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Press release from Marketwire

CAE reports first quarter financial results for fiscal year 2012

- Revenue up 17% and net income up 16% compared to prior year - Earnings per share of $0.17 compared to $0.14 in prior year - C$3.5 billion order backlog and 1.05x quarterly book-to-sales

Wednesday, August 10, 2011

CAE reports first quarter financial results for fiscal year 201208:38 EDT Wednesday, August 10, 2011MONTREAL, CANADA--(Marketwire - Aug. 10, 2011) -(NYSE:CAE)(TSX:CAE) – CAE today reported financial results for the first quarter ended June 30, 2011. Net income attributable to equity holders of the company was C$43.1 million (C$0.17 per share) this quarter, compared to C$37.2 million (C$0.14 per share) last year. All financial information is in Canadian dollars.Revenue for the quarter was $427.9 million, 17% higher than $366.4 million in the first quarter last year. "We had good performance this quarter led by our Civil business, which continues to benefit from the commercial aerospace up-cycle and our leadership positions in emerging markets," said Marc Parent, CAE's President and Chief Executive Officer. "Full-flight simulator sales are off to a strong start and we signed three pivotal joint venture agreements, including the total outsourcing of training by AirAsia, one of the world's fastest growing airlines. In Defence, order delays added margin pressure but we achieved solid revenue growth over last year. The market outlook has become more challenging as governments re-evaluate their force structures and contend with budget constraints. However, our healthy backlog, long-term value proposition and position in key growth defence markets give us confidence for future growth."First quarter operating profit(1) was $72.0 million, or 16.8% of revenue. Summary of consolidated results(amounts in millions, except for operating margins)Q1-2012Q4-2011Q3-2011Q2-2011Q1-2011Revenue$427.9465.6410.8388.0366.4Operating profit$72.077.870.368.865.7As a % of revenue%16.816.717.117.717.9Net income attributable to equity holders of the company$43.145.538.539.137.2Backlog$3,463.23,449.03,224.93,199.93,116.3CAE made the decision this quarter to report New Core Markets (NCMs) as a separate business segment in order to provide investors with greater visibility into these initiatives and to provide a clearer view of the performance of its Training and Services/Civil segment, which previously included NCMs. Civil segmentsRevenue for our combined Civil segments increased 19% in the first quarter to $210.1 million compared to $176.9 million last year. Operating profit was $45.2 million (21.5% of revenue) compared to $36.4 million (20.6% of revenue) last year.Civil market activity strengthened for CAE during the first quarter with 11 full-flight simulator orders for customers in Asia, Europe, and the Americas. We also renewed and added a range of training contracts expected to generate $104.9 million in future revenue. We announced that we will double to eight the number of locations in our global network offering business aviation training, including the addition of centres in Asia and South America. In commercial aviation, we announced three important joint-ventures during the quarter at the Paris Air Show. We announced a joint-venture with AirAsia to provide the airline and other third-party customers with training for pilots, cabin crews, maintainers and ground services personnel. We also announced the launch of a new training centre joint-venture in Delhi, India with Interglobe, the parent company of IndiGo Airlines. We also announced a third joint-venture during the quarter with Mitsui & Co. to establish and operate a training centre in Japan in support of the upcoming Mitsubishi Regional Jet. We received $229.8 million in combined civil segment orders this quarter representing a book-to-sales ratio of 1.09x. The ratio for the last 12 months was 1.27x.Training & Services/Civil (TS/C)(amounts in millions except operating margins, RSEU and FFSs deployed)Q1-2012Q4-2011Q3-2011Q2-2011Q1-2011Revenue$124.0121.0113.2109.9109.9Segment operating income$35.525.324.223.626.8Operating margins%28.620.921.421.524.4Backlog$970.5986.5774.2695.3706.8RSEU137132132131132FFS deployed160156152151150Simulation Products/Civil (SP/C)(amounts in millions except operating margins)Q1-2012Q4-2011Q3-2011Q2-2011Q1-2011Revenue$86.176.266.763.067.0Segment operating income$9.79.47.97.99.6Operating margins%11.312.311.812.514.3Backlog$341.1303.8324.3304.7251.3Military segmentsRevenue