CAE
Annual Report 2000

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Repositioning for Value

CAE Inc.
Suite 3060, P.O. Box 30, Royal Bank Plaza
Toronto, Canada  M5J 2J1
www.cae.com

CAE Annual Report for the year ended March 31, 2000

 
 
 
 
 
 
 
 
 
C A E a t   a   G l a n c e

Business Profile >

CAE is the world’s premier provider of simulation and control technologies for training
and optimisation solutions in Aerospace, Defence and Forestry.

Business Units >

Commercial Simulation and Training

CAE’s Commercial Simulation and Training business is the world leader in the design
and production of commercial flight simulators and visual systems. 

CAE is making a major, disciplined move into the pilot training market to fuel growth.
Together with the pursuit of simulator maintenance and support activities, specific
emphasis will be placed on the establishment of independent training centres and
alliances with major airlines and other flight training companies.

Military Simulation and Controls

In the military simulation and training industry, CAE is the premier designer and man-
ufacturer of military flight and land-based simulation and training systems. 

In the marine controls industry, CAE is the world leader in the supply of control systems
for marine applications.

Forestry Systems

CAE’s Forestry Systems business is the world leader in providing advanced technology
solutions to enable customers to increase the recovery of fibre and the value of their
wood products.

In the wood products industry, CAE combines proprietary software, sensors and control
systems with advanced mechanical designs to provide leading-edge sawmill optimisa-
tion and wood processing solutions for the hardwood, softwood and engineered wood
industries.

In the pulp and paper industry, CAE provides advanced screening solutions worldwide.

Cover Image

>

An image of Dorval airport, Montreal, Canada, captured from CAE's MAXVUE™ image generator
running in real-time. MAXVUE Plus™ offers the highest polygon capacity available in the market
today for an interactive, high fidelity visual system, thereby increasing the realism of the scene.

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All illustrations and product images in CAE's annual report were created by CAE employees.
Special  thanks  to  Gilles  Guitard,  Zbynek  Najser,  Stuart  Pittman,  Sigi  Rothbart,  Keith
Selevich, and Andrew Wilson.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C A E   A n n u a l   R e p o r t

F i n a n c i a l   H i g h l i g h t s
( a m o u n t s   i n   m i l l i o n s   e x c e p t   p e r   s h a r e   a m o u n t s )

Operating results
Continuing operations

Revenue
Earnings
Net earnings

Financial position
Total assets
Total debt, net of cash

Per share
Earnings from continuing operations
Net earnings
Dividends
Shareholders’ equity

2 0 0 0

1 9 9 9

$ 1,164.3
90.7
$
98.5
$

$
$
$

905.9
73.7
77.3

$ 1,224.2
108.1
$

$ 1,065.2
271.5
$

$
$
$
$

0.83
0.90
0.19
3.53

$
$
$
$

0.66
0.70
0.16
3.03

Geographic Distribution of Revenue

Revenue by Business Segment

United States 39%

Commercial Simulation 
and Training 41%

Ca nada  14%

Othe r  3%

Asia  10%

1

Europe 34%

Forestry 
Systems 26%

Military 
Simulation and  
Controls 33 % 

C A E2 0 0 0 A R

C h a i r m a n ’ s   M e s s a g e

CAE is one of Canada’s success stories – an advanced technology company with
significant  opportunities  to  build  upon  its  achievements  as  a  leading  global 
supplier of simulation and control technologies for training and optimisation.

I became Chairman of CAE in June, 1999, upon David Race’s retirement after
48 years’ service, during which he made an enormous contribution to the growth
and  development  of  this  company.  While  his  experience  will  be  greatly  missed,
we wish him well in his retirement. We also want to thank John Caldwell for his
important  contribution  to  the  company  over  eleven  years,  the  last  six  as  Chief
Executive, and wish him continued success in his new endeavours.

I  want  to  extend  special  thanks  to  two  long-serving  directors  retiring  this
year  –  Roderick  “Huck”  Henry  and  Hasso  von  Falkenhausen.  Hasso  von
Falkenhausen has been unfailing in his support of CAE and particularly helpful
to  our  efforts  in  Germany.  As  a  senior  Canadian  businessman,  “Huck”  Henry
has  also  been  a  tremendous  supporter  of  CAE,  and  has  worked  diligently  over
many  years  at  enhancing  the  working  relationship  between  the  Board  and
senior management.

We are pleased to welcome Derek Burney as CAE’s new President and CEO.
A  seasoned  senior  executive,  Derek  comes  to  CAE after  six  years  as  Chairman
and CEO of Bell Canada International, and four years as Canada’s Ambassador
to the United States. The Board is very pleased with the rapid progress to date
in  focusing  the  CAE team  around  well-defined  core  business  activities,  and  in
clarifying the future direction of the Corporation.

On behalf of the Board, we are very proud to be working together with CAE’s
management and employees – an outstanding group of women and men – in the
development  of  one  of  this  country’s  great  technology  assets,  one  which  I  am
confident will deliver real value to customers and shareholders.

2

L.R. Wilson 
C h a i r m a n   o f   t h e   B o a r d

C A E2 0 0 0 A R

P r e s i d e n t ’ s   M e s s a g e

Repositioning CAE for Value

When  I  joined  CAE on  October  1,  1999,  the  challenge  was  clear.  Despite  an
impressive  financial  performance  in  recent  years,  CAE had  not  delivered
acceptable returns to shareholders. There were doubts about our ability to sus-
tain growth in our core simulation business, questions about our business mix,
and concerns about productivity and margin levels.

In  February,  the  Board  approved  a  strategy  intended  to  respond  to  these
concerns  and,  more  fundamentally,  to  improve  shareholder  value.  The  new
strategy,  developed  from  an  intensive  review  of  CAE’s  core  strengths  and  an
analysis of key growth opportunities, has three main elements:

Focus >

Divesting  non-core  businesses  and  concentrating  on  three  high  growth,  high
margin  businesses:  Commercial  Simulation  and  Training,  Military  Simulation
and  Controls,  and  Forestry  Systems.  These  actions  give  clarity  and  coherence
to our strategic direction.

Fix >

A combination of integration, consolidation and productivity measures intended
to reduce costs, increase efficiency, and enhance CAE’s competitiveness.

Grow >

Most importantly, a series of growth initiatives enabling us to expand the scope
of our core businesses.

C A E2 0 0 0 A R

By repositioning CAE in this manner, we expect to double net earnings over the
next three years. This is an ambitious goal, especially following a very strong fiscal
2000, which saw revenue increase by 29% and earnings up 23%. Nevertheless, 
it is achievable, based on the confidence and full commitment of the CAE team.

Strategy in Action

The initial steps in our strategy are already well underway:

Focus >

>

>

We concluded the sale of our Railway Technologies and Services group, result-
ing in an after-tax gain of $13.6 million.
We have signed an agreement to sell our Energy Control Systems business and
expect the transaction to be finalised in the month of May.
We  expect  to  conclude  the  divestiture  of  our  Cleaning  Technologies  group  by
the end of this summer.

Fix >

>

>

Through a combination of divestments and consolidations we have reduced the
number of profit centres from 21 to 5, signifying most dramatically how we are
changing the manner in which we manage our businesses.
The  corporate  functions  –  finance,  human  resources,  communications  and
business development – are fully integrated into the businesses.
Specific productivity goals have been established for each profit centre.

Grow >

>

>

>

The most significant growth initiative was our decision to make a major, but disci-
plined, move into pilot training. We are launching our first training centre in Brazil
and we intend to aggressively pursue other opportunities worldwide. Pilot training is
a natural extension of our simulator market. It is 15 times larger on an annual basis
and offers the potential of a steady revenue stream as well as higher margins.
We  are  investing  in  software  and  hardware  innovations  that  will  sustain  our
leading edge technologies and complement our entry into pilot training. 
We are determined to increase our access to the US and European military mar-
kets,  building  on  recent  successes  through  teaming  and  partnership
arrangements.
In July, we will officially open our Medium Support Helicopter Aircrew Training
Facility  at  RAF Benson  in  the  UK.  This  will  be  a  showcase  for  state-of-the-art
helicopter  training  and  is  a  leading  example  of  the  advantages  to  be  gained
from  a  partnership  between  government  and  private  industry.  We  intend  to
leverage the experience gained through this programme to exploit other oppor-
tunities in the delivery of training services to the military.

C A E2 0 0 0 A R

4

P r e s i d e n t ’ s   M e s s a g e

>

>

>

We will expand the scope of our Marine Controls product offering to include other
key  control  systems  and  we  are  actively  exploring  a  move  into  the  commercial
marine sector.
Our  Forestry  Systems  group  is  best  known  for  product  innovation.  We  are
investing in order to do even more in the future and look to generate 25% of our
revenue from new products in the next three years.
In addition, we are exploring opportunities to leverage  CAE’s expertise in real-
time  simulation  software  to  take  advantage  of  emerging  opportunities  created
through the Internet and e-commerce.

A Compelling Value Proposition

Fundamentally,  our  strategy  is  to  do  more  of  what  we  do  best,  thereby  firmly
establishing  CAE as  a  global  leader  with  a  range  of  advanced  simulation  and
control technologies for training and optimisation solutions. With greater focus
and commitment we are providing a platform for innovation and growth.

Much  more  remains  to  be  done  but  I  am  encouraged  by  the  progress  to
date. Most of all, I am convinced that we have a plan and are building a team
that will deliver greater value for shareholders.

D. H. Burney
P r e s i d e n t   a n d   C h i e f   E x e c u t i v e   O f f i c e r

5

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A Major Disciplined Move
into Pilot Training

Chris Fauquier is Managing Director, CAE Flight Training, 
South America, Sao Paulo, Brazil

CAE broke  ground  in  April  2000  on  a  six-simulator  pilot  training  facility  in  Sao  Paulo,  Brazil,  near  South
America’s  largest  airport.  The  facility  will  open  in  2001  as  the  first  independently  owned  and  operated
flight training centre in South America. Local airlines will have access to simulators close to home, elimi-
nating the costs associated with training abroad. This centre will meet the requirements of several regional
airlines and can expand to eight simulators as demand grows. Classroom computer training will familiarise
pilots  with  aircraft  systems  prior  to  training  on  CAE’s  state-of-the-art  simulators.  Debrief  rooms  are  also
provided  for  performance  evaluation  in  post-simulator  sessions.  This  major  investment  demonstrates  our
commitment to the pilot training market and establishes our credibility as we explore opportunities around
the world to rapidly expand this part of our business.

