CAE reports second quarter results for fiscal year 2008



    - Net earnings increased 25% year over year to CDN$38.9 million
    - Revenue increased 26% year over year to CDN$353.9 million
    - Net cash generated from continuing operations of CDN$97.7 million
    - Free cash flow of CDN$27.1 million

    MONTREAL, Nov. 8 /CNW Telbec/ - (NYSE:   CGT; TSX: CAE) - CAE today
reported financial results for the second quarter ended September 30, 2007.
Net earnings were $38.9 million ($0.15 per share) this quarter, compared to
$31.0 million ($0.12 per share) in the second quarter of last year. All
financial information is in Canadian dollars.

    
    Summary of consolidated results

    (millions, except
     operating margins)        Q2-08     Q1-08     Q4-07     Q3-07     Q2-07
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue               $    353.9     358.3     337.3     331.2     280.4
    Earnings before
     interest and
     income taxes (EBIT)  $     62.1      58.0      53.3      44.2      44.8
    As a % of revenue     %     17.5      16.2      15.8      13.3      16.0
    Net earnings          $     38.9      38.7      34.3      29.7      31.0
    Backlog               $  2,513.3   2,599.5   2,774.6   2,711.9   2,584.0
    -------------------------------------------------------------------------


    Consolidated revenue was $353.9 million, $73.5 million higher than in the
second quarter of 2007.
    Second-quarter consolidated earnings before interest and taxes(1) (EBIT)
were $62.1 million, or 17.5% of revenue. EBIT increased 39% or $17.3 million
year over year, as a result of higher segment operating income in our two
Civil segments and in Simulation Products/Military. Excluding non-recurring
items last year, EBIT increased by $15.6 million.
    "We are continuing to benefit from strong market conditions and the
successful execution of our strategy," said Robert E. Brown, CAE's President
and Chief Executive Officer. "Despite the rising Canadian dollar over the past
three years, we have achieved greater profitability by lowering costs and
becoming more efficient. We are accelerating initiatives to identify and
capture additional savings."
    During the quarter we signed contracts for five civil full-flight
simulators (FFSs). In addition, the Emirates-CAE Flight Training Centre
committed to a Bombardier Global Express FFS and a CAE 5000 Series Hawker
Beechcraft Hawker 800 XPi FFS. We have announced 21 FFS orders year to date,
and, with the strong level of activity in the market, we believe the number of
FFS orders could reach 34 by March 31, 2008.
    We secured more than $165 million in new training contracts in civil
training and services, including a 15-year training centre operations services
agreement with Air Canada. We also announced an expansion of our global
training network to add into service 16 new business jet training programs
over the next two years.
    We concluded a number of new contracts in the combined military segments,
totalling $ 114 million this quarter, including the design and delivery of
training systems and services to the United States Navy, Air Force and Marine
Corps.
    Since the end of the quarter, we announced that the Government of Canada
has qualified the CAE-led team for the C-130J and CH-47 aircrew training
capability. Public Works and Government Services Canada will release to CAE a
request for proposal to acquire equipment and aircrew training services over
20 years for Canada's future tactical airlift aircraft and helicopter fleets.

    Business segment highlights

    Simulation Products/Civil (SP/C)

    Financial results

    (millions, except
     operating margins)        Q2-08     Q1-08     Q4-07     Q3-07     Q2-07
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue               $    112.3     113.0      97.6      92.1      84.2
    Segment operating
     income               $     26.2      19.7      15.3      15.5      18.7
    Operating margins     %     23.3      17.4      15.7      16.8      22.2
    Backlog               $    373.3     413.3     352.8     340.0     313.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Revenue in the SP/C segment was $112.3 million this quarter, up by 33%
over the same period last year. Revenue increased as a result of higher orders
and revenue recorded on simulators that were being manufactured for which we
got contracts during the quarter.
    Segment operating income was $26.2 million, up by 40% over the same period
last year. This increase is mainly due to higher revenue this quarter,
improved program performance and a more favourable mix.
    New orders totalled $74.3 million, and segment backlog was $373.3 million
at the end of the quarter.

