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CAE INC — Interim / Quarterly Report 2004
Nov 4, 2004
30636_ffr_2004-11-04_7d83ccda-811c-4d7c-bb71-16c11671497e.zip
Interim / Quarterly Report
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6-K 1 m14555ore6vk.htm FORM 6-K e6vk PAGEBREAK
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TABLE OF CONTENTS
| Consolidated Balance Sheets |
|---|
| Consolidated Statements of Earnings |
| Consolidated Statements of Retained Earnings |
| Consolidated Statements of Cash Flow |
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Table of Contents
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 6-K
Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934
For the month of: November 2004 Commission File Number: 1-31402
CAE Inc. (Name of Registrant)
Royal Bank Plaza South Tower, Suite 3060 Toronto, Ontario Canada M5J 2J1 (Address of Principal Executive Offices) Telephone: (416) 866-6967
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F o Form 40-F þ
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes o No þ
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| /s/ Aline Belanger | |
|---|---|
| Name: | Aline Belanger |
| Title: | Vice President, Corporate Controller and Assistant Secretary |
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EXHIBIT INDEX
| Exhibit | Description of Exhibit |
|---|---|
| 99 | Press |
| Release-Q2 Earning Release |
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Exhibit 99
Press Release
CAE reports second-quarter results
Consolidated revenue increases 10% from last year to C$235.1 million
Earnings from continuing operations before interest and tax (EBIT) rise 8% to C$22.2 million
Restoration of double-digit Military margins
Higher capacity utilization of Civil training network
Sale of Discontinued Marine Controls unit for approximately C$328 million expected to close before March 31, 2005
Montreal, November 4, 2004 (NYSE: CGT; TSX: CAE) CAE today reported results for the second quarter ended September 30, 2004. Financial information is in Canadian dollars.
On November 1, 2004, CAE announced that it had signed a purchase and sale agreement with L-3 Communications of New York to sell its Marine Controls business unit for approximately $328 million, including $276 million in cash and the assumption of $52 million in debt. The transaction is subject to certain regulatory approvals and other closing conditions, with a closing date expected prior to the end of CAEs current fiscal year.
As a result, the financial results of Marine Controls have been reclassified as Discontinued Operations. Previously reported statements have been reclassified; interest expense has been reallocated to Discontinued Operations based on their share of capital employed. The continuing operations of CAE are Civil Simulation and Training (Civil) and Military Simulation and Training (Military).
Consolidated revenue from Civil and Military for the second quarter increased 10% to $235.1 million from the $213.2 million generated in the prior year. The increase is attributable to an 18% increase in Civils contribution, including adverse foreign exchange impacts totaling $5 million.
Earnings before interest and taxes (EBIT) from continuing operations increased 8% to $22.2 million from the $20.6 million generated in the prior year. The increase is due to a 14% improvement in Militarys contribution, with 12.3% operating margins. Civils EBIT was flat, with a reduced contribution from the units Equipment and Services component offsetting a stronger contribution from Aviation training (67% utilization rate versus 57% last year).
CAEs President and Chief Executive Officer, Robert E. Brown, stated, The second quarter saw the restoration of Militarys double-digit margins and higher utilization of Civils global training network. The sale of Marine Controls will enable CAE to focus on our core simulation and training businesses from a position of greater financial strength and flexibility. We will now devise and execute a plan that will deliver improved cash flow, profitability and a higher return on invested capital.
Second-quarter interest expense decreased to $5.8 million from $6.2 million last year. A second quarter income tax rate of 22% (compared to 24% last year) resulted in tax expense of $3.6 million.
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Net earnings from continuing and discontinued operations for the second quarter of $14.0 million (or 6 cents a share) compare to $15.1 million (or 7 cents per share) last year. The reduction is attributable to a decreased contribution from discontinued operations, with the net earnings of the discontinued Marine Controls unit declining to $1.2 million from $4.1 million last year.
Year-to-date, revenue increased by 10% to reach $466.0 million, with a cumulative negative foreign exchange impact of approximately $5.5 million. The increase is attributable primarily to the higher utilization of Civils training network. Cumulative EBIT from CAEs continuing operations increased to $53.7 million from $39.8 million last year, with Civils EBIT up 91% and Militarys down 3%. Year-to-date EBIT in both business segments was affected positively by the first-quarter recognition of investment tax credits (ITC) totaling $14.2 million and negatively by adverse foreign exchange impacts on operating earnings totaling approximately $2.1 million. Year-to-date net earnings in the discontinued Marine Controls unit were $6.6 million, compared to $7.0 million last year.
