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Press release from Marketwire

CAE reports third quarter financial results for fiscal year 2013

- Revenue of C$522.1 million compared to C$453.1 million in prior year - EPS of C$0.15 (C$0.18 before restructuring, integration and acquisition costs) vs. C$0.18 in prior year - Free cash flow of C$90.7 million

Wednesday, February 13, 2013

CAE reports third quarter financial results for fiscal year 201309:55 EST Wednesday, February 13, 2013MONTREAL, CANADA--(Marketwire - Feb. 13, 2013) -(NYSE:CAE)(TSX:CAE) - CAE today reported financial results for the third quarter ended December 31, 2012. Net income attributable to equity holders was $37.8 million ($0.15 per share) this quarter, compared to $45.6 million ($0.18 per share) last year. All financial information is in Canadian dollars.Excluding $8.8 million (after-tax) of restructuring, integration and acquisition costs this quarter, net income attributable to equity holders was $46.6 million ($0.18 per share). Revenue for the quarter was $522.1 million, 15% higher than $453.1 million last year. "Our results for the quarter were as we anticipated, given the integration and restructuring efforts underway in our Civil and Military segments," said Marc Parent, CAE's President and Chief Executive Officer. "In Civil Products, simulator wins in the quarter put us on track for annual sales in the mid-30s. The integration of recently acquired Oxford is progressing as planned, and we continue to expect significant synergies in Civil Training as this effort is concluded. In Military, order levels continued to reflect the delays currently inherent to the defence market, but we had a good win rate and we remain confident given our high level of bid activity." Summary of consolidated results(amounts in millions, except for operating margins)Q3-2013Q2-2013Q1-2013Q4-2012Q3-2012Revenue$522.1514.4480.1506.7453.1Operating profit(1)$62.466.944.888.777.5As a % of revenue %12.013.09.317.517.1Net income$37.536.821.753.746.1Net income attributable to equity holders of the Company$37.836.521.353.245.6Backlog(2)$3,833.03,909.13,894.53,724.23,514.9Civil segments Revenue for our combined Civil segments increased 41% in the third quarter to $287.2 million compared to $203.7 million last year. Third quarter operating income was $47.1 million (16.4% of revenue) compared to $42.0 million (20.6% of revenue) last year. This quarter's results include the acquisition of Oxford Aviation Academy (Oxford), which is still in the process of being integrated with CAE's existing operations. We received six full-flight simulator (FFS) orders in the third quarter, including orders from COMAC of China for the first two FFSs for its new C919 passenger aircraft, and two FFSs for the Federal Air Transportation Agency in Russia. During the quarter, we also obtained training services contracts expected to generate $149.3 million in future revenue. We received $219.0 million in combined civil segment orders this quarter representing a book-to-sales ratio of 0.76x. The ratio for the trailing 12 months was 1.0x.Training & Services/Civil (TS/C)(amounts in millions, except operating margins, RSEU and FFSs deployed)Q3-2013Q2-2013Q1-2013Q4-2012Q3-2012Revenue$193.8189.1170.9132.3123.0Segment operating income$29.127.333.330.328.8Operating margins%15.014.419.522.923.4Backlog$1,345.81,360.91,400.01,183.41,102.8RSEU(3)186187164142140FFSs deployed222218216171170Simulation Products/Civil (SP/C)(amounts in millions, except operating margins)Q3-2013Q2-2013Q1-2013Q4-2012Q3-2012Revenue$93.498.980.383.180.7Segment operating income$18.018.914.414.013.2Operating margins%19.319.117.916.816.4Backlog$361.2385.2361.9351.6366.5Military segments Revenue for our combined Military segments decreased 7% in the third quarter to $206.2 million compared to $222.3 million last year. Operating income was $27.0 million (13.1% of revenue) for the quarter, compared to $36.9 million (16.6% of revenue) last year. We booked orders during the quarter from customers including the U.S. Navy under its foreign military sale program for two MH-60R Seahawk helicopter simulators for the Royal Australian Navy. We also received orders from the U.K. Ministry of Defence for helicopter simulator upgrades and training services at the Medium Support Helicopter Aircrew Training