Table of Contents Consolidated Interim Financial Statements |
Consolidated income statement | 1 |
Consolidated statement of comprehensive income | 2 |
Consolidated statement of financial position | 3 |
Consolidated statement of changes in equity | 4 |
Consolidated statement of cash flows | 5 |
Notes to the Consolidated Interim Financial Statements |
Note 1 - Nature of operations and summary of significant accounting policies | 6 |
Note 2 - Business combinations | 7 |
Note 3 - Operating segments and geographic information | 7 |
Note 4 - Other (gains) and losses | 9 |
Note 5 - Restructuring, integration and acquisitions costs | 9 |
Note 6 - Finance expense - net | 10 |
Note 7 - Government participation | 10 |
Note 8 - Earnings per share | 10 |
Note 9 - Supplementary cash flows information | 11 |
Note 10 - Fair value of financial instruments | 11 |
Note 11 - Related party transactions | 12 |
| | | | Consolidated Interim Financial Statements |
Consolidated Income Statement |
| |
| | Three months ended |
| | | June 30 | (Unaudited) |
(amounts in millions of Canadian dollars, except per share amounts) | 2022 | 2021 |
Revenue | | 3 | $ | $ | 752.7 |
Cost of sales | | | | 538.9 |
Gross profit | | $ | $ | 213.8 |
Research and development expenses | | | | 23.5 |
Selling, general and administrative expenses | | | | 105.9 |
Other (gains) and losses | | 4 | | | (5.7) |
Share of after-tax profit of equity accounted investees | | 3 | | | (8.3) |
Restructuring, integration and acquisition costs | | 5 | | | 12.2 |
Operating income | | $ | $ | 86.2 |
Finance expense – net | | 6 | | | 28.6 |
Earnings before income taxes | | $ | $ | 57.6 |
Income tax (recovery) expense | | | | 10.3 |
Net income | | $ | $ | 47.3 |
Attributable to: | |
Equity holders of the Company | | $ | $ | 46.4 |
Non-controlling interests | | | | 0.9 |
Earnings per share attributable to equity holders of the Company |
Basic and diluted | | 8 | $ | $ | 0.16 |
The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
| | | | | CAE First Quarter Report 2023 I 1 |
Consolidated Interim Financial Statements |
Consolidated Statement of Comprehensive Income |
| Three months ended |
| | June 30 | (Unaudited) |
(amounts in millions of Canadian dollars) | 2022 | 2021 |
Net income | $ | 3.7 | $ | 47.3 |
Items that may be reclassified to net income |
Foreign currency exchange differences on translation of foreign operations | $ | 56.3 | $ | (37.6) |
Net (loss) gain on hedges of net investment in foreign operations | | (43.6) | | 14.4 |
Reclassification to income of foreign currency exchange differences | | (0.2) | | (2.2) |
Net gain (loss) on cash flow hedges | | 8.3 | | (13.8) |
Reclassification to income of gains on cash flow hedges | | (15.9) | | (3.7) |
Income taxes | | 3.5 | | 6.1 |
| $ | 8.4 | $ | (36.8) |
Items that will never be reclassified to net income |
Remeasurement of defined benefit pension plan obligations | $ | 62.1 | $ | 3.6 |
Income taxes | | (16.5) | | (0.9) |
| $ | 45.6 | $ | 2.7 |
Other comprehensive income (loss) | $ | 54.0 | $ | (34.1) |
Total comprehensive income | $ | 57.7 | $ | 13.2 |
Attributable to: |
Equity holders of the Company | $ | 54.9 | $ | 12.8 |
Non-controlling interests | | 2.8 | | 0.4 |
The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
2 I CAE First Quarter Report 2023 |
| | | | | Consolidated Interim Financial Statements |
Consolidated Statement of Financial Position |
(Unaudited) | June 30 | March 31 |
(amounts in millions of Canadian dollars) | 2022 | 2022 |
Assets |
Cash and cash equivalents | | | | $ 206.0 | $ 346.1 |
Accounts receivable | 658.1 | 556.9 |
Contract assets | 612.0 | 608.3 |
Inventories | 550.4 | 519.8 |
Prepayments | | 71.3 | | 56.7 |
Income taxes recoverable | | 42.8 | | 33.2 |
Derivative financial assets | | 28.5 | | 27.6 |
Total current assets | $ 2,169.1 | $ 2,148.6 |
Property, plant and equipment | 2,170.8 | 2,129.3 |
Right-of-use assets | 363.9 | 373.0 |
Intangible assets | 3,872.5 | 3,796.3 |
Investment in equity accounted investees | 463.9 | 454.0 |
Employee benefits assets | | 29.9 | | | — |
