractor role on a major Aircrew Training Systems Contract to provide KC-135 training for the U.S. Air Force. This 10-year, $250 million award represents an important milestone for CAE as we pursue services outsourcing opportunities around the globe; We won a contract to provide a comprehensive CC-130J transport aircraft maintenance technician training solution for the Government of Canada; We won a seven-year contract to provide aircrew training services to the Royal Australian Air Force on the Multi-Role Tanker Transport (MRTT) aircraft; We announced the Level D certification of India's first full-fidelity helicopter simulator, a Bell 412, in our joint venture facility with Hindustan Aeronautics Limited; Also in India, we expanded the scope of our joint venture's Dhruv helicopter training to include the civil variant of this first major Indian helicopter to have secured large foreign sales; and We furthered our position in the land simulation market with the acquisition of RTI International's TAL (Technology Assisted Learning) business unit, which has provided vehicle maintenance trainers for the US Army for the past 20 years. Combined Military orders in the quarter totaled $250.2 million for a book-to-sales ratio of 0.98x. Orders were $938.8 million for the year for a book-to-sales ratio of 1.09x. In addition to CAE's combined military backlog of $2.15 billion at March 31, 2011, CAE's unfunded military backlog (2) was $461.4 million. Simulation Products/Military (SP/M)(amounts in millions except operating margins)FY2011FY2010Q4-2011Q3-2011Q2-2011Q1-2011Q4-2010Revenue$586.1545.6179.4153.7137.2115.8149.3Segment operating income$101.995.730.928.324.718.025.8Operating margins%17.417.517.218.418.015.517.3Backlog$886.6868.0886.6881.0920.3921.2868.0Training & Services /Military (TS/M)(amounts in millions except operating margins)FY2011FY2010Q4-2011Q3-2011Q2-2011Q1-2011Q4-2010Revenue$279.0263.177.067.068.666.468.5Segment operating income$45.743.99.910.511.513.89.2Operating margins%16.416.712.915.716.820.813.4Backlog$1,262.31,193.71,262.31,234.81,270.01,226.41,193.7New Core MarketsRevenue in New Core Markets was $38.0 million for the year, up from $2.3 million last year. Operating income was negative $2.6 million for the quarter and negative $6.9 million for the year. We are in the early stages of investing in the capabilities, reach and scale of our business within these new market verticals. We have been developing our position in both the healthcare and mining markets through a combination of organic research and development, and acquisitions. In CAE Mining, we continued to grow software sales with new customers in Latin America including Colquisiri, Minera Lincuna and Yamana (Caraiba) and we made further sales to Votorantim Metais in Brazil, as well as multiple sites of Fresnillo in Mexico. During the quarter we bought Century Systems, which complements our Datamine acquisition, made earlier in the year, by further expanding our presence in the mining industry.In CAE Healthcare, we launched our CAE Caesar™ trauma patient simulator during the quarter, which is a high-fidelity patient simulator for training civil and military practitioners responsible for the care of trauma patients in the field. During the year, we sold more than 80 surgical simulators to medical schools and hospitals and we sold more than 50 Vimedix ultrasound simulators. Also, related to medical imaging, CAE's ICCU e-Learning ultrasound curriculum was endorsed by and integrated into the American College of Chest Physicians' (ACCP) critical care ultrasound training program.Additional financial highlightsThe effect of translating the results of our self-sustaining subsidiaries into Canadian dollars negatively impacted this year's revenue by $81.0 million and net earnings by $11.7 million, when compared to fiscal year 2010. Income taxes this quarter were $12.9 million representing an effective tax rate of 21%. The lower rate was the result of two special elements: tax assets booked on losses in the U.K.; and, lower future tax rates on future tax liabilities. Excluding those elements, the income tax expense this quarter would have been $17.5 million, representing