A cutaway view of our new training centre 
in Sao Paulo, Brazil, showing three of four 
simulators initially being installed

A representative image of the next generation 
visual system in a full flight simulator

Next Generation Visuals 
Excite the Eyes

Nick Leontidis is Vice President, 
Visual Systems, Montreal, Canada

CAE’s MAXVUE™ visual system produces all the computer-generated graphics that pilots see in the “out of
the  window”  view  during  simulator  sessions.  As  part  of  our  commitment  to  produce  innovative  products,
we’re developing a next generation  PC-based image generator. By leveraging  PC-based  3D graphics tech-
nology, we can improve the realism and more completely immerse a pilot in the training environment. It is
CAE’s  objective,  going  forward,  to  base  future  image  generators  on  this  emerging  technology,  which  will
ultimately provide customers with a superior training product.

C A E2 0 0 0 A R

Delivering Military Helicopter
Training in the New Millennium

Brian Symes is Managing Director,
MSHATF, RAF Benson, UK

In October 1997, the UK Ministry of Defence awarded CAE an initial 20-year contract to design, construct,
manage,  finance  and  operate  a  flight  simulator  training  facility  for  Royal  Air  Force  helicopter  crews. 
The Medium Support Helicopter Aircrew Training Facility (MSHATF) programme marked the first transfer of
a complete military training function to a commercial contractor. Using six state-of-the-art networked flight
simulators, and CAE’s proprietary ITEMS™ tactical simulation software, this facility provides tactical training
and mission rehearsal for pilots in an environment that can include up to 500 computer-generated players –
both friendly and hostile. MSHATF established CAE’s leading position in the demanding and uncompromising
area  of  military  helicopter  simulation.  It  also  showcases  our  expertise  in  building  and  managing  training
centres in support of our major growth initiatives in both commercial and military pilot training.

A cutaway view showing three of six helicopter 
simulators at the MSHATF facility in the UK, 
which will be opened officially in July 2000 

C A E2 0 0 0 A R

This illustration is representative of the 
types of control systems that will be 
integrated in the Astute Class submarine

Expanding Marine Controls
into Submarine Technology

Janet Browne is Program Manager, the Astute Project, 
the BAE Systems Shipyard, Barrow-In-Furness, UK

CAE has won its first contract to provide the Controls and Instrumentation (C&I) for the  UK Royal Navy’s
new Astute Class nuclear submarines. With extensive expertise in marine controls, CAE is working under a
wider  requirements-based  contract  where  it  must  specify  the  systems,  develop  the  software,  build/select
the hardware and then provide reasoned justifications against agreed safety and operability criteria devel-
oped  between  CAE and  its  customer,  BAE Systems.  We  are  teaming  with  specialist  firms  such  as
Rolls-Royce (UK) and Imtech (Holland) to provide specific elements of the propulsion control, and steering
and diving control systems that are within our scope of responsibility as prime contractor for the C&I sys-
tem.  Thanks  to  this  jointly  developed  and  integrated  solution,  the  resulting  new  technology  and  broader
applications associated with this contract will benefit our customers.

C A E2 0 0 0 A R

CAE Technology Integrates Operations
and Optimises Sawmill Output

Tim Mosher is Team Leader, 
Sawmill Optimization, Salmon Arm, Canada

CAE is a leader in advanced sawmill technology. The Mill Host™ is proprietary software developed to allow
customers to set up, monitor, manage and optimise sawmill operations from one central Windows-based
desktop computer. It links CAE’s entire suite of proprietary mill optimisation programs, covering log break-
down  through  to  final  cut  and  sorting.  Customers  use  the  Mill  Host  to  graphically  define  their  lumber
output  requirements,  which  are  then  optimally  distributed  in  the  mill.  The  system  also  acts  as  an  order
desk tool to prioritise production and report real-time mill productivity information. The offline simulation
utility  enables  customers  to  test  alternative  product  configurations  to  maximise  both  output  and  profits.
Software solutions such as Mill Host will increase the benefits of CAE’s optimisation products by providing
a fully integrated sawmill management platform.

A cutaway illustration of a sawmill showing the Mill Host
system analysing data to optimise lumber output at each
stage of the mill operation

Computer output showing how equipment 
in the pulp mill is performing against 
specifications to identify potential mill 
deficiencies and improvement options

Pulp Mill Simulation
Expands Customer Service

Peter LeBlanc is Technical Director, 
Pulp and Paper, Glens Falls, US

With a focus on improving productivity for our customers, we applied the ROSE® software program used in
modelling flight simulators to simulate the operation of hundreds of pieces of equipment in the pulp mill
environment.  This  new  application  of  the  ROSE software  evaluates  key  elements  and  measures  perfor-
mance  levels  according  to  equipment  specifications  to  identify  mill  deficiencies  and  assist  in  investment
decisions  for  new  capital  equipment.  Products  such  as  pulp  mill  simulation  allow  us  to  innovate  and
expand the breadth of our offering, providing significant economic value for our customers.

C A E2 0 0 0 A R

Software Technology Positions 
CAE in the New Economy

Mansour Brek is Manager, 
User Interface Technologies, Montreal, Canada

CAE has developed software tools to support some of the most demanding real-time interactive simulation
applications in the world. Networking technology, and in particular the Internet, is creating new commercial
opportunities for our network-based simulation products. The use of simulation in Web-based training, design
and  e-commerce  represents  a  significant  opportunity  for  CAE. For  example,  CAE’s  Real-time  Advanced
Visualization  Environment  (RAVE™)  can  create  a  dynamic  graphical  interface  to  access  simulations  over
the Web. RAVE is one of several integrated software development initiatives that will leverage our expertise
in high fidelity real-time simulation into the new economy of the Internet.

This application of RAVE allows the user 
to dynamically view high fidelity 
schematics of a ship’s systems 

C A E2 0 0 0 A R

Financial Review

Review of Operations
and Management’s
Discussion and Analysis 

Management and 
Auditors’ Reports 

14

26

Consolidated 
Financial 
Statements

28

Notes to 
Consolidated 
Financial Statements

31

Board of Directors 
and Officers

Information for Shareholders

45

46

R e v i e w   o f   O p e r a t i o n s   a n d
M a n a g e m e n t ’ s   D i s c u s s i o n   a n d   A n a l y s i s

Management’s Discussion and Analysis (MD&A) of fiscal 2000’s financial results focuses
on  the  core  businesses  of  CAE Inc.:  Commercial  Simulation  and  Training,  Military
Simulation and Controls, and Forestry Systems, and includes a review of the operations
and financial situation of each segment. This MD&A should be read in conjunction with
the audited consolidated financial statements on pages 28 to 43.

This MD&A contains forward-looking statements with respect to CAE Inc. and its
subsidiaries based on assumptions that CAE Inc. considered reasonable at the time they
were prepared. These forward-looking statements, by their nature, necessarily involve
risks and uncertainties that could cause actual results to differ materially from those con-
templated  by  the  forward-looking  statements.  CAE Inc.  cautions  the  reader  that  the
assumptions regarding future events, many of which are beyond the control of CAE Inc.
and its subsidiaries, may ultimately prove to be incorrect. Factors that could cause actual
results or events to differ materially from current expectations are discussed on page 24.

Summary of Consolidated Results

Revenue
Consolidated revenue for fiscal 2000 reached $1.2 billion, an increase of 29% over the
fiscal 1999 level of $906 million. All businesses experienced significantly higher revenue.
Commercial Simulation and Training revenue increased 36% or $127.4 million over fis-
cal  1999,  reflecting  the  buoyant  market and CAE’s continued success in capturing a
major share of full flight simulator orders. Revenue in Military Simulation and Controls
grew by 8% or $29.2 million due to increased activity on contracts in progress, including
the Medium Support Helicopter programme in the UK and the NATO Flying Training pro-
gramme  in  Canada.  Forestry  Systems  enjoyed  a  52%  or  $101.8  million  increase  in
revenue as a result of improved market sector dynamics and the full year contribution
from the fiscal 1999 acquisitions of Newnes and McGehee.

Earnings from Continuing Operations
Consolidated earnings from continuing operations climbed to $90.7 million or $0.83 per
share, reflecting a 23% improvement from last year’s level of $73.7 million or $0.66 
per  share.  Operating  earnings  in  Commercial  Simulation  and  Training  outpaced  the
growth in revenue, as the incremental volume, combined with productivity improvements,
contributed to an increase in margins. Operating earnings in Military Simulation and
Controls decreased, despite the higher revenue, due to a change in the mix of programme
activity and higher costs to complete certain simulator programmes. Forestry Systems
also generated a significant increase in operating earnings resulting from the revenue
growth and partially offset by the cost to close the corporation’s screen plate manufactur-
ing facility in Sweden during the fourth quarter.

Continuing Operations >

14

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R e v i e w   o f   O p e r a t i o n s   a n d   M a n a g e m e n t ’ s   D i s c u s s i o n   a n d   A n a l y s i s

Discontinued >
Operations

CAE completed the sale of substantially all of the assets of its Railway Technologies and
Services group on December 3, 1999, resulting in an after-tax gain of $13.6 million.
Total proceeds from the sale will approximate $65 million, $52.5 million of which was
received on closing. The balance will be received during the first half of fiscal 2001.

On February 2, 2000, the Board of Directors approved the plan for CAE to focus on
three  strong  growth,  high  margin  businesses:  Commercial  Simulation  and  Training,
Military Simulation and Controls, and Forestry Systems. The Board also approved the
divestiture of the Cleaning Technologies group of companies and the Energy Control
Systems business. These divestments are expected to be completed during fiscal 2001.
The results of these operating units, along with the results of Railway Technologies and
Services, have been reported as discontinued operations.

The results of discontinued operations amounted to $7.8 million and include the
$13.6 million net gain on disposal of Railway Technologies and Services, as compared to
net earnings of $3.6 million in fiscal 1999. 

Net Earnings >

Consolidated net earnings increased 27% to $98.5 million or $0.90 per share compared
with consolidated net earnings of $77.3 million or $0.70 per share in fiscal 1999.

Cash Flow >

CAE’s cash and short-term investments increased by a combined $209 million dur-
ing the year, to $163.5 million and $71.1 million respectively, from the cash position
of $25.6 million last year. The increase reflects the higher earnings, significantly lower
non-cash working capital, the initial proceeds from the sale of the Railway Technologies
and Services group, funds received from the sale and leaseback of two simulators, and
lower capital expenditures. The Corporation also expended $36.3 million to purchase 4.3 mil-
lion shares at an average price of $8.37 under its Normal Course Issuer Bid.

Backlog >

Order backlog as at March 31, 2000, reflects the company’s continuing strong growth
potential and is at a record $1.8 billion.

Review of Operations

Commercial Simulation and Training
CAE’s Commercial Simulation and Training business is the world leader in the design
and production of commercial flight simulators and visual systems. In addition, CAE is
making a major, disciplined move into the pilot training market to fuel growth. Together
with the pursuit of simulator maintenance and support activities, specific emphasis will
be placed on the establishment of independent training centres and alliances with major
airlines to address their individual pilot training needs.

