CAE reports fourth quarter and full-year results
11 May 2005 - 11:42PM
PR Newswire (US)
CAE reports fourth quarter and full-year results - Restructuring
plan on track - Net debt reduced to $285.8M from $529.6M a year ago
- Free cash flow for fiscal 2005 increased to $87.8M from $9.8M -
Backlog from continuing operations rose to $2.5B - Military order
intake increased 34% MONTREAL, May 11 /PRNewswire-FirstCall/ --
(NYSE: CGT; TSX: CAE) - CAE today released financial results for
the fourth quarter and fiscal year ended March 31, 2005.
Fourth-quarter earnings from continuing operations, excluding non-
recurring items, were $14.1 million, or $0.06 per share, compared
to $16.1 million or $0.07 per share in the corresponding
year-earlier period. Also excluding non-recurring items, earnings
per share for fiscal year 2005 were $0.19, compared to $0.21 the
previous year. (All amounts are expressed in Canadian dollars.) CAE
reports earnings from continuing operations of $9.3 million for the
fourth quarter, and a net loss from continuing operations for the
fiscal year totalling $304.7 million, or $1.23 per share. The
full-year results reflect a significant third-quarter loss, which
included sizeable non-cash writedowns related to impairment in the
value of goodwill as well as tangible and intangible assets and set
the stage for implementation of a comprehensive restructuring plan,
announced in mid-February 2005, to enhance the Company's long-term
prospects. As part of that restructuring plan, major elements of
the sale of CAE's Marine Controls business were completed during
the fourth quarter. This transaction has enabled the Company to
significantly strengthen its financial position. "We have made
meaningful progress in the early stages of our restructuring,"
stated President and CEO, Robert E. Brown. "Our balance sheet is
stronger; our cash flow has improved significantly; and our
businesses are in the process of being reorganised with a view to
driving performance improvement." CAE's operations are being
realigned into three reporting groups with clearly defined
responsibilities and enhanced accountability. The restructuring
plan also includes initiatives designed to rationalize the
Company's global manufacturing and training footprint; reduce
production costs for full-flight simulators; and increase
efficiency and productivity by introducing new best practices and
processes. The underlying aim is to improve the quality of assets,
strengthen the balance sheet and generate strong free cash flow
that will translate into sustained profitability and improved
returns on investment. "We made some tough decisions and completed
some difficult tasks in a short period of time during the latter
stages of fiscal 2005," Mr. Brown observed. "Major challenges still
await us," he added. "Fiscal 2006 will be a pivotal transition
year, as we focus relentlessly on the successful execution of key
elements of our program and build a solid foundation to begin
generating earnings growth in fiscal 2007. I am confident that we
have the right people and the right plan in place." Since February,
restructuring actions have included consolidation of the Company's
engineering and program-management departments, respectively, to
boost efficiency and eliminate duplication. Several sites adjacent
to CAE's main facility in Montreal have been closed and most of the
approximately 450 layoffs announced in February have taken place. A
number of other sites in the Company's global network are slated
for rationalization in the period ahead. As well, a range of
full-flight simulators will be redistributed within the global
training network in order to optimize their utilization. Among its
stated operating objectives, CAE has targeted a reduction of its
production costs and cycle times for civil full-flight simulators.