Deferred tax assets | 111.2 | 117.4 |
Derivative financial assets | | 15.6 | | 10.5 |
Other non-current assets | 559.1 | 549.7 |
Total assets | $ 9,756.0 | $ 9,578.8 |
Liabilities and equity | | | | |
Accounts payable and accrued liabilities | $ 895.0 | $ 975.1 |
Provisions | | 31.8 | | 36.7 |
Income taxes payable | | 27.8 | | 22.7 |
Contract liabilities | 833.8 | 788.3 |
Current portion of long-term debt | 228.8 | 241.8 |
Derivative financial liabilities | | 33.8 | | 26.6 |
Total current liabilities | | | | $ 2,051.0 | $ 2,091.2 |
Provisions | | | | | 20.7 | | 20.6 |
Long-term debt | 3,003.1 | 2,804.4 |
Royalty obligations | 121.1 | 126.0 |
Employee benefits obligations | | | | | 81.7 | 109.7 |
Deferred tax liabilities | | | | | 96.1 | | 93.7 |
Derivative financial liabilities | | 1.4 | | 1.0 |
Other non-current liabilities | | | | 226.8 | 245.6 |
Total liabilities | | | | $ 5,601.9 | $ 5,492.2 |
Equity | | | |
Share capital | $ 2,237.9 | $ 2,224.7 |
Contributed surplus | | | | | 40.2 | | 38.6 |
Accumulated other comprehensive income | | | | (23.6) | | (31.2) |
Retained earnings | | | | 1,824.9 | 1,777.6 |
Equity attributable to equity holders of the Company | | | | $ 4,079.4 | $ 4,009.7 |
Non-controlling interests | | | | | 74.7 | | 76.9 |
Total equity | | | | $ 4,154.1 | $ 4,086.6 |
Total liabilities and equity | | | | $ 9,756.0 | $ 9,578.8 |
The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
| | | | | | CAE First Quarter Report 2023 I 3 |
| | | | | | | | | | | | | Consolidated Interim Financial Statements |
| | | | | | | | | | |
al | y |
| | 3.7 | | 3.3 | (5.0) | | | | | | 4.6 | (2.4) |
| | 54.0 | 57.7 | 11.5 | | | Total | | 47.3 | (34.1) | 13.2 | 20.2 |
Totequity |
| equit |
| 4,086.6 | | | | 4,154.1 | | 3,212.8 | | | | 3,248.4 |
| | | | | | | | | | | |
| $ | $ | $ | | $ | | $ | $ | $ | | $ |
| | | | | | | | | | |
| | 2.0 | 0.8 | 2.8 | — | — | | | | 0.9 | 0.4 | — | — |
| ests | 76.9 | | | (5.0) | 74.7 | olling | ests | 72.3 | (0.5) | | (2.4) | 70.3 |
olling |
| inter | | | | | | inter |
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| $ | $ | $ | | $ | | $ | $ | $ | | $ |
Non-Non- |
| | | | | | | | |
| | 1.7 | | 3.3 | — | | | | | | 4.6 | — |
panyTotal | 53.2 | 54.9 | 11.5 | | | pany | Total | 46.4 | (33.6) | 12.8 | 20.2 |
| 4,009.7 | | | | 4,079.4 | | 3,140.5 | | | | 3,178.1 |
| | | | | | | | | | | |
| $ | $ | $ | | $ | | $ | $ | $ | | $ |
s of the Coms of the Com |
| | 1.7 | — | — | — | | | | 2.7 | — | — | — |
| nings | 45.6 | 47.3 | | | | nings | 46.4 | 49.1 |
| ear | 1,777.6 | | | | 1,824.9 | Retained | ear | 1,543.7 | | | | 1,592.8 |
Retained | | | | | | | | | | | |
| $ | $ | $ | | $ | | $ | $ | $ | | $ |
| | | | | | | | | |
| e | | | | | | e |
| | — | 7.6 | 7.6 | — | — | — | | | | — | — | — | — |
| (31.2) | | | | (23.6) | | 58.1 | (36.3) | (36.3) | | 21.8 |
ibutable to equity holderincomibutable to equity holderincom |
ehensive | | | | | | ehensive |
Attrpr | $ | $ | $ | | $ | Attr | ulated other | pr | $ | $ | $ | | $ |
ulated other |
comcom |
AccumAccum |
| | | | | | | | | |
| | — | — | — | 3.3 | — | | | | — | — | — | 4.6 | — |
| plus | 38.6 | | (1.7) | | 40.2 | | plus | 22.5 | | (3.1) | | 24.0 |
ibutedibutedsur |
| sur |
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| value | | 13.2 | | | Stated | value | | 23.3 |
Stated |
| 2,224.7 | | | | 2,237.9 | | 1,516.2 | | | | 1,539.5 |
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| shar | | | | | | | | | | | ted Interim Financial S |
| | | 645,277 | | | | | | 933,943 |
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| 317,024,123 | | | | 317,669,400 | | 293,355,463 | | | | 294,289,406 |
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(Unaudited)Thr(amexcept num | Balances as at | Net incom | Other | Total com | Exer | Shar | Tr | Balances as at | Thr | (am | except num | Balances as at | Net incom | Other | Total com | Exer | Shar | Tr | Balances as at | The accompanying notes form an integral part of these Consolida | Consolidated Statement of Changes in Equity |
| | | | | | | | | | | | | 4 I CAE First Quarter Report 2023 |
