CAE reports first quarter financial results for fiscal year 2013 and announces dividend increase

MONTREAL, CANADA—(Marketwire – Aug. 9, 2012) – (NYSE:CAE)(TSX:CAE) – CAE today reported financial results for the first quarter ended June 30, 2012. Net income attributable to equity holders was $21.3 million ($0.08 per share) this quarter, compared to $43.1 million ($0.17 per share) last year. All financial information is in Canadian dollars.

Excluding the $32.0 million ($25.4 million after tax) impact of restructuring, integration and acquisition costs this quarter, net income attributable to equity holders was $46.7 million ($0.18 per share).

Revenue for the quarter was $480.1 million, 12% higher than $427.9 million last year.

“We made good progress this quarter in executing our plan to strengthen our market position and to adapt our business to market conditions. Our results reflect the ongoing efforts associated with the implementation of our restructuring program, and the acquisition and integration of Oxford Aviation Academy,” said Marc Parent, CAE’s President and Chief Executive Officer. “Our Civil business continued to show the strength of our global franchise, and we are encouraged by the better than anticipated opportunities for synergies we have identified with Oxford. Military results in the quarter reflected the late timing of orders received in the prior year, which will start to benefit our second half. We remain confident in modest Military growth for the year as a whole.”

CAE’s Board of Directors today approved a 25% increase in CAE’s quarterly dividend, reflecting our continued confidence in CAE’s business model, which involves increased recurring revenue and cash flow.

“Following our two recent large acquisitions, we have the right platforms to leverage our unique capabilities and lead the market, and we are focused on the integration and execution of our business,” added Parent. “With no further material acquisition plans in the near term, we are prioritizing the use of capital and free cash flow toward selectively funding investments where demand has been secured, reducing our debt, and generating higher current returns for shareholders.”

Civil segments
Revenue for our combined Civil segments increased 20% in the first quarter to $251.2 million compared to $210.1 million last year. First quarter operating income was $47.7 million (19.0% of revenue) compared to $45.2 million (21.5% of revenue) last year. Our results include six weeks of performance from the recently acquired Oxford Aviation Academy (Oxford), which is now in the process of being integrated with CAE.

Civil market activity continued to be robust with seven full-flight simulator orders booked in the first quarter. Year to date we have announced 10 orders and continue to expect the total to reach the mid-30s by the end of the fiscal year. During the quarter, we also obtained training services contracts expected to generate $132.4 million in future revenue. These contracts include a multi-year agreement with Cebu Pacific Air at the new Philippine Academy for Aviation Training and long term contract extensions with existing customers, SilkAir in Singapore and KLM Flight Academy to train Ab-Initio cadets at the CAE Oxford Aviation Academy.

We received $235.2 million in combined civil segment orders this quarter representing a book-to-sales ratio of 0.94×. The ratio for the trailing 12 months was 1.24×.

Military segments
Revenue for our combined Military segments decreased 2% in the first quarter to $202.8 million compared to $206.4 million last year. Operating income was $28.4 million (14.0% of revenue) for the quarter, compared to $29.4 million (14.2% of revenue) last year.

We booked orders during the quarter for a suite of fixed-wing Advanced Jet Trainer aircraft simulators and training devices and we received a contract to perform upgrades on the U.S. Navy’s MH-60S and MH-60R Seahawk helicopter maintenance trainers. We also got an order from the U.S. Air Force to upgrade a C-5 weapons systems trainer. In services, we received a contract to continue providing in-service support for the Canadian Forces CF-18 aircraft, and a contract to provide training support services for the Royal Australian Air Force on C-130H and C-130J aircraft.

We received $145.5 million in combined military segment orders this quarter representing a book-to-sales ratio of 0.72×. The ratio for the trailing 12 months was 1.00×.

New Core Markets
Revenue in New Core Markets was $26.1 million for the quarter, up 129% from $11.4 million last year. Operating income was $0.7 million for the quarter, compared to negative $2.6 million last year.

We continued to gain traction by penetrating global markets for our innovative products and services.

In CAE Mining, we sold software solutions to customers including Vale, Polymetal International and Somincor during the quarter and we released new applications and updates to our software and hardware solutions.

In CAE Healthcare, we sold solutions within our range of simulator products and centre management systems to defence customers in the U.S. and U.K., and to universities and teaching hospitals in the U.S., Mexico, Slovenia, Poland, UAE and Japan.

Additional financial highlights
Income taxes this quarter were $6.2 million representing an effective tax rate of 22%, compared to 24% last year. The lower rate is mainly due to lower income in higher tax jurisdictions, which was further accentuated by our restructuring measures in Europe.

Free cash flow(5) was negative $98.1 million this quarter. The decrease from last quarter was mainly attributable to unfavourable changes in non-cash working capital and lower cash provided by operating activities mainly as a result of the restructuring, integration and acquisition costs. The unfavourable changes in non-cash working capital, as we normally see in the first quarter of the fiscal year, are mainly due to a decrease in our accounts payable and accrued liabilities and an increase in the net position of our contracts in progress and in accounts receivable. The decrease from the first quarter of fiscal 2012 was mainly attributable to lower cash provided by operating activities and lower proceeds from the disposal of property, plant and equipment. The decrease was partially offset by a lower investment in non-cash working capital.

Capital expenditures totalled $46.5 million this quarter, including $34.3 million in growth capital expenditures and $12.2 million for maintenance. We continue to invest selectively where we have secured demand and total capital expenditures for the year are expected to be in the range of $150 million, which is lower than the $166 million invested last year. The synergies we will derive from the acquisition of Oxford will alleviate some of the capital investments we would have otherwise had to make to support the growth of our customers.

Net debt(6) was $988.9 million as at June 30, 2012 compared with $534.3 million as at March 31, 2012. The increase of $454.6 million was mainly due to the financing of our acquisition of Oxford. Effective June 29, 2012, we amended our unsecured revolving credit facility at more favourable interest rates and extended the maturity date from April 2015 to April 2017. The available facility amount was increased from US$450.0 million to US$550.0 million, with the additional US$100.0 million used to refinance and reduce part of the two-year banking facility put in place for the Oxford acquisition from approximately $300 million to $200 million.

CAE will pay a dividend of $0.05 per share effective September 28, 2012 to shareholders of record at the close of business on September 14, 2012.