    Training & Services/Civil (TS/C)

    Financial results

    (millions, except
     operating margins)        Q2-08     Q1-08     Q4-07     Q3-07     Q2-07
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue               $     90.0      94.8      91.7      83.1      78.4
    Segment operating
     income               $     14.6      19.6      21.3      13.5      11.2
    Operating margins     %     16.2      20.7      23.2      16.2      14.3
    Backlog               $    887.5     853.4     951.6     905.6     842.9
    -------------------------------------------------------------------------


    Revenue in the TS/C segment increased 15% year over year as a result of
continued strong demand in most of our training centres and the addition of
seven Revenue Simulator Equivalent Units (RSEUs) to our global network.
    Segment operating income was $14.6 million (16.2% of revenue), up by 30%
from last year. While our civil training business showed increased operational
strength, margins in the quarter were impacted by costs associated with the
expansion of our network and the ramp-up of new training programs.
    New orders exceeded $165 million, and segment backlog was $887.5 million
at the end of the quarter.

    Simulation Products/Military (SP/M)

    Financial results

    (millions, except
     operating margins)        Q2-08     Q1-08     Q4-07     Q3-07     Q2-07
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue               $     97.1      95.5      92.2     105.2      64.3
    Segment operating
     income               $     13.4      12.3       9.5      11.2       7.3
    Operating margins     %     13.8      12.9      10.3      10.6      11.4
    Backlog               $    535.3     560.5     635.8     609.0     626.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Revenue in the SP/M segment was $97.1 million this quarter, up by 51% over
the same period last year as a result of higher activity on some U.S. and U.K.
programs as well as the integration into our results of Engenuity and Multigen
Paradigm. These increases were partly offset by the appreciation of the
Canadian dollar against the U.S. dollar.
    Segment operating income this quarter was $13.4 million, up 84% year over
year. The increase follows higher revenues related to the achievement of some
significant milestones on some U.S. and U.K. programs.
    New orders totalled $84.6 million, and segment backlog was $535.3 million
at the end of the quarter. We expect variations in the level of order bookings
between quarters in both Military segments because of the unique nature of
military contracts and the irregular timing in which they are awarded.

    Training & Services/Military (TS/M)

    Financial results

    (millions, except
     operating margins)        Q2-08     Q1-08     Q4-07     Q3-07     Q2-07
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue               $     54.5      55.0      55.8      50.8      53.5
    Segment operating
     income               $      7.9       6.4       6.1       6.8       9.3
    Operating margins     %     14.5      11.6      10.9      13.4      17.4
    Backlog               $    717.2     772.3     834.4     857.3     801.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Revenue in the TS/M segment was $54.5 million, up by 2% from last year.
The foreign exchange impact was offset by the integration of the recent
acquisitions of Engenuity and Kesem.
    Segment operating income was $7.9 million, down by 15% over the same
period last year. This decrease is mainly because the prior year included
higher labour rate adjustments related to U.S. military contracts. This
decrease was partially offset by a bi-annual dividend received this quarter
from an investment in the U.K.
    New orders totalled $29.4 million this quarter, and segment backlog was
$717.2 million at the end of the quarter.
    Combined revenue this quarter for the Military business as a whole was
$151.6 million and combined operating income was $21.3 million, resulting in
an operating margin of 14.1%.

    Cash flow and financial position

    As of the end of the second quarter, we generated $97.7 million of net
cash from continuing operations. We invested $87.4 million in capital
expenditures, and received $25.2 million in non-recourse financing. As a
result, we generated free cash flow(2) of $27.1 million this quarter.
    Net debt(3) was $218.6 million for the quarter, down by 1% from last
quarter.
    CAE will pay a dividend of $0.01 per share on December 31, 2007 to
shareholders of record on December 14, 2007.

