Table of Contents Consolidated Interim Financial Statements |
Consolidated income (loss) statement | 1 |
Consolidated statement of comprehensive income (loss) | 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 - Changes in accounting policies | 7 |
Note 3 - Business combinations and acquisition of investment in equity accounted investees | 7 |
Note 4 - Operating segments and geographic information | 9 |
Note 5 - Other (gains) and losses | 11 |
Note 6 - Restructuring, integration and acquisitions costs | 12 |
Note 7 - Debt facilities and finance expense - net | 12 |
Note 8 - Government participation | 13 |
Note 9 - Share capital and earnings per share | 13 |
Note 10 - Supplementary cash flows information | 14 |
Note 11 - Contingencies | 14 |
Note 12 - Fair value of financial instruments | 15 |
Note 13 - Related party transactions | 17 |
Note 14 - Event after the reporting period | 17 |
| | | Consolidated Interim Financial Statements |
Consolidated Income (Loss) Statement |
| |
| | Three months ended | | Six months ended |
| | | September 30 | September 30 | (Unaudited) |
(amounts in millions of Canadian dollars, except per share amounts) | 2021 | | | 2020 | 2021 | | 2020 |
Revenue | | 4 | 814.9 | $ | | 704.7 | | $ 1,567.6 | $ 1,255.2 |
Cost of sales | | | | | 513.7 | 1,126.2 | | | 956.2 |
Gross profit | | $ | 227.6 | $ | | 191.0 | | $ | 441.4 | | | | $ | 299.0 |
Research and development expenses | | | 30.7 | | 25.6 | | 54.2 | | | 45.7 |
Selling, general and administrative expenses | | | 122.1 | | 88.2 | | 228.0 | | | 182.1 |
Other (gains) and losses | | 5 | | (4.1) | | (2.7) | | (9.8) | | | 93.9 |
Share of after-tax (profit) loss of equity accounted investees | | 4 | | (11.8) | | 0.6 | | (20.1) | | | 8.3 |
Restructuring, integration and acquisition costs | | 6 | | 51.5 | | 51.1 | | 63.7 | | | 51.1 |
Operating income (loss) | | $ | 39.2 | $ | | 28.2 | | $ | 125.4 | | | | $ | (82.1) |
Finance expense – net | | 7 | | 35.0 | | 35.2 | | 63.6 | | | 70.3 |
Earnings (loss) before income taxes | | $ | 4.2 | $ | | | $ | 61.8 | | | | $ (152.4) |
Income tax recovery | | | (13.0) | | (1.0) | | (2.7) | | | (36.4) |
Net income (loss) | | $ | 17.2 | $ | | | $ | 64.5 | | | | $ (116.0) |
Attributable to: | | | |
Equity holders of the Company | | $ | 14.0 | $ | | | $ | 60.4 | | | | $ (115.8) |
Non-controlling interests | | | 3.2 | | (0.8) | | 4.1 | | | (0.2) |
Earnings (loss) per share attributable to equity holders of the Company |
Basic and diluted | | 9 | $ | 0.04 | $ | | (0.02) | | $ | 0.20 | | | | $ | (0.44) |
The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
| | | | | CAE Second Quarter Report 2022 I 1 |
Consolidated Interim Financial Statements |
Consolidated Statement of Comprehensive Income (Loss) |
| Three months ended | | Six months ended |
| | September 30 | September 30 | (Unaudited) |
(amounts in millions of Canadian dollars) | 2021 | | | 2020 | 2021 | | 2020 |
Net income (loss) | $ | 17.2 | $ | | (6.0) | | $ | 64.5 | | | | $ | (116.0) |
Items that may be reclassified to net income (loss) |
Foreign currency exchange differences on translation of foreign operations | $ | 49.4 | $ | | (13.7) | | $ | 11.8 | | | | $ | (119.6) |
Net (loss) gain on hedges of net investment in foreign operations | (21.9) | | | 25.1 | (7.5) | | 72.2 |
Reclassification to income of foreign currency exchange differences | (1.0) | | | (10.7) | (3.2) | | (16.5) |
Net (loss) gain on cash flow hedges | (3.9) | | | 13.1 | (17.7) | | 43.4 |
Reclassification to income of losses (gains) on cash flow hedges | 3.8 | | | (7.4) | 0.1 | | (12.4) |
Income taxes | (5.6) | | | (3.6) | 0.5 | | (11.0) |
| $ | 20.8 | $ | | 2.8 | | $ | (16.0) | | | | $ | (43.9) |
Items that will never be reclassified to net income (loss) |
Remeasurement of defined benefit pension plan obligations | $ | 32.5 | $ | | 15.1 | | $ | 36.1 | | | | $ | (107.9) |
Net gain on financial assets carried at fair value through OCI | — | | | 0.1 | — | | — |
Income taxes | (8.6) | | | (3.8) | (9.5) | | 28.5 |
| $ | 23.9 | $ | | 11.4 | | $ | 26.6 | | | | $ | (79.4) |
Other comprehensive income (loss) | $ | 44.7 | $ | | 14.2 | | $ | 10.6 | | | | $ | (123.3) |
Total comprehensive income (loss) | $ | 61.9 | $ | | 8.2 | | $ | 75.1 | | | | $ | (239.3) |
Attributable to: |
Equity holders of the Company | $ | 58.0 | $ | | 9.4 | | $ | 70.8 | | | | $ | (236.3) |
Non-controlling interests | 3.9 | | | (1.2) | 4.3 | | (3.0) |
The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
2 I CAE Second Quarter Report 2022 |
| | | | | Consolidated Interim Financial Statements |
Consolidated Statement of Financial Position (Unaudited) | September 30 | March 31 |
(amounts in millions of Canadian dollars)Notes | 2021 | 2021 |
Assets |
Cash and cash equivalents | $ | | | 340.4 | $ | 926.1 |
Restricted funds for subscription receipts deposit | | | 9 | — | 700.1 |
Accounts receivable | | | | 559.1 | 518.6 |
Contract assets | | | | 588.9 | 461.9 |
Inventories | | | | 537.6 | 647.8 |
Prepayments | | | | 59.3 | 52.1 |
Income taxes recoverable | | | | 53.1 | 39.8 |
Derivative financial assets | | | | 18.2 | 32.2 |
Total current assets | $ 2,156.6 | $ 3,378.6 |
Property, plant and equipment | | | | 2,111.9 | 1,969.4 |
Right-of-use assets | | | | 357.9 | 308.5 |
Intangible assets | | | | 3,431.1 | 2,055.8 |
Investment in equity accounted investees | | | | 445.0 | 422.2 |
Deferred tax assets | | | | 119.5 | 104.9 |
Derivative financial assets | | | | 7.2 | 13.2 |
Other non-current assets | | | | 523.4 | 495.8 |
Total assets | $ 9,152.6 | $ 8,748.4 |