for CAE's combined Military segments increased 14% in the first quarter to $206.4 million compared to $181.8 million last year. Operating profit was $29.4 million (14.2% of revenue), compared to $31.2 million (17.2% of revenue) last year. During the quarter, CAE was awarded a letter subcontract by Boeing Training Systems and Services to provide maintenance and support services for M-346 jet-fighter full-mission simulators being developed for an international customer. The support services will begin in 2013 following delivery of the M-346 ground-based training system, and will run for a period of 20 years. We also saw the resumption of U.S. procurement activity resulting in a contract to CAE from the United States Navy to design and manufacture two additional MH-60R Seahawk helicopter trainers. We also won a subcontract to design and manufacture trainers for the United States Air Force under Boeing's C-130 Avionics Modernization Program. In the land domain, we were awarded a contract for five Abrams tank maintenance training systems for the United States Army. We also teamed with Force Protection Industries to compete for the Canadian Forces Tactical Armoured Patrol Vehicle project. Combined Military orders in the quarter totaled $209.7 million for a book-to-sales ratio of 1.02x. The ratio for the last 12 months was 0.98x. In addition to CAE's combined military backlog of $2.15 billion at June 30, 2011, CAE's unfunded military backlog(2) was $342.3 million.Simulation Products/Military (SP/M)(amounts in millions except operating margins)Q1-2012Q4-2011Q3-2011Q2-2011Q1-2011Revenue$135.2179.3153.7137.2115.8Segment operating income$18.834.028.625.117.3Operating margins%13.919.018.618.314.9Backlog$897.8888.7883.0922.2922.9Training & Services /Military (TS/M)(amounts in millions except operating margins)Q1-2012Q4-2011Q3-2011Q2-2011Q1-2011Revenue$71.278.066.169.866.0Segment operating income$10.612.010.913.513.9Operating margins%14.915.416.519.321.1Backlog$1,253.81,270.01,243.41,277.71,235.3New Core MarketsRevenue for New Core Markets increased 48% in the first quarter to $11.4 million compared to $7.7 million last year. Operating loss was $2.6 million compared to $1.9 million last year.CAE Healthcare sold more than 25 surgical and ultrasound simulator systems and modules to customers in Australia, Asia, Europe and North America, including institutions like the Mayo Clinic and the Massachusetts General Hospital. CAE Mining sold its geological modelling and mine planning systems to 18 new customers including Kazakhmys in Kazakhstan, African Minerals in Sierra Leone, Vale in Brazil and Koza Gold in Turkey. New Core Markets (NCM)(amounts in millions)Q1-2012Q4-2011Q3-2011Q2-2011Q1-2011Revenue$11.411.111.18.17.7Segment operating income (loss)$(2.6)(3.9)(1.3)(1.3)(1.9)Additional financial highlightsIncome taxes this quarter were $13.6 million representing an effective tax rate of 24%. Proportionately more income was generated this quarter from lower rate tax jurisdictions than last year.Free cash flow(3) was negative $88.5 million this quarter due to both lower cash provided by operating activities and unfavourable movements in non-cash working capital compared to the recent fourth quarter. We normally see significant negative movement in non-cash working capital in the first quarter of the fiscal year and this is mainly due to a decrease in accounts payable and accrued liabilities and an increase in the net position of contracts in progress and in accounts receivable.Capital expenditures totalled $30.5 million this quarter, including $19.6 million in support of our growth initiatives and the balance for maintenance. CAE's net debt(4) of $520.5 million as at June 30, 2011 compares with a net debt of $383.8 million as at March 31, 2011, as consistently measured under IFRS. The increase of $136.7 million was mainly due to an increase in our working capital accounts. CAE will pay a dividend of $0.04 per share on September 30, 2011 to shareholders of record at the close of business on September 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 interim financial statements which are posted on our website at www.cae.com/Q1FY12.CAE's unaudited consolidated interim financial statements and management's discussion and analysis for the quarter ended June 30, 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 Q1 FY2012 and annual meeting of shareholders FY2011 CAE will host a conference call focusing on fiscal year 2012 first quarter 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. CAE is also