15

C A E2 0 0 0 A R

Financial Results

( a m o u n t s   i n   m i l l i o n s   o f   d o l l a r s )

2 0 0 0

1 9 9 9

1 9 9 8

1 9 9 7

1 9 9 6

Revenue
Operating earnings
Backlog
Capital expenditures

$
$
$
$

480.2
82.3
527.8
11.7

352.8
55.9
482.7
23.2

296.8
56.7
339.9
27.4

186.3
27.4
154.2
9.0

230.3
15.7
233.6
10.4

Revenue and operating earnings in Commercial Simulation and Training climbed sig-
nificantly over last year’s levels, up 36% and 47%, respectively. The increase reflects the
high level of order activity over the last two years, productivity improvements, and the
leverage on costs resulting from the increase in volume.

Backlog  increased  in  the  year  to  a  record  $527.8  million,  representing  a  9%

increase over last year.

Capital expenditures declined significantly in the fiscal year. Expenditures in fiscal
1999 included costs for completing the facility expansion and the construction of four
full flight simulators for long-term lease.

Operational Highlights
Demand for flight training equipment remained strong during fiscal 2000 due to ongoing
fleet renewal, fleet expansion, strong growth in the regional jet market and pilot attrition.
In addition, the use of simulators for training has continued to increase due to improving
technology and the significant cost savings as compared with flight training aboard an
actual aircraft.

CAE achieved outstanding results in the commercial flight simulation and visual
systems market in fiscal 2000. The Corporation won 31 of 41 full flight simulators (FFS)
and three of five flight training devices ordered, representing a worldwide market share
of 74%. CAE’s commercial MAXVUE™ visual system captured 28 out of 50 competed
orders, or a 56% market share.

In the fourth quarter, CAE announced a major thrust into the commercial pilot train-
ing business with a plan to build a training facility in Sao Paulo, Brazil. South America is
one of the fastest growing aviation markets worldwide and currently lacks an indepen-
dent  training  facility.  CAE also  secured  a  long-term  contract  with  Sao  Paulo–based
Transportes Aéreos Regionais S.A. (TAM) for Fokker 100 and Airbus A-320 training in the
new facility. Contracts with additional airlines for these and other airframes are currently
under negotiation. When operational in the spring of 2001, this facility will contain four
FFSs with ancillary training equipment and classrooms.

C A E2 0 0 0 A R

16

R e v i e w   o f   O p e r a t i o n s   a n d   M a n a g e m e n t ’ s   D i s c u s s i o n   a n d   A n a l y s i s

Outlook
The market for commercial flight simulation equipment is expected to remain strong in
fiscal 2001. The factors which drove the market to record levels in recent years remain
largely unchanged, although the simulator equipment market is moving away from the
sale of major aircraft simulator types to regional and business aircraft simulators. This
shift is driven by a strong aircraft delivery forecast over the next few years in the latter
two markets.

These factors, combined with the anticipated continued growth in air travel, the
generally strong financial position of the airline industry and the order backlog for deliv-
ery of new aircraft, should lead to a consistent order level of approximately 30 to 40
devices over the next few years.

As noted earlier, the Corporation plans to invest substantially over the next three
years in expanding the scope of its commercial simulation business by entering the $8 bil-
lion  pilot  training  market.  CAE will  capitalise  on  its  solid  reputation  and  its  strong
relationship with the major airlines to grow the pilot training business worldwide in part-
nership with its customers and other third-party suppliers. CAE’s first training facility, in
Sao Paulo, Brazil, is expected to generate approximately $10 million in revenue annually.
CAE expects to increase its advantage in lead time, cost, quality and reputation for per-
formance  through  operational  improvements  and  research  and  development  (R&D)
programmes. In particular, during late fiscal 2000, the Corporation launched a large-scale
R&D programme to improve its flight simulator products. These R&D projects should initially
result in incremental improvements to existing products and, in the longer term, lead to the
introduction of new products with the potential to significantly alter market dynamics.
In addition, CAE is investing in the development of a next generation visual system,
capitalising on the significant improvements in off-the-shelf PC-based 3D graphics tech-
nology.  These  technical  innovations  will  enable  the  Corporation  to  develop  a  visual
system at a lower cost while significantly improving the realism of the virtual image.

Incremental growth in this market is anticipated from demand for FFS simulators
and visual system upgrades required as the installed base of aging visual systems reach
the end of their economic life. This trend is occurring in the military market as well.

CAE expects to maintain its commanding leadership position in commercial simula-
tion and visual systems due to its focus on customer relationships, its commitment to
innovation and technology, product quality, reliability and efficiency, and its continuing
efforts to shorten delivery cycles through process improvements.

C A E2 0 0 0 A R

17

Military Simulation and Controls
CAE’s Military Simulation and Controls business is a premier designer and manufacturer
of military flight and land-based simulation and training systems, and is the world leader
in the supply of marine control systems. During fiscal 2000, CAE’s four independent mil-
itary simulation and training operations were integrated into one focused profit centre.

Financial Results

( a m o u n t s   i n   m i l l i o n s   o f   d o l l a r s )

2 0 0 0

1 9 9 9

1 9 9 8

1 9 9 7

1 9 9 6

Revenue
Operating earnings
Backlog
Capital expenditures, net

384.9
$
15.4
$
$ 1,219.3
10.1
$

355.7
25.2
1,242.6
45.7

334.2
20.6
1,242.2
25.4

370.1
30.9
489.4
16.2

300.8
36.5
421.8
10.6

Revenue in this business increased 8% while operating earnings declined by $9.9 million
in the fiscal year. The revenue increase reflects higher activity on the Medium Support
Helicopter (MSH) and NATO Flying College military simulation programmes and the recent
marine control system contract for the UK Royal Navy’s Astute Class nuclear submarine
programme. The decrease in operating earnings reflects a change in product mix and the
impact of contract cost increases on certain military simulation programmes, including
the estimated cost for the termination of the Hornet Radar Evaluation Programme and
resulting closure of the operating facility in Adelaide, Australia.

The new facility in Burgess Hill, UK, and the construction of the training facility for
the MSH programme were substantially completed last year, resulting in lower capital
expenditures this year.

Operational Highlights
In fiscal 2000, CAE continued its efforts to establish itself as a significant training equip-
ment  provider  in  the  United  States.  CAE was  awarded  contracts  from  Flight  Safety
Services Corp. for the US Air Force C5 Weapon System Trainer #9 and the C5 Avionics
Modernisation programme. In addition, Raytheon awarded CAE a contract for the pro-
duction of three training devices for the E3A Airborne Warning and Control (AWAC). This
programme is the first to include the MAXVUE™ Medallion visual system. MAXVUE™
Medallion is the first product resulting from the alliance with Sogitec Industries SA,
announced last year. These contracts are valued at over $124 million.

C A E2 0 0 0 A R

18

R e v i e w   o f   O p e r a t i o n s   a n d   M a n a g e m e n t ’ s   D i s c u s s i o n   a n d   A n a l y s i s

CAE was also successful in enhancing its position as a training service provider. 
The Corporation was awarded the Canadian Forces Air Simulators and Trainers Contracted
Maintenance Programme to provide maintenance services for seven flight simulators and
training devices at five locations across Canada. Long-term contractor maintenance pro-
grammes were also initiated for the Royal Navy Lynx Mk. 8 and the Royal Air Force Medium
Support Helicopter Aircrew Training Facility (MSHATF) programmes in the UK, as well as
the Royal Australian Air Force Airlift programme in Australia. The total value of these con-
tracts is in excess of $72 million. CAE continues to focus on expanding its relationship with
current customers through long-term service agreements, upgrades of current devices and
provision of additional training equipment. 

The delivery of training services to the Royal Air Force at CAE’s MSHATF has started.
As of April 2000, four of the six flight simulators that form the core of this facility have
been certified Ready for Training by the customer. The fifth simulator is scheduled to
achieve Ready for Training in May 2000. The last simulator should be ready, as origi-
nally  scheduled,  early  in  2001.  This  showcase  facility  represents  the  first  turnkey
training services programme for CAE. This achievement is an important milestone in
relation to CAE’s entry into the military and commercial training services business.

CAE won every major military marine control system contract awarded in fiscal
2000,  excluding  contracts  for  repeat  orders  of  existing  competitors’  control  system
designs. These contracts include awards from three different navies around the world.

During the year, CAE was awarded its first ever submarine control system contract
by BAE Systems. CAE will be the Controls and Instrumentation (C&I) integrator for the
UK Royal Navy’s three new Astute Class nuclear submarines. This initial contract is val-
ued at approximately $75 million, with an option for two more submarines. The C&I
system to be delivered provides the integrated control of steering, diving, depth control,
and platform management of these new generation submarines. Employing digital con-
trols technology, this system enables manpower reduction while decreasing construction
costs and providing enhanced operational effectiveness.

Outlook
The military simulation and training market is driven by the introduction of new aircraft
platforms, upgrades and life extensions to existing aircraft and a shift to greater use of
simulation in pilot training programmes due to the high degree of realism and the signif-
icantly lower cost. In addition to technology and price, the customers’ – in most cases,
governments – key purchase criteria include the contractor’s local geographic presence.
CAE is well positioned to capitalise on opportunities in the international market, with
operations in Canada, the United States, Germany, the United Kingdom and Australia,
as well as teaming and/or collaboration arrangements in other countries.

C A E2 0 0 0 A R

19

The procurement of helicopter and transport aircraft is expected to increase over the
next few years and this growth will translate into many simulation opportunities for CAE
to pursue worldwide. The Corporation has identified over $2.5 billion in military simula-
tion opportunities over the next three to five years.

Key upcoming programmes include simulators for the Tiger attack helicopter, the US
Army Light Assault Attack Reconfigurable combat simulator (LASAR), the Eurofighter
2000, the Eurocopter 135/155 and the NH-90 tactical transport helicopter.

CAE is also targeting new opportunities for turnkey training centres in Europe, the
Americas  and  Asia  based  on  the  model  developed  for  the  Royal  Air  Force  MSH pro-
gramme. CAE’s capability to provide comprehensive tactical mission training is proving
to be a significant incentive as potential customers consider their options.

In addition, with hundreds of flight simulators deployed worldwide, the market for
lifetime support of training equipment and upgrades is a clear target market for CAE to
pursue. CAE is recognised as a leading corporation for upgrades and support, having
successfully upgraded and/or maintained its own and third-party simulators worldwide.
With its leading edge technology solution, CAE is well positioned to capitalise on
upcoming international marine programmes in Europe, the US and Asia, with the market
expected to remain strong in the coming years. In addition, CAE is launching initiatives
to broaden its scope of supply to include other key control systems within a ship and the
utilisation of its vast investments in warship automation technology in the commercial
marine sector.

Forestry Systems
CAE’s Forestry Systems business is the world leader in providing innovative solutions for
the forest products sector. The Corporation’s advanced technologies enable customers to
increase the value of products recovered from wood fibre resources. During fiscal 2000,
the forestry businesses were integrated into two focused profit centres: Wood Products
and Pulp and Paper.

