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Press release from Marketwire

CAE reports third quarter financial results for fiscal year 2012

- Q3 revenue up 10% and net income attributed to equity holders up 18% compared to prior year - Q3 earnings per share of C$0.18 compared to C$0.15 in prior year - Combined Civil segment Q3 operating margin of 20.6% and combined Military of 16.6%

Wednesday, February 08, 2012

CAE reports third quarter financial results for fiscal year 201208:15 EST Wednesday, February 08, 2012MONTREAL, CANADA--(Marketwire - Feb. 8, 2012) -(NYSE:CAE)(TSX:CAE) - CAE today reported financial results for the third quarter ended December 31, 2011. Net income attributable to equity holders of the company was C$45.6 million (C$0.18 per share) this quarter, up 18% compared to C$38.5 million (C$0.15 per share) last year. All financial information is in Canadian dollars.Revenue for the quarter was $453.1 million, 10% higher than $410.8 million in the third quarter last year. Third quarter operating profit(1) was $77.5 million, or 17.1% of revenue. "We are pleased with our financial performance this quarter with stronger margins in both our civil and defence business units," said Marc Parent, CAE's President and Chief Executive Officer. "The level of civil aviation market activity remains high in all regions and our order intake reflects our strong competitive position. Although procurement delays in defence continue to make predicting the timing of orders a challenge, we won contracts with key defence customers during the quarter. As well, we remain encouraged by the range of global opportunities in our pipeline." Summary of consolidated results(amounts in millions, except for operating margins)Q3-2012Q2-2012Q1-2012Q4-2011Q3-2011Revenue$453.1433.5427.9465.6410.8Operating profit$77.563.972.077.870.3As a % of revenue%17.114.716.816.717.1Net income attributable to equity holders of the company$45.638.443.145.538.5Backlog$3,514.93,648.23,463.23,449.03,224.9Civil segmentsRevenue for our combined Civil segments increased 13% in the third quarter to $203.7 million compared to $179.9 million last year. Operating profit was $42.0 million (20.6% of revenue) compared to $32.1 million (17.8% of revenue) last year. Revenue for the first nine months increased 18% to $625.5 million compared to $529.7 million last year. Year-to-date operating profit was $129.5 million (20.7% of revenue), compared to $100.0 million (18.9% of revenue) last year. Our civil market activity continued to be strong across all regions in the third quarter. We sold 11 full-flight simulators, bringing our nine month total orders to 30, which exceeds the total number we sold all of last year. We also signed training services contracts expected to generate $122.2 million in future revenue, including an exclusive long term agreement with flydubai in the United Arab Emirates. We also broadened our footprint in South East Asia with the announcement of a training joint venture with Cebu Pacific Air in the Philippines.We received $234.6 million in combined civil segment orders this quarter representing a book-to-sales ratio of 1.15x. The ratio for the last 12 months was 1.24x.Training & Services/Civil (TS/C)(amounts in millions except operating margins, RSEU and FFSs deployed)Q3-2012Q2-2012Q1-2012Q4-2011Q3-2011Revenue$123.0119.1124.0121.0113.2Segment operating income$28.827.635.525.324.2Operating margins%23.423.228.620.921.4Backlog$1,102.81,125.4970.5986.5774.2RSEU140139137132132FFS deployed170165160156152Simulation Products/Civil (SP/C)(amounts in millions except operating margins)Q3-2012Q2-2012Q1-2012Q4-2011Q3-2011Revenue$80.792.686.176.266.7Segment operating income$13.214.79.79.47.9Operating margins%16.415.911.312.311.8Backlog$366.5340.6341.1303.8324.3Military segmentsRevenue for CAE's combined Military segments increased 1% in the third quarter to $222.3 million compared to $219.8 million last year. Third quarter operating profit was $36.9 million (16.6% of revenue), compared to $39.5 million (18.0% of revenue) last year. Revenue for the first nine months increased 4% to $630.2 million compared to $608.6 million last year. Year-to-date