Liabilities and equity |
Accounts payable and accrued liabilities | $ | | | 796.1 | $ | 945.6 |
Provisions | | | | 42.0 | 52.6 |
Income taxes payable | | | | 16.2 | 16.2 |
Contract liabilities | | | | 634.6 | 674.7 |
Current portion of long-term debt | | | 7 | 205.7 | 216.3 |
Liabilities for subscription receipts | | | 9 | — | 714.1 |
Derivative financial liabilities | | | | 8.7 | 13.8 |
Total current liabilities | $ 1,703.3 | $ 2,633.3 |
Provisions | | | | 28.8 | 30.9 |
Long-term debt | | | 7 | 2,616.2 | 2,135.2 |
Royalty obligations | | | | 149.3 | 141.8 |
Employee benefits obligations | | | | 198.1 | 222.2 |
Deferred tax liabilities | | | | 93.7 | 123.5 |
Derivative financial liabilities | | | | 2.9 | 3.1 |
Other non-current liabilities | | | | 341.7 | 245.6 |
Total liabilities | $ 5,134.0 | $ 5,535.6 |
Equity |
Share capital | $ 2,219.7 | $ 1,516.2 |
Contributed surplus | | | | 37.3 | 22.5 |
Accumulated other comprehensive income | | | | 56.7 | 58.1 |
Retained earnings | | | | 1,630.7 | 1,543.7 |
Equity attributable to equity holders of the Company | $ 3,944.4 | $ 3,140.5 |
Non-controlling interests | | | | 74.2 | 72.3 |
Total equity | $ 4,018.6 | $ 3,212.8 |
Total liabilities and equity | $ 9,152.6 | $ 8,748.4 |
The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
| | | | | CAE Second Quarter Report 2022 I 3 |
| | | | | | | | | | | | | | Consolidated Interim Financial Statements |
| | | | | | | | | | | | |
al | y |
| | | | | 5.8 | (2.4) | | | | | 2.4 | 7.5 |
| | 64.5 | 10.6 | 75.1 | 22.8 | | 14.8 | | Total |
Tot | | | | 689.7 | | | | | equity |
| equit | | | | | | | | | (116.0) | (123.3) | (239.3) |
| 3,212.8 | | | | | | 4,018.6 | | 2,578.3 | | | 2,348.9 |
| | | | | | | | | | | | |
| $ | $ | $ | | | | $ | | $ | $ | $ | $ |
| | | | | | | | | | | | |
| | 4.1 | 0.2 | 4.3 | — | — | — | — | | | | | — | — |
| ests | 72.3 | | | | | (2.4) | 74.2 | olling | ests | 88.6 | (0.2) | (2.8) | (3.0) | 85.6 |
olling |
| inter | | | | | | | | inter |
contrcontr |
| $ | $ | $ | | | | $ | | $ | $ | $ | $ |
Non-Non- |
| | | | | | | | | | | | |
| | | | | 5.8 | — | | | | | 2.4 | 7.5 |
panyTotal | 60.4 | 10.4 | 70.8 | 22.8 | | 14.8 | | pany | Total |
| | | | 689.7 | | | | | | (115.8) | (120.5) | (236.3) |
| 3,140.5 | | | | | | 3,944.4 | | 2,489.7 | | | 2,263.3 |
| | | | | | | | | | | | |
| $ | $ | $ | | | | $ | | $ | $ | $ | $ |
| | | | | | | | s of the Com | | | | |
s of the Com |
| | | | — | — | — | — | — | | | | | — | — |
| nings | 60.4 | 26.6 | 87.0 | | | | | | nings | (79.4) |
| | | | | | | | | | (115.8) | (195.2) |
| ear | 1,543.7 | | | | | | 1,630.7 | Retained | ear | 1,590.1 | | | 1,394.9 |
Retained | | | | | | | | | | | | |
| $ | $ | $ | | | | $ | | $ | $ | $ | $ |
| | | | | | | | | | | |
| e | | | | | | | | e |
| | — | | — | — | — | — | | | | — | — | — |
| 58.1 | (16.2) | (16.2) | | | 14.8 | 56.7 | | | (41.1) | (41.1) |
| | | | | | | | ibutable to equity holder | incom | 193.2 | | | 152.1 |
ibutable to equity holderincom |
ehensive | | | | | | | | ehensive |
Attrpr | $ | $ | $ | | | | $ | Attr | ulated other | pr | $ | $ | $ | $ |
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comcom |
AccumAccum |
| | | | | | | | | | | |
| | — | — | — | | 5.8 | — | — | | | | — | — | — | 7.5 |
| plus | 22.5 | | | 12.5 | (3.5) | | | 37.3 | | plus | 26.9 | | (0.4) | 34.0 |
ibutedibutedsur |
| sur |
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| | | | | | | | | | | | | tatements. |
es | | — | — | — | | — | — | — | | es | | — | — | — | 2.8 | — |
| value | | | 677.2 | 26.3 | | | | Stated | value | 679.5 | | | 682.3 |
Stated |
| 1,516.2 | | | | | | 2,219.7 |
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| shar | | | | | | | | | | | | ted Interim Financial S |
| | | | | | | | | | | 167,500 |
Num | | | | 1,032,293 | | | | Num |
| | | | 22,400,000 |
| 293,355,463 | | | | | | 316,787,756 | | 265,619,627 | | | 265,787,127 |
| | | | 9 | | 3 |
| Notes |
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| | | | subscr | ansfer | to business com | ansactions with non- |
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| | | | | | | | | | | | | | 4 I CAE Second Quarter Report 2022 |
| | | | | | Consolidated Interim Financial Statements |
Consolidated Statement of Cash Flows |
(Unaudited) |
Six months ended September 30 |
(amounts in millions of Canadian dollars)Notes | 2021 | 2020 |
Operating activities |
Net income (loss) | | | | $ | 64.5 | | | $ | (116.0) |
Adjustments for: |
Depreciation and amortization | 4 | 149.7 | 161.8 |
Impairment of non-financial assets | | 11.3 | 128.3 |
Share of after-tax (profit) loss of equity accounted investees | | (20.1) | 8.3 |
Deferred income taxes | | (8.9) | (46.1) |
Investment tax credits | | (13.3) | (8.6) |
Share-based payments expense | | (1.8) | 12.9 |
Defined benefit pension plans | | 11.9 | 9.6 |
Other non-current liabilities | | (15.8) | (9.2) |
Derivative financial assets and liabilities – net | | 15.6 | (30.1) |
Other | | 20.2 | 29.9 |
Changes in non-cash working capital | 10 | (311.5) | (183.6) |
Net cash used in operating activities | | | | $ | (98.2) | | | $ | (42.8) |
Investing activities |
Business combinations, net of cash acquired | 3 | | | $ (1,376.4) | $ | — |
Acquisition of investment in equity accounted investees | 3 | (4.3) | — |
Additions to property, plant and equipment | 4 | (120.6) | (33.2) |
Proceeds from disposal of property, plant and equipment | | 7.9 | 0.2 |
Additions to intangible assets | 4 | (38.9) | (28.7) |
Net (payments to) proceeds from equity accounted investees | | (0.4) | 0.9 |