an effective tax rate of 28%. For the year, the effective tax rate was 26% and excluding the elements above, the rate was 28%. Net cash in the fourth quarter provided by continuing operating activities was $190.5 million and free cash flow(3) was $161.2 million. For the year, net cash provided by continuing operating activities was $247.0 million and free cash flow was $147.1 million. Net debt(4) was $198.1 million as at March 31, 2011, down $87.5 million from the third quarter.CAE will pay a dividend of $0.04 per share on June 30, 2011 to shareholders of record at the close of business on June 15, 2011.Additional informationYou will find a more detailed discussion of our results by segment in the Management's Discussion and Analysis (MD&A) as well as in our consolidated financial statements which are posted on our website at www.cae.com/Q4FY11.CAE's audited annual financial statements and management's discussion and analysis for the year ended March 31, 2011 have been filed with the Canadian securities commissions and are available on our website (www.cae.com) and on SEDAR (www.sedar.com). They have also been filed with the U.S. Securities and Exchange Commission and are available on their website (www.sec.gov).Conference call Q4 FY2011CAE will host a conference call focusing on fiscal year 2011 fourth quarter and full-year financial results 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. Immediately following the conference call, Management will hold an information session on IFRS to discuss the expected impact of this reporting standard on CAE's future results. The IFRS session will take place on the same conference call, using the same lines. A PowerPoint presentation for the IFRS session will be available for download on www.cae.com. CAE is a world leader in providing simulation and modeling technologies and integrated training solutions for the civil aviation industry and defence forces around the globe. With annual revenues exceeding C$1.6 billion, CAE employs more than 7,500 people at more than 100 sites and training locations in more than 20 countries. We have the largest installed base of civil and military full-flight simulators and training devices. Through our global network of 32 civil aviation, military and helicopter training centres, we train more than 80,000 civil and military crewmembers yearly. We also offer modeling and simulation software to various market segments and, through CAE's professional services division, we assist customers with a wide range of simulation-based needs. www.cae.comCertain statements made in this news release, including, but not limited to, statements that are not historical facts, are forward-looking and are subject to important risks, uncertainties and assumptions. The results or events predicted in these forward-looking statements may differ materially from actual results or events. These statements do not reflect the potential impact of any non-recurring or other special items or events that are announced or completed after the date of this news release, including mergers, acquisitions, or other business combinations and divestitures. You will find more information about the risks and uncertainties associated with our business in the MD&A section of our annual report and annual information form for the year ended March 31, 2011. These documents have been filed with the Canadian securities commissions and are available on our website (www.cae.com), on SEDAR (www.sedar.com) and a free copy is available upon request to CAE. They have also been filed with the U.S. Securities and Exchange Commission under Form 40-F and are available on EDGAR (www.sec.gov). You will also find on our web site the MD&A for the fiscal 2011 fourth quarter. The forward-looking statements contained in this news release represent our expectations as of May 19, 2011 and, accordingly, are subject to change after this date. We do not update or revise forward-looking information even if new information becomes available unless legislation requires us to do so. You should not place undue reliance on forward-looking statements.Notes(1) Earnings before interest and taxes (EBIT) is a non-GAAP measure that shows us how we have performed before the effects of certain financing decisions and tax structures. We track EBIT 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. (2) Unfunded backlog is a non-GAAP measure that represents firm military orders we have received but have not yet executed for which funding authorization has not yet been obtained. We include unexercised options with a high probability that they will be exercised, but exclude indefinite-delivery/ indefinite-quantity (IDIQ) contracts.