operating profit was $96.5 million (15.3% of revenue), compared to $109.3 million (18.0% of revenue) last year. During the quarter, CAE was awarded contracts for Tornado jet maintenance trainers for the German Air Force and UK Royal Air Force, and we received additional contract options for P-8A Poseidon simulators for Boeing and the US Navy. In terms of aftermarket opportunities, we won upgrade work for Canadian Forces simulators involving the CC-130H Hercules aircraft and the CH-146 Griffon helicopter. In Asia, we were awarded contracts to provide support services for an AW139 helicopter simulator in Malaysia and a multi-year, helicopter training services contract with another key customer in the region. Combined Military orders in the quarter totaled $124.1 million for a book-to-sales ratio of 0.56x. The ratio for the last 12 months was 0.89x. In addition to CAE's combined military backlog(2) of $2.0 billion at December 31, 2011, CAE's unfunded military backlog(3) was $269.4 million.Simulation Products/Military (SP/M)(amounts in millions except operating margins)Q3-2012Q2-2012Q1-2012Q4-2011Q3-2011Revenue$152.4136.0135.2179.3153.7Segment operating income$26.920.918.834.028.6Operating margins%17.715.413.919.018.6Backlog$812.7907.4897.8888.7883.0Training & Services/Military (TS/M)(amounts in millions except operating margins)Q3-2012Q2-2012Q1-2012Q4-2011Q3-2011Revenue$69.965.571.278.066.1Segment operating income$10.09.310.612.010.9Operating margins%14.314.214.915.416.5Backlog$1,232.91,274.81,253.81,270.01,243.4New Core MarketsRevenue for New Core Markets was $27.1 million compared to $11.1 million last year. Operating loss was $1.4 million, compared to a loss of $1.3 million last year.CAE Healthcare received endorsement for its ultrasound e-Learning curriculum and seminars from the Canadian Critical Care Society and the simulation centre we manage at Université de Montréal received accreditation from The Royal College of Physicians and Surgeons of Canada. During the quarter we sold patient simulators, courseware, and centre management systems to customers in North America, Eastern Europe, and the Middle East. CAE Mining added new customers for its geological modeling, data management, and mine planning systems including Silver Lake Resources and Optiro in Australia and Exploraciones Mineras Parreña in Mexico.New Core Markets (NCM)(amounts in millions)Q3-2012Q2-2012Q1-2012Q4-2011Q3-2011Revenue$27.120.311.411.111.1Segment operating income (loss)$(1.4)(8.6)(2.6)(3.9)(1.3)Additional financial highlightsIncome taxes this quarter were $15.2 million representing an effective tax rate of 25%, compared to 29% last year. The decrease was mainly due to the settlement of a tax audit in Canada as well as a change in the mix of income from various jurisdictions. Free cash flow(4) was $46.2 million this quarter owing to a favourable change in non-cash working capital compared to last year and more cash provided by continuing operations. Capital expenditures totalled $44.1 million this quarter, including $25.3 million in support of our growth initiatives and the balance for maintenance. Net debt(5) was $593.9 million as at December 31, 2011 compared with $618.8 million as at September 30, 2011. The decrease of $24.9 million was mainly due to favourable foreign exchange movements. CAE will pay a dividend of $0.04 per share on March 30, 2012 to shareholders of record at the close of business on March 15, 2012.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/Q3FY12.CAE's unaudited consolidated interim financial statements and management's discussion and analysis for the quarter ended December 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 Q3 FY2012CAE will host a conference call focusing on fiscal year 2012 third 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 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 over 25 countries. Through CAE's global network of 34 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 applies 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 February 8, 2012 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) Backlog is a non-GAAP measure that represents the expected value of