The newly formed Simulation Products Group is well into the process
of identifying opportunities to reach these objectives. CAE had
indicated total expected restructuring charges in the range of $55
to $65 million by the end of fiscal year 2006. With $24.5 million
of expenses before tax already incurred in fiscal year 2005 and a
number of major activities completed, the restructuring plan is
tracking within the lower end of that range. As of fiscal year
2006, CAE will report its financial performance on a segmented
basis in order to improve disclosure and transparency with regard
to its equipment and training businesses. Marine Controls
divestiture CAE completed the divestiture of substantially the
entire Marine Controls segment to L-3 Communications ("L-3") during
the fourth quarter in a transaction valued at $238.6 million. In
accordance with the purchase agreement, L-3 will also acquire two
other components of the Marine Controls segment, including the
assumption of the CAE's guarantee of pnds stlg 23.0 million ($53
million) of project-finance related debt for the UK Astute Class
submarine training program. Cash flow and financial position CAE's
free cash flow (defined as net cash provided by continuing
operations, less capital expenditures and dividends, plus sale and
leaseback proceeds) reached $87.8 million for the year, compared to
$9.8 million in the prior year. This improved performance
notwithstanding, CAE maintains its previously indicated objective
to emerge from the current transition year - fiscal year 2006 -with
a solid foundation to begin generating meaningful earnings growth,
free cash flow and positive investment returns. Operating cash flow
totalled $207.6 million (including cash restructuring charges),
compared to $5.7 million the prior year. The increase resulted from
improved operating results, excluding non-cash items, and $85.6
million generated in non-cash working capital. CAE's net debt,
defined as long-term debt less cash and cash equivalents, was
reduced from $529.6 million to $285.8 million through the repayment
of $243.7 million, resulting in a debt-to-total-capitalization
ratio of approximately 35% (or approximately 50% including the net
present value of all off-balance sheet, recourse obligations), from
approximately 40% last year. Non-recurring items Reported
fourth-quarter results include a cash restructuring charge of $24.5
million (pre-tax), together with an additional $9.2 million charge
(pre- tax) in primarily non-cash, related to the early repayment of
a high-interest- rate loan in Brazil and the settlement of various
financial instruments. Also, the fourth quarter results included
other non-recurring charges amounting to $3.1 million (pre-tax),
representing mainly restructuring charges incurred prior to the
adoption of a formal "restructuring plan" as defined by GAAP. As a
result, this $3.1 million charge is included in earnings from
continued operations and not in the $24.5 million. Finally, the
fourth quarter was affected by the recognition of $23.5 million of
tax assets. Of the $23.5 million, $12.2 million is related to the
reduction in the valuation allowance on CAE's net operating losses
in the United States. The remaining amount relates to the
materialization of the net capital losses in the United States as a
result of the sale of Marine. The later recognition of the net
capital losses was not included in the gain on disposition of
Marine. In addition to these items, full-year reported results
include a one-time charge of approximately $3.8 million and a
non-cash charge of $443.3 million for impairment in the value of
goodwill, intangible and tangible assets recorded in the third
quarter. Also included are one-time benefits of $14.2 million from
additional investment tax credits ("ITC") recognized in the first
quarter. It should be noted that while ITCs are normal recurring
items for CAE, the one-time ITC contingency released in the first
quarter was non- recurring. Additional consolidated financial
results In the fourth quarter, consolidated revenues from
continuing operations reached $262.7 million, compared to $261.1
million in the corresponding, year- earlier quarter. Consolidated
revenues from continuing operations for the full fiscal year
reached $986.2 million, notwithstanding the appreciation of the
Canadian dollar over the course of the year. This compares to
$938.4 million in the prior fiscal year. The net increase in
consolidated revenue results from a $58.4 million (or 13%) increase
in Civil revenues, partially offset by a $10.6 million (or 2%)
decrease in Military revenues. Fourth-quarter consolidated earnings
before interest and taxes ("EBIT") from continuing operations, net
of one-time items, were $27.7 million, compared to $27.3 million in
the year-earlier period. On the same basis, consolidated EBIT for
the full fiscal year was $88.3 million, compared to $90.6 million
the previous year. The consolidated backlog from continuing
operations at March 31, 2005 was $2.5 billion, up from $2.3 billion
a year earlier. Capital expenditures for the latest year amounted
to $118.0 million, compared to $86.8 million in the prior year.
Capital expenditures are expected to be in the range of $135
million in fiscal year 2006, reflecting prior investment
commitments and maintenance expenditures. Civil business unit
highlights Civil concluded the year with 17 full-flight simulator
orders (compared to 16 orders in the prior year) for a competed
market share of 77%. Included in this order book were three
simulators for the Airbus A380, bringing to five the number of A380
simulator orders that CAE has won since the inception of the
super-jumbo aircraft program. CAE already has reached a critical
milestone with the delivery of the first A380 full-flight simulator
to Airbus. A second such device is on schedule for anticipated
delivery later this year. Training revenues increased 13% over the
previous year, reflecting the growth of the training network to 105
full-flight simulators as well as improved utilization, which
reached 73% for the year. Average revenue per simulator increased
slightly to approximately $3.1 million. Civil generated operating
earnings of $10.8 million in the fourth quarter of fiscal 2005,
compared to $6.0 million in the third quarter and $11.8 million in
fourth quarter of fiscal 2004. Consistent with third-quarter
results, training services represented the largest proportion of
margin. Profitability in the equipment segment improved modestly,
but the Company recognizes the fact that its Civil equipment
backlog will present challenges over the next several quarters.