20

C A E2 0 0 0 A R

R e v i e w   o f   O p e r a t i o n s   a n d   M a n a g e m e n t ’ s   D i s c u s s i o n   a n d   A n a l y s i s

The Wood Products division provides proprietary machinery and equipment for soft-
wood lumber and engineered wood producers. Operating out of British Columbia and
California,  CAE combines  proprietary  software,  sensors  and  control  systems  with
advanced mechanical design to provide leading-edge sawmill optimisation solutions to
the global wood products industry.

The Pulp and Paper division provides advanced screening solutions for pulp and paper
companies. CAE operates out of Quebec, Finland and Belgium, and has market access
worldwide via a combination of regional offices, technical agents and strategic alliances.

Financial Results

( a m o u n t s   i n   m i l l i o n s   o f   d o l l a r s )

2 0 0 0

1 9 9 9

1 9 9 8

1 9 9 7

1 9 9 6

Revenue
Operating earnings
Backlog
Capital expenditures, net

$
$
$
$

299.2
43.8
86.6
9.1

197.4
32.8
64.0
7.4

109.4
16.2
23.9
6.3

138.7
19.8
28.3
13.3

149.1
28.0
51.0
4.7

Revenue and operating earnings in Forestry Systems increased 52% and 34%, respec-
tively, during the fiscal year. The strong North American housing market and a global
recovery of pulp prices during calendar year 1999 drove the improvements. In addition,
the inclusion of a full year of the operations of the sawmill optimisation businesses
(acquired in fiscal 1999) contributed to the growth.

Backlog climbed $22.6 million or 35% in the year, reflecting the sustained demand

for equipment in this market sector.

Capital expenditures increased 23% over fiscal 1999. Expenditures incurred to expand
the manufacturing facility in California and equipment upgrades in Finland contributed
to the increase.

Operational Highlights
CAE demonstrated global reach for its sawmill optimisation expertise with the installation
of an entire sawmill for Balcus Timber in Northern Ireland during fiscal 2000. The order
is significant as it showcases CAE’s Mill Host™ concept, whereby a single software solution
is determined for a log (before it reaches the first saw blade). This optimised solution is
then utilised throughout the mill until the resulting lumber is sorted and stacked for ulti-
mate sale. This order positions CAE well for future success in the European market.

C A E2 0 0 0 A R

21

CAE continued its tradition of introducing new technology to the wood products
industry during fiscal 2000. The first Linear Planermill Optimizer (LPO) was delivered
during the fourth quarter. The LPO utilises a combination of x-ray and moisture detection
technology to grade finished lumber for optimum market value. In addition, the first pro-
totype PanelMSR ® (Machine Stress Rated) machine will be installed at an Oriented
Strand  Board  (OSB)  mill  in  May  2000.  The  PanelMSR ® measures  panel  stiffness  to
ensure structural quality is maintained, and will ultimately provide mill operators with a
tool for process optimisation.

The expansion of CAE’s Ukiah, California facility, to be completed in the first quar-
ter of fiscal 2001, will further the Corporation’s ability to respond to the strong market
demand for its products.

In addition, new product development efforts have been directed at leveraging CAE’s
core simulation and control capabilities into the pulp and paper sector. The preliminary
introduction of a pulp mill simulation model that allows mill managers to assess the effi-
ciency of their various screening applications has been received enthusiastically.

During the fourth quarter of fiscal 2000, the screen plate manufacturing plant in
Sweden was closed and its drilling operations consolidated into the facility in Finland to
improve operational efficiency. In addition, a strategic alliance with a Korean manufac-
turer was achieved that provides improved access to the Asian market.

Outlook
The continued strong housing market in North America, with housing starts forecast 
to  remain above 1.5 million during 2000, and stable lumber prices bode well for CAE.
Lumber and engineered wood producers are continuing to take advantage of new tech-
nology to optimise their wood fibre utilisation and thereby improve competitiveness.
CAE is well positioned as the leading supplier in North America to benefit from this trend
going forward. As efforts are focused on extending the Corporation’s reach more aggres-
sively overseas, additional upside potential exists.

Pulp prices rose during the first quarter of 2000 to their highest levels in four years.
Asian pulp and paper producers have seen capacity utilisation levels rise significantly 
as  economic  conditions  have  improved.  Both  of  these  factors  will  contribute  to  a 
strong year for CAE in fiscal 2001 as a leading supplier to the pulp and paper industry.
The planned introduction of new technology-based solutions will further bolster the
Corporation’s opportunities.

C A E2 0 0 0 A R

22

R e v i e w   o f   O p e r a t i o n s   a n d   M a n a g e m e n t ’ s   D i s c u s s i o n   a n d   A n a l y s i s

Liquidity and Capital Resources

CAE’s cash and short-term investments position increased by $209 million during the
year. Cash increased to $163.5 million from the March 31, 1999, level of $25.6 mil-
lion. Surplus cash flow in the fourth quarter was invested in short-term investments
($71.1 million) comprised of high grade commercial paper with maturity under nine
months. CAE’s higher cash balances resulted from the increase in net earnings, a signifi-
cant reduction in working capital due to the achievement of several contract milestones
and advance deposits on new orders, $52.5 million in cash received on the sale of its
Railway Technologies and Services and the $35.5 million in proceeds received on the
sale and leaseback of two simulators. The increase was partially offset by the $36.3 mil-
lion expended to purchase 4.3 million shares under CAE’s Normal Course Issuer Bid.

Capital expenditures totalled $30.9 million compared with $76.3 million in fiscal
1999. The fiscal 1999 level was the highest level ever recorded for CAE and included the
completion of a new facility for CAE’s UK operation, the MSHATF, and facilities expan-
sion for Commercial Simulation and Training and for the Pulp and Paper division, as well
as the completion of four simulators for long-term lease. The fiscal 2000 expenditures
reflect normal capital asset replacement.

CAE employs foreign exchange forward contracts to manage the exposure created
when sales are made in foreign currencies. The amount and timing of forward contracts
vary on a number of factors, including milestone billings and the use of foreign materials
and/or subcontractors on the programme. As at March 31, 2000, CAE had $416 million 
in Canadian equivalent foreign exchange contracts that, if marked to market at that date,
would result in a foreign exchange gain of $2.5 million. These would be equally offset by
future losses of foreign denominated cash flows over the balance of the contracts.

CAE also uses financial instruments to manage its exposure to changing interest
rates and to adjust its mix of fixed and floating interest rate debt. In order to benefit 
from the low short-term interest rates prevailing in the Canadian market, CAE concluded
interest rate swap agreements in 1997 with two Canadian financial institutions for peri-
ods between eight and fifteen years. At March 31, 2000, CAE had interest rate swaps
covering long-term debt amounting to $96 million that, if marked to market at that date,
would result in a gain of $5.8 million. CAE deals only with sound counter-parties in exe-
cuting any of its financial instruments.

As at March 31, 2000, CAE had US$155 million of accumulated non-capital loss
carry-forwards that can be used to offset income taxes payable on future earnings from
US operations. 

C A E2 0 0 0 A R

23

Recently Issued Accounting Standards Not Yet Implemented
In fiscal 2001, CAE will be required to adopt the recently issued accounting standards for
financial reporting purposes from CICA Handbook Section 3465 – Accounting for Income
Taxes  and Section 3461 – Employee Future Benefits. The impact of adopting new stan-
dards on the Consolidated Statements of Earnings is not expected to be material.

Business Risks >

and Uncertainties

CAE operates in different industry segments that involve various risk factors and uncer-
tainties, which are carefully considered in the Corporation’s management policies.

Market Cycles
CAE companies participate in competitive global markets that are subject to worldwide
economic  trends  and  political  influences.  Many  of  the  Corporation’s  products  are
affected by industry market cycles. The commercial simulation market generally follows
the trend established in the commercial airline industry, particularly the delivery of new
aircraft. Military simulation programmes, awarded mainly by governments, are depen-
dent on price, technology, life cycle costs, delivery, quality and government spending on
defence programmes, and may also be influenced by in-country presence. Lead times on
military programmes can easily surpass 12 months. Forest product commodity prices
such as the price of pulp, sawn lumber and OSB panel board, which, in turn, are gov-
erned  by  the  demand  for  paper  and  the  health  of  the  construction  industry,  impact
demand for various equipment and services offered by Forestry Systems.

CAE has positioned itself in three core business segments, geographically and by
industry sector, and is expanding the scope of its product offerings to help moderate
these risks.

Product Innovation
CAE emphasises product innovation in all segments. Its success is dependent upon the
advancement of technology on existing products and the introduction of new products. 
In response, CAE expends a significant amount on research and development, which in
many cases is sponsored by the customer. Certain initiatives also receive the support of
the Canadian Government through the Technology Partnerships Canada Programme.

Changes in Contract Cost
CAE’s operating results may fluctuate from a change in the cost to complete long-term
fixed-price contracts. Typically these contracts incorporate new technological solutions,
the costs of which are difficult to estimate.

24

C A E2 0 0 0 A R

R e v i e w   o f   O p e r a t i o n s   a n d   M a n a g e m e n t ’ s   D i s c u s s i o n   a n d   A n a l y s i s

Key Personnel
CAE is dependent on the continued service of qualified technical personnel, and its ability
to attract and retain them. CAE applies a compensation philosophy designed to mitigate
this risk.

Year 2000 
CAE depends on technology for business applications (e.g., accounting and management
systems), engineering design and support systems (e.g., CAD and communication sys-
tems) that could be date-sensitive. System dependency and the potential scope of the
Year 2000 problem vary from operating company to operating company.

CAE completed the replacement, modification, testing and implementation of all
important computer systems prior to December 31, 1999. Contingency plans, including
alternative supply sources, were also formulated.

The Corporation has experienced no disruptions attributable to the Year 2000 issue
to date, and accordingly believes that the issue now represents significantly reduced
risk. CAE’s operating companies will, however, continue to monitor their systems in line
with their standard business risk management practices.

25

C A E2 0 0 0 A R

M a n a g e m e n t   a n d   A u d i t o r s ’   R e p o r t s

Management Report >

Management is responsible for the integrity and objectivity of the information contained
in this annual report and for the consistency between the financial statements and other
financial and operating data contained elsewhere in the report. The accompanying finan-
cial statements have been prepared by management in accordance with accounting
principles generally accepted in Canada, using policies and procedures established by
management, and reflect the Corporation’s financial position, results of operations and
cash flow.

Management has established and maintains a system of internal control which is
designed to provide reasonable assurance that assets are safeguarded from loss or unau-
thorized use and that financial information is reliable and accurate. The Corporation also
maintains an internal audit function that evaluates and formally reports to management
and the Audit Committee on the adequacy and effectiveness of internal controls.

