CAE reports third quarter financial results for fiscal year 2014

MONTREAL, CANADA—(Marketwired – Feb. 11, 2014) – (NYSE:CAE)(TSX:CAE) – CAE today reported financial results for the third quarter ended December 31, 2013. Net income attributable to equity holders was $46.1 million ($0.18 per share) this quarter, compared to $37.5 million ($0.14 per share) last year. Revenue for the quarter was $513.6 million, compared to $500.9 million in the third quarter last year. All financial information is in Canadian dollars.

“Our performance improved across the board in the third quarter with higher operating margins and a strong order intake,” said Marc Parent, CAE’s President and Chief Executive Officer. “We have increased confidence for a strong second half with high-teens margins in Civil and continued resiliency in defence. Our operational discipline is driving positive results, and with a clearer outlook for defence, and a robust commercial aerospace market, we are positioned for continued growth.”

Summary of consolidated results

Civil segments

Revenue for our combined Civil segments grew 3% in the third quarter to $282.1 million compared to $273.4 million last year. Third quarter operating income was $45.2 million (16.0% of revenue) compared to $39.0 million (14.5% of revenue) last quarter and $46.1 million (16.9% of revenue) last year.

We received 12 FFS orders in the third quarter and have since announced another three, bringing us to a record 43 year to date. During the quarter we signed long-term training agreements with airlines and operators including Japan Airlines, Virgin Australia Regional Airlines, Air Transat and Jetflite. Since the end of the quarter, CAE has been selected as the exclusive Dassault-Approved Training Provider for the newly-launched Falcon 5X long-range business jet. We received $329.2 million in combined civil segment orders this quarter for a book-to-sales ratio of 1.17×. Third quarter Civil backlog was a record $2.1 billion.

Training & Services/Civil (TS/C)

Simulation Products/Civil (SP/C)

Military segments

Revenue for our combined Military segments grew 2% in the third quarter to $201.8 million compared to $198.8 million last year. Combined Military operating income was $31.0 million (15.4% of revenue) for the quarter, compared to $25.4 million (12.8% of revenue) last year.

We booked orders during the quarter for simulators, upgrades and services for enduring aircraft platforms including the MH-60R Seahawk helicopter for the Royal Danish Navy, the P-8A Poseidon aircraft for the US Navy, and the C-130 Hercules aircraft for the US Air Force. On new aircraft programs for CAE, we signed contracts for a comprehensive ground-based training system on the T-6C aircraft for the Mexican Air Force, an Unmanned Aerial System Mission Trainer for the General Atomics Predator for the Italian Air Force, and aircrew training services for the T-44C Pegasus for the US Navy. We had success broadening our core market with the signature of a ten-year agreement with the Brunei Ministry of Home Affairs to establish a training centre and conduct emergency management training. In total, we received $240.3 million in combined military segment orders this quarter, representing a book-to-sales ratio of 1.19×. Third quarter Military backlog was $2.0 billion and we had an additional $435.4 million of unfunded backlog6.

Simulation Products/Military (SP/M)

Training & Services /Military (TS/M)

New Core Markets

Revenue in New Core Markets was $29.7 million for the quarter, compared to $28.7 million last year. Operating income was $1.4 million compared to $1.7 million last year.

In CAE Healthcare, we made further inroads in the defence market with the sale of a record 44 Caesar Trauma Patient Simulators to the U.S. Navy Expeditionary Combat Command. We also sold our centre management, ultrasound simulators and patient simulators to a variety of teaching institutions in the U.S. Since the end of the quarter, we unveiled the CAE Fidelis Maternal Fetal Simulator at IMSH – the world’s largest healthcare simulation conference. The new simulator was developed to help healthcare instructors to improve training and patient outcomes in the event of serious complications arising from childbirth.

In CAE Mining, we released a major update to enhance the performance and functionality of our flagship resource modelling solution. We sold resource modeling, open pit and underground mine planning software and geological and engineering services to customers globally.

New Core Markets (NCM)

Additional financial highlights

Income taxes this quarter were $11.3 million representing an effective tax rate of 19%, compared to 17% last year. The increase in the effective tax rate was mainly due to a change in the mix of income from various jurisdictions.

Free cash flow7 was negative $12.7 million this quarter. The decrease from last quarter was mainly attributable to unfavorable changes in non-cash working capital8, dividends from certain joint ventures, and lower cash from operations.

For the year to date, free cash flow was positive $95.5 million, or $117.2 million higher than the same period last year. The increase was mainly due to favourable changes in non-cash working capital and an increase in cash provided by operating activities.

Capital expenditures9 totaled $37.2 million this quarter with $22.8 million for growth this quarter and $60.7 million year to date. Maintenance capital expenditures were $14.4 million this quarter and $31.0 million for the first nine months.

Net debt10 was $886.5 million as at December 31, 2013, compared to $810.4 million as at September 30, 2013. Our net debt-to-total capital11 ratio remained stable at 39%.

CAE will pay a dividend of $0.06 per share effective March 31, 2014 to shareholders of record at the close of business on March 14, 2014.