NumbersCAE reports second-quarter results
TORONTO, Nov. 5 /PRNewswire-FirstCall/ - (NYSE: CGT; TSX: CAE) - CAE
today reported earnings from continuing operations for the second quarter (Q2)
ending September 30, 2003 of C$15.1 million (or 7 cents per share), compared
to the same earnings in the first quarter and C$23.3 million (11 cents per
share) in the prior fiscal year.
Consolidated revenue for the second quarter was C$246.1 million compared
to C$242.9 million in the first quarter and C$252.3 million in the prior year,
while the backlog of C$2.2 billion at September 30 was constant with the June
30 level.
The year-over-year reduction in operating earnings was due primarily to
pricing pressures in civil aviation markets, lower margins on the changing mix
of military programs, foreign exchange impacts, and higher pension and long-
term compensation expense. Foreign exchange impacts reduced second quarter
earnings per share by two cents relative to last year. Operating earnings
increased C$3.5 million and margins improved 13% from the first quarter, with
the increase in operating earnings counterbalanced by a C$4.0 million increase
in Q2 tax expense.
Year-to-date earnings from continuing operations of C$30.2 million
(14 cents per share) and revenue of C$489.0 million compared to C$60.6 million
(28 cents per share) and C$528.1 million respectively in the prior year, with
foreign exchange impacts having reduced earnings per share by six cents
relative to the prior first half. Net earnings for the second quarter and year-
to-date were C$15.1 million (or 7 cents per share) and C$28.3 million (or
13 cents per share) respectively.
CAE's net debt, defined as long-term debt less cash and short-term
investments, decreased by C$232.1 million to C$549.8 million during the second
quarter. Net debt has now been reduced by 40% (or C$363.2 million) since
December 31, 2002. The reduction in net debt during the second quarter was
attributable to net proceeds from an equity issue in the amount of
C$168.0 million and the receipt of C$94.0 million from the sale and leaseback
of five simulators, offset by increases in non-cash working capital of
C$12.3 million and capital expenditures of C$33.5 million. Second-quarter
capital expenditures were C$24.3 million lower than last year, while year-to-
date capital expenditures of C$58.7 million compare to C$130.9 million in the
first half of the prior fiscal year.
CAE's President and CEO Derek H. Burney stated, "During the second
quarter, CAE achieved a major objective for the year as a whole - the
significant strengthening of our balance sheet. As expected, our operating
performance remained constrained by the severe market pressure in the civil
aviation sector and by foreign exchange fluctuations."
Business Unit Highlights
Civil Simulation and Training ("Civil") reported second-quarter operating
earnings of C$9.9 million compared to C$6.6 million in the first quarter and
C$19.9 million in the prior year period. The reduction in operating earnings
relative to the prior year is attributable primarily to adverse equipment
market conditions, foreign exchange impacts and the accounting for additional
sale and leaseback financings. Revenue for the second quarter increased
slightly from the first quarter and 7% from the prior year to C$111.3 million.
The year-over-year increase in Q2 revenue is attributable to a 10% increase in
Q2 training revenue (20% net of foreign exchange impacts). Training revenue
year-to-date increased 15% over last year (23% net of foreign exchange) to
reach C$131.8 million, thereby accounting for 60% of Civil's revenue in the
first half of this fiscal year compared to approximately 50% in the prior
year.
Capacity utilization of Civil's installed training base of 92 simulators
was 61% year-to-date, with the decline in Q2 utilization relative to the first
quarter due to seasonal factors, delays in the Dornier 328 aircraft program
and Air Canada's reduced training needs. Civil has secured a foothold in the
growing Russian aviation market through an eight-year training agreement with
Aeroflot. As well, Civil has entered a new training joint venture with Iberia
Airlines involving a consolidation of Spanish-based assets that could serve as
the model for similar ventures with other major airlines.
Civil has won 11 of 12 competed orders for full-flight simulators as of
November 5, already matching the 11 orders secured during the entire prior
fiscal year. Among the Q2 orders was a prototype simulator for the new Airbus
A380 aircraft. The orders secured in the first half will begin to impact on
Civil's production levels and financial performance in the second half of the
year and fiscal year 2005.