The financial statements have been examined by external auditors appointed by the
shareholders. Their examination provides an independent view as to management’s dis-
charge of its responsibilities insofar as they relate to the fairness of reported operating
results  and  financial  condition.  They  obtain  an  understanding  of  the  Corporation’s
accounting systems and procedures and conduct such tests and related procedures as
they deem necessary to arrive at an opinion on the fairness of the financial statements.
Ultimate responsibility to the shareholders for the financial statements rests with
the Board of Directors. An Audit Committee is appointed by the Board to review the
financial statements in detail and to report to the Directors prior to such statements
being approved for publication. The Audit Committee meets regularly with management,
the internal auditors and the external auditors to discuss their evaluation of internal
accounting controls, audit results and the quality of financial reporting. The external
auditors have free access to the Audit Committee, without management’s presence, to
discuss the results of their audit.

D. H. Burney 
P r e s i d e n t   a n d  

C h i e f   E x e c u t i v e   O f f i c e r  

P.G. Renaud
V i c e   P r e s i d e n t ,   F i n a n c e ,

C h i e f   F i n a n c i a l   O f f i c e r ,

a n d   S e c r e t a r y

26

C A E2 0 0 0 A R

M a n a g e m e n t   a n d   A u d i t o r s ’   R e p o r t s

Auditors’ Report >

to the Shareholders
of CAE Inc.

We have audited the Consolidated Balance Sheets of CAE Inc. as at March 31, 2000 and
1999, and the Consolidated Statements of Earnings, Retained Earnings and Cash Flow for
the years then ended. These financial statements are the responsibility of the Corporation’s
management. Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain reason-
able assurance as to whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and dis-
closures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material
respects, the financial position of the Corporation as at March 31, 2000 and 1999, and
the results of its operations and cash flows for the years then ended in accordance with
Canadian generally accepted accounting principles.

C h a r t e r e d   A c c o u n t a n t s

T o r o n t o ,   C a n a d a

A p r i l   2 7 ,   2 0 0 0

27

C A E2 0 0 0 A R

C o n s o l i d a t e d   B a l a n c e   S h e e t s

a s   a t   m a r c h   3 1   ( a m o u n t s   i n   m i l l i o n s   o f   d o l l a r s )

2 0 0 0

1 9 9 9

Assets
Current assets
Cash
Short-term investments
Accounts receivable
Inventories ( n o t e   3 )
Prepaid expenses
Income taxes recoverable

Net assets of discontinued operations ( n o t e   2 )
Property, plant and equipment, net ( n o t e   4 )
Goodwill
Other assets ( n o t e   5 )

$ 163.5
71.1
325.3
108.1
14.5
28.6

711.1
105.2
214.8
144.1
49.0

$

25.6
–
266.2
121.6
14.9
26.8

455.1
147.6
243.7
162.5
56.3

$ 1,224.2

$ 1,065.2

Liabilities and shareholders’ equity
Current liabilities

Accounts payable and accrued liabilities
Deposits on contracts
Long-term debt due within one year

$

$ 306.7
219.2
0.9

Long-term debt ( n o t e   6 )
Long-term liabilities 
Deferred income taxes

Shareholders’ equity

Capital stock ( n o t e   8 )
Retained earnings 
Currency translation adjustments

526.8
270.7
40.6
6.8

844.9

122.1
272.1
(14.9)

379.3

201.4
141.1
0.9

343.4
296.2
75.5
11.8

726.9

154.2
194.2
(10.1)

338.3

28

A p p r o v e d   b y   t h e   B o a r d :

$ 1,224.2

$ 1,065.2

D. H. Burney 
D i r e c t o r  

L. R. Wilson
D i r e c t o r

C o n s o l i d a t e d   F i n a n c i a l   S t a t e m e n t s

C o n s o l i d a t e d   S t a t e m e n t s   o f   E a r n i n g s

y e a r s   e n d e d   m a r c h   3 1  
( a m o u n t s   i n   m i l l i o n s   e x c e p t   p e r   s h a r e   a m o u n t s )

2 0 0 0

1 9 9 9

Revenue

Commercial Simulation and Training
Military Simulation and Controls
Forestry Systems

Operating earnings

Commercial Simulation and Training
Military Simulation and Controls
Forestry Systems

Earnings from continuing operations before

interest and income taxes

Interest expense, net

Earnings from continuing operations before income taxes
Income taxes ( n o t e   9 )

Earnings from continuing operations
Results of discontinued operations ( n o t e   2 )

Net earnings

Earnings per share from continuing operations

Net earnings per share

$ 480.2
384.9
299.2

$

352.8
355.7
197.4

$ 1,164.3

$

905.9

$

82.3
15.4
43.8

$

55.9
25.2
32.8

141.5
10.0

131.5
40.8

90.7
7.8

98.5

0.83

0.90

$

$

$

113.9
9.6

104.3
30.6

73.7
3.6

77.3

0.66

0.70

$

$

$

Average number of shares outstanding

109.5

111.1

C o n s o l i d a t e d   S t a t e m e n t s   o f   R e t a i n e d   E a r n i n g s

29

y e a r s   e n d e d   m a r c h   3 1   ( a m o u n t s   i n   m i l l i o n s   o f   d o l l a r s )

2 0 0 0

Retained earnings at beginning of year
Net earnings
Dividends

$ 194.2
98.5
(20.6)

$

1 9 9 9

134.7
77.3
(17.8)

Retained earnings at end of year

$ 272.1

$

194.2

C A E2 0 0 0 A R

C o n s o l i d a t e d   S t a t e m e n t s   o f   C a s h   F l o w

y e a r s   e n d e d   m a r c h   3 1
( a m o u n t s   i n   m i l l i o n s   o f   d o l l a r s )

2 0 0 0

1 9 9 9  
( n o t e   1 )

Operating activities
Earnings from continuing operations
Adjustments to reconcile net earnings to cash flows from 

operating activities:

Amortisation
Deferred income taxes
Other
Decrease (increase) in non-cash working capital ( n o t e   1 0 )

Cash provided by continuing operating activities

Investing activities
Proceeds on disposition of business unit ( n o t e   2 )
Acquisitions ( n o t e   1 5 )
Short-term investments
Capital expenditures
Proceeds from sale and leaseback of assets
Other

Net cash used in continuing investing activities

Financing activities
Proceeds from (repayments of) long-term debt borrowings
Dividends paid, net of stock dividends
Purchase of capital stock
Other

Net cash used in continuing financing activities
Net cash used in discontinued operations ( n o t e   2 )
Effect of foreign exchange rate changes on cash

Net increase (decrease) in cash
Cash at beginning of year

$

90.7

$

73.7

33.7
(7.6)
(0.3)
133.5

250.0

52.5
–
(71.1)
(30.9)
35.5
(11.4)

(25.4)

(5.5)
(20.4)
(36.3)
0.2

(62.0)
(21.6)
(3.1)

137.9
25.6

28.6
(1.6)
(2.0) 
(70.3)

28.4 

–
(111.5)
–
(76.3)
–
(4.1)

(191.9)

8.7
(17.6)
–
(3.5)

(12.4)
(8.9)
7.6

(177.2)
202.8

Cash at end of year

$ 163.5

$

25.6

C A E2 0 0 0 A R

30

N o t e s   t o   C o n s o l i d a t e d   F i n a n c i a l   S t a t e m e n t s

y e a r s   e n d e d   m a r c h   3 1 ,   2 0 0 0   a n d   1 9 9 9   ( a m o u n t s   i n   m i l l i o n s   o f   d o l l a r s )

Note 01

S u m m a r y   o f   S i g n i f i c a n t   A c c o u n t i n g   P o l i c i e s
Accounting  policies  of  the  Corporation  and  its  subsidiaries  conform  with  generally
accepted accounting principles in Canada and reflect practices appropriate to the indus-
tries in which they operate.

New Accounting Standards
The Consolidated Statements of Cash Flow for the 12 months ended March 31, 1999,
has been restated to reflect the new requirements under Section 1540 of the Canadian
Institute of Chartered Accountants Handbook, Cash Flow Statements.

Consolidation
The consolidated financial statements include the accounts of the Corporation and all
subsidiaries. All inter-corporate accounts and transactions have been eliminated.

Acquisitions are accounted for by the purchase method and accordingly the results

of operations of subsidiaries are included from the dates of acquisition.
Portfolio investments are accounted for using the cost method.

Revenue Recognition
Revenue from long-term contracts is recognised using the percentage of completion
method,  where  revenue,  earnings  and  unbilled  accounts  receivable  are  recorded  as
related costs are incurred. Revisions in cost and earnings estimates during the term of
the contract are reflected in the period in which the need for revision becomes known.
Losses, if any, are recognised fully when first anticipated.

All other revenue is recorded and related costs transferred to cost of sales at the

time the product is shipped or the service is provided.

Cash and Short-Term Investments
Cash consists of cash and cash equivalents which are short-term, highly liquid invest-
ments with maturity of 90 days or less. Short-term investments include money market
instruments and commercial paper carried at the lower of cost or market value.

Inventories
Inventories are stated at the lower of average cost and net realisable value.

Property, Plant and Equipment
Property, plant and equipment is stated at cost. The declining balance and straight-line
methods are used in computing amortisation of property, plant and equipment based on
the following useful lives: buildings and improvements, 20 to 40 years; machinery and
equipment, 3 to 10 years; and property under capital lease, over the term of the lease.

Foreign Currency Translation and Financial Instruments
Assets and liabilities denominated in currencies other than Canadian dollars are trans-
lated at exchange rates in effect at the balance sheet date. Revenue and expense items
are translated at average rates of exchange for the year. Translation gains or losses are
included in the determination of earnings, except for gains or losses arising on translation
of accounts of foreign subsidiaries considered self-sustaining and gains or losses arising

C A E2 0 0 0 A R
C A E2 0 0 0 A R

31

from the translation of foreign currency debt that has been designated as a hedge of the
net investment in subsidiaries, which are deferred as a separate component of share-
holders’ equity. Gains or losses arising from the translation of foreign currency debt not
designated as a hedge of the net investment in subsidiaries are deferred, included in
other assets and amortised on a straight-line basis over the term of the debt.

The Corporation enters into forward contracts to manage exposures resulting from
foreign exchange fluctuations in the ordinary course of business. The contracts are nor-
mally for terms up to 12 months and are used as hedges of foreign denominated cash
flows. Gains and losses on outstanding contracts are offset against the gains and losses
of the hedged item at the maturity of the underlying transactions. The Corporation nego-
tiates forward contracts only with financially sound counterparties.

The  carrying  value  of  financial  instruments  approximates  fair  value  except

where indicated.

Goodwill
The excess purchase price paid on the acquisition of businesses over the value assigned
to identifiable net assets acquired, is allocated to goodwill. Goodwill is stated at cost
less  accumulated  amortisation  and  is  being  amortised  on  a  straight-line  basis  over 
40 years. The value of goodwill is evaluated by reviewing the financial returns of the
related business, taking into account the risk associated with the business, and is written
down when there has been an impairment of its value.