Dividends received from equity accounted investees | | 0.6 | 10.0 |
Other | | (2.4) | (0.1) |
Net cash used in investing activities | | | | $ (1,534.5) | $ | (50.9) |
Financing activities |
Net repayment of borrowing under revolving credit facilities | | | | $ | — | | | $ | (555.4) |
Proceeds from long-term debt | 7 | 414.5 | 17.3 |
Repayment of long-term debt | | (21.9) | (11.7) |
Repayment of lease liabilities | | (32.4) | (39.0) |
Net proceeds from the issuance of common shares | | 691.8 | 2.4 |
Other | | (1.1) | (0.7) |
Net cash provided by (used in) financing activities | | | | $ | 1,050.9 | | | $ | (587.1) |
Effect of foreign currency exchange differences on cash and cash equivalents | | | | $ | (3.9) | | | $ | (7.7) |
Net decrease in cash and cash equivalents | | | | $ | (585.7) | | | $ | (688.5) |
Cash and cash equivalents, beginning of period | | 926.1 | 946.5 |
Cash and cash equivalents, end of period | | | | $ | 340.4 | | | $ | 258.0 |
The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
| | | | | | CAE Second Quarter Report 2022 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 November 11, 2021. NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Nature of operationsCAE is a high technology company providing solutions to make the world a safer place. |
CAE Inc. and its subsidiaries’ (or the Company) operations are managed through three segments: (i) |
Civil Aviation Training Solutions – Provides comprehensive training solutions for flight, cabin, maintenance and ground personnel in commercial, business and helicopter aviation, a 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) | Defence and Security – Provides training and mission support solutions for defence forces across multi-domain operations, and for government organizations responsible for public safety; |
(iii) Healthcare – Provides integrated education and training solutions to healthcare students and clinical professionals across their |
career life cycle, including surgical 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 Training Solutions 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 Defence 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 federal government’s budget cycle, which in the U.S. is based on a September year-end. |
However, due to the impact of 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, 2021, except for the changes in accounting policies described in Note 2. These policies have been consistently applied to all periods presented. 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, 2021. 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 consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. 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, 2021. |
The uncertainties created by the COVID-19 pandemic required the use of judgements and estimates in certain areas, such as impairment of financial and non-financial assets and revenue recognition. The future impact of the COVID-19 pandemic increases the risk, in future reporting periods, of material adjustments to the carrying amount of the Company’s net assets. |
6 I CAE Second Quarter Report 2022 |
| | | Notes to the Consolidated Interim Financial Statements |
NOTE 2 – CHANGES IN ACCOUNTING POLICIES |
New and amended standards adopted by the Company |
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest rate benchmark reform – Phase 2In August 2020, the IAS issued an amendment to IFRS 9 – Financial instruments, IAS 39 – Financial instruments: recognition and measurement, IFRS 7 – Financial instrument: disclosures, IFRS 4 – Insurance contracts and IFRS 16 – Leases. The amendments address issues that arise from implementation of Interbank Offered Rate (IBOR) reform, where IBORs are replaced with alternative benchmark rates. For financial instruments at amortized cost, the amendments introduce a practical expedient such that if a change in the contractual cash flows is as a result of IBOR reform and occurs on an economically equivalent basis, the change will be accounted for by updating the effective interest rate with no immediate gain or loss recognized. The amendments also provide additional temporary relief from applying specific IAS 39 and IFRS 9 hedge accounting requirements to hedging relationships affected by IBOR reform and will require disclosure of information about new risks arising from the reform and how the transition to alternative benchmark rates will be managed. |
This amendment to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 was adopted April 1, 2021. The Company has elected to apply the practical expedient and will apply to transactions occurring subsequent to April 1, 2021. The Company’s treasury department is managing the transition plan so that the existing contracts that refer to IBORs shall be adjusted to ensure contract continuity and address term and credit differences between IBORs and alternative reference rates. The adoption of this amendment had no material impact on the consolidated interim financial statements. |
NOTE 3 – BUSINESS COMBINATIONS AND ACQUISITION OF INVESTMENT IN EQUITY ACCOUNTED INVESTEES |
Business combinations |