| | | | | | Consolidated Interim Financial Statements |
Consolidated Statement of Cash Flows |
(Unaudited) |
Three months ended June 30 |
(amounts in millions of Canadian dollars)Notes | 2022 | 2021 |
Operating activities |
Net income | | | | $ | 3.7 | | | $ | 47.3 |
Adjustments for: |
Depreciation and amortization | 3 | 82.6 | 71.1 |
Impairment of non-financial assets | 3 | 3.2 | 2.3 |
Share of after-tax profit of equity accounted investees | | (11.4) | (8.3) |
Deferred income taxes | | (8.5) | (1.3) |
Investment tax credits | | (0.9) | (9.5) |
Share-based payments expense | | (4.8) | (8.7) |
Defined benefit pension plans | | 4.3 | 6.8 |
Other non-current liabilities | | (5.3) | (2.3) |
Derivative financial assets and liabilities – net | | (6.0) | 20.3 |
Other | | 10.8 | 17.4 |
Changes in non-cash working capital | 9 | (230.3) | (264.2) |
Net cash used in operating activities | | | | $ | (162.6) | | | $ | (129.1) |
Investing activities |
Business combinations, net of cash acquired | | | | $ | — | | | $ | (16.0) |
Additions to property, plant and equipment | 3 | (73.9) | (73.9) |
Proceeds from disposal of property, plant and equipment | | 4.0 | 1.8 |
Additions to intangible assets | 3 | (25.4) | (19.3) |
Net proceeds from (payments to) equity accounted investees | | 1.1 | (0.5) |
Dividends received from equity accounted investees | | 6.4 | — |
Other | | (5.0) | (2.4) |
Net cash used in investing activities | | | | $ | (92.8) | | | $ | (110.3) |
Financing activities |
Net proceeds from borrowing under revolving credit facilities | | | | $ | 133.3 | | | $ | — |
Proceeds from long-term debt | | 8.9 | 6.7 |
Repayment of long-term debt | | (23.6) | (7.9) |
Repayment of lease liabilities | | (12.3) | (12.6) |
Net proceeds from the issuance of common shares | | 11.5 | 20.2 |
Net cash provided by financing activities | | | | $ | 117.8 | | | $ | 6.4 |
Effect of foreign currency exchange differences on cash and cash equivalents | | | | $ | (2.5) | | | $ | (2.6) |
Net decrease in cash and cash equivalents | | | | $ | (140.1) | | | $ | (235.6) |
Cash and cash equivalents, beginning of period | | 346.1 | 926.1 |
Cash and cash equivalents, end of period | | | | $ | 206.0 | | | $ | 690.5 |
The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
| | | | | | | CAE First Quarter Report 2023 I 5 |
Notes to the Consolidated Interim Financial Statements |
Notes to the Consolidated Interim Financial Statements(Unaudited)(Unless otherwise stated, all tabular amounts are in millions of Canadian dollars) |
The consolidated interim financial statements were authorized for issue by the board of directors on August 10, 2022. |
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Nature of operationsCAE equips people in critical roles with the expertise and solutions to create a safer world. As a technology company, CAE digitalizes the physical world by deploying simulation training and critical operations support solutions. |
CAE Inc. and its subsidiaries’ (or the Company) operations are managed through three segments: |
(i) Civil Aviation – Provides comprehensive training solutions for flight, cabin, maintenance and ground personnel in commercial, |
business and helicopter aviation, a complete range of flight simulation training devices, ab initio pilot training and crew sourcing services, as well as end-to-end digitally-enabled crew management, training operations solutions and optimization software; |
(ii) Defense and Security – A platform agnostic, global training and simulation pure play focusing on ensuring mission readiness by |
integrating systems and solutions across all five domains for government organizations responsible for public safety; |
(iii) Healthcare – Provides healthcare students and clinical professionals innovative, integrated and virtual education and training |
solutions, including interventional and imaging simulations, curricula, audiovisual debriefing solutions, centre management platforms and patient simulators. |
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 common shares are traded on the Toronto Stock Exchange (TSX) and on the New York Stock Exchange (NYSE). |