Facility, which CAE operates under a long term services agreement. We received $150.1 million in combined military segment orders this quarter, representing a book-to-sales ratio of 0.73x. The ratio for the trailing 12 months was 1.11x.Simulation Products/Military (SP/M)(amounts in millions, except operating margins)Q3-2013Q2-2013Q1-2013Q4-2012Q3-2012Revenue$140.5130.8135.4195.6152.4Segment operating income$18.320.919.534.626.9Operating margins%13.016.014.417.717.7Backlog$728.9723.1755.6786.0812.7Training & Services /Military (TS/M)(amounts in millions, except operating margins)Q3-2013Q2-2013Q1-2013Q4-2012Q3-2012Revenue$65.767.367.471.569.9Segment operating income$8.77.48.911.010.0Operating margins%13.211.013.215.414.3Backlog$1,397.11,439.91,377.01,403.21,232.9New Core Markets Revenue in New Core Markets was $28.7 million for the quarter, up 6% from $27.1 million last year. Operating income was $1.7 million for the quarter, compared to negative $1.4 million last year. In CAE Healthcare, we made inroads in global markets with sales of our products to support new simulation centres in China, including surgical simulators and associated curriculum packages. We also sold surgical simulators in Japan. In the U.S., we continued to sell our full suite of patient simulator products and centre management systems.In CAE Mining, we sold our resource modelling and mine planning software solutions to major mining customers in Africa, Brazil, Mexico and Russia. New Core Markets (NCM)(amounts in millions, except operating margins)Q3-2013Q2-2013Q1-2013Q4-2012Q3-2012Revenue$28.728.326.124.227.1Segment operating income (loss)$1.72.20.7(1.2)(1.4)Operating margins%5.97.82.7--Additional financial highlights Income taxes this quarter were $9.4 million representing an effective tax rate of 20%, compared to 25% last year. The tax rate was lower than the third quarter last year due to a change in the mix of income from various jurisdictions and the recognition of a tax asset generated from profits in one of our foreign operations.Free cash flow(4) was positive $90.7 million this quarter. The increase from last quarter was mainly attributable to favourable changes in non-cash working capital and higher proceeds from the disposal of assets. The increase from the third quarter of fiscal 2012 was mainly attributable to favourable changes in non-cash working capital, and lower maintenance capital expenditures. Capital expenditures totalled $32.9 million this quarter, including $24.0 million in growth capital expenditures and $8.9 million for maintenance. Net debt(5) was $965.4 million as at December 31, 2012, compared with $994.8 million as at September 30, 2012.In December 2012, pursuant to a private placement, CAE issued debt of $348.9 million ($125.0 million and US$225.0 million) to refinance existing debt. Of this amount, $50.0 million bears floating interest rates based on bankers' acceptance rates plus a spread. The remaining $298.9 million ($75.0 million and US$225.0 million) bear an interest rate ranging from 3.6% to 4.2%. The notes hold maturity dates ranging from December 2019 to December 2027.CAE will pay a dividend of $0.05 per share effective March 28, 2013 to shareholders of record at the close of business on March 15, 2013. Additional information You 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/investors.CAE's unaudited consolidated interim financial statements and management's discussion and analysis for the quarter ended December 31, 2012 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 FY2013 CAE will host a conference call focusing on fiscal year 2013 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 approximately 8,000 people at more than 100 sites and training locations in approximately 30 countries. CAE offers civil aviation, military, and helicopter training services in more than 45 locations worldwide and trains approximately 100,000 crewmembers yearly. In addition, the CAE Oxford Aviation Academy offers training to aspiring pilot cadets in 11 CAE-operated flight schools. CAE's business is diversified, ranging from the sale of simulation products to providing comprehensive services such as training and aviation services, integrated enterprise solutions, in-service support and crew sourcing. The company applies simulation expertise and operational experience to help customers enhance safety, improve efficiency, maintain readiness and solve challenging problems. CAE is leveraging its simulation capabilities in new markets such as healthcare and mining. www.cae.comYou 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, 2012. 