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Leading by
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cae.com
ANNUAL REPORT
Fiscal year ended March 31, 2012
Corporate Profile
CAE is a global leader in modeling, simulation and training for civil aviation and defence. The company
employs approximately 8,000 people at more than 100 sites and training locations in approximately 30
countries. CAE offers civil aviation, military, and helicopter training services in more than 45 locations
worldwide and trains approximately 100,000 crewmembers yearly. In addition, the CAE Oxford Aviation
Academy offers training to aspiring pilot cadets in 12 CAE-operated flight schools. CAE’s business
is diversified, ranging from the sale of simulation products to providing comprehensive services such
as training and aviation services, professional services, in-service support and crew sourcing. The
company applies simulation expertise and operational experience to help customers enhance safety,
improve efficiency, maintain readiness and solve challenging problems. CAE is leveraging its simulation
capabilities in new markets such as healthcare and mining. www.cae.com
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Financial Highlights
Global Reach
Chairman’s Message
Message to Shareholders
Leading by Innovation
Civil
Defence
New Core Markets
Social Responsibility
Financial Review
Management’s Discussion and Analysis
Management’s Report on Internal
Control over Financial Reporting
Independent Auditor’s Report
Consolidated Financial Statements
Notes to Consolidated Financial
Statements
151
Board of Directors and Officers
152
Shareholder and Investor Information
153
Forward-Looking Statements
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As an eTree member, CAE Inc. is committed to meeting shareholder needs while
being environmentally friendly. For each shareholder that receives electronic
copies of shareholder communications, CAE will plant a tree through Tree
Canada, the leader in Canadian urban reforestation.
30%
Contains FSC® certified post-consumer and 70% virgin fibre
Certified EcoLogo and FSC Mixed Sources
Manufactured using biogas energy
Financial Highlights
(amounts in millions, except per share amounts)
2012
2011
Operating results
Revenue
Net income
Backlog
Financial position
Net cash provided by operating activities
Capital expenditures
Total assets
Total long term debt, net of cash
Per share
Basic earnings attributable to equity holders of the Company
Dividends
Equity
Revenue Distribution Fiscal 2012
5% New Core Markets
5% New Core Markets
1,821.2
182.0
3,724.2
233.9
165.7
3,183.7
534.3
0.70
0.16
4.05
34%
49%
46%
53%
42%
36%
30%
Defence
Civil
Simulation
products
Training &
services
1,630.8
160.9
3,449.0
226.3
111.3
2,817.3
383.8
0.62
0.15
3.63
United States
of America
Asia
Australia
Canada
Central and
South America
Middle East
Europe
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2 | CAE Annual Report 2012
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BEnson
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CAE Annual Report 2012 | 3
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4 | CAE Annual Report 2010
4 | CAE Annual Report 2012
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Chairman’s Message
CAE’s 65th year was very successful.
the company achieved solid increases in
revenue and earnings, while completing a
number of initiatives that position CAE for
sustained growth in the years ahead.
our progress during fiscal year 2012 has resulted in a broader
Based on these fundamentals, and a record order backlog
global footprint and greater capabilities to complement our
totaling $3.7 billion entering fiscal year 2013, we have every
recognized leadership in technological innovation. CAE’s
reason to be confident of CAE’s future.
industry-leading position in the civil aerospace market is
stronger than ever and despite a tough global defence market,
Anthony S. Fell retired from the Board of Directors prior to
the company has grown orders and revenues to record levels
last year’s Annual meeting of Shareholders, after serving as
in key markets such as the United States, and achieved strong
a director since 2000. on behalf of shareholders, I wish to
profitability overall.
thank mr. Fell for his many years of service to CAE, and his
contribution to the company’s success.
CAE continues to benefit from revenue balance between
its Civil and military businesses, and between products and
I also wish to congratulate marc Parent, our President and
services, as well as sound geographic diversification. We are
Chief Executive officer, and his management team on a solid
also expanding into new markets with CAE mining and CAE
year, and CAE’s employees for their continued dedication to
Healthcare, which began to generate meaningful revenues in
the company’s progress.
fiscal year 2012, and are destined to become as large in the
years ahead as any of CAE’s four other segments are today.
Lynton R. Wilson
Chairman of the Board
CAE Annual Report 2012 | 5
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6 | CAE Annual Report 2012
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Message to Shareholders
CAE achieved a solid performance in fiscal year
2012, delivering strong financial results while laying
the foundation for future growth. Our revenue and
earnings increased by double digits, with good
margins and a strong order intake that brought our
backlog to a record level at year-end.
Strong financial results
• In Military, we received a record level of U.S. defence
Consolidated revenue was up 12% at $1.82 billion and net
contracts and witnessed continued growth in emerging
income attributable to equity holders reached $180.3 million
markets. Total revenue was up 4% and margins exceeded
or $0.70 per share, compared to $160.3 million or $0.62 per
15%, making CAE one of a select few defence companies
share in the fiscal year ended March 31, 2011.
that continued to show revenue growth and good
profitability last year. New orders totalled $959.7 million
We generated $173.7 million of free cash flow and ended the
and backlog was $2.19 billion.
year in a healthy financial position with net debt of $534.3 million
and a net debt to EBITDA ratio of 1.24x.
Laying the foundation for growth
During fiscal year 2012 and early in fiscal 2013, we made
Our core Civil and Military businesses both contributed to
significant moves in all of our businesses to further strengthen
our results.
our competitive position and growth potential.
• In Civil, we benefited from our strong market position and
healthy demand in all regions. Total revenue increased
In Civil aviation, we significantly expanded our global footprint
16% and operating margins exceeded 20%. Utilization in
and capabilities in all market segments. We increased the
our training centres increased from 70% to 73% last year
number of simulators in our network by 10% and signed
and we also experienced growth in revenue per simulator.
long-term agreements with key players in the industry.
New orders in the combined Civil segment booked for the
Our biggest move was the acquisition of Oxford Aviation
year reached $1.1 billion, a new record for CAE, and our
Academy, completed in May 2012, with annual revenue of
combined civil backlog at year-end was $1.54 billion.
approximately $280 million.
CAE Annual Report 2012 | 7
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we are 8,000
employees on
six continents
and we serve
customers in
more than 190
countries.
our global reach,
innovation and
strong balance
sheet position
us well for the
future.
In addition to increasing the scale of
growing acceptance of simulation and
CAE’s commercial aviation
training
synthetic training by U.S. forces and
footprint, already the largest in the
confirmation that we have the right
industry,
this
transaction broadened
platform exposure at a time of budget
our solutions portfolio into pilot and
constraints. We are experiencing
maintenance crew sourcing, positioning
increased demand from Asia and the
our company to meet long-term demand
middle East, where defence forces are
for aviation professionals at every stage.
being modernized, and lower activity
oxford Aviation Academy’s global brand
in Europe, where military budgets
reputation and market leadership in Ab-
are being reduced. In response to
Initio training will help CAE expand capacity
these trends, we have refocused our
and gain access to a well-diversified and
resources and capabilities, resulting in
complementary customer base of airlines
a workforce reduction of approximately
and aircraft leasing companies, providing
300 employees, mainly in Europe and
us with opportunities
for
increased
montreal head office.
revenue synergies.
In our New Core markets, we continued
In business jet and helicopter pilot
to make good progress aligning our
training, we implemented major capacity
resources and structure
for
future
expansions and extended our global
growth, including the integration of
market coverage in response to growing
acquisitions.
demand.
• CAE
Healthcare
significantly
expanded its market reach through
As a result of these actions, we have a
the acquisition of medical Education
broader civil aviation training footprint,
Technologies
(mETI), gaining a
increased capacity and an even wider set
direct sales force in the U.S., close
of capabilities with which to differentiate
customer
relationships,
innovative
CAE in the market. At the same time, the
marketing initiatives and a worldwide
proportion of recurring revenues in our
distributor network.
Civil business has increased materially.
• CAE Mining broadened its footprint
with new offices in Australia and
In the military market, we continued
Western Canada. We completed
to implement our strategies in the air,
the development of our first mining
land, unmanned aerial systems and
simulator,
called CAE
Terra™,
professional services domains. We see
which leverages aircraft simulation
8 | CAE Annual Report 2012
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standards and is intended for training
is positive based on a solid backlog,
Acknowledgments
operators of large haul trucks and
a large opportunity pipeline and our
Our success is due to many factors, key
electric shovels.
strong positioning in terms of platform
among them being the contributions
exposure and global footprint.
of CAE employees. I believe we have
Outlook
the best professionals in our industry
In addition to these strategic moves,
With respect to New Core Markets,
and I take this opportunity to thank
our strong balance sheet, healthy cash
we are making excellent progress
them for their continued hard work and
flow, record backlog of $3.7 billion and
towards building a material business
dedication. The acquisitions of METI
strong pipeline of opportunities give
that leverages our core competencies
and Oxford have further strengthened
us a solid start to the new fiscal year
outside Civil and Military. While
our team, and I welcome these new
and continued confidence in the way
continuing to make investments in CAE
employees into the global CAE family.
forward.
Healthcare and CAE Mining to increase
their scale and scope, we also expect
I also wish
to acknowledge
the
For our Civil business, we expect
this segment to be profitable in fiscal
important contribution of Martin Gagné,
sustained growth with good margins
year 2013.
despite the economic situation in Europe.
who has retired from his position as
Military Group President. I would like to
Civil aerospace market fundamentals
Our positive outlook is also underpinned
thank him for having been a key player
are strong, with the projected doubling
by our globally recognized innovation
in making CAE’s military business the
of the global aircraft fleet over the next
and technology leadership in modeling,
global leader it is today. Martin has
15-20 years and original equipment
simulation, and
training solutions.
agreed to stay on as a consultant in
manufacturers reporting a record backlog
We invest approximately 10% of our
order to ensure a smooth transition
of more than 9,500 commercial aircraft.
annual revenue in R&D to continuously
and to continue to provide support
In this favourable context, we are looking
deepen and broaden our portfolio of
on a number of strategic initiatives.
to capitalize on our broader training
products, services and solutions. Our
We welcome his successor, Gene
footprint while ramping up expected
simulation-based
technologies
are
Colabatistto, who brings
to CAE
synergies from the integration of Oxford.
global benchmarks and an important
more than 25 years of experience in
We also see the potential of a broader
competitive advantage for CAE.
leadership positions both in our industry
recovery in business aviation training.
and in the military.
In summary, we have built a strong
In our Military business, our objective is
foundation for sustained growth and
I would also like to thank our Board
to grow revenue and generate sector-
we are expecting another successful
of Directors for their counsel and
leading margins. The market continues
year for CAE as we focus on executing
support, and our shareholders for their
to be challenging in terms of predicting
on the strategic investments made this
confidence in our company.
the timing of orders but our outlook
past year.
President and Chief Executive Officer
Marc Parent
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Leading by
innovation
Innovation takes many forms at CAE, from developing new
technologies to customizing training services and solutions,
from the ways we leverage partnerships with customers and
original equipment manufacturers (OEMs) to how we seize
market opportunities.
CAE is recognized globally for innovation and technology
leadership in modeling, simulation, and training solutions for
civil aviation and defence. Innovation is the constant thread
in our 65-year history and continues to provide CAE with a
compelling advantage as we look to the future.
Leading by innovation, we have developed the broadest
expertise in our field, providing customers with the largest
array of training equipment, services and solutions – on
the largest range of aircraft types and defence platforms
– all tailored to each customer’s specific needs. We pride
ourselves on being very close to our customers and
understanding what they need to make their business or
mission more successful.
We have unmatched global reach with operations and training
centres in 30 countries, experienced team members on the
ground in 100 locations – approximately 8,000 employees
worldwide – and clients in more than 190 countries. No other
company in our business has the capabilities, credibility and
presence we have across global markets.
operations. We believe no other company makes this level of
R&D investment specific to modeling, simulation and training.
Leading by innovation has allowed us to establish our
simulation-based technology as the global benchmark.
Through our leadership, we have developed more first full-
flight simulators for new aircraft platforms than any other
company. Today, CAE has the largest global installed base of
civil and defence full-flight simulators and training devices, a
solid foundation for sustained growth.
In the civil aviation market, simulation-based training has
become the norm. We have strengthened our technology
advantage through innovations in integrated solutions and
the ability to provide comprehensive services built around
customer needs.
In the defence market, we are advancing the use of simulation
for mission preparation and rehearsal, which is critical for
ensuring readiness and, we strongly believe, will allow forces
to do more for less in an age of budget austerity.
Leadership in technology
We invest approximately 10% of our annual revenues in R&D
to deepen and broaden our current portfolio of products,
services and solutions. Another important objective is to
increase our capabilities beyond training into other areas of
the aerospace and defence market, such as analysis and
Leveraging opportunities
We are a company with a strong culture of partnerships with
customers and OEMs, and we are proud to be the trusted
partner of the world’s airlines and defence forces in both
mature and emerging markets. Through unique partnerships,
we have gained first-mover advantage in key vertical and
10 | CAE Annual Report 2012
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#1
Civil Simulation
Equipment Sales
#1
Commercial
Aviation Training
#2
Business
Aviation Training
#1
Helicopter
Aviation Training
#1
Military Virtual
Air Training
Innovation is the constant
thread in our 65-year history
and continues to provide CAE
with a compelling advantage
as we look to the future.
geographic markets while significantly
accelerating our
in
both our civil and defence businesses.
time-to-market
established with our customers over
more than six decades. Our customers
trust us to deliver the highest quality
today and for the long term.
in
commercial
Leading by
innovation has made
CAE the world’s largest flight services
organization with the number one
aviation
position
and helicopter training, first outside
North America in business aviation
training and number two globally, as
well as number one in Ab-Initio pilot
training. Our defence business is a
premier supplier of training systems
to the defence forces of more than
50 nations, ranking first globally in
virtual air training and in rotary-wing
and tanker/transport aircraft training
solutions.
More recently, we began leveraging
the expertise acquired
in aviation
training to the healthcare and mining
markets. Through R&D, organic
growth, acquisitions and partnerships,
we have already established CAE as
a leader in modeling and simulation-
based solutions in these industries.
environments
Satisfying customers
Our vision is to be the partner of choice
for customers operating in complex,
by
mission-critical
providing the most accessible and
innovative modeling- and simulation-
based solutions to enhance safety,
improve efficiency and help solve
challenging problems.
That is what we do every day. Leading
by innovation, we are focused on safety,
operational efficiency and mission
readiness. The quality of our solutions
is backed by the credibility we have
focus on modeling,
Through our
simulation and
training, and our
innovation mindset, we are well-
positioned to satisfy our customers.
#1
Ab-Initio Pilot
(Undergraduate) Training
#1
CAE Annual Report 2012 | 11
Healthcare Simulation
Technology
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Civil
CAE’s innovation was at the core of major
achievements in our Civil business in fiscal 2012,
as we significantly expanded our global training
footprint through partnerships, increased our
simulator sales, and introduced new learning
tools and technologies to enhance pilot training.
Through pivotal partnerships, we consolidated our leadership in commercial aviation
training in the emerging markets of Southeast Asia, China, India, the Middle East and
Latin America. These are the world’s fastest-growing aviation markets and our partners
and potential customers in these regions account for some of the largest aircraft orders
in the history of aviation.
Our partnership with Malaysia’s AirAsia, one of the world’s fastest growing carriers, is the
first joint venture of its kind. Under this agreement, CAE will undertake responsibility for
training all of Air Asia’s pilots, maintenance engineers, flight attendants and ground crew.
In India, which is estimated to need more than 7,000 new commercial pilots over the next
seven years, we are building a training centre in Delhi in a joint venture with the parent
company of IndiGo Airlines. It will be the fifth aviation training facility that CAE operates in
India, allowing us to provide training across the civil aviation spectrum.
These joint ventures, as well as the one with Cebu Pacific Air in the Philippines,
complement our long-term relationship with China Southern Airlines, our partner in the
aviation training centre in Zhuhai, China, which is expanding its capacity with additional
commercial aircraft simulators and its scope by adding helicopter and Ab-Initio training
to its capabilities.
We also announced plans to open a second facility in Dubai, United Arab Emirates, in 2012
with our partner Emirates Group to provide additional training capacity for airline pilots
Under our joint venture
agreement with Cebu Pacific
Air, the Philippines’ largest
domestic carrier, we are
establishing an aviation training
centre to meet their needs and
those of other airlines.
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and aviation maintenance
In Latin America,
we expanded our training centres in São Paulo, Brazil and
Santiago, Chile in support of TAM Airlines and LAN Airlines.
technicians.
Nurtured by our innovation and capabilities, these partnerships will be
a growing source of recurring revenues for years to come.
Strong increase in simulator sales
Recognition of CAE’s innovation and technology leadership also came
through a strong increase in full-flight simulator (FFS) sales as global
airlines invested to upgrade their facilities and augment pilot and cabin
crew training. The total number of FFS sales for fiscal 2012 increased
to 37, compared to 29 in the previous year. Reflecting our broad
capabilities, many of these sales were accompanied by contracts to
supply CAE Simfinity™ Integrated Procedures Trainers, CAE Simfinity
Virtual Simulators, procedures trainers specified by OEMs, as well as
simulator updates and spares.
Launch of innovative training tools
We are constantly working toward enhancing the effectiveness of
pilot training by improving the fidelity and the immersive experience of
the training environment, as well as by delivering the highest-quality,
operationally focused training in an efficient and effective manner that
is convenient for our customers. Many innovations were introduced in
fiscal 2012, further expanding customer training options and flexibility.
Virtual Ground School. We launched a new program that enables
business aircraft pilots to study required recurrent training courseware
anywhere they have an internet connection. The CAE Simfinity™
Virtual Ground School features regulator-approved web-based study
of the same systems and procedures course material they would
cover in an instructor-led classroom.
Innovative end-to-end solution
Following the end of fiscal year 2012, we
have greatly enhanced CAE’s industry-leading
position with the addition of two of the industry’s
strongest brands in Ab-Initio aviation training and
crew sourcing: Oxford Aviation Academy and
Parc Aviation. The acquisition of Oxford Aviation
Academy broadens our portfolio of capabilities with
an end-to-end training and crew sourcing solution:
• The world’s largest type rating network with 42
training locations,
• The world’s largest flight training organization with
12 Ab-Initio flight schools,
• The world’s largest aviation personnel sourcing
organization with over 1,200 pilots, maintenance
crew and other aviation professionals currently on
assignment with 50 airlines
This expansion is an important step for CAE toward
addressing the global aviation personnel shortage
and allows us to offer more customer solutions at
more locations, and more opportunities for customers
to be safer and more efficient in their operations.
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CAE RealCase. CAE became the first business aircraft training orga-
nization to incorporate recent real-life event scenarios into recurrent pilot
training courses across a global network using a proven case study ap-
proach. The CAE RealCase evidence-based training scenarios increase
training effectiveness by enabling pilots to apply their analytical and deci-
sion-making skills in an interactive, collaborative environment. Classroom
discussion focuses on root causes and courses of action for safely and
effectively dealing with recent real-life situations on the same aircraft.
Loss of control in-flight training. CAE and Aviation Performance Solutions
(APS) introduced a new web-based tool designed to help standardize
full-flight simulator instructor knowledge for loss of control in-flight (LoC-I).
LoC-I is defined as flight that occurs outside of the normal flight en-
velope in which the pilot is unable to control the aircraft. The new tool
provides a way to effectively deliver a standardized level of theoretical
knowledge to a large number of instructors efficiently and quickly.
Enhancing realism and
performance
The third generation of our market-
leading CAE Tropos™-6000 simu-
lation visual image generator (IG)
for civil aviation training, launched
in fiscal year 2012, provides a
more immersive environment and
an enhanced pilot training experi-
ence with new features leveraging
the power of the latest commercial
graphics processors.
Among the many features introduced or enhanced in the new CAE
Tropos-6000 are more realistic blowing snow and other taxiway con-
taminants, new 3D scattered and broken cloud patterns, storm fronts
and haze, as well as new water reflections and other special effects.
The new CAE Tropos-6000 is fully compatible with the CAE True™
Airport service, which provides more than 200 up-to-date airport
databases online via an internet portal.
Major expansions in business and helicopter training
Civil
Comprehensive solutions
our joint venture with mitsui & Co., Ltd. to establish
and operate a training centre in Japan for the new
mitsubishi Regional Jet (mRJ) vividly illustrates our
ability to provide comprehensive solutions. We had
earlier signed an agreement with mitsubishi Aircraft
Corporation to develop and deliver a comprehensive
training solution for the mRJ, including a 10-year
Exclusive Training Provider program.
is developing
Under the mRJ training program, CAE will provide
instructional systems development,
integrated
simulation
facilities planning and
technology,
regulatory expertise. In support of the mitsubishi
agreement, CAE
full-flight
simulators as well as CAE Simfinity™ integrated
procedures trainers. We are also designing curricula
and courseware, and providing CAE-led training
for pilots, maintenance technicians, cabin crew,
dispatchers and ground support personnel. The two
simulators will be the world’s first two mRJ FFSs.
two
The 70-90 seat mRJ is planned to enter service
in 2015 with launch customer All Nippon
Airways (ANA).
Strong response by customers to our customized training, advanced training technology, flexible scheduling and unique service
experience, has enabled CAE to increase the number of locations in its global business aviation training network from six at the
beginning of fiscal 2012 to ten by the end of fiscal 2013. This will provide CAE business aviation customers with conveniently
accessible training in every major region of the world, including the first business jet training centres for high-growth markets in
Latin America. The new training locations will be in Toluca, mexico; São Paulo, Brazil; melbourne, Australia; and Shanghai, China.
CAE deployed a new helicopter training program for the Bell 412 in mexico, bringing the number of locations in our worldwide
network to nine. We also announced that Sikorsky S-76 training will be inaugurated soon in São Paulo with joint venture partner
Líder. Additional announced sites in Asia which will be inaugurated in 2012 and 2013 will increase our civil helicopter network to
13, more locations than any other helicopter flight training organization. CAE launched three innovative simulation-based training
programs in Brazil and Norway for helicopter pilots and maintenance engineers, specifically targeting mission training for the
offshore oil and gas market, search-and-rescue and other complex scenarios.
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Defence
through innovative solutions, CAE’s
Military business is demonstrating that
its leading edge modeling and simulation
technologies can help customers maintain
readiness at a lower cost.
More simulation for more applications
From air to land, from training pilots and tank crews to maintenance technicians, and
from defence to homeland security and critical infrastructure protection, CAE is offering
simulation-based solutions that satisfy budget-constrained customers who are seeking
to do more with less. In fiscal 2012, both our revenues and order backlog provided
strong evidence that the use of simulation and synthetic training is growing and CAE’s
expertise is in strong demand.
With orders from Boeing for six additional P-8A Poseidon operational flight trainers (oFTs) for
the U.S. Navy obtained in fiscal 2012, we now have contracts to develop ten simulators for
this new multi-mission maritime patrol aircraft. The ratio of simulators to aircraft is significantly
higher for the P-8A than for the fleet of P-3C orion aircraft it is replacing.
The U.S. Navy will also use CAE’s mission crew trainer and tactical mission trainer
products to provide student flight officers with the knowledge and skills required to
function in a joint, network-centric conflict environment. The two undergraduate military
flight officer multi-crew simulators will be delivered in 2013.
We obtained contracts from Lockheed martin to design and manufacture eight additional
C-130J weapon systems trainers, enabling various branches of the United States
CAE is delivering simulators for the
U.S. Navy’s new P-8A multi-mission
maritime patrol aircraft.
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CAE was selected to design and manufacture two CAE 7000 series
FFss for the Airbus A350 xwB, the world’s first FFss for the new
long-range aircraft. CAE will also develop six CAE simfinity.
Air Force (USAF) as well as the United States marine Corps to increase
the amount of synthetic training for this aircraft. The simulators will
support the needs of the USAF’s Air mobility Command, Air Combat
Command and Air Force Special operations Command. CAE has
developed more training systems worldwide for the C-130 Hercules
and its variants than any other company.
simulation gains in ground training systems
CAE is successfully extending its reach into the land domain,
leveraging its leadership in simulation technology and bolt-on
acquisitions to develop training solutions for tank crews and
maintenance personnel. We offer a range of simulation-based
solutions for land forces, including training solutions such as driver
and crew gunnery trainers for armoured fighting vehicles (AFvs)
and main battle tanks, artillery and forward air control trainers, and
command and staff training systems.
In the U.S., CAE is upgrading the U.S. Army’s High-mobility Artillery
Rocket System (HImARS) maintenance training system (mTS). The
HImARS mTS combines desktop diagnostics trainers and high-
fidelity mock-up trainers that are designed to provide skill-level
development for system operation, fault diagnosis, troubleshooting,
and repair tasks for armament specialty soldiers supporting the
HImARS tactical system.
We also won a contract to design and manufacture five additional
Abrams tank hands-on trainers (HoTs). The Abrams HoTs are high-
fidelity replicas of the Abrams tank turret and are designed to give
maintenance technicians diagnostic and hands-on training.
Expanded scope on kC-135
contract
CAE’s leadership in simulator technology and
experience in upgrading legacy simulators is
proving highly useful in helping the U.S. Air
Force extend the life of its aging fleet of KC-135
Stratotankers. In fiscal 2012, the U.S. Air Force
exercised the option for the second year of aircrew
services provided by CAE USA as the prime
contractor in the 10-year KC-135 training program.
In addition, we were awarded contract
modifications to provide a range of upgrades to
the USAF’s fleet of 19 existing KC-135 operational
flight trainers (oFTs). These upgrades will enhance
simulator reliability and maintainability, as well as
ensure concurrency with the actual aircraft.
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outside the U.S., CAE has delivered tank and AFv training systems
in the United Kingdom and India. We have developed and delivered a
comprehensive suite of tank simulators to the Indian Army, including
driver, gunner and crew training for the indigenous Arjun tank. In Asia
this year, we were contracted to develop tank driver and gunnery
simulators as part of a program to develop a new training centre for
ground forces in the region.
leading in synthetic environments
A global leader in simulation-based training, CAE is a strong proponent
of using modeling and simulation as a tool for mission preparation
and rehearsal. Through an ambitious three-year R&D project, we are
leading the industry in developing a Dynamic Synthetic Environment
(DSE), a complex virtual world that can change rapidly, thus providing
not only a valuable training environment, but also a tool to be used
for actual decision-making. The objective of our research is to bring
virtual training and simulation-based mission rehearsal to the next
level of realism and effectiveness.
We are building DSE around the
Common Database (CDB), which was
originally developed by CAE and is
now an industry standard delivering
correlated and interoperable databases.
With the CDB as the foundation, military
personnel will be able to extend the use
of simulation and rehearse for missions
in real-time, ultimately helping military
forces prepare more cost-effectively and
leave less room for surprise outcomes.
Defence
Demonstrating UAs benefits
CAE has teamed with Aeronautics Ltd., a leader in
unmanned aerial systems (UAS), to conduct an R&D
project aimed at demonstrating how unmanned
systems can be used for civil applications such as
remote inspection of pipelines and hydroelectric
installations, surveillance of forest fires, observation
of critical natural resources, assessing natural
disasters and a range of other applications.
With this project, CAE is leveraging its modeling
and simulation technologies as well as in-service
support capabilities to develop a comprehensive
offering of unmanned intelligence, surveillance,
and reconnaissance services. The vast amount of
information and intelligence gathered by sensors
can be collected in a simulation-based synthetic
environment and then used to support intelligent
decision-making based on integrated information.
Brunei centre breaks new ground
The nation of Brunei and other customers in Southeast Asia will have access to the full breadth of CAE’s technological
capabilities and innovation through the CAE Brunei multi-Purpose Training Centre (mPTC) under construction in Brunei
Darussalam. A venture between the Brunei Government and CAE, mPTC will be an integrated facility providing state-of-the-art
training solutions based on modeling and simulation technologies to local and regional customers.
The CAE Brunei mPTC will cater mainly to the oil and gas, emergency/crisis management, and defence domains. It will
include the development of a major helicopter simulator facility offering both civil and defence training solutions. The centre will
also aim to leverage Brunei’s status as a well-established oil and gas producer, providing a suite of industry-specific training
solutions, including strategic infrastructure protection and support for procurement planning and emergency preparedness.
This partnership provides CAE, a world leader in turnkey training centres with a first-mover advantage in a region looking to
develop human capital and diversify its economic base.
The CAE Brunei mPTC will initially offer training services on the Sikorsky S-70i Black Hawk helicopter, Pilatus PC-7 and
Sikorsky S-92 helicopter. The centre will feature extensive use of Presagis software and will be constructed initially with five
simulator bays along with supporting classrooms. Long-term training services contracts valued at approximately C$170 million
for CAE have already been signed.
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New Core Markets
Healthcare
CAE is leveraging its credibility as an innovation,
technology and training leader in the civil aviation
and defence sectors to build a profitable and
sustainable business by accelerating the adoption
of simulation-based training solutions in the
healthcare field worldwide.
Launched two years ago, CAE Healthcare has used
acquisitions, organic synergies and technology innovation to
rapidly establish itself as the global leader in risk-free modeling
and simulation-based training for healthcare students and
professionals. The most important step in the advancement
of our healthcare strategy was the acquisition in fiscal 2012
of Medical Education Technologies, Inc. (METI), which
significantly expanded our market reach through METI’s direct
sales force in the U.S., customer relationships, innovative
marketing initiatives and worldwide distributor network.
With the integration of METI’s market-leading solutions, CAE
Healthcare offers a full spectrum of cutting-edge learning
tools, including surgical and imaging simulation, curriculum,
centre management and highly realistic adult, pediatric and
baby simulators that are designed to mimic human medical
scenarios including trauma, heart attack, drug overdose
and effects of bioterrorism. Today, more than 6,000 of
our simulators are in use worldwide by medical and nursing
schools, hospitals, defence forces and other entities.
Critical mass enables deeper market penetration
Having achieved critical mass, CAE Healthcare is positioned
to be the driving force behind the widespread adoption of
simulation-based training solutions for healthcare education
worldwide. CAE is pursuing its growth objectives through a
number of actions and initiatives:
• Continuous R&D
innovative
technologies that will bring medical simulation to new levels
of realism and training effectiveness.
to develop
investment
• Investment in bolt-on acquisitions to complement current
products, solutions and global market access, such as the
expansion of our surgical simulation product line through the
purchase of Haptica’s ProMIS™ minimally invasive surgery
and spine simulator.
• Strong support for innovative marketing initiatives such
as the METI Human Patient Simulation Network (HPSN)
conferences attended by more than 3,000 healthcare
professionals every year and which showcase simulation-
based healthcare training.
• Seeking endorsements for its products and solutions from
international opinion leaders and medical societies, based
on conclusive studies, such as the endorsement by the
Canadian Critical Care Society of CAE Healthcare’s bedside
ultrasound e-Learning curriculum and seminars.
• Increased efforts, including lobbying, to educate the medical
community and governments on the benefits of simulation-
based training in terms of the quality, safety and efficiency
of patient care and to make such training standard for
healthcare professionals, as it is for aircraft pilots.
• Expanding our list of thought-leading customers which
included, in fiscal 2012, Mount Sinai Hospital in New York,
Tufts University in Boston, New York University, Western
Carolina University and Americare Diagnostic Services, in
the U.S., President’s Hospital in Moscow, Russia, Universiti
Brunei Darussalam in Jalan Tungku Link, Brunei and the
NATO Centre of Excellence for Military Medicine in Budapest,
Hungary.
Huge market potential
The global market opportunities for CAE Healthcare’s solutions
are very large and growing. In the U.S. alone, there are nearly
800,000 physicians and 67,000 medical students, three
million nurses and 250,000 nursing students, as well as 5,800
hospitals. According to the World Health Organization, there
are 8.8 million physicians, 14.5 million nurses and over 59,000
hospitals worldwide.
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New Core Markets
Mining
CAE Mining aims to develop the industry’s most
compelling technology and service solutions to advance
the efficiency and safety of mine operations by combining
the hands-on experience of its more than 100 geologists,
mining engineers and other professionals with CAE’s
65-year record of technology leadership in modeling,
simulation and training in the global aviation industry.
CAE Mining was created through the acquisition of Datamine
and Century Systems, two well-established service providers
to the global mining industry, providing world class subject
matter expertise, longstanding customer relationships and
proven software and services capabilities.
We have a presence in eleven countries and our products and
services are currently being used at customer sites in close to
100 countries worldwide. Our products and services cover the
entire mining value chain:
are available in three versions: an open classroom design, a
closed classroom design and a deployable simulator that can
be transported to mine sites.
The simulators fully replicate the equipment’s performance
in normal and abnormal operations, providing unparalleled
realism with the most authentic experience. Operators
will be able to rehearse and prepare for the most complex
tasks, thereby improving the safety and efficiency of mining
operations, at a lower cost than training on real equipment.
• Our software products are used for managing exploration and
geological data, mine strategy, optimization, detailed design
and scheduling for all mining methods and commodities.
• Our technical consulting team services client needs such
as managing exploration drilling programs, mining studies,
resource evaluation, on-site technical services and business
improvement projects.
The CAE Terra mining simulator is the first of a series of
products that will cover a comprehensive range of mining
equipment. As we have done in our other industry sectors,
we are developing the next generation fully-integrated suite of
simulation solutions for the mining industry. They range from
desktop trainers and e-learning to part-task trainers, high-
fidelity simulators and training services.
• Our
training services
include workforce development
planning, training needs analysis, professional development
in technical disciplines and the design and implementation of
operator training curriculum.
Introducing the next generation mining simulators
Less than two years after its creation, CAE Mining has
introduced its first innovation for the global mining industry –
the CAE Terra™ simulators for operator training on a range of
mining equipment.
The mining simulators leverage CAE’s expertise in modeling,
simulation and training and are designed for a range of mining
equipment, from complex machinery such as the P&H 4100
electric shovel to the common CAT 793F haul truck. Simulators
CAE Mining’s enhanced planning and optimization tools enable
mining companies to squeeze more production and profit out
of what they have. Our simulation-based training solutions will
help them enhance operational efficiency and safety.
Growing the mining simulator market
We estimate the current mining simulator market to be
approximately $100 million globally from customers that
include mining companies, mining contractors, heavy
equipment operators, original equipment manufacturers,
training organizations, as well as universities and technical
institutions. With the next generation of mining simulators and
integrated solutions that CAE Mining expects to introduce in
the coming years, we believe the market will grow.
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Social Responsibility
CAE has a long tradition of caring for its communities,
employees and the environment. Our corporate giving is
focused on education, healthcare and organizations that
support the disadvantaged. Every year, our employees
around the globe do their part by participating in a wide
range of activities to help people in need.
The annual fund-raising for Centraide of Greater Montreal
(United Way) produced outstanding
last year,
surpassing its goal and reaching a new record. The total
donation by CAE and Montreal employees was $768,403, an
effort singled out by Centraide as one of the best employee
campaigns of the year in the large company category.
results
In Canada, CAE is one of the gold sponsors that enabled the
Adaptive Sports Foundation (ASF) to initiate the annual Soldier
On Festival in Valcartier, Québec and Edmonton, Alberta. ASF
encourages physically disabled children and adults, including
wounded soldiers, to discover new abilities through alpine
skiing and water sports.
Around the globe
CAE and its employees support hundreds of causes around
the world. The following are a few examples:
In the U.S., CAE awarded four scholarships to the University of
North Dakota and eight scholarships to the University of South
Florida, the University of Central Florida and the University of
Florida.
CAE Australia supports Angel Flight, a charity that co-
ordinates non-emergency flights to help country people trying
to deal with the triple trouble of bad health, poor finances and
daunting distance. All flights are free and may involve patients
traveling to medical facilities anywhere in Australia. Through
BBQ breakfasts and lunches, raffles and other activities,
employees raised enough funds for 12 mission flights.
CAE India employees donate funds, clothes, bed sheets,
groceries and personal hygiene products to several old age
homes, in addition to volunteering for the Samarthanam Trust
for the Disabled, a charity dedicated to assisting the visually
impaired through developmental activities.
CAE Amsterdam is helping Stichting Hoogvliegers (High Flyers
Foundation), which stimulates chronically and/or terminally
ill children, by giving them an adventurous look into aviation
through simulator rides at the centre.
CAE UK hosted a career event for local schools at the Burgess
Hill training centre that attracted 99 high school girls aspiring
to university. The guests toured the facility and listened to
presentations by CAE employees on the range of career
opportunities in our industry.
Environment, health and safety
Our environment, health and safety policy ensures compliance
with legal requirements while driving continuous improvement
within a context of sustainable development and responsible
management.
Our products and services are inherently eco-friendly as
carbon-emitting jet fuel is substituted by an electricity-based
simulator. We are constantly implementing new initiatives to
reduce impacts, including comprehensive recycling programs
in our main Montreal plant that cover over 70% of its total
residual materials. We have also made excellent progress
in extending the useful life of certain chemicals used in our
operations, replacing petroleum solvents with water-based
cleaning solutions, and eliminating hazardous substances by
substituting greener alternatives and processes.
To find out more about how we are reducing the environmental
impact of our manufacturing activities and the compelling
environmental benefits of our modeling and simulation
technologies, please consult the Environment section of our
Web site at cae.com.
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Financial Review
CAE Annual Report 2012 | 25
1. HigHligHts
2. intRoduCtion
3. About CAE
3.1 Who we are
3.2 our vision
3.3 our strategy and value proposition
3.4 our operations
3.5 Foreign exchange
3.6 non-gAAP and other financial measures
4. ConsolidAtEd REsults
4.1 Results of our operations – fourth quarter of fiscal 2012
4.2 Results of our operations – fiscal 2012
4.3 Consolidated orders and backlog
5. REsults by sEgmEnt
5.1 Civil segments
5.2 military segments
5.3 new Core markets
6. ConsolidAtEd CAsH movEmEnts And liquidity
6.1 Consolidated cash movements
6.2 sources of liquidity
6.3 government cost-sharing
6.4 Contractual obligations
7. ConsolidAtEd FinAnCiAl Position
7.1 Consolidated capital employed
7.2 off balance sheet arrangements
7.3 Financial instruments
8. businEss CombinAtions
9. EvEnts AFtER tHE REPoRting PERiod
10. businEss RisK And unCERtAinty
10.1 Risks relating to the industry
10.2 Risks relating to the Company
10.3 Risks relating to the market
11. RElAtEd PARty tRAnsACtions
12. CHAngEs in ACCounting stAndARds
12.1 iFRs implementation
12.2 Future changes in accounting standards
12.3 use of judgements, estimates and assumptions
13. ContRols And PRoCEduREs
13.1 Evaluation of disclosure controls and procedures
13.2 internal control over financial reporting
14. ovERsigHt RolE oF Audit CommittEE And boARd oF diRECtoRs
15. AdditionAl inFoRmAtion
16. sElECtEd FinAnCiAl inFoRmAtion
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Management’s Discussion and Analysis
for the fourth quarter and year ended March 31, 2012
1. HIGHLIGHTS
International Financial Reporting Standards (IFRS)
This report is prepared in accordance with IFRS and should be read in conjunction with our consolidated financial statements for the
year ended March 31, 2012, which were prepared in accordance with IFRS 1, First-time adoption of IFRS, as issued by the
International Accounting Standards Board (IASB). The comparative figures for the year ended March 31, 2011 have been restated to
comply with IFRS. See Note 2 of the consolidated financial statements for details on the most significant adjustments to the
statements of financial position, changes in equity, net income, comprehensive income and cash flows.
FINANCIAL
FOURTH QUARTER OF FISCAL 2012
Higher revenue over last quarter and higher revenue over the fourth quarter of fiscal 2011
Consolidated revenue was $506.7 million this quarter, $53.6 million or 12% higher than last quarter and $41.1 million or 9% higher
than the fourth quarter of fiscal 2011.
Higher net income attributable to equity holders of the Company compared to last quarter and compared to the fourth
quarter of fiscal 2011
Net income attributable to equity holders of the Company was $53.2 million (or $0.21 per share) this quarter, compared to $45.6
million (or $0.18 per share) last quarter, representing an increase of $7.6 million or 17%, and compared to $45.5 million (or $0.18
per share) in the fourth quarter of last year, representing an increase of $7.7 million or 17%;
Excluding the reversal of the restructuring provision of $1.0 million booked in the fourth quarter of fiscal 2011, net income
attributable to equity holders of the Company was $44.7 million (or $0.17 per share) for that quarter.
Positive free cash flow1 at $106.7 million this quarter
Net cash provided by operations was $122.1 million this quarter, compared to $70.4 million last quarter and $162.1 million in the
fourth quarter of last year;
Maintenance capital expenditures1 and other asset expenditures were $13.1 million this quarter, $17.3 last quarter, and
$19.0 million in the fourth quarter of last year;
Cash dividends were $8.4 million this quarter, $8.0 million last quarter and $10.1 million in the fourth quarter of last year.
FISCAL 2012
Higher revenue over fiscal 2011
Consolidated revenue was $1,821.2 million, $190.4 million or 12% higher than last year.
Higher net income attributable to equity holders of the Company
Net income attributable to equity holders of the Company was $180.3 million (or $0.70 per share) compared to $160.3 million (or
$0.62 per share) last year, representing a $20.0 million or 12% increase;
Excluding charges of $8.4 million ($2.7 million after tax) related to the acquisition and integration of Medical Educational
Technologies, Inc. (METI), which was acquired during the year, net income attributable to equity holders of the Company would
have been $183.0 million (or $0.71 per share) this year.
Excluding the reversal of the restructuring provision of $1.0 million ($0.8 million after tax) booked in fiscal 2011, net income
attributable to the equity holders of the Company would have been $159.5 million (or $0.62 per share).
Positive free cash flow at $173.7 million
Net cash provided by operations was $233.9 million this year, compared to $226.3 million last year;
Maintenance capital expenditures and other asset expenditures were $61.2 million this year, compared to $62.7 million last year;
Cash dividends were $33.4 million this year, compared to $37.9 million last year.
Capital employed1 ending at $1,576.5 million
Capital employed increased by $259.8 million or 20% this year;
Non-cash working capital1 increased by $64.5 million in fiscal 2012, ending at $113.4 million;
Property, plant and equipment increased by $82.7 million;
Other long-term assets increased by $184.8 million, while other long-term liabilities increased by $72.2 million;
Net debt1 increased by $150.5 million this year, ending at $534.3 million.
1 Non-GAAP and other financial measures (see Section 3.6).
CAE Annual Report 2012 | 27
Management’s Discussion and Analysis
ORDERS22
The book-to-sales ratio2 for the quarter was 1.44x (combined civil was 1.32x, combined military was1.57x and New Core Markets
was 1.0x). The ratio for the last 12 months was 1.17x (combined civil was 1.29x, combined military was 1.07x and New Core
Markets was 1.0x);
Total order intake this year was $2,128.3 million, up $273.8 million over last year;
Total backlog2 was $3,724.2 million at March 31, 2012, $275.2 million higher than last year.
Civil segments
Training & Services/Civil obtained contracts with an expected value of $686.9 million;
Simulation & Products/Civil won $398.7 million of orders, including contracts for 37 full-flight simulators (FFSs).
Military segments
Simulation Products/Military won $528.8 million of orders for new training systems and upgrades;
Training & Services/Military won contracts valued at $430.9 million.
New Core Markets segment
New Core Markets won $83.0 million of orders.
BUSINESS COMBINATIONS AND JOINT VENTURES
On August 24, 2011, we announced that CAE Healthcare acquired Medical Education Technologies, Inc. (METI), a worldwide
leader in medical simulation technologies and educational software, for US$130 million;
We entered into four new joint venture arrangements during fiscal 2012: CAE Japan Flight Training Inc. (51% participation), Asian
Aviation Centre of Excellence Sdn. Bhd. (50% participation) and CAE Simulation Training Private Limited (25% participation) in the
first quarter and Philippine Academy for Aviation Training, Inc. (50% participation) in the third quarter;
In March 2012, we acquired the outstanding 80.5% of the interests in Flight Simulator Capital L.P. (Simucap) that we previously did
not own. With this acquisition, CAE owns 100% of the units of Simucap.
OTHER
We issued senior notes for US$150.0 million by way of a private placement to fund the METI acquisition and to replace other
existing obligations which carried higher interest costs.
2 Non-GAAP and other financial measures (see Section 3.6).
28 | CAE Annual Report 2012
Management’s Discussion and Analysis
2. INTRODUCTION
In this report, we, us, our, CAE and Company refer to CAE Inc. and its subsidiaries. Unless we have indicated otherwise:
This year and 2012 mean the fiscal year ending March 31, 2012;
Last year, prior year and a year ago mean the fiscal year ended March 31, 2011;
Dollar amounts are in Canadian dollars.
This report was prepared as of May 23, 2012, and includes our management’s discussion and analysis (MD&A) for the year and the
three-month period ended March 31, 2012 and the consolidated financial statements and notes for the year ended March 31, 2012.
We have written it to help you understand our business, performance and financial condition for fiscal 2012. Except as otherwise
indicated, all financial information has been reported in accordance with IFRS. All quarterly information disclosed in the MD&A is
based on unaudited figures.
For additional information, please refer to our annual consolidated financial statements for this fiscal year, which you will find in the
annual report for the year ended March 31, 2012. The MD&A provides you with a view of CAE as seen through the eyes of
management and helps you understand the company from a variety of perspectives:
Our vision;
Our strategy and value proposition;
Our operations;
Foreign exchange;
Non-GAAP and other financial measures;
Consolidated results;
Results by segment;
Consolidated cash movements and liquidity;
Consolidated financial position;
Business combinations;
Events after the reporting period;
Business risk and uncertainty;
Related party transactions;
Changes in accounting standards;
Controls and procedures;
Oversight role of the Audit Committee and Board of Directors.
You will find our most recent annual report and annual information form (AIF) on our website at www.cae.com, on SEDAR at
www.sedar.com or on EDGAR at www.sec.gov.
ABOUT MATERIAL INFORMATION
This report includes the information we believe is material to investors after considering all circumstances, including potential market
sensitivity. We consider something to be material if:
It results in, or would reasonably be expected to result in, a significant change in the market price or value of our shares, or;
It is quite likely that a reasonable investor would consider the information to be important in making an investment decision.
ABOUT FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements about our activities, events and developments that we expect to or anticipate may
occur in the future including, for example, statements about our business outlook, assessment of market conditions, strategies, future
plans, future sales, pricing for our major products and capital spending. Forward-looking statements normally contain words like
believe, expect, anticipate, plan, intend, continue, estimate, may, will, should and similar expressions. Such statements are not
guarantees of future performance. They are based on management’s expectations and assumptions regarding historical trends,
current conditions and expected future developments, as well as other factors that we believe are appropriate in the circumstances.
We have based these statements on estimates and assumptions that we believed were reasonable when the statements were
prepared. Our actual results could be substantially different because of the risks and uncertainties associated with our business.
Important risks that could cause such differences include, but are not limited to, the length of sales cycles, rapid product evolution,
level of defence spending, condition of the civil aviation industry, competition, availability of critical inputs, foreign exchange rate
occurrences and doing business in foreign countries. Additionally, differences could arise because of events that are announced or
completed after the date of this report, including mergers, acquisitions, other business combinations and divestitures. You will find
more information about the risks and uncertainties affecting our business in Business risk and uncertainty in the MD&A.
We do not update or revise forward-looking information even if new information becomes available unless legislation requires us to do
so. You should not place undue reliance on forward-looking statements.
CAE Annual Report 2012 | 29
Management’s Discussion and Analysis
3. ABOUT CAE
3.1 Who we are
CAE is a world leader in providing simulation and modeling technologies and integrated training services primarily to the civil aviation
industry and defence forces around the globe. We are globally diversified with more than 7,500 people at more than 100 sites and
training locations in over 25 countries. We have annual revenue exceeding $1.8 billion, nearly 90% of which comes from worldwide
exports and international activities. We have the largest installed base of civil and military flight simulators and a broad global aviation
training network. We offer civil aviation, military and helicopter training services in 40 locations worldwide where we train more than
80,000 civil and military crewmembers annually. Our main products include full-flight simulators (FFSs), which replicate aircraft
performance in a full array of situations and environmental conditions. We apply our simulation expertise and operational experience
to help customers enhance safety, improve efficiency, maintain readiness and solve challenging problems. We are now leveraging our
simulation capabilities in new markets such as healthcare and mining.
Approximately half of our revenue comes from the sale of simulation products, software and simulator updates, and the balance from
services including training, maintenance, aviation services and professional services.
Founded in 1947 and headquartered in Montreal, Canada, CAE has built an excellent reputation and long-standing customer
relationships based on 65 years of experience, strong technical capabilities, a highly trained workforce, and global reach.
CAE’s common shares are listed on the Toronto and New York stock exchanges under the symbol CAE.
3.2 Our vision
Our vision is for CAE to be synonymous with safety, efficiency and mission readiness. We intend to be the mission partner of choice
for customers operating in complex mission-critical environments by providing the most innovative product and service solutions to
enhance safety, improve efficiency and provide superior decision-making capabilities.
3.3 Our strategy and value proposition
Our strategy
We are a world-leading provider of modeling and simulation-based training and decision support solutions. We currently serve
customers in two primary markets: civil aerospace and defence. We have extended our capabilities into new markets of
simulation-based training and optimization solutions in healthcare and mining.
A key tenet of our strategy in our core civil aerospace and defence markets is to derive an increasing proportion of our business from
the existing fleet. This would include providing solutions for customers in support of the global fleet of civilian and military aircraft.
Historically, the primary driver of our business was the delivery of new commercial aircraft. Our Simulation Products/Civil (SP/C)
segment, which in fiscal 2012 represented 19% of our consolidated revenue, is most dependent on this more deeply cyclical market
driver. As a result of our diversification efforts, the balance of our business involves mainly more stable and recurring sources of
revenue like training and services as well as military simulation products and services.
In addition to diversifying our interests among customer markets, our strategy has also involved more balance between products,
which tend to be more short-term and cyclical, and services, which tend to be more long term and stable. As well, we continue to
diversify our interests globally. This is intended to bring our solutions closer to our customers’ home bases, which we think is a distinct
competitive advantage. This also allows us to be less dependent on any one market, and since business conditions are rarely
identical in all regions of the world, we believe this provides a degree of stability to our performance. We are investing in both the
mature and emerging markets to capitalize on current and future growth opportunities. Approximately one third of our revenue comes
from the U.S., one third from Europe and one third from the rest of the world including the high growth, emerging markets. We
continue to execute our growth strategy by selectively investing to meet the long-term needs of our aerospace and defence
customers, investing in adjacencies within our core markets, and by investing in our new core markets.
Value proposition
The value we provide customers is the ability to enhance the safety of their operations, improve their mission readiness for potentially
dangerous situations and lower their costs by helping them become more operationally efficient. We offer a range of products and
services solutions to enhance our customers’ planning and decision-making abilities, as well as a complete range of products and
services that can be arranged in a customized package to suit our customers’ needs and can be adapted as their needs evolve over
the lifecycle of their operations. We also offer a broad global reach, and as a result, we are able to provide solutions in proximity to our
customers, which is an important cost-benefit consideration for them.
30 | CAE Annual Report 2012
Our core competencies and competitive advantages include:
World-leading modeling and simulation technology;
Comprehensive knowledge of training and learning methodologies for the operation of complex systems using modeling and
Management’s Discussion and Analysis
simulation;
Total array of training products and services solutions;
Broad-reaching customer intimacy;
Extensive global coverage and in-depth country familiarity;
High-brand equity;
Proven systems engineering and program management processes;
Best-in-class customer support;
Well established in new and emerging markets.
World-leading modeling and simulation technology
We pride ourselves on our technological leadership. Pilots around the world view our simulation as the closest thing to the true
experience of flight. We have consistently led the evolution of flight training and simulation systems technology with a number of
industry firsts. We have simulated the entire range of large civil aircraft, a large number of the leading regional and business aircraft
and a number of civil helicopters. We are an industry leader in providing simulation and training solutions for fixed-wing transport
aircraft, maritime patrol aircraft and helicopter platforms for the military. We also have extensive knowledge, experience and credibility
in designing and developing simulators for prototype aircraft of major aircraft manufacturers. We have extended our expertise in
modeling and simulation beyond training into other mission-critical areas where these technologies are used to support superior
decision-making capabilities. As well, we are now applying these capabilities to new markets, such as healthcare and mining.
Comprehensive knowledge of training and learning methodologies for the operation of complex systems using modeling and
simulation
We revolutionized the way aviation training is performed when we introduced our CAE SimfinityTM-based training solutions
and courseware. These training devices effectively bring the virtual aircraft cockpit into the classroom at the earliest stages of ground
school training, making it a more effective and efficient training experience overall. We build upon the CAE SimfinityTM product line to
develop the trainers that are used in the Airbus pilot and maintenance technician training programs. We also developed e-Learning
solutions to enable pilots and technicians to train anytime and anywhere. We are using our experience gained in the development of
training and learning methodologies in aerospace to bring and enhance modeling and simulation technologies to our training solutions
in the healthcare and mining domains.
Total array of training products and services solutions
We offer a wide array of training products, from desktop trainers to FFSs, addressing both our civil and military customers’ training
needs. With a large network of training centres, we are also a global leader in aviation training providing the complete solution to meet
our customers’ training and pilot placement needs. Our civil pilot training programs span over 90 different aircraft models including
business aircraft, civil helicopters and commercial airliners and provide curricula for initial, type rating, recurrent and maintenance
training. Our civil pilot provisioning solution adds value and moves our customers’ businesses forward by identifying, screening,
selecting, training and ultimately placing pilots at their airlines. In addition, we deliver civil ab initio pilot training through our CAE
Global Academy which is the largest network of ab initio flight schools in the world, with 11 schools across the globe. With 65 years of
experience in simulation, we are an industry expert in aviation training and are the industry’s training solution one-stop shop.
Broad-reaching customer intimacy
We have been in business for 65 years and have relationships with most of the world’s airlines and the governments of approximately
50 defence operators in approximately 35 countries, including all branches of the U.S. forces. Our customer advisory boards and
technical advisory boards involve airlines and operators worldwide. By listening carefully to customers, we are able to gain a deep
understanding of their mission needs and respond with innovative product and service offerings that help improve the safety and
efficiency of their operations and their ability to make superior decisions.
Extensive global coverage and in-depth country familiarity
We are globally diversified with more than 7,500 people at more than 100 sites and training location in over 25 countries. Our broad
geographic coverage allows us to respond quickly and cost effectively to customer needs and new business opportunities while
having a deep understanding and respect of the regulations and customs of the local market. We operate a fleet of more than 180
full-flight and full-mission simulators in 40 civil aviation, military and helicopter training locations worldwide to meet the wide range of
operational requirements of our customers. Our fleet includes simulators for various types of aircraft from major manufacturers,
including commercial jets, business jets and helicopters, both civil and military.
High-brand equity
Our simulators are typically rated among the highest in the industry for reliability and availability. This is a key benefit because
simulators normally operate in high-duty cycles of up to 20 hours a day. We design our products so customers can upgrade them,
giving them more flexibility and opportunity as products change or new air-worthiness regulations are introduced.
We have a broad global footprint, which enables close, long-term relationships with our customers. Our brand not only promises
leading technology, but also superior customer support. CAE has a customer sales and support organization that rivals the size of a
number of our competitor’s entire organizations.
CAE Annual Report 2012 | 31
Management’s Discussion and Analysis
Proven systems engineering and program management processes
We continue to develop solutions and deliver technically complex programs within schedule to help ensure that there are trained and
mission-ready aircrew and combat troops around the world. This includes MH-60 simulators for the U.S. Navy; C-130J simulators for
the U.S., Indian and Canadian Defence Forces; MRH90 simulators for the Australian Defence Forces, Royal Netherlands Navy and
German Armed Forces; A330 Multi-Role Tanker Transport training devices for the Royal Australian Air Force, United Arab Emirates
Air Force and Royal Saudi Air Force; and M-346 jet trainer simulators for the Italian Air Force and the Republic of Singapore Air
Force. These and other programs combined with our continued investment in R&D continue to strengthen our technological
leadership and strengthen our management expertise to deliver complex programs that feature sensor simulation for maritime
operations, synthetic tactical environments for naval and fighter operations as well as our visualization and common database
technologies that deliver rich, immersive synthetic environments for the most effective training and mission rehearsal possible.
Best-in-class customer support
We maintain a strong focus on after-sales support, which is often critical in winning additional sales contracts as well as important
update and maintenance services business. Our customer support practices, including a web-based customer portal, performance
dashboard, and automated report cards, have resulted in enhanced customer support according to customer comments and
feedback.
Well established in new and emerging markets
Our approach to global markets is to model ourselves as a multi-domestic rather than a foreign company. This has enabled us to be a
first mover into growth markets like China, India, the Middle East, South America and Southeast Asia, where we have been active for
several decades.
3.4 Our operations
We primarily serve two markets globally:
The civil market includes aircraft manufacturers, major commercial airlines, regional airlines, business aircraft operators, civil
helicopter operators, third-party training centres, ab initio pilot students and flight training organizations (FTOs);
The military market includes original equipment manufacturers (OEMs), government agencies and defence forces worldwide.
We also serve the healthcare market, involving hospital and university simulation centres, teaching institutions, medical societies and
OEMs, and the mining market, serving global mining corporations, exploration companies, mining contractors and the world’s premier
mining consultancies.
We are a global leader with an unparalleled range of capabilities to help our customers achieve greater levels of operational
efficiency, safety and readiness. As such, we use an integrated solutions-based approach to market, which often results in multi-year
agreements with our customers to provide them with a full complement of both products and services. Although this go-to-market
approach increasingly entails the bundling of products and services, since fiscal 2006, we have reported our operating results in four
individual segments: one for products and one for services for each of our two main markets. In addition to our Civil and Military
business segments, we report Healthcare and Mining which, as of the first quarter of fiscal 2012, are presented together as the New
Core Markets (NCM) segment (previously presented in Training & Services/Civil). Fiscal 2011 comparative figures for
Training & Services/Civil have been restated.
CIVIL MARKET
Training & Services/Civil (TS/C)
Provides business, commercial and helicopter aviation training for flight, cabin, maintenance and ground personnel and associated
services
We are the largest provider of commercial and helicopter aviation training services in the world and the second largest provider of
business aviation training services. We lead the market in the high-growth emerging regions of China, India, the Middle East, South
America and Southeast Asia. Through our broad global network of training centres we serve all sectors of civil aviation including
general aviation, major and regional airlines, helicopter operators and business aviation. We currently operate 171 FFSs and provide
aviation training and services in more than 20 countries around the world, including aviation training centres, FTOs and third-party
locations. Among our thousands of customers, we have strategic relationships, partnerships and joint ventures with more than 20
major airlines, aircraft operators and OEMs around the world. We offer a comprehensive range of training solutions and services,
including curriculum development, training centre operations, pilot training, cabin crew training, aircraft maintenance technician
training, e-Learning and courseware solutions, and consulting services. We are a leader in flight sciences, using flight data analysis to
improve airline safety, maintenance, flight operations and training. CAE Global Academy is the world’s largest network of ab initio
FTOs, with a capacity for training up to 1,800 pilot cadets annually. We also offer our global base of airline customers a long-term
solution to pilot recruitment with pilot sourcing services.
32 | CAE Annual Report 2012
Management’s Discussion and Analysis
Simulation Products/Civil (SP/C)
Designs, manufactures and supplies civil flight simulation training devices and visual systems
We are the world leader in the provision of civil flight simulation equipment, including FFSs and a comprehensive suite of integrated
training procedures trainers, flight training devices and web-based e-learning, using the same high-fidelity Level D software as the
FFSs. We have designed and manufactured more civil FFSs for major and regional commercial airlines, third-party training centres
and OEMs than any other company. We have developed a wealth of experience in developing first-to-market simulators for more than
35 new types of aircraft models, and more recently we have developed or have been awarded contracts to develop simulators for the
Airbus A350 XWB, Boeing 747-8, Mitsubishi Regional Jet (MRJ), ATR42-600 and ATR72-600, Bombardier CSeries, Global Express
and Learjet 85, Embraer Phenom 100 and 300, Dassault Falcon 7X and the Commercial Aircraft Corporation of China, Ltd (COMAC)
ARJ21. We also offer a full range of support services including simulator updates and upgrades, maintenance services, sales of spare
parts and simulator relocations.
Market trends and outlook
In commercial aviation, aircraft capacity and passenger traffic growth are primarily driven by gross domestic product (GDP). The
aerospace industry’s widely held expectation is that long-term average growth for air travel will be approximately 5% annually over the
next two decades. The growth rates in the emerging markets have been outpacing this global average growth rate, which is of
particular interest to us given our leadership position in these regions. The U.S. legacy airlines, a traditional CAE customer base, are
in the process of renewing their aircraft fleets to modern, efficient aircraft. The growth in air travel and re-fleeting requirements have
led to high commercial aircraft backlogs, to commercial aircraft manufacturers increasing their production rates and to the
announcement of new aircraft programs.
In business aviation, aircraft orders and utilization are primarily driven by corporate profitability and by general economic conditions.
U.S.-operated aircraft utilization has to improve by approximately 15-20% in order to recover the ground lost during the last recession.
The business aviation industry remains cautiously optimistic, and while some market uncertainty persists, the number of business jet
flights rose 2% in 2011 compared with 2010, according to the U.S. Federal Aviation Administration (FAA).
Major business aircraft OEMs such as Bombardier, Cessna, Dassault and Gulfstream have announced new aircraft programs which
are an indication of their long-term confidence in the demand for business aircraft travel. Globally, we continue to see a steady
increase in demand for large-cabin business jets, while demand for mid-sized and small-cabin jets remains stable at low levels.
In the SP/C segment, the level of market activity has improved in the current fiscal year. We maintained our leadership position with
37 FFS unit sales in fiscal 2012.
The following secular trends form the basis of our Civil market investment hypothesis:
Expected long-term growth in air travel;
Demand in emerging markets arising from secular growth and a need for infrastructure to support air travel;
Aircraft backlogs;
More efficient and more technologically advanced aircraft platforms;
Aircraft re-fleeting by legacy airlines;
Long-term demand and shortage of trained aviation professionals (pilots, maintenance, cabin crew).
Expected long-term growth in air travel
In calendar 2011, passenger traffic increased by 5.9% compared to calendar 2010, while freight-tonne-kilometres remained stable
over the same period with a modest 0.7% decrease compared to calendar 2010. For the first three months of calendar 2012,
passenger traffic increased by 7.4% compared to the first three months of calendar 2011, while freight-tonne-kilometres remained
stable, decreasing by 0.7% over the same period. Over the past 20 years, air travel has grown at an average rate of 4.8% and this is
expected to continue over the next 20 years. Possible impediments to steady growth progression in air travel include major
disruptions such as regional political instability, acts of terrorism, pandemics, natural disasters, sharp and sustained increases in fuel
costs, major prolonged economic recessions or other major world events.
Demand in emerging markets arising from secular growth and a need for infrastructure to support air travel
Emerging markets such as Africa, China, Eastern Europe, the Indian sub-continent, the Middle East, South America and Southeast
Asia are expected to continue experiencing higher air traffic and economic growth over the long term than mature markets such as
North America and Western Europe, as well as an increasing liberalization of air policy and bilateral air agreements. We expect these
markets to drive the long-term demand for the broad array of products and services solutions that we bring to bear. We have been
active in these high-growth regions for several decades and are positioned as the market leader with well-established operations,
strategic partnerships and joint ventures in each of these regions.
Aircraft backlogs
In calendar 2011, commercial aircraft OEMs Boeing and Airbus received 2,224 net orders for new aircraft (firm orders minus
cancellations), compared to 1,104 net orders in calendar 2010. Net aircraft orders for Boeing and Airbus were 502 for the three-month
period ending March 31, 2012, and they continue to work through record backlog levels of more than 8,000 aircraft, which should help
generate opportunities for our full portfolio of training products and services. In calendar 2011, Boeing and Airbus reported a total of
1,011 airplane deliveries, compared to 972 deliveries in calendar 2010. For the three-month period ending March 31, 2012,
commercial airplane deliveries for Boeing and Airbus were 268. Airbus and Boeing have announced a succession of upcoming
significant production increases of key models such as the Airbus A320-family and A330, and Boeing’s B737NG and B777. Higher
aircraft deliveries should translate into higher demand for training products and services.
CAE Annual Report 2012 | 33
Management’s Discussion and Analysis
More efficient and more technologically advanced aircraft platforms
Airlines demand more efficient aircraft
Commercial aircraft OEMs have announced plans to introduce, or have already introduced, new, more efficient platforms. Some
examples include the new Boeing 737 MAX, the Boeing 747-8 and 787, the Airbus A350 XWB and A320neo, the Mitsubishi MRJ, the
COMAC ARJ21, Russia’s UAC SSJ100 and the Bombardier CSeries. The demand for these new, more efficient platforms is driven by
high fuel prices, and, as fuel accounts for a significant portion of an airline’s operating costs, airlines are actively seeking ways to
reduce this cost.
Business jet operators demand high performance aircraft
Business aircraft OEMs have announced plans to introduce, or have already introduced, a variety of new aircraft models incorporating
the latest technologies to enhance performance and operator benefits such as range, speed, comfort and the accessibility of business
air travel. Some examples include the Bombardier Learjet 85, the Global 7000 and 8000, Embraer’s Legacy Series and Lineage 1000,
Gulfstream’s G650 and Cessna’s Citation M2 and Latitude.
These more efficient and more technologically advanced aircraft platforms will drive the demand for new types of simulators and
training programs. One of our strategic priorities is to partner with manufacturers to position ourselves for future opportunities. In
recent years, we have signed contracts with Bombardier for the CSeries aircraft, with ATR for the new ATR42/72-600 aircraft, with
Mitsubishi Aircraft Corporation for the new MRJ, and with Airbus for the A350 XWB to leverage our modeling, simulation and training
expertise to deliver training solutions, including CAE 7000 Series FFS, CAE SimfinityTM procedures trainers, comprehensive training
programs and expansion of our network to meet airlines’ training needs. Deliveries of new-model aircraft are subject to program
delays, which in turn affect the timing of FFS orders and deliveries.
Aircraft re-fleeting by legacy airlines
Legacy airlines have been taking steps to renew their aging aircraft fleets. The recent order activity in the U.S. from Boeing and
Airbus, for example from customers such as American Airlines, Southwest Airlines and Delta Airlines, highlights the potential for
greater penetration of new generation of aircraft in the U.S. air transportation system.
Long-term demand and shortage of trained aviation professionals (pilots, maintenance, cabin crew)
Worldwide demand is expected to increase over the long term
Growth in the civil aviation market has driven the demand for pilots, maintenance technicians and cabin crew worldwide, resulting in a
shortage of qualified professionals in several markets. Pilot supply constraints include aging crew demographics, fewer military pilots
transferring to civil airlines and low enrolment in technical schools. In emerging markets such as China, India, the Middle East, South
America and Southeast Asia, long-term air traffic growth is outpacing the growth in mature markets and this trend is expected to
continue.
New pilot certification process requires simulation-based training
Simulation-based pilot certification training is beginning to take on an even greater role with the Multi-crew Pilot License (MPL)
certification process developed by the International Civil Aviation Organization (ICAO), which has been adopted by several individual
national aviation authorities around the world. The MPL process places more emphasis on simulation-based training to develop ab
initio students into First Officers for modern aircraft. We launched the CAE MPL course in fiscal 2010 and graduates of our MPL
program are now flying. In fiscal 2012, we signed the world’s first long-term commitment to MPL by a major airline with Air Asia. If the
MPL process continues to be adopted and gains momentum in emerging markets like China, India, Southeast Asia, Eastern Europe
and the Middle East where there is the greatest need for a large supply of qualified pilots trained in an efficient and effective manner,
it would result in increased use of simulation-based training.
MILITARY MARKET
We generate revenue across the defence market value chain by offering solutions to help maintain and enhance our customers’
efficiency, mission readiness and decision-making capabilities. We provide simulation products such as full-mission simulators (FMS);
we perform updates and upgrades to a significant installed base of simulators and training devices; we provide maintenance and in-
service support solutions; we offer training centres and turnkey training services; we have a range of capabilities to provide
simulation-based professional services for analysis, training and operational decision-making; and we have a software business called
Presagis, which develops and sells commercial-off-the-shelf (COTS) modeling and simulation software solutions to OEMs,
government agencies and defence forces.
We approach the world’s defence markets by leveraging our global footprint and our in-country expertise. We have local presence
and centres of excellence in key markets including Australia, Canada, Germany, India, Singapore, the U.K and the U.S. We have
developed global operating processes which allow us to place a high level of decision-making autonomy within the regions while
leveraging the full breadth of our products, services and capabilities which results in greater efficiency and stronger customer
relationships.
34 | CAE Annual Report 2012
Management’s Discussion and Analysis
Simulation Products/Military (SP/M)
Designs, manufactures and supplies advanced military training equipment and software tools for air forces, armies and navies
Our SP/M segment is a world leader in the design and production of military flight simulation equipment. We develop simulation
equipment, training systems and software tools for a variety of military aircraft, including fast jets, helicopters, trainer aircraft, maritime
patrol and tanker/transport aircraft. We also offer simulation-based solutions for land and naval forces, including a range of driver and
gunnery trainers for tanks and armoured fighting vehicles (AFVs) as well as hands-on and virtual maintenance trainers. We have
designed the broadest range of military helicopter simulators in the world, and we have also developed more training systems for the
C-130 Hercules transport aircraft than any other company. We have delivered simulation products and training systems to more than
50 defence operators in approximately 35 countries, including all of the U.S. services.
Training & Services/Military (TS/M)
Supplies turnkey training services, maintenance and support services, simulation-based professional services and in-service support
solutions
Our TS/M segment provides turnkey training services and training systems integration expertise to global defence forces, such as the
Medium Support Helicopter Aircrew Training Facility (MSHATF) at Royal Air Force (RAF) Benson in the U.K., the Operational Training
Systems Provider (OTSP) program for the Canadian Forces, the German Army Aviation School at Buckeburg, the KC-135 Aircrew
Training System for the United States Air Force (USAF) at 13 U.S. and international bases as well as to our joint venture training
centres, including Rotorsim s.r.l in Italy with AgustaWestland and Helicopter Training Private Limited (HATSOFF) in India with
Hindustan Aeronautics Limited (HAL). Recently, we formed a venture with the Government of Brunei to develop the CAE Brunei Multi
Purpose Training Centre Sdn Bhd (MPTC) where we will provide long-term training services involving helicopter and fixed-wing
aircraft training. We also provide a range of training support services such as contractor logistics support, maintenance services,
classroom instruction and simulator training in over 70 sites around the world. TS/M additionally provides a variety of modeling and
simulation-based professional and defence services, and offers a range of in-service support solutions such as systems engineering
and lifecycle management.
Market trends and outlook
We continue to see a good number of opportunities globally for our modeling and simulation-based solutions. However, in mature
markets such as the United States and Europe, we are experiencing longer and delayed procurement processes which are impacting
the timing of contract awards. While the Unites States and Europe address budget challenges, we are seeing increased opportunities
originating from regions with growing defence budgets, like Asia and the Middle East, where CAE has an established and growing
presence. While the short-term uncertainty brings near-term challenges, the expectation within the defence establishment is that more
and more training will be simulation-based in the future. Three important factors help to distinguish our defence business. First, we
have a uniquely global position that gives us balance and diversity across the world’s defence market. Second, we have a strong,
experienced position on aircraft platforms that are expected to have a long program life. Third, and most fundamentally, simulation-
based training provides considerable value as defence forces operate in a constrained budget environment yet still need to train and
maintain troops’ readiness.
Global position
CAE’s military business has, since its inception, been globally diversified as the majority of global defence expenditures have been
outside the Canadian domestic market. Approximately 1/3 of our business comes from the U.S., 1/3 from Europe and 1/3 from the
rest of the world. We are currently working from a solid backlog and continue to see a broad pipeline of global opportunities despite
known pressures on governments, mainly in the U.S., continental Europe and the U.K., to reduce defence spending in order to
achieve fiscal reforms. These pressures have led to some program delays and reductions, which has made it more difficult to predict
the timing and size of opportunities in the U.S. and Europe. Nations, such as Germany and the U.K., are in the process of reducing
their force structures, which will result in fewer personnel requiring training on the affected platforms, which may impact our future
business. Yet at the same time, emerging markets such as India, other Asian countries and the Middle East are planning growth in
defence expenditures and we are well positioned in these regions. Since our interests span across a broad range of more than
50 defence operators in approximately 35 countries, our military business is diversified across markets experiencing various rates of
defence expenditure.
CAE Annual Report 2012 | 35
Management’s Discussion and Analysis
Platform position
We have made a conscious effort over the last several years to position the company on aircraft platforms that we believe have long
program lives ahead of them. We are mainly involved with the air domain on platforms such as helicopters, transport aircraft, tankers,
maritime patrol, and lead-in fighter trainer aircraft. We have a good track record for delivering programs on time and on budget and we
are well positioned to provide defence forces with simulation and training solutions on a range of these type of military platforms.