    Additional consolidated financial results

    The consolidated backlog was $2.513 billion at the end of this quarter,
compared to $2.599 billion at the end of last quarter. New orders of
$353.8 million were added to backlog this quarter, while negative foreign
exchange movements reduced the Canadian dollar value of the backlog by $86.1
million. The net increase was more than offset by $353.9 million of revenues
generated from backlog.
    Income taxes were $17.7 million this quarter, representing an effective
tax rate of 31%. We expect the effective income tax rate for fiscal 2008 to be
approximately 30%.
    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
financial statements which are posted on our website at
www.cae.com/financialsQ2FY08.

    Conference call

    CAE will host a conference call today at noon EST for analysts,
institutional investors and the media. North American participants can listen
to the conference by dialing 1-866-540-8136 or (514) 868-1042. Overseas
participants can dial +800-6578-9868 or 1(514) 868-1042. The conference call
will also be audio Webcast live for the public at www.cae.com.
    CAE is a world leader in providing simulation and modelling technologies
and integrated training solutions for the civil aviation industry and defence
forces around the globe. With annual revenues exceeding C$1 billion, CAE
employs approximately 6,000 people at more than 75 sites and training
locations in 20 countries. We have the largest installed base of civil and
military full-flight simulators and training devices. More than
75,000 crewmembers train yearly in our global network of 27 civil aviation and
military training centres. We also offer modelling and simulation software to
various market segments and through CAE's professional services division, we
assist customers with a wide range of simulation-based needs.

    Certain 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, 2007. 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 November 8, 2007 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) Earnings before interest and taxes (EBIT) is a non-GAAP measure that
        shows us how we have performed before the effects of certain
        financing decisions and tax structures. We track EBIT 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) Free cash flow is a non-GAAP measure that tells 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 all
        capital expenditures (including growth capital expenditures and
        capitalized costs) and dividends paid, and then adding the proceeds
        from sale and leaseback arrangements and other asset-specific
        financing (including non-recourse debt). Dividends are deducted in
        the calculation of free cash flow because we consider them an
        obligation, like interest on debt, which means that amount is not
        available for other uses.

    (3) 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 (debt
        that matures in more than one year), including the current portion,
        and subtracting cash and cash equivalents.


    Consolidated Balance Sheets

                                                          As at        As at
    (Unaudited)                                    September 30     March 31
    (amounts in millions of Canadian dollars)              2007         2007
    -------------------------------------------------------------------------

    Assets
    Current assets
      Cash and cash equivalents                       $   144.3    $   150.2
      Accounts receivable                                 261.7        219.8
      Inventories                                         197.7        203.8
      Prepaid expenses                                     21.8         23.5
      Income taxes recoverable                             31.7         24.7
      Future income taxes                                   4.5          3.7
    -------------------------------------------------------------------------
                                                          661.7        625.7
    Property, plant and equipment, net                    948.9        986.6
    Future income taxes                                    79.5         81.5
    Intangible assets                                      59.5         36.0
    Goodwill                                              112.1         96.9
    Other assets                                          144.2        129.5
    -------------------------------------------------------------------------
                                                      $ 2,005.9    $ 1,956.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities
      Accounts payable and accrued liabilities        $   380.4    $   403.9
      Deposits on contracts                               183.3        184.8
      Current portion of long-term debt                    25.5         27.2
      Future income taxes                                   7.8          4.9
    -------------------------------------------------------------------------
                                                          597.0        620.8
    Long-term debt                                        337.4        256.0
    Deferred gains and other long-term liabilities        209.5        232.7
    Future income taxes                                    31.6         16.8
    -------------------------------------------------------------------------
                                                        1,175.5      1,126.3
    -------------------------------------------------------------------------