Seasonality and cyclicality of the businessThe Company’s business operating segments are affected in varying degrees by market cyclicality and/or seasonality. As such, operating performance over a given interim period should not necessarily be considered indicative of full fiscal year performance. |
The Company’s business, revenues and cash flows are affected by certain seasonal trends. In the Civil Aviation segment, the level of training delivered is driven by the availability of pilots to train, which tends to be lower in the second quarter as pilots are flying more and training less and thus, resulting in lower revenues. In the Defense and Security segment, revenue and cash collection tend to be higher in the second half of the year as contract awards and availability of funding are influenced by the government’s budget cycle, which in the U.S. is based on a September year-end. |
However, due to the continued impact from the COVID-19 pandemic results may not follow historical patterns. |
Basis of preparationThe key accounting policies applied in the preparation of these consolidated interim financial statements are consistent with those disclosed in Note 1 of the Company’s consolidated financial statements for the year ended March 31, 2022. These policies have been consistently applied to all periods presented. Certain amendments to accounting standards were applied for the first time on April 1, 2022, but did not have an impact on the consolidated interim financial statements of the Company. These condensed consolidated interim financial statements should be read in conjunction with the Company’s most recent annual consolidated financial statements for the year ended March 31, 2022. |
The consolidated interim financial statements have been prepared in accordance with Part I of the CPA Canada Handbook |
| - Accounting, International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards |
Board (IASB) applicable to the preparation of interim financial statements, IAS 34, Interim Financial Reporting. |
The functional and presentation currency of CAE Inc. is the Canadian dollar. |
Use of judgements, estimates and assumptionsThe preparation of the consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities and disclosures at the date of the consolidated interim financial statements, as well as the reported amounts of revenues and expenses for the period reported. Actual results could differ from those estimates. Changes will be reported in the period in which they are identified. In preparing these consolidated interim financial statements, the significant judgements made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements of the year ended March 31, 2022. |
6 I CAE First Quarter Report 2023 |
| Notes to the Consolidated Interim Financial Statements |
NOTE 2 – BUSINESS COMBINATIONS |
During the three months ended June 30, 2022, the Company completed its final assessment of the fair value of assets acquired and liabilities assumed of L3Harris Technologies’ Military Training business (L3H MT) acquired in fiscal 2022. |
During the three months ended June 30, 2022, adjustments to preliminary purchase price allocations of acquisitions realized in fiscal 2022 resulted in increases of intangible assets of $18.7 million, current liabilities of $3.6 million, other long-term liabilities of $2.8 million and other long-term assets of $2.3 million, and decreases of current assets of $13.2 million and deferred tax assets of $1.4 million. |
NOTE 3 – OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION |
The Company elected to organize its operating segments principally on the basis of its customer markets. The Company manages its operations through its three segments. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. |
The Company has decided to disaggregate revenue from contracts with customers by segment, by products and services and by geographic regions as the Company believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors. |