(3) Free cash flow is a non-GAAP measure that shows us how much cash we have available to build the business, 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, other assets not related to growth and dividends paid and adding proceeds from sale of property, plant and equipment. (4) 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, and subtracting cash and cash equivalents. Consolidated Balance Sheets(Unaudited) As at March 31 (amounts in millions of Canadian dollars)20112010AssetsCurrent assetsCash and cash equivalents$276.4$312.9Accounts receivable296.9237.5Contracts in progress207.9220.6Inventories125.1126.9Prepaid expenses54.533.7Income taxes recoverable52.224.3Future income taxes9.27.1$1,022.2$963.0Property, plant and equipment, net1,180.11,147.2Future income taxes76.782.9Intangible assets178.8125.4Goodwill198.5161.9Other assets201.6141.5$2,857.9$2,621.9Liabilities and shareholders' equityCurrent liabilitiesAccounts payable and accrued liabilities$527.1$467.8Deposits on contracts173.3199.7Current portion of long-term debt30.751.1Future income taxes31.823.0$762.9$741.6Long-term debt443.8441.6Deferred gains and other long-term liabilities262.6200.5Future income taxes119.282.4$1,588.5$1,466.1Shareholders' equityCapital stock$445.9$441.5Contributed surplus13.510.9Retained earnings1,050.1918.8Accumulated other comprehensive loss(240.1)(215.4)$1,269.4$1,155.8$2,857.9$2,621.9Consolidated Statements of Earnings(Unaudited)Three months ended March 31Twelve months ended March 31(amounts in millions of Canadian dollars, except per share amounts)2011201020112010Revenue$464.4$395.9$1,629.0$1,526.3Earnings before restructuring, interest and income taxes$69.4$64.9$258,3$264.1Restructuring charge (reversal of provision)(1.0)1.9(1.0)34.1Earnings before interest and income taxes$70.4$63.0$259.3$230.0Interest expense, net7.85.530.726.0Earnings before income taxes$62.6$57.5$228.6$204.0Income tax expense12.917.058.859.5Earnings from continuing operations$49.7$40.5$169.8$144.5Results of discontinued operations––––Net earnings$49.7$40.5$169.8$144.5Basic and diluted earnings per share from continuing operations$0.19$0.16$0.66$0.56Basic and diluted earnings per share$0.19$0.16$0.66$0.56Weighted average number of shares outstanding (basic)256.9256.4256.7255.8Weighted average number of shares outstanding (diluted)(1)258.0256.4257.3255.8(1)For fiscal year 2010, the effect of stock options potentially exercisable was anti-dilutive; therefore, the basic and diluted weighted average number of shares outstanding are the same.Consolidated Statements of Changes in Shareholders' Equity(Unaudited) Year ended March 31, 2011 (amounts in millions of Canadian dollars, except number of shares)Common SharesNumber of SharesStated ValueContri- buted SurplusRetained EarningsAccumu- lated Other Compre- hensive LossTotal Share- holders' EquityBalances, beginning of year256,516,994$441.5$10.9$918.8$(215.4)$1,155.8Stock options exercised394,8502.8–––2.8Transfer upon exercise of stock options–1.0(1.0)–––Stock dividends52,9120.6–(0.6)––Stock-based compensation––3.6––3.6Net earnings–––169.8–169.8Dividends–––(37.9)–(37.9)Other comprehensive loss––––(24.7)(24.7)Balances, end of year256,964,756$445.9$13.5$1,050.1$(240.1)$1,269.4(Unaudited) Year ended March 31, 2010 (amounts in millions of Canadian dollars, except number of shares)Common SharesNumber of SharesStated ValueContri- buted Surplus Retained Earnings Accumu- lated Other Compre- hensive Loss Total Share- holders' EquityBalances, beginning of year255,146,443$430.2$10.1$805.0$(47.5)$1,197.8Stock options exercised1,327,2207.5–––7.5Transfer upon exercise of stock options–3.4(3.4)–––Stock dividends43,3310.4–(0.4)––Stock-based