L3Harris Technologies’ Military Training businessOn July 2, 2021, the Company concluded the previously announced acquisition of L3Harris Technologies’ Military Training business (L3H MT) for cash consideration of $1,337.7 million [US$1,075.3 million], subject to additional purchase price adjustments. L3H MT includes Link Simulation & Training, Doss Aviation and AMI. Link Simulation & Training is one of the leading providers of military training solutions in the U.S., Doss Aviation is the provider of initial flight training to the United States Air Force, and AMI is a design and manufacturing facility for simulator hardware. The acquisition expands the Company’s position as a platform-agnostic training systems integrator by diversifying its training and simulation leadership in the air domain, complementing land and naval training solutions, and enhancing its training and simulation capabilities in space and cyber. |
In March 2021, in order to mitigate the potential impact on the purchase price of variations in the foreign exchange rate, the Company entered into forward foreign currency contracts to hedge a portion of the purchase price of the L3H MT acquisition (US$800 million). The Company applied hedge accounting and the change in fair value of these financial instruments prior to the L3H MT acquisition date was recorded in other comprehensive income. On July 2, 2021, these financial instruments were exercised in connection with the closing of the L3H MT acquisition, and the realized cash flow hedge losses of $17.1 million, less income tax recovery of $2.3 million, were transferred from accumulated other comprehensive income and included as an adjustment to the purchase consideration. |
The preliminary determination of the fair value of the net assets acquired and liabilities assumed arising from the L3H MT acquisition are as follows: |
| L3H MT |
Current assets | | $ | 122.9 |
Current liabilities | | (125.0) |
Property, plant and equipment | | 97.4 |
Right-of-use assets | | 31.4 |
Intangible assets | | 1,320.4 |
Deferred tax | | 39.7 |
Other non-current assets | | 7.7 |
Long-term debt, including current portion | | (33.9) |
Other non-current liabilities | | (103.1) |
Total purchase consideration, including the hedge of the purchase price | | $ | 1,357.5 |
Short-term payable | | (5.0) |
Total cash consideration paid on acquisition date | | $ | 1,352.5 |
The preliminary fair value of the acquired intangible assets amounts to $1,320.4 million and consists of goodwill of $996.7 million ($860.5 million is deductible for tax purposes), customer relationships of $217.7 million and technology of $106.0 million. |
The fair value and the gross contractual amount of the acquired accounts receivable were $49.2 million. |
Total acquisition costs incurred relating to this acquisition are included in Restructuring, integration and acquisition costs in the consolidated income statement (Note 6). |
| | | | CAE Second Quarter Report 2022 I 7 |
Notes to the Consolidated Interim Financial Statements |
The revenue and adjusted segment operating income included in the consolidated income statement from L3H MT since the acquisition date was $135.1 million and $16.2 million respectively. Had L3H MT been consolidated from April 1, 2021, the consolidated income statement would have shown revenue and adjusted segment operating income of approximately $274.2 million and $32.4 million respectively. These pro-forma amounts are estimated based on the operations of the acquired businesses prior to the business combinations by the Company and assuming that the purchase price allocations were effective April 1, 2021. |
The net assets acquired, including intangibles, of L3H MT are included in the Defence and Security segment. |
The purchase price allocation is preliminary as at September 30, 2021. |
Other fiscal 2022 business combinationsRB Group On April 1, 2021, the Company acquired the remaining 79% equity interest in the RB Group, a leading provider of fully integrated solutions that modernize the way airlines and business aircraft operators interact with their crew. This acquisition further supports the Company’s expansion into digital flight crew management in its goal to drive additional software-enabled Civil aviation services. Prior to this transaction, the Company's 21% ownership interest in the RB Group was accounted for using the equity method. |
GlobalJet ServicesOn June 10, 2021, the Company acquired GlobalJet Services (GlobalJet), a provider of aviation maintenance training that is recognized around the world for its services for both business and helicopter sectors. This acquisition expands the Company’s aircraft platform addressability in the maintenance training market through world-class, regulatory approved training programs. |
Medicor Lab Inc. On July 5, 2021, the Company acquired the shares of Medicor Lab Inc. (Medicor), a company which specializes in task trainer and realistic synthetic skin production. This acquisition augments the Company’s portfolio of products and expands its capabilities to offer improved quality simulators for a better customer experience. |
The aggregate purchase price for the acquisitions of the RB Group, GlobalJet and Medicor consist of cash consideration (net of cash acquired) of $19.0 million, a long |
| ‑term payable of $1.2 million and a contingent consideration of up to $4.0 million if certain targets are |
met, and are mainly allocated to goodwill and intangible assets. |
The net assets acquired, including intangibles, of the RB Group and GlobalJet are included in the Civil Aviation Training Solutions segment, and those of Medicor are included in the Healthcare segment. The purchase price allocations of the RB Group, GlobalJet and Medicor are preliminary as at September 30, 2021. |