These aircraft segments specifically include the C-130J transport aircraft, the P-8A Poseidon and P-3C Orion maritime patrol aircraft,
the KC-46A tanker and A330 Multi-Role Tanker Transport, the NH90 helicopter, the M-346 and Hawk lead-in fighter trainers, the S-70
and H-60 helicopter variants, the CH-47 Chinook heavy-lift helicopter, Unmanned Aerial Systems (UAS) and other aircraft that form
part of the backbone of defence forces globally. Thus far, while in some markets these platforms are not completely immune to
pressures, platforms involving helicopters and airlift/transport aircraft, which serve both defence and humanitarian operations, have
been relatively less exposed to reductions when compared to platforms like combat aircraft (i.e. fighters). In the U.S., planned cuts as
part of the proposed fiscal 2013 budget have not materially impacted programs where we have a strong position, and we do not
anticipate major impacts to programs such as the MH-60S/R, C-130J, P-8A, and others. The USAF’s proposed cancellation of the C-
130 Avionics Modernization Program (AMP) in its current state is the one program potentially impacting CAE in the short-term, but this
is not one of CAE USA’s largest programs and would have minimal impact on our outlook. Our overall positive long-term outlook is
supported by the expectation that aircraft types such as the C-130J and H-60 helicopters, which serve critical military as well as
humanitarian roles, will continue to be in demand globally. These platforms are comprised of newer aircraft types with long program
lives ahead of them and we believe this will drive opportunities for us over the next decade.
Value of simulation-based training
Industry research studies suggest that simulation-based solutions will be well placed to address some of the budget challenges facing
defence operators. For example, a market research study conducted by Aerospace and Defence Media (ASD) in calendar 2012
estimates that military pilot training done in simulators will increase from an estimated 50% in 2011 to 80% by 2021. We view
ourselves as fundamentally being part of the solution to achieving lower training costs while maintaining or improving readiness. To
date, we have seen some of our defence customers move to increase their use of simulation-based training in an effort to achieve
operational savings, and we expect this kind of activity to continue over the long term, even as force structures contract in some
countries. The heads of defence forces and governments have expressed their explicit desire to move more training hours from actual
weapon systems platforms to simulators as a means of achieving recurring savings. In the near term, though, the urgency of budget
reductions has meant that the first priority for defence forces is finding areas to cut and then secondly, to look for ways to save going
forward, which we believe will lead to increased use of simulation. We also continue to pursue new growth opportunities by expanding
our core capabilities to other defence domains such as land vehicle and professional services.
Market drivers and our position
We believe that we are uniquely positioned in the current environment to be part of the solution to reducing the cost of military
readiness. Demand for our products and services should be driven by the:
Explicit desire of governments and defence forces to increase the use of modeling and simulation;
Growing demand for our specialized modeling and simulation-based products and services;
High cost of operating live assets for training which leads to more use of simulation;
Current and future nature of warfare requires joint forces training and mission rehearsal;
Growing demand for traditional home station training.
Explicit desire of governments and defence forces to increase the use of modeling and simulation
Governments and defence forces have demonstrated an explicit desire to increase the use of modeling and simulation for analysis,
training, and operational decision-making. These sentiments are expressed by militaries globally, especially by the U.S. and other
defence forces facing budget challenges. Unlike civil aviation where the use of simulators for training is common practice, there are no
requirements to train in simulators in defence, therefore the level of adoption has traditionally been much lower. Simulation offers a
number of advantages that address an ever increasing global threat level and new economic constraints that are pressuring top-line
defence spending. The cost savings from the use of modeling and simulation are considerable. The USAF estimates that live training
is approximately 10 times more costly than simulation-based training. According to the Department of Defence Fiscal Year 2013
budget proposal, USAF officials, in an effort to reduce costs, have proposed cutting the service’s flight training budget. The USAF
promises that, by spending more time in “advanced simulator training”, aircrews will make up the lost flight training. The cost of fuel,
detrimental environmental impacts, and significant wear and tear on weapon systems and aircraft all point to greater use of simulation
and synthetic training. This type of training is critical for ensuring the readiness of global defence forces as they face new and
challenging threats.
Growing demand for our specialized modeling and simulation-based products and services
New aircraft platforms
One of our strategic priorities is to partner with manufacturers in the defence market to strengthen relationships and position ourselves
for future opportunities. OEMs have introduced new platforms and continue to upgrade and extend the life of existing platforms, which
drives worldwide demand for simulators and training. For example, Boeing is developing a new maritime patrol aircraft called the P-8A
Poseidon and has won the U.S. Air Force contract for new air refueling tankers, NH Industries is delivering the NH90 helicopter,
Airbus Military is aggressively marketing the A330 MRTT, A400M and C-295 transport aircraft worldwide, Lockheed Martin is doubling
production of the C-130J aircraft, Alenia Aermacchi is successfully marketing the M-346 advanced lead-in fighter trainer and Sikorsky
is offering new models of its H-60 helicopter to armies and navies worldwide, all of which fuel the demand for new simulators and
training, and for all of which we have products at different development and production stages.
36 | CAE Annual Report 2012
Management’s Discussion and Analysis
Use of modeling and simulation for analysis and decision support
Traditionally, modeling and simulation have been used to support training. This specific application is well understood and employed
by militaries and civilian agencies around the world. We believe there are growth opportunities in applying simulation across the
program lifecycle, including support for analysis and decision-making operations. We see governments and militaries looking to use
simulation-based synthetic environments to support research and development programs, system design and testing, intelligence
analysis, integration and exploitation, and to provide the decision support tools necessary to support mission planning in operations.
As an example, we developed a National Modelling and Simulation Centre (NMSC) for the Ministry of Defence of Brunei. The NMSC
is being used by the Royal Brunei Armed Forces and Ministry of Defence to analyze force structure options, evaluate and validate
capabilities, develop doctrine and tactics, and support training and mission rehearsal exercises.
Trend towards outsourcing of training and maintenance services
Defence forces and governments continue to scrutinize expenditures to find ways to reduce costs and allow active-duty personnel to
focus on operational requirements, which has an impact on defence budgets and resources. There has been a growing trend among
defence forces to outsource a variety of training services and we expect this trend to continue. Governments are outsourcing training
services because they can be delivered more quickly and more cost effectively. We have participated in contracts of this nature in
Canada, Germany, Australia, the U.K. and the U.S. In fiscal 2011, we announced that CAE USA was awarded an expected ten-year
contract (subject to annual funding) to provide comprehensive KC-135 aircrew training services to the USAF. CAE USA is the prime
contractor responsible for providing program management, academic and simulator instruction, maintenance and logistics services,
training device upgrades, and relocation services for more than 3,500 USAF KC-135 tanker aircrews. In Australia, we have delivered
a suite of KC-30A MRTT training devices and are now providing comprehensive training services, including classroom and simulator
instruction to the Royal Australian Air Force. Recently, we formed a venture with the Government of Brunei to develop the CAE Brunei
MPTC where we will provide long-term training services involving helicopter and fixed-wing aircraft training.
Extension and upgrade of existing weapon system platforms
OEMs are extending the life of existing weapon system platforms by introducing upgrades or adding new features, which increases
the demand for upgrading simulators to meet the new standards. For example, several OEMs are offering global militaries operating
C-130 aircraft a suite of avionics upgrades, which in turn leads to a requirement for major upgrades to existing C-130 training systems
or potential new C-130 training systems. As an example, during fiscal 2012 we won a contract to perform a major upgrade to the
Canadian Forces’ existing CC-130H FMS. While retiring some older model C-5’s, the USAF is also upgrading 52 legacy C-5 aircraft to
the new C-5M configuration, which includes both avionics upgrades and a re-engining program. In fiscal 2011 we won a competitive
contract to perform upgrades on the USAF’s C-5 training devices over the next several years. The award of the USAF KC-135 Aircrew
Training System has provided us with a contract vehicle for performing upgrades to all the KC-135 training devices resulting from
major aircraft upgrades and simulator obsolescence.
High cost of operating live assets for training which leads to more use of simulation
More defence forces and governments are adopting simulation in training programs because it improves realism, significantly lowers
costs, reduces operational demands on aircraft that are being depreciated faster than originally planned, and lowers risk compared to
operating actual weapon system platforms. Using a simulator for training also reduces actual aircraft flying hours and allows training
for situations where an actual aircraft and/or its crew and passengers would be at risk. The USAF, which is the U.S. government’s
largest user of energy, estimates that its fuel costs have risen more than 225 percent over the past decade. The escalating cost of fuel
is prompting a greater adoption of simulation-based training.
Current and future nature of warfare requires joint forces training and mission rehearsal
Demand for networking
Allies are cooperating and creating joint and coalition forces which are driving the demand for joint and networked training and
operations. Training devices that can be networked to train different crews and allow for networked training across a range of
platforms are increasingly important as the desire to conduct mission rehearsal exercises in a synthetic environment increases. For
example, as part of the C-130J Maintenance and Aircrew Training System II program with Lockheed Martin, CAE is developing C-
130J weapon systems trainers for various branches of the U.S. Air Force that feature networking capabilities for distributed mission
operations.
Growing adoption of synthetic training for mission rehearsal
There is a growing trend among defence forces to use synthetic training to meet more of their mission training requirements.
Simulation technology solutions enable defence customers to plan sophisticated missions and carry out full-mission rehearsals in a
synthetic environment as a complement to traditional live training or mission preparation. Synthetic training offers militaries a cost-
effective way to provide realistic training for a wide variety of scenarios while ensuring they maintain a high state of readiness. For
example, at our MSHATF in the United Kingdom, we provide pre-deployment training to the Royal Air Force and other allied forces
prior to Afghanistan deployments.
Growing demand for traditional home station training
With the United States and allies in the process of reducing the number of troops deployed to support operations in Afghanistan and
elsewhere, there will be a growing demand for traditional home station training. When the troops are not involved in actual operations,
military forces need to train to maintain the troops’ skills and readiness. Most militaries expect to rebalance the mix of live, virtual and
constructive training. For example, the U.S. Army is planning to reduce the use of live training ranges and transfer some of this
training to virtual and constructive simulation to reduce costs. This will ultimately create opportunities for training devices and training
services. However, most militaries are also planning to reduce force levels, which will impact the existing and future training
infrastructure required.
CAE Annual Report 2012 | 37
Management’s Discussion and Analysis
NEW CORE MARKETS (NCM)
Healthcare market
Simulation-based training is becoming recognized as one of the most effective ways to prepare healthcare practitioners to care for
patients and respond to critical situations while reducing the overall risk to patients. Through acquisitions and partnerships with
experts in the healthcare field, we are leveraging our knowledge, experience and best practices in simulation-based aviation training
to work with healthcare experts to deliver innovative education, technologies and service solutions to improve the safety and efficiency
of this industry. Our objective is to offer realistic and comprehensive tools that will help students and practitioners sharpen their skills
and prepare for better patient outcomes. Our offering, which integrates simulation and modeling, ranges from creating learning
programs to deploying a wide range of specialty-based simulators.
in
revenue
five main areas: patient simulators, surgical simulators, ultrasound simulators,
learning
We generate
applications/courseware and centre management systems. Our patient simulators offer a high level of believability and life-like
responses and teach students and healthcare practitioners to intervene quickly in trauma scenarios with appropriate clinical
measures. Our surgical simulators incorporate haptic technology designed to allow students and practitioners to practice and acquire
skills to perform minimally invasive procedures, including bronchoscopies, endoscopies and cardiac valve replacements. Our
ultrasound simulators combine e-learning, a mannequin and real time 3D animated display that allows students and practitioners to
become familiar with diagnostic bedside ultrasound. Our simulation learning applications, such as our learning modules, e-learning
and mobile applications provide simulation tools which can be embedded within hospital work environments or large teaching
institutions which maximize time available for student-learning through remote delivery of content and allows for self-guided learning
experiences and assessment. Our medical simulation centre solutions are designed to simplify the operations behind managing
complex simulation, assessment, recording and debriefing, scheduling and event activities and student learning.
Following the acquisition of Medical Education Technologies, Inc. (METI) during the second quarter of fiscal 2012, CAE Healthcare
has now become a leader in simulation-based technology for healthcare. METI is a worldwide leader in medical simulation
technologies and education software with over 6,000 simulators in medical schools, nursing schools, hospitals, defence forces and
other entities. CAE Healthcare now has offices located in Canada, the U.S., Hungary and Germany and has over 300 employees that
work with a team of 50 clinical educators and a network of more than 40 distributors in 40 countries.
Market trends and outlook
The Healthcare simulation-based market is today focused mainly on education, consisting of the operation, maintenance and
procurement of all types of simulation technology, and ranges from about $750 million to upward of $1 billion. Of that, approximately
$150 million is represented by the human patient simulation market, which is expected to grow in the double-digit range over the next
several years, driven by the need for greater patient safety and better efficiency and effectiveness of healthcare education using
simulation technology. Our vision is for CAE Healthcare to lead broad adoption of simulation-based training solutions for healthcare
practitioners, improve patient safety, reduce overall training cost, and ultimately save more lives.
Medical simulation allows students and practitioners to practice procedures in an environment where errors do not result in unwanted
circumstances. Medical errors result in 50,000 to 100,000 fatalities per year in the U.S. alone, according to the Institute of Medicine's
(IOM) published report, “To Err is Human: Building a Safer Health System”. Medical simulators can help to reduce procedural errors
by working to fundamentally change the competency assessment and training of healthcare practitioners, just as flight simulators
revolutionized pilot certification and training decades ago. In addition to the 793,000 physicians and 67,000 medical students, there
are approximately 3 million nurses and 250,000 nursing students in the U.S. and 8.8 million physicians and 14.5 million nurses
worldwide.
The demand for our products and services is driven by the:
Use of patient simulators;
Increased adoption of minimally-invasive surgery;
Advances in imaging technology applications in healthcare;
Increasing healthcare costs;
Service provider shortages.
Use of patient simulators
Patient simulators are the most commonly used simulators in the healthcare education and training markets. Patient simulators have
been designed and developed to support a variety of applications in the education and training of practitioners. Human patient
simulation provides an opportunity to reduce medical errors and their severity while improving patient care by enabling tailored clinical
learning experiences to provide opportunities to train for high-risk, low-frequency events.
Human patient simulation can also provide practitioners with an opportunity to practice care for a simulated patient with acute
problems, such as airway obstruction or cardiac arrest, hemorrhage, shock, or various other common emergent situations. Using
simulators, healthcare team members can work through each clinical situation by assessing the presenting symptoms, providing
appropriate interventions, and managing the simulator’s response to the various treatments.
38 | CAE Annual Report 2012
Management’s Discussion and Analysis
Increased adoption of minimally-invasive surgery
Minimally-invasive surgery (MIS) is accomplished through small surgical incisions, specialized surgical instruments, and endoscopic
or other alternative surgical imaging. Due to the advantages of MIS (reduced patient trauma and shorter hospitalization periods), it
has seen increased adoption and utilization in a number of previously invasive surgical procedures. Continuing advances in surgical
technology and MIS techniques for a variety of procedures have established surgery as the leading market application for simulation
technology in healthcare.
Advances in imaging technology applications in healthcare
Advanced imaging technology integration into healthcare industry practices has increased due to regulatory healthcare reform, the
development of affordable technology-driven products and growing industry awareness of the advantages of technology
implementation. Increasing patient awareness of alternative technological options in surgery and other medical procedures have also
helped to pressure insurers and service providers into accepting and implementing information technologies and advanced imaging
technologies. For example, bedside ultrasonography has become an invaluable tool in the management of critically ill patients. The
hand-carried ultrasound (HCU) has tremendous potential to immediately provide diagnostic information at the bedside not assessable
by a physical examination alone. Provided that healthcare practitioners performing point-of-care examinations with the HCU have
adequate training, the HCU has the potential to become a tremendous advantage for bedside assessment and treatment of intensive
care unit (ICU) patients.
Increasing healthcare costs
Growth and costs of primary care services are correlated to general population growth and healthcare coverage expansion. Longer
life expectancy and the baby boomer generation have generated significant demand for services associated with chronic illnesses and
aging populations. In addition, general consensus exists among health economists that the rise in healthcare costs and spending is
principally the result of widespread adoption of medical technologies and a greater number of advanced medical services and
treatments during inpatient and outpatient visits. Widespread adoption of medical technologies and a greater number of advanced
medical services could ultimately translate into higher demand for training products and services. Experts have demonstrated that the
use of medical simulation improves patient outcomes and reduces error rates which help mitigate the rate of increase in the overall
cost of healthcare.
Service provider shortages
Shortages of primary care or family medicine physicians and specialty-medicine physicians are expected to occur. Virtual medical and
surgical simulators will aid in the education and training of physicians and medical professionals, by helping to relieve bottlenecks and
improve the effectiveness of training. An aging population is driving an increasing need for healthcare delivery while the aging
healthcare workforce is resulting in increasing turnover risk at hospitals. According to the U.S. Department of Health and Human
Services, "the U.S. will require 1.2 million new Registered Nurses (RNs) by 2014 to meet the nursing needs of the country, 500,000 to
replace those leaving practice and an additional 700,000 new RNs to meet growing demands for nursing services". The World Health
Organization also reported that there were 57 countries with critical shortages equivalent to a global deficit of 2.4 million doctors,
nurses and midwives worldwide. As students graduate and move into clinical practice, there is a growing need among hospitals for
on-boarding programs that transition the new nurse to competent practitioner effectively and efficiently. Simulation is now moving from
the academic setting into clinical practice as a means to provide a safe environment for clinical training.
Mining market
We have customers in over 90 countries that are currently supported by our offices in Australia, Brazil, Canada, Chile, India,
Kazakhstan, Peru, South Africa, the U.S. and the U.K. We provide products and services for open pit and underground operations to
mining organizations, from large diversified miners to junior miners and consultancies.
We generate revenue by delivering products and services across the mining value chain. Our software products are used for
managing exploration and geological data, mine strategy, optimization, detailed design and scheduling for all mining methods and
commodities. Our technical consulting team includes over 100 experienced geologists and mining engineers, servicing client needs
such as managing exploration drilling programs, mining studies, resource evaluation, on-site technical services and business
improvement projects. Our CAE Terra mining equipment simulators, developed and launched in fiscal 2012, leverage our experience
in simulation to provide an unrivalled level of realism. Our simulators are integrated with a comprehensive student management
system, lesson planning tools and interactive touch panel instructor station. Our training services include workforce development
planning, training needs analysis, professional development in technical disciplines and the design and implementation of operator
training curriculum. Our operator training courseware is designed for multiple delivery modes including self-paced e-learning,
instructor-led classroom training, procedural training and scenarios delivered in our high fidelity simulators.
Market trends and outlook
Our technology and services are used by customers to increase productivity and improve safety. The factors driving demand for our
technology and services are:
Industry skills shortages due to rapid expansion in new mines;
Health and safety priority;
Greater need for operational efficiency to optimize yields from currently operating mines;
Declining grades and higher energy consumption resulting in increased cost of extraction;
Increased activity in exploration and mining due to continued strong demand for commodities.
CAE Annual Report 2012 | 39
Management’s Discussion and Analysis
Industry skills shortages due to rapid expansion in new mines
Skill shortages in many regions are putting upward pressure on wages and project costs. Without significant increases in the number
of skilled workers or the introduction of new technology to expand production with fewer workers, growth in supply will be constrained.
BHP Billiton estimates the resources industry in Australia alone will need more than 150,000 extra workers across a variety of
disciplines over the next five years. Skill shortages will likely drive demand for additional training.
Health and safety priority
Health and safety standards continue to be an area of focus for improvement through the use of technological advances and
increased skills training to create a more highly skilled and better-educated work force. Mining companies are focusing on automated
equipment, remote control of operations and simulation-based training of the workforce as means to improve overall safety.
Greater need for operational efficiency to optimize yields from currently operating mines
In the last 30 years the average grade of ore bodies in some mining regions of the world has halved, while the waste removed to
access the minerals has more than doubled. Given the volatility of mineral prices and energy costs, different approaches are needed.
These will include the increased use of optimization tools, simulation and scenario analysis within the industry to maximize value and
maintain the viability of current operations, while helping mining companies focus on maximizing metal recovery instead of simply
maximizing throughput.
Declining grades and higher energy consumption resulting in increased cost of extraction
Average grades have been trending lower while energy consumption has been on the rise, leading to a significant change in the cost
base of the industry. Large mining organizations are requiring multi-disciplinary expertise to help address complex industry-wide
challenges. We are actively involved in finding technology-based solutions for recovering metal using less energy. Our existing tools
for optimization and scenario analysis help mining organizations respond to changing prices and input costs in order to maximize the
potential of their existing operations.
Increased activity in exploration and mining due to continued strong demand for commodities
Commodity prices are driven by supply and demand. While commodity prices are off their peaks, they remain at historically high
prices and demand remains strong. Increased consumerism and urbanization in emerging markets are fueling growth in demand for
raw materials, particularly for bulk materials such as iron ore and coal, although economic conditions in the U.S. and Europe are
dampening growth in mature markets.
The world’s 40 largest miners have collectively announced the investment of more than US$300 billion for capital programs.
Investment in new supply is increasingly focused on deposits in more remote territories or those requiring more complex
development. Much of the exploration activity is being performed by junior miners who are investing in drilling programs to determine
mineral resources and ore reserves.
3.5 Foreign exchange
We report all dollar amounts in Canadian dollars. We value assets, liabilities and transactions that are measured in foreign currencies
using various exchange rates as required by IFRS.
The tables below show the variations of the closing and average exchange rates for our three main operating currencies.
We used the closing foreign exchange rates below to value our assets, liabilities and backlog in Canadian dollars at the end of each of
the following periods:
U.S. dollar (US$ or USD)
Euro (€)
British pound (£ or GBP)
We used the average foreign exchange rates below to value our revenues and expenses:
U.S. dollar (US$ or USD)
Euro (€)
British pound (£ or GBP)
2012
1.00
1.33
1.60
2012
0.99
1.37
1.58
2011
0.97
1.38
1.56
2011
1.02
1.34
1.58
Increase/
(decrease)
3%
(4%)
3%
(Decrease)/
increase
(3%)
2%
-
For fiscal 2012, the effect of translating the results of our foreign operations into Canadian dollars resulted in a decrease in revenue of
$1.2 million and no impact to net income, when compared to fiscal 2011.
40 | CAE Annual Report 2012
Management’s Discussion and Analysis
Three areas of our business are affected by changes in foreign exchange rates:
Our network of training centres
Most of our training network revenue and costs are in local currencies. Changes in the value of local currencies relative to the
Canadian dollar therefore have an impact on the network’s net profitability and net investment. Under IFRS, gains or losses in the
net investment in a foreign operation that result from changes in foreign exchange rates are deferred in the foreign currency
translation account (accumulated other comprehensive income), which is part of the equity section of the consolidated statement of
financial position. Any effect of the fluctuation between currencies on the net profitability has an immediate translation impact on
the consolidated income statement and an impact on year-to-year and quarter-to-quarter comparisons.
Our simulation products operations outside of Canada (Australia, Germany, India, Singapore, U.K and U.S.)
Most of the revenue and costs in these operations from foreign operations are generated in their local currency except for some
data and equipment bought in different currencies from time to time, as well as any work performed by our Canadian
manufacturing operations. Changes in the value of the local currency relative to the Canadian dollar therefore have a translation
impact on the operation’s net profitability and net investment when expressed in Canadian dollars.
Our simulation products operations in Canada
Although the net assets of our Canadian operations are not exposed to changes in the value of foreign currencies (except for
receivables and payables in foreign currencies), a significant portion of our annual revenue generated from Canada is in foreign
currencies (mostly the U.S. dollar and the euro), while a significant portion of our expenses are in Canadian dollars.
We generally hedge the milestone payments of sales contracts denominated in foreign currencies to protect ourselves from some
of the foreign exchange exposure. Since less than 100% of our revenue is hedged, it is not possible to completely offset the effects
of changing foreign currency values, which leaves some residual exposure that can affect the consolidated income statement.
We continue to hold a portfolio of currency hedging positions intended to mitigate the risk to a portion of future revenues presented
by the volatility of the Canadian dollar versus foreign currencies. The hedges are intended to cover a portion of the revenue in
order to allow the unhedged portion to match the foreign cost component of the contract. With respect to the remaining expected
future revenues, our manufacturing operations in Canada remain exposed to changes in the value of the Canadian dollar.
In order to reduce the variability of specific U.S. and euro-denominated manufacturing costs, we hedge some of the foreign
currency costs incurred in our manufacturing process.
Sensitivity analysis
We conducted a sensitivity analysis to determine the current impact of variations in the value of foreign currencies. We evaluated the
sources of foreign currency revenues and expenses and determined that our consolidated exposure to foreign currency mainly occurs
in two areas:
Foreign currency revenues and expenses in Canada for the manufacturing business – we hedge a portion of these exposures;
Translation of foreign currency of operations in foreign countries. Our exposure is mainly in our operating profit.
First we calculated the revenue and expenses per currency to determine the operating profit in each currency. Then we deducted the
amount of hedged revenues to determine a net exposure by currency. Next we added the net exposure from foreign operations to
determine the consolidated foreign exchange exposure in different currencies.
Finally, we conducted a sensitivity analysis to determine the impact of a weakening of one cent in the Canadian dollar against each of
the other three currencies. The table below shows the typical impact of this change, after taxes, on our yearly revenue and operating
profit, as well as our net exposure:
Exposure (amounts in millions)
U.S. dollar (US$ or USD)
Euro (€)
British pound (£ or GBP)
$
Revenue
11.4
2.2
1.0
$
Operating
Profit
2.8
0.3
0.2
$
Hedging
(2.3)
(0.1)
(0.1)
$
Net
Exposure
0.5
0.2
0.1
A possible strengthening of one cent in the Canadian dollar would have the opposite impact.
CAE Annual Report 2012 | 41
Management’s Discussion and Analysis
3.6 Non-GAAP and other financial measures
This MD&A includes non-GAAP and other financial measures. Non-GAAP measures are useful supplemental information but may not
have a standardized meaning according to GAAP. You should not confuse this information with, or use it as an alternative for,
performance measures calculated according to GAAP. You should also not use them to compare with similar measures from other
companies.
Adjusted net debt
Adjusted net debt is a non-GAAP measure we use to monitor how much net debt we have without taking into account additional
obligations under finance leases. We monitor this indicator and believe that readers of our MD&A use it in assessing our performance
with our peers. We calculate it by taking our total long-term debt, including the current portion of long-term debt and subtracting cash
and cash equivalents and obligations under finance leases.
Backlog
Backlog is a non-GAAP measure that represents the expected value of orders we have received but have not yet executed.
For the SP/C, SP/M and TS/M segments, we consider an item part of our backlog when we have a legally binding commercial
agreement with a client that includes enough detail about each party’s obligations to form the basis for a contract or an order;
Military contracts are usually executed over a long-term period and some of them must be renewed each year. For the SP/M and
TS/M segments, we only include a contract item in backlog when the customer has authorized the contract item and has received
funding for it;
For the TS/C and NCM segments, we include revenues from customers with both long-term and short-term contracts when these
customers commit to pay us training fees, or when we reasonably expect them from current customers.
The book-to-sales ratio is the total orders divided by total revenue in the period.
Capital employed
Capital employed is a non-GAAP measure we use to evaluate and monitor how much we are investing in our business. We measure
it from two perspectives:
Capital used:
For the company as a whole, we take total assets (not including cash and cash equivalents), and subtract total liabilities (not
including long-term debt and the current portion of long-term debt);
For each segment, we take the total assets (not including cash and cash equivalents, tax accounts and other non-operating
assets), and subtract total liabilities (not including tax accounts, long-term debt and the current portion of long-term debt, royalty
obligations, employee benefits obligations and other non-operating liabilities).
Source of capital:
In order to understand our source of capital, we add net debt to total equity.
Capital expenditures (maintenance and growth) from property, plant and equipment
Maintenance capital expenditure is a non-GAAP measure we use to calculate the investment needed to sustain the current level of
economic activity.
Growth capital expenditure is a non-GAAP measure we use to calculate the investment needed to increase the current level of
economic activity.
Free cash flow
Free cash flow is a non-GAAP measure that shows us how much cash we have available to build the business, repay debt and meet
ongoing financial obligations. We use it as an indicator of our financial strength and liquidity. We calculate it by taking the net cash
generated by our continuing operating activities, subtracting maintenance capital expenditures, other assets not related to growth and
dividends paid and adding proceeds from the disposal of property, plant and equipment.
Gross profit
Gross profit is a non-GAAP measure equivalent to the operating profit excluding research and development expenses, selling, general
and administrative expenses and other (gains) losses – net.
Net debt
Net debt is a non-GAAP measure we use to monitor how much debt we have after taking into account liquid assets such as cash and
cash equivalents. We use it as an indicator of our overall financial position, and calculate it by taking our total long-term debt,
including the current portion of long-term debt, and subtracting cash and cash equivalents.
Non-cash working capital
Non-cash working capital is a non-GAAP measure we use to monitor how much money we have committed in the day-to-day
operation of our business. We calculate it by taking current assets (not including cash and cash equivalents or the current portion of
assets held-for-sale) and subtracting current liabilities (not including the current portion of long-term debt or the current portion of
liabilities related to assets held-for-sale).
Operating profit
Operating profit is a non-GAAP measure that shows us how we have performed before the effects of certain financing decisions and
tax structures. We track operating profit because we believe it makes it easier to compare our performance with previous periods, and
with companies and industries that do not have the same capital structure or tax laws.
42 | CAE Annual Report 2012
Management’s Discussion and Analysis
Research and development expenses
Research and development expenses are a financial measure we use to measure the amount of expenditures directly attributable to
research and development activities that we have expensed during the period, net of investment tax credits and government
contributions.
Return on capital employed
Return on capital employed (ROCE) is a non-GAAP measure we use to evaluate the profitability of our invested capital. We calculate
this ratio over a rolling four-quarter period by taking earnings from continuing operations attributable to equity holders of the Company
excluding interest expense, after tax, divided by the average capital employed.
Revenue simulator equivalent unit
Revenue simulator equivalent unit (RSEU) is a financial measure we use to show the total average number of FFSs available to
generate revenue during the period. For example, in the case of a 50/50 flight training joint venture, we will report only 50% of the
FFSs deployed under this joint venture as an RSEU. If a FFS is being powered down and relocated, it will not be included as an
RSEU until the FFS is re-installed and available to generate revenue.
Segment operating income (loss)
Segment operating income or loss (SOI) is a non-GAAP measure and our key indicator of each segment’s financial performance. This
measure gives us a good indication of the profitability of each segment because it does not include the impact of any items not
specifically related to the segment’s performance. We calculate it by using segment operating profit, which excludes the net finance
expense, income taxes, discontinued operations and other items not specifically related to the segment’s performance.
Unfunded backlog
Unfunded backlog is a non-GAAP measure that represents firm military orders we have received but have not yet executed for which
funding authorization has not yet been obtained. We include unexercised options with a high probability that they will be exercised,
but exclude indefinite-delivery/indefinite-quantity (IDIQ) contracts.
4. CONSOLIDATED RESULTS3
4.1 Results of our operations – fourth quarter of fiscal 2012
(amounts in millions, except per share amounts)
Revenue
Cost of sales
Gross profit3
As of % of revenue
Research and development expenses3
Selling, general and administrative expenses
Other (gains) losses – net
Operating profit3
As of % of revenue
Finance income
Finance expense
Finance expense – net
Earnings before income taxes
Income tax expense
As a % of earnings before income taxes (tax rate)
Net income
Attributable to:
Equity holders of the Company
Non-controlling interests
Earnings per share (EPS) attributable to equity holders
of the Company
Basic
Diluted
3 Non-GAAP and other financial measures (see Section 3.6).
Q4-2012
Q3-2012
Q2-2012
Q1-2012
Q4-2011
$
$
$
%
$
$
$
$
%
$
$
$
$
$
%
$
$
$
$
$
$
506.7
336.6
170.1
33.6
15.2
71.8
(5.6)
88.7
17.5
(1.5)
18.1
16.6
72.1
18.4
26
53.7
53.2
0.5
53.7
0.21
0.21
453.1
300.2
152.9
433.5
296.0
137.5
427.9
288.3
139.6
465.6
311.0
154.6
33.7
16.5
62.5
(3.6)
77.5
17.1
(1.6)
17.8
16.2
61.3
15.2
25
46.1
45.6
0.5
46.1
0.18
0.18
31.7
15.9
59.8
(2.1)
63.9
14.7
(2.3)
17.2
14.9
49.0
10.3
21
38.7
38.4
0.3
38.7
0.15
0.15
32.6
15.2
62.3
(9.9)
72.0
16.8
(1.2)
16.1
14.9
57.1
13.6
24
43.5
43.1
0.4
43.5
0.17
0.17
33.2
12.9
67.1
(3.2)
77.8
16.7
(1.2)
16.4
15.2
62.6
16.6
27
46.0
45.5
0.5
46.0
0.18
0.18
CAE Annual Report 2012 | 43
Management’s Discussion and Analysis
Revenue was 12% higher than last quarter and 9% higher compared to the fourth quarter of fiscal 2011
Revenue was $53.6 million higher than last quarter mainly because:
SP/M’s revenue increased by $43.2 million, or 28%, mainly due to higher revenue recorded for a C-130 simulator that was partially
manufactured and for which we signed a contract during the quarter and programs executed in North America and Europe;
TS/C’s revenue increased by $9.3 million, or 8%, mainly due to higher revenue generated in North and South America and in
Europe. The increase was partially offset by the translation of a stronger Canadian dollar against the U.S. dollar and the Euro and
a lower contribution from ab initio training in Europe;
SP/C’s revenue increased by $2.4 million or 3%, mainly due to higher production levels resulting from an increase in order intake,
partially offset by lower revenue recorded in the quarter for sales of simulators partially manufactured;
TS/M’s revenue increased by $1.6 million, or 2%, mainly due to a higher level of activity on our training programs and higher
revenue on the U.S. KC-135 ATS program and Australian programs. The increase was partially offset by a lower level of activity on
European programs and an unfavourable foreign exchange impact on the translation of European operations;
NCM’s revenue decreased by $2.9 million or 11%, mainly due to lower revenue from CAE Healthcare.
Revenue was $41.1 million higher than the same period last year largely because:
SP/M’s revenue increased by $16.3 million, or 9%, mainly due to higher revenue recorded for a C-130 simulator that was partially
manufactured and for which we signed a contract during the quarter, programs executed in North America, and the integration of
RTI International’s TAL business unit, acquired in February 2011. The increase was partially offset by less activity on Australian
helicopter programs, programs executed in Europe and the completion of a NMSC contract in Brunei earlier in the fiscal year;
NCM’s revenue increased by $13.1 million or 118%, mainly due to higher revenue from CAE Healthcare, resulting primarily from
the integration of METI, acquired in August 2011, in addition to more revenue from CAE Mining;
TS/C’s revenue increased by $11.3 million, or 9%, due to higher revenue generated in all regions as well as the integration into our
results of CHC Helicopter’s HFTO, acquired in February 2011. The increase was partially offset by a lower contribution from ab
initio training in Europe;
SP/C’s revenue increased by $6.9 million, or 9%, mainly due to higher production levels resulting from an increase in order intake,
partially offset by lower revenue recorded in the quarter for sales of simulators partially manufactured;
TS/M’s revenue decreased by $6.5 million, or 8%, mainly due to a lower level of activity in our Professional Services business in
the U.S. and lower revenue from a European in-service support contract completed earlier in the fiscal year. The decrease was
partially offset by higher revenue on Australian programs, new U.S. and European executed contracts and a higher level of activity
on our training programs.
You will find more details in Results by segment.
Operating profit was $11.2 million higher than last quarter and $10.9 million higher compared to the fourth quarter of fiscal
2011
Operating profit for this quarter was $88.7 million, or 17.5% of revenue compared to $77.5 million or 17.1% of revenue last quarter
and $77.8 million or 16.7% of revenue in the fourth quarter of fiscal 2011. Excluding the reversal of the restructuring charge booked in
the fourth quarter of fiscal 2011, operating profit was $76.8 million, or 16.5% of revenue for that quarter.
Operating profit increased by 14% compared to last quarter. Increases in segment operating income4 were $7.7 million, $1.5 million,
$1.0 million, $0.8 million and $0.2 million from SP/M, TS/C, TS/M, SP/C and NCM respectively.4
Operating profit increased 14% compared to the fourth quarter of fiscal 2011. Increases in segment operating income of $5.0 million,
$4.6 million $2.7 million and $0.6 million for TS/C, SP/C, NCM and SP/M respectively were partially offset by a decrease in segment
operating income of $1.0 million for TS/M.
You will find more details in Results by segment.
Net finance expense was $0.4 million higher than last quarter and $1.4 million higher compared to the fourth quarter of fiscal
2011
The net finance expense was higher than last quarter, mainly because of higher factoring financing costs.
The increase in net finance expense over the fourth quarter of fiscal 2011 was mainly due to an increase in interest expense resulting
from the new private placement of senior notes issued, partially offset by lower interest expense on finance lease obligations, an
increase in capitalized interest for assets under construction and an increase in interest income on long-term receivables.
4 Non-GAAP and other financial measures (see Section 3.6).
44 | CAE Annual Report 2012
Management’s Discussion and Analysis
Effective income tax rate was 26% this quarter
Income taxes this quarter were $18.4 million, representing an effective tax rate of 26%, compared to 25% last quarter and 27% for the
fourth quarter of fiscal 2011.
The effective tax rate increased over the last quarter mainly due to a settlement of a tax audit in Canada in the previous quarter and a
change in the mix of income from various jurisdictions.
The decrease in the effective tax rate from the fourth quarter of fiscal 2011 was mainly attributable to a change in the mix of income
from various jurisdictions.
4.2 Results of our operations – fiscal 2012
(amounts in millions, except per share amounts)
Revenue
Cost of sales
Gross profit
As of % of revenue
Research and development expenses
Selling, general and administrative expenses
Other gains – net
Operating profit
As of % of revenue
Finance income
Finance expense
Finance expense – net
Earnings before income taxes
Income tax expense
As a % of earnings before income taxes (tax rate)
Net income
Attributable to:
Equity holders of the Company
Non-controlling interests
Earnings per share (EPS) attributable to equity holders
of the Company
Basic
Diluted
FY2012
1,821.2
1,221.1
FY2011
1,630.8
1,082.0
600.1
33.0
62.8
256.4
(21.2)
302.1
16.6
(6.6)
69.2
62.6
239.5
57.5
24
182.0
180.3
1.7
182.0
0.70
0.70
548.8
33.7
44.5
239.9
(18.2)
282.6
17.3
(4.4)
64.4
60.0
222.6
61.7
28
160.9
160.3
0.6
160.9
0.62
0.62
$
$
$
%
$
$
$
$
%
$
$
$
$
$
%
$
$
$
$
$
$
Revenue was 12% or $190.4 million higher than last year
Revenue was higher than last year mainly because:
SP/C’s revenue increased by $69.6 million, or 26%, mainly due to higher production levels resulting from an increase in order
intake, partially offset by less favourable hedging rates;
NCM’s revenue increased by $45.0 million, or 118%, mainly due to higher revenue from CAE Healthcare, resulting primarily from
the integration of METI and higher service and software sale revenue from CAE Mining;
TS/C’s revenue increased by $44.4 million, or 10%, due to higher revenue generated in all regions as well as the integration into
our results of CHC Helicopter’s HFTO. The increase was partially offset by the negative effect from a lower contribution from ab
initio training in Europe and a stronger Canadian dollar against the U.S. dollar;
SP/M’s revenue increased by $33.2 million, or 6%, mainly due to the integration of RTI International’s TAL business unit, higher
revenue recorded for a C-130 simulator that was partially manufactured and for which we signed a contract and programs
executed in North America. The increase was partially offset by lower volume on Australian helicopter programs, the completion of
a Canadian helicopter program in fiscal 2011 and lower revenue on programs executed in Europe;
TS/M’s revenue decreased by $1.8 million, due to a lower level of activity in our Professional Services business in the U.S. and
lower revenue from the completion of a European in-service support contract, which was offset by higher in-service support on a
Canadian program and a higher level of activity on U.S. ATS programs, training and services in Australia and Europe.
You will find more details in Results by segment.
CAE Annual Report 2012 | 45
Management’s Discussion and Analysis
Gross profit was $51.3 million higher than last year
The gross profit was $600.1 million this year, or 33.0% of revenue compared to $548.8 million or 33.7% of revenue last year. As a
percentage of revenue, gross profit was stable when compared to last year.
Operating profit was $19.5 million higher than last year
Operating profit this year was $302.1 million, or 16.6% of revenue, compared to $282.6 million, or 17.3% of revenue last year.
Excluding charges of $8.4 million related to the acquisition and integration of METI, which was acquired during the year, operating
profit would have been $310.5 million, or 17.0% of revenue this year. Excluding the reversal of the restructuring charge booked in the
fourth quarter of fiscal 2011, operating profit was $281.6 million, or 17.3% of revenue last year.
Operating profit increased by 7% compared to last year. Increases in segment operating income of $22.3 million for TS/C and
$16.8 million for SP/C were partially offset by decreases of $9.4 million, $5.4 million and $3.8 million for TS/M, NCM and SP/M
respectively.
You will find more details in Results by segment.
Net finance expense was $2.6 million higher than last year
(amounts in millions)
Finance expense, prior period
Increase in finance expense on long-term debt (other than finance leases)
Decrease in finance expense on finance leases
Increase in finance expense on royalty obligations
Decrease in finance expense on amortization of deferred financing costs
Increase in finance expense on accretion of provisions
Increase in other finance expense
Increase in borrowing costs capitalized
Increase in finance expense from the prior period
Finance income, prior period
Increase in interest income on loans and receivables
Increase in other interest income
Increase in finance income from the prior period
Net finance expense, current period
FY2011 to
FY2012
64.4
5.8
(1.4)
0.2
(0.2)
0.5
1.7
(1.8)
4.8
(4.4)
(1.4)
(0.8)
(2.2)
62.6
$
$
$
$
$
Net finance expense was $62.6 million this year, $2.6 million or 4% higher than last year. The increase was mainly due to higher
interest expense resulting from the new private placement of senior notes issued, partially offset by lower interest expense on finance
lease obligations, an increase in capitalized interest for assets under construction and an increase in interest income on long-term
receivables.
Effective income tax rate is 24%
This fiscal year, income taxes were $57.5 million, representing an effective tax rate of 24%, compared to 28% for the same period last
year. The decrease in the effective tax rate compared to fiscal 2011 was principally due to lower Canadian and foreign statutory rates,
combined with the mix of income from various jurisdictions, the recognition of previously unrecognized deferred tax assets as well as
the settlement of a tax audit in Canada. In addition, the effective tax rate was favourably impacted by deferred tax assets recognized
on inter-company transactions.
4.3 Consolidated orders and backlog
Our consolidated backlog was $3,724.2 million at the end of fiscal 2012, which is 8% higher than last year. New orders of
$2,128.3 million increased the backlog this year, while $1,821.2 million in revenue was generated from the backlog.
Backlog up by 8% over last year
(amounts in millions)
Backlog, beginning of period
+ orders
- revenue
+ / - adjustments
Backlog, end of period
46 | CAE Annual Report 2012
FY2012
$
3,449.0
2,128.3
(1,821.2)
(31.9)
FY2011
$
3,052.8
1,854.5
(1,630.8)
172.5
$
3,724.2
$
3,449.0
Management’s Discussion and Analysis
In fiscal 2012, adjustments included $38.0 million related to the cancelation of an order, termination of programs and a defence
services program adjustment resulting from a delay in the performance of a delivery obligation by the OEM. The adjustment was
partially offset by the impact of foreign exchange.
In fiscal 2011, in addition to the negative foreign exchange impact resulting from the stronger Canadian dollar, adjustments included
an amount of $187.8 million related to the acquisition of CHC Helicopter’s HFTO, $56.3 million related to the acquisition of RTI
International’s TAL business unit, and revised downward revenue expectations of $21.1 million for contracts acquired in the purchase
of DSA, for which work has been delayed.
The book-to-sales ratio for the quarter was 1.44x. The ratio for the last 12 months was 1.17x.
You will find more details in Results by segment.
5. RESULTS BY SEGMENT
We manage our business and report our results in five segments:
Civil segments:
Training & Services/Civil (TS/C);
Simulation Products/Civil (SP/C).
Military segments:
Simulation Products/Military (SP/M);
Training & Services/Military (TS/M).
New Core Markets (NCM) segment.
Transactions between operating segments are mainly simulator transfers from the SP/C segment to the TS/C segment and are
recorded at cost.
The method used for the allocation of assets jointly used by the operating segments and costs and liabilities jointly incurred (mostly
corporate costs) between operating segments is based on the level of utilization when determinable and measurable, otherwise the
allocation is based on a proportion of each segment’s cost of sales.
KEY PERFORMANCE INDICATORS
Segment operating income (loss)
(amounts in millions, except operating margins)
FY2012
FY2011 Q4-2012 Q3-2012 Q2-2012 Q1-2012 Q4-2011
Civil segments
Training & Services/Civil
Simulation Products/Civil
Military segments
Simulation Products/Military
Training & Services/Military
New Core Markets
Total segment operating income (SOI)
Reversal of restructuring provision
Operating profit
$
%
$
%
$
%
$
%
$
$
$
$
122.2
24.5
51.6
15.1
101.2
16.3
40.9
14.7
(13.8)
302.1
-
302.1
99.9
22.0
34.8
12.8
105.0
17.9
50.3
18.0
(8.4)
281.6
1.0
282.6
30.3
22.9
14.0
16.8
34.6
17.7
11.0
15.4
(1.2)
88.7
-
88.7
28.8
23.4
13.2
16.4
26.9
17.7
10.0
14.3
(1.4)
77.5
-
27.6
23.2
14.7
15.9
20.9
15.4
9.3
14.2
(8.6)
63.9
-
35.5
28.6
9.7
11.3
18.8
13.9
10.6
14.9
(2.6)
72.0
-
77.5
63.9
72.0
25.3
20.9
9.4
12.3
34.0
19.0
12.0
15.4
(3.9)
76.8
1.0
77.8
CAE Annual Report 2012 | 47
Management’s Discussion and Analysis
5.1 Civil segments
FISCAL 2012 EXPANSIONS AND NEW INITIATIVES
We introduced the third generation of the market-leading CAE TroposTM-6000 simulation visual image generator for civil aviation
training, offering an enhanced pilot training experience with new features leveraging the power of the latest commercial graphics
processors;
We announced that we will double our global business aviation network by 2013 from four locations to eight with the addition of
training capabilities in Amsterdam, the Netherlands; Toluca, Mexico; São Paulo, Brazil; Shangai, China and Melbourne, Australia;
We announced the opening or expansion of new facilities in Dubai, United Arab Emirates , Barcelona, Spain, São Paulo, Brazil and
Johannesburg, South Africa;
We opened a new location in Toluca, Mexico with Learjet 40/45 and Bell 412 simulators qualified to Level D-equivalent standards
by Mexico's Dirección General de Aeronáutica Civil (DGAC);
We signed agreements for new joint ventures to train pilots and different aviation professionals with AirAsia Berhad in Kuala-
Lumpur, Cebu Pacific Air at Clark Freeport Zone, Philippines, InterGlobe Enterprises Limited, parent of Indigo Airlines, in Delhi,
India. These will address the partner airline training needs and also serve third party markets;
We signed an agreement for a new joint venture with Mitsui & Co. to establish and operate a training centre in Japan for the new
Mitsubishi Regional Jet (MRJ);
We opened or announced the opening of various locations to serve target markets in regions at Baltic Aviation Academy (BAA),
based in Vilnius, Lithuania, Czech Airlines (CSA) based at the Prague-Ruzyne Airport in the Czech Republic; Air China in Beijing,
China and at the new Virgin America training centre in San Francisco, U.S.;
We introduced the CAE SimfinityTM Virtual Ground School, the first web-based regulated recurrent training program for business
aircraft pilots to receive approval from the FAA, reinforcing our position as a training innovator;
We have begun work on our newly signed five-year Long-Term Support Agreement (LTSA) with US Airways. This is a new
efficiency-oriented solution which enables aviation training centres to improve schedule predictability in planning multi-year
updates and reduces life-cycle training costs;
We also announced the introduction of the Sikorsky S-76C++ training programs to be offered in Asia;
We announced that we will deploy three new simulation-based training programs for helicopter pilots and maintenance engineers,
including Sikorsky S-92 training in Stavanger, Norway and São Paulo, Brazil, and Eurocopter EC-225 training in São Paulo, Brazil.
COMBINED FINANCIAL RESULTS
(amounts in millions, except operating
margins)
Revenue
$
Segment operating income
Operating margins
Backlog
$
%
$
FY2012
840.9
173.8
20.7
1,535.0
FY2011
726.9
134.7
18.5
1,290.3
Q4-2012
215.4
44.3
20.6
1,535.0
Q3-2012
Q2-2012
Q1-2012
Q4-2011
203.7
42.0
20.6
1,469.3
211.7
42.3
20.0
1,466.0
210.1
45.2
21.5
1,311.6
197.2
34.7
17.6
1,290.3
The combined civil book-to-sales ratio was 1.32x for the quarter and 1.29x on a trailing 12-month basis.
TRAINING & SERVICES/CIVIL
TS/C obtained contracts this quarter expected to generate future revenues of $214.3 million, including:
A five-year contract with AirAsia through which we will train more than 200 additional new AirAsia A320 First Officers in a
competency-based MPL program to be conducted at training locations in Malaysia;
A seven-year agreement with Vueling Airlines as the anchor customer for the new CAE Barcelona training centre, training Vueling
Airbus A320 pilots and cabin crew;
A contract to train a third group of pilot cadets for Vietnam Airlines at CAE Global Academy Phoenix. This brings the total number
of Vietnam Airlines cadets to 120.
48 | CAE Annual Report 2012
Management’s Discussion and Analysis
Financial Results
(amounts in millions, except operating
margins, RSEU and FFSs deployed)
Revenue
$
Segment operating income
Operating margins
Depreciation and amortization
Property, plant and equipment
expenditures
Intangible assets and other
assets expenditures
Capital employed
Backlog
RSEU5
FFSs deployed
$
%
$
$
$
$
$
FY2012
498.4
122.2
24.5
81.3
FY2011
454.0
99.9
22.0
75.0
Q4-2012
Q3-2012
Q2-2012
Q1-2012
Q4-2011
132.3
30.3
22.9
20.7
123.0
119.1
124.0
121.0
28.8
23.4
21.0
27.6
23.2
20.0
35.5
28.6
19.6
25.3
20.9
19.5
137.1
77.9
37.2
37.6
39.0
23.3
27.5
9.4
1,173.0
1,183.4
139
171
8.2
1,070.0
986.5
131
156
2.8
1,173.0
1,183.4
142
171
2.3
1,150.8
1,102.8
140
170
2.4
1,149.7
1,125.4
139
165
1.9
1,083.8
970.5
137
160
2.3
1,070.0
986.5
132
156
Comparative figures for the fourth quarter and YTD of fiscal 2011 have been restated to exclude NCM.
Revenue up 8% over last quarter and up 9% over the fourth quarter of fiscal 20115
The increase over last quarter was mainly attributable to higher revenue generated in North and South America and in Europe. The
increase was partially offset by the translation of a stronger Canadian dollar against the U.S. dollar and the Euro and a lower
contribution from ab initio training in Europe.
The increase over the fourth quarter of fiscal 2011 was due to higher revenue generated in all regions as well as the integration into
our results of CHC Helicopter’s HFTO, acquired in February 2011. The increase was partially offset by a lower contribution from ab
initio training in Europe.
Revenue was $498.4 million this year, 10% or $44.4 million higher than last year
The increase over last year was attributable to higher revenue generated in all regions as well as the integration into our results of
CHC Helicopter’s HFTO. The increase was partially offset by the negative effect from a lower contribution from ab initio training in
Europe and a stronger Canadian dollar against the U.S. dollar.
Segment operating income up 5% over last quarter and up 20% over the fourth quarter of fiscal 2011
Segment operating income was $30.3 million (22.9% of revenue) this quarter, compared to $28.8 million (23.4% of revenue) last
quarter and $25.3 million (20.9% of revenue) in the fourth quarter of fiscal 2011.
Segment operating income increased by $1.5 million, or 5%, from last quarter. The increase was mainly attributable to the higher
demand in North and South America and in Europe and to a gain from strategic expansion initiatives. The increase was partially offset
by the unfavorable impact resulting from the revaluation of non-cash working capital accounts denominated in foreign currencies, as
well as the lower contribution from ab initio training in Europe.
Segment operating income increased by $5.0 million, or 20%, over the fourth quarter of fiscal 2011. The increase was mainly due to
higher demand in North and South America, in the emerging markets and in Europe as well as to a gain from strategic expansion
initiatives. The increase was partially offset by the lower contribution from ab initio training in Europe.
Segment operating income was $122.2 million, up 22% or $22.3 million over last year
Segment operating income was $122.2 million (24.5% of revenue) this year, compared to $99.9 million (22.0% of revenue) last year.
The increase was mainly attributable to higher demand in North and South America, in the emerging markets and in Europe, the
integration into our results of CHC Helicopter’s HFTO and to gains from strategic expansion initiatives. The increase was partially
offset by the lower contribution from ab initio training in Europe.
Capital expenditures at $37.2 million this quarter and $137.1 million for the year
Maintenance capital expenditures were $3.1 million for the quarter and $27.1 million for the year. Growth capital expenditures were
$34.1 million for the quarter and $110.0 million for the year. As the civil aviation market trends and outlook point to prolonged global
growth, we continue to selectively invest in our training network to keep pace with the growth of our customers, especially in the
emerging markets, in both the commercial and business aviation sectors.
5 Non-GAAP and other financial measures (see Section 3.6).
CAE Annual Report 2012 | 49
Management’s Discussion and Analysis
Capital employed increased by $22.2 million over last quarter and by $103.0 million over last year
Capital employed increased over the last quarter mainly due to investments in our training network. The increase was partially offset
by a decrease in non-cash working capital.
Capital employed increased over the prior year mainly due to investments in our training network and the impact of movements in
foreign exchange rates.
Backlog was at $1,183.4 million at the end of the year
(amounts in millions)
Backlog, beginning of period
+ orders
- revenue
+ / - adjustments (mainly F/X)
Backlog, end of period
$
FY2012
986.5
686.9
(498.4)
8.4
$
1,183.4
FY2011
728.7
546.9
(454.0)
164.9
986.5
$
$
Adjustments in fiscal 2012 are mainly due to favorable foreign exchange fluctuation. Adjustments in fiscal 2011 related mainly to the
acquisition of CHC Helicopter’s HFTO.
This quarter's book-to-sales ratio was 1.62x. The ratio for the last 12 months was 1.38x.
SIMULATION PRODUCTS/CIVIL
SP/C was awarded contracts for the following 7 FFSs this quarter:
One ATR72-500 FFS to Air Algérie;
One Boeing 737NG to Emirates-CAE Flight Training;
Two Airbus A320 FFSs for the new CAE Simulation Training Private Limited, an Interglobe-CAE joint venture;
One Embraer ERJ-190 FFS to Zhuhai Flight Training Centre, a joint venture of China Southern Airlines and CAE;
Two FFSs to undisclosed customers.
This brings SP/C’s order intake for the year to 37 FFSs.
Financial Results
(amounts in millions, except operating
margins)
Revenue
Segment operating income
$
$
Operating margins
Depreciation and amortization
Property, plant and equipment
expenditures
Intangible assets and other
assets expenditures
Capital employed
Backlog
%
$
$
$
$
$
FY2012
FY2011
Q4-2012
Q3-2012
Q2-2012
Q1-2012
Q4-2011
342.5
51.6
15.1
7.4
272.9
34.8
12.8
6.8
83.1
14.0
16.8
2.1
80.7
13.2
16.4
1.7
92.6
14.7
15.9
1.8
86.1
9.7
11.3
1.8
76.2
9.4
12.3
1.6
5.8
6.5
2.3
1.3
1.1
1.1
1.3
19.3
39.1
351.6
14.2
58.7
303.8
5.2
39.1
351.6
4.5
65.4
366.5
5.7
62.9
340.6
3.9
83.4
341.1
4.4
58.7
303.8
Revenue up 3% over last quarter and up 9% over the fourth quarter of fiscal 2011
The increase from last quarter and the fourth quarter of fiscal 2011 was mainly due to higher production levels resulting from an
increase in order intake, partially offset by lower revenue recorded in the quarter for sales of simulators partially manufactured.
Revenue was $342.5 million for the year, 26% or $69.6 million higher than last year
The increase in revenue was primarily due to higher production levels resulting from an increase in order intake, partially offset by less
favourable hedging rates.
Segment operating income up 6% over last quarter and up 49% over the fourth quarter of fiscal 2011
Segment operating income was $14.0 million (16.8% of revenue) this quarter, compared to $13.2 million (16.4% of revenue) last
quarter and $9.4 million (12.3% of revenue) in the fourth quarter of fiscal 2011.
The increase over last quarter was mainly due to higher revenue, as mentioned above, while operating margins remained stable.
The increase from the fourth quarter of fiscal 2011 was primarily due to an improvement in project margins and an increase in volume,
partially offset by higher research and development expenses.
50 | CAE Annual Report 2012
Management’s Discussion and Analysis
Segment operating income was $51.6 million for the year, 48% or $16.8 million higher than last year
Segment operating income was $51.6 million (15.1% of revenue) this year, compared to $34.8 million (12.8% of revenue) last year.
The increase was primarily due to an improvement in project margins and an increase in volume, partially offset by a less favourable
foreign exchange impact.
Capital employed decreased by $26.3 million from last quarter and decreased by $19.6 million from last year
Capital employed was lower than last quarter mainly due to a decrease in contracts in progress assets and an increase in accounts payable
and accrued liabilities, partially offset by an increase in accounts receivable.
Capital employed was lower than last year mainly due to an increase in contracts in progress liabilities and higher accounts payable and
accrued liabilities, partially offset by an increase in accounts receivable.
Backlog up 16% compared to last year
(amounts in millions)
Backlog, beginning of period
+ orders
- revenue
+ / - adjustments
Backlog, end of period
FY2012
303.8
398.7
(342.5)
(8.4)
351.6
$
$
FY2011
252.1
330.8
(272.9)
(6.2)
303.8
$
$
Adjustments in fiscal 2012 consist primarily of the cancellation of an order.
This quarter's book-to-sales ratio was 0.84x. The ratio for the last 12 months was 1.16x.
5.2 Military segments
FISCAL 2012 EXPANSIONS AND NEW INITIATIVES
We entered into a teaming agreement with Force Protection Industries to compete for the Canadian Forces Tactical Armoured
Patrol Vehicle (TAPV) project. Force Protection has been selected by the Canadian Government as one of the competitor
companies qualified to provide up to 600 wheeled combat vehicles and related long-term support services. As the main Canadian
partner, CAE would have overall responsibility for the comprehensive in-service support (ISS) solution;
We announced that the German Armed Forces and German Federal Office of Civil Protection and Disaster Assistance (BBK)
have started using the CAE GESI constructive simulation system, known in Germany under the name SIRA, jointly for
civil-military emergency management training and as part of emergency management simulation exercises;
We announced that the simulator cockpit for the civil/conventional variant of the Dhruv helicopter was certified to Level D, the
highest qualification for flight simulators, by India’s Directorate General Civil Aviation (DGCA) and entered service at the
HATSOFF training centre in Bengaluru, India;
We entered into an exclusive teaming agreement with General Atomics Aeronautical Systems, Inc. (GA-ASI), a leading
manufacturer of Unmanned Aircraft Systems (UAS), tactical reconnaissance radars and surveillance systems, to offer the
Miskam UAS for Canada’s Joint UAV Surveillance and Target Acquisition System (JUSTAS) program;
We, in partnership with Hawker Beechcraft, continue to support the marketing efforts of the AT-6 Light Attack and Armed
Reconnaissance aircraft by demonstrating the CAE-built AT-6 unit training device at various industry shows, including the Paris
Air Show, Air Force Association (AFA) conference and exhibition, and Air Education and Training Command (AETC) annual
symposium;
We, in conjunction with Aeronautics, a leading manufacturer and supplier of unmanned system, signed a strategic teaming
agreement making CAE the preferred simulation and mission training solution provider for Aeronautics unmanned aerial
systems (UAS);
We upgraded the Royal Australian Air Force’s (RAAF) C-130J Hercules full-flight and mission simulator (FFMS) to provide
additional tactical training capabilities. The simulator was upgraded with a new radar warning receiver (RWR) simulation which
will be used to provide RAAF C-130J aircrews with early warning and threat detection alerts during training;
We completed a major upgrade to one of the CH-47 Chinook dynamic mission simulators located at our Medium Support
Helicopter Aircrew Training Facility (MSHATF) in the U.K., and the Royal Air Force (RAF) is now training its Chinook aircrews to
the new RAF CH-47 Mk4 standard. The simulator upgrade was done in parallel with the upgrades currently being performed on
the RAF’s CH-47 Chinook fleet as part of the JULIUS program;
We inaugurated, through our Rotorsim s.r.l. joint venture with AgustaWestland, the launch of the Joint NH90 Training Program
(JNTP) for the Netherlands Ministry of Defence;
We inaugurated, through our HATSOFF joint venture with HAL, the launch of training for the Eurocopter AS365 N3 Dauphin
helicopter in India. A CAE-built AS365 Dauphin simulator cockpit was certified to Level D, the highest qualification for flight
simulators, by India’s Directorate General Civil Aviation (DGCA) as well as the European Aviation Safety Agency (EASA);
We signed a shareholder’s agreement with the Government of Brunei to form a venture company, where will own 60 percent and
the Government of Brunei will own 40 percent, to develop and operate the CAE Brunei Multi-Purpose Training Centre;
We initiated KC-135 boom operator training for the United States Air Force at McConnell Air Force Base (AFB) in Kansas on a
new Boom Operator Weapon Systems Trainer (BOWST) for the KC-135 aerial refuelling aircraft;
CAE Annual Report 2012 | 51
Management’s Discussion and Analysis
Rossell India Limited received approval from India’s Foreign Investment Promotion Board to form a joint venture with CAE of
which we will own 26 percent of the joint venture, making the company eligible for defence offset programs in India;
We commenced KC-135 aircrew training for the United States Air Force at Hickam AFB in Hawaii after relocating a KC-135
operational flight trainer from Grand Forks AFB in North Dakota;
We teamed with Aeronautics to conduct the first series of demonstration flights of the Miskam unmanned aerial system (UAS) at
the UAS Centre of Excellence located at Alma airport in Quebec, Canada. The research and development program is aimed at
demonstrating the use of UASs for civil applications.
COMBINED FINANCIAL RESULTS
(amounts in millions, except operating
margins)
Revenue
Segment operating income
$
$
Operating margins
Backlog
%
$
FY2012
897.3
142.1
15.8
2,189.2
FY2011
865.9
155.3
17.9
2,158.7
Q4-2012
267.1
45.6
17.1
2,189.2
Q3-2012
Q2-2012
Q1-2012
Q4-2011
222.3
36.9
16.6
2,045.6
201.5
30.2
15.0
2,182.2
206.4
29.4
14.2
2,151.6
257.3
46.0
17.9
2,158.7
The combined military book-to-sales ratio was 1.57x for the quarter and 1.07x on a trailing 12-month basis.
The combined military unfunded backlog6 was $257.4 million at March 31, 2012.6
SIMULATION PRODUCTS/MILITARY
SP/M was awarded $179.7 million in orders this quarter, including:
An order from Lockheed Martin for four C-130J weapon systems trainers and related C-130J training devices for the U.S. Air Force
Air Combat Command, Air Mobility Command and Special Operations Command;
An order from an undisclosed customer in the Middle East for one C-130 FMS;
A contract from EADS North America to design and manufacture a UH-72A Lakota cockpit procedures trainer for the United States
Army;
An additional contract modification from the USAF to perform upgrades on KC-135 operational flight trainers;
A contract from the United States Army to perform upgrades to the High Mobility Artillery Rocket System (HIMARS) maintenance
training system.
Financial Results
(amounts in millions, except operating
margins)
Revenue
Segment operating income
$
$
Operating margins
Depreciation and amortization
Property, plant and equipment
expenditures
Intangible assets and other
assets expenditures
Capital employed
Backlog
%
$
$
$
$
$
FY2012
FY2011
Q4-2012
Q3-2012
Q2-2012
Q1-2012
Q4-2011
619.2
101.2
16.3
12.0
586.0
105.0
17.9
11.2
195.6
34.6
17.7
3.3
152.4
26.9
17.7
3.1
136.0
20.9
15.4
2.9
135.2
18.8
13.9
2.7
179.3
34.0
19.0
2.9
10.8
10.1
2.4
2.6
3.0
2.8
3.2
19.0
270.4
786.0
12.5
197.9
888.7
5.8
270.4
786.0
5.4
266.7
812.7
4.3
262.5
907.4
3.5
282.7
897.8
3.8
197.9
888.7
Revenue up 28% over last quarter and up 9% over the fourth quarter of fiscal 2011
The increase over last quarter was mainly due to higher revenue recorded for a C-130 simulator that was partially manufactured and
for which we signed a contract during the quarter and programs executed in North America and Europe.
The increase over the fourth quarter of fiscal 2011 was mainly due to higher revenue recorded for a C-130 simulator that was partially
manufactured and for which we signed a contract during the quarter, programs executed in North America, and the integration of RTI
International’s TAL business unit, acquired in February 2011. The increase was partially offset by less activity on Australian helicopter
programs, programs executed in Europe and the completion of a NMSC contract in Brunei earlier in the fiscal year.
Revenue was $619.2 million this year, 6% or $33.2 million higher than last year
The increase in revenue over last year was mainly due to the integration of RTI International’s TAL business unit, higher revenue
recorded for a C-130 simulator that was partially manufactured and for which we signed a contract and programs executed in North
America. The increase was partially offset by lower volume on Australian helicopter programs, the completion of a Canadian
helicopter program in fiscal 2011 and lower revenue on programs executed in Europe.
6 Non-GAAP and other financial measures (see Section 3.6).
52 | CAE Annual Report 2012
Management’s Discussion and Analysis
Segment operating income up 29% over last quarter and up 2% over the fourth quarter of fiscal 2011
Segment operating income was $34.6 million (17.7% of revenue) this quarter, compared to $26.9 million (17.7% of revenue) last
quarter and $34.0 million (19.0% of revenue) in the fourth quarter of fiscal 2011.
The increase over last quarter was mainly due to higher revenue, as mentioned above, while operating margins remained stable.
The increase over the fourth quarter of fiscal 2011 was mainly due to higher volume on programs executed in North America and
lower research and development expenses. The increase was partially offset by lower volume on programs executed in Europe.
Segment operating income was $101.2 million this year, 4% or $3.8 million lower than last year
Segment operating income was $101.2 million (16.3% of revenue) this year, compared to $105.0 million (17.9% of revenue) last year.
The decrease was mainly due to lower volume on programs executed in Europe, the completion of a Canadian helicopter program in
fiscal 2011 and higher research and development expenses. The decrease was partially offset by higher volume on programs
executed in North America and the integration of RTI International’s TAL business unit.
Capital employed increased by $3.7 million over last quarter and by $72.5 million over last year
The increase over last quarter was mainly due to a higher investment in intangible and other assets.
The increase over last year was mainly due to an increase in non-cash working capital accounts and higher intangible assets.
Backlog down 12% over last year
(amounts in millions)
Backlog, beginning of period
+ orders
- revenue
+ / - adjustments
Backlog, end of period
FY2012
888.7
528.8
(619.2)
(12.3)
786.0
$
$
FY2011
869.8
558.9
(586.0)
46.0
888.7
$
$
Adjustments in fiscal 2012 included amounts related to the termination of programs, partially offset by the impact of foreign exchange.
This quarter's book-to-sales ratio was 0.92x. The ratio for the last 12 months was 0.85x.
TRAINING & SERVICES/MILITARY
TS/M was awarded $240.0 million in orders this quarter, including:
A contract to provide long-term training services at the CAE Brunei Multi-Purpose Training Centre on the Sikorsky S-70i Black
Hawk, Pilatus PC-7, and Sikorsky S-92 platforms;
Additional contract modifications from the United States Air Force to perform upgrades on KC-135 operational flight trainers as part
of the KC-135 Aircrew Training System program;
A contract from prime contractor Lockheed Martin to provide maintenance and support services as part of the U.S. Air Force
C-130J Maintenance and Aircrew Training System program;
A contract from the Canadian Department of National Defence to provide maintenance and support services as part of the Air
Force Integrated Information Learning Environment (AFIILE) program.
Financial Results
(amounts in millions, except operating
margins)
Revenue
Segment operating income
$
$
Operating margins
Depreciation and amortization
Property, plant and equipment
expenditures
Intangible assets and other
assets expenditures
Capital employed
Backlog
%
$
$
$
$
$
FY2012
FY2011
Q4-2012
Q3-2012
Q2-2012
Q1-2012
Q4-2011
278.1
40.9
14.7
18.1
279.9
50.3
18.0
14.1
71.5
11.0
15.4
5.2
9.2
13.4
1.5
1.7
181.2
1,403.2
0.8
177.7
1,270.0
1.1
181.2
1,403.2
69.9
10.0
14.3
5.0
2.1
0.1
65.5
9.3
14.2
4.0
2.6
0.3
71.2
10.6
14.9
3.9
3.0
0.2
78.0
12.0
15.4
5.1
3.2
0.3
199.0
1,232.9
190.7
1,274.8
205.2
1,253.8
177.7
1,270.0
CAE Annual Report 2012 | 53
Management’s Discussion and Analysis
Revenue up 2% over last quarter and down 8% from the fourth quarter of fiscal 2011
The increase over last quarter was mainly due to a higher level of activity on our training programs and higher revenue on the U.S.
KC-135 ATS program and Australian programs. The increase was partially offset by a lower level of activity on European programs
and an unfavourable foreign exchange impact on the translation of European operations.
The decrease from the fourth quarter of fiscal 2011 was mainly due to a lower level of activity in our Professional Services business in
the U.S. and lower revenue from a European in-service support contract completed earlier in the fiscal year. The decrease was
partially offset by higher revenue on Australian programs, new U.S. and European executed contracts and a higher level of activity on
our training programs.
Revenue was $278.1 million this year, stable compared to last year
A lower level of activity in our Professional Services business in the U.S. and lower revenue from the completion of a European
in-service support contract was offset by higher in-service support on a Canadian program and a higher level of activity on U.S. ATS
programs, training and services in Australia and Europe.
Segment operating income up 10% over last quarter and down 8% from the fourth quarter of fiscal 2011
Segment operating income was $11.0 million (15.4% of revenue) this quarter, compared to $10.0 million (14.3% of revenue) last
quarter and $12.0 million (15.4% of revenue) in the fourth quarter of fiscal 2011.
The increase over last quarter was mainly due a higher level of training activity and higher volume on the U.S. KC-135 ATS program
and Australian programs. The increase was partially offset by a lower volume on European programs.
The decrease from the fourth quarter of fiscal 2011 was mainly due to the completion of a European in-service support contract earlier
in the fiscal year and a lower dividend received from a U.K.-based TS/M investment. The decrease was partially offset by a higher
level of activity on our training programs and by higher volume and lower operational costs on Australian programs.
Segment operating income was $40.9 million this year, 19% or $9.4 million lower than last year
Segment operating income was $40.9 million (14.7% of revenue) this year, compared to $50.3 million (18.0% of revenue) last year.
The decrease was primarily due to the ramp-up of the KC-135 ATS program, lower margins on some U.S. training programs, the
completion of a European in-service support contract, a lower dividend received from a U.K.-based TS/M investment and a lower level
of activity in our Professional Services business in the U.S. The decrease was partially offset by lower selling, general and
administrative expenses.
Capital employed decreased by $17.8 from last quarter and increased by $3.5 million over last year
The decrease from last quarter was due to a decrease in non-cash working capital accounts and lower property, plant and equipment.
The increase over last year was mainly due to an increase in non-cash working capital accounts and higher other assets, partially
offset by lower property, plant and equipment and movement in foreign exchange rates.
Backlog up 10% over last year
(amounts in millions)
Backlog, beginning of period
+ orders
- revenue
+ / - adjustments
Backlog, end of period
$
FY2012
1,270.0
430.9
(278.1)
(19.6)
$
1,403.2
FY2011
1,202.2
379.9
(279.9)
(32.2)
1,270.0
$
$
Adjustments in fiscal 2012 included amounts related to the termination of a program and an adjustment made for a defence services
program resulting from a delay in the performance of a delivery by the OEM. The adjustment was partially offset by the impact of
foreign exchange.
This quarter's book-to-sales ratio was 3.36x. The ratio for the last 12 months was 1.55x.