Results by segmentThe profitability measure employed by the Company for making decisions about allocating resources to segments and assessing segment performance is adjusted segment operating income. Adjusted segment operating income is calculated by taking operating income and excluding restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events, which gives an indication of the profitability of each segment because it does not include the impact of items not specifically related to the segment’s performance. |
The accounting principles used to prepare the information by operating segments are the same as those used to prepare the Company’s consolidated financial statements. 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 measurable, otherwise the allocation is based on a proportion of each segment’s cost of sales and revenue. |
| Defense | | | |
| | | | | Civil Aviation | and Security | Healthcare | | Total |
Three months ended June 30 | | | | | 2022 | 2021 | 2022 | 2021 | | | | | | | 2022 | 2021 | 2022 | 2021 |
External revenue | | | | | | | | | $ 480.4 $ 432.9 $ 413.3 $ 288.2 $ | 39.6 $ | 31.6 | $ 933.3 | $ 752.7 |
Depreciation and amortization | | | | | | | | | | 58.5 | 55.5 | 20.9 | 12.2 | 3.2 | 3.4 | | 82.6 | | 71.1 |
Impairment of non-financial assets – net | | | | | | | | | | 2.3 | 2.4 | 0.4 | 0.2 | 0.5 | (0.3) | 3.2 | | 2.3 |
Share of after-tax profit of equity accounted investees | | | | | | | | | | 9.9 | 4.9 | 1.5 | 3.4 | — | — | | 11.4 | | 8.3 |
Operating income (loss) | | | | | | | | | | 75.4 | 59.0 | (30.3) | 22.6 | (5.7) | 4.6 | | 39.4 | | 86.2 |
Adjusted segment operating income (loss) | | | | | | | | | | 86.6 | 69.7 | (21.2) | 23.7 | (4.5) | 5.0 | | 60.9 | | 98.4 |
Reconciliation of adjusted segment operating income is as follows: |
| Defense | | | |
| | | | | Civil Aviation | and Security | Healthcare | | Total |
Three months ended June 30 | | | | | 2022 | 2021 | 2022 | 2021 | | | | | | | 2022 | 2021 | 2022 | 2021 |
Operating income (loss) | | | | | | | | | $ | 75.4 $ | 59.0 $ (30.3) $ | 22.6 $ | (5.7) $ | 4.6 | $ | 39.4 | $ | 86.2 |
Restructuring, integration and acquisition costs (Note 5) | | | | | | | | | | 11.2 | 10.7 | 9.1 | 1.1 | 1.2 | 0.4 | | 21.5 | | 12.2 |
Adjusted segment operating income (loss) | | | | | | | | | $ | 86.6 $ | 69.7 $ (21.2) $ | 23.7 $ | (4.5) $ | 5.0 | $ | 60.9 | $ | 98.4 |
| | CAE First Quarter Report 2023 I 7 |
Notes to the Consolidated Interim Financial Statements |
Capital expenditures by segment, which consist of additions to property, plant and equipment and intangible assets (excluding those acquired in business combinations), are as follows: |
| Three months ended |
| | June 30 |
| 2022 | 2021 |
Civil Aviation | $ | 83.8 | $ | 80.0 |
Defense and Security | 12.0 | 8.9 |
Healthcare | 3.5 | 4.3 |
Total capital expenditures | $ | 99.3 | $ | 93.2 |
Assets and liabilities employed by segmentThe Company uses assets employed and liabilities employed to assess resources allocated to each segment. Assets employed include accounts receivable, contract assets, inventories, prepayments, property, plant and equipment, right-of-use assets, intangible assets, investment in equity accounted investees, derivative financial assets and other non-current assets. Liabilities employed include accounts payable and accrued liabilities, provisions, contract liabilities, derivative financial liabilities and other non-current liabilities. |
Assets and liabilities employed by segment are reconciled to total assets and liabilities as follows: |
| June 30 | March 31 |
| 2022 | 2022 |
Assets employed | | |
Civil Aviation | | | $ 5,402.7 | $ 5,269.6 |
Defense and Security | 3,294.6 | 3,163.1 |
Healthcare | | 282.3 | | 269.2 |
Assets not included in assets employed | | 776.4 | | 876.9 |
Total assets | | | $ 9,756.0 | $ 9,578.8 |
Liabilities employed | | | | |
Civil Aviation | | | $ 1,038.8 | $ 1,012.7 |
Defense and Security | | 766.2 | | 824.8 |
Healthcare | | 62.1 | | 64.9 |
Liabilities not included in liabilities employed | 3,734.8 | 3,589.8 |
Total liabilities | | | $ 5,601.9 | $ 5,492.2 |