Military Simulation and Training ("Military') generated second-quarter
operating earnings of C$11.8 million, compared to C$12.3 million in the first
quarter and C$16.2 million in the prior fiscal year. Second-quarter revenue of
C$100.4 million was constant relative to the first quarter while decreasing 8%
from the prior year. The year-over-year reductions in revenue and earnings
were due primarily to foreign exchange impacts and a one-time incentive
payment for early delivery included in last year's results. Military's margins
were also impacted by higher start up costs on new projects and higher bid and
proposal costs incurred in pursuit of new opportunities. The recent committed
orders from Lockheed Martin of more than C$125 million to provide C-130J
training for the U.S. Air Force and additional contracts from the U.S. Army
Special Operations Forces with a potential value exceeding C$110 million are
evidence of new success in the key U.S. defence market that will bolster
Military's performance in the balance of the year.
Marine Controls ("Marine) generated second-quarter operating earnings of
C$5.6 million, compared to C$4.9 million in the first quarter and
C$7.2 million in the prior year. Revenues of C$34.4 million compared to
C$34.2 in the first quarter and C$39.3 million in the prior year. The
reductions in year-over-year operating earnings and revenue are attributable
primarily to foreign exchange impacts and delays on the U.K. Astute submarine
training program. During the second quarter, Marine was awarded new contracts
by the U.S. and Indian navies.
CAE is a leading provider of integrated training solutions and advanced
simulation and controls technologies to civil aviation, military and marine
customers. The company generates annual revenues in excess of C$1 billion and
employs about 6,000 people in Canada, the United States and around the globe.
This press release includes forward-looking statements that are based on
certain assumptions and reflects CAE's 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
CAE's 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.
<<
Consolidated Balance Sheets
as at as at
September 30 March 31
2003 2003
(amounts in millions of Canadian dollars) (Unaudited) (Audited)
_________________________________________________________________________
Assets
Current assets
Cash and cash equivalents $ 115.1 $ 17.1
Short-term investments 4.9 2.6
Accounts receivable 319.1 373.1
Inventories 171.6 136.3
Prepaid expenses 29.2 14.0
Income taxes recoverable 32.7 25.7
Future income taxes 2.1 3.5
_________________________________________________________________________
674.7 572.3
Restricted cash 13.2 14.4
Assets of discontinued operations - 50.0
Property, plant and equipment, net 809.3 930.4
Future income taxes 84.6 85.7
Intangible assets 158.9 171.7
Goodwill 344.1 366.8
Other assets 166.1 165.2
_________________________________________________________________________
$ 2,250.9 $ 2,356.5
_________________________________________________________________________
_________________________________________________________________________
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 328.2 $ 413.3
Deposits on contracts 90.9 101.2
Long-term debt due within one year 11.4 13.4
Future income taxes 42.4 42.4
_________________________________________________________________________
472.9 570.3
Liabilities of discontinued operations - 17.9
Long-term debt 658.4 798.0
Long-term liabilities 150.0 139.6
Future income taxes 73.0 80.5
_________________________________________________________________________
1,354.3 1,606.3
_________________________________________________________________________
Shareholders' Equity
Capital stock 366.4 190.5
Contributed surplus 0.6 -
Retained earnings 541.2 531.2
Currency translation adjustment (11.6) 28.5
_________________________________________________________________________
896.6 750.2
_________________________________________________________________________
$ 2,250.9 $ 2,356.5
_________________________________________________________________________
_________________________________________________________________________
Consolidated Statements of Earnings
(amounts in millions of three months ended six months ended
Canadian dollars, September 30 September 30
except per share amounts) (Unaudited) (Unaudited)
2003 2002 2003 2002
_________________________________________________________________________
Revenue
Civil Simulation
and Training $ 111.3 $ 104.4 $ 220.4 $ 239.9
Military Simulation
and Training 100.4 108.6 200.0 214.6
Marine Controls 34.4 39.3 68.6 73.6
_________________________________________________________________________
$ 246.1 $ 252.3 $ 489.0 $ 528.1
_________________________________________________________________________
_________________________________________________________________________
Operating earnings
Civil Simulation
and Training $ 9.9 $ 19.9 $ 16.5 $ 57.6
Military Simulation
and Training 11.8 16.2 24.1 34.8
Marine Controls 5.6 7.2 10.5 13.6
_________________________________________________________________________
Earnings from continuing