Income Taxes
The Corporation follows the tax allocation method of accounting for income taxes whereby
earnings  are  charged  with  income  taxes  relating  to  reported  earnings.  Differences
between such taxes and taxes currently payable or recoverable are reflected in deferred
income taxes and arise because of differences between the time certain items of revenue
and expense are reported in the accounts and the time they are reported for income tax
purposes. Investment tax credits arising from research and development are deducted
from the related costs and are accordingly included in the determination of earnings in
the same year as the related costs. Investment tax credits arising from the acquisition of
property, plant and equipment are deducted from the cost of those assets with amortisa-
tion calculated on the net amount.

Post-Retirement Benefits 
Pensions
Pension expense includes the cost of pension benefits, related to defined benefit plans,
accrued for employees’ services for the year and the past service costs, adjustments for
plan amendments, and experience gains and losses amortised on a straight-line basis
over the expected average remaining service life of the plan participants.

Benefits Other than Pensions
The Corporation accrues estimates of future costs of retiree post-employment benefits over
the employees’ average remaining service life. The long-term portion of all post-employment
benefits is included in Long-term liabilities on the Consolidated Balance Sheet.

Earnings per Share
The calculation of earnings per share is based on the weighted average number of shares
outstanding. Conversion of the outstanding stock options would not materially dilute
earnings per share.

C A E2 0 0 0 A R

32

N o t e s   t o   C o n s o l i d a t e d   F i n a n c i a l   S t a t e m e n t s

Note 02

Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of the contingent assets and
liabilities at the date of the financial statements and revenue and expenses for the period
reported. Actual results could differ from those estimates.

D i s c o n t i n u e d   O p e r a t i o n s
On December 3, 1999, the Corporation completed the sale of substantially all of the
assets of its Railway Technologies and Services business segment, resulting in an after-
tax  gain  on  disposition  of  $13.6  million.  The  Corporation  expects  to  receive  total
proceeds of $65.5 million, of which $52.5 million was received in cash on December 3,
1999, with the balance to be received in cash over the next six months.

On February 2, 2000, the Board of Directors approved a plan to divest its Cleaning
Technologies and Energy Control Systems businesses. These discontinued businesses
are expected to be sold within the next fiscal year.

As a result of the sale of the Railway Technologies and Services business and the
planned divestiture of the other businesses (together the “Discontinued Operations”), the
results of operations for the Discontinued Operations have been reported separately in
the Consolidated Statements of Earnings and previously reported financial statements
have  been  reclassified.  Interest  expense  has  been  allocated  to  the  Discontinued
Operations based on their share of the Corporation’s net assets.

Summarized financial information for the Discontinued Operations is as follows:

Revenue

Results of discontinued operations
(i) Results of operations prior to measurement

dates, net of income tax recovery of
$3.1; (1999 – $0.5)

(ii) Net gain from discontinued operations,

net of income taxes of $2.7

Results of discontinued operations

Current assets
Property, plant and equipment, net
Goodwill
Deferred income taxes
Other assets

Current liabilities
Other liabilities

2 0 0 0

1 9 9 9

$ 173.7

$

164.2

$

$

(6.0)

13.8

7.8

68.9
19.4
40.0
0.3
1.0

129.6
23.6
0.8

$

$

3.6

–

3.6

80.8
30.7
71.0
2.6
1.0

186.1
36.9
1.6

Net assets of discontinued operations

$ 105.2

$

147.6

Net cash used in operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities

$ (10.4)
(10.5)
(0.7)

$

(1.5)
(8.1)
0.7

Net cash used in discontinued operations

$ (21.6)

$

(8.9)

33

Note 03

I n v e n t o r i e s

Work-in-progress
Raw materials, supplies and manufactured products

$

2 0 0 0

60.3
47.8

$

1 9 9 9

81.9
39.7

$ 108.1

$

121.6

Note 04

P r o p e r t y ,   P l a n t   a n d   E q u i p m e n t

2 0 0 0

Land
Buildings and improvements
Machinery and equipment
Property under capital leases

1 9 9 9

Land
Buildings and improvements
Machinery and equipment
Property under capital leases

C o s t

A c c u m u l a t e d
A m o r t i s a t i o n

$

9.9
152.9
203.2
10.6

$

–
42.4
114.7
4.7

$

N e t   B o o k
V a l u e

9.9
110.5
88.5
5.9

$ 376.6

$ 161.8

$ 214.8

C o s t

A c c u m u l a t e d
A m o r t i s a t i o n

N e t   B o o k
V a l u e

$

9.9
173.6
215.6
12.5

$

–
33.7
129.0
5.2

$

9.9
139.9
86.6
7.3

$

411.6

$

167.9

$

243.7

Note 05

O t h e r   A s s e t s

Investment tax credits ( i )
Investment in and advances to CVS Leasing Ltd. ( i i )
Deferred charges ( i i )
Other

$

2 0 0 0

14.8
16.4
10.4
7.4

$

1 9 9 9

29.3
9.1
9.0
8.9

$

49.0

$

56.3

34

(i) Investment tax credits are available to reduce future federal income taxes payable 
in Canada.

(ii) During fiscal 1998, the Corporation led a consortium that was contracted by the 
UK Ministry of Defence (“MoD”) to design, construct, manage, finance and operate an
integrated simulator based aircrew training facility for the Medium Support Helicopter
fleet of the Royal Air Force. The contract covers a 40-year period, which can be termi-
nated by the MoD after 20 years.

C A E2 0 0 0 A R

N o t e s   t o   C o n s o l i d a t e d   F i n a n c i a l   S t a t e m e n t s

In  connection  with  the  contract,  the  Corporation  has  established  a  subsidiary,
CAE Aircrew Training plc, which it owns 74% thereof with the balance held by the other
consortium partners. This subsidiary has leased the land from the MoD, has built the
facility and will operate the training centre, and has been consolidated with the accounts
of the Corporation.

The pre-operating expenditures in connection with this contract were deferred up
until the aircrew training facility was ready for training in March 2000. The deferred
costs will, commencing in fiscal 2001, be amortised over the remaining life of the initial
20-year period of the contract.

In addition, the Corporation has a minority shareholding of 11% in, and has
advanced funds to, CVS Leasing Ltd., a company established to acquire the simulators
and other equipment that will be leased to Aircrew.

Note 06

D e b t   F a c i l i t i e s
A. Long-Term Debt

Senior notes ( i ) , ( v )
Five-year revolving term loan, to a maximum of
US$220.0, unsecured, due May 31, 2002 ( v )

Five-year revolving term loan,

to a maximum of Deutschmark 100.0
unsecured, due May 31, 2002 (2000 – DM 87.0;
1999 – DM 100.0) ( i i ) , ( v )

Eighteen-year term loan, to a maximum of £12.7 

secured, maturing April 1, 2001, to October 1, 2015
(2000 – £11.9; 1999 – £9.9) ( i i ) , ( i i i ) , ( v )

Obligations under capital

lease commitments ( i v ) , ( v )

Less: Long-term debt due within one year

2 0 0 0

1 9 9 9

$ 177.0

$

183.0

–

–

61.9

83.4

27.6

5.1

271.6
0.9

24.1

6.6

297.1
0.9

$ 270.7

$

296.2

(i) In June 1997, pursuant to a private placement with certain investors, the Corporation
borrowed US$108 million and $20 million. These unsecured senior notes, which rank
equally with the term bank financing are repayable after 8, 10, 12 and 15 years. Fixed
interest of approximately 7.5% is payable semi-annually in June and December.

(ii) Interest on bank term loans is charged at rates approximating LIBOR.

(iii) In October 1997 the Corporation arranged project financing for its subsidiary to
finance the Corporation’s Medium Support Helicopter Programme for the Ministry of
Defence in the United Kingdom. This term loan is secured by the project assets of the
subsidiary and is repayable over 18 years to October 1, 2015.

(iv) The effective interest rate on obligations under capital leases was approximately
7.0% (1999 – 7.3%).

C A E2 0 0 0 A R

35

(v) Payments required in each of the next five years to meet the retirement provisions of
the long-term debt are as follows:

Year ending March 31,

2001
2002
2003
2004
2005
Thereafter

$

0.9
2.6
66.3
3.5
23.2
175.1

$

271.6

Note 07

Interest expense on long-term debt was $14.5 million (1999 – $15.6 million).

The  fair  value  of  the  long-term  debt  at  March  31,  2000,  including  the  effect  of

related interest rate swap agreements, is approximately $275 million.

B. Short-Term Debt
The Corporation has unsecured bank lines of credit available in various currencies totalling
$80.4 million (1999 – $84.0 million). The effective interest rate on short-term borrow-
ings was 7.6% (1999 – 7.6%).

F i n a n c i a l   I n s t r u m e n t s
The Corporation has estimated the fair values of its financial instruments as at March 31,
2000, using quoted market values where available and other information.

At March 31, 2000, the Corporation had outstanding forward contracts to hedge its
foreign currency cash flows into Canadian dollars. These forward exchange contracts
have maturity dates up to December 2004. The fair value of these contracts if marked to
market at March 31, 2000, would result in a gain of $2.5 million. This would be equally
offset by future losses of foreign denominated cash flows over the remaining terms of
the contracts.

Effective June 9, 1997, the Corporation entered into interest rate swap agreements
with two different financial institutions for a total nominal value of $68 million whereby in
the first instance the Corporation will receive a fixed interest rate of 7.2% semi-annually
for 8 years and in the second instance the Corporation will receive a fixed interest rate of
7.7% semi-annually for 15 years. In both cases, the Corporation will pay quarterly vari-
able interest established at bankers acceptance rates, plus a premium.

Pursuant to the requirements of its long-term project financing, on October 16,
1997, the Corporation’s subsidiary entered into an interest rate swap agreement with
two financial institutions for a maximum total nominal value of £12.7 million whereby
the subsidiary will receive payments of floating rate interest and will pay a fixed interest
rate of 6.8% semi-annually for 13 years.

Receipts and payments under interest rate swap agreements have been accounted

for as adjustments to interest expense on long-term debt.

The fair value of the interest rate swap agreements if marked to market at March 31,

2000, would result in a gain of $5.8 million.

36

C A E2 0 0 0 A R

N o t e s   t o   C o n s o l i d a t e d   F i n a n c i a l   S t a t e m e n t s

Note 08

C a p i t a l   S t o c k
i) The Corporation’s articles of incorporation authorize the issue of an unlimited number
of preferred shares, issuable in series, and an unlimited number of common shares. 
To date the Corporation has not issued any preferred shares.

ii) A reconciliation of the issued common shares of the Corporation follows:

N u m b e r
o f   S h a r e s

2 0 0 0

S t a t e d
V a l u e

N u m b e r
o f   S h a r e s

1 9 9 9

S t a t e d
V a l u e

Balance at beginning of year
Stock options exercised ( a )
Stock dividends ( b )
Purchase of Capital Stock ( c )
Treasury issue ( n o t e   1 5 )

111,466,032
414,637
34,016
(4,335,500)

$ 154.2
3.9
0.3
(36.3)

110,490,405
352,275
23,352

$ 145.1
1.9
0.2

600,000

7.0

Balance at end of year

107,579,185

$ 122.1

111,466,032

$ 154.2

a) During the year, the Corporation granted 1,107,000 options, exercisable at $8.45 per
share and 200,000 options, exercisable at $8.20 per share, to certain officers and key
employees of the Corporation and its subsidiaries to purchase common shares. The
option price for each issue was equal to the closing price of the common shares on the 
Toronto  Stock  Exchange  on  the  trading  day  immediately  prior  to  the  day  the  stock
options were issued.