orders we have received but have not yet executed. (3) 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. (4) 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 disposal of property, plant and equipment. (5) 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. Consolidated Statement of Financial Position(Unaudited)(amounts in millions of Canadian dollars)December 312011March 31 2011AssetsCash and cash equivalents$241.7$276.4Accounts receivable312.8296.8Contracts in progress : assets251.6230.5Inventories145.3124.3Prepayments46.543.5Income taxes recoverable80.258.8Derivative financial assets12.718.9Total current assets$1,090.8$1,049.2Property, plant and equipment1,273.21,211.0Intangible assets530.4375.8Deferred tax assets25.120.7Derivative financial assets8.811.6Other assets161.6149.0Total assets$3,089.9$2,817.3Liabilities and equityAccounts payable and accrued liabilities$529.3$551.9Provisions23.120.9Income taxes payable9.512.9Contracts in progress : liabilities126.7125.8Current portion of long-term debt147.686.2Derivative financial liabilities16.512.4Total current liabilities$852.7$810.1Provisions9.410.4Long-term debt688.0574.0Royalty obligations158.0161.6Employee benefits obligations96.662.8Deferred gains and other non-current liabilities180.9187.6Deferred tax liabilities80.264.5Derivative financial liabilities12.513.4Total liabilities$2,078.3$1,884.4EquityShare capital$449.4$440.7Contributed surplus19.317.1Other reserves(8.9)(9.8)Retained earnings532.0466.4Equity attributable to equity holders of the Company$991.8$914.4Non-controlling interests19.818.5Total equity$1,011.6$932.9Total liabilities and equity$3,089.9$2,817.3Consolidated Income Statement(Unaudited)(amounts in millions of Canadian dollars, except per share amounts)Three months ended December 31Nine months ended December 312011201020112010Revenue$453.1$410.8$1,314.5$1,165.2Cost of sales300.2274.8884.5771.0Gross profit$152.9$136.0$430.0$394.2Research and development expenses16.59.247.631.6Selling, general and administrative expenses62.561.4184.6172.8Other (gains) losses - net(3.6)(4.9)(15.6)(15.0)Operating profit$77.5$70.3$213.4$204.8Finance income(1.6)(1.1)(5.1)(3.2)Finance expense17.816.751.148.0Finance expense - net$16.2$15.6$46.0$44.8Earnings before income taxes$61.3$54.7$167.4$160.0Income tax expense15.215.839.145.1Net income$46.1$38.9$128.3$114.9Attributable to:Equity holders of the Company$45.6$38.5$127.1$114.8Non-controlling interests0.50.41.20.1$46.1$38.9$128.3$114.9Earnings per share from continuing operations attributable to equity holders of the CompanyBasic and diluted$0.18$0.15$0.49$0.45Consolidated Statement of Comprehensive IncomeThree months endedNine months ended(Unaudited)December 31December 31(amounts in millions of Canadian dollars)2011201020112010Net income$46.1$38.9$128.3$114.9Other comprehensive income (loss)Foreign currency translation adjustmentNet currency translation difference on the translation of financial statements of foreign operations$(39.9)$(42.7)$18.6$(16.1)Net change in gains (losses) on certain long-term debt denominated in foreign currency and designated as hedges of net investments in foreign operations4.23.7(7.3)2.8Reclassifications to income-(0.6)-(0.6)Income taxes(0.5)(0.5)1.4(0.9)$(36.2)$(40.1)$12.7$(14.8)Net changes in cash flow hedgeEffective portion of changes in fair value of cash flow hedges$13.1$13.9$(14.8)$6.1Net change in fair value of cash flow hedges transferred to net income or to related non-financial assets or liabilities6.4(1.9)(0.2)(7.5)Income taxes(5.6)(3.3)3.30.7$13.9$8.7$(11.7)$(0.7)Defined benefit plan actuarial gains (losses) adjustmentDefined benefit plan actuarial gains (losses)$2.5$(0.5)$(42.3)$(8.5)Income taxes(0.7)0.111.72.2$1.8$(0.4)$(30.6)$(6.3)Other comprehensive loss$(20.5)$(31.8)$(29.6)$(21.8)Total comprehensive income$25.6$7.1$98.7$93.1Total comprehensive income attributable to:Equity holders of the Company$25.2$6.9$97.4$93.0Non-controlling interests0.40.21.30.1Total comprehensive income$25.6$7.1$98.7$93.1Consolidated Statement of Changes in Equity(Unaudited) Attributable to equity holders of the Companynine months ended December 31, 2011Common shares(amounts in millions