hosting its annual meeting of shareholders for fiscal year 2011 today at 10:30 a.m. ET at the Hotel Omni Mont-Royal in Montreal. The meeting will also be webcast live on CAE's site at www.cae.com. At the meeting, members of CAE senior management will review the activities of the last fiscal year, present the financial results for the first quarter ended June 30 this year and discuss prospects for the current fiscal year. CAE is a global leader in modeling, simulation and training for civil aviation and defence. The company employs more than 7,500 people at more than 100 sites and training locations in more than 20 countries. Through CAE's global network of 32 civil aviation, military and helicopter training centres, the company trains more than 80,000 crewmembers yearly. CAE's business is diversified, ranging from the sale of simulation products to providing comprehensive services such as training and aviation services, professional services and in-service support. The company aims to apply its simulation expertise and operational experience to help customers enhance safety, improve efficiency, maintain readiness and solve challenging problems. CAE is now leveraging its simulation capabilities in new markets such as healthcare and mining. 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). The forward-looking statements contained in this news release represent our expectations as of August 10, 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) Operating profit is a non-GAAP measure that shows us how we have performed before the effects of certain financing decisions and tax structures. We track operating profit 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 Statement of Financial Position(Unaudited)June 30March 31April 1(amounts in millions of Canadian dollars)201120112010AssetsCash and cash equivalents$180.9$276.4$312.9Accounts receivable318.9296.8238.2Contracts in progress : assets248.2230.5205.5Inventories144.2124.3126.8Prepayments39.343.524.2Income taxes recoverable72.158.830.7Derivative financial assets16.518.927.9Total current assets$1,020.1$1,049.2$966.2Property, plant and equipment1,209.21,211.01,197.1Intangible assets381.2375.8290.4Deferred tax assets21.320.724.7Derivative financial assets12.511.615.1Other assets165.2149.097.8Total assets$2,809.5$2,817.3$2,591.3Liabilities and EquityAccounts payable and accrued liabilities$501.7$551.9$493.0Provisions19.820.932.1Income taxes payable5.912.96.5Contracts in progress : liabilities105.5125.8167.4Current portion of long-term debt168.186.268.5Derivative financial liabilities14.212.49.3Total current liabilities$815.2$810.1$776.8Provisions9.710.48.2Long-term debt533.3574.0600.9Royalty obligations148.1161.6148.0Employee benefits obligations65.162.881.4Deferred gains and other non-current liabilities184.4187.6129.3Deferred tax liabilities75.064.513.2Derivative financial liabilities16.213.415.1Total liabilities$1,847.0$1,884.4$1,772.9EquityShare capital$443.4$440.7$436.3Contributed surplus18.117.114.2Other reserves(15.1)(9.8)11.4Retained earnings497.2466.4338.5Equity attributable to equity holders of the Company$943.6$914.4$800.4Non-controlling interests18.918.518.0Total equity$962.5$932.9$818.4Total liabilities and equity$2,809.5$2,817.3$2,591.3Consolidated Income Statement(Unaudited)three months ended June 30(amounts in millions of Canadian dollars, except per share amounts)20112010Revenue$427.9$366.4Cost of sales288.3237.4Gross profit$139.6$129.0Research and development expenses15.212.6Selling, general and administrative expenses62.356.2Other (gains) losses - net(9.9)(5.5)Operating profit$72.0$65.7Finance income(1.2)(1.0)Finance expense16.115.2Finance expense - net$14.9$14.2Earnings before income taxes$57.1$51.5Income tax expense13.614.9Net income$43.5$36.6Attributable to:Equity holders of the Company$43.1$37.2Non-controlling interests0.4(0.6)$43.5$36.6Earnings per share from continuing operations attributable to equity holders of the CompanyBasic$0.17$0.15Diluted0.170.14Consolidated Statement of Comprehensive Income(Unaudited)three months ended June 30(amounts in millions of Canadian dollars)20112010Net income$43.5$36.6Other comprehensive income (loss)Foreign currency translation adjustmentNet currency translation difference on the translation of financial statements of foreign operations$(0.9)$18.3Net change in gains (losses) on certain long-term debt denominated in foreign currency and designated as hedges of net investments in foreign operations0.8(4.2)$(0.1)$14.1Net changes in cash flow hedgeEffective portion of changes