| Table of Contents |
| Consolidated Interim Financial Statements Consolidated (loss) income statement | 2 |
| Consolidated statement of comprehensive (loss) income | 3 |
| Consolidated statement of financial position | 4 |
| Consolidated statement of changes in equity | 5 |
| Consolidated statement of cash flows | 6 |
| Notes to the Consolidated Interim Financial Statements |
| Note 1 – Nature of operations and summary of significant accounting policies | 7 |
| Note 2 – Changes in accounting policies | 8 |
| Note 3 – Impact of the COVID-19 pandemic | 8 |
| Note 4 – Operating segments and geographic information | 9 |
| Note 5 – Impairment and other (gains) and losses | 11 |
| Note 6 – Debt facilities and finance expense – net | 12 |
| Note 7 – Government participation | 12 |
| Note 8 – Share capital, earnings per share and dividends | 13 |
| Note 9 – Supplementary cash flows information | 13 |
| Note 10 – Fair value of financial instruments | 13 |
| Note 11 – Related party transactions | 15 |
| Note 12 – Event after the reporting period | 15 |
| Consolidated Interim Financial Statements Consolidated (Loss) Income Statement |
| (Unaudited)Three months ended June 30(amounts in millions of Canadian dollars, except per share amounts) |
| 2020 | 2019 |
| Revenue | 4 | | | $ | 550.5 | | | $ | 825.6 |
| Cost of sales | 442.5 | 581.9 |
| Gross profit | | | | $ | 108.0 | | | $ | 243.7 |
| Research and development expenses | 20.1 | 31.9 |
| Selling, general and administrative expenses | 93.9 | 113.3 |
| Impairment and other (gains) and losses | 96.6 | (0.3) |
| Share of after-tax loss (profit) of equity accounted investees | 7.7 | (12.1) |
| Operating (loss) profit | | | | $ | (110.3) | | | $ | 110.9 |
| Finance expense – net | 35.1 | 34.9 |
| (Loss) earnings before income taxes | | | | $ | (145.4) | | | $ | 76.0 |
| Income tax (recovery) expense | (35.4) | 13.0 |
| Net (loss) income | | | | $ | (110.0) | | | $ | 63.0 |
| Attributable to: | |
| Equity holders of the Company | | | | $ | (110.6) | | | $ | 61.5 |
| Non-controlling interests | 0.6 | 1.5 |
| (Loss) earnings per share attributable to equity holders of the Company Basic and diluted | 8 | | | $ | (0.42) | | | $ | 0.23 |
| The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
| 2 I CAE First Quarter Report 2021 |
| Consolidated Interim Financial Statements |
| | Consolidated Statement of Comprehensive (Loss) Income |
| | (Unaudited)Three months ended June 30(amounts in millions of Canadian dollars) |
| | | 2020 | 2019 |
| | Net (loss) income | | | $ | (110.0) | | | $ | 63.0 |
| | Items that may be reclassified to net (loss) income |
| | Foreign currency exchange differences on translation of foreign operations | | | $ | (105.9) | | | $ | (69.3) |
| | Reclassification to income of foreign currency exchange differences | (5.8) | (1.9) |
| | Net gain on cash flow hedges | 30.3 | 12.5 |
| | Reclassification to income of losses on cash flow hedges | (5.0) | (0.7) |
| | Net gain on hedges of net investment in foreign operations | 47.1 | 22.5 |
| | Income taxes | (7.4) | (0.8) |
| | | | | $ | (46.7) | | | $ | (37.7) |
| | Items that will never be reclassified to net (loss) income |
| | Remeasurement of defined benefit pension plan obligations | | | $ | (123.0) | | | $ | (43.6) |
| | Net loss on financial assets carried at fair value through OCI | (0.1) | (0.1) |
| | Income taxes | 32.3 | 11.5 |
| | | | | $ | (90.8) | | | $ | (32.2) |
| | Other comprehensive loss | | | $ | (137.5) | | | $ | (69.9) |
| | Total comprehensive loss | | | $ | (247.5) | | | $ | (6.9) |
| | Attributable to:Equity holders of the Company |
| | | | | $ | (245.7) | | | $ | (7.1) |
| | Non-controlling interests | (1.8) | 0.2 |
| | The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
| CAE First Quarter Report 2021 I 3 |
| Consolidated Interim Financial Statements |
| Consolidated Statement of Financial Position (Unaudited) | June 30 | March 31 |
| (amounts in millions of Canadian dollars)Notes | 2020 | 2020 |
| AssetsCash and cash equivalents |
| $ | 363.3 | $ | 946.5 |
| Accounts receivable | 517.5 | 566.1 |
| Contract assets | 536.3 | 569.3 |
| Inventories | 670.7 | 616.2 |
| Prepayments | 59.2 | 55.1 |
| Income taxes recoverable | 32.1 | 30.4 |