54 | CAE Annual Report 2012
Management’s Discussion and Analysis
5.3 New Core Markets
FISCAL 2012 EXPANSIONS AND NEW INITIATIVES
CAE Healthcare expansions and new initiatives included the following:
We acquired Medical Education Technologies, Inc. (METI), a worldwide leader in medical simulation technologies and educational
software, for US$130 million. With this acquisition we gained a comprehensive line of patient simulators, a centre management
system and a library of learning modules;
We acquired Haptica’s surgical simulation products and augmented reality technology. Haptica’s ProMIS™ surgical simulator and
minimally invasive spine surgery simulator will be added to the core offerings of our surgical simulation division;
We announced that the Canadian Critical Care Society endorsed our ultrasound e-Learning curriculum and seminars;
Our Centre d’apprentissage des attitudes et habiletés cliniques (CAAHC) simulation centre received accreditation privileges by
The Royal College of Physicians and Surgeons of Canada;
We hosted our annual simulation user conference in Tampa, U.S. with over 1000 clinical educators, clinicians and students from
around the world.
CAE Mining expansions and new initiatives included the following:
We announced that CAE Mining signed an exclusive agreement to commercialise CSIRO’s Sirovision technology, a 3D image
capturing and analysis technology developed for use in mining;
We have opened an office in Vancouver, British Columbia, to focus on the western Canadian market;
We have opened an office in Brisbane, Australia, to improve our support of eastern Australia.
ORDERS
Major CAE Healthcare sales this quarter included:
A sale to Methodist University in Fayetteville, U.S., of patient simulators, curriculum and centre management systems;
A sale to University of Arizona in Tucson, U.S., of centre management systems;
A sale to St. Joseph’s Hospital and Medical Center in Phoenix, U.S., of centre management systems;
A sale to Insimed in Bogota, Colombia for surgical simulators;
A sale to I-MAN Group in Riyadh, Saudi Arabia for surgical, imaging and patient simulators;
A sale to Guy's and St Thomas' Hospital in London, U.K. for ultrasound simulators;
A sale to Sir Charles Gairdner Hospital in Perth, Australia for surgical simulators and centre management systems.
Major CAE Mining sales this quarter included:
A contract to provide a workforce development strategy for the University of Saskatchewan;
A sale of geological data management systems to Vale S.A.’s Canadian operations;
A sale of resource modeling and mine planning systems to Goldcorp Inc. for its Mexican operations.
Financial Results
(amounts in millions, except operating
margins)
Revenue
Segment operating loss
Depreciation and amortization
Property, plant and equipment
$
$
$
expenditures
Intangible assets and other
assets expenditures
Capital employed
$
$
$
FY2012
FY2011
Q4-2012
Q3-2012
Q2-2012
Q1-2012
Q4-2011
83.0
(13.8)
7.0
38.0
(8.4)
2.6
24.2
(1.2)
2.2
27.1
(1.4)
2.4
20.3
(8.6)
1.6
11.4
(2.6)
0.8
11.1
(3.9)
0.5
2.8
3.3
1.0
0.5
1.0
0.3
0.9
5.7
179.3
7.6
40.4
2.7
179.3
(2.5)
174.5
2.9
181.9
2.6
44.6
2.1
40.4
Revenue down 11% from last quarter and up 118% over the fourth quarter of fiscal 2011
The decrease from last quarter was mainly due to lower revenue from CAE Healthcare.
The increase over the fourth quarter of fiscal 2011 was mainly due to higher revenue from CAE Healthcare, resulting primarily from
the integration of METI, acquired in August 2011, in addition to more revenue from CAE Mining.
Revenue was $83.0 million this year, 118% or $45.0 million higher than last year
The increase was mainly due to higher revenue from CAE Healthcare, resulting primarily from the integration of METI and higher
service and software sale revenue from CAE Mining.
Segment operating loss down from last quarter and down from the fourth quarter of fiscal 2011
Segment operating loss was $1.2 million this quarter, compared to $1.4 million last quarter and $3.9 million in the fourth quarter of
fiscal 2011.
The decrease in the segment operating loss from last quarter was mainly due to higher segment operating income in CAE Healthcare,
resulting from an improvement in margins from synergies realized with the integration of METI and a net benefit of $1.7 million from
the reversal of provisions for contingent consideration of past acquisitions, partially offset by continued integration charges and higher
operational costs from CAE Mining.
CAE Annual Report 2012 | 55
Management’s Discussion and Analysis
The decrease in segment operating loss from the fourth quarter of fiscal 2011 was primarily due to higher segment operating income
in CAE Healthcare, resulting from an improvement in margins from synergies realized with the integration of METI and a net benefit of
$1.7 million from the reversal of provisions for contingent consideration potentially payable for past acquisitions, partially offset by
continued integration charges and higher operational costs from CAE Mining.
Segment operating loss was $13.8 million this year, 64% or $5.4 million higher than last year
Segment operating loss was $13.8 million this year, compared to $8.4 million last year.
The increase in the segment operating loss was due to the recognition this year of $8.4 million of charges related to the acquisition
and integration of METI.
Capital employed increased by $4.8 million over last quarter and increased $138.9 million over last year
The increase over last quarter was mainly due to an increase in non-cash working capital accounts and lower long-term provisions,
partially offset by a decrease in intangible assets as a result of movements in foreign exchange rates.
The increase over last year was mainly due to higher intangible assets primarily related to the acquisition of METI.
6. CONSOLIDATED CASH MOVEMENTS AND LIQUIDITY
We manage liquidity and regularly monitor the factors that could affect it, including:
Cash generated from operations, including timing of milestone payments and management of working capital;
Capital expenditure requirements;
Scheduled repayments of long-term debt obligations, our credit capacity and expected future debt market conditions.
6.1 Consolidated cash movements
(amounts in millions)
Cash provided by operating activities*
Changes in non-cash working capital
Net cash provided by operating activities
Maintenance capital expenditures7
Other assets
Proceeds from the disposal of property, plant
and equipment
Dividends paid
Free cash flow 7
Growth capital expenditures 7
Capitalized development costs
Other cash movements, net
Business combinations, net of cash and cash
equivalents acquired
Joint ventures, net of cash and cash
equivalents acquired
Effect of foreign exchange rate changes on
cash and cash equivalents
Net (decrease) increase in cash before
FY2012
FY2011
Q4-2012
Q3-2012
Q4-2011
$
$
$
$
$
$
305.6
(71.7)
233.9
(48.9)
(12.3)
34.4
(33.4)
173.7
(116.8)
(42.8)
3.7
(126.0)
(27.6)
1.5
$
$
$
305.3
(79.0)
226.3
(37.4)
(25.3)
1.5
(37.9)
127.2
(73.9)
(22.6)
-
(71.3)
(1.9)
(4.0)
$
$
$
97.8
24.3
122.1
(8.3)
(4.8)
6.1
(8.4)
106.7
(36.1)
(12.8)
2.6
0.1
-
-
$
$
$
73.7
(3.3)
70.4
(18.8)
1.5
1.1
(8.0)
46.2
(25.3)
(11.3)
(0.3)
97.2
64.9
162.1
(10.5)
(8.5)
0.1
(10.1)
133.1
(25.7)
(6.3)
7.4
-
(48.0)
(0.8)
(4.8)
-
(2.5)
proceeds and repayment of long-term debt
$
(134.3)
$
(46.5)
$
60.5
$
3.7
$
58.0
* before changes in non-cash working capital
Free cash flow was $106.7 million for the quarter7
Free cash flow was $60.5 million higher than last quarter and $26.4 million lower than the fourth quarter of fiscal 2011. Similar to prior
years, our free cash flow is at its highest in the last two quarters and at its lowest during the first two quarters of the fiscal year. This
trend is expected to continue in fiscal 2013.
The increase from last quarter was mainly due to more cash provided by operating activities and favourable changes in non-cash
working capital.
The decrease compared to the fourth quarter of fiscal 2011 was mainly due to less favourable changes in non-cash working capital,
partially offset by higher proceeds from the disposal of property, plant and equipment and lower other asset expenditures.
7 Non-GAAP and other financial measures (see Section 3.6).
56 | CAE Annual Report 2012
Management’s Discussion and Analysis
Free cash flow was $173.7 million this year
Free cash flow was 37% or $46.5 million higher than last year.
The increase in free cash flow was mainly due to higher proceeds from the disposal of property, plant and equipment and lower other
asset expenditures.
Capital expenditures were $44.4 million this quarter and $165.7 million for the year
Growth capital expenditures were $36.1 million this quarter and $116.8 million for the year. We are continuing to selectively expand
our training network to address additional market share and in response to the training demands of our customers. Maintenance
capital expenditures were $8.3 million this quarter and $48.9 million for the year.
Business combinations, net of cash and cash equivalents acquired, of $126.0 million for the year
The cash movement resulting from business combinations, net of cash and cash equivalents acquired was mainly due to the
acquisition of METI during the year.
6.2 Sources of liquidity
We have committed lines of credit at floating rates, each provided by a syndicate of lenders. We and some of our subsidiaries can
borrow funds directly from these credit facilities to cover operating and general corporate expenses and to issue letters of credit and
bank guarantees.
The total amount available through these committed bank lines at March 31, 2012 was US$450.0 million (2011 – US$450.0 million)
with an option, subject to lender’s consent, to increase to a total amount of US$650.0 million, of which US$123.7 million was used for
letters of credit (2011 – US$168.8 million). The applicable interest rate on this revolving term credit facility is at our option, based on
the bank’s prime rate, bankers’ acceptance rates or LIBOR plus a spread which depends on the credit rating assigned by Standard &
Poor’s Rating Services. There was EUR 10.0 million drawn under the facilities as at March 31, 2012 (2011 – nil). Effective
April 1, 2011, we amended the agreement to extend the maturity date by two years, from April 2013 to April 2015.
We have an unsecured Export Development Canada (EDC) Performance Security Guarantee (PSG) account for US$150.0 million.
This is an uncommitted revolving facility for performance bonds, advance payment guarantees or similar instruments. As at
March 31, 2012, the total outstanding for all these instruments, translated into Canadian dollars, was $70.1 million compared to
$63.3 million as at March 31, 2011.
We have a facility of €30.0 million with a European bank for the issuance of bank guarantees and letters of credit, under which
approximately $26.4 million was used principally in support of our European military operations.
We are involved in a program in which we sell undivided interests in certain of our accounts receivable and contracts in progress
assets (current financial assets program) to third parties for cash consideration for amounts up to $150.0 million without recourse to
CAE. As at March 31, 2012, we sold $81.5 million of accounts receivable (2011 – $54.4 million) and $54.2 million of contracts in
progress (2011 – $37.4 million).
In August 2011, we issued senior notes for US$150.0 million by way of a private placement to fund the METI acquisition and to
replace other existing obligations at lower interest costs. The average maturity is 11.7 years with an average interest rate of
approximately 4.5%, with interest payable semi-annually in August and February. These unsecured senior notes have fixed
repayment amounts of US$100.0 million in 2021 and US$50.0 million in 2026. These notes were issued to two institutional investors.
In November 2011, we exercised purchase options in the amount of US$13.2 million for two simulators previously accounted for as
finance leases, resulting in a reduction of obligations under finance leases.
We believe that our cash and cash equivalents, access to credit facilities and expected free cash flow will enable the pursued growth
of our business, the payment of dividends and will enable us to meet all other expected financial requirements in the near term.
The following table summarizes the long-term debt:
(amounts in millions)
Total long-term debt
Less:
Current portion of long-term debt
Current portion of finance leases
Long-term portion of long-term debt
As at March 31
2012
As at March 31
2011
$
$
821.6
113.6
22.4
685.6
$
$
660.2
58.5
27.7
574.0
CAE Annual Report 2012 | 57
Management’s Discussion and Analysis
6.3 Government cost-sharing
We have signed agreements with various governments whereby the latter share in the cost, based on expenditures incurred by us, of
certain R&D programs for modeling and simulation, visual systems and advanced flight simulation technology for civil applications and
networked simulation for military applications, as well as for the new markets of simulation-based training in healthcare and mining.
During fiscal 2009, we announced that we will invest up to $714 million in Project Falcon, an R&D program that will continue over five
years. The goal of Project Falcon is to expand our modeling and simulation technologies, develop new ones and increase our
capabilities beyond training into other areas of the aerospace and defence market, such as analysis and operations. Concurrently, the
Government of Canada agreed to participate in Project Falcon through a repayable investment of up to $250 million made through the
Strategic Aerospace and Defence Initiative (SADI), which supports strategic industrial research and pre-competitive development
projects in the aerospace, defence, space and security industries (refer to Notes 1 and 13 of our consolidated financial statements).
During fiscal 2010, we announced that we will invest up to $274 million in Project New Core Markets, an R&D program extending over
seven years. The aim is to leverage our modeling, simulation and training services expertise into the new markets of healthcare and
mining. The Québec government agreed to participate up to $100 million in contributions related to costs incurred before the end of
fiscal 2016.
You will find more details in Note 14 of our consolidated financial statements.
6.4 Contractual obligations
We enter into contractual obligations and commercial commitments in the normal course of our business. These include debentures,
notes and others. The table below shows when they mature.
Contractual obligations
As at March 31, 2012
(amounts in millions)
Long-term debt (excluding interest) $
Finance leases (excluding interest)
Operating leases
Purchase obligations
$
2013
114.4
22.4
30.2
15.5
2014
52.8
22.2
24.0
11.5
$
$
2015
32.6
17.6
22.1
11.5
2016
31.6
8.7
17.1
-
$
2017
96.6
7.8
15.8
-
Thereafter
354.7
$
64.2
32.8
-
$
Total
682.7
142.9
142.0
38.5
$
182.5
$
110.5
$
83.8
$
57.4
$
120.2
$
451.7
$ 1,006.1
We also had total availability under the committed credit facilities of US$326.3 million as at March 31, 2012 compared to
US$281.2 million at March 31, 2011.
We have purchase obligations related to agreements that are enforceable and legally binding. Most are agreements with
subcontractors to provide services for long-term contracts that we have with our clients. The terms of the agreements are significant
because they set out obligations to buy goods or services in fixed or minimum amounts, at fixed, minimum or variable prices and at
approximate times.
As at March 31, 2012, we had other long-term liabilities that are not included in the table above. These include some accrued pension
liabilities, deferred revenue, deferred gains on assets and various other long-term liabilities. Cash obligations on the accrued
employee pension liability depends on various elements including market returns, actuarial gains and losses and the interest rate.
We did not include deferred tax liabilities since future payments of income taxes depend on the amount of taxable earnings and on
whether there are tax loss carry-forwards available.
58 | CAE Annual Report 2012
7. CONSOLIDATED FINANCIAL POSITION8
7.1 Consolidated capital employed
(amounts in millions)
Use of capital:
Current assets
Less: cash and cash equivalents
Current liabilities
Less: current portion of long-term debt
Non-cash working capital8
Property, plant and equipment
Other long-term assets
Other long-term liabilities
Total capital employed
Source of capital:
Current portion of long-term debt
Long-term debt
Less: cash and cash equivalents
Net debt8
Equity attributable to equity holders of the Company
Non-controlling interests
Source of capital
Management’s Discussion and Analysis
As at March 31
2012
As at March 31
2011
$
$
$
$
$
$
1,148.1
(287.3)
(883.4)
136.0
113.4
1,293.7
741.9
(572.5)
1,576.5
136.0
685.6
(287.3)
534.3
1,021.9
20.3
1,576.5
$
$
$
$
$
$
1,049.2
(276.4)
(810.1)
86.2
48.9
1,211.0
557.1
(500.3)
1,316.7
86.2
574.0
(276.4)
383.8
914.4
18.5
1,316.7
Capital employed increased 20% over last year
The increase was mainly the result of increases in intangible assets as a result of the acquisition of METI, property, plant and
equipment and non-cash working capital, partially offset by an increase in other long-term liabilities.
Our return on capital employed8 (ROCE) was 15.0% this year compared to 15.7% for last year.
Non-cash working capital increased by $64.5 million
The increase was mainly due to a decrease in contract in progress liabilities in addition to increases in income taxes recoverable,
inventories, contract in progress assets and accounts receivable. The increase was partially offset by an increase in accounts payable
and accrued liabilities.
Net property, plant and equipment up $82.7 million
The increase mainly resulted from capital expenditures of $165.7 million and foreign exchange variations of $8.1 million, partially
offset by depreciation of $92.3 million.
Net debt higher than last year
The increase was largely caused by the issuance of US$150.0 million of senior notes in a private placement during the year and the
effect of foreign exchange rate changes on long-term debt.
Change in net debt
(amounts in millions)
Net debt, beginning of period
Impact of cash movements on net debt
(see table in the consolidated cash movements section)
Effect of foreign exchange rate changes on long-term debt
Other
Increase in net debt during the period
Net debt, end of period
8 Non-GAAP and other financial measures (see Section 3.6).
FY2012
383.8
134.3
7.8
8.4
150.5
534.3
$
$
$
FY2011
356.5
46.5
(16.6)
(2.6)
27.3
383.8
$
$
$
CAE Annual Report 2012 | 59
Management’s Discussion and Analysis
Adjusted net debt9 higher than last year9
The increase was mainly due to a higher net debt resulting from the issuance of US$150.0 million of senior notes in a private
placement during the year and the effect of foreign exchange rate changes on long-term debt, in addition to a decrease in long-term
obligations under finance leases mainly as a result of repayments.
Adjusted net debt
(amounts in millions)
Current portion of long-term debt
Long-term debt
Less: Cash and cash equivalents
Less: Obligations under finance leases
Adjusted net debt
As at March 31
2012
$
$
136.0
685.6
(287.3)
(142.9)
391.4
As at March 31
2011
$
$
86.2
574.0
(276.4)
(183.3)
200.5
Total equity increased by $109.3 million this year
The increase in equity was mainly due to net earnings of $182.0 million, partially offset by a defined benefit plan actuarial loss
adjustment of $47.5 million and dividends of $33.4 million.
Outstanding share data
Our articles of incorporation authorize the issue of an unlimited number of common shares and an unlimited number of preferred
shares issued in series. We had a total of 258,266,295 common shares issued and outstanding as at March 31, 2012 with total share
capital of $454.5 million.
As at April 30, 2012, we had a total of 258,395,244 common shares issued and outstanding.
Dividend policy
We paid a dividend of $0.04 per share in each quarter of fiscal 2012. These dividends were eligible under the Income Tax Act
(Canada) and its provincial equivalents.
Our Board of Directors has the discretion to set the amount and timing of any dividend. The Board reviews the dividend policy once a
year based on the cash requirements of our operating activities, liquidity requirements and projected financial position. We expect to
declare dividends of approximately $41.3 million in fiscal 2013 based on our current dividend policy and the 258 million common
shares outstanding as at March 31, 2012.
Guarantees
We issued letters of credit and performance guarantees for $127.7 million in the normal course of business this year which are not
recognized in the consolidated statement of financial position, compared to $153.7 million last fiscal year. The amount was lower this
year due to a decrease in advance payment obligations.
Pension obligations
We maintain defined benefit and defined contribution pension plans. We expect to contribute approximately $13.2 million more than
the annual required contribution for current services to satisfy a portion of the underfunded liability of the defined benefit pension plan.
Contributions necessary to fund our pension obligations have been increasing mainly as a result of modest long-term bond returns,
market performance and a change in the mortality assumptions used.
7.2 Off balance sheet arrangements
Prior to the adoption of IFRS, certain sale and leaseback transactions entered into as part of our TS/C operations were classified as
operating leases and were off balance sheet obligations. Since the adoption of IFRS, most of these sale and leaseback transactions
are classified as finance leases and their obligations are now included in the consolidated statement of financial position. Note 2 to the
consolidated financial statements provides more details about the adjustments for these arrangements.
Most of our current off balance sheet obligations are from obligations related to operating leases from:
The operation of a training centre for the MSH project with the U.K. Ministry of Defence to provide simulation training services. The
operating lease commitments are between the operating company, which has the service agreement with the U.K. Ministry of
Defence, and the asset company, which owns the assets. These leases are non recourse to us;
Certain buildings that are leased throughout our network of training and production facilities in the normal course of business.
You can find more details about operating lease commitments in Note 27 to the consolidated financial statements.
9 Non-GAAP and other financial measures (see Section 3.6).
60 | CAE Annual Report 2012
Management’s Discussion and Analysis
In the normal course of business, we are involved in a program in which we sell undivided interests in certain of our accounts
receivable and contracts in progress assets (current financial assets program) to third parties for cash consideration for amounts up to
$150.0 million without recourse to CAE. We continue to act as a collection agent. These transactions are accounted for when we have
considered to have surrendered control over the transferred accounts receivable and contracts in progress assets. Certain contracts
in progress assets sold through the program are not eligible for de-recognition and the cash consideration received for these assets is
classified in the current portion of long-term debt. As at March 31, 2012, $81.5 million (2011 – $54.4 million) and $54.2 million (2011 –
$37.4 million) of specific accounts receivable and contracts in progress assets respectively were sold to financial institutions pursuant
to these agreements.
7.3 Financial instruments
We are exposed to various financial risks in the normal course of business. We enter into forward and swap contracts to manage our
exposure to fluctuations in foreign exchange rates, interest rates and changes in share price which have an effect on our share-based
payments costs. We also continually assess whether the derivatives we use in hedging transactions are effective in offsetting changes
in fair value or cash flows of hedged items. We enter into these transactions to reduce our exposure to risk and volatility, and not for
speculative reasons. We only deal with highly rated counterparties.
Classification of financial instruments
We have made the following classifications for our financial instruments:
Cash and cash equivalents, restricted cash and all derivative instruments, except for derivatives designated as effective hedging
instruments, are classified as fair value through profit and loss (FVTPL);
Accounts receivable, qualifying contracts in progress, non-current receivables and advances are classified as loans and
receivables, except for those that we intend to sell immediately or in the near term, which are classified as FVTPL;
Portfolio investments are classified as available-for sale;
Accounts payable and accrued liabilities and long-term debt, including interest payable, as well as finance leases, are classified as
other financial liabilities, all of which are measured at amortized cost using the effective interest rate method;
To date, we have not classified any financial assets as held-to maturity.
Fair value of financial instruments
The fair value of a financial instrument is the amount at which the financial instrument could be exchanged in an arm’s-length
transaction between knowledgeable and willing parties under no compulsion to act. The fair value of a financial instrument is
determined by reference to the available market information at the reporting date. When no active market exists for a financial
instrument, we determine the fair value of that instrument based on valuation methodologies as discussed below. In determining
assumptions required under a valuation model, we primarily use external, readily observable market data inputs. Assumptions or
inputs that are not based on observable market data incorporate our best estimates of market participant assumptions, and are used
when external data is not available. Counterparty credit risk and the fair values of our own credit risk have been taken into account in
estimating the fair value of all financial assets and financial liabilities, including derivatives.
We used the following assumptions and valuation methodologies to estimate the fair value of financial instruments:
The fair value of cash and cash equivalents, restricted cash, accounts receivable, contracts in progress, accounts payable and
accrued liabilities approximate their carrying values due to their short-term maturities;
The fair value of finance lease obligations are estimated using the discounted cash flow method;
The fair value of long-term debt, long-term obligations and non-current receivables (including advances) are estimated based on
discounted cash flows using current interest rates for instruments with similar terms and remaining maturities;
The fair value of derivative instruments (including forward contracts, swap agreements and embedded derivatives with economic
characteristics and risks that are not clearly and closely related to those of the host contract) are determined using valuation
techniques and are calculated as the present value of the estimated future cash flows using an appropriate interest rate yield curve
and foreign exchange rate, adjusted for CAE’s and the counterparty’s credit risk. Assumptions are based on market conditions
prevailing at each reporting date. Derivative instruments reflect the estimated amounts that we would receive or pay to settle the
contracts at the reporting date;
The fair value of available-for-sale investments, if any, which do not have readily available market value, but for which fair value
can be reliably measured, is estimated using a discounted cash flow model, which includes some assumptions that are not
supportable by observable market prices or rates.
A description of the fair value hierarchy is discussed in Note 29 of our consolidated financial statements.
Financial risk management
Due to the nature of the activities that we carry out and as a result of holding financial instruments, we are exposed to credit risk,
liquidity risk and market risk, including foreign currency risk and interest rate risk. Our exposure to credit risk, liquidity risk and market
risk is managed within risk management parameters approved by the board of directors. These risk management parameters remain
unchanged since the previous period, unless otherwise indicated.
We use derivative instruments to manage market risk against the volatility in foreign exchange rates, interest rates and share-based
payments in order to minimize their impact on our results and financial position.
CAE Annual Report 2012 | 61
Management’s Discussion and Analysis
Embedded derivatives are recorded at fair value separately from the host contract when their economic characteristics and risks are
not clearly and closely related to those of the host contract. We may enter into freestanding derivative instruments which are not
eligible for hedge accounting, to offset the foreign exchange exposure of embedded foreign currency derivatives. In such
circumstances, both derivatives are carried at fair value at each statement of financial position date with the change in fair value
recorded in consolidated net income.
Our policy is not to utilize any derivative financial instruments for trading or speculative purposes. We may choose to designate
derivative instruments, either freestanding or embedded, as hedging items. This process consists of matching derivative hedging
instruments to specific assets and liabilities or to specific firm commitments or forecasted transactions. To some extent, we use
non-derivative financial liabilities to hedge foreign currency exchange rate risk exposures.
Credit risk
Credit risk is defined as our exposure to a financial loss if a debtor fails to meet its obligations in accordance with the terms and
conditions of its arrangements with us. We are exposed to credit risk on our accounts receivable and certain other assets through our
normal commercial activities. We are also exposed to credit risk through our normal treasury activities on our cash and cash
equivalents and derivative financial assets.
Credit risks arising from our normal commercial activities are managed in regards to customer credit risk. An allowance for doubtful
accounts is established when there is a reasonable expectation that we will not be able to collect all amounts due according to the
original terms of the receivables (see Note 5 of the consolidated financial statements). When a trade receivable is uncollectible, it is
written-off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written-off are
recognized in income.
Our customers are primarily established companies with publicly available credit ratings and government agencies, which facilitates
risk monitoring. In addition, we typically receive substantial non-refundable advance payments for construction contracts. We closely
monitor our exposure to major airlines in order to mitigate our risk to the extent possible. Furthermore, our trade accounts receivable
are not concentrated with specific customers but are held from a wide range of commercial and government organizations. As well,
our credit exposure is further reduced by the sale of certain of our accounts receivable and contracts in progress assets to third-party
financial institutions for cash consideration on a non-recourse basis (current financial assets program). We do not hold any collateral
as security. The credit risk on cash and cash equivalents is mitigated by the fact that they are in place with a diverse group of major
Japanese, North American and European financial institutions.
We are exposed to credit risk in the event of non-performance by counterparties to our derivative financial instruments. We use
several measures to minimize this exposure. First, we enter into contracts with counterparties that are of high-credit quality (mainly
A-rated or better). We signed International Swaps & Derivatives Association, Inc. (ISDA) Master Agreements with the majority of
counterparties with whom we trade derivative financial instruments. These agreements make it possible to apply full netting when a
contracting party defaults on the agreement, for each of the transactions covered by the agreement and in force at the time of default.
Also, collateral or other security to support derivative financial instruments subject to credit risk can be requested by us or our
counterparties (or both parties, if need be) when the net balance of gains and losses on each transaction exceeds a threshold defined
in the ISDA Master Agreement. Finally, we monitor the credit standing of counterparties on a regular basis to help minimize credit risk
exposure.
The carrying amounts presented in Note 5 and Note 29 of the consolidated financial statements represent the maximum exposure to
credit risk for each respective financial asset as at the relevant dates.
Liquidity risk
Liquidity risk is defined as the potential that we cannot meet our cash obligations as they become due.
We manage this risk by establishing cash forecasts, as well as long-term operating and strategic plans. The management of
consolidated liquidity requires a regular monitoring of expected cash inflows and outflows which is achieved through a forecast of our
consolidated liquidity position, for adequacy and efficient use of cash resources. Liquidity adequacy is assessed in view of seasonal
needs, growth requirements and capital expenditures, and the maturity profile of indebtedness, including off balance sheet
obligations. We manage our liquidity risk to maintain sufficient liquid financial resources to fund our operations and meet our
commitments and obligations. In managing our liquidity risk, we have access to a revolving unsecured credit facility of
US$450.0 million, with an option, subject to the lender’s consent, to increase to a total amount of up to US$650.0 million. As well, we
have agreements to sell certain of our accounts receivable and contracts in progress assets for an amount up to $150.0 million
(current financial assets program). We also regularly monitor any financing opportunities to optimize our capital structure and maintain
appropriate financial flexibility.
Market risk
Market risk is defined as our exposure to a gain or a loss in the value of our financial instruments as a result of changes in market
prices, whether those changes are caused by factors specific to the individual financial instruments or its issuer, or factors affecting all
similar financial instruments traded in the market. We are mainly exposed to foreign currency risk and interest rate risk.
Foreign currency risk
Foreign currency risk is defined as our exposure to a gain or a loss in the value of our financial instruments as a result of fluctuations
in foreign exchange rates. We are exposed to foreign currency rate variability primarily in relation to certain sale commitments,
expected purchase transactions and debt denominated in a foreign currency. As well, most of our foreign operations’ functional
currencies are other than the Canadian dollar (in particular the U.S. dollar [USD], euro [€] and British pounds [GBP or £]). Our related
62 | CAE Annual Report 2012
Management’s Discussion and Analysis
exposure to the foreign currency rates is primarily through cash and cash equivalents and other working capital elements of these
foreign operations.
We also mitigate foreign currency risks by having our foreign operations transact in their functional currency for material procurement,
sale contracts and financing activities.
We use forward foreign currency contracts and foreign currency swap agreements to manage our exposure from transactions in
foreign currencies and to synthetically modify the currency of exposure of certain financial position items. These transactions include
forecasted transactions and firm commitments denominated in foreign currencies.
Our foreign currency hedging programs are typically unaffected by changes in market conditions, as related derivative financial
instruments are generally held-to-maturity, consistent with the objective to fix currency rates on the hedged item.
Foreign currency sensitivity analysis
Foreign currency risk arises on financial instruments that are denominated in a foreign currency. Assuming a reasonably possible
strengthening of 5% in the relevant foreign currencies against the Canadian dollar for the year ended March 31, 2012, the pre-tax
effects on net income would have been a negative net adjustment of $1.0 million (2011 – negative net adjustment of $4.9 million) and
a negative net adjustment of $39.4 million (2011 – negative net adjustment of $23.0 million) on other comprehensive income (OCI).
Interest rate risk
Interest rate risk is defined as our exposure to a gain or a loss to the value of our financial instruments as a result of fluctuations in
interest rates. We bear some interest rate fluctuation risk on our floating rate long-term debt and some fair value risk on our fixed
interest long-term debt. We mainly manage interest rate risk by fixing project-specific floating rate debt in order to reduce cash flow
variability. We also have a floating rate debt through an unhedged bank borrowing, a specific fair value hedge and other asset-specific
floating rate debt. A mix of fixed and floating interest rate debt is sought to reduce the net impact of fluctuating interest rates.
Derivative financial instruments used to synthetically convert interest rate exposures are mainly interest rate swap agreements.
We use financial instruments to manage our exposure to changing interest rates and to adjust our mix of fixed and floating interest
rate debt on long-term debt. The mix was 77% fixed-rate and 23% floating-rate at the end of this year (2011 – 74% fixed rate and 26%
floating rate).
Our interest rate hedging programs are typically unaffected by changes in market conditions, as related derivative financial
instruments are generally held-to-maturity to establish asset and liability management matching, consistent with the objective to
reduce risks arising from interest rate movements. As a result, the changes in variable interest rates do not have a significant impact
on net income and OCI.
Interest rate risk sensitivity analysis
In fiscal 2012 and fiscal 2011, a 1% increase/decrease in the interest rate would not have a significant impact on our net income and
OCI.
Share-based payments cost
We have entered into equity swap agreements with a major Canadian financial institution to reduce our cash and income exposure to
fluctuations in our share price relating to the Deferred Share Unit (DSU) and Long-Term Incentive Deferred Share Unit (LTI-DSU)
programs. Pursuant to the agreement, we receive the economic benefit of dividends and share price appreciation while providing
payments to the financial institution for the institution’s cost of funds and any share price depreciation. The net effect of the equity
swaps partly offset movements in our share price impacting the cost of the DSU and LTI-DSU programs and is reset monthly. As at
March 31, 2012, the equity swap agreements covered 2,500,000 of our common shares (2011 – 2,755,000).
Hedge of net investments in foreign operations
As at March 31, 2012, we have designated a portion of our senior notes totalling US$192.8 million (2011 – US$105.0 million) as a
hedge of net investments in foreign operations. Gains or losses on the translation of the designated portion of our senior notes are
recognized in OCI to offset any foreign exchange gains or losses on translation of the financial statements of foreign operations.
We have determined that there is no concentration of risks arising from financial instruments and estimated that the information
disclosed above is representative of our exposure to risk during the period.
Refer to the Consolidated Statements of Comprehensive Income for the total amount of the change in fair value of financial
instruments designated as cash flow hedges recognized in income for the period and total amount of gains and losses recognized in
OCI and to Note 29 of the consolidated financial statements for the classification of financial instruments.
CAE Annual Report 2012 | 63
Management’s Discussion and Analysis
8. BUSINESS COMBINATIONS
Fiscal 2012 acquisitions
As at March 31, 2012, we entered into business combination transactions for a total cost of $131.4 million.
An amount of $0.7 million of acquisition-related costs was included in general and administrative expenses in the consolidated income
statement for the year ended March 31, 2012.
Medical Education Technologies, Inc.
In August 2011, we acquired 100% of the shares of Medical Education Technologies, Inc. (METI). With this acquisition, we gain global
market access, expand our product and services offering and acquired simulation-based technology for healthcare.
The fair value of the acquired identifiable intangible assets of $39.0 million (including technology and customer relationships) is still
provisional for the period ended March 31, 2012, and will be until the valuations for those assets are finalized. Preliminary goodwill of
$99.1 million arising from the acquisition of METI is attributable to the advantages gained, which include:
- A platform that immediately propels us to an important position by providing access to the human patient simulator segment, a
significant segment of the overall healthcare simulation market;
- An expanded customer base for CAE Healthcare, enabling the offering of the existing portfolio of solutions to a much broader
market;
- An experienced management team with subject matter expertise and industry know-how.
The fair value of the acquired accounts receivable was $9.7 million. Gross contractual amounts receivable amount to $10.5 million,
but $0.8 million of this amount is not expected to be collected.
The revenue and operating profit included in the consolidated income statement from METI since the acquisition date is $35.9 million
and $0.6 million respectively. Had METI been consolidated from April 1, 2011, the consolidated income statement would have shown
additional revenue and operating profit from METI of $31.0 million and $1.8 million respectively. These pro-forma amounts are
estimated based on the operations of the acquired business prior to the business combination, but are adjusted to reflect our
accounting policies where significant. The amounts are provided as supplemental information and are not necessarily indicative of
future performance.
Haptica Limited
In July 2011, we acquired the assets and intellectual property of Haptica Limited (Haptica). The acquisition serves to add to CAE
Healthcare’s surgical solution offering.
The fair value of the acquired identifiable assets amounted to $0.7 million (including technology and intellectual property rights) and
no goodwill is recognized from this acquisition.
Flight Simulator-Capital L.P.
In March 2012, we acquired the outstanding 80.5% of the interests in Flight Simulator-Capital L.P. (Simucap) that we previously did
not own. With this acquisition, we own 100% of the units of Simucap. The acquisition provides us with control of a financing vehicle
that offers lease financing for our civil flight simulators and access to financing of up to 85% of the equipment value available from
Export Development Canada. The structure allows us to provide more financing alternatives to customers. No goodwill is recognized
from this acquisition.
Other
Adjustments to the determination of the net identifiable assets acquired and liabilities assumed for certain fiscal 2011 acquisitions
were also completed during the fiscal year and resulted in an adjustment to goodwill of nil. Remaining additional consideration
outstanding for previous years’ acquisitions amounts to $9.0 million which is contingent on certain conditions being satisfied.
A summary of the total net assets of all acquisitions is included in Note 3 of our consolidated financial statements.
64 | CAE Annual Report 2012
Management’s Discussion and Analysis
9. EVENTS AFTER THE REPORTING PERIOD
Oxford Aviation Academy Luxembourg S. à r. l.
On May 16, 2012, we acquired 100% of the shares of Oxford Aviation Academy Luxembourg S. à r. l. (OAA) for total consideration of
$314.3 million. OAA is a provider of aviation training and crew sourcing services. With this acquisition, we strengthen our leadership
and global reach in civil aviation training by increasing our training centre footprint, growing our flight academy network and extending
our portfolio of aviation training solutions. Management considers it impracticable to disclose information about the fair value of the net
assets acquired since the findings of the valuation exercise are not yet available. The acquisition of OAA was financed through a
senior unsecured credit facility.
No revenue or operating profit from OAA was included in our consolidated income statement as at March 31, 2012.
Restructuring
We announced restructuring measures on May 23, 2012 which are designed to refocus our resources and capabilities in response to
a change
300 employees worldwide.
these measures, our current workforce
in our defence market. Under
is being reduced by approximately
10. BUSINESS RISK AND UNCERTAINTY
We operate in several industry segments that have various risks and uncertainties. Management and the Board discuss the principal
risks facing our business, particularly during the annual strategic planning and budgeting processes. The risks and uncertainties
described below are risks that could materially affect our business, financial condition and results of operation. These risks are
categorized as industry-related risks, risks specific to CAE and risks related to the current market environment. These are not
necessarily the only risks we face; additional risks and uncertainties that are presently unknown to us or that we may currently deem
immaterial may adversely affect our business.
Management attempts to mitigate risks that may affect our future performance through a process of identifying, assessing, reporting
and managing risks that are significant from a corporate perspective.
10.1 Risks relating to the industry
Competition
We sell our simulation equipment and training services in highly competitive markets. New entrants are emerging and others are
positioning themselves to try to take greater market share. Some of our competitors are larger than we are, and have greater
financial, technical, marketing, manufacturing and distribution resources. In addition, some competitors have well-established
relationships with, or are important suppliers to, aircraft manufacturers, airlines and governments, which may give them an advantage
when competing for projects for these organizations. In particular, we face competition from Boeing, which has pricing and other
competitive advantages over us with respect to training, update and maintenance services related to Boeing aircraft simulators.
Boeing has a licencing model for new Boeing civil aircraft simulators which includes a requirement for simulator manufacturers and
service training operators to pay Boeing a royalty to manufacture, update or upgrade a simulator, and to provide training services on
new Boeing simulators.
Some OEMs may be interested in deepening their services offered to their customers for training services. OEMs have certain
advantages in competing with independent training service providers. An OEM controls the pricing for the data, parts and equipment
packages that are often required to manufacture a simulator based on that OEM’s aircraft, which in turn is a critical capital cost for any
simulation-based training service provider. Some OEMs may be in a position to demand licence royalties to permit the manufacturing
of simulators based on the OEM’s aircraft, and/or to permit any training on such simulators. CAE also has some advantages, including
being a simulator manufacturer, sometimes being able to replicate aircraft without data, parts and equipment packages from an OEM,
and owning a diversified training network that includes joint ventures with large airline operators which are aircraft customers for some
OEMs. To mitigate the foregoing risks, we work on value-added business propositions to various OEMs. We have recently, as
announced in fiscal 2012, extended our business relationships with OEMs such as Augusta Westland, Bombardier, Bell Helicopter
and others. We also regularly work with other OEMs on business opportunities related to equipment and training services.
We obtain most of our contracts through competitive bidding processes that subject us to the risk of spending a substantial amount of
time and effort on proposals for contracts that may not be awarded to us. We cannot be certain that we will continue to win contracts
through competitive bidding processes at the same rate as we have in the past.
Periods of economic recession or credit constraints for civil market products lead to heightened competition for each available civil
aircraft simulator sale. This in turn leads to a reduction in profit on sales won during such a period. Should such conditions occur, we
could experience price and margin erosion.
Level and timing of defence spending
A significant portion of our revenue comes from sales to military customers around the world. In fiscal 2012, for example, sales by the
SP/M and TS/M segments accounted for 49% of our revenue. We are either the primary contractor or a subcontractor for various
programs by Canadian, U.S., European, and other foreign governments. If funding for a government program is cut, we could lose
future revenue, which could have a negative effect on our operations. If countries we have contracts with significantly lower their
military spending, there could be a material negative effect on our sales and earnings. We are experiencing longer and delayed
procurement processes in mature markets, such as the U.S. and Europe, which impacts the timing of contract awards and results in
delayed recognition of revenue.
CAE Annual Report 2012 | 65
Management’s Discussion and Analysis
Government-funded military programs
Like most companies that supply products and services to governments, we can be audited and reviewed from time to time. Any
adjustments that result from government audits and reviews may have a negative effect on our results of operations. Some costs may
not be reimbursed or allowed in negotiations of fixed-price contracts. As a result, we may also be subject to a higher risk of legal
actions and liabilities than companies that cater only to the private sector, which could have a materially negative effect on our
operations.
Civil aviation industry
A significant portion of our revenue comes from supplying equipment and training services to the commercial and business airline industry.
If jet fuel prices attain high levels for a sustained period, there could be a greater impetus for airlines to replace older, less
fuel-efficient aircraft. However, higher fuel costs could also limit the airlines’ available financial resources, and could potentially cause
deliveries of new aircraft to be delayed or cancelled. Airlines may slow capacity growth or cut capacity should sustained high fuel
costs make the availability of such capacity not economically viable. Such a reaction would negatively affect the demand for our
training equipment and services.
Constraints in the credit market may reduce the ability of airlines and others to purchase new aircraft, negatively affecting the demand
for our training equipment and services, and the purchase of our products.
We are also exposed to credit risk on accounts receivable from our customers. We have adopted policies to ensure we are not
significantly exposed to any individual customer. Our policies include analyzing the financial position of our customers and regularly
reviewing their credit quality. We also subscribe from time to time to credit insurance and, in some instances, require a bank letter of credit
to secure our customers’ payments to us.
Regulatory rules imposed by aviation authorities
We are required to comply with regulations imposed by aviation authorities. These regulations may change without notice, which
could disrupt our sales and operations. Any changes imposed by a regulatory agency, including changes to safety standards imposed
by aviation authorities such as the U.S. Federal Aviation Administration, could mean we have to make unplanned modifications to our
products and services, causing delays or resulting in cancelled sales. We cannot predict the impact that changing laws or regulations
might have on our operations. Any changes could have a materially negative effect on our results of operations or financial condition.
Sales or licences of certain CAE products require regulatory approvals and compliance
The sale or licence of many of our products is subject to regulatory controls. These can prevent us from selling to certain countries
and require us to obtain from one or more governments an export licence or other approvals to sell certain technology such as military
related simulators or other training equipment, including military data or parts. These regulations change often and we cannot be
certain that we will be permitted to sell or license certain products to customers, which could cause a potential loss of revenue for us.
If we fail to comply with government laws and regulations related to export controls and national security requirements, we could be
suspended or barred from government contracts or subcontracts for a period of time, which would negatively affect our revenue from
operations and profitability, and could have a negative effect on our reputation and ability to procure other government contracts in the
future.
10.2 Risks relating to the Company
Product evolution
The civil aviation and military markets in which we operate are characterized by changes in customer requirements, new aircraft
models and evolving industry standards. If we do not accurately predict the needs of our existing and prospective customers or
develop product enhancements that address evolving standards and technologies, we may lose current customers and be unable to
bring on new customers. This could reduce our revenue. The evolution of the technology could also have an impact on the value of our
fleet of FFSs.
Research and development activities
We carry out some of our R&D initiatives with the financial support of government, including the Government of Québec through
Investissements Québec (IQ) and the Government of Canada through SADI. We may not, in the future, be able to replace these
existing programs with other government risk-sharing programs of comparable benefit to us, which could have a negative impact on
our financial performance and research and development activities.
We receive investment tax credits on eligible R&D activities that we undertake in Canada from the federal government and investment
tax credits on eligible R&D activities that we undertake in Québec from the provincial government. The credits we receive are based
on federal and provincial legislation currently enacted. The investment tax credits available to us can be reduced by changes to the
respective governments’ legislation which could have a negative impact on our financial performance and research and development
activities.
Fixed-price and long-term supply contracts
We provide our products and services mainly through fixed-price contracts that require us to absorb cost overruns, even though it can
be difficult to estimate all of the costs associated with these contracts or to accurately project the level of sales we may ultimately
achieve. In addition, a number of contracts to supply equipment and services to commercial airlines and defence organizations are
long-term agreements that run up to 20 years. While some of these contracts can be adjusted for increases in inflation and costs, the
adjustments may not fully offset the increases, which could negatively affect the results of our operations.
66 | CAE Annual Report 2012
Management’s Discussion and Analysis
Procurement and OEMs encroachment
We are required to procure data, parts, equipment and many other inputs from a wide variety of OEMs and sub-contractors. We are
not always able to find two or more sources for inputs we need, and in the case of specific aircraft simulators and other training
equipment, significant inputs can only be sole sourced. We may therefore be vulnerable to delivery schedule delays, the financial
condition of the sole-source suppliers and their willingness to deal with us. Within their corporate groups, some sole-source suppliers
include businesses that compete with parts of our business.
Warranty or other product-related claims
We manufacture simulators that are highly complex and sophisticated. These may contain defects that are difficult to detect and
correct. If our products fail to operate correctly or have errors, there could be warranty claims or we could lose customers. Correcting
these defects could require significant capital investment. If a defective product is integrated into our customer’s equipment, we could
face product liability claims based on damages to the customer’s equipment. Any claims, errors or failures could have a negative
effect on our operating results and business. We cannot be certain that our insurance coverage will be sufficient to cover one or more
substantial claims.
Product integration and program management risk
Our business could be negatively affected if our products do not successfully integrate or operate with other sophisticated software,
hardware, computing and communications systems that are also continually evolving. If we experience difficulties on a project or do
not meet project milestones, we may have to devote more engineering and other resources than originally anticipated. While we
believe we have recorded adequate provisions for risks of losses on fixed-price contracts, it is possible that fixed-price and long-term
supply contracts could subject us to additional losses that exceed obligations under the terms of the contracts.
Protection of intellectual property
We rely in part on trade secrets and contractual restrictions, such as confidentiality agreements and licenses, to establish and protect
our proprietary rights. These may not be effective in preventing a misuse of our technology or in deterring others from developing
similar technologies. We may be limited in our ability to acquire or enforce our intellectual property rights in some countries.
Intellectual property
Our products contain sophisticated software and computer systems that are supplied to us by third parties. These may not always be
available to us. Our production of simulators often depends on receiving confidential or proprietary data on the functions, design and
performance of a product or system that our simulators are intended to simulate. We may not be able to obtain this data on
reasonable terms, or at all.
Infringement claims could be brought against us or against our customers. We may not be successful in defending these claims and
we may not be able to develop processes that do not infringe on the rights of third parties, or obtain licenses on terms that are
commercially acceptable, if at all.
Litigation related to our intellectual property rights could be lengthy and costly and could negatively affect our operations or financial
results, whether or not we are successful in defending a claim.
Key personnel
Our continued success will depend in part on our ability to retain and attract key personnel with the relevant skills, expertise and
experience. Our compensation policy is designed to mitigate this risk.
Environmental liabilities
We use, generate, store, handle and dispose of hazardous materials at our operations, and used to at some of our discontinued or
sold operations. Past operators at some of our sites also carried out these activities.
New laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination,
new clean-up requirements or claims on environmental indemnities we have given may result in us having to incur substantial costs.
This could have a materially negative effect on our financial condition and results of operations.
We have made provisions for claims we know about and remediation we expect will be required, but there is a risk that our provisions
are not sufficient.
In addition, our discontinued operations are largely uninsured against such claims, so an unexpectedly large environmental claim
against a discontinued operation could reduce our profitability in the future.
Liability claims arising from casualty losses
Because of the nature of our business, we may be subject to liability claims, including claims for serious personal injury or death,
arising from:
Accidents or disasters involving training equipment we have sold or aircraft for which we have provided training equipment or
services;
Our pilot provisioning;
Our live flight training operations.
We may also be subject to product liability claims relating to equipment and services that our discontinued operations sold in the past.
We cannot be certain that our insurance coverage will be sufficient to cover one or more substantial claims.
Integration of acquired businesses
The success of our acquisitions depends on our ability to crystallize synergies both in terms of successfully marketing our broadened
product offering as well as efficiently consolidating the operations of the acquired businesses into our existing operations.
CAE Annual Report 2012 | 67
Management’s Discussion and Analysis
Our ability to penetrate new markets
We are attempting to leverage our knowledge, experience and best practices in simulation-based aviation training and optimization to
penetrate the new markets of simulation-based training in healthcare and mining.
As we enter these new markets, unforeseen difficulties and expenditures could arise, which may have an adverse effect on our
operations, profitability and reputation. Penetrating new markets is inherently more difficult than managing within our already
established core markets. The risks associated with entering new markets are greater; however, we believe there is potential for CAE
to develop material revenues in these new business areas over the long term.
Enterprise resource planning
We are investing time and money in an ERP system. If the system does not operate as expected or when expected, it may be difficult
for us to claim compensation or correction from any third party. We may not be able to realize the expected value of the system and
this may have a negative effect on our operations, profitability and reputation.
Length of sales cycle
The sales cycle for our products and services is long and unpredictable, ranging from 6 to 18 months for civil aviation applications and
from 6 to 24 months or longer for military applications. During the time when customers are evaluating our products and services, we
may incur expenses and management time. Making these expenditures in a quarter that has no corresponding revenue will affect our
operating results and could increase the volatility of our share price. We may pre-build certain products in anticipation of orders to
come and to facilitate a faster delivery schedule to gain competitive advantage; if orders for those products do not materialize when
expected, we have to carry the pre-built product in inventory for a period of time until a sale is realized.
Reliance on technology
We depend on information technology networks and systems to process, transmit and store electronic data and financial information,
to manage business operations and to comply with regulatory, legal, national security, contractual and tax requirements. In addition,
our business requires the appropriate and secure utilization of sensitive and confidential information belonging to third parties such as
aircraft OEMs and national defence forces. An information technology system failure or breach of data security could disrupt our
operations, cause the loss of business information, compromise confidential information, require significant management attention
and resources and could have a material adverse effect on our operations, reputation and financial performance. We have in place
security controls, policy enforcement mechanisms and monitoring systems in order to address potential threats.
10.3 Risks relating to the market
Foreign exchange
Our operations are global with nearly 90% of our revenue generated in foreign currencies, mainly the U.S. dollar, the euro and the
British pound. Our revenue is divided approximately one-third in each of the U.S, Europe and the rest of the world.
Our Canadian operations generate approximately 38% of our revenues with a large portion of our operating costs in Canadian dollars.
When the Canadian dollar increases in value, it negatively affects our foreign currency-denominated revenue and hence our financial
results. When the Canadian dollar decreases in value, it negatively affects our foreign currency-denominated costs and our
competitive position compared to other equipment manufacturers in jurisdictions where operating costs are lower. We have various
hedging programs to partially offset this exposure. However, our currency hedging activities do not entirely mitigate foreign exchange
risk and provide only short-term offsetting benefits.
Business conducted through our foreign operations, mainly Military and Civil training and services, are substantially based in local
currencies. A natural hedge exists by virtue of revenues and operating expenses being in like currencies. However, we face unhedged
currency translation exposure with these operations since we consolidate results in Canadian dollars for financial reporting purposes.
Devaluation of foreign currencies against the Canadian dollar, for example volatility in the Euro currency as a result of European
economic austerity measures and credit market conditions, would have a negative translation impact.
Availability of capital
Our main credit facility, which was refinanced in April 2011, is up for renewal in April 2015. We cannot determine at this time whether
the credit facility will be renewed at the same cost, for the same duration and on similar terms as were previously available.
Pension plans
Pension funding is based on actuarial estimates and is subject to limitations under applicable income tax and other regulations.
Actuarial estimates prepared during the year were based on assumptions related to projected employee compensation levels at the
time of retirement and the anticipated long-term rate of return on pension plan assets. The actuarial funding valuation reports
determine the amount of cash contributions that we are required to contribute into the registered retirement plans. Our latest pension
funding reports show the pension plans to be in a solvency deficit position. Therefore, we are required to make cash funding
contributions. If this reduced level of pension fund assets persists to the date of the next funding valuations, we will be required to
increase our cash funding contributions, reducing the availability of such funds for other corporate purposes.
Doing business in foreign countries
We have operations in over 25 countries and sell our products and services to customers around the world. Sales to customers
outside Canada and the U.S. made up approximately 55% of revenue in fiscal 2012. We expect sales outside Canada and the U.S. to
continue to represent a significant portion of revenue in the foreseeable future. As a result, we are subject to the risks of doing
business internationally.
68 | CAE Annual Report 2012
Management’s Discussion and Analysis
These are the main risks we are facing:
Change in laws and regulations;
Tariffs, embargoes, controls and other restrictions;
General changes in economic and geopolitical conditions;
Complexity and risks of using foreign representatives and consultants.
11. RELATED PARTY TRANSACTIONS
A list of principal investments which significantly impact our results or assets is presented in Note 32 of our consolidated financial
statements.
The following transactions are carried out in the normal course of business with related parties which include joint ventures and our
joint venture partners:
As at March 31
(amounts in millions)
Current amounts owed from
Portion attributable to the interest of the other venturers
Other
Current amounts owed to
Portion attributable to the interest of the other venturers
Other
Non-current amounts owed from
Portion attributable to the interest of the other venturers
Years ended March 31
(amounts in millions)
Sales of products and services
Portion attributable to the interest of the other venturers
Other
Purchases of products and services, and other
Portion attributable to the interest of the other venturers
Other
Other income transactions
Portion attributable to the interest of the other venturers
2012
37.8
0.3
13.2
0.6
$
$
$
10.0
2011
16.1
0.5
11.2
0.7
0.4
$
$
$
2012
2011
$ 105.8
$
55.9
6.8
7.1
$
16.1
$
28.8
4.5
8.7
$
9.8
$
-
The non-current amounts owed from related parties are obligations under finance leases maturing in October 2022 which carry an
interest rate of 5.14% per annum. There are no provisions held against any of the receivables from related parties as at
March 31, 2012 (2011 – nil).
In addition, during fiscal 2012, transactions amounting to $2.1 million (2011 – $2.3 million) were made, at normal market prices, with
organizations of which some of our directors are partners or officers.
Compensation of key management personnel
Key management personnel have the ability and responsibility to make major operational, financial and strategic decisions for the
Company and include certain executive officers. The compensation paid or payable to key management for employee services is
shown below:
Years ended March 31
(amounts in millions)
Salaries and other short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
$
2012
4.9
1.3
1.5
2.5
$
10.2
2011
5.1
1.0
-
8.9
15.0
$
$
CAE Annual Report 2012 | 69
Management’s Discussion and Analysis
12. CHANGES IN ACCOUNTING STANDARDS
12.1
IFRS implementation
Effective April 1, 2010, we began reporting our financial results in accordance with IFRS. This MD&A should be read in conjunction
with our consolidated financial statements for the year ended March 31, 2012, which were prepared in accordance with IFRS 1, First-
time adoption of IFRS, as issued by the International Accounting Standards Board (IASB). The comparative figures for each period of
the year ended March 31, 2011 have been restated to comply with IFRS. For details on the most significant adjustments to the
consolidated financial statements, refer to Note 2 – First-time adoption of IFRS of our consolidated financial statements.
12.2 Future changes in accounting standards
Financial instruments
In November 2009, the IASB released IFRS 9, Financial Instruments, which is the first part of a three-part project to replace IAS 39,
Financial Instruments: Recognition and Measurement. It addresses classification and measurement of financial assets and liabilities.
IFRS 9 replaces the multiple category and measurement models of IAS 39 for debt instruments with a new mixed measurement
model having two categories: amortized cost and fair value through profit or loss. Most of the requirements in IAS 39 for classification
and measurement of financial liabilities were carried forward in IFRS 9. However, the portion of the changes in fair value related to our
own credit risk must be presented in OCI rather than in income. IFRS 9 is effective for annual periods beginning on or after January 1,
2015, with earlier application permitted. We are currently evaluating the impact of the standard on its consolidated financial
statements.
In October 2010, the IASB amended IFRS 7, Financial Instruments: Disclosures. IFRS 7 was amended to require quantitative and
qualitative disclosures for transfers of financial assets where the transferred assets are not derecognized in their entirety or the
transferor retains continuing managerial involvement. If a substantial portion of the total amount of the transfer activity occurs in the
closing days of a reporting period, the amendment also requires disclosure of supplementary information. These amendments are
effective for annual periods beginning on or after July 1, 2011, with earlier application permitted. We are currently evaluating the
impact of the amendments on its consolidated financial statements.
Consolidation
In May 2011, the IASB released IFRS 10, Consolidated Financial Statements, which replaces SIC-12, Consolidation – Special
Purpose Entities, and parts of IAS 27, Consolidated and Separate Financial Statements. The new standard builds on existing
principles by identifying the concept of control as the determining factor in whether an entity should be included in a company’s
consolidated financial statements. The standard provides additional guidance to assist in the determination of control where it is
difficult to assess. IFRS 10 is effective for annual periods beginning on or after January 1, 2013, with earlier application permitted. We
are currently evaluating the impact of the standard on its consolidated financial statements.
Joint arrangements
In May 2011, the IAS released IFRS 11, Joint Arrangements, which supersedes IAS 31, Interests in Joint Ventures, and SIC-13,
Jointly Controlled Entities – Non-monetary Contributions by Venturers. IFRS 11 focuses on the rights and obligations of a joint
arrangement, rather than its legal form as is currently the case under IAS 31. The standard addresses inconsistencies in the reporting
of joint arrangements by requiring the equity method to account for interest in jointly controlled entities. IFRS 11 is effective for annual
periods beginning on or after January 1, 2013, with early application permitted. We currently use proportionate consolidation to
account for interests in joint ventures, but must apply the equity method under IFRS 11. Under the equity method, our share of net
assets, net income and OCI of joint ventures will be presented as one-line items on the statement of financial position, the statement
of income and the statement of comprehensive income, respectively.
Disclosure of interests in other entities
In May 2011, the IASB released IFRS 12, Disclosure of Interests in Other Entities. IFRS 12 is a new and comprehensive standard on
disclosure requirements for all forms of interests in other entities, including joint arrangements, associates and unconsolidated
structured entities. The standard requires an entity to disclose information regarding the nature and risks associated with its interests
in other entities and the effects of those interests in its financial position, financial performance and cash flows. IFRS 12 is effective for
annual periods beginning on or after January 1, 2013, with earlier application permitted. We are currently evaluating the impact of the
standard on its consolidated financial statements.
Fair value measurement
In May 2011, the IASB released IFRS 13, Fair Value Measurement. IFRS 13 defines fair value, sets out in a single IFRS a framework
for measuring fair value and requires disclosures about fair value measurements. IFRS 13 applies when other IFRSs require or permit
fair value measurements. It does not introduce any new requirements to measure an asset or a liability at fair value, change what is
measured at fair value in IFRSs or address how to present changes in fair value. The standard is effective for annual periods
beginning on or after January 1, 2013, with earlier application permitted. We are currently evaluating the impact of the standard on its
consolidated financial statements.
70 | CAE Annual Report 2012
Management’s Discussion and Analysis
Employee benefits
In June 2011, the IASB amended IAS 19, Employee Benefit. IAS 19 is amended to reflect significant changes to recognition and
measurement of defined benefit pension expense and termination benefits by the elimination of the option to defer the recognition of
actuarial gains and losses (the corridor approach) and expand the disclosure requirements. These amendments are effective for
years beginning on or after January 1, 2013, with earlier application permitted. We are currently evaluating the impact of these
amendments on its consolidated financial statements.
Financial statement presentation
In June 2011, the IASB amended IAS 1, Financial Statement Presentation, to change the disclosure of items presented in OCI,
including a requirement to separate items presented in OCI into two groups based on whether or not they may be recycled to profit or
loss in the future. The amendments are effective for annual periods beginning on or after July 1, 2012. We are currently evaluating the
impact of the amendments on its consolidated financial statements.
12.3 Use of judgements, estimates and assumptions
Because we prepare our consolidated financial statements in conformity with IFRS, we are required to make judgements, estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the
date of the consolidated financial statements, as well as the reported amounts of revenues and expenses for the period reported. We
also exercise judgement in applying our accounting policies. The areas involving a higher degree of judgement or complexity, or areas
where assumption and estimates are significant to the consolidated financial statements are disclosed below. Actual results could
differ from those estimates. We report changes to our estimates in the period in which they are identified.
Business combinations
Business combinations are accounted for in accordance with the acquisition method; thus, on the date that control is obtained. The
acquiree’s identifiable assets, liabilities and contingent liabilities are measured at their fair value. Depending on the complexity of
determining these valuations, we either consult with independent experts or develop the fair value internally by using appropriate
valuation techniques which are generally based on a forecast of the total expected future net discounted cash flows. These
evaluations are linked closely to the assumptions made by management regarding the future performance of the related assets and
any changes in the discount rate applied.
Development costs
Development costs are recognized as intangible assets and are amortized over their useful lives when they meet the criteria for
capitalization. Forecasted revenue and profitability for the relevant projects are used to assess compliance with the capitalization
criteria and to assess the recoverable amount of the assets.
Impairment of non-financial assets
Our impairment test for goodwill is based on fair value less costs to sell calculations and uses valuation models such as the
discounted cash flows model. The cash flows are derived from the plan approved by management for the next five years. Cash flow
projections take into account past experience and represent management’s best estimate about future developments. Cash flows
after the five-year period are extrapolated using estimated growth rates. Key assumptions which management has based its
determination of fair value less costs to sell include estimated growth rates, post-tax discount rates and tax rates. The post-tax
discount rates were derived from the respective cash generating units’ representative weighted average cost of capital which range
from 8% to 12%. These estimates, including the methodology used, can have a material impact on the respective values and
ultimately the amount of any goodwill impairment.
Likewise, whenever property, plant and equipment and intangible assets are tested for impairment, the determination of the assets’
recoverable amount involves the use of estimates by management and can have a material impact on the respective values and
ultimately the amount of any impairment.
Provisions
In determining the amount of the provisions, assumptions and estimates are made in relation to discount rates, the expected costs
and the expected timing of the costs.
Revenue recognition
We use the percentage-of-completion method in accounting for our fixed-price contracts to deliver services and manufacture
products. Use of the percentage-of-completion method requires us to estimate the work performed to date as a proportion of the total
work to be performed. Management conducts monthly reviews of its estimated costs to complete, percentage-of-completion estimates
and revenues and margins recognized, on a contract-by-contract basis. The impact of any revisions in cost and earnings estimates is
reflected in the period in which the need for a revision becomes known.
CAE Annual Report 2012 | 71
Management’s Discussion and Analysis
Defined benefit pension plans
The cost of defined benefit pension plans as well as the present value of the pension obligations is determined using actuarial
valuations. The actuarial valuations involve making assumptions about discount rates, expected rates of return on assets, future
salary increases, mortality rates and future pension increases. All assumptions are reviewed at each reporting date. Any changes in
these assumptions will impact the carrying amount of pension obligations. In determining the appropriated discount rate management
considers the interest rates of corporate bonds that are denominated in the currency in which the benefits will be paid with an AA/AAA
rating, and that have terms to maturity approximating the terms of the related pension liability. The mortality rate is based on publicly
available mortality tables for the specific country. Future salary increases and pension increases are based on expected future
inflation rates for the specific country.
The expected return on plan assets is determined by considering the expected returns on the assets underlying the current
investment policy applicable over to the period over which the obligation is to be settled. For the purpose of calculating the expected
return on plan assets, historical and expected future returns were considered separately for each class of assets based on the asset
allocation and the investment policy.
Other key assumptions for pension obligations are based, in part, on current market conditions. See note 15 of our consolidated
financial statements for further details regarding assumptions used.
Share-based payments
We measure the cost of cash and equity-settled transactions with employees by reference to the fair value of the related instruments
at the date at which they are granted. Estimating fair value for share-based payments requires determining the most appropriate
valuation model for a grant, which is dependent on the terms and conditions of the grant. This also requires making assumptions and
determining the most appropriate inputs to the valuation model including the expected life of the option, volatility and dividend yield.
Income taxes
We are subject to income tax laws in numerous jurisdictions. Judgement is required in determining the worldwide provision for income
taxes. The determination of tax liabilities and assets involve certain uncertainties in the interpretation of complex tax regulations. We
provide for potential tax liabilities based on the probability weighted average of the possible outcomes. Differences between actual
results and those estimates could have an effect on the income tax liabilities and deferred tax liabilities in the period in which such
determinations are made.
Deferred tax assets are recognized to the extent that it is more likely than not that taxable profit will be available against the losses
that can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be
recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. The
recorded amount of total deferred tax assets could be altered if estimates of projected future taxable income and benefits from
available tax strategies are lowered, or if changes in current tax regulations are enacted that impose restrictions on the timing or
extent of our ability to utilise future tax benefits.
Government assistance repayments
In determining the amount of repayable government assistance, assumptions and estimates are made in relation to discount rates,
expected revenues and the expected timing of revenues, when relevant. Revenue projections take into account past experience and
represent management’s best estimate about the future. Revenues after a five-year period are extrapolated using estimated growth
rates depending on the estimated timing of repayments. The estimated repayments are discounted using average rates ranging from
8.5% to 13.0% based on terms of similar financial instruments. These estimates along with the methodology used to derive the
estimates can have a material impact on the respective values and ultimately any repayable obligation in relation to government
assistance. A 1% increase to the growth rates would increase the royalty obligation at March 31, 2012 by approximately $8.2 million.
13. CONTROLS AND PROCEDURES
The internal auditor reports regularly to management on any weaknesses it finds in our internal controls and these reports are
reviewed by the Audit Committee.
In accordance with National Instrument 52-109 issued by the Canadian Securities Administrators (CSA), certificates signed by the
President and Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) have been filed. These filings certify the
appropriateness of our disclosure controls and procedures and the design and effectiveness of the internal controls over financial
reporting.
13.1 Evaluation of disclosure controls and procedures
Our disclosure controls and procedures are designed to provide reasonable assurance that information is accumulated and
communicated to our President and CEO and CFO and other members of management, so we can make timely decisions about
required disclosure.
Under the supervision of the President and CEO and the CFO, management evaluated the effectiveness of our disclosure controls
and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under U.S. Securities Exchange Act of 1934, as of March 31, 2012. The
President and CEO and the CFO concluded from the evaluation that the design and operation of our disclosure controls and
procedures were effective as at March 31, 2012, and ensure that information is recorded, processed, summarized and reported within
the time periods specified under Canadian and U.S. securities laws.
72 | CAE Annual Report 2012
Management’s Discussion and Analysis
13.2 Internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal controls over financial reporting, as defined in Rule
13a-15(f) and 15d-15(f) under the U.S. Securities Exchange Act of 1934. Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting, and the preparation of consolidated financial
statements for external purposes in accordance with IFRS. Management evaluated the design and operation of our internal controls
over financial reporting as of March 31, 2012, based on the framework and criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and has concluded that our
internal control over financial reporting is effective. Management did not identify any material weaknesses.
There were no changes in our internal controls over financial reporting that occurred during fiscal year 2012 that have materially
affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
14. OVERSIGHT ROLE OF AUDIT COMMITTEE AND BOARD OF DIRECTORS
The Audit Committee reviews our annual MD&A and related consolidated financial statements with management and the external
auditor and recommends them to the Board of Directors for their approval. Management and our internal auditor also provide the
Audit Committee with regular reports assessing our internal controls and procedures for financial reporting. The external auditor
reports regularly to management on any weaknesses it finds in our internal control, and these reports are reviewed by the Audit
Committee.
15. ADDITIONAL INFORMATION
You will find additional information about CAE, including our most recent AIF, on our website at www.cae.com, or on SEDAR at
www.sedar.com or on EDGAR at www.sec.gov.
CAE Annual Report 2012 | 73
Management’s Discussion and Analysis
16. SELECTED FINANCIAL INFORMATION
The following table provides selected quarterly financial information for the years 2010 through to 2012. The information for 2010 is
reported on a previous Canadian GAAP basis (prior to the adoption of IFRS), while the information for 2011 and 2012 is reported on
an IFRS basis. Accordingly, the financial information for 2010 is not directly comparable to subsequent periods.
(amounts in millions, except per share amounts and exchange rates)
Q1
Q2
Q3
Q4
Total
Fiscal 2012 – IFRS
Revenue
Net income
Equity holders of the Company
Non-controlling interests
Basic EPS attributable to equity holders of the Company
Diluted EPS attributable to equity holders of the Company
Average number of shares outstanding (basic)
Average number of shares outstanding (diluted)
Average exchange rate, U.S. dollar to Canadian dollar
Average exchange rate, Euro to Canadian dollar
Average exchange rate, British pound to Canadian dollar
Fiscal 2011 – IFRS
Revenue
Net income
Equity holders of the Company
Non-controlling interests
Basic EPS attributable to equity holders of the Company
Diluted EPS attributable to equity holders of the Company
Average number of shares outstanding (basic)
Average number of shares outstanding (diluted)
Average exchange rate, U.S. dollar to Canadian dollar
Average exchange rate, Euro to Canadian dollar
Average exchange rate, British pound to Canadian dollar
Fiscal 2010 – Previous Canadian GAAP
Revenue
Earnings from continuing operations
Basic earnings per share from continuing operations
Diluted earnings per share from continuing operations
Net earnings
Basic earnings per share
Diluted earnings per share
Average number of shares outstanding (basic)
Average number of shares outstanding (diluted)
Average exchange rate, U.S. dollar to Canadian dollar
Average exchange rate, Euro to Canadian dollar
Average exchange rate, British pound to Canadian dollar
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
427.9
433.5
453.1
506.7
1,821.2
43.5
43.1
0.4
0.17
0.17
257.0
258.0
0.97
1.39
1.58
366.4
36.6
37.2
(0.6)
0.15
0.14
256.5
256.8
1.03
1.31
1.53
383.0
27.2
0.11
0.11
27.2
0.11
0.11
255.4
255.4
1.17
1.59
1.81
38.7
38.4
0.3
0.15
0.15
257.3
258.0
0.98
1.38
1.58
388.0
39.4
39.1
0.3
0.15
0.15
256.6
257.1
1.04
1.34
1.61
364.5
39.1
0.15
0.15
39.1
0.15
0.15
255.6
46.1
45.6
0.5
0.18
0.18
257.9
258.6
1.02
1.38
1.61
410.8
38.9
38.5
0.4
0.15
0.15
256.8
257.7
1.01
1.38
1.60
382.9
37.7
0.15
0.15
37.7
0.15
0.15
255.9
53.7
53.2
0.5
0.21
0.21
257.9
258.6
1.00
1.31
1.57
465.6
46.0
45.5
0.5
0.18
0.18
256.9
258.2
0.99
1.35
1.58
395.9
40.5
0.16
0.16
40.5
0.16
0.16
256.4
(1)
(1)
255.6
1.10
1.57
1.80
(1)
255.9
1.06
1.56
1.73
(1)
256.4
1.04
1.44
1.63
182.0
180.3
1.7
0.70
0.70
257.5
258.2
0.99
1.37
1.58
Total
1,630.8
160.9
160.3
0.6
0.62
0.62
256.7
257.5
1.02
1.34
1.58
Total
1,526.3
144.5
0.56
0.56
144.5
0.56
0.56
255.8
255.8
1.09
1.54
1.74
(1)
(1) For these periods, the effect of stock options potentially exercisable was anti-dilutive; therefore, the basic and diluted weighted average
number of shares outstanding are the same.