OtherDuring the six months ended September 30, 2021, the Company completed its final assessment of the fair value of assets acquired and liabilities assumed of Flight Simulation Company B.V. and Merlot Aero Limited acquired in fiscal 2021. |
During the six months ended September 30, 2021, adjustments to preliminary purchase price allocations of acquisitions realized in fiscal 2021 resulted in increases of intangible assets of $19.1 million, current liabilities of $8.5 million, and deferred tax assets of $4.8 million, and a decrease of current assets of $15.4 million. |
During the six months ended September 30, 2021, net cash considerations of $4.9 million were paid for acquisitions realized in prior years. |
Investment in equity accounted investees |
SkyWarrior Flight Training LLCIn August 2021, the Company acquired a 37% equity interest in SkyWarrior Flight Training LLC (SkyWarrior) for cash consideration of $4.3 million. SkyWarrior is a flight training operation which primarily delivers Phase 1 initial flight training to U.S. and international military customers. |
8 I CAE Second Quarter Report 2022 |
| | Notes to the Consolidated Interim Financial Statements |
NOTE 4 – 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 segmentIn the fourth quarter of fiscal 2021, the Company revised its segment profitability measure to better reflect how management evaluates the performance of its operating segments. The Company has retrospectively revised the comparative period to conform to the current definition and presentation. |
The 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 the operating income and excluding restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or material 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. |
| Civil Aviation | Defence | | | |
| Training Solutions | and Security | Healthcare | | Total |
Three months ended September 30 | 2021 | | | | | 2020 | 2021 | 2020 | | | | | | 2021 | 2020 | 2021 | 2020 |
External revenue | $ 362.1 $ 364.5 $ 417.9 $ 303.2 $ | | | | | | | 34.9 $ | 37.0 | $ 814.9 | $ 704.7 |
Depreciation and amortization | | 55.4 | | | | | 58.9 | 20.0 | 13.3 | 3.2 | 4.0 | | 78.6 | | 76.2 |
Impairment of non-financial assets – net | | 8.1 | | | | | 24.4 | 0.8 | 4.2 | 0.1 | 1.0 | | 9.0 | | 29.6 |
Impairment of accounts receivable – net | | 0.4 | | | | | 0.8 | — | | | | | | | — | — | — | | 0.4 | | 0.8 |
Share of after-tax profit (loss) of equity accounted investees | | 10.9 | | | | | (0.9) | 0.9 | 0.3 | — | — | | 11.8 | | (0.6) |
Operating income (loss) | | 49.9 | | | | | 15.5 | (8.9) | 11.4 | (1.8) | 1.3 | | 39.2 | | 28.2 |
Adjusted segment operating income (loss) | | 65.3 | | | | | 51.9 | 26.7 | 24.2 | (1.3) | 3.2 | | 90.7 | | 79.3 |
| Civil Aviation | Defence | | | |
| Training Solutions | and Security | Healthcare | | Total |
Six months ended September 30 | 2021 | | | | | 2020 | 2021 | 2020 | | | | | | 2021 | 2020 | 2021 | 2020 |
External revenue | $ 795.0 $ 612.5 $ 706.1 $ 583.4 $ | | | | | | | 66.5 $ | 59.3 | $ 1,567.6 | $ 1,255.2 |
Depreciation and amortization | | 110.9 | | | | | 126.5 | 32.2 | 27.6 | 6.6 | 7.7 | | 149.7 | | 161.8 |
Impairment of non-financial assets – net | | 10.5 | | | | | 101.6 | 1.0 | 25.6 | (0.2) | 1.1 | | 11.3 | | 128.3 |
Impairment of accounts receivable – net | | (0.6) | | | | | 5.5 | — | | | | | | | — | — | 0.1 | | (0.6) | 5.6 |
Share of after-tax profit (loss) of equity accounted investees | | 15.8 | | | | | (8.5) | 4.3 | 0.2 | — | — | | 20.1 | | (8.3) |
Operating income (loss) | | 108.9 | | | | | (82.4) | 13.7 | 2.2 | 2.8 | (1.9) | 125.4 | | (82.1) |
Adjusted segment operating income (loss) | | 135.0 | | | | | 35.7 | 50.4 | 41.5 | 3.7 | — | | 189.1 | | 77.2 |
Reconciliation of adjusted segment operating income is as follows: |
| Civil Aviation | Defence | | | |
| Training Solutions | and Security | Healthcare | | Total |
Three months ended September 30 | 2021 | | | | | 2020 | 2021 | 2020 | | | | | | 2021 | 2020 | 2021 | 2020 |
Operating income (loss) | $ | 49.9 $ | | | | | 15.5 $ | (8.9) $ | 11.4 $ | (1.8) $ | 1.3 | $ | 39.2 | $ | 28.2 |
Restructuring, integration and acquisition costs (Note 6) | | 15.4 | | | | | 36.4 | 35.6 | 12.8 | 0.5 | 1.9 | | 51.5 | | 51.1 |
Adjusted segment operating income (loss) | $ | 65.3 $ | | | | | 51.9 $ | 26.7 $ | 24.2 $ | (1.3) $ | 3.2 | $ | 90.7 | $ | 79.3 |
| | | CAE Second Quarter Report 2022 I 9 |
| | | | | Notes to the Consolidated Interim Financial Statements |
Civil Aviation | Defence | | | |
Training Solutions | and Security | Healthcare | | Total |
| | | | | Six months ended September 30 | 2021 | | | | | | 2020 | 2021 | 2020 | | | | | | | 2021 | 2020 | 2021 | 2020 |
| | | | | Operating income (loss) | $ 108.9 $ (82.4) $ | | | | | | | 13.7 $ | 2.2 $ | 2.8 $ | (1.9) $ 125.4 | | $ (82.1) |
| | | | | Restructuring, integration and acquisition costs (Note 6) | | 26.1 | | | | | | 36.4 | 36.7 | 12.8 | 0.9 | 1.9 | | 63.7 | | 51.1 |
| | | | | Impairments and other gains and losses incurred |
| | | | | in relation to the COVID-19 pandemic | | — | | | | | | 81.7 | — | 26.5 | — | — | | — | | 108.2 |
| | | | | Adjusted segment operating income (loss) | $ 135.0 $ | | | | | | 35.7 $ | 50.4 $ | 41.5 $ | 3.7 $ | — | $ 189.1 | $ | 77.2 |
| | | | | Capital expenditures by segment, which consist of additions to property, plant and equipment and intangible assets, are as follows: |
| Three months ended | | Six months ended |
| | | | | | | | | September 30 | September 30 |
| 2021 | 2020 | 2021 | 2020 |
| | | | | Civil Aviation Training Solutions | | $ | 52.6 | | | | | | | $ | 16.5 | $ | 132.6 | $ | 36.5 |