    Shareholders' Equity
    Capital stock                                         417.4        401.7
    Contributed surplus                                     5.6          5.7
    Retained earnings                                     574.4        510.2
    Accumulated other comprehensive loss                 (167.0)       (87.7)
    -------------------------------------------------------------------------
                                                          830.4        829.9
    -------------------------------------------------------------------------
                                                      $ 2,005.9    $ 1,956.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statements of Earnings

    (Unaudited)                       Three months ended    Six months ended
    (amounts in millions of Canadian        September 30        September 30
     dollars, except per share amounts)   2007      2006      2007      2006
    -------------------------------------------------------------------------

    Revenue                            $ 353.9   $ 280.4   $ 712.2   $ 582.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings before interest and
     income taxes                      $  62.1   $  44.8   $ 120.1   $  91.9
    Interest expense, net                  5.4       1.2       8.0       4.2
    -------------------------------------------------------------------------
    Earnings before income taxes       $  56.7   $  43.6   $ 112.1   $  87.7
    Income tax expense                    17.7      12.3      34.4      23.4
    -------------------------------------------------------------------------
    Earnings from continuing
     operations                        $  39.0   $  31.3   $  77.7   $  64.3
    Results of discontinued operations    (0.1)     (0.3)     (0.1)     (0.9)
    -------------------------------------------------------------------------
    Net earnings                       $  38.9   $  31.0   $  77.6   $  63.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share from
     continuing operations             $  0.15   $  0.12   $  0.31   $  0.26
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted earnings per share from
     continuing operations             $  0.15   $  0.12   $  0.31   $  0.25
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted earnings per
     share                             $  0.15   $  0.12   $  0.31   $  0.25
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average number of shares
     outstanding (Basic)                 253.5     251.0     253.0     250.9
    -------------------------------------------------------------------------
    Weighted average number of shares
     outstanding (Diluted)               254.9     252.9     254.3     252.8
    -------------------------------------------------------------------------


    Consolidated Statements of Retained Earnings

    (Unaudited)                       Three months ended    Six months ended
    (amounts in millions of                 September 30        September 30
     Canadian dollars)                    2007      2006      2007      2006
    ------------------------------------------------------------------------
    Retained earnings at beginning of
     period                            $ 538.1   $ 422.7   $ 510.2   $ 392.8
    Transition adjustments -
     Financial instruments                   -         -      (8.3)        -
    Net earnings                          38.9      31.0      77.6      63.4
    Dividends                             (2.6)     (2.5)     (5.1)     (5.0)
    -------------------------------------------------------------------------
    Retained earnings at end of
     period                            $ 574.4   $ 451.2   $ 574.4   $ 451.2
    -------------------------------------------------------------------------


    Consolidated Statements of Comprehensive Income

    (Unaudited)                       Three months ended    Six months ended
    (amounts in millions of                 September 30        September 30
     Canadian dollars)                    2007      2006      2007      2006
    -------------------------------------------------------------------------
    Net earnings                       $  38.9   $  31.0   $  77.6   $  63.4
    -------------------------------------------------------------------------
    Other comprehensive income (loss),
     net of income taxes:

      Foreign Currency Translation
       Adjustment
      Net foreign exchange gains
       (losses) on translating financial
       statements of self-sustaining
       foreign operations                (43.1)      0.7    (110.6)    (16.0)
      Net change in gains on certain
       long-term debt denominated in
       foreign currency and designated
       as hedges on net investments
       of self-sustaining foreign
       operations                          6.3         -      14.6       5.6
      Income tax adjustment                0.4         -       0.9      (0.2)
    -------------------------------------------------------------------------
                                         (36.4)      0.7     (95.1)    (10.6)
    -------------------------------------------------------------------------

      Net Changes in Cash Flow Hedge
      Net change in gains on derivative
       items designated as hedges of
       cash flows                         10.5         -      28.6         -
      Income tax adjustment               (3.5)        -      (9.3)        -
    -------------------------------------------------------------------------
                                           7.0         -      19.3         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total other comprehensive (loss)
     income                              (29.4)      0.7     (75.8)    (10.6)
    -------------------------------------------------------------------------