operations before
interest and income taxes 27.3 43.3 51.1 106.0
Interest expense, net 6.7 9.1 13.9 16.9
_________________________________________________________________________
Earnings from continuing
operations before
income taxes 20.6 34.2 37.2 89.1
Income taxes 5.5 10.9 7.0 28.5
_________________________________________________________________________
Earnings from continuing
operations $ 15.1 $ 23.3 $ 30.2 $ 60.6
Results of discontinued
operations - - (1.9) -
_________________________________________________________________________
Net earnings $ 15.1 $ 23.3 $ 28.3 $ 60.6
_________________________________________________________________________
_________________________________________________________________________
Basic and diluted
earnings per share
from continuing
operations $ 0.07 $ 0.11 $ 0.14 $ 0.28
_________________________________________________________________________
_________________________________________________________________________
Basic and diluted
net earnings per share $ 0.07 $ 0.11 $ 0.13 $ 0.28
_________________________________________________________________________
_________________________________________________________________________
Average number of shares
outstanding 220.0 219.4 219.8 219.4
_________________________________________________________________________
_________________________________________________________________________
Consolidated Statements of Retained Earnings
(amounts in millions of three months ended six months ended
Canadian dollars) September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
_________________________________________________________________________
Retained earnings at
beginning of period
as previously reported $ 537.8 $ 471.2 $ 531.2 $ 446.8
Adjustments for changes
in accounting policies - - - (6.4)
_________________________________________________________________________
Retained earnings at
beginning of period
as restated 537.8 471.2 531.2 440.4
Share issue costs (net
of taxes of $2.4 million) (5.1) - (5.1) -
Net earnings 15.1 23.3 28.3 60.6
Dividends (6.6) (6.6) (13.2) (13.1)
_________________________________________________________________________
Retained earnings
at end of period $ 541.2 $ 487.9 $ 541.2 $ 487.9
_________________________________________________________________________
_________________________________________________________________________
Consolidated Statements of Cash Flow
(amounts in millions of three months ended six months ended
Canadian dollars) September 30 September 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
_________________________________________________________________________
Operating activities
Earnings from continuing
operations $ 15.1 $ 23.3 $ 30.2 $ 60.6
Adjustments to reconcile
earnings to cash flow
from operating activities:
Amortization 16.7 14.8 34.9 33.1
Future income taxes (3.8) 0.8 (7.5) 5.4
Investment tax credit (7.9) (3.9) (12.1) (7.8)
Other 7.1 1.0 (2.8) (7.0)
Decrease (increase)
in non-cash working
capital (12.3) 1.8 (86.2) (78.4)
_________________________________________________________________________
Net cash provided by
(used in) continuing
operating activities 14.9 37.8 (43.5) 5.9
_________________________________________________________________________
Investing activities
Short-term investments, net 1.4 6.4 (2.3) 13.4
Capital expenditures (33.5) (57.8) (58.7) (130.9)
Proceeds from disposition
of businesses 2.5 25.0 22.3 25.0
Proceeds from sale and
leaseback of assets 94.0 92.2 122.5 92.2
Development costs - (3.9) (2.8) (8.6)
Deferred pre-operating
costs 0.4 (3.7) (0.3) (5.8)
Other assets 0.1 (12.0) (1.9) (13.6)
_________________________________________________________________________
Net cash provided by
(used in) continuing
investing activities 64.9 46.2 78.8 (28.3)
_________________________________________________________________________
Financing activities
Proceeds of long-term debt 174.7 72.3 313.6 151.3
Repayments of
long-term debt (340.4) (142.4) (406.2) (148.3)
Dividends paid (6.4) (6.6) (12.9) (13.1)
Common stock issuances 175.6 1.4 175.6 3.4
Share issue costs (7.0) - (7.0) -
Other (1.7) (4.0) (1.8) (4.9)
_________________________________________________________________________
Net cash (used in) provided
by continuing financing
activities (5.2) (79.3) 61.3 (11.6)
_________________________________________________________________________
Net cash provided by
discontinued activities - 2.3 3.3 2.6
_________________________________________________________________________
Effect of foreign exchange
rate changes on cash
and cash equivalents (0.6) 2.6 (1.9) 5.1
_________________________________________________________________________
Net increase (decrease) in
cash and cash equivalents 74.0 9.6 98.0 (26.3)
Cash and cash equivalents
at beginning of period 41.1 52.9 17.1 88.8
_________________________________________________________________________
Cash and cash equivalents
at end of period $ 115.1 $ 62.5 $ 115.1 $ 62.5
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