Year-to-date interest expense is down 18% from last year to $10.6 million, while the first-half tax rate is higher (26% compared to 14% last year), due to the recognition in last years first quarter of loss carry-forwards related to Australian operations. The Company still expects the full-year tax rate to average approximately 30%, excluding any tax impact from the expected gain on the Marine divestment.
Year-to-date net earnings of $38.3 million (or 16 cents a share) compare to $28.3 million (or 13 cents per share) in the prior year.
Second-quarter cash flow from operations increased to $21.8 million compared to $11.1 million in the first quarter and $21.5 million last year. During the second quarter, cash flow from all operations offset investment activities. Cash and cash equivalents as at September 30 were $8.5 million lower than at the end of the first quarter. Subsequent to September 30, a cash milestone payment in the amount of $18 million has been received for work performed in the German NTF program.
As at September 30, 2004, CAEs net debt, defined as long-term debt less cash and cash equivalents, was $630.3 million compared to $529.6 million as at March 31. The majority of the increase in net debt is attributed to the formation of CAEs majority-owned training operation with Iberia, which resulted in additional borrowings of $61.8 million. Net debt will be reduced by the after-tax cash proceeds from the sale of Marine Controls.
CAEs consolidated backlog at September 30, 2004 was $2.3 billion, compared to $2.0 billion in the prior year period. The backlog excludes any amounts for Militarys selection as the preferred bidder on the NH-90 and UK Armoured Vehicle Training Service (AVTS) programs. As at November 4, Civil has secured 7 of 9 full flight simulator orders in the competed global market.
A more detailed discussion of business unit highlights can be found in the Management Discussion & Analysis available on the CAE website at www.cae.com/Financials2005Q2.
CAE is a leading provider of simulation and modeling technologies and integrated training services for commercial and business aviation, and defence customers worldwide. The company has annual revenues of approximately C$1 billion, with operations and training facilities in 17 countries on five continents.
This press release includes forward-looking statements that are based on certain assumptions and reflects CAEs current expectations. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Additional factors are discussed in CAEs materials filed with the securities regulatory authorities in Canada and the United States from time to time. CAE disclaims any intention or obligation to update or revise any forward-looking statements
- 30 -
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On the web: www.cae.com
Media contacts: Arthur C. Perron, Vice-President, Government and Media Relations, (514) 340-5370, [email protected]
Anne von Finckenstein, Manager, Media Relations, (514) 341-6780, ext. 4889, [email protected]
Investor relations : Andrew Arnovitz, Director, Corporate Communications and Investor Relations, (514) 734-5760, [email protected]
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link1 "Consolidated Balance Sheets"
Consolidated Balance Sheets
| (Unaudited) — (amounts in millions of Canadian dollars) | as at September 30 — 2004 | 2004 | ||
|---|---|---|---|---|
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | $ 23.6 | $ | 54.7 | |
| Accounts receivable | 318.0 | 316.5 | ||
| Inventories | 155.5 | 147.7 | ||
| Prepaid expenses | 21.3 | 19.6 | ||
| Income taxes recoverable | 87.0 | 52.0 | ||