| | | | | Defence and Security | | 9.2 | 7.0 | 18.1 | 11.7 |
| | | | | Healthcare | | 4.5 | 2.6 | 8.8 | 13.7 |
| | | | | Total capital expenditures | | $ | 66.3 | | | | | | | $ | 26.1 | $ | 159.5 | $ | 61.9 |
| | | | | 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: |
| | September 30 | | March 31 |
| | | | | | 2021 | 2021 |
| | | | | Assets employed | | |
| | | | | Civil Aviation Training Solutions | $ 4,822.0 | | $ 4,847.5 |
| | | | | Defence and Security | 3,196.4 | 1,561.9 |
| | | | | Healthcare | | 273.8 | | 250.2 |
| | | | | Assets not included in assets employed | | 860.4 | 2,088.8 |
| | | | | Total assets | $ 9,152.6 | | $ 8,748.4 |
| | | | | Liabilities employed | | | | | | | | |
| | | | | Civil Aviation Training Solutions | $ | 884.5 | $ 1,039.4 |
| | | | | Defence and Security | | 730.2 | | 540.5 |
| | | | | Healthcare | | 63.7 | | 159.3 |
| | | | | Liabilities not included in liabilities employed | 3,455.6 | 3,796.4 |
| | | | | Total liabilities | $ 5,134.0 | | $ 5,535.6 |
| | | | | Products and services informationThe Company's revenue from external customers for its products and services are as follows: |
| Three months ended | | Six months ended |
| September 30 | | | September 30 |
| 2021 | | | | | | | 2020 | 2021 | 2020 |
| | | | | Products | | $ | 319.3 | | | | | | | | $ | 284.5 | $ | 653.2 | $ | 474.6 |
| | | | | Training and services | | | 495.6 | | | | | | | | 420.2 | | 914.4 | $ | 780.6 |
| | | | | Total external revenue | | $ | 814.9 | | | | | | | | $ | 704.7 | $ 1,567.6 | | $ 1,255.2 |
| | | | | |
| | | | | 10 I CAE Second Quarter Report 2022 |
Notes to the Consolidated Interim Financial Statements |
NOTE 6 – RESTRUCTURING, INTEGRATION AND ACQUISITION COSTS |
| Three months ended | | Six months ended |
| | September 30 | September 30 |
| 2021 | | | 2020 | 2021 | | 2020 |
Integration and acquisition costs | | | | | | $ | 38.3 | $ | | — | | | $ | 43.7 | | | | | $ | — |
Impairment of non-financial assets | | 7.8 | | | 23.8 | 9.9 | | | 23.8 |
Severances and other employee related costs | | 0.7 | | | 19.9 | 2.0 | | | 19.9 |
Other costs | | 4.7 | | | 7.4 | 8.1 | | | 7.4 |
Total restructuring, integration and acquisition costs | | | | | | $ | 51.5 | $ | | 51.1 | | | $ | 63.7 | | | | | $ | 51.1 |
On August 12, 2020, the Company announced that it would be taking additional measures to best serve the market by optimizing its global asset base and footprint and adjusting its business to correspond with the expected level of demand and the structural efficiencies that will be enduring. As a result of these measures, the Company has implemented a restructuring program consisting mainly of real estate costs, asset relocations and other direct costs related to the optimization of its footprint and employee termination benefits, which have been carried out throughout fiscal 2021 and into fiscal 2022. |
Impairment of non-financial assets incurred in relation to this restructuring program primarily includes impairment of property, plant and equipment of training devices determined to be in surplus, intangible assets related to the termination of certain product offerings, and buildings and right-of-use assets related to leased real estate facilities to align with the optimization of the Company’s footprint and asset base. |
For the three and six months ended September 30, 2021, integration and acquisition costs associated with the L3H MT acquisition (Note 3) amounted to $35.7 million and $36.9 million, respectively. |
NOTE 7 – DEBT FACILITIES AND FINANCE EXPENSE – NET |
Issuance of term loans On July 2, 2021, concurrent with the completion of the L3H MT acquisition (Note 3), the Company entered into unsecured term loan agreements for an aggregate amount of US$300.0 million, which consists of a first tranche of US$175.0 million due in 2023 and a second tranche of US$125.0 million due in 2025, bearing interest at variable rates. |
Revolving credit facility extensionIn September 2021, the Company extended the maturity date of its US$850.0 million unsecured revolving credit facility until September 29, 2026. |
Finance expense - net |
| Three months ended | | Six months ended |
| | September 30 | September 30 |
| 2021 | | | 2020 | 2021 | | 2020 |
Finance expense: |
Long-term debt (other than lease liabilities) | $ | 26.5 | $ | | 24.7 | | | $ | 50.8 | | | | | $ | 51.7 |
Lease liabilities | | 4.3 | | | 6.0 | | 8.2 | | | 11.5 |
Royalty obligations | | 2.7 | | | 2.6 | | 5.6 | | | 5.1 |
Employee benefits obligations | | 1.3 | | | 1.6 | | 2.6 | | | 3.2 |
Other | | 5.1 | | | 3.9 | | 6.8 | | | 6.4 |
Borrowing costs capitalized | | (1.5) | | | (0.6) | | (2.9) | | | (1.3) |
Finance expense | $ | 38.4 | $ | | 38.2 | | | $ | 71.1 | | | | | $ | 76.6 |
Finance income: |
Loans and investment in finance leases | $ | (2.7) | $ | | (2.6) | | | $ | (4.8) | | | | | $ | (5.2) |
Other | | (0.7) | | | (0.4) | | (2.7) | | | (1.1) |
Finance income | $ | (3.4) | $ | | (3.0) | | | $ | (7.5) | | | | | $ | (6.3) |
Finance expense – net | $ | 35.0 | $ | | 35.2 | | | $ | 63.6 | | | | | $ | 70.3 |
12 I CAE Second Quarter Report 2022 |
| Notes to the Consolidated Interim Financial Statements |
NOTE 8 – GOVERNMENT PARTICIPATION |
Government contributions, other than COVID-19 government support programs, were recognized as follows: |
| Three months ended | | Six months ended |
| | September 30 | September 30 |
| 2021 | | | 2020 | 2021 | | 2020 |
Credited to non-financial assets | $ | 3.1 | $ | | 5.3 | | $ | 6.5 | | | | $ | 8.7 |
Credited to income | | 4.7 | | | 5.5 | | 8.9 | | | 10.7 |