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 13, 2013 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.NotesOperating profit is 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. Backlog is a non-GAAP measure that represents the expected value of orders we have received but have not yet executed. Revenue simulator equivalent unit (RSEU) is a financial measure we use to show the total average number of FFSs available to generate revenue during the period. 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. 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)December 31March 31(amounts in millions of Canadian dollars)20122012AssetsCash and cash equivalents$305.0$287.3Accounts receivable380.8308.4Contracts in progress: assets242.5245.8Inventories180.7153.1Prepayments56.747.7Income taxes recoverable124.295.5Derivative financial assets7.610.3Total current assets$1,297.5$1,148.1Property, plant and equipment1,489.01,293.7Intangible assets783.7533.2Deferred tax assets39.224.1Derivative financial assets4.67.2Other assets199.6177.4Total assets$3,813.6$3,183.7Liabilities and equityAccounts payable and accrued liabilities$635.5$597.6Provisions48.621.6Income taxes payable10.210.9Contracts in progress: liabilities106.0104.6Current portion of long-term debt157.4136.0Derivative financial liabilities11.712.7Total current liabilities$969.4$883.4Provisions7.76.0Long-term debt1,113.0685.6Royalty obligations157.5161.6Employee benefits obligations129.4114.2Deferred gains and other non-current liabilities183.5186.0Deferred tax liabilities137.291.8Derivative financial liabilities12.712.9Total liabilities$2,710.4$2,141.5EquityShare capital$467.9$454.5Contributed surplus21.419.2Accumulated other comprehensive loss(17.5)(9.8)Retained earnings602.2558.0Equity attributable to equity holders of the Company$1,074.0$1,021.9Non-controlling interests29.220.3Total equity$1,103.2$1,042.2Total liabilities and equity$3,813.6$3,183.7Consolidated Income Statement(Unaudited)Three months ended December 31Nine months ended December 31(amounts in millions of Canadian dollars, except per share amounts)2012201120122011Revenue$522.1$453.1$1,516.6$1,314.5Cost of sales370.9300.21,062.3884.5Gross profit$151.2$152.9$454.3$430.0Research and development expenses14.016.542.547.6Selling, general and administrative expenses67.362.5203.0184.6Other (gains) losses - net(5.9)(3.6)(20.5)(15.6)Restructuring, integration and acquisition costs13.4-55.2-Operating profit$62.4$77.5$174.1$213.4Finance income(2.7)(1.6)(5.8)(5.1)Finance expense18.217.855.851.1Finance expense - net$15.5$16.2$50.0$46.0Earnings before income taxes$46.9$61.3$124.1$167.4Income tax expense9.415.228.139.1Net income$37.5$46.1$96.0$128.3Attributable to:Equity holders of the Company$37.8$45.6$95.6$127.1Non-controlling interests(0.3)0.50.41.2$37.5$46.1$96.0$128.3Earnings per share from continuing operations attributable to equity holders of the CompanyBasic and diluted$0.15$0.18$0.37$0.49Consolidated Statement of Comprehensive IncomeThree months endedNine months ended(Unaudited)December 31December 31(amounts in millions of Canadian dollars)2012201120122011Net income$37.5$46.1$96.0$128.3Foreign currency translationNet currency translation difference on the translation of financial statements of foreign operations$36.2$(39.9)$(2.2)$18.6Net (losses) gains on certain long-term debt denominated in foreign currency and designated as hedges of net investments in foreign operations(7.4)4.2(0.2)(7.3)Income taxes0.8(0.5)(0.5)1.4$29.6$(36.2)$(2.9)$12.7Net changes in cash flow hedgesEffective portion of changes in fair value of cash flow hedges$(6.7)$13.1$2.5$(14.8)Net change in fair value of cash flow hedges transferred to net income or to related non-financial assets or liabilities(1.4)6.4(9.1)(0.2)Income taxes2.5(5.6)1.93.3$(5.6)$13.9$(4.7)$(11.7)Defined benefit plan actuarial gains (losses)Defined benefit plan actuarial gains (losses)$18.9$2.5$(20.7)$(42.3)Income taxes(5.1)(0.7)5.511.7$13.8$1.8$(15.2)$(30.6)Other comprehensive income (loss)$37.8$(20.5)$(22.8)$(29.6)Total