| Future income taxes | 5.5 | 1.8 | ||
| Current assets held for sale | 83.4 | 89.8 | ||
| 694.3 | 682.1 | |||
| Restricted cash | 4.3 | 7.0 | ||
| Property, plant and equipment, net | 883.1 | 791.7 | ||
| Future income taxes | 66.8 | 89.0 | ||
| Intangible assets | 128.6 | 129.2 | ||
| Goodwill | 293.2 | 300.7 | ||
| Other assets | 142.7 | 165.4 | ||
| Long-term assets held for sale | 126.9 | 128.2 | ||
| $ 2,339.9 | $ | 2,293.3 | ||
| Liabilities and Shareholders Equity | ||||
| Current liabilities | ||||
| Accounts payable and accrued liabilities | $ 288.9 | $ | 322.0 | |
| Deposits on contracts | 80.4 | 69.3 | ||
| Long-term debt due within one year | 38.0 | 8.8 | ||
| Future income taxes | 53.6 | 51.1 | ||
| Current liabilities related to assets held for sale | 55.1 | 54.5 | ||
| 516.0 | 505.7 | |||
| Long-term debt | 615.9 | 575.5 | ||
| Deferred gains and other long-term liabilities | 161.3 | 155.6 | ||
| Future income taxes | 75.5 | 77.5 | ||
| Long-term liabilities related to assets held for sale | 67.7 | 60.2 | ||
| 1,436.4 | 1,374.5 | |||
| Shareholders Equity | ||||
| Capital stock | 368.4 | 367.5 | ||
| Contributed surplus | 2.2 | 1.3 | ||
| Retained earnings | 585.6 | 562.1 | ||
| Currency translation adjustment | (52.7 | ) | (12.1 | ) |
| 903.5 | 918.8 | |||
| $ 2,339.9 | $ | 2,293.3 |
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link1 "Consolidated Statements of Earnings"
Consolidated Statements of Earnings
| three months ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| (Unaudited) | September 30 | September 30 | ||||||
| (amounts in millions of Canadian | ||||||||
| dollars, except per share amounts) | 2004 | 2003 | 2004 | 2003 | ||||
| Revenue | ||||||||
| Civil Simulation and Training | $ 131.3 | $ | 111.3 | $ | 258.4 | $ | 220.4 | |
| Military Simulation and Training | 103.8 | 101.9 | 207.6 | 201.7 | ||||
| $ 235.1 | $ | 213.2 | $ | 466.0 | $ | 422.1 | ||
| Earnings from continuing operations before interest and | ||||||||
| income taxes | ||||||||
| Civil Simulation and Training | $ 9.4 | $ | 9.4 | $ | 30.8 | $ | 16.1 | |
| Military Simulation and Training | 12.8 | 11.2 | 22.9 | 23.7 | ||||
| Earnings from continuing operations before | ||||||||
| interest and income taxes | 22.2 | 20.6 | 53.7 | 39.8 | ||||
| Interest on long-term debt | 9.2 | 9.6 | 18.0 | 18.9 | ||||
| Other interest expense (income), net | (3.4 | ) | (3.4 | ) | (7.4 | ) | (6.0 | ) |
| Earnings from continuing operations before income | ||||||||
| taxes | 16.4 | 14.4 | 43.1 | 26.9 | ||||
| Income taxes | 3.6 | 3.4 | 11.4 | 3.7 | ||||
| Earnings from continuing operations | $ 12.8 | $ | 11.0 | $ | 31.7 | $ | 23.2 | |
| Results of discontinued operations | 1.2 | 4.1 | 6.6 | 5.1 | ||||
| Net earnings | $ 14.0 | $ | 15.1 | $ | 38.3 | $ | 28.3 | |
| Basic earnings per share from continuing operations | $ 0.05 | $ | 0.05 | $ | 0.13 | $ | 0.11 | |
| Diluted earnings per share from continuing | ||||||||
| operations | $ 0.05 | $ | 0.05 | $ | 0.13 | $ | 0.11 | |
| Basic earnings per share | $ 0.06 | $ | 0.07 | $ | 0.16 | $ | 0.13 | |
| Diluted earnings per share | $ 0.05 | $ | 0.07 | $ | 0.15 | $ | 0.13 | |
| Weighted average number of shares outstanding | 246.8 | 220.0 | 246.7 | 219.8 |
link1 "Consolidated Statements of Retained Earnings"
Consolidated Statements of Retained Earnings
| three months ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| (Unaudited) | September 30 | September 30 | ||||||
| (amounts in millions of Canadian dollars) | 2004 | 2003 | 2004 | 2003 | ||||
| Retained earnings at beginning of period | $ 579.0 | $ | 537.8 | $ | 562.1 | $ | 531.2 | |