74 | CAE Annual Report 2012
Selected segment information
(amounts in millions, except operating margins)
Q4-2012
Q4-2011
FY2012
FY2011
IFRS
IFRS
IFRS
IFRS
Civil segments
Simulation Products/Civil
Revenue
Segment operating income
Operating margins (%)
Training & Services/Civil
Revenue
Segment operating income
Operating margins (%)
Total Civil segments
Revenue
Segment operating income
Operating margins (%)
Military segments
Simulation Products/Military
Revenue
Segment operating income
Operating margins (%)
Training & Services/Military
Revenue
Segment operating income
Operating margins (%)
Total Military segments
Revenue
Segment operating income
Operating margins (%)
New Core Markets
Revenue
Segment operating loss
Operating margins (%)
Total
Revenue
Segment operating income
Operating margins (%)
$
$
$
$
$
83.1
14.0
16.8
132.3
30.3
22.9
215.4
44.3
20.6
195.6
34.6
17.7
71.5
11.0
15.4
267.1
45.6
17.1
24.2
(1.2)
(5.0)
$
506.7
Other
Operating profit
$
$
88.7
17.5
-
88.7
$
$
$
76.2
9.4
12.3
121.0
25.3
20.9
197.2
34.7
17.6
179.3
34.0
19.0
78.0
12.0
15.4
$
257.3
46.0
17.9
11.1
(3.9)
(35.1)
465.6
76.8
16.5
1.0
77.8
$
$
$
$
Management’s Discussion and Analysis
FY2010
Previous
Canadian
GAAP
$
$
$
$
$
284.1
49.4
17.4
433.5
75.1
17.3
717.6
124.5
17.3
545.6
95.7
17.5
263.1
43.9
16.7
808.7
139.6
17.3
N/A
N/A
N/A
$
342.5
$
51.6
15.1
498.4
122.2
24.5
840.9
173.8
20.7
619.2
101.2
16.3
278.1
40.9
14.7
897.3
142.1
15.8
83.0
(13.8)
(16.6)
$
$
$
$
$
$
$
$
272.9
34.8
12.8
454.0
99.9
22.0
726.9
134.7
18.5
586.0
105.0
17.9
279.9
50.3
18.0
865.9
155.3
17.9
38.0
(8.4)
(22.1)
$ 1,821.2
302.1
16.6
-
302.1
$
$
$ 1,630.8
281.6
$ 1,526.3
264.1
17.3
1.0
282.6
$
$
17.3
(34.1)
230.0
$
$
CAE Annual Report 2012 | 75
Management’s Discussion and Analysis
Selected annual information for the past five years
(amounts in millions, except per share amounts)
IFRS
Revenue
Net income
Equity holders of the Company
Non-controlling interests
Average exchange rate, U.S. dollar to Canadian dollar
Average exchange rate, Euro to Canadian dollar
Average exchange rate, British pound to Canadian dollar
Financial position:
Total assets
Total non-current financial liabilities1
Total net debt
Per share:
Basic EPS attributable to equity holders of the Company
Diluted EPS attributable to equity holders of the
Company
Dividends
Total equity
(amounts in millions, except per share amounts)
Previous Canadian GAAP
Revenue
Earnings from continuing operations
Net earnings
Average exchange rate, U.S. dollar to Canadian dollar
Average exchange rate, Euro to Canadian dollar
Average exchange rate, British pound to Canadian dollar
Financial position:
Total assets
Total non-current financial liabilities1
Total net debt
Per share:
Basic earnings from continuing operations
Diluted earnings from continuing operations
Basic net earnings
Diluted net earnings
Basic dividends
Shareholders' equity
2012
2011
$ 1,821.2
182.0
$ 1,630.8
160.9
180.3
1.7
0.99
1.37
1.58
160.3
0.6
1.02
1.34
1.58
$ 3,183.7
$ 2,817.3
869.0
534.3
757.5
383.8
$
0.70
$
0.62
0.70
0.16
4.05
0.62
0.15
3.63
2010
2009
2008
$ 1,526.3
144.5
144.5
1.09
1.54
1.74
$ 1,662.2
202.2
201.1
1.13
1.59
1.91
$ 1,423.6
163.4
151.3
1.03
1.46
2.07
$ 2,621.9
457.0
179.8
$ 2,665.8
375.4
285.1
$ 2,243.2
362.1
124.1
$
0.56
0.56
0.56
0.56
0.12
4.52
$
0.79
0.79
0.79
0.79
0.12
4.70
$
0.64
0.64
0.60
0.59
0.04
3.71
(1) Includes long-term debt, long-term derivative liabilities and other long-term liabilities meeting the definition of a financial liability.
76 | CAE Annual Report 2012
CAE InC.
COnSOLIDATED FInAnCIAL STATEMEnTS
MAnAgEMEnT’S REpORT On InTERnAL COnTROL OvER
FInAnCIAL REpORTIng
InDEpEnDEnT AuDITOR’S REpORT
COnSOLIDATED FInAnCIAL STATEMEnTS
Consolidated Statement of Financial position
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
nOTES TO ThE COnSOLIDATED FInAnCIAL STATEMEnTS
note 1 nature of Operations and Summary of Significant Accounting policies
note 2 First-Time Adoption of IFRS
note 3 Business Combinations
note 4 Investments in Joint ventures
note 5 Accounts Receivable
note 6 Inventories
note 7 property, plant and Equipment
note 8 Intangible Assets
note 9 Other Assets
note 10 Accounts payable and Accrued Liabilities
note 11 Contracts in progress
note 12 provisions
note 13 Debt Facilities
note 14 government Assitance
note 15 Employee Benefits Obligations
note 16 Deferred gains and other non-current liabilities
note 17 Income Taxes
note 18 Share Capital, Earnings per Share and Dividends
note 19 Accumulated Other Comprehensive (Loss) Income
note 20 Employee Compensation
note 21 Impairment of non-Financial Assets
note 22 Other (gains) Losses – net
note 23 Finance Expense – net
note 24 Share-Based payments
note 25 Supplementary Cash Flows Information
note 26 Contingencies
note 27 Commitments
note 28 Capital Risk Management
note 29 Financial Instruments
note 30 Financial Risk Management
note 31 Operating Segments and geographic Information
note 32 Related party Relationships
note 33 Related party Transactions
note 34 Events after the Reporting period
78
78
80
80
81
82
83
84
85
85
99
108
110
111
111
112
113
114
115
115
116
117
120
121
124
124
127
128
128
128
128
129
129
133
133
133
134
135
138
144
147
149
150
CAE Annual Report 2012 | 77
Consolidated Financial Statements
Management’s Report on Internal Control Over Financial Reporting
Management of CAE is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in
Rule 13a-15(f), 15d-15(f) under the Securities Exchange Act of 1934). CAE’s internal control over financial reporting is a process
designed under the supervision of CAE’s President and Chief Executive Officer and Chief Financial Officer to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external
reporting purposes in accordance with Canadian generally accepted accounting principles.
As of March 31, 2012, management conducted an assessment of the effectiveness of the Company’s internal control over the
financial reporting based on the framework and criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that the
Company’s internal control over financial reporting as of March 31, 2012 was effective.
M. Parent
President and Chief Executive Officer
S. Lefebvre
Vice-president, Finance and Chief Financial Officer
Montreal (Canada)
May 23, 2012
Independent Auditor’s Report
To the Shareholders of CAE Inc.
We have completed an integrated audit of CAE Inc. and its subsidiaries’ current year consolidated financial statements and their
internal control over financial reporting as at March 31, 2012 and an audit of their prior year consolidated financial statements. Our
opinions, based on our audits, are presented below.
Report on the consolidated financial statements
We have audited the accompanying consolidated financial statements of CAE Inc. and its subsidiaries, which comprise the
consolidated statements of financial position, as at March 31, 2012, March 31, 2011 and April 1, 2010 and the consolidated
statements of income, comprehensive income, changes in equity, and cash flows for the years ended March 31, 2012 and March 31,
2011, and the related notes, which comprise a summary of significant accounting policies and other explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits
in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement. Canadian generally accepted auditing standards require that
we comply with ethical requirements.
An audit involves performing procedures to obtain audit evidence, on a test basis, about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks
of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the company’s preparation and fair presentation of the consolidated financial
statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the
appropriateness of accounting principles and policies used and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion
on the consolidated financial statements.
78 | CAE Annual Report 2012
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of CAE Inc. and its
subsidiaries as at March 31, 2012, March 31, 2011 and April 1, 2010 and their financial performance and their cash flows for the years
ended March 31, 2012 and March 31, 2011 in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
Report on internal control over financial reporting
We have also audited CAE Inc. and its subsidiaries’ internal control over financial reporting as at March 31, 2012, based on criteria
established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
Management’s responsibility for internal control over financial reporting
Management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over
Financial Reporting.
Auditor’s responsibility
Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We
conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects.
An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control,
based on the assessed risk, and performing such other procedures as we consider necessary in the circumstances.
We believe that our audit provides a reasonable basis for our audit opinion on CAE Inc.’s internal control over financial reporting.
Definition of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material
effect on the financial statements.
Inherent limitations
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, CAE Inc. and its subsidiaries maintained, in all material respects, effective internal control over financial reporting as at
March 31, 2012, based on criteria established in Internal Control – Integrated Framework issued by COSO.
May 23, 2012
Montréal, Quebec, Canada
1 Chartered accountant auditor permit No.12300
CAE Annual Report 2012 | 79
Consolidated Statement of Financial Position
Consolidated Statement of Financial Position
Consolidated Financial Statements
Consolidated Financial Statements
(amounts in millions of Canadian dollars)
Notes
March 31
April 1
March 31
(amounts in millions of Canadian dollars)
2010
2011
2012
Assets
(Note 2)
(Note 2)
Cash and cash equivalents
$ 312.9
$ 276.4
$ 287.3
296.8
230.5
Accounts receivable
308.4
Contracts in progress : assets
245.8
Inventories
153.1
Prepayments
47.7
124.3
43.5
Income taxes recoverable
Derivative financial assets
58.8
18.9
95.5
10.3
$ 1,148.1
$ 1,049.2
Total current assets
Property, plant and equipment
1,293.7
Intangible assets
533.2
Deferred tax assets
Derivative financial assets
1,211.0
375.8
20.7
11.6
24.1
7.2
238.2
205.5
126.8
24.2
30.7
27.9
$ 966.2
1,197.1
290.4
24.7
15.1
97.8
Other assets
177.4
Total assets
$ 3,183.7
149.0
$ 2,817.3
$ 2,591.3
Liabilities and equity
Accounts payable and accrued liabilities
$ 551.9
$ 493.0
$ 597.6
Provisions
21.6
Income taxes payable
10.9
20.9
12.9
Contracts in progress : liabilities
104.6
Current portion of long-term debt
136.0
Derivative financial liabilities
125.8
86.2
12.7
12.4
Total current liabilities
$ 810.1
$ 883.4
Provisions
10.4
6.0
32.1
6.5
167.4
68.5
9.3
$ 776.8
8.2
600.9
148.0
574.0
161.6
Long-term debt
685.6
Royalty obligations
161.6
Employee benefits obligations
114.2
Deferred gains and other non-current liabilities
186.0
Deferred tax liabilities
Derivative financial liabilities
62.8
187.6
81.4
129.3
64.5
13.4
13.2
15.1
91.8
12.9
$ 1,884.4
Total liabilities
$ 2,141.5
Equity
Share capital
$ 454.5
Contributed surplus
19.2
$ 440.7
17.1
$ 1,772.9
$ 436.3
14.2
Accumulated other comprehensive (loss) income
(9.8)
Retained earnings
558.0
Equity attributable to equity holders of the Company
(9.8)
466.4
11.4
338.5
$ 800.4
$ 1,021.9
$ 914.4
Non-controlling interests
18.5
20.3
$ 1,042.2
Total equity
Total liabilities and equity
$ 932.9
$ 2,817.3
$ 3,183.7
18.0
$ 818.4
$ 2,591.3
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
Notes
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
March 31
2012
$ 287.3
308.4
245.8
153.1
47.7
95.5
10.3
$ 1,148.1
1,293.7
533.2
24.1
7.2
177.4
March 31
2011
(Note 2)
$ 276.4
296.8
230.5
124.3
43.5
58.8
18.9
April 1
2010
(Note 2)
$ 312.9
238.2
205.5
126.8
24.2
30.7
27.9
$ 1,049.2
$ 966.2
1,211.0
375.8
20.7
11.6
149.0
1,197.1
290.4
24.7
15.1
97.8
$ 3,183.7
$ 2,817.3
$ 2,591.3
$ 597.6
$ 551.9
$ 493.0
21.6
10.9
104.6
136.0
12.7
20.9
12.9
125.8
86.2
12.4
32.1
6.5
167.4
68.5
9.3
$ 883.4
6.0
$ 810.1
10.4
$ 776.8
8.2
685.6
161.6
114.2
186.0
91.8
12.9
574.0
161.6
62.8
187.6
64.5
13.4
600.9
148.0
81.4
129.3
13.2
15.1
$ 2,141.5
$ 1,884.4
$ 1,772.9
$ 454.5
19.2
(9.8)
558.0
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
$ 440.7
17.1
(9.8)
466.4
$ 436.3
14.2
11.4
338.5
$ 914.4
$ 800.4
18.5
$ 932.9
$ 2,817.3
18.0
$ 818.4
$ 2,591.3
The accompanying notes form an integral part of these Consolidated Financial Statements.
The accompanying notes form an integral part of these Consolidated Financial Statements.
80 | CAE Annual Report 2012
Consolidated Financial Statements
Consolidated Financial Statements
Consolidated Income Statement
Consolidated Statement of Financial Position
Years ended March 31
(amounts in millions of Canadian dollars, except per share amounts)
(amounts in millions of Canadian dollars)
Assets
Revenue
Cash and cash equivalents
Cost of sales
ccounts receivable
Gross profit
Contracts in progress : assets
Research and development expenses
Inventories
Selling, general and administrative expenses
Prepayments
Other (gains) losses – net
Income taxes recoverable
Operating profit
Derivative financial assets
Finance income
Total current assets
Finance expense
Property, plant and equipment
Finance expense – net
Intangible assets
Earnings before income taxes
Deferred tax assets
Income tax expense
Derivative financial assets
Net income
Other assets
Total assets
Attributable to:
Equity holders of the Company
Liabilities and equity
Non-controlling interests
ccounts payable and accrued liabilities
Provisions
Earnings per share from continuing operations
Income taxes payable
attributable to equity holders of the Company
Contracts in progress : liabilities
Basic and diluted
Current portion of long-term debt
Notes
Notes
31
5
11
6
22
29
23
23
7
8
17
17
29
9
10
12
11
18
13
Derivative financial liabilities
The accompanying notes form an integral part of these Consolidated Financial Statements.
Total current liabilities
Provisions
29
12
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
Equity
Share capital
Contributed surplus
ccumulated other comprehensive (loss) income
Retained earnings
Equity attributable to equity holders of the Company
Non-controlling interests
Total equity
Total liabilities and equity
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
March 31
2012
$ 287.3
308.4
245.8
153.1
47.7
95.5
10.3
$ 1,148.1
1,293.7
533.2
24.1
7.2
177.4
$ 3,183.7
$ 597.6
21.6
10.9
104.6
136.0
12.7
$ 883.4
6.0
685.6
161.6
114.2
186.0
91.8
12.9
March 31
2012
2011
(Note 2)
$ 1,821.2
$ 276.4
1,221.1
296.8
$ 600.1
230.5
62.8
124.3
256.4
43.5
(21.2)
58.8
$ 302.1
18.9
(6.6)
$ 1,049.2
69.2
1,211.0
62.6
375.8
$ 239.5
20.7
57.5
11.6
$ 182.0
149.0
$
$ 2,817.3
$ 180.3
1.7
$ 551.9
$ 182.0
20.9
12.9
$
125.8
0.70
86.2
12.4
$ 810.1
10.4
574.0
161.6
62.8
187.6
64.5
13.4
April 1
2011
2010
(Note 2)
(Note 2)
$ 1,630.8
$ 312.9
1,082.0
238.2
$ 548.8
205.5
44.5
126.8
239.9
24.2
(18.2)
30.7
$ 282.6
27.9
(4.4)
$ 966.2
64.4
1,197.1
60.0
290.4
$ 222.6
24.7
61.7
15.1
$ 160.9
97.8
$
$ 2,591.3
$ 160.3
0.6
$ 493.0
$ 160.9
32.1
6.5
$
167.4
0.62
68.5
9.3
$ 776.8
8.2
600.9
148.0
81.4
129.3
13.2
15.1
$ 2,141.5
$ 1,884.4
$ 1,772.9
$ 454.5
19.2
(9.8)
558.0
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
$ 440.7
17.1
(9.8)
466.4
$ 436.3
14.2
11.4
338.5
$ 914.4
$ 800.4
18.5
$ 932.9
$ 2,817.3
18.0
$ 818.4
$ 2,591.3
CAE Annual Report 2012 | 81
Consolidated Statement of Financial Position
Consolidated Statement of Comprehensive Income
Consolidated Financial Statements
Consolidated Financial Statements
2012
$ 182.0
2011
$ 160.9
$
13.5
$
(23.7)
(3.9)
-
0.8
10.4
5.2
(0.6)
(1.3)
$
(20.4)
(8.7)
$
9.1
$
$
(4.7)
3.1
$
(10.3)
$
$
$
$
$
-
-
(64.9)
17.4
(47.5)
(47.4)
(10.2)
0.5
(0.6)
(0.1)
(0.1)
8.6
(2.3)
6.3
(14.8)
$
$
$
$
$
$
$ 134.6
$ 146.1
$ 132.8
1.8
$ 134.6
$ 145.4
0.7
$ 146.1
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
March 31
2012
2011
Years ended March 31
April 1
March 31
(amounts in millions of Canadian dollars)
Net income
Other comprehensive income (loss)
Foreign currency translation
308.4
Net currency translation difference on the translation of financial
245.8
(Note 2)
$ 312.9
(Note 2)
$ 276.4
238.2
205.5
2010
$ 287.3
296.8
230.5
statements of foreign operations
124.3
43.5
126.8
153.1
Net change in (losses) gains on certain long-term debt denominated in foreign
24.2
47.7
currency and designated as hedges of net investments in foreign operations
Reclassifications to income
58.8
18.9
95.5
10.3
Income taxes
$ 1,148.1
$ 1,049.2
$ 966.2
1,293.7
Net changes in cash flow hedges
533.2
Effective portion of changes in fair value of cash flow hedges
1,211.0
375.8
1,197.1
290.4
Net change in fair value of cash flow hedges transferred to
net income or to related non-financial assets or liabilities
24.1
7.2
177.4
Income taxes
$ 3,183.7
20.7
11.6
149.0
$ 2,817.3
$ 2,591.3
30.7
27.9
24.7
15.1
97.8
Net change in available-for-sale financial instruments
Net change in fair value of available-for-sale financial assets
$ 551.9
$ 493.0
$ 597.6
21.6
10.9
20.9
Defined benefit plan actuarial (losses) gains
12.9
Defined benefit plan actuarial (losses) gains
125.8
104.6
Income taxes
86.2
136.0
167.4
68.5
32.1
6.5
12.7
12.4
9.3
$ 883.4
6.0
$ 810.1
10.4
$ 776.8
8.2
Other comprehensive loss
Total comprehensive income
Total comprehensive income attributable to:
574.0
685.6
Equity holders of the Company
161.6
161.6
Non-controlling interests
62.8
114.2
Total comprehensive income
187.6
186.0
81.4
129.3
600.9
148.0
91.8
12.9
64.5
13.4
13.2
15.1
The accompanying notes form an integral part of these Consolidated Financial Statements.
$ 2,141.5
$ 1,884.4
$ 1,772.9
$ 454.5
19.2
(9.8)
558.0
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
$ 440.7
17.1
(9.8)
466.4
$ 436.3
14.2
11.4
338.5
$ 914.4
$ 800.4
18.5
$ 932.9
$ 2,817.3
18.0
$ 818.4
$ 2,591.3
82 | CAE Annual Report 2012
Consolidated Statement of Financial Position
4
.
4
7
.
3
4
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0
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Consolidated Financial Statements
(amounts in millions of Canadian dollars)
Assets
Cash and cash equivalents
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Contracts in progress : assets
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Current portion of long-term debt
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Total current liabilities
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$
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3
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3
3
(
-
-
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3
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-
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6
1
(
.
7
3
$
7
.
$
-
-
-
-
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4
Employee benefits obligations
4
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a
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$
t
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$
d
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.
4
4
-
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$
-
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.
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.
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4
.
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(
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.
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3
(
March 31
2012
March 31
2011
6
.
0
0
.
8
1
1
.
0
-
-
-
-
-
7
.
0
$ 287.3
-
-
-
(Note 2)
$ 276.4
)
2
.
0
(
3
.
0
6
1
3
.
0
6
1
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$
308.4
245.8
296.8
230.5
)
6
.
0
(
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1
.
0
(
)
5
.
0
2
(
8
.
2
3
.
6
153.1
47.7
4
.
5
95.5
4
1
10.3
$
-
-
9
.
3
124.3
43.5
)
2
.
0
58.8
(
18.9
)
9
.
7
3
(
$ 1,148.1
$ 1,049.2
-
-
-
-
-
1,293.7
533.2
3
.
6
6
.
6
24.1
6
1
7.2
$
177.4
$ 3,183.7
)
6
.
0
(
-
1,211.0
375.8
)
2
.
0
20.7
(
11.6
)
9
.
7
3
(
149.0
$ 2,817.3
-
.
)
6
0
(
.
)
1
0
(
)
5
.
0
2
(
)
2
.
1
2
(
-
-
-
-
-
-
$ 597.6
$
21.6
10.9
$ 551.9
20.9
12.9
-
-
-
-
-
104.6
136.0
-
-
-
.
)
0
1
(
125.8
9
86.2
3
-
.
-
12.7
$
$ 883.4
6.0
12.4
$ 810.1
10.4
-
-
-
-
685.6
161.6
-
-
.
8
2
.
6
0
.
0
1
574.0
161.6
-
-
-
114.2
186.0
$
91.8
12.9
62.8
187.6
64.5
13.4
-
-
-
-
-
-
$ 2,141.5
0
5
8
,
4
9
3
$ 454.5
19.2
(9.8)
558.0
2
1
9
2
5
,
8
1
Notes
-
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CAE Annual Report 2012 | 83
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Financial Statements
Consolidated Financial Statements
Notes
2012
2011
$ 182.0
$ 160.9
March 31
2012
2011
Years ended March 31
April 1
March 31
(amounts in millions of Canadian dollars)
Operating activities
(Note 2)
Net income
$ 312.9
Adjustments to reconcile net income to cash flows from operating activities:
238.2
308.4
Depreciation of property, plant and equipment
205.5
245.8
Amortization of intangible and other assets
(Note 2)
$ 276.4
296.8
230.5
2010
$ 287.3
153.1
47.7
Financing cost amortization
124.3
43.5
Deferred income taxes
95.5
10.3
Investment tax credits
Share-based payments
58.8
18.9
126.8
24.2
30.7
27.9
$ 1,148.1
Defined benefit pension plans
$ 1,049.2
$ 966.2
1,197.1
290.4
Amortization of other non-current liabilities
1,211.0
375.8
1,293.7
533.2
Other
24.1
Changes in non-cash working capital
7.2
20.7
11.6
Net cash provided by operating activities
149.0
177.4
Investing activities
Business combinations, net of cash and cash equivalents acquired
Joint venture, net of cash and cash equivalents acquired
24.7
15.1
$ 2,817.3
$ 2,591.3
97.8
$ 3,183.7
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Proceeds from disposal of property, plant and equipment
$ 493.0
$ 551.9
$ 597.6
$ 883.4
6.0
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12.9
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68.5
125.8
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Capitalized development costs
Enterprise resource planning (ERP) and other software
104.6
Other
136.0
Net cash used in investing activities
Financing activities
Net borrowing under revolving unsecured credit facilities
$ 810.1
10.4
Net effect of current financial assets program
685.6
Proceeds from long-term debt, net of transaction costs
161.6
Repayment of long-term debt
114.2
Proceeds from finance lease
186.0
Repayment of finance lease
Dividends paid
$ 776.8
8.2
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161.6
62.8
187.6
81.4
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600.9
148.0
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$ 2,141.5
Other
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$ 1,772.9
23
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13
18
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
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$ 440.7
17.1
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
(9.8)
Effect of foreign exchange rate changes on cash
558.0
$ 436.3
14.2
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466.4
11.4
338.5
and cash equivalents
$ 1,021.9
$ 914.4
$ 800.4
Cash and cash equivalents, end of year
18.0
18.5
Supplemental information:
20.3
$ 1,042.2
$ 932.9
Dividends received
$ 2,817.3
Interest paid
$ 3,183.7
$ 818.4
$ 2,591.3
The accompanying notes form an integral part of these Consolidated Financial Statements.
Interest received
Income taxes paid
The accompanying notes form an integral part of these Consolidated Financial Statements.
84 | CAE Annual Report 2012
92.3
33.5
1.6
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(12.0)
(5.3)
(71.7)
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$ 233.9
$ 226.3
$ (126.0)
(27.6)
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5.0
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1.5
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(18.5)
(6.8)
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$ (230.9)
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11.0
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312.9
(4.0)
$ 287.3
$ 276.4
$
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26.9
$
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48.5
3.7
14.9
Notes to the Consolidated Financial Statements
(Unless otherwise stated, all amounts are in millions of Canadian dollars)
The consolidated financial statements were authorized for issue by the board of directors on May 23, 2012.
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations
CAE Inc. and its subsidiaries (or the Company) design, manufacture and supply simulation equipment services and develop
integrated training solutions for the military, commercial airlines, business aircraft operators, aircraft manufacturers, healthcare
education and service providers and the mining industry. CAE’s flight simulators replicate aircraft performance in normal and
abnormal operations as well as a comprehensive set of environmental conditions utilizing visual systems that contain an extensive
database of airports, other landing areas, flying environments, motion and sound cues to create a fully immersive training
environment. The Company offers a range of flight training devices based on the same software used on its simulators. The Company
also operates a global network of training centres in locations around the world.
The Company’s operations are managed through five segments:
(i) Training & Services/Civil (TS/C) – Provides business, commercial and helicopter aviation training for flight, cabin, maintenance
and ground personnel and associated services;
(ii) Simulation Products/Civil (SP/C) – Designs, manufactures and supplies civil flight simulation training devices and visual systems;
(iii) Simulation Products/Military (SP/M) – Designs, manufactures and supplies advanced military training equipment and software
tools for air forces, armies and navies;
(iv) Training & Services/Military (TS/M) – Supplies turnkey training services, maintenance and support services, simulation-based
professional services and in-service support solutions;
(v) New Core Markets (NCM) – Provides, designs and manufactures healthcare training services and devices and mining services
and tools.
CAE is a limited liability company incorporated and domiciled in Canada. The address of the main office is 8585 Côte-de-Liesse,
Saint-Laurent, Québec, Canada, H4T 1G6. CAE shares are traded on the Toronto Stock Exchange and on the New York Stock
Exchange.
Basis of preparation
The key accounting policies applied in the preparation of these consolidated financial statements are described below. These policies
have been consistently applied to all years presented, unless otherwise stated.
The consolidated financial statements of CAE have been prepared in accordance with Part I of the Canadian Institute of Chartered
Accountants (CICA) Handbook (referred to as IFRS) as issued by the International Accounting Standards Board (IASB). The
accounting policies and basis of preparation differ from those set out in the Annual Report for the year ended March 31, 2011, which
was prepared in accordance with Part V of the CICA Handbook (referred to as previous Canadian Generally Accepted Accounting
Principles (previous Canadian GAAP)). Details of the effect of the transition from previous Canadian GAAP to IFRS on the Company’s
reported financial position, financial performance and cash flows are provided in Note 2. Comparative figures for fiscal 2011 in these
consolidated financial statements have been restated to give effect to these changes.
The consolidated financial statements have been prepared under the historical cost convention, except for the following items
measured at fair value: derivative financial instruments, financial instruments at fair value through profit and loss, available-for-sale
financial assets and liabilities for cash-settled share-based arrangements, and as modified by the transitional provisions permitted by
IFRS 1 (see Note 2).
The functional and presentation currency of CAE Inc. is the Canadian dollar.
Basis of consolidation
Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Company has the power to govern the financial and
operating policies to obtain benefits from its activities. Subsidiaries are fully consolidated from the date control is obtained and they
are de-consolidated on the date control ceases. When subsidiaries’ financial statements are prepared in accordance with local GAAP,
these financial statements are converted to IFRS for consolidation purposes.
All significant intercompany balances, transactions, income and expenses are eliminated in full. As well, profits and losses resulting
from intercompany transactions that are recognized in assets, such as inventories and property, plant and equipment, are eliminated
in full.
CAE Annual Report 2012 | 85
Consolidated Statement of Financial Position
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Joint ventures
Joint ventures are accounted for under the proportionate consolidation method. Joint ventures are companies in which the Company
exercises joint control by virtue of a contractual agreement. The Company’s investment in joint ventures includes goodwill identified
on acquisition, net of any accumulated impairment loss.
March 31
2012
Gains and losses realized on internal sales with joint ventures are eliminated, to the extent of the Company’s interest in the joint
venture.
March 31
April 1
2010
2011
$ 287.3
(Note 2)
$ 276.4
(Note 2)
$ 312.9
95.5
10.3
238.2
205.5
124.3
43.5
126.8
24.2
296.8
230.5
Business combinations
308.4
Business combinations are accounted for under the acquisition method. The consideration transferred for the acquisition of a
245.8
subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Company, if any, at
153.1
the date control is obtained. The consideration transferred includes the fair value of any liability resulting from a contingent
47.7
consideration arrangement. Acquisition-related costs, other than share and debt issue costs incurred to issue financial instruments
that form part of the consideration transferred, are expensed as incurred. Identifiable assets acquired and liabilities assumed in a
business combination are measured initially at their fair value at the acquisition date. If a business combination is achieved in stages,
the Company remeasures its previously held interest in the acquiree at its acquisition-date fair value and recognizes the resulting gain
or loss, if any, in net income.
1,293.7
533.2
The excess of the consideration transferred over the fair value of the Company’s share of the identifiable net assets acquired is
20.7
recorded as goodwill.
11.6
1,197.1
290.4
1,211.0
375.8
24.7
15.1
58.8
18.9
30.7
27.9
$ 966.2
$ 1,049.2
24.1
7.2
$ 1,148.1
177.4
Contingent consideration classified as a provision is measured at fair value, with subsequent changes recognized in income. If the
contingent consideration is classified as equity, it is not remeasured until it is finally settled within equity.
$ 2,817.3
$ 2,591.3
$ 3,183.7
149.0
97.8
$ 597.6
$ 551.9
$ 493.0
20.9
12.9
New information obtained during the measurement period, up to 12 months following the acquisition date, about facts and
circumstances existing at the acquisition date will be accounted for as an adjustment to goodwill; otherwise, it will be recognized in
income.
21.6
10.9
Non-controlling interests
104.6
Non-controlling interests (NCI) represent equity interests in subsidiaries owned by outside parties. The share of net assets of
136.0
subsidiaries attributable to non-controlling interests is presented as a component of equity. NCI’s share of net income and
comprehensive income is recognized directly in equity. Changes in the Company’s ownership interest in subsidiaries that do not result
in a loss of control are accounted for as equity transactions.
125.8
86.2
167.4
68.5
32.1
6.5
12.7
12.4
9.3
$ 883.4
6.0
$ 810.1
10.4
$ 776.8
8.2
574.0
161.6
The Company treats transactions with non-controlling interests as transactions with equity owners of the Company. For interests
685.6
purchased from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the
161.6
carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals of non-controlling interests are also
114.2
recorded in equity.
186.0
62.8
187.6
600.9
148.0
81.4
129.3
13.2
15.1
64.5
13.4
91.8
12.9
$ 2,141.5
$ 1,772.9
$ 1,884.4
Financial instruments and hedging relationships
Financial instruments
Financial assets and financial liabilities
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of
another entity. Financial instruments in the form of financial assets and financial liabilities are generally presented separately.
Financial assets and financial liabilities, including derivatives, are recognized on the consolidated statement of financial position when
the Company becomes a party to the contractual provisions of the financial instrument. On initial recognition, all financial instruments
(9.8)
are measured at fair value.
558.0
$ 440.7
17.1
$ 436.3
14.2
(9.8)
466.4
11.4
338.5
$ 454.5
19.2
$ 1,021.9
$ 914.4
$ 800.4
$ 1,042.2
$ 3,183.7
18.0
18.5
20.3
$ 2,591.3
$ 2,817.3
$ 932.9
$ 818.4
The fair value of a financial instrument is the amount at which the financial instrument could be exchanged in an arm’s-length
transaction between knowledgeable and willing parties under no compulsion to act. The best evidence of fair value at initial
recognition is the transaction price (i.e., the fair value of the consideration given or received), unless the fair value of that instrument is
evidenced by comparison with other observable current market transactions in the same instrument (i.e., without modification or
repackaging) or based on a valuation technique whose variables include only data from observable markets. When there is a
difference between the fair value of the consideration given or received at initial recognition and the amount determined using a
valuation technique, such difference is recognized immediately in income unless it qualifies for recognition as some other type of
asset or liability. Subsequent measurement of the financial instruments is based on their classification as described below. Financial
assets and financial liabilities can be classified into one of these categories: fair value through profit and loss, held-to-maturity
investments, loans and receivables, other financial liabilities and available-for-sale. The determination of the classification depends on
the purpose for which the financial instruments were acquired and their characteristics. Except in very limited circumstances, the
classification is not changed subsequent to the initial recognition.
86 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Financial instruments at fair value through profit and loss
Consolidated Statement of Financial Position
Financial instruments classified at fair value through profit and loss (FVTPL) are carried at fair value at each reporting date with the
change in fair value recorded in income. The FVTPL classification is applied when a financial instrument:
Is a derivative, including embedded derivatives accounted for separately from the host contract, but excluding those derivatives
April 1
designated as effective hedging instruments;
(amounts in millions of Canadian dollars)
Has been acquired or incurred principally for the purpose of selling or repurchasing in the near future;
Assets
Cash and cash equivalents
(Note 2)
Is part of a portfolio of financial instruments that are managed together and for which there is evidence of a recent actual pattern
$ 312.9
of short-term profit-taking; or
March 31
2012
(Note 2)
$ 276.4
$ 287.3
March 31
Notes
2011
2010
ccounts receivable
Has been irrevocably designated as such by the Company (fair value option).
Contracts in progress : assets
5
11
308.4
245.8
296.8
230.5
238.2
205.5
9
6
29
7
8
177.4
17
29
$ 1,148.1
$ 1,049.2
24.1
7.2
95.5
10.3
58.8
18.9
20.7
11.6
153.1
47.7
124.3
43.5
1,211.0
375.8
1,293.7
533.2
ccounts payable and accrued liabilities
instruments, are classified as FVTPL;
126.8
Inventories
Held-to-maturity investments, loans and receivables and other financial liabilities
24.2
Prepayments
Financial instruments classified as held-to-maturity investments, loans and receivables and other financial liabilities are carried at
30.7
Income taxes recoverable
amortized cost using the effective interest method. Interest income or expense is included in income in the period as incurred.
27.9
Derivative financial assets
Available-for-sale
Total current assets
$ 966.2
Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or that are not classified
1,197.1
Property, plant and equipment
in any of the preceding categories. Financial assets classified as available-for-sale are carried at fair value at each reporting date.
290.4
Intangible assets
Unrealized gains and losses, including changes in foreign exchange rates, are recognized in other comprehensive income (loss)
24.7
Deferred tax assets
(OCI) in the period in which the changes arise and are transferred to income when the assets are derecognized or an other than
15.1
Derivative financial assets
temporary impairment occurs. If objective evidence of impairment exists these changes are recognized in income in the period
97.8
Other assets
incurred. Also, any changes in the initial fair value resulting from currency fluctuation are recognized in income in the period incurred.
Total assets
$ 2,591.3
If a reliable estimate of the fair value of an unquoted equity instrument cannot be made, this instrument is measured at cost, less any
impairment losses. Dividends are recognized in income when the right of payment has been established.
Liabilities and equity
As a result, the following classifications were determined:
$ 493.0
(i) Cash and cash equivalents, restricted cash and all derivative instruments, except for derivatives designated as effective hedging
32.1
Provisions
6.5
Income taxes payable
(ii) Accounts receivable, qualifying contracts in progress, non-current receivables and advances are classified as loans and
167.4
Contracts in progress : liabilities
receivables, except for those that the Company intends to sell immediately or in the near term, which are classified as FVTPL;
68.5
Current portion of long-term debt
(iii) Portfolio investments are classified as available-for-sale;
9.3
Derivative financial liabilities
(iv) Accounts payable and accrued liabilities and long-term debt, including interest payable, as well as finance lease obligations are
Total current liabilities
$ 776.8
8.2
Provisions
(v) To date, the Company has not classified any financial assets as held-to-maturity.
Long-term debt
Royalty obligations
Transaction costs
81.4
Employee benefits obligations
Transaction costs that are directly related to the acquisition or issuance of financial assets and financial liabilities (other than those
129.3
Deferred gains and other non-current liabilities
classified as FVTPL) are included in the fair value initially recognized for those financial instruments. These costs are amortized to
income using the effective interest rate method.
13.2
Deferred tax liabilities
15.1
Derivative financial liabilities
Offsetting of financial assets and financial liabilities
Total liabilities
$ 1,772.9
Financial assets and financial liabilities are offset and the net amount is presented in the consolidated statement of financial position
Equity
when the Company has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis or to realize
$ 436.3
Share capital
the assets and settle the liabilities simultaneously.
14.2
Contributed surplus
classified as other financial liabilities, all of which are measured at amortized cost using the effective interest rate method;
$ 810.1
10.4
$ 883.4
6.0
$ 440.7
17.1
125.8
86.2
574.0
161.6
104.6
136.0
685.6
161.6
114.2
186.0
62.8
187.6
600.9
148.0
20.9
12.9
21.6
10.9
64.5
13.4
91.8
12.9
11
13
13
29
$ 597.6
$ 551.9
$ 3,183.7
$ 2,817.3
$ 1,884.4
$ 2,141.5
15
16
17
29
149.0
12.7
12.4
10
12
29
12
18
$ 454.5
19.2
19
(9.8)
558.0
ccumulated other comprehensive (loss) income
11.4
Impairment of financial assets
338.5
Retained earnings
At each reporting date, the carrying amounts of the financial assets other than those to be measured at FVTPL are assessed to
$ 800.4
Equity attributable to equity holders of the Company
determine whether there is objective evidence of impairment. Impairment losses on financial assets carried at cost are reversed in
subsequent periods if the amount of loss decreases and the decrease can be related objectively to an event occurring after the
18.0
Non-controlling interests
impairment was recognized.
Total equity
Total liabilities and equity
Hedge accounting
Documentation
The accompanying notes form an integral part of these Consolidated Financial Statements.
At the inception of a hedge, if the Company elects to use hedge accounting, the Company formally documents the designation of the
hedge, the risk management objectives and strategy, the hedging relationship between the hedged item and hedging item and the
method for testing the effectiveness of the hedge, which must be reasonably assured over the term of the hedging relationship and
can be reliably measured. The Company formally assesses, both at inception of the hedge relationship and on an ongoing basis,
whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of
hedged items in relation to the hedged risk.
(9.8)
466.4
$ 914.4
$ 818.4
$ 932.9
$ 3,183.7
$ 1,042.2
$ 1,021.9
$ 2,817.3
$ 2,591.3
18.5
20.3
CAE Annual Report 2012 | 87
Consolidated Statement of Financial Position
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Method of accounting
The method of recognizing fair value gains and losses depends on whether derivatives are at FVTPL or are designated as hedging
instruments, and, if the latter, the nature of the risks being hedged. All gains and losses from changes in the fair value of derivatives
not designated as hedges are recognized in income. When derivatives are designated as hedges, the Company classifies them either
as: (a) hedges of the change in fair value of recognized assets or liabilities or firm commitments (fair value hedges); or (b) hedges of
the variability in highly probable future cash flows attributable to a recognized asset or liability, a firm commitment or a forecasted
transaction (cash flow hedges); or (c) hedges of a net investment of a foreign operation.
March 31
April 1
2010
2011
March 31
2012
$ 287.3
(Note 2)
$ 276.4
(Note 2)
$ 312.9
296.8
230.5
Fair value hedge
308.4
For fair value hedges outstanding, gains or losses arising from the measurement of derivative hedging instruments at fair value are
245.8
recorded in income and the carrying amount of the hedged items are adjusted by gains and losses on the hedged item attributable to
153.1
the hedged risks which are recorded in income.
47.7
126.8
24.2
124.3
43.5
238.2
205.5
58.8
18.9
30.7
27.9
$ 1,148.1
$ 1,049.2
Cash flow hedge
The effective portion of changes in the fair value of derivative instruments that are designated and qualify as cash flow hedges is
recognized in OCI, while the ineffective portion is recognized immediately in income. Amounts accumulated in OCI are reclassified to
1,293.7
income in the period in which the hedged item affects income. However, when the forecasted transactions that are hedged items
result in recognition of non-financial assets (for example, inventories or property, plant and equipment), gains and losses previously
533.2
recognized in OCI are included in the initial carrying value of the related non-financial assets acquired or liabilities incurred. The
deferred amounts are ultimately recognized in income as the related non-financial assets are derecognized or amortized.
1,197.1
290.4
1,211.0
375.8
$ 966.2
95.5
10.3
24.1
7.2
$ 3,183.7
177.4
Hedge accounting is discontinued prospectively when the hedging relationship no longer meets the criteria for hedge accounting,
when the designation is revoked, or when the hedging instrument expires or is sold. Any cumulative gain or loss directly recognized in
OCI at that time remains in OCI until the hedged item is eventually recognized in income. When it is probable that a hedged
transaction will not occur, the cumulative gain or loss that was recognized in OCI is recognized immediately in income.
$ 2,817.3
$ 2,591.3
20.7
11.6
149.0
24.7
15.1
97.8
$ 597.6
$ 551.9
$ 493.0
20.9
12.9
21.6
10.9
Hedge of net investments in foreign operations
The Company has designated certain long-term debt as a hedge of CAE’s overall net investments in foreign operations whose
activities are denominated in a currency other than the Company’s functional currency. The portion of gains or losses on the hedging
104.6
item that is determined to be an effective hedge is recognized in OCI, net of tax and is limited to the translation gain or loss on the net
136.0
investment.
125.8
86.2
167.4
68.5
32.1
6.5
12.7
$ 883.4
6.0
12.4
$ 810.1
10.4
9.3
$ 776.8
8.2
574.0
161.6
Derecognition
Financial assets
685.6
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized when:
161.6
114.2
186.0
The rights to receive cash flows from the asset have expired;
81.4
The Company has transferred its rights to receive cash flows from the asset and either has transferred substantially all the risks
129.3
and rewards of the asset or has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
64.5
13.2
15.1
13.4
62.8
187.6
600.9
148.0
91.8
12.9
$ 2,141.5
Financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires.
$ 1,884.4
$ 1,772.9
$ 454.5
19.2
$ 440.7
17.1
$ 436.3
14.2
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and
(9.8)
the recognition of a new liability, and the difference in the respective carrying amounts is recognized in income.
558.0
(9.8)
466.4
11.4
338.5
$ 1,021.9
$ 1,042.2
$ 3,183.7
18.0
20.3
$ 818.4
$ 800.4
$ 914.4
Foreign currency translation
18.5
Foreign operations
$ 932.9
Assets and liabilities of subsidiaries that have a functional currency other than the Canadian dollar are translated from their functional
currency to Canadian dollars at exchange rates in effect at the reporting date. The resulting translation adjustments are included in
the foreign currency translation adjustment reserve in equity. Translation gains or losses related to long term intercompany account
balances, which form part of the overall net investment in foreign operations, and those arising from the translation of debt
denominated in foreign currencies and designated as hedges on the overall net investments in foreign operations are also included in
the foreign currency translation adjustment reserve. Revenue and expenses are translated at the average exchange rates for the
period.
$ 2,817.3
$ 2,591.3
When the Company reduces its overall net investment in foreign operations, which includes a reduction in the initial capital that does
not result in a loss of control or through the settlement of inter-company advances that had been considered part of the Company’s
overall net investment, the relevant amount in the foreign currency translation adjustment reserve is transferred to income.
88 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Notes
ccounts receivable
Transactions and balances
Consolidated Statement of Financial Position
Monetary assets and liabilities denominated in foreign currencies are translated at the prevailing exchange rate at the reporting date.
Non-monetary assets and liabilities, and revenue and expense items denominated in foreign currencies are translated into the
functional currency using the exchange rate prevailing at the dates of the respective transactions. Foreign exchange gains and losses
April 1
resulting from the settlement of such transactions are recognized in income.
(amounts in millions of Canadian dollars)
Assets
(Note 2)
Cash and cash equivalents
$ 312.9
Cash and cash equivalents
Cash and cash equivalents consist of cash and highly-liquid investments with original terms to maturity of 90 days or less at the date
238.2
of purchase.
205.5
Contracts in progress : assets
Accounts receivable
126.8
Inventories
Receivables are initially recognized at fair value and are subsequently carried at amortized cost, net of an allowance for doubtful
24.2
Prepayments
accounts, based on expected recoverability. The amount of the allowance is the difference between the asset’s carrying amount and
30.7
Income taxes recoverable
the present value of the estimated future cash flows, discounted at the original effective interest rate. The loss is recognized in
27.9
Derivative financial assets
income. Subsequent recoveries of amounts previously provided for or written-off are credited against the same account.
Total current assets
1,197.1
Property, plant and equipment
The Company is involved in a program in which it sells undivided interests in certain of its accounts receivable and contracts in
290.4
Intangible assets
progress: assets (current financial assets program) to third parties for cash consideration for an amount up to $150.0 million without
recourse to the Company. The Company continues to act as a collection agent. These transactions are accounted for when the
24.7
Deferred tax assets
Company is considered to have surrendered control over the transferred accounts receivable and contracts in progress: assets.
15.1
Derivative financial assets
March 31
2012
(Note 2)
$ 276.4
1,211.0
375.8
1,293.7
533.2
308.4
245.8
296.8
230.5
124.3
43.5
153.1
47.7
20.7
11.6
58.8
18.9
95.5
10.3
$ 966.2
$ 287.3
$ 1,049.2
$ 1,148.1
March 31
17
29
5
11
7
8
2011
2010
29
6
24.1
7.2
Other assets
Contracts in progress: assets
Total assets
$ 2,591.3
Contracts in progress, resulting from applying the percentage-of-completion method, are value based on materials, direct labour,
relevant manufacturing overhead and estimated contract margins. (Refer to Accounts receivable for sale of contracts in progress:
Liabilities and equity
assets).
$ 2,817.3
$ 3,183.7
177.4
149.0
97.8
9
ccounts payable and accrued liabilities
10
$ 597.6
$ 551.9
$ 493.0
29
12
12.7
11
13
21.6
10.9
20.9
12.9
104.6
136.0
125.8
86.2
32.1
Provisions
Inventories
6.5
Income taxes payable
Raw materials are valued at the lower of average cost and net realizable value. Spare parts to be used in the normal course of
167.4
Contracts in progress : liabilities
business are valued at the lower of cost, determined on a specific identification basis, and net realizable value.
68.5
Current portion of long-term debt
9.3
Derivative financial liabilities
Work in progress is stated at the lower of cost, determined on a specific identification basis, and net realizable value. The cost of work
in progress includes material, labour and an allocation of manufacturing overhead, which is based on normal operating capacity.
Total current liabilities
$ 776.8
8.2
Provisions
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the
600.9
Long-term debt
estimated costs necessary to make the sale. In the case of raw materials and spare parts, the replacement cost is the best measure
148.0
Royalty obligations
of net realizable value.
Employee benefits obligations
Deferred gains and other non-current liabilities
Property, plant and equipment
13.2
Deferred tax liabilities
Property, plant and equipment are recorded at cost less any accumulated depreciation and any accumulated net impairment losses.
15.1
Derivative financial liabilities
Costs include expenditures that are directly attributable to the acquisition or manufacturing of the item. The cost of an item of property,
plant and equipment that is initially recognized includes, when applicable, the initial present value estimate of the costs required to
Total liabilities
$ 1,772.9
dismantle and remove the asset and restore the site on which it is located at the end of its useful life. Purchased software that is
Equity
integral to the functionality of the related equipment is capitalized as part of that equipment. Subsequent costs are included in the
$ 436.3
Share capital
asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits are
14.2
Contributed surplus
present and the cost of the item can be measured reliably. Updates on training devices are recognized in the carrying value of the
11.4
training device if it is probable that the future economic benefits embodied with the part will flow to the Company and its cost can be
338.5
Retained earnings
measured reliably; otherwise, they are expensed. The costs of day-to-day servicing of property, plant and equipment are recognized
in income as incurred.
$ 800.4
Equity attributable to equity holders of the Company
ccumulated other comprehensive (loss) income
$ 810.1
10.4
$ 883.4
6.0
$ 440.7
17.1
$ 454.5
19.2
(9.8)
558.0
62.8
187.6
574.0
161.6
685.6
161.6
81.4
129.3
114.2
186.0
(9.8)
466.4
91.8
12.9
64.5
13.4
13
29
$ 914.4
$ 1,884.4
$ 2,141.5
17
29
15
16
12.4
12
18
19
$ 1,021.9
18.0
Non-controlling interests
A loss on disposal is recognized in income when the carrying value of a replaced item is derecognized, unless the item is transferred
Total equity
$ 818.4
to inventories. If it is not practicable to determine the carrying value, the cost of the replacement and the accumulated depreciation
Total liabilities and equity
$ 2,591.3
calculated by reference to that cost will be used to derecognize the replaced part. Gains and losses on disposal of property, plant and
equipment are determined by comparing the proceeds from disposal with its carrying amount, and are recognized net within other
gains and losses.
The accompanying notes form an integral part of these Consolidated Financial Statements.
$ 932.9
$ 1,042.2
$ 3,183.7
$ 2,817.3
20.3
18.5
CAE Annual Report 2012 | 89
Consolidated Statement of Financial Position
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
The different components of property, plant and equipment are recognized separately when their useful lives are materially different
and such components are depreciated separately in income. Leased assets are depreciated over the shorter of the lease term and
their useful lives. If it is reasonably certain that the Company will obtain ownership by the end of the lease term, the leased asset is
depreciated over its useful life. Land is not depreciated. The estimated useful lives, residual values and depreciation methods are as
March 31
follows:
2012
March 31
April 1
2010
2011
(Note 2)
$ 276.4
(Note 2)
$ 312.9
$ 287.3
Buildings and improvements
Simulators
308.4
Machinery and equipment
245.8
Aircraft
153.1
Aircraft engines
47.7
296.8
230.5
124.3
43.5
95.5
10.3
58.8
18.9
238.2
205.5
126.8
24.2
30.7
27.9
Method
Declining balance/Straight-line
Straight-line (10% residual)
Declining balance/Straight-line
Straight-line (15% residual)
Based on utilization
Rates/Years
2.5 to 10%/3 to 20 years
Not exceeding 25 years
20 to 35%/2 to 10 years
Not exceeding 12 years
Not exceeding 3,000 hours
Depreciation methods, useful lives and residual values, when applicable, are reviewed and adjusted, if appropriate, on a prospective
basis at each reporting date.
$ 1,148.1
$ 1,049.2
$ 966.2
1,211.0
375.8
1,293.7
Leases
533.2
The Company leases certain property, plant and equipment from and to others. Leases where the Company has substantially all the
24.1
risks and rewards of ownership are classified as finance leases. All other leases are accounted for as operating leases.
7.2
24.7
15.1
20.7
11.6
1,197.1
290.4
149.0
97.8
$ 3,183.7
$ 2,817.3
177.4
The Company as a lessor
With regards to finance leases, the asset is derecognized at the commencement of the lease and a gain (loss) is recognized in
income. The net present value of the minimum lease payments and any discounted unguaranteed residual value are recognized as
non-current receivables. Income from operating leases is recognized on a straight-line basis over the term of the corresponding lease.
$ 2,591.3
$ 597.6
$ 551.9
$ 493.0
21.6
10.9
20.9
12.9
32.1
6.5
The Company as a lessee
Finance leases are capitalized at the lease’s commencement at the lower of the fair value of the leased item and the present value of
104.6
the minimum lease payments. Any initial direct costs of the lessee are added to the amount recognized as an asset. The
136.0
corresponding obligations are included in long-term debt. Payments made under operating leases are charged to income on a
straight-line basis over the period of the lease.
125.8
86.2
167.4
68.5
12.7
12.4
9.3
$ 883.4
6.0
$ 776.8
$ 810.1
Sale and leaseback transactions
8.2
10.4
The Company engages in sales and leaseback transactions as part of the Company’s financing strategy to support investment in the
600.9
574.0
685.6
civil and military training and services business. Where a sale and leaseback transaction results in a finance lease, any excess of
148.0
161.6
161.6
sales proceeds over the carrying amount is deferred and amortized over the lease term. Where a sale and leaseback transaction
114.2
results in an operating lease, and it is clear that the transaction is established at fair value, any profit or loss is recognized
186.0
immediately. If the sales price is below fair value, the shortfall is recognized in income immediately except that, if the loss is
compensated for by future lease payments at below market price, it is deferred and amortized in proportion to the lease payments
over the period for which the asset is expected to be used. If the sale price is above fair value, the excess over fair value is deferred
and amortized over the period the asset is expected to be used.
$ 1,772.9
62.8
187.6
81.4
129.3
91.8
12.9
13.2
15.1
64.5
13.4
$ 1,884.4
$ 2,141.5
$ 454.5
19.2
$ 436.3
14.2
Intangible assets
$ 440.7
Goodwill
17.1
Goodwill is measured at cost less accumulated impairment losses, if any.
(9.8)
558.0
Goodwill arises on the acquisition of subsidiaries and joint ventures. Goodwill represents the excess of the cost of an acquisition,
including the Company’s best estimate of the fair value of contingent consideration, over the fair value of the Company’s share of the
net identifiable assets of the acquired subsidiary or joint venture at the acquisition date.
(9.8)
466.4
11.4
338.5
$ 800.4
$ 914.4
20.3
18.5
18.0
$ 1,021.9
$ 1,042.2
$ 932.9
$ 2,817.3
$ 818.4
$ 2,591.3
$ 3,183.7
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
The accompanying notes form an integral part of these Consolidated Financial Statements.
Goodwill is allocated to cash-generating units (CGUs) or groups of CGUs that are expected to benefit from the related business
combination.
Research and development (R&D)
Research costs are expensed as incurred. Development costs are also charged to income in the period incurred unless they meet all
the specific capitalization criteria established in IAS 38, Intangible Assets. Capitalized development costs are stated at cost and net of
accumulated amortization and accumulated impairment losses, if any. Amortization of the capitalized development costs commences
when the asset is available for use and is included in research and development expense.
Other intangible assets
Intangible assets acquired separately are measured at cost upon initial recognition. The cost of intangible assets acquired in a
business combination is the fair value as at the acquisition date. Following initial recognition, intangible assets are carried at cost, net
of accumulated amortization and accumulated impairment losses, if any.
90 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce, and prepare
Consolidated Statement of Financial Position
the asset to be capable of operating in the manner intended by management. Subsequent costs are recognized in the carrying
amount of the item if it is probable that the future economic benefits embodied with the item will flow to the Company and its cost can
be measured reliably.
April 1
Gains and losses on disposal of intangible assets are determined by comparing the proceeds from disposal with its carrying amount
2010
(amounts in millions of Canadian dollars)
and are recognized within other gains and losses.
Assets
(Note 2)
$ 312.9
Cash and cash equivalents
Amortization
Contracts in progress : assets
Amortization is calculated using the straight-line method for all intangible assets over their estimated useful lives as follows:
Inventories
Prepayments
March 31
2012
(Note 2)
$ 276.4
ccounts receivable
308.4
245.8
296.8
230.5
238.2
205.5
$ 287.3
March 31
5
11
Notes
2011
6
153.1
47.7
Income taxes recoverable
Derivative financial assets
Capitalized development costs
Total current assets
Customer relationships
Property, plant and equipment
ERP and other software
Intangible assets
Technology
Deferred tax assets
Other intangible assets
Derivative financial assets
Other assets
Amortization methods and useful lives are reviewed and adjusted, if appropriate, on a prospective basis at each reporting date.
Total assets
1,211.0
375.8
1,293.7
533.2
20.7
11.6
95.5
10.3
24.1
7.2
$ 1,148.1
$ 1,049.2
$ 2,817.3
$ 3,183.7
17
29
177.4
149.0
7
8
29
9
126.8
124.3
24.2
43.5
Amortization period
58.8
30.7
(in years)
27.9
18.9
Not exceeding 10
$ 966.2
3 to 20
1,197.1
3 to 10
290.4
3 to 15
24.7
2 to 20
15.1
97.8
$ 2,591.3
Impairment of non-financial assets
Liabilities and equity
The carrying amounts of the Company’s non-financial assets, other than inventories, deferred tax assets and assets arising from
$ 493.0
employee benefits are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not
be recoverable. Goodwill and assets that have indefinite lives or that are not yet available for use are tested for impairment annually
32.1
Provisions
or at any time if an indicator of impairment exists.
6.5
Income taxes payable
ccounts payable and accrued liabilities
20.9
12.9
$ 597.6
$ 551.9
12
10
21.6
10.9
167.4
Contracts in progress : liabilities
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. The recoverable
68.5
Current portion of long-term debt
amount is determined for an individual asset; unless the asset does not generate cash inflows that are largely independent of those
9.3
Derivative financial liabilities
from other assets or groups of assets. In such case, the CGU that the asset belongs to is used to determine the recoverable amount.
Total current liabilities
$ 776.8
For the purposes of impairment testing, the goodwill acquired in a business combination is allocated to CGUs, which generally
8.2
Provisions
corresponds to its operating segments or one level below, that are expected to benefit from the synergies of the combination,
600.9
Long-term debt
irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
148.0
Royalty obligations
$ 810.1
10.4
$ 883.4
6.0
104.6
136.0
125.8
86.2
574.0
161.6
11
13
13
29
12.7
12.4
29
12
685.6
161.6
17
29
15
16
62.8
187.6
114.2
186.0
81.4
Employee benefits obligations
An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Where the
129.3
Deferred gains and other non-current liabilities
recoverable amount of a CGU to which goodwill has been allocated is lower than the CGU’s carrying amount, the related goodwill is
13.2
Deferred tax liabilities
impaired. Any remaining amount of impairment exceeding the impaired goodwill is recognized on a pro rata basis of the carrying
15.1
Derivative financial liabilities
amount of each asset in the respective CGU. Impairment losses are recognized in income.
Total liabilities
$ 1,772.9
The Company evaluates impairment losses, other than goodwill impairment, for potential reversals at each reporting date. An
Equity
impairment loss is reversed if there is any indication that the loss has decreased or no longer exists due to changes in the estimates
$ 436.3
Share capital
used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does
14.2
Contributed surplus
not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been
11.4
recognized. Such reversal is recognized in income.
338.5
Retained earnings
Borrowing costs
$ 800.4
Equity attributable to equity holders of the Company
Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost of
18.0
Non-controlling interests
the asset. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale.
Total equity
$ 818.4
Capitalization of borrowing costs ceases when the asset is completed and ready for productive use. All other borrowing costs are
Total liabilities and equity
$ 2,591.3
recognized as finance expense in income, as incurred.
ccumulated other comprehensive (loss) income
$ 454.5
19.2
$ 440.7
17.1
(9.8)
558.0
(9.8)
466.4
64.5
13.4
91.8
12.9
$ 914.4
$ 932.9
$ 1,884.4
$ 2,141.5
$ 1,021.9
$ 1,042.2
$ 3,183.7
$ 2,817.3
20.3
18.5
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
CAE Annual Report 2012 | 91
Consolidated Statement of Financial Position
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Other assets
Restricted cash
The Company is required to hold a defined amount of cash as collateral under the terms of certain subsidiaries’ external bank
financing, government-related sales contracts and business combination arrangements.
March 31
2012
March 31
2011
April 1
2010
$ 287.3
(Note 2)
$ 276.4
(Note 2)
$ 312.9
Deferred financing costs
Deferred financing costs related to the revolving unsecured term credit facilities, when it is probable that some or all of the facilities will
be drawn down, and deferred financing costs related to sale and leaseback agreements are included in other assets at cost and are
308.4
amortized on a straight-line basis over the term of the related financing agreements.
245.8
153.1
Accounts payable and accrued liabilities
47.7
Accounts payable and accrued liabilities are recognized initially at fair value and subsequently measured at amortized cost using the
effective interest method.
124.3
43.5
126.8
24.2
296.8
230.5
238.2
205.5
95.5
10.3
58.8
18.9
30.7
27.9
$ 1,148.1
$ 1,049.2
$ 966.2
1,211.0
375.8
Provisions
Provisions are recognized when the Company has a present or legal or constructive obligation as a result of past events, it is probable
1,293.7
that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not
533.2
recognized for future operating losses. Provisions are measured at the present value of the expenditures expected to be required to
settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to
the obligation. The increase in the provision due to passage of time is recognized as a finance expense. When there are a number of
177.4
similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as
a whole.
1,197.1
290.4
24.7
15.1
20.7
11.6
24.1
7.2
$ 2,817.3
$ 2,591.3
149.0
97.8
$ 3,183.7
$ 597.6
Long-term debt
Long-term debt is recognized initially at fair value, net of transaction costs incurred. They are subsequently stated at amortized cost.
Any difference between the proceeds (net of transaction costs) and the redemption value is recognized in income over the period of
borrowings using the effective interest method.
$ 493.0
$ 551.9
20.9
12.9
32.1
6.5
21.6
10.9
125.8
86.2
104.6
Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that
136.0
some or all of the facility will be drawn down. In these cases, the fee is deferred until the draw-down occurs. To the extent that there is
9.3
no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity
services and amortized over the period of the facility to which it relates.
$ 776.8
8.2
$ 810.1
10.4
12.7
12.4
167.4
68.5
$ 883.4
6.0
600.9
148.0
574.0
161.6
Share capital
685.6
Common shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in
161.6
equity as a deduction, net of tax, from the proceeds.
114.2
186.0
Accumulated other comprehensive income
Foreign currency translation
This is used to record exchange differences arising from the translation of the financial statements of foreign operations. It is also
used to record the effect of hedging net investments in foreign operations.
62.8
187.6
81.4
129.3
91.8
12.9
64.5
13.4
13.2
15.1
$ 1,884.4
$ 1,772.9
$ 2,141.5
$ 454.5
19.2
$ 436.3
14.2
$ 440.7
Net changes in cash flow hedges
17.1
This represents the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged
11.4
(9.8)
transactions that have not yet occurred.
(9.8)
338.5
466.4
558.0
Net changes in available-for-sale
$ 800.4
This records fair value changes on available-for-sale financial assets.
18.0
18.5
$ 914.4
$ 1,021.9
20.3
$ 1,042.2
$ 932.9
$ 818.4
$ 3,183.7
Defined benefit plan actuarial losses
This is used to record actuarial gains and losses of defined benefit plans in the period in which they occur.
$ 2,817.3
$ 2,591.3
92 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Notes
ccounts receivable
Revenue recognition
Consolidated Statement of Financial Position
Multiple component arrangements
The Company sometimes enters into multiple component revenue arrangements, which may include a combination of design,
engineering and manufacturing of flight simulators, as well as the provision of spare parts and maintenance. When a single sales
April 1
transaction requires the delivery of more than one product or service (multiple components), the revenue recognition criteria are
2010
(amounts in millions of Canadian dollars)
applied to the separately identifiable components. A component is considered separately identifiable if the delivered item has value to
Assets
(Note 2)
(Note 2)
the customer on a stand-alone basis and the fair value associated with the product or service can be measured reliably.
$ 312.9
$ 276.4
Cash and cash equivalents
238.2
The allocation of the revenue from a multiple component arrangement is based on the fair value of each element in relation to the fair
value of the arrangement as a whole.
205.5
Contracts in progress : assets
126.8
Inventories
The Company's revenues can be divided into two main accounting categories: construction contracts and sales of goods and
24.2
Prepayments
services.
Income taxes recoverable
Derivative financial assets
Construction contracts
Total current assets
$ 966.2
A construction contract is a contract specifically negotiated for the construction of an asset or of a group of assets, which are
1,197.1
Property, plant and equipment
interrelated in terms of their design, technology, function, purpose or use. According to its characteristics, a construction contract can
290.4
Intangible assets
either be accounted for separately, be segmented into several components which are each accounted for separately, or be combined
with another construction contract in order to form a single construction contract for accounting purposes in respect of which revenues
24.7
Deferred tax assets
and expense will be recognized.
15.1
Derivative financial assets
March 31
2012
1,293.7
533.2
1,211.0
375.8
308.4
245.8
296.8
230.5
124.3
43.5
153.1
47.7
20.7
11.6
30.7
27.9
95.5
10.3
58.8
18.9
$ 287.3
$ 1,049.2
$ 1,148.1
March 31
17
29
5
11
7
8
2011
29
6
24.1
7.2
97.8
Other assets
Revenue from construction contracts for the design, engineering and manufacturing of training devices is recognized using the
Total assets
$ 2,591.3
percentage-of-completion method when the revenue, contract costs to complete and the stage of contract completion at the end of the
reporting period can be measured reliably and when the contract costs can be clearly identified and measured reliably so that actual
Liabilities and equity
contract costs incurred can be compared with prior estimates, and the economic benefits associated with the transaction will flow to
the Company.
$ 493.0
32.1
Provisions
Provisions for estimated contract losses are recognized in the period in which the loss is determined. Contract losses are measured at
6.5
Income taxes payable
the amount by which the estimated total costs exceed the estimated total revenue from the contract. Warranty provisions are recorded
167.4
Contracts in progress : liabilities
when revenue is recognized based on past experience.
68.5
Current portion of long-term debt
ccounts payable and accrued liabilities
125.8
86.2
20.9
12.9
21.6
10.9
11
13
$ 597.6
$ 551.9
$ 3,183.7
$ 2,817.3
177.4
149.0
10
12
9
104.6
136.0
9.3
Derivative financial liabilities
Progress payments received on construction contracts are deducted from the amount due from the customer as the contract is
completed. Progress payments received before the corresponding work has been performed are classified as contracts in progress:
Total current liabilities
$ 776.8
liabilities.
8.2
Provisions
$ 810.1
10.4
12.7
12.4
29
12
$ 883.4
6.0
13
29
600.9
Long-term debt
The cumulative amount of costs incurred and profit recognized, reduced by losses and progress billing, is determined on a
148.0
Royalty obligations
contract-by-contract basis. If this amount is positive it is classified as an asset. If this amount is negative it is classified as a liability.
Employee benefits obligations
114.2
Deferred gains and other non-current liabilities
186.0
Post-delivery customer support is billed separately, and revenue is recognized over the support period.
Deferred tax liabilities
91.8
Derivative financial liabilities
Sales of goods and services
12.9
Total liabilities
$ 1,772.9
Software arrangements
Revenue from off-the-shelf software sales is recognized when it is probable that the economic benefits will flow to the Company, the
Equity
revenue can be measured reliably and delivery has occurred. Revenue from fixed-price software arrangements and software
$ 436.3
Share capital
customization contracts that require significant production, modification, or customization of software fall under the scope of
14.2
Contributed surplus
construction contracts and are recognized using the percentage-of-completion method.
$ 454.5
19.2
$ 440.7
17.1
62.8
187.6
574.0
161.6
81.4
129.3
685.6
161.6
64.5
13.4
13.2
15.1
$ 1,884.4
$ 2,141.5
15
16
17
29
18
ccumulated other comprehensive (loss) income
19
Retained earnings
Spare parts
$ 800.4
Equity attributable to equity holders of the Company
Revenue from the sale of spare parts is recognized when the significant risks and rewards of ownership of the goods are transferred,
18.0
Non-controlling interests
the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control
Total equity
$ 818.4
over the goods sold, the revenue and the costs incurred in respect to the transaction can be measured reliably and the economic
benefits associated with the transaction will flow to the Company.
Total liabilities and equity
$ 2,591.3
$ 914.4
$ 932.9
$ 1,021.9
$ 1,042.2
$ 3,183.7
$ 2,817.3
20.3
18.5
(9.8)
558.0
(9.8)
466.4
11.4
338.5
Product maintenance
The accompanying notes form an integral part of these Consolidated Financial Statements.
Revenue from maintenance contracts is generally recognized on the basis of the percentage-of-completion of the transaction when it
is probable that the future economic benefits will flow to the Company and when the amount of revenue can be measured reliably.
Under the percentage-of-completion method, revenue is recorded as related costs are incurred, on the basis of the percentage of
actual costs incurred to date, related to the estimated total costs to complete the contract.
Training and consulting services
Revenue from training and consulting services is recognized as the services are rendered, the revenue and the costs incurred or to be
incurred in respect of the transaction can be measured reliably and the economic benefits associated with the transaction will flow to
the Company.
For flight schools, cadet training courses are offered mainly by way of ground school and live aircraft flight. During the ground school
phase, revenue is recognized in income on a straight-line basis, while during the live aircraft flight phase, revenue is recognized
based on actual hours flown.
CAE Annual Report 2012 | 93
Consolidated Statement of Financial Position
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Other
Sales incentives to customers
The Company may provide sales incentives in the form of credits, free products and services, and minimum residual value
guarantees. Generally, credits and free products and services are recorded at their estimated fair value as a reduction of revenues or
included in the cost of sales. Sales with minimum residual value guarantees are recognized in accordance with the substance of the
transaction taking into consideration whether the risks and rewards of ownership have been transferred.
March 31
March 31
2012
April 1
2010
2011
$ 287.3
(Note 2)
$ 276.4
(Note 2)
$ 312.9
296.8
230.5
Non-monetary transactions
308.4
The Company may also enter into sales arrangements where little or no monetary consideration is involved. The non-monetary
transactions are measured at the more reliable measure of the fair value of the asset given up and fair value of the asset received.
245.8
153.1
Deferred revenue
47.7
Cash payments received or advances currently due pursuant to contractual arrangements are recorded as deferred revenue until all
of the foregoing conditions of revenue recognition have been met.
126.8
24.2
124.3
43.5
238.2
205.5
58.8
18.9
30.7
27.9
95.5
10.3
$ 1,148.1
$ 1,049.2
$ 966.2
Employee benefits
1,211.0
1,293.7
Defined benefit pension plans
375.8
533.2
The Company maintains defined benefit pension plans that provide benefits based on length of service and final average earnings.
The service costs and the pension obligations are actuarially determined for each plan using the projected unit credit method,
management’s best estimate of expected plan investment performance, salary escalation, retirement ages of employees and life
177.4
expectancy.
1,197.1
290.4
20.7
11.6
24.7
15.1
24.1
7.2
149.0
97.8
$ 3,183.7
$ 2,817.3
$ 2,591.3
$ 597.6
$ 551.9
The defined benefit asset or liability comprises the present value of the defined benefit obligation at the reporting date, less past
service costs not yet recognized and less the fair value of plan assets out of which the obligations are to be settled. The value of any
employee benefit asset recognized is restricted to the sum of any past service costs not yet recognized and the present value of any
economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan (asset ceiling test).
Minimum funding requirements may give rise to an additional liability to the extent they require paying contributions to cover an
existing shortfall. Plan assets are not available to the creditors of the Company nor can they be paid directly to the Company. Fair
104.6
value of plan assets is based on market price information. Contributions reflect actuarial assumptions of future investment returns,
salary projections and future service benefits.
136.0
125.8
86.2
167.4
68.5
21.6
10.9
20.9
12.9
32.1
6.5
$ 493.0
12.7
12.4
9.3
$ 883.4
6.0
574.0
161.6
$ 810.1
10.4
$ 776.8
8.2
Actuarial gains and losses arising from experience adjustments, changes in actuarial assumptions and the effect of any asset ceiling
and minimum liability are recognized to OCI in the period in which they arise. Past service costs are recognized as an expense on a
straight-line basis over the average period until the benefits become vested. To the extent that the benefits are already vested
685.6
following the introduction of, or changes to, a defined benefit plan, the Company recognizes past service costs immediately into
161.6
income.
114.2
Defined contribution pension plans
186.0
64.5
The Company also maintains defined contribution plans for which the Company pays fixed contributions to publicly or privately
administered pension insurance plans on a mandatory, contractual or voluntary basis and will have no legal or constructive obligation
13.4
to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit
expense in income as the services are provided.
62.8
187.6
600.9
148.0
81.4
129.3
91.8
12.9
13.2
15.1
$ 1,884.4
$ 1,772.9
$ 2,141.5
$ 454.5
19.2
$ 440.7
17.1
$ 436.3
14.2
Termination benefits
Termination benefits are recognized as an expense when the Company is demonstrably committed, without realistic possibility of
(9.8)
withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination
benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are
558.0
recognized as an expense, if the Company has made an offer of voluntary redundancy, based on the number of employees expected
to accept the offer. Benefits falling due more than 12 months after the reporting date are discounted to their present value.
(9.8)
466.4
11.4
338.5
$ 800.4
$ 914.4
$ 1,021.9
18.5
18.0
20.3
$ 1,042.2
$ 932.9
$ 818.4
$ 3,183.7
$ 2,817.3
Share-based payment transactions
The Company’s five share-based payment plans are segregated into two categories of plans: Employee Stock Option Plan (ESOP),
which is considered an equity-settled share-based payment plan; and Employee Stock Purchase Plan (ESPP), Deferred Share Unit
(DSU) plan, Long-Term Incentive Deferred Share Unit (LTI-DSU) plan and Long-Term Incentive Restricted Share Unit (LTI-RSU)
plan, which are considered cash-settled share-based payment plans.
$ 2,591.3
For both categories, the fair value of the employee services received in exchange is recognized as an expense in income. Service
and non-market performance conditions attached to the transactions are not taken into account in determining fair value.