in fair value of cash flow hedges$(2.0)$(4.3)Net change in fair value of cash flow hedges transferred to net income or to related non-financial assets or liabilities(4.5)(8.4)Income taxes1.33.7$(5.2)$(9.0)Defined benefit plan actuarial losses adjustmentDefined benefit plan actuarial losses$(2.7)$(4.6)Income taxes0.71.2$(2.0)$(3.4)Other comprehensive (loss) income$(7.3)$1.7Total comprehensive income$36.2$38.3Total comprehensive income (loss) attributable to:Equity holders of the Company$35.8$38.7Non-controlling interests0.4(0.4)Total comprehensive income$36.2$38.3Consolidated Statement of Changes in Equity(Unaudited)Attributable to equity holders of the Companythree months ended June 30, 2011Common shares(amounts in millions of Canadian dollars, except number of shares)Number of shares Stated valueContri- buted surplusOther reserves Retained earningsTotal Non-controlling interestsTotal equityBalances, beginning of period256,964,756$440.7$17.1$(9.8)$466.4$914.4$18.5$932.9Net income----43.143.10.443.5Other comprehensive loss:Foreign currency translation adjustment---(0.1)-(0.1)-(0.1)Net changes in cash flow hedge---(5.2)-(5.2)-(5.2)Defined benefit plan actuarial losses adjustment----(2.0)(2.0)-(2.0)Total comprehensive income-$-$-$(5.3)$41.1$35.8$0.4$36.2Stock options exercised127,9500.7---0.7-0.7Stock dividends124,0751.6--(1.6)---Transfer upon exercise of stock options-0.4(0.4)-----Shared-based payments--1.4--1.4-1.4Dividends----(8.7)(8.7)-(8.7)Balances, end of period257,216,781$443.4$18.1$(15.1)$497.2$943.6$18.9$962.5(Unaudited)Attributable to equity holders of the Companythree months ended June 30, 2010Common shares(amounts in millions of Canadian dollars, except number of shares)Number of shares Stated value Contri- buted surplus Other reserves Retained earningsTotalNon-controlling interestsTotal equityBalances, beginning of period256,516,994$436.3$14.2$11.4$338.5$800.4$18.0$818.4Net income----37.237.2(0.6)36.6Other comprehensive income (loss):Foreign currency translation adjustment---13.9-13.90.214.1Net changes in cash flow hedge---(9.0)-(9.0)-(9.0)Defined benefit plan actuarial losses adjustment----(3.4)(3.4)-(3.4)Total comprehensive income-$-$-$4.9$33.8$38.7$(0.4)$38.3Stock options exercised39,2000.3---0.3-0.3Stock dividends11,7510.1--(0.1)---Transfer upon exercise of stock options-0.2(0.2)-----Shared-based payments--1.6--1.6-1.6Acquisition of non-controlling interests----(0.2)(0.2)(0.2)(0.4)Dividends----(7.6)(7.6)-(7.6)Balances, end of period256,567,945$436.9$15.6$16.3$364.4$833.2$17.4$850.6The total of Retained earnings and other reserves for the three months ended June 30, 2011 was $482.1 million ($380.7 million as at June 30, 2010).Consolidated Statement of Cash Flows(Unaudited)three months ended June 30(amounts in millions of Canadian dollars)20112010Operating activitiesNet income$43.5$36.6Adjustments to reconcile net income to cash flows from operating activities:Depreciation of property, plant and equipment21.820.5Amortization of intangible and other assets7.05.6Financing cost amortization0.40.4Deferred income taxes12.13.2Investment tax credits(4.4)(1.1)Share-based payments5.55.7Defined benefit pension plans(2.0)1.0Amortization of other non-current liabilities(2.5)(1.8)Other(9.2)0.2Changes in non-cash working capital(160.0)(114.5)Net cash used in operating activities$(87.8)$(44.2)Investing activitiesBusiness combinations, net of cash and cash equivalents acquired$-$(16.3)Joint venture, net of cash and cash equivalents acquired(24.9)(1.9)Capital expenditures from property, plant and equipment(30.5)(21.4)Proceeds from disposal of property, plant and equipment23.7-Capitalized development costs(7.3)(3.0)ERP and other software(4.7)(3.7)Other(0.1)(1.3)Net cash used in investing activities$(43.8)$(47.6)Financing activitiesNet borrowing under revolving unsecured credit facilities$49.0$-Net proceeds from current financial assets program0.8-Proceeds from long-term debt, net of transaction costs9.65.4Repayment of long-term debt(11.4)(7.1)Repayment of finance lease(3.5)(3.6)Dividends paid(8.7)(7.6)Common stock issuance0.70.3Other(0.6)(8.4)Net cash provided by (used in) financing activities$35.9$(21.0)Net decrease in cash and cash equivalents$(95.7)$(112.8)Cash and cash equivalents, beginning of period276.4312.9Effect of foreign exchange rate changes on cash and cash equivalents0.20.4Cash and cash equivalents, end of period$180.9$200.5Supplemental information:Interest paid$11.5$14.3Interest received1.81.3Income taxes paid14.03.3FOR 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