comprehensive income$75.3$25.6$73.2$98.7Attributable to:Equity holders of the Company$75.5$25.2$72.7$97.4Non-controlling interests(0.2)0.40.51.3$75.3$25.6$73.2$98.7Consolidated Statement of Changes in Equity(Unaudited)Attributable to equity holders of the Companynine months ended December 31, 2012Common shares(amounts in millions of Canadian dollars, except number of shares)Number of sharesStated valueContributed surplusAccumulated other comprehensive (loss) incomeRetained earningsTotalNon-controlling interestsTotal equityBalances, beginning of period258,266,295$454.5$19.2$(9.8)$558.0$1,021.9$20.3$1,042.2Net income----95.695.60.496.0Other comprehensive income (loss):Foreign currency translation---(3.0)-(3.0)0.1(2.9)Net changes in cash flow hedges---(4.7)-(4.7)-(4.7)Defined benefit plan actuarial losses----(15.2)(15.2)-(15.2)Total comprehensive income-$-$-$(7.7)$80.4$72.7$0.5$73.2Stock options exercised382,2503.2---3.2-3.2Optional cash purchase1,161-------Stock dividends940,8599.3--(9.3)---Transfer upon exercise of stock options-0.9(0.9)-----Share-based payments--3.1--3.1-3.1Additions to non-controlling interests------8.48.4Dividends----(26.9)(26.9)-(26.9)Balances, end of period259,590,565$467.9$21.4$(17.5)$602.2$1,074.0$29.2$1,103.2(Unaudited)Attributable to equity holders of the Companynine months ended December 31, 2011 Common shares(amounts in millions of Canadian dollars, except number of shares)Number of sharesStated valueContributed surplusAccumulated other comprehensive (loss) incomeRetained earningsTotalNon-controlling interestsTotal equityBalances, beginning of period256,964,756$440.7$17.1$(9.8)$466.4$914.4$18.5$932.9Net income----127.1127.11.2128.3Other comprehensive income (loss):Foreign currency translation---12.6-12.60.112.7Net changes in cash flow hedges---(11.7)-(11.7)-(11.7)Defined benefit plan actuarial losses----(30.6)(30.6)-(30.6)Total comprehensive income-$-$-$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$1,011.6The total of retained earnings and accumulated other comprehensive loss for the nine months ended December 31, 2012 was $584.7 million (2011 - $523.1 million).Consolidated Statement of Cash Flows(Unaudited)nine months ended December 31(amounts in millions of Canadian dollars)20122011Operating activitiesNet income$96.0$128.3Adjustments to reconcile net income to cash flows from operating activities:Depreciation of property, plant and equipment79.568.0Amortization of intangible and other assets34.024.3Financing cost amortization1.31.3Deferred income taxes19.218.2Investment tax credits(16.6)(10.6)Share-based payments(1.4)1.2Defined benefit pension plans(5.7)(9.0)Amortization of other non-current liabilities(10.3)(8.5)Other(11.2)(5.4)Changes in non-cash working capital(109.0)(96.0)Net cash provided by operating activities$75.8$111.8Investing activitiesBusiness combinations, net of cash and cash equivalents acquired$(284.6)$(126.1)Joint ventures, net of cash and cash equivalents acquired-(27.6)Capital expenditures for property, plant and equipment(123.4)(121.3)Proceeds from disposal of property, plant and equipment7.828.3Capitalized development costs(37.0)(30.0)Enterprise resource planning (ERP) and other software(13.9)(12.3)Other(0.8)4.8Net cash used in investing activities$(451.9)$(284.2)Financing activitiesNet borrowing under revolving unsecured credit facilities$132.3$14.2Net effect of current financial assets program(24.6)10.4Proceeds from long-term debt, net of transaction costs703.1182.1Repayment of long-term debt(374.1)(26.7)Repayment of finance lease(17.3)(19.9)Dividends paid(26.9)(25.0)Common stock issuance3.22.0Other(1.6)(0.9)Net cash provided by financing activities$394.1$136.2Net increase (decrease) in cash and cash equivalents$18.0$(36.2)Cash and cash equivalents, beginning of period287.3276.4Effect of foreign exchange rate changes on cash and cash equivalents(0.3)1.5Cash and cash equivalents, end of period$305.0$241.7Supplemental information:Dividends received$2.4$4.7Interest paid41.535.1Interest received4.64.3Income taxes paid20.923.4FOR FURTHER INFORMATION PLEASE CONTACT: Contact Information: Investor relations:Andrew Arnovitz, Vice President,Investor Relations and Strategy(514) 734-5760andrew.arnovitz@cae.comMedia:Nathalie Bourque, Vice President,Public Affairs and Global Communications(514) 734-5788nathalie.bourque@cae.com