For equity-settled plans, the cost of equity-settled transactions is measured at fair value using the Black-Scholes option pricing model.
The compensation expense is measured at the grant date and recognized over the service period with a corresponding increase to
equity-settled share-based payments reserve in equity. The cumulative expenses recognized for equity-settled transactions at each
reporting date represents the extent to which the vesting period has expired and management’s best estimate of the number of equity
instruments that will ultimately vest. For options with graded vesting, each tranche is considered a separate grant with a different
vesting date and fair value, and each tranche is accounted for separately.
94 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
2011
Notes
March 31
ccounts receivable
March 31
2012
For cash-settled plans, a corresponding liability is recognized. The fair value of employee services received is calculated by
Consolidated Statement of Financial Position
multiplying the number of units expected to vest with the fair value of one unit as of grant date based on the market price of the
Company’s common shares. The fair value of the ESPP is a function of the Company’s contributions. Until the liability is settled, the
Company re-measures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes
April 1
in fair value recognized in income for the period. The Company has entered into equity swap agreements with a major Canadian
financial institution in order to reduce its cash and earnings exposure related to the fluctuation in the Company’s share price relating to
2010
(amounts in millions of Canadian dollars)
the DSU and LTI-DSU programs.
Assets
(Note 2)
$ 312.9
Cash and cash equivalents
Current and deferred income tax
238.2
Income tax expense comprises of current and deferred tax. An income tax expense is recognized in income except to the extent that it
205.5
Contracts in progress : assets
relates to items recognized directly in equity, in which case it is recognized in equity.
126.8
Inventories
24.2
Prepayments
Current tax is the amount expected to be paid or recovered from taxation authorities on the taxable income/loss for the year, using tax
30.7
Income taxes recoverable
rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable/receivable in respect of previous
27.9
Derivative financial assets
years.
Total current assets
$ 966.2
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is
1,197.1
Property, plant and equipment
subject to interpretation. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax
290.4
Intangible assets
authorities.
24.7
Deferred tax assets
15.1
Derivative financial assets
Deferred tax is recognized using the balance sheet liability method, providing for temporary differences between the tax bases of
97.8
Other assets
assets or liabilities and their carrying amount for financial reporting purposes.
Total assets
$ 2,591.3
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, and jointly controlled entities, except
where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary
Liabilities and equity
difference will not reverse in the foreseeable future.
(Note 2)
$ 276.4
1,293.7
533.2
1,211.0
375.8
124.3
43.5
308.4
245.8
296.8
230.5
153.1
47.7
20.7
11.6
58.8
18.9
95.5
10.3
24.1
7.2
$ 287.3
$ 1,049.2
$ 1,148.1
$ 2,817.3
$ 3,183.7
17
29
5
11
177.4
149.0
7
8
29
6
9
10
$ 597.6
$ 551.9
$ 493.0
ccounts payable and accrued liabilities
32.1
Provisions
21.6
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to be applied to temporary differences when
6.5
Income taxes payable
they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
10.9
167.4
Contracts in progress : liabilities
104.6
Deferred tax assets are recognized for all deductible temporary differences and carry forward of unused tax losses. The recognition of
68.5
Current portion of long-term debt
136.0
deferred tax assets are limited to the amount which is more likely than not to be realized.
Derivative financial liabilities
125.8
86.2
20.9
12.9
11
13
12.4
9.3
29
12
12.7
Total current liabilities
$ 776.8
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer more likely than not that a
8.2
Provisions
recognized deferred income tax asset will be realized. Unrecognized deferred income tax assets are reassessed at each reporting
600.9
Long-term debt
date and are recognized to the extent that it has become more likely than not that an unrecognized deferred income tax asset will be
realized.
148.0
Royalty obligations
81.4
Employee benefits obligations
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they
129.3
Deferred gains and other non-current liabilities
relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities which intend to
13.2
Deferred tax liabilities
settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
15.1
Derivative financial liabilities
$ 810.1
10.4
$ 883.4
6.0
574.0
161.6
685.6
161.6
62.8
187.6
114.2
186.0
64.5
13.4
13
29
15
16
17
29
12
91.8
12.9
18
$ 2,141.5
$ 1,884.4
Total liabilities
Investment tax credits
Equity
Investment tax credits (ITCs) arising from R&D activities are deducted from the related costs and are accordingly included in the
$ 436.3
Share capital
determination of net income when there is reasonable assurance that the credits will be realized. ITCs arising from the acquisition or
development of property, plant and equipment and capitalized development costs are deducted from the cost of those assets with
14.2
Contributed surplus
amortization calculated on the net amount.
11.4
ccumulated other comprehensive (loss) income
338.5
Retained earnings
Earnings per share
$ 800.4
Equity attributable to equity holders of the Company
Earnings per share is calculated by dividing the net income for the period attributable to the common shareholders of the Company by
18.0
Non-controlling interests
the weighted average number of common shares outstanding during the period. The diluted weighted average number of common
Total equity
$ 818.4
shares outstanding is calculated by taking into account the dilution that would occur if the securities or other agreements for the
Total liabilities and equity
$ 2,591.3
issuance of common shares were exercised or converted into common shares at the later of the beginning of the period or the
issuance date unless it is anti-dilutive. The treasury stock method is used to determine the dilutive effect of the stock options. The
The accompanying notes form an integral part of these Consolidated Financial Statements.
treasury stock method is a method of recognizing the use of proceeds that could be obtained upon the exercise of options in
computing diluted earnings per share. It assumes that any proceeds would be used to purchase common shares at the average
market price during the period. The Company has one category of dilutive potential common shares which is share options.
$ 440.7
17.1
$ 454.5
19.2
(9.8)
558.0
(9.8)
466.4
$ 914.4
$ 932.9
$ 1,021.9
$ 1,042.2
$ 3,183.7
$ 2,817.3
$ 1,772.9
20.3
18.5
19
Dividend distribution
In the period in which the dividends are approved by the Company’s Board of Directors, the dividend is recognized as a liability in the
Company’s financial statements.
CAE Annual Report 2012 | 95
Consolidated Statement of Financial Position
Government assistance
Government contributions are recognized where there is reasonable assurance that the contribution will be received and all attached
conditions will be complied with by the Company.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
March 31
2012
March 31
2011
April 1
2010
The Company benefits from investment tax credits that are deemed to be equivalent to government contributions.
$ 287.3
(Note 2)
$ 276.4
Contributions are received for Project New Core Markets from Investissement Québec (IQ) for costs incurred in R&D programs.
Contributions were received in previous fiscal years for Project Phoenix from Industry Canada under the Technology Partnerships
Canada (TPC) program and from IQ. Repayable government assistance are recognized as royalty obligations. The current portion is
308.4
included as part of the accrued liabilities.
245.8
296.8
230.5
238.2
205.5
(Note 2)
$ 312.9
124.3
43.5
153.1
The obligation to repay royalties is recorded when the contribution is receivable and is estimated based on future projections. The
47.7
obligation is discounted using the prevailing market rates of interest, at that time, for a similar instrument (similar as to currency, term,
58.8
type of interest rate, guarantees or other factors) with a similar credit rating. The difference between government contributions and the
18.9
discounted value of royalty obligations is accounted for as a government contribution which is recognized as a reduction of costs or as
a reduction of capitalized expenditures.
95.5
10.3
30.7
27.9
126.8
24.2
$ 1,049.2
$ 966.2
$ 1,148.1
1,197.1
290.4
1,211.0
375.8
1,293.7
The Company recognizes the Government of Canada’s participation in Project Falcon as an interest-bearing long-term obligation. The
533.2
initial measurement of the accounting liability recognized to repay the lender is discounted using the prevailing market rates of
interest, at that time, for a similar instrument (similar as to currency, term, type of interest rate, guarantees or other factors) with a
similar credit rating. The difference between the face value of the long-term obligation and the discounted value of the long-term
obligation is accounted for as a government contribution which is recognized as a reduction of costs or as a reduction of capitalized
177.4
expenditures.
20.7
11.6
24.7
15.1
24.1
7.2
149.0
97.8
$ 2,817.3
$ 2,591.3
$ 3,183.7
$ 597.6
$ 551.9
$ 493.0
21.6
10.9
Use of judgements, estimates and assumptions
The preparation of the consolidated financial statements in conformity with IFRS requires the Company’s management (management)
to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and
expenses for the period reported. It also requires management to exercise its judgement in applying the Company’s accounting
104.6
policies. The areas involving a higher degree of judgement or complexity, or areas where assumption and estimates are significant to
the consolidated financial statements are disclosed below. Actual results could differ from those estimates. Changes will be reported
136.0
in the period in which they are identified.
125.8
86.2
167.4
68.5
20.9
12.9
32.1
6.5
12.4
9.3
12.7
$ 883.4
6.0
$ 810.1
10.4
$ 776.8
8.2
574.0
161.6
Business combinations
Business combinations are accounted for in accordance with the acquisition method; thus, on the date that control is obtained. The
685.6
acquiree’s identifiable assets, liabilities and contingent liabilities are measured at their fair value. Depending on the complexity of
161.6
determining these valuations, the Company either consults with independent experts or develops the fair value internally by using
114.2
appropriate valuation techniques which are generally based on a forecast of the total expected future net discounted cash flows.
186.0
These evaluations are linked closely to the assumptions made by management regarding the future performance of the related assets
and any changes in the discount rate applied.
62.8
187.6
600.9
148.0
81.4
129.3
91.8
12.9
64.5
13.4
13.2
15.1
$ 2,141.5
$ 1,884.4
Development costs
Development costs are recognized as intangible assets and are amortized over their useful lives when they meet the criteria for
capitalization. Forecasted revenue and profitability for the relevant projects are used to assess compliance with the capitalization
criteria and to assess the recoverable amount of the assets.
$ 1,772.9
$ 440.7
17.1
$ 436.3
14.2
$ 454.5
19.2
$ 1,021.9
20.3
$ 914.4
$ 800.4
11.4
338.5
(9.8)
(9.8)
Impairment of non-financial assets
466.4
558.0
The Company’s impairment test for goodwill is based on fair value less costs to sell calculations and uses valuation models such as
the discounted cash flows model. The cash flows are derived from the plan approved by management for the next five years. Cash
flow projections take into account past experience and represent management’s best estimate about future developments. Cash flows
after the five-year period are extrapolated using estimated growth rates. Key assumptions which management has based its
determination of fair value less costs to sell include estimated growth rates, post-tax discount rates and tax rates. The post-tax
discount rates were derived from the respective CGUs’ representative weighted average cost of capital which range from 8% to 12%.
These estimates, including the methodology used, can have a material impact on the respective values and ultimately the amount of
any goodwill impairment.
$ 818.4
$ 932.9
$ 2,817.3
$ 2,591.3
18.5
18.0
$ 1,042.2
$ 3,183.7
Likewise, whenever property, plant and equipment and intangible assets are tested for impairment, the determination of the assets’
recoverable amount involves the use of estimates by management and can have a material impact on the respective values and
ultimately the amount of any impairment.
Provisions
In determining the amount of the provisions, assumptions and estimates are made in relation to discount rates, the expected costs
and the expected timing of the costs.
96 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Notes
ccounts receivable
March 31
2012
Revenue recognition
Consolidated Statement of Financial Position
The Company uses the percentage-of-completion method in accounting for its fixed-price contracts to deliver services and
manufacture products. Use of the percentage-of-completion method requires the Company to estimate the work performed to date as
a proportion of the total work to be performed. Management conducts monthly reviews of its estimated costs to complete, percentage-
April 1
of-completion estimates and revenues and margins recognized, on a contract-by-contract basis. The impact of any revisions in cost
2010
(amounts in millions of Canadian dollars)
and earnings estimates is reflected in the period in which the need for a revision becomes known.
Assets
(Note 2)
$ 312.9
Cash and cash equivalents
Defined benefit pension plans
The cost of defined benefit pension plans as well as the present value of the pension obligations is determined using actuarial
238.2
valuations. The actuarial valuations involve making assumptions about discount rates, expected rates of return on assets, future
205.5
Contracts in progress : assets
salary increases, mortality rates and future pension increases. All assumptions are reviewed at each reporting date. Any changes in
126.8
Inventories
these assumptions will impact the carrying amount of pension obligations. In determining the appropriated discount rate management
24.2
Prepayments
considers the interest rates of corporate bonds that are denominated in the currency in which the benefits will be paid with an AA/AAA
30.7
Income taxes recoverable
rating, and that have terms to maturity approximating the terms of the related pension liability. The mortality rate is based on publicly
27.9
Derivative financial assets
available mortality tables for the specific country. Future salary increases and pension increases are based on expected future
Total current assets
inflation rates for the specific country.
$ 966.2
1,197.1
Property, plant and equipment
The expected return on plan assets is determined by considering the expected returns on the assets underlying the current
290.4
Intangible assets
investment policy applicable over to the period over which the obligation is to be settled. For the purpose of calculating the expected
24.7
Deferred tax assets
return on plan assets, historical and expected future returns were considered separately for each class of assets based on the asset
15.1
Derivative financial assets
allocation and the investment policy.
Other assets
(Note 2)
$ 276.4
1,293.7
533.2
1,211.0
375.8
308.4
245.8
296.8
230.5
124.3
43.5
153.1
47.7
20.7
11.6
58.8
18.9
95.5
10.3
24.1
7.2
$ 287.3
$ 1,049.2
$ 1,148.1
March 31
17
29
5
11
149.0
7
8
2011
97.8
29
6
9
177.4
ccounts payable and accrued liabilities
Total assets
$ 2,591.3
Other key assumptions for pension obligations are based, in part, on current market conditions. See Note 15 for further details
regarding assumptions used.
Liabilities and equity
Share-based payments
$ 493.0
The Company measures the cost of cash and equity-settled transactions with employees by reference to the fair value of the related
32.1
Provisions
instruments at the date at which they are granted. Estimating fair value for share-based payments requires determining the most
6.5
Income taxes payable
appropriate valuation model for a grant, which is dependent on the terms and conditions of the grant. This also requires making
167.4
Contracts in progress : liabilities
assumptions and determining the most appropriate inputs to the valuation model including the expected life of the option, volatility and
68.5
Current portion of long-term debt
dividend yield.
Derivative financial liabilities
125.8
86.2
104.6
136.0
20.9
12.9
21.6
10.9
11
13
$ 597.6
$ 551.9
$ 2,817.3
$ 3,183.7
12.4
9.3
10
12
29
12.7
Total current liabilities
$ 776.8
Income taxes
8.2
Provisions
The Company is subject to income tax laws in numerous jurisdictions. Judgement is required in determining the worldwide provision
600.9
Long-term debt
for income taxes. The determination of tax liabilities and assets involve certain uncertainties in the interpretation of complex tax
148.0
Royalty obligations
regulations. The Company provides for potential tax liabilities based on the probability weighted average of the possible outcomes.
Differences between actual results and those estimates could have an effect on the income tax liabilities and deferred tax liabilities in
81.4
Employee benefits obligations
the period in which such determinations are made.
129.3
Deferred gains and other non-current liabilities
$ 810.1
10.4
$ 883.4
6.0
574.0
161.6
685.6
161.6
62.8
187.6
13
29
15
16
12
114.2
186.0
13.2
Deferred tax liabilities
Deferred tax assets are recognized to the extent that it is more likely than not that taxable profit will be available against the losses
15.1
Derivative financial liabilities
that can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be
Total liabilities
$ 1,772.9
recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. The
recorded amount of total deferred tax assets could be altered if estimates of projected future taxable income and benefits from
Equity
available tax strategies are lowered, or if changes in current tax regulations are enacted that impose restrictions on the timing or
$ 436.3
Share capital
extent of the Company’s ability to utilise future tax benefits.
14.2
Contributed surplus
$ 440.7
17.1
64.5
13.4
91.8
12.9
$ 1,884.4
$ 2,141.5
17
29
18
$ 454.5
19.2
ccumulated other comprehensive (loss) income
11.4
Government assistance repayments
338.5
Retained earnings
In determining the amount of repayable government assistance, assumptions and estimates are made in relation to discount rates,
$ 800.4
Equity attributable to equity holders of the Company
expected revenues and the expected timing of revenues, when relevant. Revenue projections take into account past experience and
18.0
Non-controlling interests
represent management’s best estimate about the future. Revenues after a five-year period are extrapolated using estimated growth
Total equity
$ 818.4
rates depending on the estimated timing of repayments. The estimated repayments are discounted using average rates ranging from
8.5% to 13.0% based on terms of similar financial instruments. These estimates along with the methodology used to derive the
Total liabilities and equity
$ 2,591.3
estimates can have a material impact on the respective values and ultimately any repayable obligation in relation to government
assistance. A 1% increase to the growth rates would increase the royalty obligation at March 31, 2012 by approximately $8.2 million.
The accompanying notes form an integral part of these Consolidated Financial Statements.
(9.8)
558.0
(9.8)
466.4
$ 914.4
$ 932.9
$ 1,021.9
$ 1,042.2
$ 2,817.3
$ 3,183.7
18.5
20.3
19
CAE Annual Report 2012 | 97
Consolidated Statement of Financial Position
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
March 31
2012
March 31
Future changes in accounting policies
Financial instruments
In November 2009, the IASB released IFRS 9, Financial Instruments, which is the first part of a three-part project to replace IAS 39,
Financial Instruments: Recognition and Measurement. It addresses classification and measurement of financial assets and liabilities.
IFRS 9 replaces the multiple category and measurement models of IAS 39 for debt instruments with a new mixed measurement
model having two categories: amortized cost and fair value through profit or loss. Most of the requirements in IAS 39 for classification
and measurement of financial liabilities were carried forward in IFRS 9. However, the portion of the changes in fair value related to the
Company’s own credit risk must be presented in OCI rather than in income. IFRS 9 is effective for annual periods beginning on or
after January 1, 2015, with earlier application permitted. The Company is currently evaluating the impact of the standard on its
308.4
consolidated financial statements.
245.8
(Note 2)
$ 312.9
(Note 2)
$ 276.4
296.8
230.5
238.2
205.5
April 1
2010
2011
$ 287.3
$ 1,148.1
124.3
43.5
126.8
24.2
$ 1,049.2
$ 966.2
30.7
27.9
58.8
18.9
95.5
10.3
153.1
In October 2010, the IASB amended IFRS 7, Financial Instruments: Disclosures. IFRS 7 was amended to require quantitative and
47.7
qualitative disclosures for transfers of financial assets where the transferred assets are not derecognized in their entirety or the
transferor retains continuing managerial involvement. If a substantial portion of the total amount of the transfer activity occurs in the
closing days of a reporting period, the amendment also requires disclosure of supplementary information. These amendments are
effective for annual periods beginning on or after July 1, 2011, with earlier application permitted. The Company is currently evaluating
the impact of the amendments on its consolidated financial statements.
1,293.7
533.2
Consolidation
In May 2011, the IASB released IFRS 10, Consolidated Financial Statements, which replaces SIC-12, Consolidation – Special
Purpose Entities, and parts of IAS 27, Consolidated and Separate Financial Statements. The new standard builds on existing
177.4
principles by identifying the concept of control as the determining factor in whether an entity should be included in a company’s
consolidated financial statements. The standard provides additional guidance to assist in the determination of control where it is
difficult to assess. IFRS 10 is effective for annual periods beginning on or after January 1, 2013, with earlier application permitted. The
Company is currently evaluating the impact of the standard on its consolidated financial statements.
1,197.1
290.4
1,211.0
375.8
20.7
11.6
24.7
15.1
24.1
7.2
$ 2,817.3
$ 2,591.3
149.0
97.8
$ 3,183.7
$ 597.6
$ 883.4
6.0
9.3
12.4
12.7
$ 493.0
32.1
6.5
21.6
10.9
600.9
148.0
167.4
68.5
125.8
86.2
574.0
161.6
$ 810.1
10.4
$ 776.8
8.2
$ 551.9
Joint arrangements
20.9
In May 2011, the IAS released IFRS 11, Joint Arrangements, which supersedes IAS 31, Interests in Joint Ventures, and SIC-13,
12.9
Jointly Controlled Entities – Non-monetary Contributions by Venturers. IFRS 11 focuses on the rights and obligations of a joint
104.6
arrangement, rather than its legal form as is currently the case under IAS 31. The standard addresses inconsistencies in the reporting
136.0
of joint arrangements by requiring the equity method to account for interest in jointly controlled entities. IFRS 11 is effective for annual
periods beginning on or after January 1, 2013, with early application permitted. The Company currently uses proportionate
consolidation to account for interests in joint ventures, but must apply the equity method under IFRS 11. Under the equity method, the
Company’s share of net assets, net income and OCI of joint ventures will be presented as one-line items on the statement of financial
position, the statement of income and the statement of comprehensive income, respectively.
685.6
161.6
Disclosure of interests in other entities
114.2
In May 2011, the IASB released IFRS 12, Disclosure of Interests in Other Entities. IFRS 12 is a new and comprehensive standard on
186.0
disclosure requirements for all forms of interests in other entities, including joint arrangements, associates and unconsolidated
structured entities. The standard requires an entity to disclose information regarding the nature and risks associated with its interests
in other entities and the effects of those interests in its financial position, financial performance and cash flows. IFRS 12 is effective for
$ 1,772.9
annual periods beginning on or after January 1, 2013, with earlier application permitted. The Company is currently evaluating the
impact of the standard on its consolidated financial statements.
$ 436.3
14.2
Fair value measurement
In May 2011, the IASB released IFRS 13, Fair Value Measurement. IFRS 13 defines fair value, sets out in a single IFRS a framework
(9.8)
for measuring fair value and requires disclosures about fair value measurements. IFRS 13 applies when other IFRSs require or permit
558.0
fair value measurements. It does not introduce any new requirements to measure an asset or a liability at fair value, change what is
measured at fair value in IFRSs or address how to present changes in fair value. The standard is effective for annual periods
beginning on or after January 1, 2013, with earlier application permitted. The Company is currently evaluating the impact of the
standard on its consolidated financial statements.
$ 440.7
17.1
(9.8)
466.4
62.8
187.6
81.4
129.3
11.4
338.5
91.8
12.9
64.5
13.4
13.2
15.1
$ 800.4
$ 914.4
$ 818.4
$ 932.9
$ 1,884.4
20.3
18.5
18.0
$ 2,141.5
$ 454.5
19.2
$ 1,021.9
$ 1,042.2
$ 3,183.7
$ 2,591.3
$ 2,817.3
Employee benefits
In June 2011, the IASB amended IAS 19, Employee Benefit. IAS 19 is amended to reflect significant changes to recognition and
measurement of defined benefit pension expense and termination benefits by the elimination of the option to defer the recognition of
actuarial gains and losses (the corridor approach) and expand the disclosure requirements. These amendments are effective for
years beginning on or after January 1, 2013, with earlier application permitted. The Company is currently evaluating the impact of
these amendments on its consolidated financial statements.
Financial statement presentation
In June 2011, the IASB amended IAS 1, Financial Statement Presentation, to change the disclosure of items presented in OCI,
including a requirement to separate items presented in OCI into two groups based on whether or not they may be recycled to profit or
loss in the future. The amendments are effective for annual periods beginning on or after July 1, 2012. The Company is currently
evaluating the impact of the amendments on its consolidated financial statements.
98 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
NOTE 2 – FIRST-TIME ADOPTION OF IFRS
Consolidated Statement of Financial Position
First-time adoption
For all periods up to and including the year ended March 31, 2011, the Company prepared its consolidated financial statements in
April 1
accordance with previous Canadian GAAP. For periods beginning on or after April 1, 2011, the Company has transitioned to IFRS.
2010
(amounts in millions of Canadian dollars)
Consequently, for the years ended March 31, 2012 and March 31, 2011, the Company has prepared its consolidated financial
statements in accordance with IFRS.
Assets
(Note 2)
$ 312.9
Cash and cash equivalents
This note explains the principal adjustments made by the Company in restating its previous Canadian GAAP equity as at April 1, 2010
238.2
and its previously published Canadian GAAP financial statements for the year ended March 31, 2011.
205.5
Contracts in progress : assets
March 31
2012
(Note 2)
$ 276.4
ccounts receivable
296.8
230.5
$ 287.3
March 31
5
11
Notes
2011
308.4
245.8
126.8
Inventories
Exemptions applied
24.2
Prepayments
IFRS 1, First-Time Adoption of International Financial Reporting Standards, allows first-time adopters certain exemptions from the
30.7
Income taxes recoverable
95.5
general requirement to apply IFRS retrospectively. The Company has applied the following exemptions:
27.9
Derivative financial assets
10.3
124.3
43.5
153.1
47.7
58.8
18.9
29
6
Canadian GAAP in opening retained earnings at April 1, 2010;
Total current assets
$ 966.2
The Company has elected to recognize specific training devices at their estimated fair values and use those fair values as
i)
1,197.1
Property, plant and equipment
deemed cost at April 1, 2010;
290.4
Intangible assets
ii) The Company has elected to recognize all cumulative actuarial gains and losses of defined benefit plans deferred under previous
24.7
Deferred tax assets
15.1
Derivative financial assets
iii) The Company has deemed the cumulative foreign currency translation adjustment for foreign operations at April 1, 2010 to be
97.8
Other assets
Total assets
$ 2,591.3
iv) The Company has elected to apply the requirement of IAS 23, Borrowing Costs, whereby interest must be capitalized to
Liabilities and equity
zero, with the adjustment recorded against opening retained earnings;
qualifying assets beginning only after April 1, 2010;
1,293.7
533.2
1,211.0
375.8
20.7
11.6
24.1
7.2
$ 2,817.3
$ 3,183.7
$ 1,049.2
$ 1,148.1
17
29
149.0
177.4
7
8
9
ccounts payable and accrued liabilities
$ 493.0
v) The Company has elected not to apply IFRS 3 (as amended in 2008), Business Combinations, to business combinations that
Provisions
32.1
occurred before April 1, 2010. Consequently, as at April 1, 2010, the carrying amount of goodwill under IFRS is equal to the
6.5
Income taxes payable
carrying amount of goodwill under previous Canadian GAAP.
20.9
12.9
21.6
10.9
$ 551.9
$ 597.6
12
10
Contracts in progress : liabilities
Current portion of long-term debt
Reconciliation of equity as reported under previous Canadian GAAP to IFRS
Derivative financial liabilities
11
13
29
Total current liabilities
Provisions
(amounts in millions)
Long-term debt
Shareholders' equity as previously reported under previous Canadian GAAP
Royalty obligations
IFRS adjustments decrease:
Employee benefits obligations
Government assistance (1)
Deferred gains and other non-current liabilities
Property, plant and equipment (1)
Deferred tax liabilities
Employee benefits
Derivative financial liabilities
Borrowing costs (1)
Total liabilities
Leases (1)
Equity
Revenue
Share capital
Income taxes and other
Contributed surplus
Equity attributable to equity holders of the Company under IFRS
Non-controlling interests
Retained earnings
Total equity as reported under IFRS
Equity attributable to equity holders of the Company
Non-controlling interests
(1) Certain tax effects for these adjustments are included in income taxes and other.
Total equity
Total liabilities and equity
ccumulated other comprehensive (loss) income
12
Notes
13
29
15
16
A
B
17
29
C
D
E
F
G
18
19
H
The accompanying notes form an integral part of these Consolidated Financial Statements.
104.6
136.0
12.7
$ 883.4
6.0
685.6
161.6
114.2
186.0
91.8
12.9
$ 2,141.5
$ 454.5
19.2
(9.8)
558.0
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
125.8
86.2
12.4
$ 810.1
March 31
10.4
2011
574.0
$ 1,269.4
161.6
62.8
(104.4)
187.6
(65.0)
64.5
(49.7)
13.4
(26.4)
$ 1,884.4
(22.9)
(5.5)
$ 440.7
(81.1)
17.1
$ 914.4
(9.8)
18.5
466.4
167.4
68.5
9.3
$ 776.8
April 1
8.2
2010
600.9
$ 1,155.8
148.0
81.4
(100.4)
129.3
(68.4)
13.2
(57.1)
15.1
(23.0)
$ 1,772.9
(23.3)
(6.0)
$ 436.3
(77.2)
14.2
$ 800.4
11.4
18.0
338.5
$ 932.9
$ 914.4
$ 818.4
$ 800.4
18.5
$ 932.9
$ 2,817.3
18.0
$ 818.4
$ 2,591.3
CAE Annual Report 2012 | 99
Consolidated Statement of Financial Position
Reconciliation of net income as reported under previous Canadian GAAP to IFRS
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
March 31
Year ended March 31, 2011
March 31
(amounts in millions, except per share amounts)
2012
Revenue
Cost of sales
April 1
2011
2010
(Note 2)
$ 312.9
(Note 2)
$ 276.4
$ 287.3
308.4
245.8
Gross profit
296.8
Research and development expenses
230.5
Selling, general and administrative expenses
124.3
Other losses (gains) – net
43.5
126.8
24.2
238.2
205.5
153.1
47.7
Operating profit
Finance income
95.5
10.3
58.8
18.9
30.7
27.9
$ 1,148.1
$ 1,049.2
Finance expense
Finance expense – net
1,293.7
Earnings before income taxes
533.2
Income tax expense
1,211.0
375.8
24.1
Net income
7.2
20.7
11.6
Attributable to:
177.4
149.0
$ 966.2
1,197.1
290.4
24.7
15.1
97.8
$ 3,183.7
Equity holders of the Company
$ 2,817.3
Non-controlling interests
$ 2,591.3
Earnings per share from continuing operations
$ 597.6
attributable to equity holders of the Company
Basic and Diluted
$ 493.0
$ 551.9
21.6
10.9
104.6
136.0
Weighted average number of
shares outstanding (basic)
Weighted average number of
12.7
shares outstanding (diluted)
12.4
20.9
12.9
125.8
86.2
32.1
6.5
167.4
68.5
9.3
Notes
F
A, B, D-F
A, C, D, G
A
A, D, E
G
H
Previous
Canadian
GAAP
Adjustment
$ 1,629.0
1,102.7
$ 526.3
46.4
238.9
(18.3)
$ 259.3
(4.1)
34.8
30.7
$
$ 228.6
58.8
$ 169.8
$ 169.8
-
$
$
$
$
$
$
$
1.8
(20.7)
22.5
(1.9)
1.0
0.1
23.3
(0.3)
29.6
29.3
(6.0)
2.9
(8.9)
(9.5)
0.6
IFRS
$ 1,630.8
1,082.0
$ 548.8
44.5
239.9
(18.2)
$ 282.6
(4.4)
64.4
60.0
$
$ 222.6
61.7
$ 160.9
$ 160.3
0.6
$
0.66
$
(0.04)
$
0.62
256.7
257.3
-
0.2
256.7
257.5
$ 883.4
6.0
$ 810.1
10.4
$ 776.8
8.2
600.9
148.0
574.0
161.6
Reconciliation of comprehensive income as reported under previous Canadian GAAP to IFRS
685.6
161.6
Year ended March 31, 2011
114.2
(amounts in millions)
186.0
Net income
91.8
12.9
Other comprehensive income (loss):
$ 1,884.4
Foreign currency translation adjustment
62.8
187.6
81.4
129.3
64.5
13.4
13.2
15.1
$ 1,772.9
Notes
B-H
$
Previous
Canadian
$ 169.8
(24.1)
GAAP
$ 2,141.5
C
(0.6)
-
-
$
(24.7)
$ 145.1
$ 145.1
-
$ 145.1
$ 454.5
19.2
Net changes in cash flow hedge
Net changes in available-for-sale financial instruments
$ 440.7
17.1
Defined benefit plan actuarial gains adjustment
(9.8)
466.4
Other comprehensive income (loss)
$ 436.3
14.2
11.4
338.5
(9.8)
558.0
$ 1,021.9
Total comprehensive income
Total comprehensive income attributable to:
18.5
Equity holders of the Company
$ 800.4
$ 914.4
20.3
18.0
$ 1,042.2
$ 932.9
Non-controlling interests
$ 2,817.3
Total comprehensive income
$ 3,183.7
$ 818.4
$ 2,591.3
100 | CAE Annual Report 2012
Adjustment
IFRS
$
$
$
$
$
$
(8.9)
$ 160.9
3.7
-
(0.1)
6.3
9.9
1.0
0.3
0.7
1.0
$
(20.4)
(0.6)
(0.1)
6.3
$
(14.8)
$ 146.1
$ 145.4
0.7
$ 146.1
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Consolidated Statement of Financial Position
Reconciliation of financial position as reported under previous Canadian GAAP to IFRS
(amounts in millions)
(amounts in millions of Canadian dollars)
Assets
Assets
Cash and cash equivalents
Cash and cash equivalents
Accounts receivable
ccounts receivable
Contracts in progress : assets
Contracts in progress : assets
Inventories
Inventories
Prepayments
Prepayments
Income taxes recoverable
Income taxes recoverable
Future income taxes
Derivative financial assets
Derivative financial assets
Total current assets
Property, plant and equipment
Total current assets
Property, plant and equipment
Intangible assets
Intangible assets
Deferred tax assets
Goodwill
Derivative financial assets
Deferred tax assets
Other assets
Derivative financial assets
Total assets
Other assets
ccounts payable and accrued liabilities
Liabilities and equity
Total assets
Liabilities and equity
Provisions
Accounts payable and
Income taxes payable
accrued liabilities
Contracts in progress : liabilities
Provisions
Current portion of long-term debt
Income taxes payable
Derivative financial liabilities
Contracts in progress : liabilities
Current portion of long-term debt
Total current liabilities
Future income taxes
Provisions
Derivative financial liabilities
Long-term debt
Royalty obligations
Total current liabilities
Employee benefits obligations
Provisions
Deferred gains and other non-current liabilities
Long-term debt
Deferred tax liabilities
Royalty obligations
Derivative financial liabilities
Employee benefits obligations
Deferred gains and other
Total liabilities
Equity
Deferred tax liabilities
Share capital
Derivative financial liabilities
Contributed surplus
non-current liabilities
Previous
Canadian
GAAP
Adjustment
Notes
March 31, 2011
IFRS
Previous
Canadian
GAAP
March 31
2012
Notes
H
F, H
F
E
A, G, H
H
H
$ 276.4
296.9
$
207.9
125.1
54.5
52.2
9.2
-
$ 1,022.2
$
A, B, D, E
A, D, H
H
D, G, H
H
C, H
1,180.1
178.8
198.5
76.7
-
201.6
-
(0.1)
5
22.6
11
(0.8)
6
(11.0)
6.6
(9.2)
29
18.9
27.0
7
30.9
8
197.0
17
(198.5)
29
(56.0)
9
11.6
(52.6)
$ 276.4
296.8
230.5
124.3
43.5
58.8
-
18.9
$ 1,049.2
1,211.0
375.8
-
20.7
11.6
149.0
$ 287.3
$ 312.9
237.5
308.4
245.8
220.6
126.9
153.1
47.7
33.7
24.3
95.5
10.3
7.1
-
$ 1,148.1
$ 963.0
1,293.7
1,147.2
533.2
125.4
24.1
161.9
7.2
82.9
177.4
$ 3,183.7
-
141.5
March 31
Adjustment
2011
(Note 2)
$
-
$ 276.4
0.7
296.8
(15.1)
230.5
(0.1)
124.3
(9.5)
43.5
6.4
58.8
(7.1)
18.9
27.9
$ 1,049.2
$
3.2
1,211.0
49.9
375.8
165.0
20.7
(161.9)
11.6
(58.2)
149.0
15.1
$ 2,817.3
(43.7)
$ 2,857.9
$ (40.6)
$ 2,817.3
$ 2,621.9
$
(30.6)
A,C, E, H
H
$ 527.1
-
H
F, H
E
H
H
H
E
A
C, H
H
A-C, E-H
H
-
173.3
30.7
31.8
-
$ 762.9
-
443.8
-
-
262.6
119.2
-
$
$
10
12
24.8
11
20.9
13
12.9
29
(47.5)
55.5
(31.8)
12
12.4
13
29
47.2
15
10.4
16
130.2
17
161.6
29
62.8
(75.0)
(54.7)
18
13.4
$ 551.9
20.9
12.9
125.8
86.2
-
12.4
$ 810.1
10.4
574.0
161.6
62.8
187.6
64.5
13.4
$ 597.6
$ 551.9
21.6
$ 467.8
10.9
-
104.6
136.0
-
199.7
12.7
$ 883.4
6.0
51.1
23.0
-
685.6
$ 741.6
161.6
-
114.2
186.0
441.6
-
91.8
12.9
-
$ 2,141.5
200.5
82.4
-
$ 454.5
19.2
$ 1,466.1
(9.8)
558.0
$ 441.5
$ 1,021.9
10.9
20.3
(215.4)
$ 1,042.2
$ 3,183.7
918.8
$
20.9
12.9
25.2
125.8
32.1
86.2
6.5
12.4
(32.3)
$
17.4
$ 810.1
(23.0)
10.4
9.3
574.0
161.6
35.2
62.8
8.2
187.6
159.3
64.5
148.0
13.4
81.4
$ 1,884.4
(71.2)
(69.2)
$ 440.7
15.1
17.1
$ 306.8
(9.8)
466.4
$
(5.2)
$ 914.4
3.3
18.5
226.8
$ 932.9
(580.3)
$ 2,817.3
$ 1,155.8
$ (355.4)
-
18.0
April 1
April 1, 2010
IFRS
2010
(Note 2)
$ 312.9
$ 312.9
238.2
238.2
205.5
205.5
126.8
126.8
24.2
24.2
30.7
30.7
27.9
-
27.9
$ 966.2
1,197.1
$ 966.2
290.4
1,197.1
24.7
290.4
15.1
-
97.8
24.7
15.1
$ 2,591.3
97.8
$ 2,591.3
$ 493.0
32.1
6.5
$ 493.0
167.4
32.1
68.5
6.5
9.3
167.4
$ 776.8
68.5
8.2
-
600.9
9.3
148.0
$ 776.8
81.4
8.2
129.3
600.9
13.2
148.0
15.1
81.4
$ 1,772.9
129.3
$ 436.3
13.2
14.2
15.1
11.4
$ 1,772.9
338.5
$ 800.4
$ 436.3
18.0
14.2
$ 818.4
11.4
338.5
$ 2,591.3
$ 800.4
18.0
$ 818.4
$ 2,591.3
$ 1,588.5
$ 295.9
19
ccumulated other comprehensive (loss) income
Total liabilities
Retained earnings
Equity
Share capital
Equity attributable to equity holders of the Company
Contributed surplus
Non-controlling interests
Accumulated other comprehensive (loss) income
Total equity
Retained earnings
Total liabilities and equity
Equity attributable to equity
The accompanying notes form an integral part of these Consolidated Financial Statements.
Non-controlling interests
holders of the Company
13.5
(240.1)
3.6
230.3
$ 445.9
$ 1,269.4
$ (355.0)
1,050.1
(583.7)
18.5
(5.2)
H
H
A-H
A-H
-
H
H
$
17.1
(9.8)
466.4
$ 914.4
$ 440.7
$ 1,884.4
18.5
Total equity
Total liabilities and equity
$ 1,269.4
$ (336.5)
$ 2,857.9
$ (40.6)
$ 932.9
$ 2,817.3
$ 1,155.8
$ (337.4)
$ 2,621.9
$
(30.6)
CAE Annual Report 2012 | 101
Consolidated Statement of Financial Position
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Summary reconciliation of statement of cash flows as reported under previous Canadian GAAP to IFRS
March 31
2012
Year ended March 31, 2011
(amounts in millions)
Cash flows provided by (used in) operating activities
Cash flows (used in) provided by investing activities
March 31
April 1
2011
2010
(Note 2)
$ 276.4
(Note 2)
$ 312.9
$ 287.3
Notes
E, H
Previous
Canadian
GAAP
Adjustment
$ 247.0
(237.3)
$
(20.7)
6.4
IFRS
$ 226.3
(230.9)
Cash flows (used in) provided by financing activities
308.4
245.8
The following items explain the most significant and pertinent restatements to the financial statements resulting from the application of
153.1
IFRS.
47.7
296.8
230.5
124.3
43.5
126.8
24.2
238.2
205.5
(42.2)
(27.9)
14.3
E, H
A) IAS 20 and IAS 32 – Accounting for government grants and disclosure of government assistance and financial
95.5
10.3
58.8
18.9
30.7
27.9
instrument: presentation
$ 1,049.2
$ 966.2
$ 1,148.1
Royalty arrangements with the government
1,293.7
Previous Canadian GAAP
533.2
accounting policy
1,211.0
375.8
1,197.1
290.4
24.1
7.2
20.7
11.6
24.7
15.1
With the exception of the Government of Canada’s contributions for Project Falcon, other
government contributions are recorded as a reduction of the related R&D program costs or
as a reduction in the program’s capitalized expenditures.
177.4
$ 3,183.7
149.0
97.8
$ 2,817.3
$ 2,591.3
$ 597.6
$ 551.9
$ 493.0
21.6
10.9
20.9
12.9
104.6
IFRS accounting policy
136.0
125.8
86.2
12.7
$ 883.4
6.0
12.4
$ 810.1
10.4
April 1, 2010 statement of
685.6
financial position impact
161.6
574.0
161.6
114.2
186.0
91.8
12.9
62.8
187.6
64.5
13.4
32.1
6.5
167.4
68.5
9.3
$ 776.8
8.2
600.9
148.0
81.4
129.3
13.2
15.1
$ 2,141.5
$ 1,884.4
$ 1,772.9
Impact on net income for the
year ended March 31, 2011
$ 454.5
19.2
$ 440.7
17.1
(9.8)
Impact on statement of cash
558.0
flows
$ 1,021.9
(9.8)
466.4
$ 914.4
$ 436.3
14.2
11.4
338.5
$ 800.4
A liability to repay the government contribution is recognized when conditions arise and the
repayment thereof is reflected in the consolidated income statement when royalties become
due.
Contributions for Project Falcon are recognized as an interest-bearing long-term obligation.
The difference between the face value of the long-term obligation and the discounted value
of the long-term obligation is accounted for as a government contribution and is recognized
as a reduction of costs or as a reduction of capitalized expenditures.
Repayable government assistance arrangements are recognized as royalty obligations. The
obligation to repay royalties is recorded when the contribution is received and is estimated
based on future projections. Subsequent re-measurement of these obligations is recognized
in income.
As a result of applying the IFRS policy, a royalty obligation, recorded at a discounted value
and accreted over time, was recorded on the statement of financial position in the amount of
$156.6 million (including the current portion), with an offsetting decrease in equity of
$100.4 million, net of a deferred tax impact of $36.8 million. As well, an increase in assets of
$19.4 million was recorded to retroactively affect government assistance that were
recognized as a reduction of costs and a reduction of capital expenditures, respectively, in
accordance with previous Canadian GAAP.
When compared to the amount recognized under previous Canadian GAAP, cost of sales
was reduced by $7.6 million as royalty expenses from arrangements with the government on
R&D programs are not recognized under IFRS. Conversely, finance expense related to
government royalty obligations increased by $13.3 million.
There is no significant impact when compared to the cash flows recognized under previous
Canadian GAAP.
20.3
18.5
18.0
$ 1,042.2
B) IAS 16 – Property, plant and equipment (PP&E)
$ 818.4
$ 932.9
$ 3,183.7
$ 2,817.3
$ 2,591.3
IFRS 1 Exemption – fair value as deemed cost
Exemption applied
April 1, 2010 statement of
financial position impact
The company elected to use fair value as deemed cost on the date of transition for specific
items of property, plant and equipment.
PP&E decreased by $76.4 million and equity decreased by $61.8 million, net of a deferred
tax impact of $14.6 million. The aggregate of the fair values for these specific training
devices was $159.0 million at April 1, 2010.
Impact on net income for the year
ended March 31, 2011
When compared to the amount recognized under previous Canadian GAAP, cost of sales
was reduced by $5.5 million, given the lower depreciation of specific training devices.
Impact on statement of cash flows
There is no significant impact when compared to the cash flows recognized under previous
Canadian GAAP.
102 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Componentization
Consolidated Statement of Financial Position
Previous Canadian GAAP
accounting policy
(amounts in millions of Canadian dollars)
IFRS accounting policy
Assets
Cash and cash equivalents
ccounts receivable
April 1, 2010 statement of
Contracts in progress : assets
financial position impact
Inventories
Prepayments
Impact on net income for the
Income taxes recoverable
year ended March 31, 2011
Derivative financial assets
Total current assets
Impact on statement of cash
Property, plant and equipment
flows
Intangible assets
Deferred tax assets
Derivative financial assets
De-recognition
Other assets
Previous Canadian GAAP
Total assets
accounting policy
Liabilities and equity
IFRS accounting policy
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
April 1, 2010 statement of
Current portion of long-term debt
financial position impact
Derivative financial liabilities
Total current liabilities
Impact on net income for the
Provisions
year ended March 31, 2011
Long-term debt
Royalty obligations
March 31
2012
The cost of an item of PP&E made up of significant separable component parts is allocated
to the component parts when practicable and when an estimate can be made of the lives of
the separate components.
April 1
March 31
2010
Each part of an item of PP&E with a cost that is significant in relation to the total cost of the
(Note 2)
item, and which has a useful life which is different than the main asset, must be depreciated
$ 312.9
separately.
(Note 2)
$ 276.4
$ 287.3
Notes
2011
6
5
11
308.4
245.8
238.2
Certain buildings are separated into components. The three components identified were: the
205.5
roof, the heating and cooling system and the rest of the building. The impact of
126.8
componentization resulted in a decrease in PP&E of $2.0 million on April 1, 2010.
24.2
When compared to the amount recognized under previous Canadian GAAP, cost of sales
30.7
increased by $0.2 million given the reduced depreciation periods of certain components of
27.9
buildings.
$ 966.2
There is no significant impact when compared to the cash flows recognized under previous
1,197.1
Canadian GAAP.
290.4
1,211.0
375.8
153.1
47.7
124.3
43.5
296.8
230.5
95.5
10.3
58.8
18.9
1,293.7
533.2
$ 1,049.2
$ 1,148.1
7
8
29
17
29
24.1
7.2
20.7
11.6
24.7
15.1
97.8
PP&E are recorded at cost less accumulated depreciation, net of any impairment charges.
$ 2,591.3
Subsequent costs are capitalized if they constitute an asset betterment or are expensed if
they constitute a repair or maintenance.
$ 2,817.3
$ 3,183.7
149.0
177.4
9
10
Upon replacement of a component, a loss on disposal is recognized to income when the
$ 493.0
carrying value of a replaced item is de-recognized, unless the item is transferred to
32.1
inventories. If it is not practical to determine such carrying value, the cost and accumulated
6.5
depreciation are calculated by reference to the cost of the replacement part.
167.4
The impact of retroactively considering past de-recognitions resulted in a decrease in PP&E
68.5
of $6.5 million on April 1, 2010.
9.3
125.8
86.2
104.6
136.0
20.9
12.9
21.6
10.9
11
13
$ 597.6
$ 551.9
12.4
12
29
12.7
$ 776.8
When compared to the amount recognized under previous Canadian GAAP, cost of sales
8.2
increased by $1.4 million given the de-recognition of specific components on certain devices
600.9
during the fourth quarter of fiscal 2011, partially offset by reduced depreciation resulting from
148.0
the reduction in PP&E upon the transition to IFRS.
$ 810.1
10.4
$ 883.4
6.0
685.6
161.6
574.0
161.6
13
29
12
81.4
There is no significant impact when compared to the cash flows recognized under previous
129.3
Canadian GAAP.
114.2
186.0
62.8
187.6
15
16
91.8
12.9
64.5
13.4
13.2
15.1
$ 2,141.5
$ 1,884.4
$ 1,772.9
18
$ 436.3
The excess of the net actuarial gain (loss) over 10% of the greater of the benefit obligation
14.2
and the fair value of plan assets is not immediately recognized in income, but is amortized
11.4
over the remaining service period of active employees (corridor approach). Unrecognized
338.5
actuarial gains and losses below the corridor are deferred.
$ 454.5
19.2
$ 440.7
17.1
(9.8)
558.0
(9.8)
466.4
19
$ 914.4
$ 800.4
$ 1,021.9
18.0
The Company elected to recognize all cumulative actuarial gains and losses of defined
$ 818.4
benefit plans deferred under previous Canadian GAAP in opening retained earnings.
$ 932.9
$ 1,042.2
18.5
20.3
$ 2,591.3
Subsequently, actuarial gains and losses for the Company’s defined benefit plans are
recognized in the period in which they occur on the statement of financial position and in
other comprehensive income.
$ 2,817.3
$ 3,183.7
Employee benefits obligations
Impact on statement of cash
Deferred gains and other non-current liabilities
flows
Deferred tax liabilities
Derivative financial liabilities
C) IAS 19 – Employee benefits
Total liabilities
Equity
IFRS 1 Exemption and accounting impact on our continuing operations – actuarial gains and losses
Share capital
Previous Canadian GAAP
Contributed surplus
accounting policy
ccumulated other comprehensive (loss) income
Retained earnings
17
29
Equity attributable to equity holders of the Company
Non-controlling interests
IFRS 1 exemption applied and
Total equity
IFRS accounting policy
Total liabilities and equity
The accompanying notes form an integral part of these Consolidated Financial Statements.
April 1, 2010 statement of
financial position impact
Impact on net income for the
year ended March 31, 2011
The effect of recognizing all cumulative actuarial gains and losses on April 1, 2010 resulted
in a decrease in other assets of $29.6 million and an additional recognition of employee
benefit obligations in the amount of $25.7 million. Equity also decreased by $40.7 million
after consideration of a deferred tax impact of $14.6 million.
When compared to the amount recognized under previous Canadian GAAP, general and
administrative expenses were reduced by $2.2 million given the reduced amortization of
actuarial gains and losses.
Impact on statement of cash
flows
There is no significant impact when compared to the cash flows recognized under previous
Canadian GAAP.
CAE Annual Report 2012 | 103
Consolidated Statement of Financial Position
Actuarial valuations
Previous Canadian GAAP
accounting policy
IFRS accounting policy
March 31
March 31
2012
2011
It is possible to value pension assets and obligations up to three months prior to year-end.
April 1
2010
Pension assets and obligations are required to be valued as at the statement of financial
position date.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
$ 287.3
(Note 2)
$ 276.4
April 1, 2010 statement of
financial position impact
308.4
245.8
Impact on net income for the
153.1
year ended March 31, 2011
47.7
296.8
230.5
124.3
43.5
Impact on statement of cash
95.5
flows
10.3
$ 1,148.1
$ 1,049.2
58.8
18.9
(Note 2)
$ 312.9
238.2
205.5
126.8
24.2
30.7
27.9
1,293.7
Past service costs
533.2
Previous Canadian GAAP
accounting policy
1,211.0
375.8
20.7
11.6
24.1
7.2
177.4
IFRS accounting policy
$ 2,817.3
149.0
$ 3,183.7
$ 966.2
1,197.1
290.4
24.7
15.1
97.8
$ 2,591.3
$ 597.6
$ 551.9
$ 493.0
20.9
12.9
21.6
10.9
April 1, 2010 statement of
financial position impact
104.6
136.0
Impact on net income for the
year ended March 31, 2011
125.8
86.2
12.7
12.4
32.1
6.5
167.4
68.5
9.3
$ 810.1
10.4
$ 776.8
8.2
$ 883.4
Impact on statement of cash
6.0
flows
685.6
161.6
D) IAS 23 – Borrowing costs
81.4
62.8
114.2
129.3
187.6
186.0
IFRS 1 Exemption – borrowing costs
13.2
64.5
15.1
13.4
Exemption applied
574.0
161.6
600.9
148.0
91.8
12.9
$ 2,141.5
$ 1,884.4
$ 1,772.9
April 1, 2010 statement of
financial position impact
$ 440.7
17.1
$ 454.5
19.2
$ 436.3
14.2
(9.8)
558.0
Impact on net income for the
year ended March 31, 2011
(9.8)
466.4
$ 914.4
$ 1,021.9
11.4
338.5
$ 800.4
18.0
18.5
20.3
$ 1,042.2
$ 3,183.7
$ 932.9
$ 2,817.3
$ 818.4
$ 2,591.3
The effect of the change in measurement date resulted in an increase in the employee
benefits obligation of $17.0 million, with an offsetting decrease in equity of $12.4 million, net
of a deferred tax impact of $4.6 million.
When compared to the amount recognized under previous Canadian GAAP, general and
administrative expenses increased by $1.1 million.
There is no significant impact when compared to the cash flows recognized under previous
Canadian GAAP.
Past service costs are amortized on a straight-line basis over the average remaining service
period of active employees expected to receive benefits under the plan up to the full eligibility
date.
Past service costs are recognized as an expense on a straight-line basis over the average
period until the benefits become vested. To the extent that the benefits are already vested
following the introduction of, or changes to, a defined benefit plan, past service costs are
recognized immediately.
The effect of recognizing benefits that have already vested resulted in an increase in the
employee benefits obligation of $4.8 million, with an offsetting decrease in equity of
$3.5 million, net of a deferred tax impact of $1.3 million.
There is no significant impact when compared to the amount recognized under previous
Canadian GAAP.
There is no significant impact when compared to the cash flows recognized under previous
Canadian GAAP.
The Company elected to apply the requirement of IAS 23, Borrowing Costs, whereby interest
must be capitalized to qualifying assets beginning only on April 1, 2010.
Unamortized capitalized interest prior to April 1, 2010 was eliminated as an adjustment to
retained earnings and resulted in a decrease in PP&E and intangible assets of $23.5 million
and $1.7 million respectively, with an offsetting decrease in equity of $23.0 million, net of a
deferred tax impact of $2.2 million.
When compared to the amount recognized under previous Canadian GAAP, cost of sales
decreased by $0.8 million due to lower amortization resulting from the elimination of
unamortized capitalized interest. However, finance expense increased by $4.3 million given
that interest on certain assets did not qualify for capitalization. Under previous Canadian
GAAP, this interest was capitalized to the cost of the related asset.
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
Impact on statement of cash
flows
There is no significant impact when compared to the cash flows recognized under previous
Canadian GAAP.
104 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
E) IAS 17 – Leases
Consolidated Statement of Financial Position
Classification
Previous Canadian GAAP
accounting policy
(amounts in millions of Canadian dollars)
Assets
Cash and cash equivalents
ccounts receivable
IFRS accounting policy
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
April 1, 2010 statement of
Total current assets
financial position impact
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Impact on net income for the
year ended March 31, 2011
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Impact on statement of cash
Contracts in progress : liabilities
flows
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
2011
Notes
March 31
$ 287.3
(Note 2)
$ 276.4
March 31
2012
Under previous Canadian GAAP, a lease is classified as either a capital (finance) lease or as
April 1
an operating lease. Lease classification is dependent on whether substantially all of the
2010
benefits and risks of ownership of a leased asset are transferred to the lessee and the
(Note 2)
assessment is made at the inception of the lease. Quantitative thresholds are given to
$ 312.9
determine classification of the leases.
5
11
238.2
Lease classification under IFRS is also dependent on whether substantially all the benefits
205.5
and risks of ownership of a leased asset are transferred to the lessee at the inception of the
126.8
lease. No quantitative thresholds are offered, and additional qualitative indicators are
24.2
provided.
30.7
27.9
Material lease arrangements, previously classified as operating leases, are recognized on
$ 966.2
the statement of financial position as finance leases. These include certain simulators
1,197.1
installed in the Company’s global network of training centres and specific buildings.
290.4
The impact of reclassifying these leases resulted in an increase in PP&E of $150.7 million
24.7
and a corresponding increase to long-term debt, including the current portion in the amount
15.1
of $176.5 million on April 1, 2010. Equity decreased by $23.3 million, net of a deferred tax
97.8
impact of $12.0 million.
1,293.7
533.2
1,211.0
375.8
308.4
245.8
296.8
230.5
124.3
43.5
153.1
47.7
20.7
11.6
95.5
10.3
58.8
18.9
24.1
7.2
$ 1,148.1
$ 1,049.2
17
29
177.4
149.0
7
8
29
6
9
10
12
$ 2,817.3
$ 3,183.7
$ 2,591.3
When compared to the amount recognized under previous Canadian GAAP, cost of sales
decreased by $10.5 million, mainly due to the reversal of rent expense, which was partially
offset by the depreciation incurred on the assets that changed lease classification.
$ 493.0
Conversely, finance expense increased by $11.1 million mainly due to interest accretion on
32.1
the long-term debt.
6.5
Under previous Canadian GAAP, payments for certain simulators installed in the Company’s
167.4
global network of training centres and specific buildings previously classified as operating
68.5
leases were classified as cash flows from operating activities. Under IFRS, given that these
9.3
leases are recognized on the statement of financial position as finance leases, such
$ 776.8
payments are treated as financing activities. For the year ended March 31, 2011, cash flows
8.2
from operating and financing activities were adjusted by $17.5 million as the lease
600.9
obligations were repaid.
148.0
$ 810.1
10.4
$ 883.4
6.0
574.0
161.6
104.6
136.0
125.8
86.2
20.9
12.9
21.6
10.9
11
13
13
29
$ 551.9
$ 597.6
12.7
12.4
29
12
685.6
161.6
Employee benefits obligations
F) IAS 18 – Revenue
Deferred gains and other non-current liabilities
Deferred tax liabilities
Long-term service arrangements
Derivative financial liabilities
Previous Canadian GAAP
Total liabilities
accounting policy
Equity
Share capital
Contributed surplus
ccumulated other comprehensive (loss) income
IFRS accounting policy
Retained earnings
Equity attributable to equity holders of the Company
Non-controlling interests
15
16
114.2
186.0
62.8
187.6
81.4
129.3
17
29
64.5
13.4
91.8
12.9
13.2
15.1
Generally, revenue from long-term maintenance contracts is recognized into income on a
$ 1,772.9
straight-line method over the contract period, or in situations when it is clear that costs will be
incurred on other than a straight-line basis, based on historical evidence, revenue is
$ 436.3
recognized over the contract period in proportion to the costs expected to be incurred in
14.2
performing services under the contract (the percentage-of-completion or POC method).
11.4
The notion that historical evidence is needed to recognize revenue under the POC method of
338.5
accounting is not necessary. As a result, for service contracts where POC accounting more
$ 800.4
appropriately estimates the outcome of the contract, revenue recognition using the
18.0
straight-line method is not appropriate.
$ 454.5
19.2
$ 440.7
17.1
(9.8)
558.0
(9.8)
466.4
$ 914.4
$ 2,141.5
$ 1,021.9
$ 1,884.4
20.3
18.5
19
18
Total equity
$ 818.4
The effect of retroactively applying the POC method for certain limited arrangements had a
April 1, 2010 statement of
Total liabilities and equity
$ 2,591.3
financial position impact
negative effect on retained earnings of $6.0 million.
The accompanying notes form an integral part of these Consolidated Financial Statements.
Impact on net income for the
year ended March 31, 2011
Revenue increased by $1.9 million, while cost of sales increased by $0.7 million.
$ 932.9
$ 1,042.2
$ 3,183.7
$ 2,817.3
Impact on statement of cash
flows
There is no significant impact when compared to the cash flows recognized under previous
Canadian GAAP.
CAE Annual Report 2012 | 105
Consolidated Statement of Financial Position
G) Income taxes and other
Unrecognized deferred tax assets
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Certain transitional adjustments have resulted in the computation of additional deferred tax
assets but given that IFRS imposes restrictions on the full recognition of future taxes by
requiring that they be recognized only to the extent that their realization is probable, certain
future tax assets have not been recognized as some benefits are expected to materialize in
periods subsequent to the period meeting the probability of recovery test required to support
such assets.
Future tax assets were recognized only to the extent that their realization is probable.
There is no significant impact when compared to the cash flows recognized under previous
Canadian GAAP.
Acquisition-related costs are costs an acquirer incurs to effect a business combination.
Under previous Canadian GAAP, direct costs of a business acquisition are capitalized as
part of the purchase price allocation while indirect costs are expensed.
The acquirer accounts for all acquisition-related costs as expenses in the periods in which
the costs are incurred and the services are received, with the exception of costs to issue debt
or equity securities.
No impact given the IFRS 1 election to apply IFRS 3 to business combinations that occurred
on or after April 1, 2010.
As a result of expensing the acquisition costs, general and administrative expenses
increased by $2.5 million.
There is no significant impact when compared to the cash flows recognized under previous
Canadian GAAP.
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
IFRS accounting policy
March 31
March 31
2012
$ 287.3
2011
(Note 2)
$ 276.4
296.8
230.5
308.4
245.8
April 1, 2010 statement of
153.1
financial position impact
47.7
124.3
43.5
April 1
2010
(Note 2)
$ 312.9
238.2
205.5
126.8
24.2
30.7
27.9
95.5
10.3
Impact on statement of cash
flows
$ 1,148.1
58.8
18.9
$ 1,049.2
$ 966.2
IFRS 3 - Business combinations
1,293.7
Acquisition costs
533.2
1,211.0
375.8
1,197.1
290.4
24.1
7.2
Previous Canadian GAAP
accounting policy
177.4
20.7
11.6
149.0
$ 3,183.7
IFRS accounting policy
$ 2,817.3
24.7
15.1
97.8
$ 2,591.3
$ 597.6
$ 551.9
$ 493.0
April 1, 2010 statement of
financial position impact
20.9
12.9
21.6
10.9
Impact on net income for the
104.6
year ended March 31, 2011
136.0
125.8
86.2
32.1
6.5
167.4
68.5
9.3
12.4
12.7
Impact on statement of cash
$ 883.4
flows
6.0
$ 810.1
10.4
$ 776.8
8.2
685.6
161.6
114.2
186.0
91.8
12.9
574.0
161.6
62.8
187.6
64.5
13.4
600.9
148.0
81.4
129.3
13.2
15.1
$ 2,141.5
$ 1,884.4
$ 1,772.9
$ 454.5
19.2
(9.8)
558.0
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
$ 440.7
17.1
(9.8)
466.4
$ 436.3
14.2
11.4
338.5
$ 914.4
$ 800.4
18.5
$ 932.9
$ 2,817.3
18.0
$ 818.4
$ 2,591.3
106 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
H) Reclassifications
Consolidated Statement of Financial Position
Below are some of the significant reclassification differences:
Previous Canadian GAAP
(amounts in millions of Canadian dollars)
Assets
Derivative
Cash and cash equivalents
financial assets are
in Accounts
receivable and Other assets, while derivative
financial
liabilities are included in Accounts payable and accrued
liabilities and Deferred gains and other long-term liabilities.
included
Contracts in progress : assets
ccounts receivable
Inventories
Current and long-term portions of future income tax assets
Prepayments
and liabilities are segregated as the Company presents a
Income taxes recoverable
classified statement of financial position. Classification is
Derivative financial assets
based on classification of the asset or liability to which the
future taxes relate. If a future tax balance is not related to an
asset or liability recognized for accounting purposes, it is
classified according to the date on which the balance is
expected to be realized.
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Provisions are included in the balance of Accounts payable
Other assets
and accrued liabilities and Deferred gains and other long-
term liabilities.
Total assets
IFRS
Notes
March 31
2012
March 31
2011
April 1
2010
(Note 2)
Derivative financial assets and derivative financial liabilities
$ 312.9
(Note 2)
$ 276.4
$ 287.3
are separately identified.
5
11
308.4
245.8
296.8
230.5
238.2
205.5
6
126.8
153.1
Deferred tax balances are not classified as current assets or
24.2
47.7
current liabilities. All deferred tax balances are classified as
30.7
long-term assets or liabilities.
27.9
124.3
43.5
58.8
18.9
29
95.5
10.3
7
8
$ 1,148.1
1,293.7
533.2
$ 1,049.2
$ 966.2
1,211.0
375.8
1,197.1
290.4
17
29
24.7
24.1
15.1
7.2
Provisions are separately identified on the statement of
97.8
177.4
20.7
11.6
149.0
9
financial position.
$ 3,183.7
$ 2,817.3
$ 2,591.3
Liabilities and equity
Employee benefit liabilities are presented in Deferred gains
and other long-term liabilities.
ccounts payable and accrued liabilities
Employee benefit liabilities are separately identified.
10
$ 597.6
$ 551.9
$ 493.0
Provisions
Income taxes payable
Income taxes payable are presented in Accounts payable
and accrued liabilities.
Contracts in progress : liabilities
Current portion of long-term debt
Non-controlling interest is included on the statement of
Derivative financial liabilities
financial position in Deferred gains and other long-term
liabilities. Net income is shown net of any earnings or losses
attributed to non-controlling interests.
Total current liabilities
Provisions
Long-term debt
Goodwill is separately identified.
Royalty obligations
Employee benefits obligations
Certain accounts receivables and contracts in progress
Deferred gains and other non-current liabilities
assets are sold to third parties for cash consideration through
a financial asset program.
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
Equity
Share capital
Contributed surplus
12
20.9
Income taxes payable are separately identified.
12.9
21.6
10.9
32.1
6.5
29
11
13
125.8
86.2
167.4
104.6
68.5
136.0
The non-controlling interests’ share of the net assets of
9.3
12.7
subsidiaries is included in equity and their share of the
comprehensive income of subsidiaries is allocated directly to
$ 776.8
$ 883.4
equity.
8.2
12
6.0
13
29
Goodwill is presented in Intangible assets.
$ 810.1
10.4
574.0
161.6
600.9
148.0
685.6
161.6
12.4
Certain contracts
15
16
81.4
the
129.3
financial asset program are not eligible for de-recognition. As
13.2
a result, the cash consideration received for these assets are
classified in the current portion of long-term debt.
15.1
62.8
in progress assets sold
187.6
114.2
186.0
64.5
13.4
through
17
29
91.8
12.9
$ 2,141.5
$ 1,772.9
For the year ended March 31, 2011, cash flows from
operating activities decreased by $32.2 million and cash
$ 436.3
flows from financing activities increased by the same amount.
14.2
$ 440.7
17.1
$ 454.5
19.2
$ 1,884.4
18
ccumulated other comprehensive (loss) income
19
Retained earnings
Equity attributable to equity holders of the Company
Non-controlling interests
Total equity
Total liabilities and equity
(9.8)
558.0
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
(9.8)
466.4
11.4
338.5
$ 914.4
$ 800.4
18.5
$ 932.9
$ 2,817.3
18.0
$ 818.4
$ 2,591.3
The accompanying notes form an integral part of these Consolidated Financial Statements.
CAE Annual Report 2012 | 107
Consolidated Statement of Financial Position
NOTE 3 – BUSINESS COMBINATIONS
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
Fiscal 2012 acquisitions
As at March 31, 2012, the Company entered into business combination transactions for a total cost of $131.4 million.
March 31
2012
$ 287.3
March 31
2011
(Note 2)
$ 276.4
April 1
2010
(Note 2)
$ 312.9
An amount of $0.7 million of acquisition-related costs was included in general and administrative expenses in the consolidated income
statement for the year ended March 31, 2012.
296.8
230.5
Medical Education Technologies, Inc.
308.4
In August 2011, the Company acquired 100% of the shares of Medical Education Technologies, Inc. (METI). With this acquisition, the
245.8
Company gains global market access, expands CAE’s product and services offering and acquired simulation-based technology for
153.1
healthcare.
47.7
124.3
43.5
126.8
24.2
238.2
205.5
95.5
10.3
58.8
18.9
30.7
27.9
$ 1,148.1
The preliminary determination of the fair value for the above acquisition of the net identifiable assets acquired and liabilities assumed
is included in the following table. The fair value of the acquired identifiable intangible assets of $39.0 million (including technology and
customer relationships) is still provisional for the period ended March 31, 2012 and will be until the valuations for those assets are
finalized. Preliminary goodwill of $99.1 million arising from the acquisition of METI is attributable to the advantages gained, which
1,293.7
include:
533.2
1,211.0
375.8
1,197.1
290.4
$ 966.2
$ 1,049.2
A platform that immediately propels the Company to an important position by providing access to the human patient simulator
segment, a significant segment of the overall healthcare simulation market;
177.4
An expanded customer base for CAE Healthcare, enabling the offering of the existing portfolio of solutions to a much broader
24.1
7.2
20.7
11.6
149.0
24.7
15.1
97.8
$ 3,183.7
market;
$ 2,817.3
$ 2,591.3
An experienced management team with subject matter expertise and industry know-how.
$ 597.6
$ 493.0
The fair value of the acquired accounts receivable was $9.7 million. Gross contractual amounts receivable amount to $10.5 million,
but $0.8 million of this amount is not expected to be collected.
$ 551.9
21.6
10.9
20.9
12.9
32.1
6.5
125.8
86.2
The revenue and operating profit included in the consolidated income statement from METI since the acquisition date is $35.9 million
104.6
and $0.6 million respectively. Had METI been consolidated from April 1, 2011, the consolidated income statement would have shown
136.0
additional revenue and operating profit from METI of $31.0 million and $1.8 million respectively. These pro-forma amounts are
estimated based on the operations of the acquired business prior to the business combination by the Company, but are adjusted to
reflect the Company’s accounting policies where significant. The amounts are provided as supplemental information and are not
necessarily indicative of future performance.
$ 776.8
8.2
$ 810.1
10.4
167.4
68.5
12.7
12.4
9.3
$ 883.4
6.0
574.0
161.6
685.6
Haptica Limited
161.6
In July 2011, the Company acquired the assets and intellectual property of Haptica Limited (Haptica). The acquisition serves to add to
114.2
CAE Healthcare’s surgical solution offering.
186.0
62.8
187.6
81.4
129.3
600.9
148.0
91.8
12.9
64.5
13.4
13.2
15.1
The fair value for the above acquisition of the net identifiable assets acquired and liabilities assumed is included in the following table
as part of Other. The fair value of the acquired identifiable assets amounted to $0.7 million (including technology and intellectual
property rights) and no goodwill is recognized from this acquisition.
$ 1,884.4
$ 1,772.9
$ 2,141.5
$ 454.5
19.2
Flight Simulator-Capital L.P.
$ 440.7
In March 2012, the Company acquired the outstanding 80.5% of the interests in Flight Simulator-Capital L.P. (Simucap) that it
17.1
previously did not own. With this acquisition, CAE owns 100% of the units of Simucap. The acquisition provides CAE with control of a
(9.8)
financing vehicle that offers lease financing for CAE’s civil flight simulators and access to financing of up to 85% of the equipment
558.0
value available from Export Development Canada. The structure allows CAE to provide more financing alternatives to customers.
$ 436.3
14.2
(9.8)
466.4
11.4
338.5
$ 1,021.9
20.3
$ 914.4
$ 800.4
18.5
18.0
The preliminary determination of the fair value for the above acquisition of the net identifiable assets acquired and liabilities assumed
is also included in the following table as part of Other. No goodwill is recognized from this acquisition.
$ 818.4
$ 932.9
$ 1,042.2
$ 2,817.3
$ 2,591.3
$ 3,183.7
Other
Adjustments to the determination of the net identifiable assets acquired and liabilities assumed for certain fiscal 2011 acquisitions
were also completed during the fiscal year and resulted in an adjustment to goodwill of nil. Remaining additional consideration
outstanding for previous years’ acquisitions amounts to $9.0 million which is contingent on certain conditions being satisfied.
108 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
March 31
2012
Fiscal 2011 acquisitions
Consolidated Statement of Financial Position
In fiscal 2011, the Company entered into business combination transactions for a total cost of $76.8 million. An amount of $2.5 million
of acquisition-related costs was included in general and administrative expenses in the consolidated income statement for the year
ended March 31, 2011.
March 31
April 1
(amounts in millions of Canadian dollars)
Datamine Corporate Limited
Assets
(Note 2)
The Company acquired Datamine Corporate Limited (Datamine). Datamine is a supplier of mining optimization software tools and
$ 312.9
Cash and cash equivalents
services.
(Note 2)
$ 276.4
$ 287.3
Notes
2011
2010
ccounts receivable
5
11
308.4
245.8
296.8
230.5
238.2
205.5
Contracts in progress : assets
Academia Aeronautica de Evora S.A.
The Company acquired the remaining non-controlling interest of Academia Aeronautica de Evora S.A. (AAE).
Inventories
Prepayments
30.7
Income taxes recoverable
Century Systems Technologies Inc.
27.9
Derivative financial assets
The Company acquired Century Systems Technologies Inc. (Century). Century is a supplier of geological data management and
governance systems to the mining industry.
Total current assets
$ 966.2
1,197.1
Property, plant and equipment
RTI International’s Technology Assisted Learning
290.4
Intangible assets
The Company acquired the assets of RTI International’s Technology Assisted Learning (TAL) business unit. TAL designs,
24.7
Deferred tax assets
manufactures and delivers maintenance trainers as well as virtual desktop trainers.
15.1
Derivative financial assets
1,293.7
533.2
1,211.0
375.8
126.8
24.2
153.1
47.7
124.3
43.5
20.7
11.6
95.5
10.3
58.8
18.9
$ 1,148.1
$ 1,049.2
17
29
7
8
29
6
24.1
7.2
Other assets
CHC Helicopter’s Helicopter Flight Training Operations
Total assets
$ 2,591.3
The Company acquired the assets of CHC Helicopter’s Helicopter Flight Training Operations (CHC Helicopter’s HFTO) in order to
provide training to helicopter pilots and maintenance engineers as well as provide general training, pilot provisioning and search and
Liabilities and equity
rescue training support.