| Share issue costs (net of taxes of $2.4 million) | | (5.1 | ) | | (5.1 | ) | ||
| Net earnings | 14.0 | 15.1 | 38.3 | 28.3 | ||||
| Dividends | (7.4 | ) | (6.6 | ) | (14.8 | ) | (13.2 | ) |
| Retained earnings at end of period | $ 585.6 | $ | 541.2 | $ | 585.6 | $ | 541.2 |
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link1 "Consolidated Statements of Cash Flow"
Consolidated Statements of Cash Flow
| three months ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| (Unaudited) | September 30 | September 30 | ||||||
| (amounts in millions of Canadian dollars) | 2004 | 2003 | 2004 | 2003 | ||||
| Operating activities | ||||||||
| Net earnings | $ 14.0 | $ | 15.1 | $ | 38.3 | $ | 28.3 | |
| Adjustments to reconcile earnings to | ||||||||
| cash flows from operating activities: | ||||||||
| Amortization | 19.3 | 15.8 | 37.2 | 33.1 | ||||
| Future income taxes | 3.0 | (3.8 | ) | 12.8 | (7.5 | ) | ||
| Investment tax credit | (6.4 | ) | (2.2 | ) | (20.1 | ) | (4.9 | ) |
| Stock based compensation | 0.6 | 0.4 | 0.9 | 0.6 | ||||
| Other | 0.5 | 6.7 | 2.8 | (3.4 | ) | |||
| Increase in non-cash working capital | (9.2 | ) | (10.5 | ) | (39.0 | ) | (86.2 | ) |
| Net cash provided by (used in) operating activities | 21.8 | 21.5 | 32.9 | (40.0 | ) | |||
| Net cash provided by (used in) discontinued | ||||||||
| operating activities | 14.1 | (6.6 | ) | 14.0 | (0.2 | ) | ||
| Net cash provided by (used in) operating activities | 35.9 | 14.9 | 46.9 | (40.2 | ) | |||
| Investing activities | ||||||||
| Purchase of business | (5.7 | ) | | (6.6 | ) | | ||
| Proceeds from disposal of discontinued operations | 0.8 | 2.5 | 0.8 | 22.3 | ||||
| Short-term investments, net | | 1.4 | | (2.3 | ) | |||
| Capital expenditures | (25.0 | ) | (30.8 | ) | (66.2 | ) | (53.2 | ) |
| Proceeds from sale and leaseback of assets | | 94.0 | | 122.5 | ||||
| Deferred development costs | (3.2 | ) | | (6.9 | ) | (2.8 | ) | |
| Deferred pre-operating costs | (0.2 | ) | 0.4 | (1.3 | ) | 0.2 | ||
| Other assets | (3.3 | ) | 0.1 | (4.1 | ) | (1.9 | ) | |
| Net cash (used in) provided by continuing investing | ||||||||
| activities | (36.6 | ) | 67.6 | (84.3 | ) | 84.8 | ||
| Net cash (used in) discontinued investing activities | (2.2 | ) | (2.7 | ) | (4.1 | ) | (6.0 | ) |
| Net cash (used in) provided by investing activities | (38.8 | ) | 64.9 | (88.4 | ) | 78.8 | ||
| Financing activities | ||||||||
| Proceeds from long-term debt | 126.0 | 172.0 | 149.2 | 310.0 | ||||
| Repayments of long-term debt | (124.7 | ) | (340.5 | ) | (127.0 | ) | (406.2 | ) |
| Dividends paid | (7.2 | ) | (6.4 | ) | (14.4 | ) | (12.9 | ) |
| Common stock issuances | 0.2 | 175.6 | 0.5 | 175.6 | ||||
| Share issue costs | | (7.0 | ) | | (7.0 | ) | ||
| Other | 1.8 | (1.7 | ) | 3.1 | (1.8 | ) | ||
| Net cash (used in) provided by continuing financing | ||||||||
| activities | (3.9 | ) | (8.0 | ) | 11.4 | 57.7 | ||
| Net cash (used in) provided by discontinued | ||||||||
| financing activities | 0.6 | 2.8 | 1.8 | 3.6 | ||||
| Net cash (used in) provided by financing activities | (3.3 | ) | (5.2 | ) | 13.2 | 61.3 | ||
| Effect of foreign exchange rate changes | ||||||||
| on cash and cash equivalents | (2.3 | ) | (0.6 | ) | (1.5 | ) | (1.9 | ) |
| Net (decrease) increase in cash and cash equivalents | (8.5 | ) | 74.0 | (29.8 | ) | 98.0 | ||
| Cash and cash equivalents at beginning of period | 40.6 | 41.1 | 61.9 | 17.1 | ||||
| Cash and cash equivalents at end of period | $ 32.1 | $ | 115.1 | $ | 32.1 | $ | 115.1 | |
| Cash and cash equivalents related to: | ||||||||
| Continuing operations | 23.6 | 108.0 | ||||||
| Discontinued operations | 8.5 | 7.1 | ||||||
| $ | 32.1 | $ | 115.1 |