Stock options were outstanding at March 31, 2000, for the purchase of 2,739,663
common shares at prices ranging from $7.25 to $12.85 and expiring during the period
from 2000 to 2005. 414,637 options were exercised and 653,500 options expired in 
the year.

b) The Corporation provides that its shareholders may elect to receive common stock
dividends in lieu of cash dividends.

c) As part of its Normal Course Issuer Bid, the Corporation purchased on the Toronto
Stock Exchange and the Montreal Stock Exchange, 4,335,500 common shares during the
year.  Shares  purchased  by  the  Corporation  were  cancelled.  Copies  of  the  Notice
of Intention to make a Normal Course Issuer Bid, filed with the Stock Exchanges, are
available without charge from the Corporation.

d) The Corporation has a Plan for the Equal Treatment of Shareholders whereby one
right has been issued for each outstanding common share of the Corporation. The rights
remain attached to the shares and are not exercisable until the occurrence of certain
designated events. The rights expire on June 14, 2000, unless terminated at an earlier
date by the Board of Directors.

37

C A E2 0 0 0 A R

Note 09

I n c o m e   T a x e s
The provision for income taxes comprises:

Current
Deferred

2 0 0 0

50.6
(9.8)

40.8

$

$

1 9 9 9

31.7
(1.1)

30.6

$

$

The Corporation’s effective income tax provision has been determined as follows:

Combined federal and provincial

statutory rate (2000 and 1999 – 44.6%)

$

Income taxed at different rates in other jurisdictions
Manufacturing and processing allowance
Tax benefit of losses not previously recognised
Research and development investment tax credits
Other 

2 0 0 0

1 9 9 9

58.7
(7.3)
(9.0)
(3.2)
(0.7)
2.3

$

46.6
(12.1)
(6.3)
(2.0)
(0.6)
5.0

Income taxes

$

40.8

$

30.6

At March 31, 2000, the Corporation had accumulated non-capital losses for income tax
purposes relating to operations in the United States, the potential benefit of which has
not been recognised in the financial statements, as follows:

( S t a t e d   i n   U S   d o l l a r s )

Losses for income tax purposes
Amounts provided for in the financial statements

that have not yet been claimed for income tax purposes

$

145.8

9.0

$ 

154.8

The losses for income tax purposes expire in the years 2005 through 2013.

38

C A E2 0 0 0 A R

N o t e s   t o   C o n s o l i d a t e d   F i n a n c i a l   S t a t e m e n t s

Note 10

S u p p l e m e n t a r y   C a s h   F l o w   I n f o r m a t i o n
Cash provided from (used for) non-cash working capital:

Accounts receivable
Inventories
Prepaid expenses
Income taxes recoverable
Accounts payable and accrued liabilities
Deposits on contracts

Net cash paid during the year for

Income taxes
Interest

2 0 0 0

$ (54.6)
9.3
0.3
10.9
88.4
79.2

$

1 9 9 9

8.7
(28.4)
(9.4)
(10.6)
(70.7)
40.1

$ 133.5

$

(70.3)

$
$

0.5
13.1

$
$

16.8
12.7

Note 11

C o n t i n g e n c i e s
(a) Through the normal course of operations, the Corporation is party to a number of
lawsuits, claims and contingencies. Accruals are made in instances where it is probable
that liabilities will be incurred and where such liabilities can be reasonably estimated.
Although it is possible that liabilities may be incurred in instances for which no accruals
have been made, the Corporation has no reason to believe that the ultimate outcome of
these matters will have a material impact on its financial position.

(b)  The  Year  2000  Issue  arises  because  many  computerised  systems  use  two  digits
rather than four to identify a year. Date-sensitive systems may recognize the Year 2000
as 1900 or some other date, resulting in errors when information using Year 2000 dates
is processed. In addition, similar problems may arise in some systems, which use certain
dates in 1999 to represent something other than a date. Although the change in date has
occurred, it is not possible to conclude that all aspects of the Year 2000 Issue that may
affect the entity, including those related to customers, suppliers, or third parties, have
been fully resolved.

Note 12

G o v e r n m e n t   C o s t   S h a r i n g
During  fiscal  1997,  the  Corporation  signed  an  agreement  with  the  Government  of
Canada under which the Government will share in the costs of certain research and
development programmes over the period of 1997 to 2001. Funding under this pro-
gramme will not exceed $31.2 million and is repayable in the form of royalties based on
future sales levels related to the projects funded. Funding received or receivable under
this programme of $27.4 million (1999 – $19.3 million) reduced research and develop-
ment expenses.

39

C A E2 0 0 0 A R

Note 13

O p e r a t i n g   L e a s e   C o m m i t m e n t s
Future minimum lease payments under operating leases, the most significant of which
relate to the Medium Support Helicopter contract with the UK MoD as described in
Note 5(ii), are as follows:

Year ending March 31,

2001
2002
2003
2004
2005
Thereafter

$

39.6
33.8
35.7
34.2
33.7
236.0

$

413.0

Note 14

P e n s i o n s
The Corporation has defined benefit plans that provide benefits based on length of ser-
vice and final average earnings. The Corporation has an obligation to ensure there are
sufficient funds in the plans to pay the benefits earned.

The actuarial present value of accrued pension benefits has been estimated taking
into consideration economic and demographic factors over an extended future period.
Significant assumptions used in the calculation are as follows:

Return on plan assets
Discount rate for pension benefit obligations
Compensation rate increases

2 0 0 0

1 9 9 9

9.0%
8.0%
3.5% to 6.0% 3.5% to 6.0%

9.0%
8.0%

The funded status of the defined benefit pension plans at March 31 was as follows:

Market value of assets
Present value of accrued pension benefits

2 0 0 0

$ 121.7
$ 104.0

1 9 9 9

114.8
97.4

$
$

Note 15

>

>

>

A c q u i s i t i o n s
During fiscal 1999, the Corporation acquired the outstanding common shares of the fol-
lowing four companies:
Alpheus Cleaning Technologies of Rancho Cucamonga, California, a designer and manu-
facturer of CO2 dry ice blast cleaning equipment, effective June 3, 1998;
Newnes  Machine  Ltd.  of  Salmon  Arm,  British  Columbia,  and  McGehee  Equipment
Company of Ukiah, California, manufacturers of optimisation equipment for the forest
products industry, effective June 29, 1998;
BEYSS GmbH Co. of Aachen, Germany, a leading supplier of cleaning equipment in
Europe, effective October 5, 1998.

The  consideration  was  $193  million  and  included  cash  of  $99.9  million,  the
assumption of $11.6 million of debt, 600,000 common shares issued for $7 million and
the balance, $74.5 million of estimated contingent consideration that was accrued and

40

C A E2 0 0 0 A R

N o t e s   t o   C o n s o l i d a t e d   F i n a n c i a l   S t a t e m e n t s

is payable over a period not to exceed five years, based primarily on the future earnings
of the acquired companies. The long-term portion of the accrual is included in Long-term
liabilities on the Consolidated Balance Sheet.

The net assets acquired from these acquisitions, at fair values, are summarized 

as follows:

Net working capital
Property, plant and equipment
Goodwill

$

1 9 9 9

13.7
22.7
156.6

$

193.0

During fiscal 2000, the contingent consideration payable was renegotiated and fixed at
specific amounts repayable over a period not to exceed two years from March 31, 2000.
This resulted in a reduction to goodwill of $11.0 million and a corresponding decrease in
Long-term liabilities.

R e s e a r c h   a n d   D e v e l o p m e n t
Research and Development expenditures aggregated $116.1 million during the year
(1999 – $115.8).

B u s i n e s s   S e g m e n t s
Effective December 31, 1999, CAE’s business segments were modified. The CAE
Electronics Group is now reported in two segments, Commercial Simulation and Training
and Military Simulation and Controls. CAE Fibre Processing Technologies is now reported
as Forestry Systems.

The Corporation’s significant business segments include:

(i) Commercial Simulation and Training – the world-leading supplier of commercial flight
simulators and visual systems, and training systems.
(ii) Military Simulation and Controls – a premier supplier of military flight simulators,
visual systems and training systems. The segment also supplies a variety of other land-
based military simulation and training systems and marine control systems.
(iii) Forestry Systems – the world leader in providing solutions for the forest product
sector. The business segment is comprised of two focused divisions, Wood Products
and Pulp and Paper, supplying proprietary machinery and equipment for softwood
lumber and engineered wood producers and advanced screening solutions for pulp and
paper companies. 

Each operating segment is led by a senior executive and offers different products and
uses different technology and marketing strategies. The Corporation evaluates perfor-
mance based on operating earnings before interest and income taxes and uses capital
employed to assess resources allocated to each segment. Capital employed includes
accounts receivable, inventories, prepaid expenses, property, plant and equipment, good-
will and other assets less accounts payable and accrued liabilities, deposits on contracts
and contingent consideration due on acquisitions included in other long-term liabilities.

C A E2 0 0 0 A R

Note 16

Note 17

41

Financial information on the Corporation’s operating and geographic segments is

shown in the following table:

Business Segments

Capital employed
Commercial Simulation and Training
Military Simulation and Controls
Forestry Systems
Other

Total capital employed
Cash
Short-term investments
Income taxes recoverable
Accounts payable and accrued liabilities
Deposits on contracts
Long-term liabilities
Net assets of discontinued operations

2 0 0 0

1 9 9 9

$

$

36.7
68.8
165.6
18.2

289.3
163.5
71.1
28.6
306.7
219.2
40.6
105.2

$

$

154.0
134.7
168.3
(9.8)

447.2
25.6
–
26.8
201.4
141.1
75.5 
147.6

Total assets

$ 1,224.2

$ 1,065.2

Capital expenditures
Commercial Simulation and Training
Military Simulation and Controls
Forestry Systems

Amortisation
Commercial Simulation and Training
Military Simulation and Controls
Forestry Systems

Additions to goodwill
Forestry Systems

$

$

$

$

$

11.7
10.1
9.1

30.9

11.3
11.0
11.4

33.7

$

$

$

23.2
45.7
7.4 

76.3

9.0 
9.5 
10.1 

$

28.6 

(11.0)

$

130.1 

42

C A E2 0 0 0 A R

N o t e s   t o   C o n s o l i d a t e d   F i n a n c i a l   S t a t e m e n t s

Geographic Segments

Revenue from external customers
Canada
US
Europe
Other countries

Capital assets and goodwill
Canada
US
Europe
Other countries

2 0 0 0

1 9 9 9

$

168.2
450.1
391.6
154.4

$

116.1
323.7
338.2
127.9

$ 1,164.3

$

905.9

$

205.8
52.1
85.4
15.6 

$

239.4
51.2
97.4
18.2

$

358.9

$

406.2

Note 18

C o m p a r a t i v e   F i n a n c i a l   S t a t e m e n t s
Certain comparative figures for 1999 have been reclassified to conform with the presen-
tation adopted in 2000.