$ 3,183.7
$ 2,817.3
149.0
177.4
97.8
9
ccounts payable and accrued liabilities
10
$ 597.6
$ 551.9
$ 493.0
Provisions
Net assets acquired and liabilities assumed arising from the acquisitions are as follows:
Income taxes payable
12
21.6
10.9
20.9
12.9
32.1
6.5
$
12
29
17.3
11
13
13
29
0.1
39.0
METI
2012
(19.6)
3.3
Contracts in progress : liabilities
As at March 31
Current portion of long-term debt
(amounts in millions)
Derivative financial liabilities
Current assets (1)
Total current liabilities
Current liabilities
Provisions
Property, plant and equipment
Long-term debt
Other assets
Royalty obligations
Intangible assets
Employee benefits obligations
Goodwill (2)
Deferred gains and other non-current liabilities
Deferred income taxes
Deferred tax liabilities
Non-current liabilities
Derivative financial liabilities
Fair value of the net assets acquired, excluding cash position
Total liabilities
Equity
Other
Share capital
Cash and cash equivalents in subsidiary acquired
Contributed surplus
Total purchase consideration
ccumulated other comprehensive (loss) income
Purchase price payable
Retained earnings
Other
Equity attributable to equity holders of the Company
Total purchase consideration settled in cash
Non-controlling interests
Additional consideration related to previous fiscal year's acquisitions
Total equity
Total cash consideration
Total liabilities and equity
(1) Excluding cash on hand
(2) This goodwill is not deductible for tax purposes.
The accompanying notes form an integral part of these Consolidated Financial Statements.
99.1
(8.1)
(0.2)
-
at acquisition
-
3.3
$ 129.0
$ 125.7
$ 128.8
$ 128.8
17
29
15
16
(5.4)
19
18
-
104.6
136.0
Other
2012
12.7
0.5
$
$ 883.4
(0.1)
6.0
-
685.6
161.6
20.5
0.7
114.2
186.0
-
-
91.8
(20.7)
12.9
$ 2,141.5
$
0.9
-
1.5
2.4
$ 454.5
19.2
$
(9.8)
558.0
(0.1)
(0.3)
$
$
$ 1,021.9
2.0
20.3
-
$ 1,042.2
2.0
$ 3,183.7
$
125.8
Total
86.2
2012
12.4
17.8
$ 810.1
(19.7)
10.4
3.3
20.6
39.7
62.8
99.1
187.6
(8.1)
64.5
(26.1)
13.4
574.0
161.6
$ 1,884.4
$ 126.6
-
$ 440.7
4.8
17.1
$ 131.4
(9.8)
(0.3)
466.4
(0.3)
$ 914.4
$ 130.8
18.5
-
$ 932.9
$ 130.8
$ 2,817.3
167.4
Total
68.5
2011
9.3
23.0
$
$ 776.8
(21.1)
8.2
8.9
600.9
148.0
1.1
26.1
81.4
129.3
36.2
(1.7)
13.2
15.1
(2.5)
$ 1,772.9
70.0
$
0.2
6.6
$ 436.3
14.2
76.8
11.4
(0.7)
338.5
-
76.1
18.0
1.8
$ 800.4
$ 818.4
77.9
$ 2,591.3
$
$
$
The net assets of CHC Helicopter’s HFTO and AAE are included in the Training & Services/Civil segment. The net assets of TAL are
included in the Simulation Products/Military segment. The net assets of METI, Haptica, Datamine and Century are included in the
New Core Markets segment. The net assets of Simucap are not included in any of the segments.
CAE Annual Report 2012 | 109
Consolidated Statement of Financial Position
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
NOTE 4 – INVESTMENTS IN JOINT VENTURES
During fiscal 2012, the Company entered into new joint venture arrangements to form CAE Japan Flight Training Inc. – 51%, Asian
Aviation Centre of Excellence Sdn. Bhd. – 50%, CAE Simulation Training Private Limited – 25% and Philippine Academy for Aviation
Training Inc. – 50%. See Note 32 for a complete list of the Company’s investments in joint ventures.
March 31
April 1
March 31
2012
2011
2010
$ 287.3
(Note 2)
$ 276.4
(Note 2)
$ 312.9
Except for the Helicopter Training Media International GmbH joint venture, whose operations are essentially focused on designing,
manufacturing and supplying advanced helicopter military training product applications, all other joint venture companies’ operations
are focused on providing civil and military aviation training and related services.
308.4
245.8
The following table summarizes the financial information of the Company's investments in joint ventures:
153.1
47.7
126.8
24.2
124.3
43.5
296.8
230.5
238.2
205.5
Property, plant and equipment and other non-current assets
Long-term debt (including current portion)
177.4
Deferred gains and other non-current liabilities
149.0
97.8
$ 3,183.7
$ 2,817.3
$ 2,591.3
95.5
(amounts in millions)
10.3
Assets
$ 1,148.1
Current assets
$ 1,049.2
58.8
18.9
1,211.0
375.8
1,293.7
533.2
Liabilities
24.1
Current liabilities
7.2
20.7
11.6
$ 597.6
Years ended March 31
(amounts in millions)
$ 551.9
Earnings information
20.9
12.9
21.6
10.9
Revenue
Net income
104.6
136.0
12.7
$ 883.4
6.0
TS/C
SP/M
TS/M
125.8
86.2
12.4
30.7
27.9
$ 966.2
1,197.1
290.4
24.7
15.1
$ 493.0
32.1
6.5
167.4
68.5
9.3
Segmented operating income
$ 810.1
10.4
$ 776.8
8.2
March 31
2012
March 31
2011
April 1
2010
$
74.4
315.6
$
67.6
258.7
$
54.0
235.0
53.8
113.9
9.5
49.0
123.1
8.0
2012
$ 111.5
$
28.9
23.8
2.1
12.4
33.3
117.2
7.5
2011
90.4
20.0
16.1
2.8
11.3
600.9
148.0
574.0
685.6
There are no contingent liabilities relating to the Company’s interests in the joint ventures and no contingent liabilities from the joint
161.6
161.6
ventures themselves.
62.8
114.2
187.6
186.0
The Company’s share of the capital commitments from the joint ventures themselves amount to $84.7 million as at March 31, 2012
(2011 – $37.5 million).
81.4
129.3
91.8
12.9
64.5
13.4
13.2
15.1
$ 2,141.5
$ 1,884.4
$ 1,772.9
$ 454.5
19.2
(9.8)
558.0
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
$ 440.7
17.1
(9.8)
466.4
$ 436.3
14.2
11.4
338.5
$ 914.4
$ 800.4
18.5
$ 932.9
$ 2,817.3
18.0
$ 818.4
$ 2,591.3
110 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
NOTE 5 – ACCOUNTS RECEIVABLE
Consolidated Statement of Financial Position
Accounts receivable are carried on the consolidated statement of financial position net of allowance for doubtful accounts. This
provision is established based on the Company’s best estimates regarding the ultimate recovery of balances for which collection is
uncertain. Uncertainty of ultimate collection may become apparent from various indicators, such as a deterioration of the credit
April 1
situation of a given client and delay in collection beyond the contractually agreed upon payment terms. Management regularly reviews
2010
(amounts in millions of Canadian dollars)
accounts receivable, monitors past due balances and assesses the appropriateness of the allowance for doubtful accounts.
Assets
Cash and cash equivalents
Details of accounts receivable were as follows:
March 31
2012
(Note 2)
$ 276.4
(Note 2)
$ 312.9
$ 287.3
March 31
Notes
2011
ccounts receivable
Contracts in progress : assets
Inventories
(amounts in millions)
Prepayments
Past due trade receivables not impaired
Income taxes recoverable
Derivative financial assets
1-30 days
31-60 days
Total current assets
61-90 days
Property, plant and equipment
Greater than 90 days
Intangible assets
Total
Deferred tax assets
Allowance for doubtful accounts
Derivative financial assets
Current trade receivables
Other assets
Accrued receivables
Total assets
Receivables from related parties
Other receivables
Liabilities and equity
Total accounts receivable
ccounts payable and accrued liabilities
Provisions
Changes in the allowance for doubtful accounts were as follows:
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
As at March 31
Derivative financial liabilities
(amounts in millions)
Total current liabilities
Allowance for doubtful accounts, beginning of year
Provisions
Additions
Long-term debt
Amounts charged off
Royalty obligations
Unused amounts reversed
Employee benefits obligations
Exchange differences
Deferred gains and other non-current liabilities
Allowance for doubtful accounts, end of year
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
NOTE 6 – INVENTORIES
Equity
Share capital
Contributed surplus
(amounts in millions)
Work in progress
Retained earnings
Raw materials, supplies and manufactured products
Equity attributable to equity holders of the Company
ccumulated other comprehensive (loss) income
Non-controlling interests
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
Total equity
The amount of inventories recognized as cost of sales was as follows:
Total liabilities and equity
Years ended March 31
The accompanying notes form an integral part of these Consolidated Financial Statements.
(amounts in millions)
Work in progress
Raw materials, supplies and manufactured products
March 31
308.4
245.8
153.1
2012
47.7
March 31
296.8
230.5
124.3
2011
43.5
238.2
205.5
April 1
126.8
2010
24.2
$
$
95.5
28.7
10.3
9.8
$ 1,148.1
8.9
1,293.7
31.3
533.2
78.7
24.1
(7.6)
7.2
113.2
177.4
45.5
$ 3,183.7
38.1
40.5
$
$
58.8
33.0
18.9
22.4
$ 1,049.2
11.7
1,211.0
15.2
375.8
82.3
20.7
(6.0)
11.6
114.8
149.0
41.3
$ 2,817.3
16.6
47.8
$
$
30.7
21.2
27.9
10.7
$ 966.2
9.3
1,197.1
20.6
290.4
61.8
24.7
(5.6)
15.1
90.6
97.8
34.5
$ 2,591.3
14.5
42.4
$ 308.4
$ 597.6
$ 296.8
$ 551.9
$ 238.2
$ 493.0
21.6
10.9
104.6
136.0
12.7
$ 883.4
6.0
685.6
161.6
114.2
186.0
91.8
12.9
20.9
12.9
125.8
86.2
12.4
2012
$ 810.1
(6.0)
$
10.4
(6.2)
574.0
2.4
161.6
2.0
62.8
0.2
187.6
(7.6)
64.5
13.4
$
32.1
6.5
167.4
68.5
9.3
2011
$ 776.8
(5.6)
$
8.2
(3.2)
600.9
0.9
148.0
2.1
81.4
(0.2)
129.3
(6.0)
13.2
15.1
$
$ 2,141.5
$ 1,884.4
$ 1,772.9
$
$ 454.5
March 31
19.2
2012
(9.8)
99.2
558.0
53.9
$ 1,021.9
$ 153.1
20.3
$ 1,042.2
$ 3,183.7
$
$ 440.7
March 31
17.1
2011
(9.8)
83.0
466.4
41.3
$ 914.4
$ 124.3
18.5
$ 932.9
$ 2,817.3
$
2012
72.6
34.3
$
$ 436.3
April 1
14.2
2010
11.4
87.6
338.5
39.2
$ 800.4
$ 126.8
18.0
$ 818.4
$ 2,591.3
$
2011
82.9
23.7
$ 106.9
$ 106.6
Write-downs of inventories in the amount of $7.5 million were made during fiscal 2012 (2011 – $4.6 million).
CAE Annual Report 2012 | 111
Consolidated Statement of Financial Position
NOTE 7 – PROPERTY, PLANT AND EQUIPMENT
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
Buildings
and
Machinery Aircraft and
Assets
under
Assets
and
equipment
aircraft
engines
finance
under
lease construction
Total
March 31
2012
March 31
2011
April 1
2010
(amounts in millions)
Net book value at April 1, 2010
(Note 2)
$ 276.4
$ 287.3
(Note 2)
$ 312.9
Land improvements
Simulators
$ 23.6
$ 173.6
$ 664.9
$
Additions
308.4
Acquisition of subsidiaries
245.8
Acquisition of joint venture
153.1
Disposals
47.7
124.3
43.5
296.8
230.5
Depreciation
Transfers and others
95.5
10.3
58.8
18.9
Exchange differences
238.2
205.5
126.8
24.2
30.7
27.9
-
-
-
-
-
0.1
(0.2)
6.9
-
2.9
(0.2)
(12.1)
5.6
(1.7)
13.3
8.3
-
(1.3)
(37.3)
65.8
(12.7)
56.3
15.0
0.6
0.3
(0.1)
(14.9)
(1.8)
(0.3)
$
10.6
$ 162.9
$ 105.2
$ 1,197.1
3.1
-
1.5
-
(2.7)
0.6
(0.2)
12.4
-
-
(0.2)
(18.2)
(8.1)
(4.6)
60.6
-
1.1
-
-
(66.9)
(0.7)
111.3
8.9
5.8
(1.8)
(85.2)
(4.7)
(20.4)
$ 175.0
$ 701.0
$
55.1
$
12.9
$ 144.2
$
99.3
$ 1,211.0
22.2
0.7
-
-
(14.1)
(0.5)
1.9
0.9
45.1
1.5
20.3
(24.1)
(44.6)
-
43.0
6.2
14.6
1.1
-
-
(15.6)
-
1.1
(0.5)
0.6
-
-
(0.1)
(3.3)
-
1.8
(0.2)
-
-
-
-
(14.7)
-
(6.2)
2.4
76.7
0.1
5.9
-
-
-
(45.3)
(0.8)
165.7
3.4
26.2
(24.2)
(92.3)
(0.5)
(3.7)
8.1
$ 186.1
$ 748.4
$
55.8
$
11.7
$ 125.7
$ 135.9
$ 1,293.7
104.6
136.0
12.7
125.8
86.2
12.4
167.4
68.5
9.3
Buildings
and
Machinery Aircraft and
aircraft
and
Assets
under
finance
Assets
under
Land improvements
Simulators
equipment
engines
lease construction
Total
$ 268.8
(95.2)
$ 809.7
(144.8)
$ 206.2
(149.9)
$ 173.6
$ 664.9
$
56.3
$ 280.4
(105.4)
$ 869.2
(168.2)
$ 189.6
(134.5)
$ 175.0
$ 701.0
$
55.1
$ 305.6
(119.5)
$ 946.7
(198.3)
$ 198.2
(142.4)
$ 186.1
$ 748.4
$
55.8
$
$
$
$
$
$
14.7
(4.1)
10.6
20.8
(7.9)
12.9
20.8
(9.1)
11.7
$ 264.2
(101.3)
$ 105.2
-
$ 1,692.4
(495.3)
$ 162.9
$ 105.2
$ 1,197.1
$ 258.1
(113.9)
$ 144.2
$ 246.4
(120.7)
$
$
99.3
-
99.3
$ 135.9
-
$ 1,740.9
(529.9)
$ 1,211.0
$ 1,883.7
(590.0)
$ 125.7
$ 135.9
$ 1,293.7
$ 1,148.1
$ 1,049.2
$ 966.2
Net book value at March 31, 2011
1,293.7
Additions
533.2
Acquisition of subsidiaries
Acquisition of joint ventures
1,211.0
375.8
20.7
11.6
$ 23.5
1,197.1
290.4
149.0
$ 2,817.3
$ 2,591.3
24.1
7.2
Disposals
177.4
Depreciation
$ 3,183.7
Impairment (Note 21)
Transfers and others
24.7
15.1
97.8
6.5
-
-
-
-
-
-
Exchange differences
$ 551.9
$ 597.6
$ 493.0
0.1
Net book value at March 31, 2012
21.6
10.9
20.9
12.9
$ 30.1
32.1
6.5
$ 883.4
6.0
$ 810.1
10.4
(amounts in millions)
Cost
685.6
Accumulated depreciation
161.6
Net book value at April 1, 2010
114.2
Cost
186.0
Accumulated depreciation
62.8
187.6
574.0
161.6
$ 776.8
8.2
$ 23.6
-
600.9
148.0
$ 23.6
81.4
129.3
$ 23.5
-
13.2
15.1
Net book value at March 31, 2011
$ 23.5
91.8
12.9
64.5
13.4
Cost
$ 2,141.5
Accumulated depreciation
$ 1,884.4
$ 1,772.9
$ 30.1
-
Net book value at March 31, 2012
$ 30.1
$ 454.5
19.2
$ 440.7
17.1
$ 436.3
14.2
As at March 31, 2012, the average remaining amortization period for full-flight simulators is 15 years (2011 – 15 years and
(9.8)
April 1, 2010 – 16 years).
558.0
(9.8)
466.4
11.4
338.5
$ 1,021.9
$ 914.4
$ 800.4
As at March 31, 2012, bank borrowings are collateralized by property, plant and equipment for the value of $113.7 million
(2011 – $270.3 million).
20.3
18.0
18.5
The accompanying notes form an integral part of these Consolidated Financial Statements.
$ 1,042.2
$ 3,183.7
$ 932.9
$ 2,817.3
$ 818.4
$ 2,591.3
112 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Assets under finance lease, with lease terms between 5 and 21 years, include simulators, buildings and machinery and equipment, as
Consolidated Statement of Financial Position
follows:
(amounts in millions)
(amounts in millions of Canadian dollars)
Simulators
Assets
Cost
Cash and cash equivalents
Accumulated depreciation
ccounts receivable
Net book value
Contracts in progress : assets
Inventories
Buildings
Prepayments
Cost
Income taxes recoverable
Accumulated depreciation
Derivative financial assets
Net book value
Total current assets
Machinery and equipment
Property, plant and equipment
Cost
Intangible assets
Accumulated depreciation
Deferred tax assets
Net book value
Derivative financial assets
Total net book value
Other assets
Notes
March 31
March 31
2012
2012
March 31
March 31
2011
2011
5
11
6
29
7
8
17
29
9
$ 211.8
$ 287.3
(110.5)
308.4
$ 101.3
245.8
$
153.1
47.7
34.0
95.5
(9.6)
10.3
$
24.4
$ 1,148.1
(Note 2)
$ 223.4
$ 276.4
(105.0)
296.8
$ 118.4
230.5
$
124.3
43.5
34.1
58.8
(8.3)
18.9
$
25.8
$ 1,049.2
$
1,293.7
0.6
533.2
(0.6)
24.1
-
7.2
$ 125.7
177.4
$
$
1,211.0
0.6
375.8
(0.6)
20.7
-
11.6
$ 144.2
149.0
$
April 1
April 1
2010
2010
(Note 2)
$ 242.8
$ 312.9
(103.0)
238.2
$ 139.8
205.5
$
126.8
24.2
21.9
30.7
1.2
27.9
$
23.1
$ 966.2
$
1,197.1
(0.5)
290.4
0.5
24.7
-
15.1
$ 162.9
97.8
$
Total assets
$ 2,591.3
As at March 31, 2012, the net book value of simulators leased out to third parties is $5.4 million (2011 – $5.1 million and
April 1, 2010 – $2.9 million).
Liabilities and equity
$ 3,183.7
$ 2,817.3
ccounts payable and accrued liabilities
Provisions
NOTE 8 – INTANGIBLE ASSETS
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
(amounts in millions)
Total current liabilities
Net book value at April 1, 2010
Provisions
Additions – internal development
Long-term debt
Additions – acquired separately
Royalty obligations
Acquisition of subsidiaries
Employee benefits obligations
Amortization
Deferred gains and other non-current liabilities
Transfers and others
Deferred tax liabilities
Exchange differences
Derivative financial liabilities
Net book value at March 31, 2011
Total liabilities
Additions – internal development
Equity
Additions – acquired separately
Share capital
Acquisition of subsidiaries
Contributed surplus
Amortization
ccumulated other comprehensive (loss) income
Impairment (Note 21)
Retained earnings
Transfers and others
Equity attributable to equity holders of the Company
Exchange differences
Non-controlling interests
Net book value at March 31, 2012
Total equity
Total liabilities and equity
Goodwill
$ 161.9
$ 195.1
-
-
36.2
-
-
(3.0)
99.1
-
-
-
-
-
3.9
10
12
11
13
29
Customer
relationships
ERP and
other
software
$
29.2
Capitalized
development
costs
$
29.5
22.6
-
-
(4.1)
(2.8)
-
3.1
-
17.0
(4.5)
2.9
(0.2)
$
12
13
29
15
16
17
29
18
19
30.3
18.5
-
-
(3.7)
0.4
(0.1)
$
45.4
17.3
-
0.1
(5.3)
(0.2)
0.1
(0.1)
$
45.2
$
47.5
42.8
-
1.4
(5.7)
(3.3)
(8.2)
0.1
-
0.2
20.9
(8.1)
(1.3)
1.1
0.1
$ 298.1
$
72.3
$
60.4
$
57.3
The accompanying notes form an integral part of these Consolidated Financial Statements.
(amounts in millions)
Cost
Accumulated depreciation
$ 161.9
-
63.6
(34.1)
45.0
(14.7)
35.3
(6.1)
relationships
Customer
Goodwill
software
costs
$
$
$
Capitalized
development
ERP and
other
Net book value at April 1, 2010
Cost
Accumulated depreciation
Net book value at March 31, 2011
Cost
Accumulated depreciation
$ 161.9
$ 195.1
-
$ 195.1
$ 298.1
-
$
$
$
29.5
78.8
(33.6)
45.2
$ 106.7
(34.4)
Net book value at March 31, 2012
$ 298.1
$
72.3
$
$
$
$
$
29.2
58.0
(10.5)
47.5
79.7
(19.3)
60.4
$
$
$
$
$
30.3
78.9
(33.5)
45.4
95.7
(38.4)
57.3
$ 597.6
$ 551.9
$ 493.0
21.6
10.9
104.6
136.0
12.7
Technology
$ 883.4
19.3
$
6.0
0.3
685.6
-
161.6
8.3
114.2
(3.0)
186.0
0.4
91.8
(0.3)
12.9
$
25.0
$ 2,141.5
-
-
$ 454.5
12.3
19.2
(3.4)
(9.8)
-
558.0
(6.5)
$ 1,021.9
0.3
20.3
$
27.7
$ 1,042.2
$ 3,183.7
Technology
$
$
$
$
$
$
26.5
(7.2)
19.3
35.2
(10.2)
25.0
41.0
(13.3)
27.7
20.9
12.9
125.8
Other
86.2
intangible
12.4
assets
$ 810.1
20.2
$
10.4
0.3
574.0
0.1
161.6
0.8
62.8
(4.4)
187.6
0.9
64.5
(0.3)
13.4
$
17.6
$ 1,884.4
0.2
1.1
$ 440.7
5.0
17.1
(3.5)
(9.8)
-
466.4
(3.3)
$ 914.4
0.3
18.5
$
17.4
$ 932.9
$ 2,817.3
Other
intangible
assets
$
$
$
$
$
$
34.9
(14.7)
20.2
35.5
(17.9)
17.6
32.3
(14.9)
17.4
32.1
6.5
167.4
68.5
9.3
Total
$ 776.8
$ 290.4
8.2
44.8
600.9
0.1
148.0
62.3
81.4
(19.7)
129.3
1.8
13.2
(3.9)
15.1
$ 375.8
$ 1,772.9
60.3
1.3
$ 436.3
138.8
14.2
(26.0)
11.4
(4.8)
338.5
(16.8)
$ 800.4
4.6
18.0
$ 533.2
$ 818.4
$ 2,591.3
Total
$ 367.2
(76.8)
$ 290.4
$ 481.5
(105.7)
$ 375.8
$ 653.5
(120.3)
$ 533.2
CAE Annual Report 2012 | 113
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
Consolidated Statement of Financial Position
For the year ended March 31, 2012, amortization of $19.7 million (2011 – $15.5 million) has been recorded in cost of sales,
$5.4 million (2011 – $3.6 million) in research and development expenses, $0.9 million (2011 – $0.6 million) in selling, general and
administrative expenses and nil (2011 – nil) was capitalized.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
March 31
2012
As at March 31, 2012, the average remaining amortization period for the capitalized development costs is 6 years (2011 – 5 years and
April 1, 2010 – 5 years).
2010
2011
March 31
April 1
The Company has no indefinite life intangible assets other than goodwill.
(Note 2)
$ 276.4
(Note 2)
$ 312.9
$ 287.3
296.8
230.5
308.4
The carrying amount of goodwill allocated to the Company's CGUs per operating segment is as follows:
245.8
153.1
47.7
126.8
24.2
124.3
43.5
238.2
205.5
58.8
18.9
95.5
10.3
(amounts in millions)
TS/C
$ 1,148.1
SP/M
1,293.7
TS/M
533.2
NCM
1,211.0
375.8
$ 1,049.2
Total goodwill
24.1
7.2
177.4
20.7
11.6
149.0
30.7
27.9
$ 966.2
1,197.1
290.4
24.7
15.1
97.8
$ 3,183.7
$ 2,817.3
NOTE 9 – OTHER ASSETS
$ 2,591.3
$ 597.6
$ 551.9
$ 493.0
(amounts in millions)
Restricted cash
21.6
10.9
20.9
12.9
32.1
6.5
Prepaid rent to portfolio investments
104.6
Investment in portfolio investments
136.0
Advances to related parties
125.8
86.2
12.4
12.7
167.4
68.5
9.3
Deferred financing costs, net of accumulated amortization of $20.6
$ 883.4
6.0
$ 810.1
10.4
$ 776.8
8.2
(2011 – $19.8 and April 1, 2010 – $18.8)
574.0
161.6
685.6
Long-term receivables
161.6
Other, net of accumulated amortization of $10.6 (2011 – $9.7 and April 1, 2010 – $8.7)
114.2
186.0
62.8
187.6
81.4
129.3
600.9
148.0
March 31
2012
$
32.3
103.1
37.2
125.5
March 31
April 1
$
2011
31.0
102.4
36.2
25.5
$
2010
27.8
95.2
36.9
2.0
$ 298.1
$ 195.1
$ 161.9
March 31
2012
March 31
2011
$
9.8
85.4
1.3
26.7
3.1
42.3
8.8
$
10.6
81.6
1.9
26.1
3.0
18.1
7.7
$
April 1
2010
16.2
45.6
2.0
21.7
1.4
3.9
7.0
$ 177.4
$ 149.0
$
97.8
91.8
Finance lease receivables
12.9
The present value of future minimum lease payment receivables, included in long-term receivables is as follows:
$ 1,884.4
$ 1,772.9
64.5
13.4
13.2
15.1
$ 2,141.5
$ 454.5
19.2
$ 440.7
(amounts in millions)
17.1
Gross investment in finance lease contracts
(9.8)
(9.8)
Less: unearned finance income
466.4
558.0
Present value of future minimum lease payment receivables
$ 436.3
14.2
11.4
338.5
$ 1,021.9
$ 914.4
$ 800.4
March 31
2012
13.6
2.7
10.9
$
$
March 31
2011
April 1
2010
$
$
-
-
-
$
$
-
-
-
The accompanying notes form an integral part of these Consolidated Financial Statements.
20.3
$ 1,042.2
$ 3,183.7
18.5
$ 932.9
$ 2,817.3
18.0
$ 818.4
$ 2,591.3
114 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
March 31
2011
April 1
2011
Present value of
future minimum
2010
lease payments
Gross
(Note 2)
$ 276.4
Investment
Future minimum lease payments from investments in finance lease contracts to be received are as follows:
Consolidated Statement of Financial Position
As at March 31
(amounts in millions)
(amounts in millions of Canadian dollars)
Assets
Cash and cash equivalents
No later than 1 year
Later than 1 year and no later than 5 years
Contracts in progress : assets
Later than 5 years
Inventories
Prepayments
Present value of
future minimum
March 31
2012
2012
0.8
3.5
6.6
ccounts receivable
308.4
245.8
lease payments
Investment
1.2
4.8
$ 287.3
5
11
Notes
Gross
7.6
6
$
$
153.1
47.7
$
13.6
10.9
$
Income taxes recoverable
Derivative financial assets
29
Total current assets
NOTE 10 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
7
Property, plant and equipment
8
Intangible assets
Deferred tax assets
(amounts in millions)
Derivative financial assets
Accounts payable trade
Other assets
Accrued liabilities
Total assets
Amounts due to related parties
Deferred revenue
Liabilities and equity
Current portion of royalty obligations
ccounts payable and accrued liabilities
Provisions
Income taxes payable
17
29
9
10
12
95.5
10.3
$ 1,148.1
1,293.7
533.2
March 31
2012
24.1
7.2
$ 264.9
177.4
216.1
$ 3,183.7
13.8
88.7
14.1
$ 597.6
$ 597.6
21.6
10.9
$
$
-
296.8
-
230.5
-
124.3
43.5
-
58.8
18.9
$ 1,049.2
1,211.0
375.8
March 31
2011
20.7
11.6
$ 253.1
149.0
207.7
$ 2,817.3
11.9
70.2
9.0
$ 551.9
$ 551.9
20.9
12.9
(Note 2)
$ 312.9
-
$
238.2
-
205.5
-
126.8
24.2
-
30.7
27.9
$
$ 966.2
1,197.1
290.4
April 1
24.7
2010
15.1
$ 222.1
97.8
186.4
$ 2,591.3
14.1
61.8
8.6
$ 493.0
$ 493.0
32.1
6.5
11
13
Contracts in progress : liabilities
NOTE 11 – CONTRACTS IN PROGRESS
Current portion of long-term debt
9.3
Derivative financial liabilities
The amounts recognized in the consolidated statement of financial position correspond, for each construction contract, to the
aggregate amount of costs incurred plus recognized profits (less recognized losses), less progress billings and amounts sold.
Total current liabilities
$ 776.8
8.2
Provisions
Long-term debt
As at March 31
Royalty obligations
(amounts in millions)
Employee benefits obligations
Contracts in progress: assets
Deferred gains and other non-current liabilities
Contracts in progress: liabilities
Deferred tax liabilities
Contracts in progress: net assets
Derivative financial liabilities
600.9
148.0
2011
81.4
$ 230.5
129.3
(125.8)
13.2
$ 104.7
15.1
$ 810.1
10.4
$ 883.4
6.0
104.6
136.0
114.2
186.0
167.4
68.5
125.8
86.2
62.8
187.6
574.0
161.6
685.6
161.6
64.5
13.4
13
29
$ 245.8
$ 141.2
15
16
17
29
(104.6)
2012
12.4
12.7
29
12
91.8
12.9
Total liabilities
These amounts correspond to:
Equity
Share capital
As at March 31
Contributed surplus
(amounts in millions)
ccumulated other comprehensive (loss) income
Aggregate amount of costs incurred plus recognized
Retained earnings
profits (less recognized losses) to date
Equity attributable to equity holders of the Company
Less: progress billing
Non-controlling interests
Less: amounts sold
Total equity
Contracts in progress: net assets
Total liabilities and equity
$ 2,141.5
$ 1,884.4
$ 1,772.9
18
19
$ 454.5
19.2
(9.8)
558.0
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
$ 440.7
17.1
2012
(9.8)
466.4
$ 2,716.3
$ 914.4
2,569.9
18.5
5.2
$ 932.9
$ 141.2
$ 2,817.3
$ 436.3
14.2
2011
11.4
338.5
$ 2,062.3
$ 800.4
1,952.3
18.0
5.3
$ 818.4
$ 104.7
$ 2,591.3
Advances received from customers on construction contracts related to work not yet commenced amounts to $0.3 million at
The accompanying notes form an integral part of these Consolidated Financial Statements.
March 31, 2012 (2011 – $0.1 million).
Construction contracts revenue recognized in fiscal 2012 amounts to $761.1 million (2011 – $719.8 million).
CAE Annual Report 2012 | 115
Consolidated Statement of Financial Position
NOTE 12 – PROVISIONS
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
$ 287.3
March 31
2012
2011
2010
April 1
March 31
238.2
205.5
(Note 2)
$ 276.4
(Note 2)
$ 312.9
Restoration and simulator removal
In certain situations, simulators are installed at locations that are not owned by the Company. In some of these cases, the Company
has an obligation to dismantle and remove the simulators from these sites and to restore the location to its original condition. A
provision is recognized for the present value of estimated costs to be incurred to dismantle and remove the simulators from these
sites and restore the location. The provision also includes amounts relating to leased land and building where restoration costs are
contractually required at the end of the lease. Where such costs arise as a result of capital expenditure on the leased asset, the
restoration costs are also capitalized.
296.8
308.4
230.5
245.8
Restructuring
153.1
Restructuring costs consist mainly of severances and other related costs, including the associated employee benefits obligation
47.7
expense. Provisions for restructuring costs are recognized when the Company has a present legal or constructive obligation as a
result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount can
be reliably estimated. Restructuring provisions are measured at the Company’s best estimate of the expenditure required to settle the
obligation at the end of the reporting period, and are discounted where the effect is material.
1,293.7
Legal claims
533.2
The amount represents a provision for certain legal claims brought against the Company. The corresponding charge is recognized in
the consolidated income statement within selling, general and administrative expenses. In Management’s opinion, the outcome of
these legal claims will not give rise to any significant loss beyond the amounts provided at March 31, 2012.
177.4
1,197.1
290.4
1,211.0
375.8
126.8
24.2
124.3
43.5
20.7
11.6
24.7
15.1
95.5
10.3
58.8
18.9
30.7
27.9
24.1
7.2
$ 966.2
$ 1,049.2
149.0
97.8
$ 1,148.1
$ 3,183.7
$ 2,591.3
$ 2,817.3
Onerous contracts
The Company is a party to contracts in which the unavoidable costs of meeting the obligations under the contracts exceed the
economic benefits expected to be received under it. The unavoidable costs under the contract reflect the lower of the cost to fulfill the
contract or any compensation or penalty arising from the failure to fulfill the contract.
$ 493.0
$ 551.9
$ 597.6
21.6
10.9
20.9
12.9
32.1
6.5
Warranties
A provision is recognized for expected warranty claims on products sold in the last two years, based on past experience of the level of
104.6
repairs and returns. It is expected that most of these costs will be incurred in the next financial year and all will have been incurred
136.0
within two to five years of the consolidated statement of financial position date. Assumptions used to calculate the provision for
warranties were based on current sales levels and current information available about returns based on the warranty period of
products sold.
125.8
86.2
167.4
68.5
12.7
12.4
9.3
$ 883.4
6.0
$ 810.1
10.4
$ 776.8
8.2
600.9
574.0
685.6
Changes in provisions are as follows:
148.0
161.6
161.6
114.2
186.0
62.8
187.6
91.8
12.9
64.5
13.4
81.4
129.3
Restoration
13.2
and simulator
15.1
removal Restructuring
Contingent
liabilities arising
on business
Legal
claims
Onerous
contracts Warranties
combinations
(see Note 3)
Other
provisions
Total
1.8
$
6.4
$
2.4
$
0.1
$ 14.6
$
11.3
$
3.7
$
40.3
-
-
(0.7)
0.1
(0.1)
1.1
-
1.1
-
-
(0.2)
-
0.9
-
0.9
-
(4.7)
(1.0)
-
-
0.7
0.7
-
1.2
(1.2)
-
-
0.7
0.7
-
0.3
(1.1)
-
-
-
1.6
0.9
0.7
0.2
(0.2)
-
-
1.6
1.0
0.6
$
$
$
$
-
(0.1)
-
-
-
-
-
-
0.9
(0.6)
-
-
0.3
0.3
6.4
(8.1)
(1.9)
-
(0.1)
$ 10.9
10.9
$
-
7.9
(7.1)
(0.6)
-
$ 11.1
10.9
-
$
0.2
$
$
$
$
$
$
$
$
4.8
(4.5)
-
0.7
0.2
12.5
5.4
7.1
-
(0.5)
(3.9)
0.9
9.0
5.3
3.7
$
$
$
$
1.4
(0.7)
-
0.1
-
4.5
3.0
1.5
5.3
(4.5)
(1.3)
-
4.0
3.4
0.6
$
$
$
$
12.9
(19.2)
(3.6)
0.9
-
31.3
20.9
10.4
15.5
(14.1)
(6.0)
0.9
27.6
21.6
6.0
$
$
$
$
(amounts in millions)
Total provisions at April 1, 2010
$ 1,884.4
$ 2,141.5
$ 1,772.9
$
Additions including increases
to existing provisions
$ 440.7
17.1
$ 454.5
19.2
Amounts used
(9.8)
Unused amounts reversed
558.0
Changes in the
(9.8)
466.4
$ 1,021.9
$ 914.4
discounted amount
18.5
Exchange differences
20.3
$ 436.3
14.2
11.4
338.5
$ 800.4
18.0
$ 1,042.2
Total provisions at March 31, 2011
Less: current portion
$ 2,817.3
$ 3,183.7
$ 932.9
$ 818.4
$
$ 2,591.3
Long-term portion
Additions including increases
to existing provisions
Amounts used
Unused amounts reversed
Changes in the
discounted amount
Total provisions at March 31, 2012
Less: current portion
Long-term portion
$
$
$
116 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
NOTE 13 – DEBT FACILITIES
Consolidated Statement of Financial Position
Long-term debt, net of transaction costs is as follows:
(amounts in millions of Canadian dollars)
(amounts in millions)
Assets
Total recourse debt
Cash and cash equivalents
Total non-recourse debt (1)
ccounts receivable
Total long-term debt
Contracts in progress : assets
Less:
Inventories
Current portion of long-term debt
Prepayments
Current portion of finance leases
Income taxes recoverable
Derivative financial assets
Notes
5
11
6
29
March 31
March 31
2012
2012
$ 678.1
$ 287.3
143.5
308.4
$ 821.6
245.8
153.1
113.6
47.7
22.4
95.5
$ 685.6
10.3
March 31
March 31
2011
2011
(Note 2)
$ 524.0
$ 276.4
136.2
296.8
$ 660.2
230.5
124.3
58.5
43.5
27.7
58.8
18.9
$ 574.0
April 1
April 1
2010
2010
(Note 2)
$ 471.4
$ 312.9
198.0
238.2
$ 669.4
205.5
126.8
40.1
24.2
28.4
30.7
$ 600.9
27.9
Total current assets
(1) Non-recourse debt is a debt in a subsidiary for which recourse is limited to the assets, equity, interest and undertaking of such subsidiary and not CAE Inc.
Property, plant and equipment
Intangible assets
Details of the recourse debt are as follows:
Deferred tax assets
Derivative financial assets
1,211.0
375.8
1,293.7
533.2
$ 1,148.1
$ 1,049.2
17
29
7
8
$ 966.2
1,197.1
290.4
9
Other assets
(amounts in millions)
Total assets
(i)
(ii)
Liabilities and equity
ccounts payable and accrued liabilities
Senior notes (US$33.0 maturing in June 2012), fixed interest rate of 7.76% payable
semi-annually in June and December
Senior notes ($15.0 and US$45.0 maturing in June 2016 and US$60.0 maturing in
June 2019), average blended rate of 7.14% payable semi-annually in June and December
Senior notes (US$100.0 maturing in August 2021 and US$50.0 maturing in August 2026),
average blended rate of 4.47% payable semi-annually in August and February.
(iii)
Provisions
Income taxes payable
(iv) Revolving unsecured term credit facilities maturing in April 2015 (US$450.0), (as at
Contracts in progress : liabilities
(v)
Current portion of long-term debt
March 31, 2011 – US$450.0, as at April 1, 2010 – US$400.0 and €100.0)
Term loans, matured in May and June 2011 (outstanding as at March 31, 2011 – €1.6 and
€0.3, as at April 1, 2010 – €7.4 and €1.5 ), implicit interest rate of 4.60%
11
13
Derivative financial liabilities
(vi) Grapevine Industrial Development Corporation bonds maturing in April 2013 (US$19.0),
Total current liabilities
(vii) Miami Dade County Bonds maturing in March 2024 (US$11.0), interest rate of 0.19%
Provisions
interest rate of 0.60% (2011 – 0.55%, 2010 – 1.35%)
12
12
29
10
(2011 – 0.34%, 2010 – 0.47%)
13
29
Deferred tax liabilities
Derivative financial liabilities
Long-term debt
(viii) Obligations under finance lease commitments, with various maturities from July 2010 to
Royalty obligations
(ix)
Employee benefits obligations
Deferred gains and other non-current liabilities
October 2036, interest rates from 3.67% to 10.67%
Term loan maturing in June 2014 (outstanding as at March 31, 2012 – US$13.2 and £5.4, as
at March 31, 2011 – US$17.5 and £7.3, as at April 1, 2010 – US$22.1 and £8.7)
Term loan maturing in June 2018 (outstanding as at March 31, 2012 – US$43.2 and £8.5, as
at March 31, 2011 – US$43.2 and £8.5, as at April 1, 2010 – US$43.2 and £8.5)
Combined coupon rate of post-swap debt of 7.90% (2011 – 7.89%)
R&D obligation from a government agency maturing in July 2029
Term loan, maturing in December 2017 (outstanding as at March 31, 2012 – €7.9, as at
March 31, 2011 – €9.2, as at April 1, 2010 – €9.7), floating interest rate with a floor of 2.5%
Total liabilities
(x)
Equity
(xi)
Share capital
(xii) Term loans maturing in January 2020 and January 2022 (outstanding as at March 31, 2012 –
Contributed surplus
€4.9, as at March 31, 2011 – €6.3, as at April 1, 2010 – €6.0), floating interest rate of
EURIBOR plus a spread
ccumulated other comprehensive (loss) income
15
16
17
29
18
19
Retained earnings
(xiii) Credit facility maturing in January 2015 (outstanding as at March 31, 2012 – $2.1 and
INR 384.2, as at March 31, 2011 – $1.5 and INR 458.4, as at April 1, 2010 – INR 362.7),
Equity attributable to equity holders of the Company
bearing interest based on floating interest rates in India prevailing at the time of each
Non-controlling interests
drawdown
Total equity
(xiv) Other debt, with various maturities from April 2010 to September 2016, average interest rate
Total liabilities and equity
(xv) Term loan, maturing in October 2020 (outstanding as at March 31, 2012 – US$17.1) bearing
of approximately 5.61%
interest at a fixed rate of 4.14%
The accompanying notes form an integral part of these Consolidated Financial Statements.
Total recourse debt, net amount
24.1
7.2
March 31
177.4
2012
$ 3,183.7
33.3
$
119.7
$ 597.6
21.6
149.9
10.9
13.3
104.6
136.0
-
12.7
19.0
$ 883.4
6.0
11.0
685.6
161.6
142.9
114.2
21.3
186.0
91.8
54.7
12.9
$ 2,141.5
58.3
10.5
$ 454.5
19.2
(9.8)
6.1
558.0
$ 1,021.9
20.3
9.6
$ 1,042.2
11.4
$ 3,183.7
17.1
$ 678.1
20.7
11.6
March 31
149.0
2011
$ 2,817.3
24.7
15.1
April 1
97.8
2010
$ 2,591.3
$
34.2
$
37.1
117.0
$ 551.9
121.5
$ 493.0
-
20.9
12.9
-
125.8
86.2
2.6
12.4
18.5
$ 810.1
10.4
10.7
574.0
161.6
183.3
62.8
27.7
187.6
64.5
53.2
13.4
32.1
-
6.5
-
167.4
68.5
12.2
9.3
19.3
$ 776.8
8.2
11.2
600.9
148.0
211.8
81.4
-
129.3
13.2
-
15.1
$ 1,884.4
28.8
$ 1,772.9
9.1
12.6
$ 440.7
17.1
(9.8)
8.4
466.4
$ 914.4
18.5
11.5
$ 932.9
$ 2,817.3
15.5
13.3
$ 436.3
14.2
11.4
8.1
338.5
$ 800.4
18.0
8.2
$ 818.4
19.6
$ 2,591.3
-
-
$ 524.0
$ 471.4
(i)
(ii)
Pursuant to a private placement, the Company borrowed US$33.0 million. These unsecured senior notes rank equally with
term bank financings. The Company has entered into an interest rate swap agreement converting the fixed interest rate into
the equivalent of a three-month LIBOR borrowing rate plus 3.6%.
Represents unsecured senior notes for $15.0 million and US$105.0 million by way of a private placement for an average
term at inception of 8.5 years.
(iii) Represents unsecured senior notes for US$150.0 million by way of a private placement for an average term at inception of
11.7 years.
CAE Annual Report 2012 | 117
Consolidated Statement of Financial Position
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
March 31
2012
(v)
$ 287.3
308.4
245.8
(vi)
153.1
47.7
95.5
10.3
24.1
7.2
(x)
177.4
$ 3,183.7
2011
2010
296.8
230.5
124.3
43.5
58.8
18.9
238.2
205.5
126.8
24.2
30.7
27.9
20.7
11.6
24.7
15.1
(iv) Represents a committed three-year revolving credit facility of US$450.0 million with an option, subject to the lender’s consent,
to increase to a total amount of up to US$650.0 million. The facility has covenants requiring a minimum fixed charge coverage
and a maximum debt coverage. The applicable interest rate on this revolving term credit facility is at the option of the Company,
based on the bank’s prime rate, bankers’ acceptance rates or LIBOR plus a spread which depends on the credit rating
assigned by Standard & Poor’s Rating Services. The spread over LIBOR has been reduced to reflect current market pricing.
March 31
April 1
The Company, in association with Iberia Lineas de España, combined their aviation training operations in Spain. Quarterly
capital repayments are made for the term of the financing. The net book value of the simulators being financed, as at
March 31, 2012, is approximately $55.1 million (€41.3 million) (as at March 31, 2011 – $63.8 million (€46.3 million), as at
April 1, 2010 – $67.7 million (€49.3 million)).
(Note 2)
$ 312.9
(Note 2)
$ 276.4
The rates are set annually by the remarketing agent based on market conditions. A letter of credit has been issued to support
the bonds for the outstanding amount of the loans. Combined interest rate is 2.60% (2011 – 3.05%, 2010 – 2.35%).
(vii) The rate is a floating rate and reset weekly. A letter of credit has been issued to support the bonds for the outstanding amount
of the loan. Combined interest rate is 2.19% (2011 – 2.84%, 2010 – 1.47%).
(viii) These finance leases relate to the leasing of various buildings, simulators, machinery and equipment.
$ 966.2
$ 1,049.2
$ 1,148.1
1,293.7
(ix) Represents senior financing for two civil aviation training centres. Tranche A is repaid in quarterly instalments of principal and
533.2
interest while Tranche B begins quarterly amortization in July 2014. In fiscal 2011, the Company converted these term loans
from non-recourse to recourse debt for a net amount of $89.5 million in 2010.
1,197.1
290.4
1,211.0
375.8
149.0
Represents an interest-bearing long-term obligation from the Government of Canada for its participation in Project Falcon, an
R&D program that will continue over five years, for a maximum amount of $250.0 million. The aggregate amount recognized at
the end of fiscal 2012 was $141.4 million (as at March 31, 2011 – $85.5 million, as at April 1, 2010 – $33.8 million) (refer to
Note 1). The discounted value of the debt recognized amounted to $58.3 million as at March 31, 2012 (as at
March 31, 2011 – $28.8 million, as at April 1, 2010 – $9.1 million).
$ 2,817.3
$ 2,591.3
97.8
$ 597.6
$ 551.9
$ 493.0
(xi) Represents the Company’s proportionate share of the debt in Rotorsim S.r.l., totalling $10.6 million (€7.9 million) (as at
March 31, 2011 – $12.7 million (€9.2 million), as at April 1, 2010 – $13.3 million (€9.7 million)). In fiscal 2011, Rotorsim S.r.l.
refinanced its debt.
21.6
10.9
20.9
12.9
32.1
6.5
104.6
(xii) Represents a loan agreement of $6.4 million (€4.8 million) (as at March 31, 2011 - $8.7 million (€6.3 million), as at
136.0
April 1, 2010 – $8.3 million (€6.0 million)) for the financing of one of the Company’s subsidiaries. In fiscal 2011, the Company
added a new tranche of financing.
12.7
12.4
9.3
125.8
86.2
167.4
68.5
$ 883.4
6.0
$ 810.1
10.4
$ 776.8
8.2
(xiii) Represents the financing facility for certain of the Company’s operations in India. The financing facility is comprised of a term
loan of up to $9.2 million (INR 470.0 million) and working capital facilities of up to an aggregate of $2.5 million
(INR 125.0 million). Drawdowns can be made in INR or any other major currencies acceptable to the lender.
685.6
161.6
(xiv) Other debts include an unsecured facility for the financing of the cost of establishment of an enterprise resource planning (ERP)
114.2
system. The facility is repayable with monthly repayments over a term of seven years beginning at the end of the first month
186.0
following each quarterly disbursement.
574.0
161.6
62.8
187.6
600.9
148.0
81.4
129.3
(xv) Represents a term loan agreement of US$19.2 million to finance two simulators deployed in the Middle East.
91.8
12.9
64.5
13.4
13.2
15.1
$ 2,141.5
$ 1,884.4
$ 1,772.9
Details of the non-recourse debt are as follows:
$ 440.7
17.1
$ 436.3
14.2
(amounts in millions)
(i)
$ 454.5
19.2
(9.8)
558.0
$ 1,021.9
(ii)
20.3
$ 1,042.2
(iii)
$ 3,183.7
11.4
338.5
(9.8)
466.4
18.0
18.5
$ 2,591.3
$ 2,817.3
$ 932.9
$ 818.4
$ 914.4
$ 800.4
Term loan of £12.7 collateralized, maturing in October 2016 (outstanding as at March 31,
2012 – £1.9, as at March 31, 2011 – £2.5, as at April 1, 2010 – £3.0), interest rate of
approximately LIBOR plus 0.95%
Term loan maturing in December 2019 (outstanding as at March 31, 2012 – €39.1, as at
March 31, 2011 – €41.8, as at April 1, 2010 – €43.9), interest rate at EURIBOR rate swapped
to a fixed rate of 4.80%
Term loans with various maturities to January 2017 (outstanding as at March 31, 2012 –
US$23.8 and ¥29.4, as at March 31, 2011 – US$17.9 and ¥21.6, as at April 1, 2010 –
US$21.9 and ¥32.8)
Term loan maturing in September 2025 collateralized (outstanding as at March 31, 2012 –
US$21.1, as at March 31, 2011 – US$21.1, as at April 1, 2010 – US$14.3), fixed interest rate
of 10.35% after effect of USD-Indian Rupees cross currency swap agreement
Term loan maturing in January 2020 (outstanding as at March 31, 2012 – US$3.1, as at
March 31, 2011 – US$3.3, as at April 1, 2010 – US$3.5), floating interest rate
Term loan maturing in June 2014 (outstanding as at March 31, 2012 – US$13.2 and £5.4, as
at March 31, 2011 – US$17.5 and £7.3, as at April 1, 2010 – US$22.1 and £8.7)
Term loan maturing in June 2018 (outstanding as at March 31, 2012 – US$43.2 and £8.5, as
at March 31, 2011 – US$43.2 and £8.5, as at April 1, 2010 – US$43.2 and £8.5)
Combined coupon rate of post-swap debt of 8.28% as at April 1, 2010
(vii) Agreement for the sale of certain accounts receivable and contracts in progress: assets
Total non-recourse debt, net amount
118 | CAE Annual Report 2012
March 31
2012
March 31
2011
April 1
2010
$
3.0
$
3.9
$
4.6
51.5
56.8
28.4
20.6
20.4
3.1
-
-
37.1
$ 143.5
19.7
3.0
-
-
32.2
59.4
27.2
13.7
3.6
34.9
54.6
-
$ 136.2
$ 198.0
The accompanying notes form an integral part of these Consolidated Financial Statements.
(iv)
(v)
(vi)
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Consolidated Statement of Financial Position
(i)
The credit facility to finance the Company’s MSH program for the MoD in the U.K., includes a term loan that is collateralized by
the project assets of the subsidiary and a bi-annual repayment that is required until 2016. The Company has entered into an
totalling £1.6 million as at March 31, 2012 (as at March 31, 2011 – £2.2 million, as at
interest rate swap
April 1, 2010 – £2.7 million) fixing the interest rate at 6.31%. The book value of the assets pledged as collateral for the credit
April 1
facility as at March 31, 2012 is £83.0 million (as at March 31, 2011 – £79.6 million, as at April 1, 2010 – £53.3 million).
March 31
2011
2010
Notes
March 31
2012
(amounts in millions of Canadian dollars)
Assets
(ii)
Cash and cash equivalents
(Note 2)
Represents the Company’s proportionate share of the German NH90 project. The total amount available for the project under
the facility is €182.7 million.
$ 312.9
(Note 2)
$ 276.4
$ 287.3
ccounts receivable
Inventories
Prepayments
238.2
(iii) Represents the Company’s proportionate share of term debt for the acquisition of simulators and expansion of the building for
205.5
Contracts in progress : assets
its joint venture in Zhuhai Xiang Yi Aviation Technology Company Limited. Borrowings are denominated in U.S. dollars and
126.8
Chinese Yuan Renminbi (¥). The U.S. dollar-based borrowings bear interest on a floating rate basis of U.S. LIBOR plus a
spread ranging from 0.50% to 4.50% and have maturities between August 2013 and January 2017. The ¥ based borrowings
24.2
bear interest at the local rate of interest with final maturities between December 2010 and September 2012.
30.7
Income taxes recoverable
27.9
Derivative financial assets
(iv) Represents the Company’s proportionate share of the US$42.1 million senior collateralized non-recourse financing for the
Total current assets
HATSOFF Helicopter Training Private Limited joint venture. The debt begins semi-annual amortization in September 2013.
$ 966.2
Property, plant and equipment
(v)
Intangible assets
1,197.1
Represents the Company’s proportionate share in a term loan to finance the Emirates-CAE Flight Training LLC, a joint venture.
290.4
1,211.0
375.8
296.8
230.5
308.4
245.8
124.3
43.5
153.1
47.7
95.5
10.3
58.8
18.9
$ 1,148.1
$ 1,049.2
5
11
7
8
29
6
1,293.7
533.2
24.7
Deferred tax assets
(vi) Represents senior financing for two civil aviation training centres. Tranche A is repaid in quarterly instalments of principal and
15.1
Derivative financial assets
interest while Tranche B begins quarterly amortization in July 2014. In fiscal 2011, the Company converted these term loans
from non-recourse to recourse debt for a net amount of $89.5 million in 2010.
97.8
20.7
11.6
24.1
7.2
Other assets
17
29
149.0
9
177.4
Total assets
$ 2,591.3
(vii) Represents an agreement with financial institutions to sell undivided interests in certain of our accounts receivable and
contracts in progress: assets for an amount up to $150.0 million without recourse to the Company. The Company continues to
act as a collection agent.
ccounts payable and accrued liabilities
Liabilities and equity
$ 493.0
$ 551.9
$ 3,183.7
$ 2,817.3
10
$ 597.6
32.1
Provisions
Payments required in each of the next five fiscal years to meet the retirement provisions of the long-term debt and face values of
6.5
Income taxes payable
finance leases are as follows:
Contracts in progress : liabilities
Current portion of long-term debt
125.8
86.2
167.4
68.5
20.9
12.9
21.6
10.9
11
13
12
Derivative financial liabilities
(amounts in millions)
Total current liabilities
2013
Provisions
2014
Long-term debt
2015
Royalty obligations
2016
Employee benefits obligations
2017
Deferred gains and other non-current liabilities
Thereafter
Deferred tax liabilities
Derivative financial liabilities
29
12
13
29
15
16
17
29
104.6
136.0
Long-term
12.7
debt
$ 883.4
114.4
$
6.0
52.8
685.6
32.6
161.6
31.6
114.2
96.6
186.0
354.7
91.8
682.7
12.9
$
Finance
12.4
leases
$ 810.1
22.4
$
10.4
22.2
574.0
17.6
161.6
8.7
62.8
7.8
187.6
64.2
64.5
$ 142.9
13.4
9.3
Total
$ 776.8
$ 136.8
8.2
75.0
600.9
50.2
148.0
40.3
81.4
104.4
129.3
418.9
13.2
$ 825.6
15.1
ccumulated other comprehensive (loss) income
Total liabilities
As at March 31, 2012, CAE is in compliance with its financial covenants.
Equity
$ 436.3
Share capital
Short-term debt
14.2
Contributed surplus
The Company has an unsecured and uncommitted bank line of credit available in euros totalling $2.7 million (as at
11.4
March 31, 2011 – $2.8 million, as at April 1, 2010 – $2.7 million), of which nil is used as at March 31, 2012 (as at March 31, 2011 –
338.5
Retained earnings
$1.3 million, as at April 1, 2010 – nil). The line of credit bears interest at a euro base rate.
Equity attributable to equity holders of the Company
Non-controlling interests
Finance lease commitments
Total equity
The present value of future finance lease commitments, included in debt facilities is as follows:
Total liabilities and equity
$ 440.7
17.1
$ 454.5
19.2
(9.8)
558.0
(9.8)
466.4
$ 914.4
$ 932.9
$ 800.4
$ 818.4
$ 2,141.5
$ 1,884.4
$ 1,021.9
$ 1,042.2
$ 1,772.9
18.0
20.3
18.5
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
(amounts in millions)
Future finance lease commitments
Less: Future finance charges on finance leases
Net investment in finance lease contracts
Less: Discounted guaranteed residual values of leased assets
Present value of future minimum lease payments
$ 3,183.7
March 31
2012
$ 2,817.3
March 31
2011
$ 2,591.3
April 1
2010
$ 142.9
41.3
$ 101.6
6.5
$
95.1
$ 183.3
$ 211.8
51.8
$ 131.5
5.8
$ 125.7
58.1
$ 153.7
5.7
$ 148.0
CAE Annual Report 2012 | 119
Consolidated Statement of Financial Position
Future minimum lease payments for finance lease commitments are as follows:
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
As at March 31
(amounts in millions)
March 31
March 31
2012
$ 287.3
2011
(Note 2)
$ 276.4
April 1
2010
(Note 2)
$ 312.9
No later than 1 year
296.8
308.4
Later than 1 year and no later than 5 years
230.5
245.8
Later than 5 years
153.1
47.7
126.8
24.2
124.3
43.5
238.2
205.5
95.5
10.3
58.8
18.9
30.7
27.9
2012
2011
Future
finance lease
Present value of
future minimum
Future Present value of
future minimum
finance lease
commitments
lease payments
commitments
lease payments
$
22.4
56.3
64.2
$
21.6
47.9
25.6
$
27.7
77.4
78.2
$
26.6
66.3
32.8
$ 142.9
$
95.1
$ 183.3
$ 125.7
$ 1,148.1
$ 1,049.2
$ 966.2
1,211.0
375.8
NOTE 14 – GOVERNMENT ASSISTANCE
1,293.7
The Company has signed agreements with various governments whereby the latter share in the cost, based on expenditures incurred
533.2
by the Company, of certain R&D programs for modeling and simulation, visual systems and advanced flight simulation technology for
civil applications and networked simulation for military applications, as well as for the new markets of simulation-based training in
healthcare and mining.
177.4
1,197.1
290.4
20.7
11.6
24.7
15.1
24.1
7.2
149.0
97.8
$ 3,183.7
$ 597.6
$ 2,817.3
$ 2,591.3
$ 551.9
$ 493.0
21.6
10.9
During fiscal 2009, the Company announced that it will invest up to $714 million in Project Falcon, an R&D program that will continue
over five years. The goal of Project Falcon is to expand the Company’s modeling and simulation technologies, develop new ones and
increase its capabilities beyond training into other areas of the aerospace and defence market, such as analysis and operations.
Concurrently, the Government of Canada agreed to participate in Project Falcon through a repayable investment of up to $250 million
made through the Strategic Aerospace and Defence Initiative (SADI), which supports strategic industrial research and pre-competitive
20.9
development projects in the aerospace, defence, space and security industries (see Notes 1 and 13 for an explanation of the royalty
12.9
obligation and debt).
125.8
104.6
86.2
During fiscal 2010, the Company announced that it will invest up to $274 million in Project New Core Markets, an R&D program
136.0
extending over seven years. The aim is to leverage CAE’s modeling, simulation and training services expertise into the new markets
of healthcare and mining. The Québec government agreed to participate up to $100 million in contributions related to costs incurred
before the end of fiscal 2016.
167.4
68.5
32.1
6.5
12.7
12.4
9.3
$ 810.1
10.4
$ 776.8
8.2
$ 883.4
6.0
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
600.9
148.0
574.0
161.6
685.6
The following table provides aggregate information regarding contributions recognized and amounts not yet received for the projects
161.6
Falcon and New Core Markets:
62.8
114.2
187.6
186.0
Years ended March 31
64.5
(amounts in millions)
13.4
Outstanding contribution receivable, beginning of year
81.4
129.3
91.8
12.9
13.2
15.1
2012
2011
14.7
$
$
12.9
$ 1,884.4
$ 1,772.9
$ 2,141.5
Contributions
Payments received
$ 454.5
19.2
Outstanding contribution receivable, end of year
$ 440.7
17.1
$ 436.3
14.2
(9.8)
466.4
(9.8)
Aggregate information about programs
558.0
The aggregate contributions recognized for all programs are as follows:
18.0
$ 800.4
$ 914.4
11.4
338.5
$ 1,021.9
$ 1,042.2
20.3
18.5
$ 932.9
Years ended March 31
$ 2,817.3
(amounts in millions)
Contributions credited to capitalized expenditures:
$ 818.4
$ 2,591.3
$ 3,183.7
The accompanying notes form an integral part of these Consolidated Financial Statements.
Project Falcon
Project New Core Markets
Contributions credited to income:
Project Falcon
Project New Core Markets
Total contributions:
Project Falcon
Project New Core Markets
There are no unfulfilled conditions or unfulfilled contingencies attached to these government contributions.
120 | CAE Annual Report 2012
42.8
(47.4)
42.7
(44.5)
$
8.3
$
12.9
2012
2011
$
7.5
11.4
$
20.9
3.0
$
28.4
14.4
$
7.6
5.6
$
25.3
4.2
$
32.9
9.8
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Notes
March 31
ccounts receivable
March 31
2012
NOTE 15 – EMPLOYEE BENEFITS OBLIGATIONS
Consolidated Statement of Financial Position
Defined benefit plans
The Company has two registered funded defined benefit pension plans in Canada (one for employees and one for designated
April 1
executives) that provide benefits based on length of service and final average earnings. The Company also maintains a funded
2010
(amounts in millions of Canadian dollars)
pension plan for employees in the Netherlands, in Norway and in the United Kingdom that provides benefits based on similar
Assets
(Note 2)
provisions.
$ 312.9
Cash and cash equivalents
In addition, the Company maintains a supplemental plan in Canada, two in Germany (CAE Elektronik GmbH plan and CAE Beyss
238.2
GmbH plan [Beyss]) and one in Norway to provide defined benefits based on length of service and final average earnings. These
205.5
Contracts in progress : assets
supplemental plans are the sole obligation of the Company, and there is no requirement to fund them. However, the Company is
126.8
Inventories
obligated to pay the benefits when they become due. As at March 31, 2012, the supplemental defined benefits pension obligations are
24.2
Prepayments
$57.1 million (2011 – $47.0 million) and the Company has issued letters of credit totalling $53.7 million (2011 – $52.8 million) to
30.7
Income taxes recoverable
collateralize these obligations under the Canadian supplemental plan.
27.9
Derivative financial assets
Contributions reflect actuarial assumptions of future investment returns, salary projections and future service benefits. Plan assets are
Total current assets
$ 966.2
represented primarily by Canadian and foreign equities, government and corporate bonds.
1,197.1
Property, plant and equipment
290.4
Intangible assets
In fiscal 2011, in the acquisition of CHC Helicopter’s HFTO, the Company assumed two pension plans resulting in additional pension
24.7
Deferred tax assets
obligations of $7.2 million and additional plan assets of $4.8 million.
15.1
Derivative financial assets
Other assets
The employee benefits obligations are as follows:
Total assets
(Note 2)
$ 276.4
1,211.0
375.8
1,293.7
533.2
296.8
230.5
308.4
245.8
124.3
43.5
153.1
47.7
20.7
11.6
58.8
18.9
95.5
10.3
24.1
7.2
$ 287.3
$ 2,817.3
$ 1,148.1
$ 3,183.7
$ 1,049.2
$ 2,591.3
17
29
5
11
149.0
177.4
7
8
2011
97.8
29
6
9
March 31
April 1
2011
$ 551.9
$ 254.9
20.9
238.8
12.9
16.1
125.8
47.0
86.2
(0.3)
12.4
$
62.8
$ 810.1
10.4
574.0
161.6
62.8
187.6
64.5
13.4
$ 1,884.4
Foreign
$
25.0
$ 440.7
0.4
17.1
1.3
(9.8)
0.3
466.4
3.8
$ 914.4
(0.5)
18.5
6.7
$ 932.9
-
$ 2,817.3
0.2
2010
$ 493.0
$ 234.5
32.1
196.6
6.5
37.9
167.4
43.9
68.5
(0.7)
9.3
$
81.1
$ 776.8
8.2
(1)
600.9
148.0
81.4
129.3
13.2
15.1
2011
$ 1,772.9
Total
$ 234.5
$ 436.3
8.4
14.2
13.3
11.4
3.0
338.5
1.0
$ 800.4
(12.2)
18.0
6.7
$ 818.4
-
$ 2,591.3
0.2
March 31
10
Liabilities and equity
(amounts in millions)
ccounts payable and accrued liabilities
Funded defined benefits pension obligations
Provisions
Fair value of plan assets
Income taxes payable
Funded defined benefits pension obligations – net
Contracts in progress : liabilities
Supplemental defined benefits pension obligations
Current portion of long-term debt
Unrecognized past service costs
Derivative financial liabilities
Employee benefits obligations
Total current liabilities
Provisions
(1) $0.3 million is included in Other Assets in the consolidated statement of financial position.
Long-term debt
685.6
Royalty obligations
161.6
The changes in the funded defined pension obligations and the fair value of plan assets are as follows:
Employee benefits obligations
114.2
Deferred gains and other non-current liabilities
186.0
2012
$ 597.6
$ 320.4
21.6
263.2
10.9
57.2
104.6
57.1
136.0
(0.1)
12.7
$ 114.2
$ 883.4
6.0
11
13
13
29
15
16
29
12
12
Deferred tax liabilities
Years ended March 31
(amounts in millions)
Derivative financial liabilities
Total liabilities
Equity
Pension obligations, beginning of year
Share capital
Current service cost
Contributed surplus
Interest cost
Employee contributions
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Retained earnings
Actuarial loss (gain)
Pension benefits paid
Non-controlling interests
Business combination
Settlements
Expected return on plan assets
Actuarial (loss) gain
Employer contributions
Employee contributions
Pension benefits paid
Business combination
Settlements
Exchange differences
91.8
12.9
$ 2,141.5
Canadian
$ 209.5
$ 454.5
8.0
19.2
12.0
(9.8)
2.7
558.0
(2.8)
$ 1,021.9
(11.7)
20.3
-
$ 1,042.2
-
-
$ 3,183.7
Canadian
$ 217.7
8.5
12.6
2.0
48.9
(10.3)
$
Foreign
37.2
1.0
1.8
0.3
2.7
(0.6)
-
-
$ 279.4
206.4
14.9
(4.9)
-
(0.5)
41.0
32.4
1.7
0.7
20.5
2.0
(10.3)
-
-
-
1.2
0.3
(0.6)
-
(0.3)
(0.8)
17
29
2012
Total
18
19
$ 254.9
9.5
14.4
2.3
51.6
(10.9)
-
(0.5)
238.8
16.6
(4.2)
21.7
2.3
(10.9)
-
(0.3)
(0.8)
$ 217.7
$
37.2
$ 254.9
173.0
12.5
9.6
20.3
2.7
(11.7)
-
-
-
23.6
1.4
2.1
0.4
0.3
(0.5)
4.8
-
0.3
196.6
13.9
11.7
20.7
3.0
(12.2)
4.8
-
0.3
Total equity
Total liabilities and equity
Exchange differences
Pension obligations, end of year
The accompanying notes form an integral part of these Consolidated Financial Statements.
Fair value of plan assets, beginning of year
$ 320.4
(0.9)
(0.9)
-
$
Fair value of plan assets, end of year
$ 228.6
$
34.6
$ 263.2
$ 206.4
$
32.4
$ 238.8
The actual return on plan assets was $12.4 million in fiscal 2012 (2011 – $25.6 million).
CAE Annual Report 2012 | 121
Consolidated Statement of Financial Position
The changes in the supplemental arrangements pension obligations are as follows:
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
(amounts in millions of Canadian dollars)
Notes
Years ended March 31
March 31
March 31
(amounts in millions)
2012
2011
April 1
2010
$ 287.3
(Note 2)
Pension obligations, beginning of year
$ 276.4
Current service cost
296.8
308.4
230.5
245.8
Interest cost
Actuarial loss
(Note 2)
$ 312.9
238.2
205.5
153.1
47.7
Pension benefits paid
Business combination
124.3
43.5
95.5
10.3
Past service cost
Exchange differences
58.8
18.9
126.8
24.2
30.7
27.9
$ 1,148.1
$ 1,049.2
$ 966.2
Pension obligations, end of year
1,293.7
533.2
The net pension cost is as follows:
1,211.0
375.8
1,197.1
290.4
24.1
7.2
20.7
11.6
Years ended March 31
149.0
177.4
(amounts in millions)
$ 2,817.3
$ 3,183.7
Funded plans
Current service cost
Interest cost
$ 597.6
$ 551.9
20.9
12.9
21.6
10.9
Expected return on plan assets
Past service cost
104.6
Settlements
136.0
Net pension cost
125.8
86.2
12.4
12.7
$ 883.4
6.0
Supplemental arrangements
Current service cost
$ 810.1
10.4
574.0
161.6
Interest cost
685.6
Past service cost
161.6
Net pension cost
114.2
186.0
Total net pension cost
62.8
187.6
$ 776.8
8.2
600.9
148.0
81.4
129.3
91.8
12.9
64.5
13.4
13.2
15.1
24.7
15.1
97.8
$ 2,591.3
$ 493.0
32.1
6.5
167.4
68.5
9.3
Canadian
Foreign
$
$
38.3
1.4
2.2
8.3
(2.5)
-
0.2
-
$
47.9
$
8.7
0.1
0.5
0.8
(0.6)
-
-
(0.3)
9.2
$
2012
Total
47.0
1.5
2.7
9.1
(3.1)
-
0.2
(0.3)
Canadian
Foreign
$
36.1
$
1.2
2.0
1.6
(2.6)
-
-
-
7.8
0.1
$
0.4
0.5
(0.6)
0.5
-
-
2011
Total
43.9
1.3
2.4
2.1
(3.2)
0.5
-
-
$
57.1
$
38.3
$
8.7
$
47.0
Canadian
Foreign
$
$
$
$
$
8.5
12.6
(14.9)
0.2
-
6.4
1.4
2.2
0.2
3.8
10.2
$
$
$
$
$
1.0
1.8
(1.7)
-
(0.2)
0.9
0.1
0.5
-
0.6
1.5
2012
Total
9.5
14.4
(16.6)
0.2
(0.2)
7.3
1.5
2.7
0.2
4.4
11.7
$
$
$
$
$
Canadian
Foreign
$
$
$
$
$
8.0
12.0
(12.5)
0.4
-
7.9
1.2
2.0
-
3.2
11.1
$
$
$
$
$
0.4
1.3
(1.4)
-
-
0.3
0.1
0.4
-
0.5
0.8
2011
Total
8.4
13.3
(13.9)
0.4
-
8.2
1.3
2.4
-
3.7
11.9
$
$
$
$
$
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
$ 2,141.5
For the year ended March 31, 2012, pension costs of $5.1 million (2011 – $4.5 million) have been charged in cost of sales, $1.7
million (2011 – $1.5 million) in research and development expenses, $3.7 million (2011 – $4.9 million) in selling, general and
administrative expenses and $1.2 million (2011 – $1.0 million) were capitalized.
$ 1,884.4
$ 1,772.9
$ 454.5
19.2
$ 440.7
17.1
The percentage of the major categories of assets which constitutes the fair value of plan assets is as follows:
The accompanying notes form an integral part of these Consolidated Financial Statements.
$ 3,183.7
Property
Other
$ 2,817.3
(9.8)
558.0
(9.8)
466.4
$ 1,021.9
20.3
As at March 31
Equity instruments
Debt instruments
$ 1,042.2
$ 914.4
18.5
$ 932.9
$ 436.3
14.2
11.4
338.5
18.0
$ 818.4
$ 2,591.3
Canadian plans
$ 800.4
2011
63%
37%
-
-
100%
2012
62%
36%
-
2%
100%
Netherlands plan
United Kingdom plan
Norway plan
2012
24%
76%
-
-
100%
2011
25%
75%
-
-
100%
2012
60%
29%
-
11%
100%
2011
53%
47%
-
-
100%
2012
9%
73%
18%
-
100%
2011
21%
49%
18%
12%
100%
As at March 31, 2012, pension plan assets include the Company's ordinary shares with a fair value of $0.3 million (2011 – $0.9 million
and April 1, 2010 – $0.7 million).