of Canadian dollars, except number of shares)Number of sharesStated valueContributed surplusOther reservesRetained earningsTotalNon-controlling interestsTotal equityBalances, beginning of period256,964,756$440.7$17.1$(9.8)$466.4$914.4$18.5$932.9Net income----127.1127.11.2128.3Other comprehensive income (loss):Foreign currency translation adjustment---12.6-12.60.112.7Net changes in cash flow hedge---(11.7)-(11.7)-(11.7)Defined benefit plan actuarial losses adjustment----(30.6)(30.6)-(30.6)Total comprehensive income-$-$-$0.9$96.5$97.4$1.3$98.7Stock options exercised283,9752.0---2.0-2.0Optional cash purchase599-------Stock dividends572,6365.9--(5.9)---Transfer upon exercise of stock options-0.8(0.8)-----Share-based payments--3.0--3.0-3.0Dividends----(25.0)(25.0)-(25.0)Balances, end of period257,821,966$449.4$19.3$(8.9)$532.0$991.8$19.8$1,011.6(Unaudited) Attributable to equity holders of the Companynine months ended December 31, 2010Common shares(amounts in millions of Canadian dollars, except number of shares)Number of sharesStated valueContributed surplusOther reservesRetained earningsTotalNon-controlling interestsTotal equityBalances, beginning of period256,516,994$436.3$14.2$11.4$338.5$800.4$18.0$818.4Net income----114.8114.80.1114.9Other comprehensive income (loss):Foreign currency translation adjustment---(14.8)-(14.8)-(14.8)Net changes in cash flow hedge---(0.7)-(0.7)-(0.7)Defined benefit plan actuarial losses adjustment----(6.3)(6.3)-(6.3)Total comprehensive income (loss)-$-$-$(15.5)$108.5$93.0$0.1$93.1Stock options exercised267,2251.8---1.8-1.8Stock dividends38,2220.4--(0.4)---Transfer upon exercise of stock options-0.7(0.7)-----Share-based payments--3.4--3.4-3.4Acquisition of non-controlling interests----(0.2)(0.2)(0.2)(0.4)Dividends----(27.8)(27.8)-(27.8)Balances, end of period256,822,441$439.2$16.9$(4.1)$418.6$870.6$17.9$888.5The total of retained earnings and other reserves for the nine months ended December 31, 2011 was $523.1 million ($414.5 million as at December 31, 2010). Consolidated Statement of Cash Flows(Unaudited)nine months ended December 31(amounts in millions of Canadian dollars)20112010Operating activitiesNet income$128.3$114.9Adjustments to reconcile net income to cash flows from operating activities:Depreciation of property, plant and equipment68.063.2Amortization of intangible and other assets24.316.9Financing cost amortization1.31.3Deferred income taxes18.225.4Investment tax credits(10.6)(9.1)Share-based payments1.214.6Defined benefit pension plans(9.0)(8.4)Amortization of other non-current liabilities(8.5)(5.3)Other(5.4)(5.4)Changes in non-cash working capital(96.0)(143.9)Net cash provided by operating activities$111.8$64.2Investing activitiesBusiness combinations, net of cash and cash equivalents acquired$(126.1)$(23.3)Joint venture, net of cash and cash equivalents acquired(27.6)(1.9)Capital expenditures for property, plant and equipment(121.3)(75.1)Proceeds from disposal of property, plant and equipment28.31.4Capitalized development costs(30.0)(16.3)ERP and other software(12.3)(12.3)Other4.8(4.5)Net cash used in investing activities$(284.2)$(132.0)Financing activitiesNet borrowing under revolving unsecured credit facilities$14.2$-Net effect of current financial assets program10.4-Proceeds from long-term debt, net of transaction costs182.135.5Repayment of long-term debt(26.7)(37.8)Proceeds from finance lease-11.0Repayment of finance lease(19.9)(26.5)Dividends paid(25.0)(27.8)Common stock issuance2.01.8Other(0.9)(9.2)Net cash provided by (used in) financing activities$136.2$(53.0)Net decrease in cash and cash equivalents$(36.2)$(120.8)Cash and cash equivalents, beginning of period276.4312.9Effect of foreign exchange rate changes on cash and cash equivalents1.5(1.5)Cash and cash equivalents, end of period$241.7$190.6Supplemental information:Interest paid$35.1$39.3Interest received4.33.3Income taxes paid23.49.9FOR FURTHER INFORMATION PLEASE CONTACT: Nathalie Bourque, Vice President,Media contact:Public Affairs and Global Communications514-734-5788nathalie.bourque@cae.comORAndrew Arnovitz, Vice President,Investor relations:Investor Relations and Strategy514-734-5760andrew.arnovitz@cae.com