With respect to Civil margins generally, the asset impairment
recognized in the third quarter has reduced amortization expenses
by approximately $9.3 million annually. Net of non-recurring items,
full-year operating earnings were $41.2 million, or 6% higher than
the prior year. Equipment and services revenues increased year over
year as the result of higher order intake, while continuing to
account for approximately 40% of the unit's total consolidated
revenues. Training services represented the balance of revenues.
Military business unit highlights Military concluded the fiscal
year with $681.4 million in new order bookings, a 34% increase over
the $506.7 million booked in the prior year. U.S. market equipment
orders represented more than 40% of all new equipment bookings.
Military's backlog at March 31, 2005 reached $1.4 billion,
including the award of a privately financed initiative for the
German NH90 helicopter program and a number of strategic wins in
the U.S.- a market in which CAE has more than doubled its order
intake over the past two years. Military generated fourth-quarter
operating earnings of $13.0 million, compared to $11.3 million in
the third quarter and $15.5 million in the corresponding
year-earlier quarter. Full-year operating earnings amounted to
$47.2 million, a decrease of $4.4 million compared to fiscal 2004,
which resulted from higher completion costs on certain programs,
particularly in the first quarter, and negative foreign-exchange
impacts of $1.2 million. Military's operating earnings, excluding
one-time items, amounted to $47.1 million. Fourth-quarter revenues
of $129.1 million were on a par with the third quarter and 2% lower
than the year-earlier period. Full-year revenue reached $466.0
million, a decrease of $10.6 million from the prior year, resulting
primarily from negative foreign-exchange impacts and delayed
program awards. A more detailed discussion of business unit
highlights can be found in the Management's Discussion &
Analysis posted on CAE's website at http://www.cae.com/financialsQ4
. Conference Call CAE will host a conference call today at 1:30
p.m. EDT for analysts, institutional investors and the media. North
American participants can access the call by dialling
1-877-783-7570 or 514-868-2566. Overseas participants can dial
+800-2787-1930 or 1-514-868-2566. The conference call will also be
audio Webcast live for the public at http://www.cae.com/ . CAE is a
leading provider of simulation and modelling technologies as well
as 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
provides comments on non-GAAP financial measures. Readers should be
cautioned that this information should not be confused with or used
as an alternative for performance measures determined in accordance
with GAAP. CAE believes that these measures provide useful
supplemental information to GAAP financial measures. However, these
non-GAAP financial measures have no standardized meaning prescribed
by GAAP and therefore are unlikely to be comparable to similar
measures presented by other companies. For a more detailed
discussion of these non-GAAP measures, please consult section 4 of
the Management's Discussion & Analysis posted on CAE's website
at http://www.cae.com/financialsQ4 . Certain statements made in
this news release, including, but not limited to, the statements
appearing under the "Outlook" section, and other 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 of any dispositions, mergers, acquisitions, or other
transactions that may be announced or that may occur after the date
hereof. For a description of risks that could cause actual results
or events to differ materially from current expectations please
refer to the section entitled "Risk Factors" contained in CAE
Inc.'s Annual Information Form for the year ended March 31, 2004
filed by CAE Inc. with the Canadian securities commissions
(available at http://www.cae.com/ or on SEDAR at
http://www.sedar.com/) and with the U.S. Securities and Exchange
Commission under Form 40-F ( available on EDGAR at
http://www.sec.gov/ ) as updated in CAE Inc.'s fiscal 2005 Fourth
Quarter MD&A dated May 11, 2005, included in this news release,
under the section entitled "Business Risks And Uncertainties". The
forward- looking statements contained in this news release
represent our expectations as of May 11, 2005 and, accordingly, are
subject to change after such date. However, we disclaim any
intention or obligation to update any forward-looking statements,
whether as a result of new information or otherwise. >
DATASOURCE: CAE INC. CONTACT: On the Web: http://www.cae.com/;
Media contacts: Nathalie Bourque, Vice President, Global
Communications, (514) 734-5788, ; Anne von Finckenstein, Manager,
Public Relations, (514) 340-5370, ; Investor relations: Andrew
Arnovitz, Director, Investor Relations, (514) 734-5760,
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