    Comprehensive income              $    9.5  $   31.7  $    1.8   $  52.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statements of Cash Flows

    (Unaudited)                       Three months ended    Six months ended
    (amounts in millions of                 September 30        September 30
     Canadian dollars)                    2007      2006      2007      2006
    -------------------------------------------------------------------------
    Operating activities
    Net earnings                       $  38.9  $   31.0  $   77.6   $  63.4
    Results of discontinued operations     0.1       0.3       0.1       0.9
    -------------------------------------------------------------------------
    Earnings from continuing operations   39.0      31.3      77.7      64.3
    Adjustments to reconcile earnings
     to cash flows from operating
     activities:
      Depreciation                        15.6      13.3      30.2      26.1
      Financing cost amortization          0.3       0.2       0.5       0.4
      Amortization and write down of
       intangible and other assets         4.6       3.6       8.5       7.2
      Future income taxes                  5.3       6.4      10.1      12.6
      Investment tax credits               3.7      (1.6)      7.5      (4.1)
      Stock-based compensation plans       1.8       4.9      (1.1)      8.0
      Employee future benefits, net       (0.1)     (0.2)     (0.2)     (0.3)
      Other                               (5.2)      0.1       1.0       1.5
      Changes in non-cash working
       capital                            32.7     (16.8)    (65.2)    (44.6)
    -------------------------------------------------------------------------
    Net cash provided by operating
     activities                           97.7      41.2      69.0      71.1
    -------------------------------------------------------------------------
    Investing activities
    Business acquisitions (net of cash
     and cash equivalents acquired)       (1.8)        -     (40.7)        -
    Proceeds from disposal of
     discontinued operations                 -      (6.6)        -      (6.6)
    Capital expenditures                 (87.4)    (40.9)   (120.1)    (81.6)
    Deferred development costs            (4.9)     (0.2)     (9.7)     (0.2)
    Deferred pre-operating costs          (0.1)        -      (0.4)     (0.1)
    Other                                 (0.9)      6.2      (3.4)      3.7
    -------------------------------------------------------------------------
    Net cash used in investing
     activities                          (95.1)    (41.5)   (174.3)    (84.8)
    -------------------------------------------------------------------------
    Financing activities
    Net borrowing under revolving
     unsecured credit facilities             -      30.0      15.0      30.0
    Proceeds from long-term debt, net
     of transaction costs and debt
     basis adjustment                     25.2      14.1     109.4      24.5
    Reimbursement of long-term debt      (12.1)     (4.0)    (16.4)     (7.6)
    Dividends paid                        (2.5)     (2.5)     (4.9)     (4.9)
    Common stock issuance                  1.9       1.6      13.5       2.7
    Other                                  0.2      (0.3)     (4.5)      0.6
    -------------------------------------------------------------------------
    Net cash provided by financing
     activities                           12.7      38.9     112.1      45.3
    -------------------------------------------------------------------------
    Effect of foreign exchange rate
     changes on cash and cash
     equivalents                          (6.0)     (0.1)    (12.7)     (1.9)
    -------------------------------------------------------------------------
    Net increase (decrease) in cash
     and cash equivalents                  9.3      38.5      (5.9)     29.7
    Cash and cash equivalents at
     beginning of period                 135.0      72.3     150.2      81.1
    -------------------------------------------------------------------------
    Cash and cash equivalents at
     end of period                     $ 144.3   $ 110.8   $ 144.3   $ 110.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

For further information: Media contact: Nathalie Bourque, Vice
President, Public Affairs and Global Communications, (514) 734-5788,
nathalie.bourque@cae.com; Investor relations: Andrew Arnovitz, Vice President,
Investor Relations and Strategy, (514) 734-5760, andrew.arnovitz@cae.com;
www.cae.com

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