122 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Significant assumptions (weighted average):
Consolidated Statement of Financial Position
Discount rate
Pension obligations as at March 31:
(amounts in millions of Canadian dollars)
Assets
Compensation rate increases
Cash and cash equivalents
Net pension cost for years ended March 31:
ccounts receivable
Expected return on plan assets
Contracts in progress : assets
Discount rate
Inventories
Compensation rate increases
Prepayments
Notes
5
11
6
2012
4.75%
3.50%
7.00%
5.75%
3.50%
Income taxes recoverable
Derivative financial assets
Amounts for the funded plans and supplemental arrangements are as follows:
Total current assets
Property, plant and equipment
As at March 31
Intangible assets
(amounts in millions)
Deferred tax assets
Funded Canadian plans
Derivative financial assets
Defined benefit obligations
Other assets
Plan assets
Total assets
Deficit
7
8
17
29
9
29
Experience adjustments (losses) gains on plan liabilities
Liabilities and equity
Experience adjustments (losses) gains on plan assets
ccounts payable and accrued liabilities
Provisions
Funded foreign plans
Income taxes payable
Defined benefit obligations
Contracts in progress : liabilities
Plan assets
Current portion of long-term debt
Deficit
Derivative financial liabilities
Experience adjustments gains (losses) on plan liabilities
Total current liabilities
Experience adjustments gains on plan assets
Provisions
Long-term debt
Canadian supplemental arrangements
Royalty obligations
Defined benefit obligation
Employee benefits obligations
Experience adjustments losses on plan liabilities
Deferred gains and other non-current liabilities
10
12
11
13
29
12
13
29
15
16
Canadian
2011
March 31
2012
5.75%
3.50%
$ 287.3
308.4
7.00%
245.8
5.75%
153.1
3.50%
47.7
95.5
10.3
$ 1,148.1
1,293.7
533.2
24.1
7.2
177.4
$ 3,183.7
$ 597.6
21.6
10.9
104.6
136.0
12.7
$ 883.4
6.0
685.6
161.6
114.2
186.0
March 31
2012
2011
4.12%
(Note 2)
2.98%
$ 276.4
296.8
5.20%
230.5
5.13%
124.3
2.35%
43.5
58.8
18.9
$ 1,049.2
1,211.0
375.8
2012
20.7
11.6
$ 279.4
149.0
228.6
$ 2,817.3
50.8
(0.6)
(4.9)
$ 551.9
$
20.9
12.9
41.0
125.8
34.6
86.2
6.4
12.4
1.3
$ 810.1
0.7
10.4
$
574.0
161.6
47.9
62.8
(2.6)
187.6
Foreign
2011
April 1
2010
5.13%
(Note 2)
2.35%
$ 312.9
238.2
5.57%
205.5
5.12%
126.8
2.04%
24.2
30.7
27.9
$ 966.2
1,197.1
290.4
2011
24.7
15.1
$ 217.7
97.8
206.4
$ 2,591.3
11.3
2.8
9.6
$ 493.0
$
32.1
6.5
37.2
167.4
32.4
68.5
4.8
9.3
(0.6)
$ 776.8
2.1
8.2
$
600.9
148.0
38.3
81.4
(1.6)
129.3
Deferred tax liabilities
Foreign supplemental arrangements
Derivative financial liabilities
Defined benefit obligations
Total liabilities
Experience adjustments losses on plan liabilities
Equity
$ 436.3
Share capital
As at March 31, 2012, the total cumulative amount of net actuarial losses before income taxes recognized in other comprehensive
income was $56.3 million (2011 – $8.6 million of net actuarial gains).
14.2
Contributed surplus
64.5
13.4
$
9.2
$ 1,884.4
(0.6)
13.2
15.1
$
8.7
$ 1,772.9
(0.5)
$ 454.5
19.2
$ 440.7
17.1
91.8
12.9
$ 2,141.5
17
29
18
ccumulated other comprehensive (loss) income
19
Retained earnings
Expected contribution for the next fiscal year is as follows:
Equity attributable to equity holders of the Company
Non-controlling interests
Total equity
(amounts in millions)
Total liabilities and equity
Expected contribution – fiscal 2013
(9.8)
558.0
$ 1,021.9
20.3
Funded plans
$ 1,042.2
Foreign
$ 3,183.7
1.8
$
Canadian
$
30.5
The accompanying notes form an integral part of these Consolidated Financial Statements.
(9.8)
466.4
11.4
338.5
$ 914.4
$ 800.4
18.5
18.0
Supplemental arrangements
$ 818.4
Foreign
$ 2,591.3
0.6
$
$ 932.9
Canadian
$ 2,817.3
2.5
$
CAE Annual Report 2012 | 123
Consolidated Statement of Financial Position
NOTE 16 – DEFERRED GAINS AND OTHER NON-CURRENT LIABILITIES
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
March 31
2012
March 31
April 1
$ 287.3
(amounts in millions)
2010
2011
Deferred gains on sale and leasebacks (1)
(Note 2)
(Note 2)
Deferred revenue
$ 312.9
$ 276.4
LTI-RSU/DSU compensation obligations (Note 24)
308.4
License payable
245.8
Deferred gains and other
153.1
47.7
296.8
230.5
124.3
43.5
126.8
24.2
238.2
205.5
March 31
2012
$
44.0
95.4
33.9
4.9
7.8
March 31
$
2011
48.8
86.1
41.3
7.1
4.3
$
April 1
2010
49.6
46.3
22.9
5.0
5.5
$ 186.0
$ 187.6
$ 129.3
30.7
(1) The related amortization for the year amounted to $4.8 million (2011 – $4.8 million).
27.9
58.8
18.9
95.5
10.3
$ 1,148.1
$ 1,049.2
$ 966.2
1,211.0
1,293.7
NOTE 17 – INCOME TAXES
375.8
533.2
Income tax expense
24.1
7.2
A reconciliation of income taxes at Canadian statutory rates with the reported income taxes is as follows:
177.4
1,197.1
290.4
20.7
11.6
24.7
15.1
149.0
97.8
$ 3,183.7
Years ended March 31
$ 2,817.3
$ 2,591.3
(amounts in millions, except for income tax rates)
Earnings before income taxes
Canadian statutory income tax rates
$ 493.0
$ 551.9
$ 597.6
32.1
20.9
Income taxes at Canadian statutory rates
6.5
12.9
21.6
10.9
12.7
167.4
68.5
Difference between Canadian and Foreign statutory rates
125.8
104.6
Losses not tax effected
86.2
136.0
Tax benefit of operating losses not previously recognized
12.4
Non-taxable capital gain
$ 810.1
10.4
Non-deductible items
Prior years' tax adjustments and assessments
685.6
Impact of change in income tax rates on deferred income taxes
161.6
Non-taxable research and development tax credits
62.8
114.2
Other tax benefits not previously recognized
187.6
186.0
Other
$ 776.8
8.2
574.0
161.6
81.4
129.3
600.9
148.0
9.3
$ 883.4
6.0
Income tax expense
91.8
12.9
64.5
13.4
13.2
15.1
2012
$ 239.5
27.99%
$
67.0
2011
$ 222.6
29.51%
$
65.7
(9.3)
5.0
(3.0)
(0.5)
3.6
1.0
(2.7)
(1.2)
(5.3)
2.9
(9.6)
4.8
(1.8)
(0.9)
3.9
3.5
(3.1)
(1.2)
(6.9)
7.3
$
57.5
$
61.7
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The applicable statutory tax rates are 27.99% in 2012 and 29.51% in 2011. The Company's applicable tax rate is the Canadian
combined rates applicable in the jurisdictions in which the Company operates. The decrease is mainly due to the reduction of the
Federal income tax rate in 2012 from 17.63% to 16.13%.
(9.8)
Significant components of the provision for the income tax expense are as follows:
558.0
(9.8)
466.4
11.4
338.5
$ 454.5
19.2
$ 440.7
17.1
$ 436.3
14.2
$ 1,021.9
$ 914.4
$ 800.4
$ 2,141.5
$ 1,884.4
$ 1,772.9
18.0
$ 818.4
$ 2,591.3
20.3
Years ended March 31
(amounts in millions)
Current income tax expense:
$ 932.9
18.5
$ 1,042.2
$ 3,183.7
Current period
$ 2,817.3
The accompanying notes form an integral part of these Consolidated Financial Statements.
Adjustment for prior years
Deferred income tax expense (recovery):
Tax benefit not previously recognized used to reduce the deferred tax expense
Impact of change in income tax rates on deferred income taxes
Origination and reversal of temporary differences
Income tax expense
124 | CAE Annual Report 2012
2012
2011
$
21.5
(0.4)
$
8.6
1.1
(8.3)
(2.7)
47.4
(8.7)
(3.2)
63.9
$
57.5
$
61.7
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Income tax recognized in other comprehensive (loss) income
Consolidated Statement of Financial Position
Deferred income tax recovery recognized in other comprehensive (loss) income amounts to $21.3 million as at March 31, 2012
(March 31, 2011 – deferred income tax expense of $3.1 million).
Deferred tax assets and liabilities
(amounts in millions of Canadian dollars)
Deferred tax assets and liabilities are attributable to the following:
Assets
Cash and cash equivalents
Notes
ccounts receivable
As at March 31
(amounts in millions)
Contracts in progress : assets
Inventories
Prepayments
Non-capital loss carryforwards
Income taxes recoverable
Intangible assets
Derivative financial assets
Amounts not currently deductible
Total current assets
Deferred revenues
Property, plant and equipment
Tax benefit carryover
Intangible assets
Unclaimed research & development
Deferred tax assets
expenditures
Derivative financial assets
Investment tax credits
Other assets
Property, plant and equipment
Total assets
Unrealized gains (losses) on foreign exchange
Financial instruments
Liabilities and equity
Government assistance
Employee benefit plans
Provisions
Percentage-of-completion versus
Income taxes payable
completed contract
ccounts payable and accrued liabilities
Contracts in progress : liabilities
Other
Current portion of long-term debt
Tax assets (liabilities)
Derivative financial liabilities
Total current liabilities
Net deferred income tax assets (liabilities)
Provisions
$
2012
44.2
9.2
25.5
11.0
5.2
7.7
-
13.8
0.1
3.6
-
27.2
-
0.8
5
11
6
Assets
2011
2012
$
-
$
40.9
9.2
26.2
9.6
5.0
6.2
-
10.7
0.1
3.1
5.1
13.6
-
1.4
29
7
8
17
29
9
10
12
(49.4)
-
-
-
-
(18.9)
(95.1)
(4.9)
(1.6)
(3.1)
-
(36.3)
(6.7)
11
13
29
$ (216.0)
124.2
$
12
(91.8)
$ 148.3
(124.2)
$
24.1
$ 131.1
(110.4)
$
20.7
Long-term debt
The analysis of deferred tax assets and deferred tax liabilities is as follows:
Royalty obligations
13
29
Employee benefits obligations
As at March 31
Deferred gains and other non-current liabilities
(amounts in millions)
Deferred tax liabilities
Deferred tax assets:
Derivative financial liabilities
Deferred tax asset to be recovered within 12 months
Total liabilities
Deferred tax asset to be recovered after 12 months
Equity
Share capital
Deferred tax liabilities:
Contributed surplus
Deferred tax liability to be recovered within 12 months
ccumulated other comprehensive (loss) income
Deferred tax liability to be recovered after 12 months
Retained earnings
Equity attributable to equity holders of the Company
Non-controlling interests
Net deferred income tax liabilities
Total equity
Total liabilities and equity
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
March 31
2012
$ 287.3
$
308.4
245.8
Liabilities
153.1
2011
47.7
-
95.5
(30.5)
10.3
-
$ 1,148.1
-
1,293.7
-
533.2
24.1
-
7.2
(14.7)
177.4
(75.6)
$ 3,183.7
(7.4)
(4.0)
-
$ 597.6
-
21.6
10.9
(38.2)
104.6
(4.5)
136.0
$ (174.9)
12.7
110.4
$ 883.4
(64.5)
$
6.0
685.6
161.6
114.2
186.0
91.8
12.9
$ 2,141.5
$ 454.5
19.2
(9.8)
558.0
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
March 31
2011
(Note 2)
$ 276.4
296.8
230.5
$
124.3
2012
43.5
44.2
58.8
(40.2)
18.9
25.5
$ 1,049.2
11.0
1,211.0
5.2
375.8
20.7
7.7
11.6
(18.9)
149.0
(81.3)
$ 2,817.3
(4.8)
2.0
(3.1)
$ 551.9
27.2
20.9
12.9
(36.3)
125.8
(5.9)
86.2
(67.7)
12.4
-
$ 810.1
(67.7)
$
10.4
$
574.0
161.6
62.8
187.6
2012
64.5
13.4
$
3.9
$ 1,884.4
144.4
$ 148.3
$ 440.7
17.1
$
(9.8)
(0.7)
466.4
(215.3)
$ 914.4
$ (216.0)
18.5
$
(67.7)
$ 932.9
$ 2,817.3
April 1
2010
(Note 2)
$ 312.9
$
238.2
205.5
Net
126.8
2011
24.2
40.9
30.7
(21.3)
27.9
26.2
$ 966.2
9.6
1,197.1
5.0
290.4
24.7
6.2
15.1
(14.7)
97.8
(64.9)
$ 2,591.3
(7.3)
(0.9)
5.1
$ 493.0
13.6
32.1
6.5
(38.2)
167.4
(3.1)
68.5
(43.8)
9.3
-
$ 776.8
(43.8)
$
8.2
$
600.9
148.0
81.4
129.3
2011
13.2
15.1
$
7.6
$ 1,772.9
123.5
$ 131.1
$ 436.3
14.2
(3.2)
11.4
(171.7)
338.5
$
$ (174.9)
$ 800.4
$
18.0
(43.8)
$ 818.4
$ 2,591.3
CAE Annual Report 2012 | 125
Consolidated Statement of Financial Position
Movement in temporary differences during fiscal year 2012 is as follows:
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
March 31
March 31
2012
(amounts in millions)
Non-capital loss carryforwards
Intangible assets
2011
(Note 2)
$ 276.4
$ 287.3
April 1
2010
(Note 2)
$ 312.9
Amounts not currently deductible
308.4
Deferred revenues
245.8
Tax benefit carryover
153.1
Unclaimed research & development expenditures
47.7
296.8
230.5
126.8
24.2
124.3
43.5
238.2
205.5
Investment tax credits
Property, plant and equipment
58.8
18.9
95.5
10.3
30.7
27.9
Unrealized gains (losses) on foreign exchange
Financial Instrument
$ 966.2
$ 1,049.2
$ 1,148.1
1,211.0
1,293.7
Government assistance
375.8
533.2
Employee benefit plans
20.7
11.6
completed contract
149.0
24.1
7.2
Percentage-of-completion versus
1,197.1
290.4
24.7
15.1
97.8
$ 2,591.3
Net deferred income tax (liabilities) assets
$ 2,817.3
177.4
Other
$ 3,183.7
Balance
Recognized
Recognized
April 1 2011
in income
in OCI
Acquisition
Balance
of subsidiary March 31 2012
$
40.9
(21.3)
26.2
9.6
5.0
6.2
(14.7)
(64.9)
(7.3)
(0.9)
5.1
13.6
(38.2)
(3.1)
$
1.9
(5.7)
(2.0)
(1.4)
0.2
1.5
(4.2)
(14.9)
2.4
(1.0)
(8.2)
(3.8)
1.8
(3.0)
$
(0.5)
0.4
0.1
-
(0.1)
-
-
(1.0)
0.1
3.9
-
17.4
0.1
0.2
$
1.9
(13.6)
$
1.2
2.8
0.1
-
-
(0.5)
-
-
-
-
-
-
44.2
(40.2)
25.5
11.0
5.2
7.7
(18.9)
(81.3)
(4.8)
2.0
(3.1)
27.2
(36.3)
(5.9)
$
(43.8)
$
(36.4)
$
20.6
$
(8.1)
$
(67.7)
Movement in temporary differences during fiscal year 2011 was as follows:
$ 551.9
$ 493.0
$ 597.6
21.6
10.9
20.9
12.9
104.6
(amounts in millions)
136.0
Non-capital loss carryforwards
Intangible assets
125.8
86.2
12.7
12.4
32.1
6.5
167.4
68.5
9.3
$ 883.4
6.0
$ 810.1
10.4
$ 776.8
8.2
Amounts not currently deductible
Deferred revenues
685.6
Tax benefit carryover
161.6
Unclaimed research & development expenditures
114.2
Investment tax credits
186.0
Property, plant and equipment
574.0
161.6
62.8
187.6
81.4
129.3
600.9
148.0
91.8
12.9
Unrealized gains (losses) on foreign exchange
Financial Instruments
64.5
13.4
13.2
15.1
$ 2,141.5
$ 454.5
19.2
$ 1,772.9
Percentage-of-completion versus
$ 1,884.4
Government assistance
Employee benefit plans
$ 440.7
17.1
completed contract
11.4
(9.8)
(9.8)
Other
338.5
466.4
558.0
Net deferred income tax assets (liabilities)
$ 800.4
$ 436.3
14.2
$ 914.4
$ 1,021.9
Balance
Recognized
Recognized
Acquisition
Balance
April 1 2010
in income
in OCI
of subsidiaries March 31 2011
$
32.8
(16.4)
25.2
7.7
4.6
5.3
(13.7)
(37.5)
(6.9)
(4.7)
12.5
20.2
(15.1)
(2.5)
$
8.6
(3.5)
1.1
2.0
0.4
0.9
(1.1)
(29.4)
(0.4)
4.9
(7.4)
(4.3)
(23.1)
(0.7)
$
(0.5)
0.3
(0.1)
(0.1)
-
-
0.1
2.0
-
(1.1)
-
(2.3)
-
0.1
$
-
(1.7)
$
-
-
-
-
-
-
-
-
-
-
-
-
40.9
(21.3)
26.2
9.6
5.0
6.2
(14.7)
(64.9)
(7.3)
(0.9)
5.1
13.6
(38.2)
(3.1)
$
11.5
$
(52.0)
$
(1.6)
$
(1.7)
$
(43.8)
20.3
18.5
18.0
$ 1,042.2
Following the acquisition of METI, the Company recognized an amount of $2.0 million of deferred tax assets for its pre-acquisition
$ 932.9
unrecognized losses.
$ 2,817.3
$ 818.4
$ 2,591.3
$ 3,183.7
As at March 31, 2012, taxable temporary differences of $327.5 million related to investments in foreign operations, including
subsidiaries and interests in joint ventures has not been recognized, because the Company controls whether the liability will be
incurred and it is satisfied that it will not be incurred in the foreseeable future.
126 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
The non-capital losses expire as follows:
Consolidated Statement of Financial Position
(amounts in millions)
Expiry date
(amounts in millions of Canadian dollars)
2013
2014
Assets
2015
Cash and cash equivalents
2016
2017
Contracts in progress : assets
2018
Inventories
2019 – 2031
Prepayments
No expiry date
Income taxes recoverable
Derivative financial assets
ccounts receivable
Notes
5
11
6
29
March 31
2012
$ 287.3
308.4
245.8
153.1
47.7
95.5
10.3
Unrecognized
March 31
Recognized
April 1
2011
-
0.3
(Note 2)
-
$ 276.4
3.1
296.8
1.7
230.5
2.2
124.3
16.0
43.5
16.2
58.8
18.9
39.5
$
2010
7.4
0.8
(Note 2)
0.1
$ 312.9
-
238.2
-
205.5
-
126.8
63.5
24.2
72.3
30.7
27.9
$ 144.1
Total current assets
$ 966.2
As at March 31, 2012, the Company has $280.3 million of deductible temporary differences for which deferred tax assets have not
1,197.1
Property, plant and equipment
been recognized. These amounts will reverse up to the next 30 years. The Company also has $1.1 million of accumulated capital
290.4
Intangible assets
losses carried forward relating to its operation in the U.S. for which deferred tax assets have not been recognized. These capital
24.7
Deferred tax assets
losses will expire in 2013.
15.1
Derivative financial assets
1,293.7
533.2
1,211.0
375.8
20.7
11.6
$ 1,049.2
$ 1,148.1
17
29
7
8
24.1
7.2
Other assets
9
Total assets
NOTE 18 – SHARE CAPITAL, EARNINGS PER SHARE AND DIVIDENDS
177.4
$ 3,183.7
149.0
97.8
$ 2,817.3
$ 2,591.3
ccounts payable and accrued liabilities
Share capital
Liabilities and equity
Authorized shares
$ 493.0
The Company is authorized to issue an unlimited number of common shares without par value and an unlimited number of preferred
32.1
Provisions
shares without par value, issuable in series.
6.5
Income taxes payable
20.9
12.9
$ 597.6
$ 551.9
10
12
21.6
10.9
167.4
Contracts in progress : liabilities
The preferred shares may be issued with rights and conditions to be determined by the Board of Directors, prior to their issue. To
68.5
Current portion of long-term debt
date, the Company has not issued any preferred shares.
Derivative financial liabilities
125.8
86.2
104.6
136.0
11
13
12.4
9.3
29
12.7
Total current liabilities
$ 776.8
Issued shares
A reconciliation of the issued and outstanding common shares of the Company is presented in the Consolidated Statement of
8.2
Provisions
Changes in Equity. As at March 31, 2012, the number of shares issued and that are fully paid amount to 258,266,295
600.9
Long-term debt
(2011 – 256,964,756).
148.0
Royalty obligations
$ 810.1
10.4
$ 883.4
6.0
574.0
161.6
13
29
12
685.6
161.6
Employee benefits obligations
Earnings per share computation
Deferred gains and other non-current liabilities
Deferred tax liabilities
The denominators for the basic and diluted earnings per share computations are as follows:
Derivative financial liabilities
17
29
15
16
114.2
186.0
91.8
12.9
62.8
187.6
64.5
13.4
81.4
129.3
13.2
15.1
ccumulated other comprehensive (loss) income
Total liabilities
Years ended March 31
Equity
Weighted average number of common shares outstanding
Share capital
Effect of dilutive stock options
Contributed surplus
Weighted average number of common shares outstanding for diluted earnings per share calculation
$ 1,772.9
2011
256,687,378
$ 436.3
809,076
14.2
257,496,454
11.4
338.5
Retained earnings
As at March 31, 2012, options to acquire 2,671,643 common shares (2011 – 1,821,675) have been excluded from the above
$ 800.4
Equity attributable to equity holders of the Company
calculation since their inclusion would have had an anti-dilutive effect.
Non-controlling interests
Total equity
Dividends
Total liabilities and equity
$ 2,817.3
The dividends declared for fiscal 2012 were $41.2 million or $0.16 per share (2011 – $38.5 million or $0.15 per share).
$ 1,884.4
2012
257,461,318
$ 440.7
763,581
17.1
258,224,899
(9.8)
466.4
$ 454.5
19.2
(9.8)
558.0
$ 932.9
$ 914.4
$ 818.4
$ 3,183.7
$ 1,021.9
$ 2,141.5
$ 1,042.2
$ 2,591.3
20.3
18.0
18.5
19
18
The accompanying notes form an integral part of these Consolidated Financial Statements.
CAE Annual Report 2012 | 127
Consolidated Statement of Financial Position
NOTE 19 – ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
March 31
2012
March 31
April 1
$ 287.3
2010
(Note 2)
$ 312.9
2011
(Note 2)
$ 276.4
As at March 31
(amounts in millions)
Balances, beginning of year
308.4
Other comprehensive income (loss)
245.8
Balances, end of year
153.1
47.7
296.8
230.5
124.3
43.5
$
$
238.2
205.5
126.8
24.2
30.7
27.9
95.5
10.3
58.8
18.9
NOTE 20 – EMPLOYEE COMPENSATION
Foreign currency
Net changes in
translation
cash flow hedges
2012
(20.5)
10.3
(10.2)
2011
$
-
(20.5)
$ (20.5)
2012
10.3
(10.3)
-
$
$
2011
10.9
(0.6)
10.3
$
$
Net changes in
available-for-sale
financial instruments
2011
2012
$
$
0.4
-
0.4
$
$
0.5
(0.1)
0.4
$
$
Total
2011
11.4
(21.2)
(9.8)
$
$
2012
(9.8)
-
(9.8)
$ 1,148.1
$ 1,049.2
$ 966.2
1,197.1
290.4
The total employee compensation expense recognized in the determination of net income is as follows:
1,211.0
1,293.7
375.8
533.2
Years ended March 31
20.7
24.1
11.6
7.2
(amounts in millions)
Salaries and benefits
177.4
Share-based payments, net of equity swap
24.7
15.1
$ 2,817.3
$ 2,591.3
149.0
97.8
$ 3,183.7
Pension costs – defined benefit plans
Pension costs – defined contribution plans
$ 597.6
$ 551.9
Total employee compensation expense
$ 493.0
21.6
10.9
20.9
12.9
32.1
6.5
2012
$ 627.8
14.2
10.5
6.7
2011
$ 573.7
20.4
10.9
6.1
$ 659.2
$ 611.1
$ 883.4
6.0
9.3
12.4
12.7
125.8
86.2
$ 810.1
10.4
$ 776.8
8.2
167.4
104.6
NOTE 21 – IMPAIRMENT OF NON-FINANCIAL ASSETS
68.5
136.0
Impairment of property, plant and equipment
In fiscal 2012, an impairment loss of $0.5 million representing the write-down of a building to its recoverable amount was recognized
in cost of sales within the Training & Services/Civil segment. The asset had a carrying amount of $6.1 million. The recoverable
amount was based on the fair value less costs to sell.
574.0
685.6
161.6
161.6
Impairment of intangible assets
62.8
114.2
In fiscal 2012, an impairment loss of $1.3 million representing the write-down of a customer relationship was recognized in cost of
187.6
186.0
sales within the New Core Markets segment. The asset had a carrying amount of $2.6 million. An impairment test was triggered
during the year as a result of an amendment to a contract upon the acquisition of METI in August 2011. The recoverable amount was
estimated based on a value in use.
$ 1,884.4
81.4
129.3
600.9
148.0
91.8
12.9
13.2
15.1
64.5
13.4
$ 1,772.9
$ 2,141.5
In addition, an impairment loss of $3.5 million mainly representing the full write-down of certain deferred development costs and other
software, also within the New Core Markets segment, was recognized in research and development expenses during the fiscal year.
$ 454.5
An impairment test was triggered upon the acquisition of METI and the subsequent realignment of the approach to the healthcare
19.2
market.
(9.8)
558.0
$ 440.7
17.1
$ 436.3
14.2
(9.8)
466.4
11.4
338.5
$ 1,021.9
$ 914.4
$ 800.4
NOTE 22 – OTHER (GAINS) LOSSES – NET
18.5
20.3
Years ended March 31
$ 932.9
$ 2,817.3
(amounts in millions)
Disposal/full retirement of property, plant and equipment
$ 818.4
$ 2,591.3
18.0
$ 1,042.2
$ 3,183.7
Net foreign exchange differences
Gain on sale of subsidiary
Dividend income
Royalty income
Cumulative translation adjustment release
Remeasurement of previously-held interest in available-for-sale investment
Other
Other (gains) losses – net
128 | CAE Annual Report 2012
2012
$
(10.2)
$
(0.5)
-
(4.0)
(0.7)
-
0.3
(6.1)
2011
(1.1)
(5.8)
(1.1)
(6.6)
(0.4)
(0.6)
-
(2.6)
$
(21.2)
$
(18.2)
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
NOTE 23 – FINANCE EXPENSE - NET
Consolidated Statement of Financial Position
Years ended March 31
March 31
2012
2011
March 31
2012
Notes
$ 287.3
Financing cost amortization
(amounts in millions)
Finance expense:
(amounts in millions of Canadian dollars)
Long-term debt (other than finance leases)
Assets
Finance leases
Cash and cash equivalents
Royalty obligations
ccounts receivable
Contracts in progress : assets
Accretion of provisions
Inventories
Other
Prepayments
Post interest rate swaps
Income taxes recoverable
Borrowing costs capitalized (1)
Derivative financial assets
Total current assets
Finance expense
Finance income:
Property, plant and equipment
Intangible assets
Other
Deferred tax assets
Derivative financial assets
Finance income
Other assets
Finance expense - net
Total assets
(1) The average capitalization rate used during fiscal 2012 to determine the amount of borrowing costs eligible for capitalization was 5.2% (2011 – 6.0%).
(Note 2)
$
38.0
$ 276.4
11.2
296.8
13.6
230.5
1.6
124.3
1.9
43.5
7.1
58.8
(2.0)
18.9
(2.2)
$ 1,049.2
69.2
$
1,211.0
375.8
(1.6)
20.7
(5.0)
11.6
(6.6)
149.0
$
62.6
$ 2,817.3
Interest income on loans and receivables
1,293.7
533.2
153.1
47.7
308.4
245.8
95.5
10.3
24.1
7.2
$ 1,148.1
$ 3,183.7
17
29
5
11
177.4
7
8
29
6
9
$
$
April 1
2011
2010
(Note 2)
$
32.2
$ 312.9
12.6
238.2
13.4
205.5
1.8
126.8
1.4
24.2
5.4
30.7
(2.0)
27.9
(0.4)
$
$ 966.2
$
64.4
1,197.1
290.4
(0.2)
24.7
(4.2)
15.1
(4.4)
97.8
$
60.0
$ 2,591.3
$
Liabilities and equity
10
ccounts payable and accrued liabilities
32.1
Provisions
NOTE 24 – SHARE-BASED PAYMENTS
6.5
Income taxes payable
The Company’s five share-based payment plans consist of two categories of plans: the Employee Stock Option Plan (ESOP), which
167.4
Contracts in progress : liabilities
qualifies as an equity-settled share-based payment plan; and the Employee Stock Purchase Plan (ESPP), Deferred Share Unit (DSU)
68.5
Current portion of long-term debt
Plan, Long-Term Incentive Deferred Share Unit (LTI-DSU) Plans and the Long-Term Incentive Restricted Share Unit (LTI-RSU) Plans,
9.3
Derivative financial liabilities
which qualify as cash-settled share-based payments plans.
Total current liabilities
$ 776.8
The effect before income taxes of share-based payment arrangements in the consolidated income statement and in the consolidated
8.2
Provisions
statement of financial position are as follows as at, and for the years ended March 31:
Long-term debt
Royalty obligations
$ 810.1
10.4
$ 883.4
6.0
125.8
86.2
574.0
161.6
104.6
136.0
20.9
12.9
21.6
10.9
11
13
13
29
$ 597.6
$ 493.0
$ 551.9
12.4
12.7
12
12
29
Employee benefits obligations
Deferred gains and other non-current liabilities
(amounts in millions)
Deferred tax liabilities
Cash-settled share-based compensation:
Derivative financial liabilities
ESPP
Total liabilities
DSU
Equity
LTI-DSU, net of equity swap
Share capital
LTI-RSU
Contributed surplus
Total cash-settled share-based compensation
ccumulated other comprehensive (loss) income
15
16
17
29
18
$
2012
5.4
(0.8)
4.5
2.4
$
11.5
19
685.6
161.6
600.9
148.0
Compensation Recognized in the consolidated
81.4
statement of financial position
129.3
2011
13.2
15.1
$
-
$ 1,772.9
(9.0)
114.2
cost/(recovery)
186.0
2011
91.8
12.9
$
4.6
$ 2,141.5
3.1
62.8
187.6
2012
64.5
13.4
$
-
$ 1,884.4
(8.2)
$
2.4
$ 454.5
7.2
19.2
17.3
(9.8)
558.0
3.9
$ 1,021.9
3.9
$
20.3
$
21.2
$ 1,042.2
$ 3,183.7
$
(21.5)
$ 440.7
(12.2)
17.1
(41.9)
(9.8)
466.4
(19.2)
$ 914.4
(19.2)
$
18.5
$
(61.1)
$ 932.9
$ 2,817.3
$
(22.0)
$ 436.3
(9.9)
14.2
(40.9)
11.4
338.5
(17.1)
$ 800.4
(17.1)
$
18.0
$
(58.0)
$ 818.4
$ 2,591.3
Equity-settled share-based compensation:
Retained earnings
ESOP
Equity attributable to equity holders of the Company
Total equity-settled share-based compensation
Non-controlling interests
Total share-based compensation
Total equity
Total liabilities and equity
The compensation costs listed above include capitalized costs of $1.0 million (2011 – $0.8 million).
15.2
3.7
3.7
$
$
The share-based payment plans are described below. There have been no cancellations to any of the plans during fiscal 2012 or
The accompanying notes form an integral part of these Consolidated Financial Statements.
fiscal 2011.
Employee Stock Option Plan
Under the Company’s long-term incentive program, options may be granted to its officers and other key employees of its subsidiaries
to purchase common shares of the Company at a subscription price of 100% of the market value at the date of the grant. Market
value is determined as the weighted average closing price of the common shares on the Toronto Stock Exchange (TSX) of the five
days of trading prior to the effective date of the grant.
As at March 31, 2012, a total of 12,787,026 common shares (2011 – 13,325,626) remained authorized for issuance under the
Employee Stock Option Plan (ESOP). The options are exercisable during a period not to exceed seven years (six years for options
issued before March 31, 2011), and are not exercisable during the first 12 months after the date of the grant. The right to exercise all
of the options vests over a period of four years of continuous employment from the grant date. Upon termination of employment at
retirement, unvested options continue to vest following the retiree’s retirement date, subject to the four year vesting period. However,
CAE Annual Report 2012 | 129
Consolidated Statement of Financial Position
if there is a change of control of the Company, the options outstanding become immediately exercisable by option holders. Options
are adjusted proportionately for any stock dividends or stock splits attributed to the common shares of the Company.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Outstanding options are as follows:
April 1
March 31
March 31
2012
2011
Years ended March 31
(Note 2)
$ 276.4
$ 287.3
2010
(Note 2)
$ 312.9
296.8
230.5
308.4
245.8
Options outstanding, beginning of year
153.1
Granted
47.7
Exercised
95.5
Forfeited
10.3
Expired
$ 1,148.1
124.3
43.5
58.8
18.9
$ 1,049.2
238.2
205.5
126.8
24.2
30.7
27.9
$ 966.2
Options outstanding, end of year
1,293.7
533.2
Options exercisable, end of year
1,211.0
375.8
1,197.1
290.4
Number
of options
6,020,489
1,223,434
(538,600)
(224,280)
(7,275)
6,473,768
3,134,974
2012
Weighted
average
exercise price
$
9.67
12.25
8.18
11.88
13.18
$ 10.20
$ 10.73
Number
of options
5,818,386
836,614
(394,850)
(224,161)
(15,500)
6,020,489
2,345,225
2011
Weighted
average
exercise price
$
9.50
9.65
6.84
10.29
5.45
$
9.67
$ 10.78
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
24.1
7.2
20.7
11.6
24.7
15.1
Summarized information about the Company's ESOP as at March 31, 2012 is as follows:
177.4
149.0
97.8
$ 3,183.7
$ 2,817.3
Range of exercise prices
$ 2,591.3
Options Outstanding
Options Exercisable
$ 597.6
$ 551.9
21.6
10.9
$7.29 to $9.41
$9.55 to $11.37
104.6
$11.39 to $14.10
136.0
Total
12.7
20.9
12.9
125.8
86.2
12.4
Number
$ 493.0
Outstanding
32.1
2,950,890
6.5
876,455
167.4
2,646,423
68.5
6,473,768
9.3
Weighted
average remaining
Weighted
average
contractual life (years)
exercise price
3.18
4.58
3.19
3.37
$
7.53
9.73
13.35
$
10.20
Number
exercisable
1,443,350
154,304
1,537,320
3,134,974
Weighted
average
exercise price
$
7.57
9.68
13.80
$ 10.73
$ 883.4
6.0
$ 810.1
10.4
$ 776.8
8.2
The weighted average market share price for share options exercised in 2012 was $11.70 (2011 – $11.28).
574.0
161.6
685.6
For the year ended March 31, 2012, compensation cost for CAE’s stock options of $3.7 million (2011 – $3.9 million) was recognized
161.6
in the consolidated income statement with a corresponding credit to contributed surplus using the fair value method of accounting for
62.8
awards that were granted since 2008.
114.2
187.6
186.0
81.4
129.3
600.9
148.0
The assumptions used for the purpose of the option calculations outlined in this note are presented below:
91.8
12.9
64.5
13.4
13.2
15.1
$ 2,141.5
$ 1,884.4
$ 1,772.9
Weighted average assumptions used in the Black-Scholes options pricing model:
$ 454.5
19.2
$ 440.7
17.1
Weighted average share price
Exercise price
(9.8)
Dividend yield
558.0
(9.8)
466.4
Expected volatility
$ 1,021.9
$ 914.4
Risk-free interest rate
Expected option term
20.3
18.5
$ 436.3
14.2
11.4
338.5
$ 800.4
18.0
$ 818.4
$ 1,042.2
$ 932.9
Weighted average fair value option granted
$ 3,183.7
$ 2,817.3
$ 2,591.3
2012
2011
$ 12.12
$ 12.25
1.33%
34.05%
2.16%
5 years
$
3.33
$
$
9.69
9.65
1.26%
34.92%
2.56%
4 years
$
2.84
The accompanying notes form an integral part of these Consolidated Financial Statements.
Expected volatility is estimated by considering historical average share price volatility over the option's expected term.
Employee Stock Purchase Plan
The Company maintains an Employee Stock Purchase Plan (ESPP) to enable employees of the Company and its participating
subsidiaries to acquire CAE common shares through regular payroll deductions or a lump-sum payment plus employer contributions.
The Company and its participating subsidiaries match the first $500 employee contribution and contribute $1 for every $2 of additional
employee contributions, up to a maximum of 3% of the employee’s base salary. The Company recorded compensation cost in the
amount of $5.4 million (2011 – $4.6 million) in respect of employer contributions under the Plan.
130 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Deferred Share Unit Plan
Consolidated Statement of Financial Position
The Company maintains a Deferred Share Unit (DSU) plan for executives, whereby an executive may elect to receive any cash
incentive compensation in the form of deferred share units. The plan is intended to promote a greater alignment of interests between
executives and the shareholders of the Company. A DSU is equal in value to one common share of the Company. The units are
April 1
issued on the basis of the average closing board lot sale price per share of CAE common shares on the TSX during the last 10 days
2010
(amounts in millions of Canadian dollars)
on which such shares traded prior to the date of issue. The units also accrue dividend equivalents payable in additional units in an
Assets
(Note 2)
amount equal to dividends paid on CAE common shares. DSUs mature upon termination of employment, whereupon an executive is
entitled to receive a cash payment equal to the fair market value of the equivalent number of common shares, net of withholdings.
$ 312.9
Cash and cash equivalents
March 31
2012
(Note 2)
$ 276.4
March 31
Notes
2011
$ 287.3
5
11
ccounts receivable
238.2
The Company also maintains a DSU plan for non-employee directors. A non-employee director holding less than the minimum
205.5
Contracts in progress : assets
holdings of common shares of the Company receives the Board retainer and attendance fees in the form of deferred share units.
126.8
Inventories
Minimum holdings means no less than the number of common shares or deferred share units equivalent in fair market value to three
times the annual retainer fee payable to a director for service on the Board. A non-employee director holding no less than the
24.2
Prepayments
minimum holdings of common shares may elect to participate in the plan in respect of half or all of his or her retainer and part or all of
30.7
Income taxes recoverable
his or her attendance fees. The terms of the plan are essentially identical to the executive DSU Plan except that units are issued on
27.9
Derivative financial assets
the basis of the closing board lot sale price per share of CAE common shares on the TSX during the last day on which the common
Total current assets
$ 966.2
shares traded prior to the date of issue.
1,197.1
Property, plant and equipment
The Company records the cost of the DSU plans as a compensation expense and accrues its long-term liability in Deferred gains and
290.4
Intangible assets
other non-current liabilities on the consolidated statement of financial position. The recovery recorded in fiscal 2012 was $0.8 million
24.7
Deferred tax assets
(2011 – $3.1 million cost).
15.1
Derivative financial assets
1,211.0
375.8
1,293.7
533.2
308.4
245.8
296.8
230.5
124.3
43.5
153.1
47.7
20.7
11.6
58.8
18.9
95.5
10.3
$ 1,049.2
$ 1,148.1
17
29
7
8
29
6
24.1
7.2
Other assets
DSUs outstanding are as follows:
Total assets
Liabilities and equity
Years ended March 31
DSUs outstanding, beginning of year
ccounts payable and accrued liabilities
Units granted
Provisions
Units cancelled
Income taxes payable
Units redeemed
Contracts in progress : liabilities
Dividends paid in units
Current portion of long-term debt
9
10
12
11
13
Derivative financial liabilities
DSUs outstanding, end of year
Total current liabilities
DSUs vested, end of the year
Provisions
The intrinsic values of the DSUs amount to $8.2 million at March 31, 2012 (2011 – $9.0 million).
Long-term debt
Royalty obligations
13
29
29
12
177.4
$ 3,183.7
149.0
97.8
$ 2,817.3
$ 2,591.3
$ 597.6
21.6
10.9
104.6
136.0
2012
$ 551.9
699,866
20.9
12.9
94,441
-
125.8
-
86.2
11,220
12.7
805,527
12.4
$ 883.4
6.0
685.6
161.6
805,527
$ 810.1
10.4
574.0
161.6
2011
595,431
$ 493.0
95,782
32.1
-
6.5
-
167.4
8,653
68.5
9.3
699,866
$ 776.8
699,866
8.2
600.9
148.0
15
16
81.4
Employee benefits obligations
Long-Term Incentive (LTI) – Deferred Share Unit Plans
129.3
Deferred gains and other non-current liabilities
The Company maintains Long-Term Incentive Deferred Share Unit (LTI-DSU) plans for executives and senior management to
13.2
Deferred tax liabilities
promote a greater alignment of interests between executives and shareholders of the Company. A LTI-DSU is equal in value to one
common share at a specific date. The LTI-DSUs are also entitled to dividend equivalents payable in additional units in an amount
15.1
Derivative financial liabilities
equal to dividends paid on CAE common shares. Eligible participants are entitled to receive a cash payment equivalent to the fair
Total liabilities
$ 1,772.9
market value of the number of vested LTI-DSUs held upon any termination of employment. Upon termination of employment at
Equity
retirement, unvested units continue to vest until November 30 of the year following the retirement date. For participants subject to
$ 436.3
Share capital
section 409A of the United States Internal Revenue Code, vesting of unvested units takes place at the time of retirement.
14.2
Contributed surplus
The Plan stipulates that granted units vest equally over five years and that following a take-over bid, all unvested units vest
11.4
immediately. The recovery recorded in fiscal 2012 was $1.7 million (2011 – $11.3 million cost).
338.5
Retained earnings
The Company entered into equity swap agreements to reduce its earnings exposure to the fluctuations in its share price (Refer to
$ 800.4
Equity attributable to equity holders of the Company
Note 30).
Non-controlling interests
ccumulated other comprehensive (loss) income
$ 454.5
19.2
$ 440.7
17.1
(9.8)
558.0
62.8
187.6
114.2
186.0
(9.8)
466.4
64.5
13.4
91.8
12.9
$ 914.4
$ 1,884.4
$ 2,141.5
$ 1,021.9
17
29
18.5
18.0
18
19
20.3
Total equity
Total liabilities and equity
LTI-DSUs outstanding under all plans are as follows:
$ 1,042.2
$ 3,183.7
$ 932.9
$ 2,817.3
$ 818.4
$ 2,591.3
The accompanying notes form an integral part of these Consolidated Financial Statements.
Years ended March 31
LTI-DSUs outstanding, beginning of year
Units granted
Units cancelled
Units redeemed
Dividends paid in units
LTI-DSUs outstanding, end of year
LTI-DSUs vested at end of year
The intrinsic values of the LTI-DSUs amount to $20.5 million at March 31, 2012 (2011 – $23.4 million).
2012
2,333,669
241,266
(64,883)
(115,927)
37,189
2,431,314
2,000,614
2011
2,832,972
381,258
(72,635)
(847,073)
39,147
2,333,669
1,818,701
CAE Annual Report 2012 | 131
Consolidated Statement of Financial Position
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Long-Term Incentive – Restricted Share Unit Plans
The Company maintains Long-Term Incentive Performance Based Restricted Shares Unit (LTI-RSU) plans to enhance the
Company’s ability to attract and retain talented individuals and also to promote a greater alignment of interest between eligible
participants and the Company’s shareholders. The LTI-RSUs are share-based performance plans.
March 31
2012
$ 287.3
March 31
2011
(Note 2)
$ 276.4
April 1
2010
(Note 2)
$ 312.9
Fiscal year 2008 Plan
LTI-RSUs granted pursuant to the plan vest after three years from their grant date as follows:
296.8
230.5
(i) 100% of the units, if CAE shares have appreciated by a minimum annual compounded growth defined as the Bank of Canada
238.2
308.4
10-year risk-free rate of return on the grant date plus 350 basis points (3.50%) over the valuation period, or, in the case of
205.5
245.8
pro-rated vesting, as of the end of the pro-ration period;
126.8
24.2
153.1
(ii) 50% of the units if, based on the grant price, the closing average price on the common CAE shares has met or exceeded the
47.7
performance of the companies listed on the Standard & Poor’s Aerospace and Defence Index (S&P A&D index), adjusted for
dividends, or, in the case of pro-rated vesting, as of the end of the pro-ration period.
124.3
43.5
95.5
10.3
58.8
18.9
30.7
27.9
$ 1,148.1
$ 1,049.2
$ 966.2
24.1
7.2
1,197.1
290.4
1,211.0
375.8
Participants subject to loss of employment, other than voluntarily or for cause, are entitled to conditional pro-rata vesting. The cost
recorded in fiscal 2012 was $1.0 million (2011 – $2.7 million).
1,293.7
533.2
Fiscal year 2011 Plan
24.7
In May 2010, the Company amended the fiscal year 2008 Plan for fiscal 2011 and subsequent years. LTI-RSUs granted pursuant to
15.1
the revised plan vest over three years from their grant date as follows:
97.8
177.4
(i) One-sixth of the total number of granted units multiplied by a factor vests every year. The factor is calculated from the one-year
Total Shareholder Return (TSR) relative performance of CAE’s share price versus that of the S&P A&D index for the period
April 1st to March 31st, immediately preceding each of the 1st, 2nd, and 3rd anniversary of the grant date, according to the following
rule:
20.7
11.6
$ 2,817.3
$ 2,591.3
149.0
$ 3,183.7
$ 597.6
$ 551.9
$ 493.0
20.9
12.9
21.6
10.9
Annual TSR Relative Performance
1st Quartile (0 – 25th percentile)
104.6
2nd Quartile (26th – 50th percentile)
136.0
3rd Quartile (51st – 75th percentile)
125.8
86.2
32.1
6.5
167.4
68.5
9.3
12.4
12.7
4th Quartile (76th – 100th percentile)
$ 810.1
10.4
$ 776.8
8.2
$ 883.4
6.0
Factor
-
50% – 98%
100% – 148%
150%
574.0
161.6
(ii) One-half of the total number of granted units multiplied by a factor vests in the final year. The factor is calculated from the
685.6
three-year TSR relative performance of CAE’s share price versus that of the companies listed on the S&P A&D index for the
161.6
period April 1st, immediately preceding the grant date, to March 31st, immediately preceding the 3rd anniversary of the grant date,
81.4
according to the same rule described in the table above.
129.3
114.2
186.0
Participants subject to loss of employment, other than voluntarily or for cause, are entitled to the units vested. The cost recorded in
fiscal 2012 was $1.4 million (2011 – $4.5 million).
62.8
187.6
600.9
148.0
13.2
15.1
64.5
13.4
91.8
12.9
$ 2,141.5
$ 1,884.4
$ 1,772.9
LTI-RSU units outstanding under all plans are as follows:
$ 454.5
19.2
$ 440.7
17.1
$ 436.3
14.2
11.4
(9.8)
(9.8)
Years ended March 31
338.5
466.4
558.0
LTI-RSUs outstanding, beginning of year
$ 800.4
Units granted
$ 914.4
$ 1,021.9
20.3
Units cancelled
Units redeemed
$ 1,042.2
$ 932.9
18.5
18.0
$ 818.4
The accompanying notes form an integral part of these Consolidated Financial Statements.
LTI-RSUs vested, end of year
$ 3,183.7
LTI-RSUs outstanding, end of year
$ 2,817.3
$ 2,591.3
Fiscal Year 2011 Plan
Fiscal Year 2008 Plan
2012
605,585
480,276
(65,895)
(5,811)
1,014,155
677,817
2011
-
628,532
(22,947)
-
605,585
301,697
2012
1,064,026
-
(403,293)
-
660,733
631,804
2011
1,438,591
-
(374,565)
-
1,064,026
821,561
The intrinsic values of the LTI-RSUs amount to $12.2 million at March 31, 2012 (2011 – $9.9 million).
132 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
NOTE 25 – SUPPLEMENTARY CASH FLOWS INFORMATION
Consolidated Statement of Financial Position
Contracts in progress : assets
Years ended March 31
(amounts in millions)
(amounts in millions of Canadian dollars)
Cash (used in) provided by non-cash working capital:
Assets
Accounts receivable
Cash and cash equivalents
Contracts in progress: assets
ccounts receivable
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Accounts payable and accrued liabilities
Provisions
Total current assets
Income taxes payable
Property, plant and equipment
Contracts in progress: liabilities
Intangible assets
Derivative financial liabilities
Income taxes recoverable
Derivative financial assets
Inventories
Prepayments
Deferred tax assets
Changes in non-cash working capital
Derivative financial assets
Other assets
Notes
5
11
6
29
7
8
17
29
9
March 31
2012
$ 287.3
308.4
245.8
153.1
47.7
95.5
10.3
$ 1,148.1
1,293.7
533.2
24.1
7.2
177.4
March 31
2012
2011
(Note 2)
$
(11.0)
$ 276.4
(7.0)
296.8
(24.1)
230.5
(0.6)
124.3
(11.6)
43.5
48.0
58.8
6.8
18.9
(2.2)
$ 1,049.2
(2.6)
1,211.0
(22.2)
375.8
(45.2)
20.7
(71.7)
11.6
$
149.0
April 1
2011
2010
(Note 2)
$
(56.6)
$ 312.9
(18.3)
238.2
13.7
205.5
(9.3)
126.8
(2.4)
24.2
39.8
30.7
58.1
27.9
(11.1)
$ 966.2
1.6
1,197.1
(63.6)
290.4
(30.9)
24.7
(79.0)
15.1
$
97.8
Total assets
NOTE 26 – CONTINGENCIES
Liabilities and equity
In the normal course of operations, the Company is party to a number of lawsuits, claims and contingencies. Although it is possible
$ 493.0
that liabilities may be incurred in instances for which no accruals have been made, the Company does not believe that the ultimate
32.1
Provisions
outcome of these matters will have a material impact on its consolidated financial position.
6.5
Income taxes payable
ccounts payable and accrued liabilities
20.9
12.9
$ 597.6
$ 551.9
$ 2,817.3
$ 3,183.7
$ 2,591.3
12
10
21.6
10.9
29
11
13
104.6
136.0
125.8
86.2
Contracts in progress : liabilities
Current portion of long-term debt
NOTE 27 – COMMITMENTS
Derivative financial liabilities
Operating lease commitments
Total current liabilities
$ 776.8
As at March 31, 2012, an amount of $26.0 million (2011 – $37.3 million and April 1, 2010 – $50.4 million) was designated as
8.2
Provisions
commitments to CVS Leasing Ltd.
600.9
Long-term debt
685.6
148.0
Royalty obligations
161.6
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Employee benefits obligations
114.2
Deferred gains and other non-current liabilities
186.0
Years ended March 31
Deferred tax liabilities
Derivative financial liabilities
(amounts in millions)
No later than 1 year
Total liabilities
Later than 1 year and no later than 5 years
Equity
Later than 5 years
Share capital
Contributed surplus
25.7
$ 436.3
$ 119.9
14.2
$ 1,884.4
$
30.2
79.0
$
29.0
$ 1,772.9
65.2
$ 810.1
10.4
$ 883.4
6.0
574.0
161.6
62.8
187.6
167.4
68.5
81.4
129.3
64.5
13.4
2012
13.2
2011
15.1
91.8
12.9
13
29
$ 2,141.5
17
29
15
16
12.7
12.4
9.3
12
18
$ 454.5
19.2
19
ccumulated other comprehensive (loss) income
Rental expenses recorded in the consolidated income statement amount to $46.8 million (2011 – $46.9 million).
Retained earnings
Equity attributable to equity holders of the Company
Contractual purchase obligations
Non-controlling interests
Total equity
Significant contractual purchase obligations are as follows:
Total liabilities and equity
Years ended March 31
The accompanying notes form an integral part of these Consolidated Financial Statements.
(amounts in millions)
2013
2014
(9.8)
558.0
11.5
11.5
$ 1,042.2
$ 3,183.7
$ 1,021.9
20.3
SP/C
$
$
2015
11.5
$
34.5
$
32.8
$ 440.7
17.1
$ 142.0
(9.8)
466.4
$ 914.4
18.5
$ 932.9
$ 2,817.3
SP/M
4.0
-
-
4.0
11.4
338.5
$ 800.4
18.0
$ 818.4
$ 2,591.3
$
Total
15.5
11.5
11.5
$
38.5
CAE Annual Report 2012 | 133
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
Consolidated Statement of Financial Position
Operating Lease Commitments as a Lessor
Future minimum lease payments receivable under non cancellable operating leases are as follows:
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
2011
April 1
March 31
2012
March 31
Years ended March 31
(amounts in millions)
(Note 2)
No later than 1 year
$ 312.9
Later than 1 year and no later than 5 years
238.2
296.8
205.5
230.5
(Note 2)
$ 276.4
Later than 5 years
308.4
245.8
$ 287.3
2010
153.1
47.7
124.3
43.5
126.8
24.2
$
2012
4.5
14.4
1.8
$
2011
3.8
16.2
3.1
$
20.7
$
23.1
NOTE 28 – CAPITAL RISK MANAGEMENT
58.8
18.9
30.7
27.9
95.5
10.3
$ 1,148.1
$ 1,049.2
The Company’s objectives when managing capital are threefold:
$ 966.2
(i) Optimize the use of debt for managing the cost of capital of the Company;
1,293.7
533.2
(ii) Keep the debt level at an amount where the Company’s financial strength and credit quality is maintained in order to withstand
1,197.1
290.4
1,211.0
375.8
24.1
7.2
20.7
economic cycles;
11.6
24.7
15.1
$ 3,183.7
$ 2,817.3
$ 2,591.3
(iii) Provide the Company’s shareholders with an appropriate rate of return on their investment.
177.4
149.0
97.8
The Company manages its debt to equity. The Company manages its capital structure and makes corresponding adjustments based
on changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital
structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or
use cash to reduce debt.
$ 493.0
$ 551.9
$ 597.6
21.6
10.9
20.9
12.9
32.1
6.5
In view of this, the Company monitors its capital on the basis of the net debt to capital ratio. This ratio is calculated as net debt divided
by the sum of the net debt and total equity. Net debt is calculated as total debt, including the short-term portion (as presented in the
104.6
consolidated statement of financial position and including non-recourse debt) less cash and cash equivalents. Total equity comprises
136.0
of share capital, contributed surplus, accumulated other comprehensive (loss) income, retained earnings and non-controlling interests.
125.8
86.2
167.4
68.5
12.7
12.4
9.3
$ 883.4
6.0
$ 810.1
10.4
$ 776.8
8.2
600.9
148.0
574.0
161.6
The level of debt versus equity in the capital structure is monitored, and the ratios are as follows:
685.6
161.6
(amounts in millions)
114.2
186.0
Total debt
91.8
Less: cash and cash equivalents
12.9
Net debt
$ 2,141.5
Equity
62.8
187.6
81.4
129.3
64.5
13.4
13.2
15.1
$ 1,884.4
$ 1,772.9
March 31
2012
$ 821.6
287.3
$ 534.3
$ 1,042.2
Net debt: equity
34:66
March 31
2011
$ 660.2
276.4
$ 383.8
$ 932.9
29:71
April 1
2010
$ 669.4
312.9
$ 356.5
$ 818.4
30:70
$ 454.5
19.2
$ 440.7
17.1
$ 436.3
14.2
The Company has certain debt agreements which require the maintenance of a certain level of capital. As at March 31, 2012, the
(9.8)
Company is compliant with its financial covenants.
558.0
(9.8)
466.4
11.4
338.5
The accompanying notes form an integral part of these Consolidated Financial Statements.
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
$ 914.4
$ 800.4
18.5
$ 932.9
$ 2,817.3
18.0
$ 818.4
$ 2,591.3
134 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
NOTE 29 – FINANCIAL INSTRUMENTS
Consolidated Statement of Financial Position
Fair value of financial instruments
The fair value of a financial instrument is determined by reference to the available market information at the reporting date. When no
April 1
active market exists for a financial instrument, the Company determines the fair value of that instrument based on valuation
2010
(amounts in millions of Canadian dollars)
methodologies as discussed below. In determining assumptions required under a valuation model, the Company primarily uses
external, readily observable market data inputs. Assumptions or inputs that are not based on observable market data incorporate the
Assets
(Note 2)
Company’s best estimates of market participant assumptions, and are used when external data is not available. Counterparty credit
$ 312.9
Cash and cash equivalents
risk and the fair values of the Company’s own credit risk are taken into account in estimating the fair value of all financial assets and
238.2
financial liabilities, including derivatives.
205.5
Contracts in progress : assets
March 31
2012
(Note 2)
$ 276.4
ccounts receivable
296.8
230.5
$ 287.3
March 31
5
11
Notes
2011
308.4
245.8
6
accrued liabilities approximate their carrying values due to their short-term maturities;
126.8
Inventories
The following assumptions and valuation methodologies have been used to estimate the fair value of financial instruments:
24.2
Prepayments
(i) The fair value of cash and cash equivalents, restricted cash, accounts receivable, contracts in progress, accounts payable and
30.7
Income taxes recoverable
27.9
Derivative financial assets
(ii) The fair value of finance lease obligations are estimated using the discounted cash flow method;
Total current assets
$ 966.2
(iii) The fair value of long-term debt, long-term obligations and non-current receivables (including advances) are estimated based on
1,197.1
Property, plant and equipment
290.4
Intangible assets
(iv) The fair value of derivative instruments (including forward contracts, swap agreements and embedded derivatives with economic
Deferred tax assets
24.7
characteristics and risks that are not clearly and closely related to those of the host contract) are determined using valuation
techniques and are calculated as the present value of the estimated future cash flows using an appropriate interest rate yield
15.1
Derivative financial assets
curve and foreign exchange rate, adjusted for the Company’s and the counterparty credit risk. Assumptions are based on market
97.8
conditions prevailing at each reporting date. Derivative instruments reflect the estimated amounts that the Company would
$ 2,591.3
receive or pay to settle the contracts at the reporting date;
discounted cash flows using current interest rates for instruments with similar terms and remaining maturities;
1,211.0
375.8
1,293.7
533.2
153.1
47.7
124.3
43.5
Total assets
20.7
11.6
95.5
10.3
58.8
18.9
24.1
7.2
Other assets
$ 1,049.2
$ 1,148.1
$ 3,183.7
$ 2,817.3
17
29
177.4
149.0
7
8
29
9
(v) The fair value of available-for-sale investments, if any, which do not have readily available market value is estimated using a
Liabilities and equity
discounted cash flow model, which includes some assumptions that are not supportable by observable market prices or rates.
10
$ 597.6
$ 551.9
$ 493.0
ccounts payable and accrued liabilities
Provisions
21.6
The carrying values and fair values of financial instruments, by class, are as follows at March 31, 2012:
Income taxes payable
10.9
12
20.9
12.9
32.1
6.5
Contracts in progress : liabilities
(amounts in millions)
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Financial assets
Long-term debt
Cash and cash equivalents
Royalty obligations
Accounts receivable
Employee benefits obligations
Contracts in progress: assets
Deferred gains and other non-current liabilities
Other assets
Deferred tax liabilities
Derivative financial assets
Derivative financial liabilities
Total liabilities
Equity
Share capital
Contributed surplus
ccumulated other comprehensive (loss) income
Retained earnings
At
Available-
FVTPL
for-Sale
$ 287.3
-
-
9.8
3.5
(3)
$
-
-
-
(4)
1.3
-
11
13
29
Loans &
Receivables
12
13
29
$
15
16
17
29
-
(2)
295.6
245.8
(5)
59.8
-
$ 300.6
$
1.3
$ 601.2
18
Other
At
FVTPL
19
Financial
Liabilities
Equity attributable to equity holders of the Company
Financial liabilities
Accounts payable, accrued liabilities and provisions
Non-controlling interests
Total long-term debt
Total equity
Other long-term liabilities
Total liabilities and equity
Derivative financial liabilities
The accompanying notes form an integral part of these Consolidated Financial Statements.
$ 444.9
825.6
170.5
-
-
5.5
$ 1,441.0
-
-
5.5
$
$
(7)
(6)
(8)
(1) DDHR: Derivatives designated in a hedge relationship.
(2) Includes trade receivables, accrued receivables and certain other receivables.
(3) Represents restricted cash.
(4) Represents the Company's portfolio investments.
(5) Includes long-term receivables and advances.
(6) Includes trade accounts payable, accrued liabilities, interest payable and certain payroll-related liabilities.
(7) Excludes transaction costs.
(8) Includes long-term royalty obligations, long-term provisions and other long-term liabilities.
104.6
136.0
12.7
125.8
86.2
12.4
167.4
68.5
Fair Value
9.3
Carrying Value
$ 883.4
DDHR
6.0
(1)
$
685.6
-
161.6
-
114.2
-
186.0
-
91.8
14.0
12.9
$
14.0
$ 2,141.5
$ 810.1
Total
10.4
574.0
$ 287.3
161.6
295.6
62.8
245.8
187.6
70.9
64.5
17.5
13.4
$ 917.1
$ 1,884.4
$ 454.5
19.2
Carrying Value
$ 440.7
17.1
(9.8)
DDHR
558.0
(1)
$ 1,021.9
-
$
20.3
-
$ 1,042.2
-
$ 3,183.7
20.1
(9.8)
466.4
Total
$ 914.4
$ 444.9
18.5
825.6
$ 932.9
170.5
$ 2,817.3
25.6
$ 776.8
8.2
600.9
$ 287.3
148.0
295.6
81.4
245.8
129.3
72.0
13.2
17.5
15.1
$ 918.2
$ 1,772.9
Fair Value
$ 436.3
14.2
11.4
338.5
$ 800.4
$ 444.9
18.0
916.1
$ 818.4
170.5
$ 2,591.3
25.6
$
20.1
$ 1,466.6
$ 1,557.1
CAE Annual Report 2012 | 135
Consolidated Statement of Financial Position
The carrying values and fair values of financial instruments, by class, were as follows at March 31, 2011:
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
(amounts in millions of Canadian dollars)
Notes
(amounts in millions)
March 31
2012
March 31
2011
(Note 2)
$ 276.4
$ 287.3
296.8
230.5
Financial assets
Cash and cash equivalents
308.4
Accounts receivable
245.8
Contracts in progress: assets
153.1
Other assets
47.7
Derivative financial assets
124.3
43.5
58.8
18.9
95.5
10.3
April 1
2010
(Note 2)
$ 312.9
238.2
205.5
126.8
24.2
30.7
27.9
At
FVTPL
Available-
Loans &
for-Sale Receivables
(1)
DDHR
Total
Carrying Value
Fair Value
$ 276.4
-
-
10.6
(3)
8.2
$
-
-
-
(4)
1.8
-
$
-
283.7
(2)
230.5
44.2
(5)
-
$
-
-
-
-
22.3
$ 276.4
283.7
$ 276.4
283.7
230.5
56.6
30.5
230.5
59.1
30.5
$ 295.2
$
1.8
$ 558.4
$
22.3
$ 877.7
$ 880.2
$ 1,148.1
1,293.7
533.2
24.1
7.2
$ 1,049.2
$ 966.2
1,211.0
375.8
20.7
11.6
1,197.1
290.4
24.7
15.1
$ 3,183.7
97.8
149.0
$ 2,817.3
177.4
Financial liabilities
Accounts payable, accrued liabilities and provisions
Total long-term debt
Other long-term liabilities
$ 551.9
Derivative financial liabilities
$ 493.0
$ 2,591.3
$ 597.6
21.6
10.9
20.9
12.9
32.1
6.5
Carrying Value
Fair Value
Other
Financial
Liabilities
(1)
DDHR
Total
$ 506.0
662.8
(6)
(7)
(8)
170.1
-
$
-
-
-
19.3
$ 506.0
662.8
170.1
25.8
$ 506.0
726.0
170.1
25.8
$ 1,338.9
$
19.3
$ 1,364.7
$ 1,427.9
At
FVTPL
$
$
-
-
-
6.5
6.5
$ 883.4
6.0
167.4
68.5
125.8
86.2
9.3
12.4
12.7
104.6
(1) DDHR: Derivatives designated in a hedge relationship.
136.0
(2) Includes trade receivables, accrued receivables and certain other receivables.
(3) Represents restricted cash.
$ 810.1
(4) Represents the Company's portfolio investments.
10.4
(5) Includes long-term receivables and advances.
574.0
(6) Includes trade accounts payable, accrued liabilities, interest payable and certain payroll-related liabilities.
685.6
161.6
(7) Excludes transaction costs.
161.6
(8) Includes long-term royalty obligations, long-term provisions and other long-term liabilities.
114.2
186.0
$ 776.8
8.2
62.8
187.6
81.4
129.3
600.9
148.0
The Company did not elect to voluntarily designate any financial instruments at FVTPL; moreover, there have not been any changes
to the classification of the financial instruments since inception.
91.8
12.9
64.5
13.4
13.2
15.1
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
(9.8)
Fair value hierarchy
558.0
The following table presents the financial instruments, by class, which are recognized at fair value. The fair value hierarchy reflects
the significance of the inputs used in making the measurements and has the following levels:
$ 800.4
$ 914.4
$ 1,021.9
(9.8)
466.4
11.4
338.5
20.3
18.5
18.0
$ 1,042.2
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
$ 818.4
$ 932.9
The accompanying notes form an integral part of these Consolidated Financial Statements.
prices) or indirectly (i.e., derived from prices);
$ 3,183.7
$ 2,817.3
$ 2,591.3
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
136 | CAE Annual Report 2012
As part of its financing transactions, the Company, through its subsidiaries, has pledged certain financial assets including cash and
cash equivalents, accounts receivable, other assets and derivative assets. As at March 31, 2012, the aggregate carrying value of
these pledged financial assets amounted to $70.5 million (2011 – $74.6 million).
$ 454.5
19.2
$ 440.7
17.1
$ 436.3
14.2
$ 2,141.5
$ 1,884.4
$ 1,772.9
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Each type of fair value is categorized based on the lowest level input that is significant to the fair value measurement in its entirety.
Consolidated Statement of Financial Position
As at March 31
(amounts in millions)
(amounts in millions of Canadian dollars)
Assets
Financial assets
Cash and cash equivalents
At FVTPL
ccounts receivable
Forward foreign currency contracts (1)
Contracts in progress : assets
Embedded foreign currency derivatives (1)
Inventories
Equity swap agreements
Prepayments
Derivatives used for hedging
Income taxes recoverable
Derivative financial assets
Forward foreign currency contracts
Foreign currency swap agreements
Interest rate swap agreements
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Financial liabilities
Derivative financial assets
At FVTPL
Other assets
Forward foreign currency contracts (1)
Total assets
Embedded foreign currency derivatives (1)
Equity swap agreements
Liabilities and equity
Derivatives used for hedging
ccounts payable and accrued liabilities
Forward foreign currency contracts
Foreign currency swap agreements
Interest rate swap agreements
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Level 2
Level 3
Notes
2012
Total
$
$
$
$
3.2
0.3
-
9.0
4.8
0.2
$
17.5
$
1.2
3.3
1.0
6.8
-
10.6
$
22.9
$
-
-
-
-
-
-
-
-
-
-
-
0.3
2.4
2.7
5
$
11
6
29
7
$
8
17
29
9
$
10
12
11
$
13
3.2
0.3
-
9.0
4.8
0.2
17.5
1.2
3.3
1.0
6.8
0.3
13.0
25.6
29
Derivative financial liabilities
(1) Does not include derivatives designated in a hedging relationship, which are presented separately.
Total current liabilities
Provisions
Changes in Level 3 financial instruments are as follows:
Long-term debt
Royalty obligations
Years ended March 31
Employee benefits obligations
(amounts in millions)
Deferred gains and other non-current liabilities
Balance, beginning of year
Deferred tax liabilities
Total realized and unrealized gains (losses):
Derivative financial liabilities
Included in income
13
29
15
16
17
29
12
March 31
2012
Level 2
$ 287.3
$
308.4
6.2
245.8
0.6
153.1
1.4
47.7
95.5
16.0
10.3
5.0
$ 1,148.1
1.3
1,293.7
30.5
533.2
$
24.1
7.2
177.4
$
0.9
$ 3,183.7
5.6
-
$ 597.6
8.0
21.6
-
10.9
7.3
104.6
21.8
136.0
$
12.7
$ 883.4
6.0
685.6
161.6
114.2
186.0
91.8
12.9
March 31
2011
Level 3
(Note 2)
$ 276.4
$
296.8
-
230.5
-
124.3
-
43.5
58.8
-
18.9
-
$ 1,049.2
-
1,211.0
-
375.8
$
20.7
11.6
149.0
$
-
$ 2,817.3
-
-
$ 551.9
-
20.9
2.4
12.9
1.6
125.8
4.0
86.2
$
12.4
$ 810.1
10.4
574.0
161.6
April 1
2011
2010
Total
(Note 2)
$ 312.9
$
238.2
6.2
205.5
0.6
126.8
1.4
24.2
30.7
16.0
27.9
5.0
$ 966.2
1.3
1,197.1
30.5
290.4
$
24.7
15.1
97.8
$
0.9
$ 2,591.3
5.6
-
$ 493.0
8.0
32.1
2.4
6.5
8.9
167.4
25.8
68.5
$
9.3
$ 776.8
8.2
600.9
148.0
$
62.8
2012
187.6
(4.0)
64.5
13.4
(0.8)
$ 1,884.4
2.1
$
81.4
2011
129.3
(4.7)
13.2
15.1
(1.2)
$ 1,772.9
1.9
Included in other comprehensive income
ccumulated other comprehensive (loss) income
Total liabilities
Equity
Balance, end of year
Share capital
Contributed surplus
Level 3 input sensitivity analysis
11.4
For the most significant item valued using techniques without observable inputs (INR/USD cross currency swap), the determination of
338.5
Retained earnings
the interest rate and liquidity premium has the most significant impact on the valuation. The impact of assuming an increase or
$ 800.4
Equity attributable to equity holders of the Company
decrease of 1% in this input would result in an increase of fair value of $0.6 million (2011 – $0.8 million) or a decrease of fair value of
18.0
Non-controlling interests
$0.6 million (2011 – $0.7 million) respectively.
Total equity
Total liabilities and equity
$
(4.0)
$ 436.3
14.2
$
(2.7)
$ 440.7
17.1
$ 454.5
19.2
(9.8)
558.0
(9.8)
466.4
$ 932.9
$ 914.4
$ 818.4
$ 1,021.9
$ 2,817.3
$ 1,042.2
$ 3,183.7
$ 2,141.5
$ 2,591.3
20.3
18.5
19
18
The accompanying notes form an integral part of these Consolidated Financial Statements.
CAE Annual Report 2012 | 137
Consolidated Statement of Financial Position
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
2011
(Note 2)
$ 276.4
2010
(Note 2)
$ 312.9
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
NOTE 30 – FINANCIAL RISK MANAGEMENT
Due to the nature of the activities that the Company carries out and as a result of holding financial instruments, the Company is
exposed to credit risk, liquidity risk and market risk, including foreign currency risk and interest rate risk. The Company’s exposure to
credit risk, liquidity risk and market risk is managed within risk management parameters approved by the board of directors. These
risk management parameters remain unchanged since the previous period, unless otherwise indicated.
March 31
April 1
March 31
2012
$ 287.3
296.8
230.5
Derivative instruments are utilized by the Company to manage market risk against the volatility in foreign exchange rates, interest
rates and share-based payments in order to minimize their impact on the Company’s results and financial position.
308.4
Embedded derivatives are recorded at fair value separately from the host contract when their economic characteristics and risks are
245.8
not clearly and closely related to those of the host contract. The Company may enter into freestanding derivative instruments which
153.1
are not eligible for hedge accounting, to offset the foreign exchange exposure of embedded foreign currency derivatives. In such
47.7
circumstances, both derivatives are carried at fair value at each statement of financial position date with the change in fair value
30.7
58.8
recorded in consolidated net income.