Products and services informationThe Company's revenue from external customers for its products and services are as follows: |
| Three months ended |
| | June 30 |
| 2022 | 2021 |
Products | | | $ | 382.2 | $ | 333.9 |
Training and services | | 551.1 | $ | 418.8 |
Total external revenue | | | $ | 933.3 | $ | 752.7 |
| | | | |
8 I CAE First Quarter Report 2023 |
| | | | | Notes to the Consolidated Interim Financial Statements |
Geographic informationThe Company markets its products and services globally. Revenues are attributed to geographical regions based on the location of customers. Non-current assets other than financial instruments and deferred tax assets are attributed to geographical regions based on the location of the assets, excluding goodwill. Goodwill is presented by geographical regions based on the Company’s allocation of the related purchase price. |
| Three months ended |
| | June 30 |
| 2022 | 2021 |
External revenue | | | |
Canada | $ | 85.6 | $ | 72.5 |
United States | | 497.1 | | 343.4 |
United Kingdom | | 65.2 | | 44.2 |
Rest of Americas | | 19.9 | | 14.6 |
Europe | | 124.8 | | 107.7 |
Asia | | 117.9 | | 140.2 |
Oceania and Africa | | 22.8 | | 30.1 |
| $ | 933.3 | $ | 752.7 |
| June 30 | March 31 |
| 2022 | 2022 |
Non-current assets other than financial instruments and deferred tax assets | | | |
Canada | $ 1,614.4 | $ 1,570.8 |
United States | 3,700.2 | 3,554.2 |
United Kingdom | | 363.3 | | 370.4 |
Rest of Americas | | 172.1 | | 177.0 |
Europe | | 889.2 | | 916.3 |
Asia | | 502.0 | | 498.1 |
Oceania and Africa | | 74.5 | | 79.5 |
| $ 7,315.7 | $ 7,166.3 |
NOTE 4 – OTHER (GAINS) AND LOSSES |
| Three months ended |
| | June 30 |
| 2022 | 2021 |
Net gain on foreign currency exchange differences | | | | $ | (2.5) | $ | (2.0) |
Other | | 0.1 | | (3.7) |
Other (gains) and losses | | | | $ | (2.4) | $ | (5.7) |
NOTE 5 – RESTRUCTURING, INTEGRATION AND ACQUISITION COSTS |
| Three months ended |
| | June 30 |
| 2022 | 2021 |
Integration and acquisition costs | | | | $ | 16.7 | $ | 5.4 |
Impairment of non-financial assets | 2.3 | | 2.1 |
Severances and other employee related costs | | — | | 1.3 |
Other costs | 2.5 | | 3.4 |
Total restructuring, integration and acquisition costs | | | | $ | 21.5 | $ | 12.2 |
For the three months ended June 30, 2022, restructuring, integration and acquisition costs associated with the L3H MT acquisition amounted to $9.5 million and the AirCentre acquisition amounted to $6.4 million. |
| | | | CAE First Quarter Report 2023 I 9 |
Notes to the Consolidated Interim Financial Statements |
NOTE 6 – FINANCE EXPENSE – NET |
Finance expense - net |
| Three months ended |
| | June 30 |
| 2022 | 2021 |
Finance expense: |
Long-term debt (other than lease liabilities) | $ | 30.7 | $ | 24.3 |
Lease liabilities | | 3.9 | | 3.9 |
Royalty obligations | | 2.9 | | 2.9 |
Employee benefits obligations | | 0.8 | | 1.3 |
Other | | 2.9 | | 1.7 |
Borrowing costs capitalized | | (2.1) | | (1.4) |
Finance expense | $ | 39.1 | $ | 32.7 |
Finance income: |
Loans and investment in finance leases | $ | (2.3) | $ | (2.1) |
Other | | (0.6) | | (2.0) |
Finance income | $ | (2.9) | $ | (4.1) |
Finance expense – net | $ | 36.2 | $ | 28.6 |
NOTE 7 – GOVERNMENT PARTICIPATION |
Government contributions, other than COVID-19 government support programs, were recognized as follows: |
| Three months ended |
| | June 30 |
| 2022 | 2021 |
Credited to non-financial assets | $ | 3.1 | $ | 2.8 |
Credited to income | | 5.9 | | 4.8 |
| $ | 9.0 | $ | 7.6 |
COVID-19 government support programsThe Company previously accessed government emergency relief measures and wage subsidy programs available around the world, mainly the Canada Emergency Wage Subsidy (CEWS) program. The Company's participation in the CEWS program ceased on June 5, 2021 and accordingly, the Company did not claim any CEWS benefits for wages and salary costs incurred subsequent to June 5, 2021. |
During the three months ended June 30, 2022, the Company received no government contributions related to COVID-19 support programs (2021 – $14.9 million received, mainly provided as a reimbursement of employee wages, of which $1.3 million were credited to non-financial assets and $13.6 million were credited to income). |