| $ | 7.8 | $ | | 10.8 | | $ | 15.4 | | | | $ | 19.4 |
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 September 30, 2020, the Company received government contributions related to COVID-19 support programs, mainly provided as a reimbursement of employee wages, in the amount of $41.9 million, of which $6.7 million were credited to non-financial assets and $35.2 million were credited to income. During the six months ended September 30, 2021, government contributions related to COVID-19 support programs totaled $14.9 million (2020 – $98.6 million), of which $1.3 million (2020 |
| | | | | | | | ‑ $19.0 million) were credited to non-financial assets and $13.6 million (2020 – $79.6 million) were credited to income. |
New financial participation agreements In September 2021, the Company concluded new financial participation agreements with the Government of Canada and the Government of Québec who will fund up to $190.0 million and $150.0 million, respectively, in the form of partially repayable loans for eligible spending related to R&D projects. The investments will fund Project Resilience, a plan to invest in R&D innovations over the next five years with the aim to develop technologies of the future, including digitally immersive solutions using data ecosystems and artificial intelligence in Civil Aviation, Defence and Security and Healthcare. |
NOTE 9 – SHARE CAPITAL AND EARNINGS PER SHARE |
Share capitalIssuance of common shares upon conversion of subscription receiptsOn July 2, 2021, concurrent with the completion of the L3H MT acquisition (Note 3), 22,400,000 outstanding subscription receipts were converted into CAE common shares in accordance with the terms of the subscription receipts, on a one-for-one basis. Proceeds from the issuance of the subscription receipts of $700.0 million together with interest earned of $0.4 million were released from escrow and used to fund the L3H MT acquisition. Total issuance-related costs amounted to $31.0 million, less income tax recovery of $8.2 million. |
Earnings per share computationThe denominators for the basic and diluted earnings per share computations are as follows: |
| Three months ended | | Six months ended |
| September 30 | | September 30 |
| 2021 | | | 2020 | 2021 | | 2020 |
Weighted average number of common shares outstanding | | | | | | | | | 316,517,351 265,781,223 305,122,253 265,719,079 |
Effect of dilutive stock options | | | | | | | | | | 2,156,603 | — | | 2,169,822 | — |
Weighted average number of common shares outstanding |
for diluted earnings per share calculation | | | | | | | | | 318,673,954 265,781,223 307,292,075 265,719,079 |
For the three months ended September 30, 2021, options to acquire 3,700 common shares (2020 – 6,566,429) have been excluded from the above calculation since their inclusion would have had an anti-dilutive effect. For the six months ended September 30, 2021, stock options to acquire 3,700 common shares (2020 – 4,236,929) have been excluded from the above calculation since their inclusion would have had an anti-dilutive effect. |
| | | | CAE Second Quarter Report 2022 I 13 |
Notes to the Consolidated Interim Financial Statements |
NOTE 10 – SUPPLEMENTARY CASH FLOWS INFORMATION |
Changes in non-cash working capital are as follows: |
Six months ended September 30 | 2021 | 2020 |
Cash (used in) provided by non-cash working capital: | | |
Accounts receivable | | | $ | 18.1 | | | $ | 13.5 |
Contract assets | | (55.3) | | 51.4 |
Inventories | | 102.0 | (104.2) |
Prepayments | | (6.3) | | (6.0) |
Income taxes | | (28.1) | | 1.5 |
Accounts payable and accrued liabilities | (203.8) | | (91.5) |
Provisions | | (8.4) | | 12.0 |
Contract liabilities | (129.7) | | (60.3) |
| | | $ (311.5) | $ (183.6) |
Supplemental information: |
Six months ended September 30 | | | | | | 2021 | 2020 |
Interest paid | | | | | | $ | 40.8 | | | $ | 56.7 |
Interest received | | | | | | | 10.0 | | 6.3 |
Income taxes paid | | | | | | | 28.5 | | 12.3 |
NOTE 11 – CONTINGENCIES |
During fiscal 2015, the Company received tax notices of reassessment from the Canada Revenue Agency (CRA) in connection with the Company’s characterization of amounts received under the Strategic Aerospace and Defence Initiative (SADI) program during its 2012 and 2013 taxation years. Under the SADI program, the Company received funding from the Government of Canada for its eligible spending in R&D projects, in the form of an unconditionally repayable interest-bearing loan, which the Company commenced repayment of the principal and interest in fiscal 2016 in accordance with the terms of the agreement. The CRA has taken the position that amounts received under the SADI program qualify as government assistance. The Company filed notices of objection against the CRA’s reassessments and subsequently filed a notice of appeal to the Tax Court of Canada. |
On September 14, 2021, the Tax Court of Canada ruled in favour of the CRA’s contention and held that the amounts received under the SADI program qualified as government assistance. On October 8, 2021, the Company filed a notice of appeal to the Federal Court of Appeal against the Tax Court’s decision. Accordingly, as at September 30, 2021, the Company has not recognized the impacts of the CRA’s reassessments in its consolidated financial statements. |
Although the Company believes that its position will ultimately prevail at the Federal Court of Appeal level, should the Company be unsuccessful, the impact of the reassessments would not result in a material adverse effect on the Company’s overall income tax expense nor income tax payable, but would, however, affect the timing of payment of such tax. |