27.9
18.9
126.8
24.2
124.3
43.5
238.2
205.5
95.5
10.3
$ 1,148.1
$ 1,049.2
$ 966.2
The Company’s policy is not to utilize any derivative financial instruments for trading or speculative purposes. The Company may
choose to designate derivative instruments, either freestanding or embedded, as hedging items. This process consists of matching
1,293.7
derivative hedging instruments to specific assets and liabilities or to specific firm commitments or forecasted transactions. To some
533.2
extent, the Company uses non-derivative financial liabilities to hedge foreign currency exchange rate risk exposures.
1,211.0
375.8
1,197.1
290.4
24.1
7.2
20.7
11.6
24.7
15.1
$ 3,183.7
149.0
Credit risk
177.4
Credit risk is defined as the Company’s exposure to a financial loss if a debtor fails to meet its obligations in accordance with the
terms and conditions of its arrangements with the Company. The Company is exposed to credit risk on its accounts receivable and
certain other assets through its normal commercial activities. The Company is also exposed to credit risk through its normal treasury
activities on its cash and cash equivalents and derivative financial assets.
$ 2,817.3
$ 2,591.3
97.8
$ 597.6
$ 551.9
$ 493.0
20.9
12.9
21.6
10.9
Credit risks arising from the Company’s normal commercial activities are managed in regards to customer credit risk. An allowance for
doubtful accounts is established when there is a reasonable expectation that the Company will not be able to collect all amounts due
according to the original terms of the receivables (See Note 5). When a trade receivable is uncollectible, it is written-off against the
104.6
allowance account for trade receivables. Subsequent recoveries of amounts previously written-off are recognized in income.
136.0
125.8
86.2
167.4
68.5
32.1
6.5
12.7
12.4
9.3
$ 883.4
6.0
$ 810.1
10.4
$ 776.8
8.2
The Company’s customers are primarily established companies with publicly available credit ratings and government agencies, which
facilitates risk monitoring. In addition, the Company typically receives substantial non-refundable advance payments for construction
contracts. The Company closely monitors its exposure to major airlines in order to mitigate its risk to the extent possible. Furthermore,
the Company’s trade accounts receivable are not concentrated with specific customers but are held from a wide range of commercial
685.6
and government organizations. As well, the Company’s credit exposure is further reduced by the sale of certain of its accounts
161.6
receivable and contracts in progress assets to third-party financial institutions for cash consideration on a non-recourse basis (current
114.2
financial assets program). The Company does not hold any collateral as security. The credit risk on cash and cash equivalents is
186.0
mitigated by the fact that they are in place with a diverse group of major Japanese, North American and European financial
institutions.
574.0
161.6
62.8
187.6
600.9
148.0
81.4
129.3
91.8
12.9
64.5
13.4
13.2
15.1
$ 2,141.5
$ 454.5
19.2
$ 1,772.9
$ 1,884.4
$ 440.7
17.1
The Company is exposed to credit risk in the event of non-performance by counterparties to its derivative financial instruments. The
Company uses several measures to minimize this exposure. First, the Company enters into contracts with counterparties that are of
high credit quality (mainly A-rated or better). The Company signed International Swaps & Derivatives Association, Inc. (ISDA) Master
Agreements with the majority of counterparties with whom it trades derivative financial instruments. These agreements make it
possible to apply full netting when a contracting party defaults on the agreement, for each of the transactions covered by the
(9.8)
agreement and in force at the time of default. Also, collateral or other security to support derivative financial instruments subject to
558.0
credit risk can be requested by the Company or its counterparties (or both parties, if need be) when the net balance of gains and
losses on each transaction exceeds a threshold defined in the ISDA Master Agreement. Finally, the Company monitors the credit
standing of counterparties on a regular basis to help minimize credit risk exposure.
$ 436.3
14.2
(9.8)
466.4
11.4
338.5
$ 800.4
$ 914.4
$ 1,021.9
18.5
18.0
20.3
$ 1,042.2
$ 932.9
$ 818.4
The carrying amounts presented in Note 5 and Note 29 represent the maximum exposure to credit risk for each respective financial
asset as at the relevant dates.
$ 2,817.3
$ 2,591.3
$ 3,183.7
Liquidity risk
Liquidity risk is defined as the potential that the Company cannot meet its cash obligations as they become due.
The Company manages this risk by establishing cash forecasts, as well as long-term operating and strategic plans. The management
of consolidated liquidity requires a regular monitoring of expected cash inflows and outflows which is achieved through a forecast of
the Company’s consolidated liquidity position, for adequacy and efficient use of cash resources. Liquidity adequacy is assessed in
view of seasonal needs, growth requirements and capital expenditures, and the maturity profile of indebtedness, including off-balance
sheet obligations. The Company manages its liquidity risk to maintain sufficient liquid financial resources to fund its operations and
meet its commitments and obligations. In managing its liquidity risk, the Company has access to a revolving unsecured credit facility
of US$450.0 million, with an option, subject to the lender’s consent, to increase to a total amount of up to US$650.0 million. As well,
the Company has agreements to sell certain of its accounts receivable and contracts in progress assets for an amount of up to
$150.0 million (current financial assets program). As at March 31, 2012, $81.5 million (2011 – $54.4 million) and $54.2 million (2011 –
$37.4 million) of specific accounts receivable and contracts in progress assets respectively were sold to financial institutions pursuant
to these agreements. Proceeds were net of $2.4 million in fees (2011 – $1.0 million). The Company also regularly monitors any
138 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
financing opportunities to optimize its capital structure and maintain appropriate financial flexibility.
Consolidated Statement of Financial Position
The following tables present a maturity analysis to the contractual maturity date, of the Company’s financial liabilities based on
expected cash flows. Cash flows from derivatives presented either as derivative assets or liabilities have been included, as the
April 1
Company manages its derivative contracts on a gross basis. The amounts are the contractual undiscounted cash flows. All amounts
contractually denominated in foreign currency, excluding equity swaps, are presented in Canadian dollar equivalent amounts using
2010
(amounts in millions of Canadian dollars)
the period-end spot rate except as otherwise stated:
Assets
(Note 2)
$ 312.9
Cash and cash equivalents
March 31
2012
(Note 2)
$ 276.4
March 31
Notes
2011
$ 287.3
Carrying Contractual
Amount Cash Flows
0-12
Months
5
13-24
11
Months
6
25-36
Months
308.4
245.8
37-48
Months
153.1
47.7
ccounts receivable
As at March 31, 2012
Contracts in progress : assets
(amounts in millions)
Inventories
Non-derivative financial
Prepayments
liabilities
Income taxes recoverable
Accounts payable, accrued
Derivative financial assets
liabilities and provisions (1)
Total current assets
Total long-term debt (2) (6)
Property, plant and equipment
Other long-term liabilities (3)
Intangible assets
Deferred tax assets
Derivative financial assets
Derivative financial
instruments
Other assets
Forward foreign
Total assets
currency contracts (4)
$ 444.9
825.6
$ 444.9
1,230.7
$ 444.9
180.4
170.5
377.0
13.7
$ 1,441.0
$ 2,052.6
$ 639.0
29
$
-
115.6
7
15.9
8
$ 131.5
17
29
9
$
(4.2)
$
-
89.5
10.6
$ 100.1
95.5
10.3
$
$ 1,148.1
1,293.7
533.2
-
76.2
15.7
91.9
$
24.1
7.2
177.4
$ 3,183.7
23.8
(22.9)
$
14.7
(14.4)
$ 597.6
21.6
10.9
296.8
49-60
230.5
Months
124.3
43.5
58.8
18.9
$
$ 1,049.2
-
135.4
13.1
1,211.0
375.8
$ 148.5
20.7
11.6
149.0
238.2
205.5
Thereafter
126.8
24.2
30.7
27.9
-
$
$ 966.2
633.6
1,197.1
308.0
290.4
$ 941.6
24.7
15.1
97.8
$ 2,817.3
$ 2,591.3
$
13.4
(13.3)
$ 551.9
20.9
12.9
125.8
86.2
9.7
(9.1)
$
3.0
(2.9)
$ 493.0
32.1
6.5
16.0
167.4
(14.9)
68.5
Derivative financial liabilities
$
4.1
$
6.5
$
$
29
2.4
$
3.1
1.6
$
12.4
0.7
$
9.3
1.2
Outflow
Liabilities and equity
Inflow
ccounts payable and accrued liabilities
Swap derivatives on total
Provisions
long-term debt (5)
Income taxes payable
Outflow
Contracts in progress : liabilities
Inflow
Current portion of long-term debt
8.3
67.1
(56.4)
$ 744.2
(748.4)
$ 593.4
(598.3)
$
$
95.9
(96.6)
10
12
9.2
(6.8)
(2.5)
11
13
10.5
(7.4)
11.0
(8.8)
104.6
136.0
10.7
(9.4)
$
12.7
$
$ 883.4
6.0
$ 1,445.1
$ 103.2
$ 636.5
$ 2,059.1
$ 133.9
12
Total current liabilities
Provisions
(1) Includes trade accounts payable, accrued liabilities, interest payable and certain payroll-related liabilities.
Long-term debt
(2) Contractual cash flows include contractual interest and principal payments related to debt obligations.
(3) Includes long-term royalty obligations, long-term provisions and other long-term liabilities.
Royalty obligations
(4) Includes forward foreign currency contracts, but excludes all embedded derivatives, either presented as derivative liabilities or derivative assets.
Employee benefits obligations
Outflows and inflows are presented in CAD equivalent using the contractual forward foreign currency rate.
Deferred gains and other non-current liabilities
(5) Includes interest rate swap and foreign currency swap contracts either designated as cash flow hedges or as fair value hedges of long-term debt
Deferred tax liabilities
either presented as derivative liabilities or derivative assets.
(6) Excludes transaction costs.
Derivative financial liabilities
Total liabilities
Equity
Share capital
Contributed surplus
$ 810.1
$ 149.2
10.4
$ 440.7
17.1
685.6
161.6
114.2
186.0
62.8
187.6
574.0
161.6
91.8
12.9
64.5
13.4
13
29
$ 1,884.4
$ 2,141.5
15
16
17
29
93.5
$ 454.5
19.2
18
$ 776.8
$ 942.8
8.2
600.9
148.0
81.4
129.3
13.2
15.1
$ 1,772.9
$ 436.3
14.2
11.4
338.5
ccumulated other comprehensive (loss) income
19
Retained earnings
Equity attributable to equity holders of the Company
Non-controlling interests
Total equity
Total liabilities and equity
(9.8)
558.0
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
The accompanying notes form an integral part of these Consolidated Financial Statements.
(9.8)
466.4
$ 914.4
$ 800.4
18.5
$ 932.9
$ 2,817.3
18.0
$ 818.4
$ 2,591.3
CAE Annual Report 2012 | 139
Consolidated Statement of Financial Position
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Carrying Contractual
Amount Cash Flows
0-12
Months
13-24
Months
25-36
Months
37-48
Months
49-60
Months
Thereafter
April 1
2010
$ 506.0
662.8
$ 506.0
947.6
$ 506.0
146.5
170.1
385.7
10.2
$
-
118.0
13.6
$
-
102.1
15.2
$
-
71.2
10.3
$
-
61.5
18.9
$
-
448.3
317.5
$ 1,839.3
$ 662.7
$ 131.6
$ 117.3
$
81.5
$
80.4
$ 765.8
March 31
As at March 31, 2011
(amounts in millions)
March 31
Non-derivative financial
liabilities
2012
Accounts payable, accrued
liabilities and provisions (1)
Total long-term debt (2) (6)
308.4
Other long-term liabilities (3)
245.8
(Note 2)
$ 276.4
296.8
230.5
$ 287.3
2011
(Note 2)
$ 312.9
238.2
205.5
$ 1,148.1
$ 1,049.2
124.3
43.5
58.8
18.9
95.5
10.3
153.1
47.7
Derivative financial
instruments
Forward foreign
currency contracts (4)
1,293.7
533.2
Swap derivatives on total
20.7
long-term debt (5)
11.6
Outflow
149.0
177.4
Inflow
Outflow
Inflow
1,211.0
375.8
24.1
7.2
$ 2,817.3
$ 3,183.7
$ 1,338.9
126.8
24.2
30.7
27.9
$ 966.2
$ (13.3)
1,197.1
290.4
24.7
15.1
97.8
$ 2,591.3
5.0
$ 632.1
(645.4)
$ 447.5
(461.0)
$ 122.7
(123.9)
$
35.7
(36.0)
$
13.2
(12.2)
81.6
(69.8)
10.6
(7.1)
10.3
(7.9)
11.2
(8.8)
$
(8.3)
$
(1.5)
$ (10.0)
$
1.2
$
2.1
$ 1,330.6
$ 1,837.8
$ 652.7
$ 132.8
$ 119.4
11.5
(10.2)
2.3
83.8
$
$
$
$
$
9.8
(9.3)
$
3.2
(3.0)
11.0
(10.3)
27.0
(25.5)
1.2
$
1.7
81.6
$ 767.5
$ 597.6
$ 551.9
$ 493.0
32.1
6.5
20.9
12.9
21.6
10.9
(1) Includes trade accounts payable, accrued liabilities, interest payable and certain payroll-related liabilities.
(2) Contractual cash flows include contractual interest and principal payments related to debt obligations.
(3) Includes long-term royalty obligations, long-term provision and other long-term liabilities.
(4) Includes forward foreign currency contracts, but excludes all embedded derivatives, either presented as derivative liabilities or derivative assets.
104.6
Outflows and inflows are presented in CAD equivalent using the contractual forward foreign currency rate.
136.0
(5) Includes interest rate swap and foreign currency swap contracts either designated as cash flow hedges or as fair value hedges of long-term debt
either presented as derivative liabilities or derivative assets.
(6) Excludes transaction costs.
125.8
86.2
167.4
68.5
12.7
12.4
9.3
$ 883.4
6.0
$ 810.1
10.4
$ 776.8
8.2
600.9
148.0
574.0
161.6
685.6
Market risk
161.6
Market risk is defined as the Company’s exposure to a gain or a loss in the value of its financial instruments as a result of changes in
114.2
market prices, whether those changes are caused by factors specific to the individual financial instruments or its issuer, or factors
186.0
affecting all similar financial instruments traded in the market. The Company is mainly exposed to foreign currency risk and interest
rate risk.
91.8
12.9
62.8
187.6
81.4
129.3
13.2
15.1
64.5
13.4
$ 2,141.5
$ 1,772.9
$ 1,884.4
Foreign currency risk
Foreign currency risk is defined as the Company’s exposure to a gain or a loss in the value of its financial instruments as a result of
fluctuations in foreign exchange rates. The Company is exposed to foreign currency rate variability primarily in relation to certain sale
commitments, expected purchase transactions and debt denominated in a foreign currency. As well, most of its foreign operations’
functional currencies are other than the Canadian dollar (in particular the U.S. dollar [USD], euro [€] and British pounds [GBP or £]).
(9.8)
The Company’s related exposure to the foreign currency rates is primarily through cash and cash equivalents and other working
capital elements of these foreign operations.
558.0
$ 440.7
17.1
$ 436.3
14.2
(9.8)
466.4
11.4
338.5
$ 454.5
19.2
$ 1,021.9
$ 914.4
$ 800.4
$ 1,042.2
$ 932.9
$ 818.4
The Company also mitigates foreign currency risks by having its foreign operations transact in their functional currency for material
procurement, sale contracts and financing activities.
20.3
18.5
18.0
$ 2,817.3
$ 3,183.7
The Company uses forward foreign currency contracts and foreign currency swap agreements to manage the Company’s exposure
from transactions in foreign currencies and to synthetically modify the currency of exposure of certain financial position items. These
transactions include forecasted transactions and firm commitments denominated in foreign currencies.
$ 2,591.3
As at March 31, 2012, the Company has forward foreign currency contracts totalling $735.4 million (buy contracts for $113.3 million
and sell contracts for $622.1 million) (2011 – $621.4 million, buy contracts for $133.0 million and sell contracts for $488.4 million),
mainly to reduce the risk of variability of future cash flows resulting from forecasted transactions and firm sales commitments.
140 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
5
11
$ 421.1
70.7
The consolidated forward foreign currency contracts outstanding are as follows:
Consolidated Statement of Financial Position
As at March 31
(amounts in millions, except average rate)
(amounts in millions of Canadian dollars)
Currencies (sold/bought)
Assets
Cash and cash equivalents
USD/CDN
Notes
Notional
Amount
(1)
ccounts receivable
Less than 1 year
6
9
10
29
2.7
0.8
0.3
6.7
40.2
7
8
17
29
16.1
0.1
9.3
13.2
Less than 1 year
ccounts payable and accrued liabilities
Contracts in progress : assets
Between 1 and 3 years
Inventories
Between 3 and 5 years
Prepayments
CDN/EUR
Income taxes recoverable
Less than 1 year
Derivative financial assets
Between 1 and 3 years
EUR/CDN
Total current assets
Less than 1 year
Property, plant and equipment
Between 1 and 3 years
Intangible assets
Between 3 and 5 years
Deferred tax assets
Derivative financial assets
Over 5 years
Other assets
EUR/USD
Total assets
EUR/AUD
Less than 1 year
Liabilities and equity
GBP/CDN
Less than 1 year
Provisions
Between 1 and 3 years
Income taxes payable
Between 3 and 5 years
Contracts in progress : liabilities
Over 5 years
Current portion of long-term debt
AUD/CDN
Derivative financial liabilities
Less than 1 year
Total current liabilities
CDN/USD
Provisions
Long-term debt
Between 1 and 3 years
Royalty obligations
Between 3 and 5 years
Employee benefits obligations
Over 5 years
Deferred gains and other non-current liabilities
SAR/CDN
Deferred tax liabilities
Less than 1 year
Derivative financial liabilities
NOK/USD
Total liabilities
Equity
USD/EUR
Share capital
Less than 1 year
Contributed surplus
SGD/CDN
Between 1 and 3 years
Retained earnings
Total
Equity attributable to equity holders of the Company
Effect of master netting agreement
Non-controlling interests
Outstanding amount
Total equity
Total liabilities and equity
(1) Exchange rates as at the end of the respective fiscal years were used to translate amounts in foreign currencies.
ccumulated other comprehensive (loss) income
$ 735.4
173.1
Less than 1 year
Less than 1 year
17.6
4.2
28.5
16.8
2.8
0.2
13
29
11
13
$ 908.5
15
16
17
29
70.6
1.6
7.2
4.7
12
29
19
12
18
-
-
-
March 31
2012
2012
Average
Rate
$ 287.3
308.4
0.98
245.8
0.98
153.1
0.99
47.7
95.5
1.34
10.3
1.37
$ 1,148.1
0.74
1,293.7
0.73
533.2
0.72
24.1
7.2
0.73
177.4
0.73
$ 3,183.7
0.74
$ 597.6
0.62
21.6
0.63
10.9
0.62
104.6
0.61
136.0
12.7
-
$ 883.4
6.0
1.03
685.6
1.13
161.6
1.08
114.2
-
186.0
91.8
-
12.9
$ 2,141.5
5.77
$ 454.5
1.37
19.2
(9.8)
1.27
558.0
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
March 31
2011
Notional
Amount
(Note 2)
$ 276.4
(1)
296.8
$ 233.4
230.5
74.3
124.3
3.1
43.5
58.8
32.7
18.9
-
$ 1,049.2
73.6
1,211.0
19.7
375.8
5.5
20.7
11.6
2.7
149.0
-
$ 2,817.3
-
$ 551.9
48.2
20.9
11.1
12.9
-
125.8
-
86.2
12.4
16.6
$ 810.1
10.4
33.8
574.0
49.0
161.6
9.6
62.8
3.2
187.6
64.5
0.2
13.4
$ 1,884.4
4.7
$ 440.7
-
17.1
(9.8)
-
466.4
$ 621.4
$ 914.4
112.0
18.5
$ 733.4
$ 932.9
$ 2,817.3
2011
April 1
2010
Average
Rate
(Note 2)
$ 312.9
238.2
0.98
205.5
0.95
126.8
0.94
24.2
30.7
1.37
27.9
-
$ 966.2
0.73
1,197.1
0.72
290.4
0.74
24.7
15.1
0.73
97.8
-
$ 2,591.3
-
$ 493.0
0.59
32.1
0.61
6.5
-
167.4
-
68.5
9.3
1.02
$ 776.8
8.2
1.02
600.9
1.06
148.0
1.13
81.4
1.08
129.3
13.2
3.84
15.1
$ 1,772.9
5.70
$ 436.3
-
14.2
11.4
-
338.5
$ 800.4
18.0
$ 818.4
$ 2,591.3
The accompanying notes form an integral part of these Consolidated Financial Statements.
The Company has entered into foreign currency swap agreements related to its senior collateralized financing, obtained in June 2007,
to convert a portion of the USD-denominated debt into GBP to finance its civil aviation training centre in the United Kingdom. The
Company designated two USD to GBP foreign currency swap agreements as cash flow hedges with outstanding notional amounts of
$2.5 million (£1.5 million) (2011 – $3.2 million [£2.1 million]) and $13.6 million (£8.5 million) (2011 – $13.2 million [£8.5 million]),
amortized in accordance with the repayment schedule of the debt until June 2014 and June 2018 respectively.
Also, in a previous fiscal year, the Company entered into a cross currency swap agreement in connection with a senior secured
non-recourse financing obtained to finance a military aviation training centre in India. This cross currency swap converts a
USD-denominated floating rate debt into an Indian rupee (INR)-denominated fixed rate debt. This swap is designated as a cash flow
hedge with notional amounts of US$21.1 million (INR 1,092.5 million) [2011 – US$21.1 million (INR 1,092.5 million)] corresponding to
the underlying loan until March 2020.
The Company’s foreign currency hedging programs are typically unaffected by changes in market conditions, as related derivative
financial instruments are generally held-to-maturity, consistent with the objective to fix currency rates on the hedged item.
CAE Annual Report 2012 | 141
Consolidated Statement of Financial Position
In fiscal 2012, net unrealized losses on the measurement of derivatives, before income taxes, of $8.7 million (2011 – $9.1 million gains)
were recognized directly in equity. Net gains/losses were reclassified from equity to be included into income or to the related non-financial
asset or liabilities as follows:
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
Years ended March 31
March 31
March 31
2012
2011
April 1
2010
$ 287.3
238.2
205.5
296.8
230.5
(amounts in millions)
(Note 2)
(Note 2)
Amount reclassified from OCI to income:
$ 312.9
$ 276.4
Revenue
308.4
Cost of sales
Finance expense – net
245.8
124.3
153.1
Total amount reclassified from OCI to income
43.5
47.7
Amount reclassified from OCI to the related non-financial asset or liability
Contracts in progress: assets
Property, plant and equipment
Total amount reclassified from OCI to the related non-financial asset or liability
1,293.7
Total amount reclassified from OCI
533.2
1,211.0
375.8
1,197.1
290.4
126.8
24.2
95.5
10.3
30.7
27.9
58.8
18.9
$ 966.2
$ 1,049.2
$ 1,148.1
2012
2011
$
$
$
$
$
6.4
0.1
(1.1)
5.4
(0.6)
(0.1)
(0.7)
4.7
$
16.5
(0.7)
(6.3)
9.5
1.8
(1.1)
0.7
10.2
$
$
$
$
24.1
7.2
20.7
11.6
24.7
15.1
During fiscal 2012, hedge accounting was discontinued for certain forward foreign currency contracts when it became probable that the
original forecasted transactions would not occur by the end of the originally specified period. As a result, a loss of $0.2 million
149.0
177.4
(2011 – nil) was recorded in income.
$ 2,817.3
$ 2,591.3
97.8
$ 3,183.7
$ 597.6
Also, a net gain of $0.4 million (2011 – net loss of $0.2 million) representing the ineffective portion of the change in fair value of the
cash flow hedges and the component of the hedging item’s gain or loss excluded from the assessment of effectiveness, was
$ 551.9
recognized in income.
20.9
12.9
The estimated net amount before tax of existing gains reported in accumulated other comprehensive income that is expected to be
recognized during the next 12 months is $5.5 million. Future fluctuation in market rate (foreign exchange rate and/or interest rate) will
104.6
impact the amount expected to be recognized.
136.0
125.8
86.2
167.4
68.5
21.6
10.9
32.1
6.5
$ 493.0
12.7
12.4
9.3
$ 883.4
6.0
$ 810.1
10.4
Foreign currency risk sensitivity analysis
The following table presents the Company’s exposure to foreign exchange risk of financial instruments and the pre-tax effects on net
income and OCI as a result of a reasonably possible strengthening of 5% in the relevant foreign currency against the Canadian dollar
as at March 31. This analysis assumes all other variables remain constant.
685.6
161.6
$ 776.8
8.2
574.0
161.6
600.9
148.0
USD
Net
Income
$
$
(0.2)
(2.2)
OCI
$ (35.5)
$ (16.9)
€
Net
Income
$
$
(1.0)
(2.2)
OCI
(2.0)
(3.7)
$
$
GBP
Net
Income
$
$
0.2
(0.5)
OCI
(1.9)
(2.4)
$
$
114.2
(amounts in millions)
186.0
62.8
187.6
64.5
13.4
81.4
129.3
13.2
15.1
$ 1,884.4
$ 1,772.9
91.8
12.9
2012
$ 2,141.5
2011
$ 454.5
19.2
$ 440.7
17.1
$ 436.3
14.2
$ 1,021.9
11.4
338.5
(9.8)
466.4
A possible weakening of 5% in the relevant foreign currency against the Canadian dollar would have an opposite impact on pre-tax
income and OCI.
$ 914.4
$ 800.4
(9.8)
558.0
Interest rate risks
Interest rate risk is defined as the Company’s exposure to a gain or a loss to the value of its financial instruments as a result of
fluctuations in interest rates. The Company bears some interest rate fluctuation risk on its floating rate long-term debt and some fair
value risk on its fixed interest long-term debt. The Company mainly manages interest rate risk by fixing project-specific floating rate
debt in order to reduce cash flow variability. The Company also has a floating rate debt through an unhedged bank borrowing, a
specific fair value hedge and other asset-specific floating rate debt. A mix of fixed and floating interest rate debt is sought to reduce
the net impact of fluctuating interest rates. Derivative financial instruments used to synthetically convert interest rate exposures are
mainly interest rate swap agreements.
$ 818.4
$ 932.9
$ 2,817.3
$ 2,591.3
20.3
18.5
18.0
$ 1,042.2
$ 3,183.7
As at March 31, 2012, the Company has entered into nine interest rate swap agreements with eight different financial institutions to
mitigate these risks for a total notional value of $146.0 million (2011 – $160.0 million). After considering these swap agreements, as at
March 31, 2012, 77% (2011 – 74%) of the long-term debt bears fixed interest rates.
142 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
The Company’s interest rate hedging programs are typically unaffected by changes in market conditions, as related derivative
Consolidated Statement of Financial Position
financial instruments are generally held-to-maturity to establish asset and liability management matching, consistent with the objective
to reduce risks arising from interest rate movements. As a result, the changes in variable interest rates do not have a significant
impact on net income and OCI.
March 31
2012
March 31
April 1
2010
(amounts in millions of Canadian dollars)
Interest rate risk sensitivity analysis
In 2012 and 2011, a 1% increase/decrease in interest rates would not have a significant impact on the Company’s net income and
Assets
(Note 2)
OCI.
$ 312.9
Cash and cash equivalents
(Note 2)
$ 276.4
Notes
2011
$ 287.3
5
11
ccounts receivable
238.2
Share-based payments cost
205.5
Contracts in progress : assets
The Company has entered into equity swap agreements with a major Canadian financial institution to reduce its cash and income
126.8
Inventories
exposure to fluctuations in its share price relating to the DSU and LTI-DSU programs. Pursuant to the agreement, the Company
24.2
Prepayments
receives the economic benefit of dividends and share price appreciation while providing payments to the financial institution for the
30.7
Income taxes recoverable
institution’s cost of funds and any share price depreciation. The net effect of the equity swaps partly offset movements in the
Company’s share price impacting the cost of the DSU and LTI-DSU programs and is reset monthly. As at March 31, 2012, the equity
27.9
Derivative financial assets
swap agreements covered 2,500,000 common shares (2011 - 2,755,000) of the Company.
Total current assets
$ 966.2
1,197.1
Property, plant and equipment
Hedge of net investments in foreign operations
290.4
Intangible assets
As at March 31, 2012, the Company has designated a portion of its senior notes totalling US$192.8 million (2011 - US$105.0 million)
24.7
Deferred tax assets
and a portion of the sale lease back obligation totalling US$19.7 million (2011 - nil) as a hedge of net investments in foreign
operations. Gains or losses on the translation of the designated portion of its senior notes are recognized in OCI to offset any foreign
15.1
Derivative financial assets
exchange gains or losses on translation of the financial statements of foreign operations.
97.8
Other assets
1,211.0
375.8
1,293.7
533.2
308.4
245.8
296.8
230.5
124.3
43.5
153.1
47.7
20.7
11.6
58.8
18.9
95.5
10.3
24.1
7.2
$ 1,049.2
$ 1,148.1
17
29
149.0
7
8
29
6
9
177.4
$ 3,183.7
Total assets
$ 2,591.3
The Company determined that there is no concentration of risks arising from financial instruments and estimated that the information
disclosed above is representative of its exposure to risk during the period.
Liabilities and equity
Letters of credit and guarantees
$ 493.0
ccounts payable and accrued liabilities
As at March 31, 2012, the Company had outstanding letters of credit and performance guarantees in the amount of $127.7 million
32.1
Provisions
(2011 - $153.7 million) issued in the normal course of business. These guarantees are issued mainly under the Revolving Term Credit
6.5
Income taxes payable
Facility as well as the Performance Securities Guarantee (PSG) account provided by Export Development Corporation (EDC) and
167.4
Contracts in progress : liabilities
under other standby facilities available to the Company through various financial institutions.
68.5
Current portion of long-term debt
The advance payment guarantees are related to progress/milestone payments made by the Company’s customers and are reduced
9.3
Derivative financial liabilities
or eliminated upon delivery of the product. The contract performance guarantees are linked to the completion of the intended product
Total current liabilities
$ 776.8
or service rendered by the Company and to the customer’s requirements. It represents 10% to 20% of the overall contract amount.
8.2
Provisions
The customer releases the Company from these guarantees at the signing of a certificate of completion. The letter of credit for the
lease obligation provides credit support for the benefit of the owner participant in the September 30, 2003 sale and leaseback
600.9
Long-term debt
transaction and varies according to the payment schedule of the lease agreement.
148.0
Royalty obligations
$ 810.1
10.4
$ 883.4
6.0
125.8
86.2
104.6
136.0
574.0
161.6
20.9
12.9
21.6
10.9
11
13
13
29
$ 597.6
$ 551.9
$ 2,817.3
12.7
12.4
12
10
29
12
685.6
161.6
Employee benefits obligations
Deferred gains and other non-current liabilities
As at March 31
Deferred tax liabilities
(amounts in millions)
Derivative financial liabilities
Advance payment
Total liabilities
Contract performance
Equity
Lease obligation
Share capital
Simulator deployment obligation
Contributed surplus
Other
ccumulated other comprehensive (loss) income
Retained earnings
15
16
17
29
18
19
114.2
186.0
91.8
12.9
$ 2,141.5
$ 454.5
19.2
(9.8)
558.0
62.8
187.6
64.5
2012
13.4
$
80.1
$ 1,884.4
16.2
23.6
$ 440.7
-
17.1
7.8
(9.8)
$ 127.7
466.4
81.4
129.3
13.2
2011
15.1
$
67.3
$ 1,772.9
52.0
22.9
$ 436.3
3.9
14.2
7.6
11.4
$ 153.7
338.5
20.3
18.5
$ 1,042.2
$ 1,021.9
$ 800.4
$ 914.4
Equity attributable to equity holders of the Company
Sale and leaseback transactions
18.0
Non-controlling interests
For certain sale and leaseback transactions, the Company has agreed to guarantee the residual value of the underlying equipment in
Total equity
$ 818.4
the event that the equipment is returned to the lessor and the net proceeds of any eventual sale do not cover the guaranteed amount.
Total liabilities and equity
$ 2,591.3
The maximum amount of exposure is $13.1 million (2011 – $13.1 million), of which $8.2 million matures in 2020 and $4.9 million in
2023. Of this amount, as at March 31, 2012, $13.1 million is recorded as a deferred gain (2011 – $13.1 million).
The accompanying notes form an integral part of these Consolidated Financial Statements.
Indemnifications
In certain instances when the Company sells businesses, it may retain certain liabilities for known exposures and provide
indemnification to the buyer with respect to future claims for certain unknown liabilities that exist, or arise from events occurring, prior
to the sale date, including liabilities for taxes, legal matters, environmental exposures, product liability, and other obligations. The
terms of the indemnifications vary in duration, from one to two years for certain types of indemnities, terms for tax indemnifications
that are generally aligned to the applicable statute of limitations for the jurisdiction in which the divestiture occurred, and terms for
environmental liabilities that typically do not expire. The maximum potential future payments that the Company could be required to
make under these indemnifications are either contractually limited to a specified amount or unlimited. The Company believes that
other than the liabilities already accrued, the maximum potential future payments that it could be required to make under these
indemnifications are not determinable at this time, as any future payments would be dependent on the type and extent of the related
claims, and all available defences, which cannot be estimated. However, historically, costs incurred to settle claims related to these
indemnifications have not been material to the Company’s consolidated financial position, net income or cash flows.
$ 932.9
$ 3,183.7
$ 2,817.3
CAE Annual Report 2012 | 143
Consolidated Statement of Financial Position
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
NOTE 31 – OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION
The Company elected to organize its businesses based principally on products and services. Operating segments are reported in a
manner consistent with the internal reporting provided to the chief operating decision-maker. The Company manages operations
through its five segments (see Note 1).
2011
March 31
April 1
2010
March 31
2012
$ 287.3
(Note 2)
$ 276.4
(Note 2)
$ 312.9
Results by segment
The profitability measure employed by the Company for making decisions about allocating resources to segments and assessing
segment performance is operating profit (hereinafter referred to as segment operating income). The accounting principles used to
308.4
prepare the information by operating segments are the same as those used to prepare the Company’s consolidated financial
245.8
statements. Transactions between operating segments are mainly simulator transfers from the SP/C segment to the TS/C segment,
153.1
which are recorded at cost. The method used for the allocation of assets jointly used by operating segments and costs and liabilities
jointly incurred (mostly corporate costs) between operating segments is based on the level of utilization when determinable and
47.7
measurable, otherwise the allocation is based on a proportion of each segment’s cost of sales.
124.3
43.5
126.8
24.2
296.8
230.5
238.2
205.5
95.5
10.3
58.8
18.9
30.7
27.9
$ 966.2
1,197.1
290.4
TS/C
SP/C
Civil
SP/M
TS/M
Military
NCM
Total
$ 498.4
$ 342.5
$ 840.9
$ 619.2
$ 278.1
$ 897.3
$ 83.0
$ 1,821.2
$ 597.6
write-downs of inventories
$ 551.9
$ 493.0
-
1.4
67.7
13.6
0.5
5.2
2.2
-
72.9
15.8
0.5
1.4
7.3
4.7
-
10.3
7.8
17.6
12.5
-
-
1.0
0.1
1.1
1.8
5.2
4.8
0.7
92.3
33.5
5.3
3.2
1.8
122.2
0.2
51.6
2.0
173.8
0.9
101.2
(0.1)
40.9
0.8
142.1
0.5
(13.8)
3.3
302.1
TS/C
SP/C
Civil
SP/M
TS/M
Military
NCM
Total
$ 454.0
$ 272.9
$ 726.9
$ 586.0
$ 279.9
$ 865.9
$ 38.0
$ 1,630.8
63.9
11.1
4.9
1.9
68.8
13.0
6.3
4.9
9.5
4.6
15.8
9.5
-
1.0
1.0
0.8
0.1
0.9
0.6
99.9
0.1
34.8
0.7
0.1
-
0.1
134.7
105.0
50.3
155.3
(8.4)
0.6
2.0
-
-
85.2
24.5
1.9
0.8
281.6
$ 1,148.1
$ 1,049.2
Year ended March 31, 2012
(amounts in millions)
1,293.7
External revenue
533.2
Depreciation and amortization
1,211.0
375.8
24.1
7.2
Property, plant and equipment
20.7
11.6
24.7
15.1
Intangible and other assets
177.4
Impairment and reversal of impairment
$ 2,817.3
149.0
$ 2,591.3
97.8
$ 3,183.7
of non-financial assets (Note 21)
Write-downs and reversals of
Write-downs and reversals of
20.9
write-downs of accounts receivable
12.9
32.1
6.5
21.6
10.9
64.5
13.4
91.8
12.9
167.4
68.5
9.3
$ 776.8
8.2
$ 883.4
6.0
12.4
12.7
125.8
86.2
Segment operating income (loss)
104.6
136.0
Year ended March 31, 2011
(amounts in millions)
External revenue
Depreciation and amortization
685.6
161.6
$ 810.1
10.4
574.0
161.6
Property, plant and equipment
Intangible and other assets
114.2
Write-downs and reversals of
186.0
write-downs of inventories
62.8
187.6
600.9
148.0
81.4
129.3
13.2
15.1
Write-downs and reversals of
write-downs of accounts receivable
$ 1,884.4
$ 1,772.9
$ 2,141.5
Segment operating income (loss)
$ 454.5
19.2
(9.8)
558.0
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
$ 440.7
17.1
(9.8)
466.4
$ 436.3
14.2
11.4
338.5
$ 914.4
$ 800.4
18.5
$ 932.9
$ 2,817.3
18.0
$ 818.4
$ 2,591.3
144 | CAE Annual Report 2012
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
Operating profit
Consolidated Statement of Financial Position
The following table provides a reconciliation between total segment operating income and operating profit:
(amounts in millions)
(amounts in millions of Canadian dollars)
Total segment operating income
Assets
Reversal of restructuring provision
Cash and cash equivalents
Operating profit
ccounts receivable
Contracts in progress : assets
Notes
5
11
March 31
2012
$ 287.3
308.4
245.8
March 31
2012
2011
$ 302.1
(Note 2)
$ 276.4
-
$ 302.1
296.8
230.5
April 1
2011
2010
$ 281.6
(Note 2)
1.0
$ 312.9
$ 282.6
238.2
205.5
6
126.8
Inventories
Capital expenditures which consist of additions to non-current assets (other than financial instruments and deferred tax assets), by
segment are as follows:
24.2
Prepayments
Income taxes recoverable
Derivative financial assets
Years ended March 31
Total current assets
(amounts in millions)
Property, plant and equipment
TS/C
Intangible assets
SP/C
Deferred tax assets
SP/M
Derivative financial assets
TS/M
Other assets
NCM
Total assets
Unallocated
$ 966.2
2011
1,197.1
86.1
290.4
20.7
24.7
22.6
15.1
14.2
97.8
10.9
$ 2,591.3
0.1
$ 1,049.2
2012
1,211.0
$ 146.5
375.8
25.1
20.7
29.8
11.6
10.9
149.0
8.5
$ 2,817.3
-
1,293.7
533.2
153.1
47.7
124.3
43.5
58.8
18.9
30.7
27.9
95.5
10.3
24.1
7.2
$ 1,148.1
$ 3,183.7
17
29
177.4
7
8
29
9
$
Total capital expenditures
Liabilities and equity
ccounts payable and accrued liabilities
10
$ 597.6
$ 551.9
$ 493.0
$ 220.8
$ 154.6
32.1
Provisions
Assets and liabilities employed by segment
6.5
Income taxes payable
The Company uses assets employed and liabilities employed to assess resources allocated to each segment. Assets employed
include accounts receivable, contracts in progress, inventories, prepayments, property, plant and equipment, intangible assets,
167.4
Contracts in progress : liabilities
derivative financial assets and other assets. Liabilities employed include accounts payable and accrued liabilities, provisions,
68.5
Current portion of long-term debt
contracts in progress, deferred gains and other non-current liabilities and derivative financial liabilities.
Derivative financial liabilities
125.8
86.2
104.6
136.0
21.6
10.9
20.9
12.9
11
13
12.4
9.3
29
12
12.7
Total current liabilities
Assets and liabilities employed by segment are reconciled to total assets and liabilities as follows:
Provisions
12
$ 883.4
6.0
Long-term debt
Royalty obligations
(amounts in millions)
Employee benefits obligations
Assets employed
Deferred gains and other non-current liabilities
TS/C
Deferred tax liabilities
SP/C
Derivative financial liabilities
SP/M
Total liabilities
TS/M
Equity
NCM
Share capital
Assets not included in assets employed
Contributed surplus
Total assets
ccumulated other comprehensive (loss) income
Liabilities employed
Retained earnings
TS/C
Equity attributable to equity holders of the Company
SP/C
Non-controlling interests
SP/M
Total equity
TS/M
Total liabilities and equity
NCM
13
29
15
16
17
29
18
19
Liabilities not included in liabilities employed
The accompanying notes form an integral part of these Consolidated Financial Statements.
Total liabilities
March 31
685.6
161.6
2012
114.2
186.0
$ 1,334.0
91.8
275.3
12.9
518.0
$ 2,141.5
359.2
225.9
$ 454.5
471.3
19.2
$ 3,183.7
(9.8)
558.0
$ 161.0
$ 1,021.9
236.2
20.3
247.6
$ 1,042.2
178.0
$ 3,183.7
46.6
1,272.1
$ 2,141.5
$ 810.1
10.4
574.0
March 31
161.6
2011
62.8
187.6
$ 1,225.4
64.5
251.6
13.4
506.5
$ 1,884.4
352.5
68.2
$ 440.7
413.1
17.1
$ 2,817.3
(9.8)
466.4
$ 155.4
$ 914.4
192.9
18.5
308.6
$ 932.9
174.8
$ 2,817.3
27.8
1,024.9
$ 776.8
8.2
600.9
April 1
148.0
2010
81.4
129.3
$ 1,184.1
13.2
241.8
15.1
433.8
$ 1,772.9
289.5
17.6
$ 436.3
424.5
14.2
$ 2,591.3
11.4
338.5
$ 154.9
$ 800.4
211.5
18.0
293.2
$ 818.4
127.6
$ 2,591.3
15.3
970.4
$ 1,884.4
$ 1,772.9
CAE Annual Report 2012 | 145
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Geographic information
The Company markets its products and services globally. Sales are attributed to countries based on the location of customers.
Non-current assets other than financial instruments and deferred tax assets are attributed to countries based on the location of the
assets.
March 31
2012
March 31
April 1
2010
Consolidated Statement of Financial Position
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
$ 287.3
2011
Years ended March 31
(Note 2)
(amounts in millions)
$ 276.4
Revenue from external customers
308.4
Canada
245.8
United States
153.1
United Kingdom
47.7
Germany
296.8
230.5
124.3
43.5
95.5
10.3
Netherlands
Other European countries
$ 1,049.2
$ 1,148.1
58.8
18.9
(Note 2)
$ 312.9
238.2
205.5
126.8
24.2
30.7
27.9
China
1,293.7
United Arab Emirates
533.2
Other Asian countries
1,211.0
375.8
24.1
7.2
Australia
20.7
11.6
Other countries
177.4
149.0
$ 966.2
1,197.1
290.4
24.7
15.1
97.8
$ 3,183.7
$ 2,817.3
$ 2,591.3
$ 597.6
$ 551.9
$ 493.0
(amounts in millions)
32.1
Non-current assets other than financial instruments and deferred tax assets
6.5
20.9
12.9
21.6
10.9
Canada
104.6
136.0
United States
South America
125.8
86.2
12.7
12.4
United Kingdom
Spain
$ 810.1
10.4
$ 883.4
6.0
Germany
Belgium
167.4
68.5
9.3
$ 776.8
8.2
685.6
161.6
114.2
186.0
91.8
12.9
574.0
161.6
62.8
187.6
64.5
13.4
Netherlands
Other European countries
United Arab Emirates
Other Asian countries
Other countries
600.9
148.0
81.4
129.3
13.2
15.1
$ 2,141.5
$ 1,884.4
$ 1,772.9
$ 454.5
19.2
(9.8)
558.0
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
$ 440.7
17.1
(9.8)
466.4
$ 436.3
14.2
11.4
338.5
$ 914.4
$ 800.4
18.5
$ 932.9
$ 2,817.3
18.0
$ 818.4
$ 2,591.3
146 | CAE Annual Report 2012
2012
2011
$ 202.0
612.0
$ 207.2
467.3
149.8
121.9
66.7
205.9
117.7
55.5
139.6
73.4
76.7
171.7
137.5
60.2
158.0
89.1
69.8
120.8
96.7
52.5
$ 1,821.2
$ 1,630.8
March 31
2012
March 31
2011
April 1
2010
$
410.8
577.8
102.4
255.6
49.6
61.4
64.7
79.3
72.1
81.7
140.0
38.0
$ 354.7
$ 295.6
431.9
71.9
248.1
53.6
64.3
60.0
93.3
80.3
74.9
117.7
28.4
459.0
50.5
194.2
57.7
66.4
70.9
88.5
68.3
68.4
111.6
13.4
$
1,933.4
$ 1,679.1
$ 1,544.5
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
NOTE 32 – RELATED PARTY RELATIONSHIPS
Consolidated Statement of Financial Position
The following table includes principal investments which significantly impact the results or assets of the Company:
March 31
2012
$ 287.3
308.4
245.8
Country of incorporation
153.1
Canada
47.7
Netherlands
95.5
Canada
10.3
United Kingdom
$ 1,148.1
United States
1,293.7
United States
533.2
United Kingdom
24.1
Australia
7.2
Netherlands
177.4
Chile
$ 3,183.7
Mauritius
Peru
(amounts in millions of Canadian dollars)
Investments in subsidiaries consolidated in the Company’s financial statements:
Assets
Cash and cash equivalents
Notes
5
11
ccounts receivable
6
9
12
29
10
7
8
17
29
As at March 31
Contracts in progress : assets
Name
Inventories
7320701 Canada Inc.
Prepayments
B.V. Nationale Luchtvaartschool
Income taxes recoverable
BGT BioGraphic Technologies Inc.
Derivative financial assets
CAE (UK) PLC
Total current assets
CAE (US) Inc.
Property, plant and equipment
CAE (US) LLC
Intangible assets
CAE Aircrew Training Services PLC
Deferred tax assets
CAE Australia Pty Ltd.
Derivative financial assets
CAE Aviation Training B.V.
Other assets
CAE Aviation Training Chile Limitada
Total assets
CAE Aviation Training International Ltd.
CAE Aviation Training Peru Inc.
Liabilities and equity
CAE Beyss Grundstücksgesellschaft mbH
ccounts payable and accrued liabilities
CAE Brunei Multi Purpose Training Centre Sdn Bhd
Provisions
CAE Center Amsterdam B.V.
Income taxes payable
CAE Center Brussels N.V.
Contracts in progress : liabilities
CAE China Support Services Company Limited
Current portion of long-term debt
CAE Civil Aviation Training Solutions, Inc.
Derivative financial liabilities
CAE Datamine Corporate Limited
Total current liabilities
CAE Delaware Buyco Inc.
Provisions
CAE Electronik GmbH
Long-term debt
CAE Engineering Korlátolt Felelősségű Társaság
Royalty obligations
CAE Euroco S.à r.l.
Employee benefits obligations
CAE Flight & Simulator Services Sdn. Bhd.
Deferred gains and other non-current liabilities
CAE Flight Solutions USA Inc.
Deferred tax liabilities
CAE Flight Training Center Mexico, S.A. de C.V.
Derivative financial liabilities
CAE Flightscape Inc.
Total liabilities
CAE Global Academy Évora, SA
Equity
CAE Global Academy Phoenix Inc.
Share capital
CAE Healthcare Inc.
Contributed surplus
CAE Holdings B.V.
CAE Holdings Limited
Retained earnings
CAE India Private Limited
Equity attributable to equity holders of the Company
CAE International Capital Management Hungary LLC
Non-controlling interests
CAE International Holdings Limited
Total equity
CAE Investments S.à r.l.
Total liabilities and equity
CAE Japan Flight Training Inc.
CAE Labuan Inc.
The accompanying notes form an integral part of these Consolidated Financial Statements.
CAE Management Luxembourg S.à r.l.
CAE Mining Canada Inc.
ccumulated other comprehensive (loss) income
11
13
13
29
15
16
17
29
29
19
18
12
Germany
$ 597.6
Brunei
21.6
Netherlands
10.9
Belgium
104.6
China
136.0
United States
12.7
United Kingdom
$ 883.4
United States
6.0
Germany
685.6
Hungary
161.6
Luxembourg
114.2
Malaysia
186.0
United States
91.8
Mexico
12.9
Canada
$ 2,141.5
Portugal
United States
$ 454.5
Canada
19.2
Netherlands
(9.8)
United Kingdom
558.0
India
$ 1,021.9
Hungary
20.3
Canada
$ 1,042.2
Luxembourg
$ 3,183.7
Japan
Malaysia
Luxembourg
Canada
CAE Mining Holdings Inc.
CAE North East Training Inc.
CAE Professional Services (Canada) Inc.
CAE Professional Services Australia Pty Ltd.
CAE Services (Canada) Inc.
CAE Services GmbH
CAE Services Italia S.r.l.
CAE Servicios Globales de Instrucción de Vuelo (España), S.L.
CAE SimuFlite Inc.
CAE Simulation Technologies Private Limited
Canada
United States
Canada
Australia
Canada
Germany
Italy
Spain
United States
India
March 31
2011
(Note 2)
$ 276.4
% equity
interest
296.8
230.5
2012
124.3
100.0%
43.5
100.0%
58.8
100.0%
18.9
100.0%
$ 1,049.2
100.0%
1,211.0
100.0%
375.8
77.9%
20.7
100.0%
11.6
100.0%
149.0
100.0%
$ 2,817.3
100.0%
100.0%
100.0%
$ 551.9
60.0%
20.9
100.0%
12.9
100.0%
125.8
100.0%
86.2
100.0%
12.4
100.0%
$ 810.1
100.0%
10.4
100.0%
574.0
100.0%
161.6
100.0%
62.8
100.0%
187.6
100.0%
64.5
100.0%
13.4
100.0%
$ 1,884.4
100.0%
100.0%
$ 440.7
100.0%
17.1
100.0%
(9.8)
100.0%
466.4
76.0%
$ 914.4
100.0%
18.5
100.0%
$ 932.9
100.0%
$ 2,817.3
-
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
April 1
2010
(Note 2)
$ 312.9
% equity
238.2
interest
205.5
2011
126.8
100.0%
24.2
100.0%
30.7
100.0%
27.9
100.0%
$ 966.2
100.0%
1,197.1
100.0%
290.4
77.9%
24.7
100.0%
15.1
100.0%
97.8
100.0%
$ 2,591.3
100.0%
-
100.0%
$ 493.0
-
32.1
100.0%
6.5
100.0%
167.4
100.0%
68.5
100.0%
9.3
100.0%
$ 776.8
-
8.2
100.0%
600.9
100.0%
148.0
100.0%
81.4
100.0%
129.3
100.0%
13.2
100.0%
15.1
100.0%
$ 1,772.9
100.0%
100.0%
$ 436.3
100.0%
14.2
100.0%
11.4
100.0%
338.5
76.0%
$ 800.4
100.0%
18.0
100.0%
$ 818.4
100.0%
$ 2,591.3
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
CAE Annual Report 2012 | 147
Consolidated Statement of Financial Position
CAE Simulator Services Inc.
CAE Singapore (S.E.A.) Pte Ltd.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
CAE South America Flight Training do Brasil Ltda.
CAE STS Limited
March 31
April 1
March 31
2012
$ 287.3
2010
(Note 2)
$ 312.9
CAE Training Aircraft B.V.
2011
CAE Training Norway AS
(Note 2)
$ 276.4
CAE USA Inc.
CAE Verwaltungsgesellschaft mbH
308.4
Engenuity Holdings (USA) Inc.
245.8
Flight Simulator-Capital L.P.
153.1
Flight Training Device (Mauritius) Ltd.
47.7
ICCU Imaging Inc.
124.3
43.5
296.8
230.5
238.2
205.5
126.8
24.2
95.5
10.3
30.7
58.8
International Flight School (Mauritius) Ltd.
27.9
18.9
Invertron Simulators PLC
$ 1,049.2
$ 966.2
$ 1,148.1
Kestrel Technologies Pte Ltd.
1,293.7
Medical Education Technologies, Inc.
533.2
Presagis Canada Inc.
Presagis Europe (S.A.)
1,211.0
375.8
1,197.1
290.4
20.7
11.6
24.1
7.2
Presagis USA Inc.
177.4
Rotorsim USA LLC
149.0
$ 2,817.3
$ 3,183.7
Sabena Flight Academy NV
Servicios de Instrucción de Vuelo, S.L.
24.7
15.1
97.8
$ 2,591.3
$ 597.6
Simubel N.V. (a CAE Aviation Training Company)
$ 551.9
Simulator Sevicios Mexico, S.A. de C.V.
$ 493.0
SIV Ops Training, S.L.
21.6
10.9
20.9
12.9
32.1
6.5
Canada
Singapore
Brazil
United Kingdom
Netherlands
Norway
United States
Germany
United States
Canada
Mauritius
Canada
Mauritius
United Kingdom
Singapore
United States
Canada
France
United States
United States
Belgium
Spain
Belgium
Mexico
Spain
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
80.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
-
100.0%
100.0%
100.0%
100.0%
100.0%
-
100.0%
100.0%
100.0%
100.0%
100.0%
80.0%
100.0%
100.0%
100.0%
104.6
Investments in joint ventures accounted for under the proportionate consolidation method:
136.0
125.8
86.2
167.4
68.5
12.7
12.4
9.3
$ 883.4
6.0
$ 810.1
10.4
$ 776.8
8.2
As at March 31
Name
600.9
574.0
685.6
Asian Aviation Centre of Excellence Sdn. Bhd.
148.0
161.6
161.6
CAE Flight Training (India) Private Limited
81.4
62.8
114.2
CAE Japan Flight Training Inc.
129.3
187.6
186.0
CAE-Lider Training do Brasil Ltda.
China Southern West Australia Flying College Pty Ltd
64.5
13.4
13.2
15.1
91.8
12.9
$ 2,141.5
CAE Simulation Training Private Limited
$ 1,884.4
Embraer CAE Training Services (UK) Limited
$ 1,772.9
$ 454.5
19.2
Embraer CAE Training Services, LLC
$ 436.3
$ 440.7
Emirates-CAE Flight Training LLC
14.2
17.1
Hatsoff Helicopter Training Private Limited
11.4
(9.8)
(9.8)
Helicopter Training Media International GmbH
338.5
466.4
558.0
HFTS Helicopter Flight Training Services GmbH
National Flying Training Institute Private Limited
18.5
Philippine Academy for Aviation Training Inc.
Rotorsim s.r.l.
$ 800.4
$ 818.4
$ 914.4
$ 932.9
20.3
18.0
$ 1,042.2
$ 1,021.9
$ 2,817.3
$ 2,591.3
$ 3,183.7
Zhuhai Xiang Yi Aviation Technology Company Limited
Available-for-sale investments:
As at March 31
Name
CVS Leasing Limited
Flight Simulator-Capital L.P.
The stated percentage of ownership is in relation to the Company’s ownership.
148 | CAE Annual Report 2012
Country of incorporation
Malaysia
India
Japan
Brazil
Australia
India
United Kingdom
United States
United Arab Emirates
India
Germany
Germany
India
Philippine
Italy
China
% equity
interest
2012
% equity
interest
2011
50.0%
50.0%
51.0%
50.0%
47.1%
25.0%
49.0%
49.0%
49.0%
50.0%
50.0%
25.0%
51.0%
50.0%
50.0%
49.0%
-
50.0%
-
50.0%
47.1%
-
49.0%
49.0%
49.0%
50.0%
50.0%
25.0%
51.0%
-
50.0%
49.0%
Country of incorporation
United Kingdom
Canada
% equity
interest
2012
13.4%
-
% equity
interest
2011
13.4%
19.5%
Notes to the Consolidated Financial Statements
Consolidated Financial Statements
NOTE 33 – RELATED PARTY TRANSACTIONS
Consolidated Statement of Financial Position
The following transactions are carried out with related parties:
ccounts receivable
As at March 31
(amounts in millions of Canadian dollars)
(amounts in millions)
Assets
Current amounts owed from
Cash and cash equivalents
Portion attributable to the interest of the other venturers
Other
Contracts in progress : assets
Current amounts owed to
Inventories
Portion attributable to the interest of the other venturers
Prepayments
Other
Income taxes recoverable
Non-current amounts owed from
Derivative financial assets
Portion attributable to the interest of the other venturers
Total current assets
Property, plant and equipment
Years ended March 31
Intangible assets
(amounts in millions)
Deferred tax assets
Sales of products and services
Derivative financial assets
Portion attributable to the interest of the other venturers
Other assets
Other
Total assets
Purchases of products and services, and other
Portion attributable to the interest of the other venturers
Liabilities and equity
Other
ccounts payable and accrued liabilities
Other income transactions
Provisions
Portion attributable to the interest of the other venturers
Income taxes payable
Notes
5
11
6
29
7
8
17
29
9
10
12
March 31
2012
$ 287.3
308.4
245.8
153.1
47.7
95.5
10.3
$ 1,148.1
1,293.7
533.2
24.1
7.2
177.4
$ 3,183.7
$ 597.6
21.6
10.9
April 1
2010
2011
(Note 2)
$ 312.9
16.1
$
238.2
0.5
205.5
$
126.8
11.2
24.2
0.7
30.7
27.9
$
0.4
$ 966.2
1,197.1
290.4
2011
24.7
15.1
55.9
97.8
7.1
$ 2,591.3
$
$
28.8
8.7
$ 493.0
32.1
-
6.5
$
March 31
2011
2012
(Note 2)
$ 276.4
37.8
$
296.8
0.3
230.5
$
124.3
13.2
43.5
0.6
58.8
18.9
$
10.0
$ 1,049.2
1,211.0
375.8
2012
20.7
11.6
149.0
$ 105.8
6.8
$ 2,817.3
$
16.1
$ 551.9
4.5
20.9
12.9
9.8
125.8
86.2
$
167.4
Contracts in progress : liabilities
68.5
Current portion of long-term debt
The non-current amounts owed from related parties are obligations under finance leases maturing in October 2022 which carry an
interest rate of 5.14% per annum. There are no provisions held against any of the receivables from related parties as at
9.3
Derivative financial liabilities
March 31, 2012 (2011 – nil).
Total current liabilities
$ 776.8
8.2
Provisions
In addition, during fiscal 2012, transactions amounting to $2.1 million (2011 – $2.3 million) were made, at normal market prices, with
600.9
Long-term debt
organizations of which some of the Company’s directors are partners or officers.
148.0
Royalty obligations
$ 810.1
10.4
$ 883.4
6.0
104.6
136.0
574.0
161.6
13
29
11
13
12.7
12.4
29
12
685.6
161.6
81.4
Employee benefits obligations
Compensation of key management personnel
129.3
Deferred gains and other non-current liabilities
Key management personnel have the ability and responsibility to make major operational, financial and strategic decisions for the
13.2
Deferred tax liabilities
Company and include certain executive officers. The compensation paid or payable to key management for employee services is
15.1
Derivative financial liabilities
shown below:
Total liabilities
Equity
Years ended March 31
Share capital
(amounts in millions)
Contributed surplus
Salaries and other short-term employee benefits
$ 454.5
19.2
62.8
187.6
114.2
186.0
64.5
13.4
91.8
12.9
$ 1,884.4
$ 2,141.5
$ 1,772.9
17
29
15
16
18
19
ccumulated other comprehensive (loss) income
Post-employment benefits
Retained earnings
Termination benefits
Equity attributable to equity holders of the Company
Share-based payments
Non-controlling interests
Total equity
Total liabilities and equity
The accompanying notes form an integral part of these Consolidated Financial Statements.
(9.8)
558.0
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
$
$ 440.7
2012
17.1
4.9
(9.8)
1.3
466.4
1.5
$ 914.4
2.5
18.5
$
10.2
$ 932.9
$
$ 436.3
2011
14.2
5.1
11.4
1.0
338.5
-
$ 800.4
8.9
18.0
$
15.0
$ 818.4
$ 2,817.3
$ 2,591.3
CAE Annual Report 2012 | 149
Consolidated Statement of Financial Position
NOTE 34 – EVENTS AFTER THE REPORTING PERIOD
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
(amounts in millions of Canadian dollars)
Notes
Cash and cash equivalents
ccounts receivable
Contracts in progress : assets
Inventories
Prepayments
Income taxes recoverable
Derivative financial assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Derivative financial assets
Other assets
Total assets
Liabilities and equity
ccounts payable and accrued liabilities
Provisions
Income taxes payable
Contracts in progress : liabilities
Current portion of long-term debt
Derivative financial liabilities
Total current liabilities
Provisions
Long-term debt
Royalty obligations
Employee benefits obligations
Deferred gains and other non-current liabilities
Deferred tax liabilities
Derivative financial liabilities
Total liabilities
ccumulated other comprehensive (loss) income
Equity attributable to equity holders of the Company
Share capital
Contributed surplus
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
5
11
6
29
7
8
17
29
9
10
12
11
13
29
12
13
29
15
16
17
29
18
19
The accompanying notes form an integral part of these Consolidated Financial Statements.
$ 287.3
March 31
2012
2010
2011
April 1
March 31
(Note 2)
$ 276.4
(Note 2)
$ 312.9
Oxford Aviation Academy Luxembourg S.à r.l.
On May 16, 2012, the Company acquired 100% of the shares of Oxford Aviation Academy Luxembourg S.à r. l. (OAA) for total
consideration of $314.3 million. OAA is a provider of aviation training and crew sourcing services. With this acquisition, CAE
strengthens its leadership and global reach in civil aviation training by increasing its training centre footprint, growing its flight
academy network and extending its portfolio of aviation training solutions. Management considers it impracticable to disclose
information about the fair value of the net assets acquired since the findings of the valuation exercise are not yet available. The
acquisition of OAA was financed through a senior unsecured credit facility.
308.4
245.8
No revenue or operating profit from OAA was included in the consolidated income statement as at March 31, 2012.
153.1
47.7
Restructuring
CAE announced restructuring measures on May 23, 2012 which are designed to refocus the Company’s resources and capabilities in
response to a change in CAE’s defence market. Under these measures, CAE’s current workforce is being reduced by approximately
300 employees worldwide.
1,293.7
533.2
1,197.1
290.4
1,211.0
375.8
126.8
24.2
296.8
230.5
124.3
43.5
238.2
205.5
95.5
10.3
58.8
18.9
30.7
27.9
$ 966.2
$ 1,049.2
$ 1,148.1
24.1
7.2
177.4
20.7
11.6
149.0
24.7
15.1
97.8
$ 3,183.7
$ 2,817.3
$ 2,591.3
$ 597.6
$ 551.9
$ 493.0
21.6
10.9
104.6
136.0
12.7
20.9
12.9
125.8
86.2
12.4
32.1
6.5
167.4
68.5
9.3
$ 883.4
6.0
$ 810.1
10.4
$ 776.8
8.2
685.6
161.6
114.2
186.0
91.8
12.9
574.0
161.6
62.8
187.6
64.5
13.4
600.9
148.0
81.4
129.3
13.2
15.1
$ 2,141.5
$ 1,884.4
$ 1,772.9
$ 454.5
19.2
(9.8)
558.0
$ 1,021.9
20.3
$ 1,042.2
$ 3,183.7
$ 440.7
17.1
(9.8)
466.4
$ 436.3
14.2
11.4
338.5
$ 914.4
$ 800.4
18.5
$ 932.9
$ 2,817.3
18.0
$ 818.4
$ 2,591.3
150 | CAE Annual Report 2012
Board of Directors and Officers
bOARD OF DIRECTORS
Lynton R. Wilson, o.C. 1, 2, 4
Chairman of the board
CAE inc.
oakville, ontario
Marc Parent 1
President and Chief Executive officer
CAE inc.
lorraine, québec
brian E. barents 2
Corporate director
Andover, Kansas
John A. (Ian) Craig 3
business Consultant and
Corporate director
ottawa, ontario
H. Garfield Emerson, q.C., iCd.d 3, 4
Principal, Emerson Advisory
and Corporate director
toronto, ontario
The Honourable Michael M. Fortier,
P.C.4
vice Chairman
RbC Capital markets
montreal, québec
Paul Gagné 2, 3
Chairman
Wajax Corporation
montreal, québec
James F. Hankinson 1, 2, 4
Corporate director
toronto, ontario
E. Randolph (Randy) Jayne II 4
managing Partner
Heidrick & struggles
international, inc.
Webster groves, missouri
Robert Lacroix, o.C., Ph.d 4
Corporate director
montreal, québec
The Honourable John Manley,
P.C., o.C.2, 3
President and Chief Executive officer
Canadian Council of Chief Executives
ottawa, ontario
Gen. Peter J. Schoomaker U.S.A.
(Ret.) 2
Corporate director
tampa, Florida
Katharine b. Stevenson 3
Corporate director
toronto, ontario
Lawrence N. Stevenson 2
managing director
Callisto Capital
toronto, ontario
1 member of the Executive Committee
2 member of the Human Resources Committee
3 member of the Audit Committee
4 member of the governance Committee
OFFICERS
Lynton R. Wilson
Chairman of the board
Marc Parent
President
and Chief Executive officer
Jeff Roberts
group President
Civil simulation Products and
training & services
Gene Colabatistto
group President
military simulation Products and
training & services
Nick Leontidis
Executive vice President
strategy and business
development
Stéphane Lefebvre
vice President, Finance
and Chief Financial officer
Hartland J. A. Paterson
vice President, legal, general
Counsel & Corporate secretary
bernard Cormier
vice President
Human Resources
Éric bussières
vice President
Finance – Civil and treasurer
Sonya branco
vice President and Controller
CAE Annual Report 2012 | 151
Shareholder and Investor Information
owners and may not be used,
changed, copied, altered, or quoted
without the written consent of the
respective owner. All rights reserved.
CORPORATE GOVERNANCE
the following documents pertaining
to CAE’s corporate governance
practices may be accessed either
from CAE’s website (www.cae.com)
or by request from the Corporate
secretary:
– board and board Committee
mandates
– Position descriptions for the board
Chair, the Committee Chairs and
the Chief Executive officer
– CAE’s Code of business Conduct,
and the board member’s Code of
Conduct
– Corporate governance guideline.
most of the new york Exchange’s
(nysE) corporate governance listing
standards are not mandatory for
CAE. significant differences
between CAE’s practices and the
requirements applicable to u.s.
companies listed on the nysE are
summarized on CAE’s website. CAE
is otherwise in compliance with the
nysE requirements in all significant
respects.
CAE SHARES
CAE’s shares are traded on the
toronto stock Exchange (tsX) and on
the new york stock Exchange (nysE)
under the symbol “CAE”.
TRANSFER AGENT AND
REGISTRAR
Computershare trust Company of
Canada
100 university Avenue, 9th Floor
toronto, ontario
m5J 2y1
tel. 514-982-7555 or
1-800-564-6253
(toll free in Canada and the u.s.)
www.computershare.com
DIVIDEND REINVESTMENT PLAN
Canadian resident registered
shareholders of CAE inc. who wish
to receive dividends in the form of
CAE inc. common shares rather
than a cash payment (currently at a
2% discount as of the date of this
Annual Report) may participate in
CAE’s dividend reinvestment plan. in
order to obtain the dividend
reinvestment plan form, please
contact Computershare trust
o to
Company of Canada or g
www.cae.com/dividend.
DIRECT DEPOSIT DIVIDEND
Canadian resident registered
shareholders of CAE inc. who
receive cash dividends may elect
to have the dividend payment
deposited directly to their bank
accounts instead of receiving a
cheque. in order to obtain the direct
deposit dividend form, please
contact Computershare trust
Company of Canada.
www.cae.com/dividend
DUPLICATE MAILINGS
to eliminate duplicate mailings by
consolidating accounts, registered
shareholders must contact
Computershare trust Company
of Canada; non-registered
shareholders must contact their
investment brokers.
152 | CAE Annual Report 2012
INVESTOR RELATIONS
quarterly and annual reports as well
as other corporate documents are
available on our website at www.
cae.com. these documents can
also be obtained from our investor
Relations department:
Investor Relations
CAE inc.
8585 Côte-de-liesse
saint-laurent, québec
H4t 1g6
tel. 1-866-999-6223
investor.relations@cae.com
Version française
Pour obtenir la version française
du rapport annuel, s’adresser à
investisseurs@cae.com.
2012 ANNUAL MEETING
the Annual and special
shareholders meeting will be held at
10:30 a.m. (Eastern time),
thursday, August 9, 2012 at the
Hotel King Edward, 37 King street
East, toronto, ontario. the meeting
will also be webcast live on CAE’s
website, www.cae.com.
AUDITORS
PricewaterhouseCoopers llP
Chartered Accountants
montreal, québec
TRADEMARKS
trademarks and/or registered
trademarks of CAE inc. and/or its
affiliates include but are not limited
to CAE, CAE medallion 6000, CAE
simfinity, CAE true Electric motion,
CAE true Airport, CAE true
Environment, CAE tropos 6000,
CAE Augmented Engineering
Environment, CAE Advanced
visionics system, CAE owl, CAE
Caesar, CAE terra, CAE vimEdiX
and CAE iCCu. All other brands
and product names are trademarks
or registered trademarks of their
respective owners. All logos,
tradenames and trademarks
referred to and used herein remain
the property of their respective
FoRWARd-looKing stAtEmEnts
Certain statements made in this annual report are forward-looking statements under the Private securities litigation
Reform Act of 1995 and Canadian securities regulations. All statements, other than statements of historical facts, included
herein that pertain to activities, events or developments that we expect or anticipate will or may occur in the future
including, for example, statements about our business outlook, assessment of market conditions, strategies, future plans,
future sales, prices for our major products, inventory levels, capital spending and tax rates are forward-looking statements.
the words “expect”, “anticipate”, “estimate”, “may”, “will”, “should”, “intend”, “believe”, “plan” and similar expressions are
intended to identify forward-looking statements. such statements are not guarantees of future performance. they are
based on management’s expectations and assumptions regarding historical trends, current conditions and expected
future developments, as well as other factors that we believe are appropriate in the circumstances. such expectations and
assumptions involve a number of business risks and uncertainties, any of which could cause actual results to differ
materially from those expressed in or implied by the forward-looking statements. the results or events predicted in these
forward-looking statements may differ materially from actual results or events. important risks that could cause such
differences include, but are not limited to, the length of sales cycle, rapid product evolution, level of defence spending,
condition of the civil aviation industry, competition, availability of critical inputs, foreign exchange rate of currencies and
doing business in foreign countries. these and other risks that could cause actual results or events to differ materially from
current expectations or assumptions are described in the risk factors section of CAE’s Annual information Form for the
year ended march 31, 2012, filed with the Canadian securities commissions and the u.s. securities and Exchange
Commission. Any forward-looking statements made in this annual report represent our expectations as of may 23, 2012,
and accordingly, are subject to change after such date. We disclaim any intention or obligation to update any forward-
looking statements unless legislation requires us to do so.
CAE Annual Report 2012 | 153
154 | CAE Annual Report 2012
Corporate Profile
CAE is a global leader in modeling, simulation and training for civil aviation and defence. The company
employs approximately 8,000 people at more than 100 sites and training locations in approximately 30
countries. CAE offers civil aviation, military, and helicopter training services in more than 45 locations
worldwide and trains approximately 100,000 crewmembers yearly. In addition, the CAE Oxford Aviation
Academy offers training to aspiring pilot cadets in 12 CAE-operated flight schools. CAE’s business
is diversified, ranging from the sale of simulation products to providing comprehensive services such
as training and aviation services, professional services, in-service support and crew sourcing. The
company applies simulation expertise and operational experience to help customers enhance safety,
improve efficiency, maintain readiness and solve challenging problems. CAE is leveraging its simulation
capabilities in new markets such as healthcare and mining. www.cae.com
1
2
4
6
10
12
16
20
24
25
27
78
78
80
85
Financial Highlights
Global Reach
Chairman’s Message
Message to Shareholders
Leading by Innovation
Civil
Defence
New Core Markets
Social Responsibility
Financial Review
Management’s Discussion and Analysis
Management’s Report on Internal
Control over Financial Reporting
Independent Auditor’s Report
Consolidated Financial Statements
Notes to Consolidated Financial
Statements
151
Board of Directors and Officers
152
Shareholder and Investor Information
153
Forward-Looking Statements
3
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As an eTree member, CAE Inc. is committed to meeting shareholder needs while
being environmentally friendly. For each shareholder that receives electronic
copies of shareholder communications, CAE will plant a tree through Tree
Canada, the leader in Canadian urban reforestation.
30%
Contains FSC® certified post-consumer and 70% virgin fibre
Certified EcoLogo and FSC Mixed Sources
Manufactured using biogas energy
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cae.com
ANNUAL REPORT
Fiscal year ended March 31, 2012