NOTE 8 – EARNINGS PER SHARE |
Earnings per share computationThe denominators for the basic and diluted earnings per share computations are as follows: |
| Three months ended |
| | June 30 |
| 2022 | 2021 |
Weighted average number of common shares outstanding | | | 317,093,423 293,601,934 |
Effect of dilutive stock options | | | | 1,086,027 | 2,184,855 |
Weighted average number of common shares outstanding |
for diluted earnings per share calculation | | | 318,179,450 295,786,789 |
For the three months ended June 30, 2022, options to acquire 2,229,865 common shares (2021 – 3,700) have been excluded from the above calculation since their inclusion would have had an anti-dilutive effect. |
10 I CAE First Quarter Report 2023 |
| | | | | | | Notes to the Consolidated Interim Financial Statements |
NOTE 9 – SUPPLEMENTARY CASH FLOWS INFORMATION |
Changes in non-cash working capital are as follows: |
Three months ended June 30 | 2022 | 2021 |
Cash (used in) provided by non-cash working capital: | | |
Accounts receivable | | | $ | (89.2) | | | $ | (21.8) |
Contract assets | | (0.4) | | (28.5) |
Inventories | | (40.2) | | 79.5 |
Prepayments | | (15.9) | | (1.9) |
Income taxes | | (4.5) | | (3.0) |
Accounts payable and accrued liabilities | | (98.0) | (179.0) |
Provisions | | (5.0) | | (2.7) |
Contract liabilities | | 22.9 | (106.8) |
| | | $ (230.3) | $ (264.2) |
Supplemental information: |
Three months ended June 30 | | | | | | 2022 | 2021 |
Interest paid | | | | | | $ | 33.5 | | | $ | 9.7 |
Interest received | | | | | | | 3.0 | | 4.1 |
Income taxes paid | | | | | | | 8.5 | | 14.4 |
NOTE 10 – 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 active market exists for a financial instrument, the Company determines the fair value of that instrument based on valuation 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 Company’s best estimates of market participant assumptions. Counterparty credit risk and the Company’s own credit risk are taken into account in estimating the fair value of financial assets and financial liabilities. The following assumptions and valuation methodologies have been used to measure the fair value of financial instruments:(i) |
The fair value of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their carrying values due to their short-term maturities; |
(ii) | The fair value of derivative instruments, which include forward contracts, swap agreements and embedded derivatives accounted for separately and is calculated as the present value of the estimated future cash flows using an appropriate interest rate yield curve and forward foreign exchange rate. Assumptions are based on market conditions prevailing at each reporting date. The fair value of derivative instruments reflect the estimated amounts that the Company would receive or pay to settle the contracts at the reporting date; |
(iii) The fair value of the equity investments, which does not have a readily available market value, is estimated using a discounted |
cash flow model, which includes some assumptions that are not based on observable market prices or rates; |
(iv) The fair value of non-current receivables is estimated based on discounted cash flows using current interest rates for instruments |
with similar risks and remaining maturities; |
(v) The fair value of long-term debts, royalties obligations and other non-current liabilities are estimated based on discounted cash |
flows using current interest rates for instruments with similar risks and remaining maturities; |
(vi) The fair value of the contingent considerations arising on business combinations are based on the estimated amount and timing |
of projected cash flows, the probability of the achievement of the criteria on which the contingency is based and the risk-adjusted discount rate used to present value the probability-weighted cash flows. |