43

C A E2 0 0 0 A R

F i v e - Y e a r   R e v i e w

( a m o u n t s   i n   m i l l i o n s   o f   d o l l a r s
e x c e p t   w h e r e   i n d i c a t e d   b y   * )

Continuing operations

Revenue
Amortisation
Earnings
Earnings per share*

Net earnings
Net earnings per share*
Ratio of current assets
to current liabilities*
Number of registered 

shareholders*

Cash dividends paid 
per common share*

2 0 0 0

1 9 9 9

1 9 9 8

1 9 9 7

1 9 9 6

$1,164.3
33.7
$
90.7
$
0.83
$
98.5
$
0.90
$

905.9
28.6
73.7
0.66
77.3
0.70

799.2
25.9
73.4
0.67
70.2
0.64

762.4
25.1
57.8
0.53
60.3
0.55

750.2
20.4
61.2
0.56
58.6
0.54

1.4

1.4

1.7

1.4

0.9

2,392

2,600

2,800

3,100

3,400

$

0.19

0.16

0.16

0.16

0.16

Q u a r t e r l y   F i n a n c i a l   I n f o r m a t i o n

( a m o u n t s   i n   m i l l i o n s   o f   d o l l a r s  
e x c e p t   p e r   s h a r e   a m o u n t s )

F i r s t
Q u a r t e r

S e c o n d
Q u a r t e r

T h i r d
Q u a r t e r

F o u r t h
Q u a r t e r

2000
Continuing operations

Revenue
Earnings
Earnings per share

Net earnings
Net earnings per share
Common share trading range:

High
Low

$ 240.5
$ 19.1
$ 0.18
$ 16.7
$ 0.15

$ 9.45
$ 7.80

257.8
21.4
0.20
20.7
0.19

342.9
25.7
0.23
37.5
0.34

323.1
24.5
0.22
23.6
0.22

9.75
8.00

10.60
7.30

17.00
9.65

( a m o u n t s   i n   m i l l i o n s   o f   d o l l a r s
e x c e p t   p e r   s h a r e   a m o u n t s )

F i r s t
Q u a r t e r

S e c o n d
Q u a r t e r

T h i r d
Q u a r t e r

F o u r t h
Q u a r t e r

1999
Continuing operations

Revenue
Earnings
Earnings per share

Net earnings 
Net earnings per share
Common share trading range:

High
Low

$ 171.9
$ 13.2
$ 0.12
$ 13.0
$ 0.12

$ 13.65
$ 11.25

241.8
17.6
0.15
17.5
0.16

12.75
8.30

235.5
20.8
0.19
23.0
0.21

10.05
8.00

256.7
22.1
0.20
23.8
0.21

9.00
7.85

44

B o a r d   o f   D i r e c t o r s

Lynton R. Wilson1,2,4

Chairman of the Board
CAE Inc.
Oakville, Ontario

Derek H. Burney1

President and 
Chief Executive Officer 
CAE Inc.
Toronto, Ontario

R. Fraser Elliott, 
C.M., Q.C.1

Senior Partner
Stikeman Elliott
Toronto, Ontario

O f f i c e r s

H. Garfield Emerson, 
Q.C.2

President and 
Chief Executive Officer
NM Rothschild & 
Sons Canada Limited
Toronto, Ontario

The Honourable 
James A. Grant, 
P.C., Q.C.1,2

Partner
Stikeman Elliott
Montreal, Quebec

James F. Hankinson3

President and 
Chief Executive Officer
New Brunswick Power 
Corporation
Fredericton, New Brunswick

Roderick L. Henry3,4

Lawrence N. Stevenson4

President
Henrod Investments Inc.
Montreal, Quebec

James W. McCutcheon, 
Q.C.3

Counsel
McCarthy Tétrault
Toronto, Ontario

George K. Petty2,4

Business Consultant
Las Vegas, Nevada

Chief Executive Officer 
Chapters Inc.
Chairman and 
Chief Executive Officer
Chapters Online Inc.
Toronto, Ontario

Dr.-Ing. Hasso von
Falkenhausen 3

Chairman of the Board of
Directors
DataCard Corp.
Minneapolis, Minnesota, U.S.A.

1. Member of the Executive Committee
2. Member of the Compensation 

Committee

3. Member of the Audit Committee
4. Member of the Governance 

Committee

Lynton R. Wilson

Paul G. Renaud

Michael A. Cossar

Chairman of the Board

Derek H. Burney

President and 
Chief Executive Officer

Vice President, Finance,
Chief Financial Officer and
Secretary

Treasurer

Allan M. Bignell

Vice President
Business Development

Robert C. Hedges

Controller and
Assistant Secretary

C A E2 0 0 0 A R

I n f o r m a t i o n   f o r   S h a r e h o l d e r s

CAE Common Shares

Additional Information

CAE’s  shares  are  traded  on  the  Toronto  Stock  Exchange  under
the symbol “CAE”.

Dividend Reinvestment Plan

Registered shareholders of CAE Inc. wishing to receive dividends
in  the  form  of  CAE  Inc.  Common  Shares  rather  than  a  cash  pay-
ment may participate in CAE’s dividend reinvestment plan.

Through  this  plan,  quarterly  dividends  can  be  reinvested  in  CAE
Common  Shares  at  the  Average  Market  Price.  This  price  will  be
the  weighted  average  trading  prices  of  the  Common  Shares  on
the Toronto Stock Exchange for the five (5) trading days immedi-
ately preceding the dividend payment date.

I n   o r d e r   t o   o b t a i n   t h e   d i v i d e n d   r e i n v e s t m e n t   p l a n   f o r m   o r   f o r
additional  information  regarding  CAE’s  Common  Shares,  please
contact:
Montreal Trust Company
Tel: (416) 981-9500
1-800-663-9097

Direct Deposit Dividend

Registered shareholders who receive cash dividends may elect to
h a v e   t h e   d i v i d e n d p a y m e n t d e p o s i t e d d i r e c t l y t o t h e i r b a n k
a c c o u n t i n s t e a d o f r e c e i v i n g   a   c h e q u e .   I n   o r d e r   t o   o b t a i n   t h e
direct deposit dividend form please contact:
Montreal Trust Company
Tel: (416) 981-9500
1-800-663-9097

Tentative Quarterly Results Release Dates for Fiscal 2001

August 2, 2000
November 1, 2000
February 7, 2001
May 2, 2001

If you wish to receive additional copies of CAE’s annual report or
copies of the annual information form, please contact:
CAE Inc.
Corporate Relations
Royal Bank Plaza, Suite 3060
Toronto, Ontario M5J 2J1
Tel: (416) 865-0070
1-800-760-0667
Fax: (416) 865-0337
Internet address: http://www.cae.com

Version française

La version française du rapport annuel est disponible sur demande
au  service  des  relations  d’entreprise,  Royal  Bank  Plaza,  Bureau
3060, C.P. 30, Toronto, Ontario M5J 2J1.

Annual & Special Meeting

The Annual & Special Meeting of Shareholders will be held at the
G l e n n   G o u l d   S t u d i o ,   C B C   B u i l d i n g ,   2 5 0   F r o n t   S t r e e t   W e s t ,
Toronto, Ontario, Wednesday, June 14, 2000, at 11:30 a.m.

Auditors

PricewaterhouseCoopers, Chartered Accountants
Toronto, Ontario

Transfer Agent and Registrar

Montreal Trust Company
Toronto, Ontario
Montreal, Quebec
Vancouver, British Columbia

Trademarks

T h e   C A E   l o g o ,   a n d   t h e   t e r m s   M A X V U E ,   M A X V U E   P l u s ,   R A V E ,
ROSE,  Mill  Host,  AddVantage  and  PanelMSR  are  all  trademarks
of CAE or its subsidiaries.

CAE Share Performance vs TSE 300 Index 

CAE

TSE 300

Assumes $100 invested  in t he  c o m mo n  s h ar e s  o f  t h e  C o mp any on  M arc h 31, 1999.   

46

$180

$160

$140

$120

$100

$80

March
99

A p ril
9 9

M a y
9 9

J une
1999

J uly
99

Aug .
99

Sept.
99

Oct.
19

Nov.
99

Dec.
99

Jan.
2000

Feb.
2000

March
200 0

C A E a t   a   G l a n c e

Business Profile >

CAE is the world’s premier provider of simulation and control technologies for training
and optimisation solutions in Aerospace, Defence and Forestry.

Business Units >

Commercial Simulation and Training

CAE’s Commercial Simulation and Training business is the world leader in the design
and production of commercial flight simulators and visual systems. 

CAE is making a major, disciplined move into the pilot training market to fuel growth.
Together with the pursuit of simulator maintenance and support activities, specific
emphasis will be placed on the establishment of independent training centres and
alliances with major airlines and other flight training companies.

Military Simulation and Controls

In the military simulation and training industry, CAE is the premier designer and man-
ufacturer of military flight and land-based simulation and training systems. 

In the marine controls industry, CAE is the world leader in the supply of control systems
for marine applications.

Forestry Systems

CAE’s Forestry Systems business is the world leader in providing advanced technology
solutions to enable customers to increase the recovery of fibre and the value of their
wood products.

In the wood products industry, CAE combines proprietary software, sensors and control
systems with advanced mechanical designs to provide leading-edge sawmill optimisa-
tion and wood processing solutions for the hardwood, softwood and engineered wood
industries.

In the pulp and paper industry, CAE provides advanced screening solutions worldwide.

Cover Image

>

An image of Dorval airport, Montreal, Canada, captured from CAE's MAXVUE™ image generator
running in real-time. MAXVUE Plus™ offers the highest polygon capacity available in the market
today for an interactive, high fidelity visual system, thereby increasing the realism of the scene.

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All illustrations and product images in CAE's annual report were created by CAE employees.
Special  thanks  to  Gilles  Guitard,  Zbynek  Najser,  Stuart  Pittman,  Sigi  Rothbart,  Keith
Selevich, and Andrew Wilson.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C
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Repositioning for Value

CAE Inc.
Suite 3060, P.O. Box 30, Royal Bank Plaza
Toronto, Canada  M5J 2J1
www.cae.com

CAE Annual Report for the year ended March 31, 2000