14 I CAE Second Quarter Report 2022 |
| | Notes to the Consolidated Interim Financial Statements |
NOTE 12 – 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, restricted funds for subscription receipts deposit, accounts receivable, accounts payable and accrued liabilities and liabilities for subscription receipts 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 Second Quarter Report 2022 I 15 |
Notes to the Consolidated Interim Financial Statements |
The carrying values and fair values of financial instruments, by category, are as follows: |
| September 30 | March 31 |
| | | 2021 | 2021 |
| | | | Level | Carrying value | Fair value | | | | | Carrying value | Fair value |
Financial assets (liabilities) measured at FVTPL |
Cash and cash equivalents | | | | Level 1 | $ | | 340.4 | $ | | 340.4 | | | $ | | 926.1 | $ | 926.1 |
Restricted cash | | | | Level 1 | | | 11.3 | | | 11.3 | | | | | 11.4 | | 11.4 |
Restricted funds for subscription receipts deposit | | | | Level 2 | | — | | | — | | | | | 700.1 | | 700.1 |
Equity swap agreements | | | | Level 2 | | | (0.9) | | | (0.9) | | | | | (0.6) | | (0.6) |
Forward foreign currency contracts | | | | Level 2 | | | (0.5) | | | (0.5) | | | | | 7.5 | | | | | | | | 7.5 |
Contingent consideration arising on business combination | | | | Level 3 | | | (15.3) | | | (15.3) | | | | | (11.2) | | (11.2) |
Derivative assets (liabilities) designated in a hedge relationship |
Foreign currency and interest rate swap agreements | | | | Level 2 | | | 5.0 | | | 5.0 | | | | | 5.1 | | | | | | | | 5.1 |
Forward foreign currency contracts | | | | Level 2 | | | 10.1 | | | 10.1 | | | | | 16.5 | | 16.5 |
Financial assets (liabilities) measured at amortized cost |
Accounts receivable(1) | | | | Level 2 | | | 520.6 | | | 520.6 | | | | | 478.7 | | 478.7 |
Investment in finance leases | | | | Level 2 | | | 120.7 | | | 135.6 | | | | | 128.5 | | 141.0 |
Advances to a portfolio investment | | | | Level 2 | | | 10.9 | | | 10.9 | | | | | 11.1 | | 11.1 |
Other assets(2) | | | | Level 2 | | | 35.4 | | | 35.4 | | | | | 28.6 | | 29.0 |
Accounts payable and accrued liabilities(3) | | | | Level 2 | | | (561.2) | | | (561.2) | | | | | (674.9) | | (674.9) |
Liabilities for subscription receipts | | | | Level 2 | | — | | | — | | | | | (714.1) | | (714.1) |
Total long-term debt(4) | | | | Level 2 | | | (2,431.8) | | | (2,675.8) | | | | (2,010.9) | | (2,216.3) |
Other non-current liabilities(5) | | | | Level 2 | | | (181.7) | | | (199.7) | | | | | (174.2) | | (187.4) |
Financial assets measured at FVOCI |
Equity investments | | | | Level 3 | | | 1.5 | | | 1.5 | | | | | 1.5 | | | | | | | | 1.5 |
| | | | | $ | | (2,135.5) $ | (2,382.6) $ | | | (1,270.8) $ | (1,476.5) |
(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. |
Changes in level 3 financial instruments are as follows: |
| Contingent |
| consideration |
| arising on |
| business | | | | | Equity |
| combination | | | | | investments | Total |
Balances as at March 31, 2021 | | | | | | | $ | (11.2) $ | | | | | | | 1.5 | | $ | (9.7) |
Additions - business combinations (Note 3) | | (4.0) | | | | | | | — | | (4.0) |
Foreign currency exchange differences recognized in other comprehensive income | | (0.1) | | | | | | | — | | (0.1) |
Balances as at September 30, 2021 | | | | | | | $ | (15.3) $ | | | | | | | 1.5 | | $ | (13.8) |
16 I CAE Second Quarter Report 2022 |
| | | | | Notes to the Consolidated Interim Financial Statements |
NOTE 13 – RELATED PARTY TRANSACTIONS |
The Company’s outstanding balances with its equity accounted investees are as follows: |
| September 30 | March 31 |
| | | 2021 | 2021 |
Accounts receivable | $ 42.5 | $ | 33.3 |
Contract assets | | | 11.6 | | 14.3 |
Other non-current assets | | | 22.5 | | 26.4 |
Accounts payable and accrued liabilities | | | | 7.0 | | | 5.8 |
Contract liabilities | | | 32.4 | | 22.0 |
Other non-current liabilities | | | | 1.5 | | | 1.5 |
The Company’s transactions with its equity accounted investees are as follows: |
| | | | | Three months ended | Six months ended |
| | | | | | September 30 | September 30 |
| | | | | 2021 | | 2020 | 2021 | 2020 |
Revenue | | | | | $ | 10.0 | $ | 29.0 | $ | | 46.2 | $ | 67.3 |
Purchases | | | | | | 0.6 | | (0.1) | | | 1.4 | | | 0.4 |
Other income | | | | | | 0.2 | | 0.3 | | | 0.5 | | | 0.7 |
NOTE 14 – EVENT AFTER THE REPORTING PERIOD |
Agreement to acquire Sabre’s AirCentre airline operations portfolioOn October 28, 2021, the Company announced that it had entered into an agreement to acquire Sabre’s AirCentre airline operations portfolio (AirCentre), a highly valuable suite of flight and crew management and optimization solutions, for US$392.5 million excluding post-closing adjustments. The transaction will provide the Company with the Sabre AirCentre product portfolio, related technology and intellectual property as well as the transfer of its highly talented workforce. Subject to completion, the acquisition will further expand the Company’s reach across its broad customer base beyond pilot training and establish itself as a technology leader in the growing market for industry-leading, digitally-enabled flight and crew operations solutions. The closing of the transaction is expected in the first quarter of calendar 2022 and is subject to customary conditions and regulatory approvals. |
| | | | | | | CAE Second Quarter Report 2022 I 17 |