Fair value hierarchyThe fair value hierarchy reflects the significance of the inputs used in making the measurements and has the following levels: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices |
| | | | | | in markets that are not active) or indirectly (i.e. quoted prices for similar assets or liabilities); |
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
Each type of fair value is categorized based on the lowest level input that is significant to the fair value measurement in its entirety. |
| | | | | | | | CAE First Quarter Report 2023 I 11 |
Notes to the Consolidated Interim Financial Statements |
The carrying values and fair values of financial instruments, by category, are as follows: |
| June 30 | March 31 |
| 2022 | 2022 |
| | | Level | Carrying value | Fair value | | | | Carrying value | Fair value |
Financial assets (liabilities) measured at FVTPL |
Cash and cash equivalents | | | Level 1 | $ | | 206.0 | $ | 206.0 | | | | $ | | | 346.1 | $ | 346.1 |
Restricted cash | | | Level 1 | | | 2.1 | | 2.1 | | | | | | | 1.9 | | | | | | | | 1.9 |
Equity swap agreements | | | Level 2 | | | (15.5) | | (15.5) | | | | | | | (13.0) | | (13.0) |
Forward foreign currency contracts | | | Level 2 | | | 6.4 | | 6.4 | | | | | | | 7.0 | | | | | | | | 7.0 |
Contingent consideration arising on business combinations | | | Level 3 | | | (3.9) | | (3.9) | | | | | | | (3.7) | | (3.7) |
Derivative assets (liabilities) designated in a hedge relationship |
Foreign currency and interest rate swap agreements | | | Level 2 | | | 15.0 | | 15.0 | | | | | | | 8.2 | | | | | | | | 8.2 |
Forward foreign currency contracts | | | Level 2 | | | 3.0 | | 3.0 | | | | | | | 8.3 | | | | | | | | 8.3 |
Financial assets (liabilities) measured at amortized cost |
Accounts receivable(1) | | | Level 2 | | | 595.1 | | 595.1 | | | | | | | 501.7 | | 501.7 |
Investment in finance leases | | | Level 2 | | | 133.9 | | 136.2 | | | | | | | 118.7 | | 124.4 |
Advances to a portfolio investment | | | Level 2 | | | 10.0 | | 10.0 | | | | | | | 10.5 | | 10.5 |
Other assets(2) | | | Level 2 | | | 24.2 | | 24.2 | | | | | | | 25.0 | | 25.0 |
Accounts payable and accrued liabilities(3) | | | Level 2 | | | (660.0) | | (660.0) | | | | | | | (696.6) | | (696.6) |
Total long-term debt(4) | | | Level 2 | | | (2,851.2) | | (2,825.6) | | | | | (2,658.8) | | (2,765.4) |
Other non-current liabilities(5) | | | Level 2 | | | (143.9) | | (142.3) | | | | | | | (151.8) | | (164.5) |
Financial assets measured at FVOCI |
Equity investments | | | Level 3 | | | 1.4 | | 1.4 | | | | | | | 1.4 | | | | | | | | 1.4 |
| | | | $ | | (2,677.4) $ | (2,647.9) $ | | | | (2,495.1) $ | (2,608.7) |
(1) | Includes trade receivables, accrued receivables and certain other receivables. |
(2) | Includes non-current receivables and certain other non-current assets. |
(3) | Includes trade accounts payable, accrued liabilities, interest payable and current royalty obligations. |
(4) | Excludes lease liabilities. The carrying value of long-term debt excludes transaction costs. |
(5) | Includes non-current royalty obligations and other non-current liabilities. |
During the three months ended June 30, 2022, there were no significant changes in level 3 financial instruments. |
NOTE 11 – RELATED PARTY TRANSACTIONS |
The Company’s outstanding balances with its equity accounted investees are as follows: |
| | | | | | | | June 30 | March 31 |
| | | | | | | | 2022 | 2022 |
Accounts receivable | | | | | | | | $ 47.6 | $ | 49.7 |
Contract assets | | | | | | | | 32.2 | | 23.0 |
Other non-current assets | | | | | | | | 12.0 | | 12.8 |
Accounts payable and accrued liabilities | | | | | | | | | 4.6 | | | | | | | | 5.1 |
Contract liabilities | | | | | | | | 40.3 | | 46.5 |
Other non-current liabilities | | | | | | | | | 1.5 | | | | | | | | 1.5 |
The Company’s transactions with its equity accounted investees are as follows: |
| | | | | | | | Three months ended |
| | June 30 |
| | | | | | | | 2022 | 2021 |
Revenue | | | | | $ | | | 42.3 | $ | 36.2 |
Purchases | | | | | | | | | 1.0 | | | | | | | | 0.8 |
Other income | | | | | | | | | 0.2 | | | | | | | | 0.3 |
12 I CAE First Quarter Report 2023 |