compensation––4.2––4.2Net earnings–––144.5–144.5Dividends–––(30.3)–(30.3)Other comprehensive loss––––(167.9)(167.9)Balances, end of year256,516,994$441.5$10.9$918.8$(215.4)$1,155.8Consolidated Statements of Comprehensive Income (Loss)(Unaudited) (amounts in millions of Canadian dollars)Three months ended March 31Twelve months ended March 312011201020112010Net earnings$49.7$40.5$169.8$144.5Other comprehensive (loss) income:Foreign currency translation adjustmentNet foreign exchange losses on translation of financial statements of self-sustaining foreign operations$(7.2)$(57.1)$(27.4)$(225.0)Net change in gains on certain long-term debt denominated in foreign currency and designated as hedges of net investments in self-sustaining foreign operations2.44.25.218.3Reclassifications to income––(0.6)0.3Income taxes(0.4)(1.5)(1.3)(0.6)$(5.2)$(54.4)$(24.1)$(207.0)Net changes in cash flow hedgeNet change in gains on derivative items designated as hedges of cash flows$2.5$13.8$9.1$58.1Reclassifications to income or to the related non-financial assets or liabilities(2.7)(8.5)(10.2)(2.2)Income taxes(0.1)(1.6)0.5(16.8)$(0.3)$3.7$(0.6)$39.1Total other comprehensive loss$(5.5)$(50.7)$(24.7)$(167.9)Comprehensive income (loss)$44.2$(10.2)$145.1$(23.4)Consolidated Statements of Accumulated Other Comprehensive Loss(Unaudited) As at and for the year ended March 31, 2011 (amounts in millions of Canadian dollars)Foreign Currency Translation AdjustmentCash Flow HedgeAccumulated Other Comprehensive LossBalance, end of fiscal 2010$(226.4)$11.0$(215.4)Details of other comprehensive loss:Net change in (losses) gains(22.2)9.1(13.1)Reclassifications to income or to the related non-financial assets or liabilities(0.6)(10.2)(10.8)Income taxes(1.3)0.5(0.8)Total other comprehensive loss for fiscal 2011$(24.1)$(0.6)$(24.7)Balance, end of fiscal 2011$(250.5)$10.4$(240.1)Consolidated Statements of Cash Flows(Unaudited) (amounts in millions of Canadian dollars)Three months ended March 31Twelve months ended March 312011201020112010Operating activitiesNet earnings$49.7$40.5$169.8$144.5Results of discontinued operations––––Earnings from continuing operations$49.7$40.5$169.8$144.5Adjustments to reconcile earnings to cash flows from operating activities:Depreciation of property, plant and equipment19.218.074.875.4Financing cost amortization0.30.21.00.8Amortization of intangible and other assets7.24.322.117.8Future income taxes22.911.449.327.2Investment tax credits(8.6)1.3(17.7)(8.6)Stock-based compensation plans2.73.917.313.9Employee future benefits, net(3.2)(1.1)(10.7)(1.4)Amortization of other long-term liabilities(3.5)(1.9)(9.0)(7.3)Other4.911.0(12.5)8.3Changes in non-cash working capital98.961.1(37.4)(3.6)Net cash provided by operating activities$190.5$148.7$247.0$267.0Investing activitiesBusiness acquisitions, net of cash and cash equivalents acquired$(49.2)$(5.1)$(74.1)$(34.7)Joint venture, net of cash and cash equivalents acquired––(1.9)–Capital expenditures(37.1)(48.5)(114.9)(130.9)Proceeds from the disposal of property, plant and equipment0.1–1.58.8Deferred development costs(6.3)(5.2)(22.6)(14.6)Other(8.5)(3.2)(25.3)(13.0)Net cash used in investing activities$(101.0)$(62.0)$(237.3)$(184.4)Financing activitiesProceeds from long-term debt, net of transaction costs$9.0$26.4$44.5$191.0Repayment of long-term debt(6.4)(15.2)(44.2)(115.1)Proceeds from capital lease––11.021.6Repayment of capital lease(1.1)(1.3)(16.0)(5.6)Dividends paid(10.1)(7.6)(37.9)(30.3)Common stock issuance1.01.52.87.5Other6.4–(2.4)(1.9)Net cash (used in) provided by financing activities$(1.2)$3.8$(42.2)$67.2Effect of foreign exchange rate changes on cash and cash equivalents$(2.5)$(11.7)$(4.0)$(32.1)Net (decrease) increase in cash and cash equivalents$85.8$78.8$(36.5)$117.7Cash and cash equivalents, beginning of period190.6234.1312.9195.2Cash and cash equivalents, end of period$276.4$312.9$276.4$312.9FOR FURTHER INFORMATION PLEASE CONTACT: Nathalie Bourque, Vice President,Media contact:Public Affairs and Global Communications(514) 734-5788nathalie.bourque@cae.comORAndrew Arnovitz, Vice President,Investor relations:Investor Relations and Strategy(514) 734-5760andrew.arnovitz@cae.com