| Derivative financial assets | 25.0 | 25.0 |
| Total current assets | $ 2,204.1 | $ | 2,808.6 |
| Property, plant and equipment | 2,007.8 | 2,154.0 |
| Right-of-use assets | 370.3 | 395.9 |
| Intangible assets | 1,974.9 | 2,056.5 |
| Investment in equity accounted investees— | 428.0 | 460.6 |
| Deferred tax assets | 105.6 | 84.5 |
| Derivative financial assets | 11.6 | 13.1 |
| Other non-current assets | 507.2 | 510.4 |
| Total assets | $ 7,609.5 | $ | 8,483.6 |
| Liabilities and equityAccounts payable and accrued liabilities |
| $ | 825.5 | $ | 934.4 |
| Provisions | 27.8 | 29.2 |
| Income taxes payable | 25.1 | 26.4 |
| Contract liabilities | 740.5 | 746.2 |
| Current portion of long-term debt | | | 6 | 219.0 | 206.2 |
| Derivative financial liabilities | 52.3 | 119.9 |
| Total current liabilities | $ 1,890.2 | $ | 2,062.3 |
| Provisions | 28.1 | 28.6 |
| Long-term debt | | | 6 | 2,551.8 | 3,106.0 |
| Royalty obligations | 134.9 | 141.1 |
| Employee benefits obligations | 340.1 | 212.8 |
| Deferred tax liabilities | 104.9 | 150.6 |
| Derivative financial liabilities | 7.9 | 12.8 |
| Other non-current liabilities | 212.3 | 191.1 |
| Total liabilities | $ 5,270.2 | $ | 5,905.3 |
| EquityShare capital |
| $ | 682.0 | $ | 679.5 |
| Contributed surplus | 32.9 | 26.9 |
| Accumulated other comprehensive income | 148.8 | 193.2 |
| Retained earnings | 1,388.8 | 1,590.1 |
| Equity attributable to equity holders of the Company | $ 2,252.5 | $ | 2,489.7 |
| Non-controlling interests | 86.8 | 88.6 |
| Total equity | $ 2,339.3 | $ | 2,578.3 |
| Total liabilities and equity | $ 7,609.5 | $ | 8,483.6 |
| The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
| 4 I CAE First Quarter Report 2021 |
| Consolidated Interim Financial Statements Consolidated Statement of Cash Flows |
| (Unaudited)Three months ended June 30(amounts in millions of Canadian dollars) |
| 2020 | 2019 |
| Operating activitiesNet (loss) income |
| | | | $ | (110.0) | | | $ | 63.0 |
| Adjustments for: |
| Depreciation and amortization | 85.6 | 73.8 |
| Impairment of non-financial assets | 98.0 | — |
| Share of after-tax loss (profit) of equity accounted investees | | 7.7 | (12.1) |
| Deferred income taxes | (37.1) | 13.0 |
| Investment tax credits | | (5.2) | (9.4) |
| Share-based payments expense | | 4.6 | 1.9 |
| Defined benefit pension plans | | 4.9 | 4.3 |
| Other non-current liabilities | | 1.0 | (4.2) |
| Derivative financial assets and liabilities – net | | (34.6) | (7.0) |
| Other | | 22.0 | 14.5 |
| Changes in non-cash working capital | (125.3) | (197.8) |
| Net cash used by operating activities | | | | $ | (88.4) | | | $ | (60.0) |
| Investing activitiesBusiness combinations, net of cash acquired |
| | | | $ | — | | | $ | (7.5) |
| Additions to property, plant and equipment | (18.0) | (89.0) |
| Proceeds from disposal of property, plant and equipment— | 0.4 |
| Additions to intangible assets | (17.8) | (22.7) |
| Net payments to equity accounted investees | | 0.5 | 0.7 |
| Dividends received from equity accounted investees | | 6.1 | — |
| Other | | (0.1) | — |
| Net cash used in investing activities | | | | $ | (29.3) | | | $ | (118.1) |
| Financing activitiesNet (repayment) proceeds from borrowing under revolving credit facilities |
| | | | $ | (439.0) | | | $ | 192.0 |
| Proceeds from long-term debt | 6.3 | 9.0 |
| Repayment of long-term debt | (5.7) | (100.8) |
| Repayment of lease liabilities | (19.2) | (25.4) |
| Dividends paid— | (25.5) |
| Issuance of common shares | | 2.2 | 14.3 |
| Repurchase and cancellation of common shares | — | (2.0) |
| Other | | (0.7) | (0.3) |
| Net cash (used in) provided by financing activities | | | | $ | (456.1) | | | $ | 61.3 |
| Effect of foreign currency exchange differences on cash and cash equivalents | | | | $ | (9.4) | | | $ | (7.3) |
| Net decrease in cash and cash equivalents | | | | $ | (583.2) | | | $ | (124.1) |
| Cash and cash equivalents, beginning of period | | 946.5 | 446.1 |
| Cash and cash equivalents, end of period | | | | $ | 363.3 | | | $ | 322.0 |
| The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
| 6 I CAE First Quarter Report 2021 |
| 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 12, 2020. |
| | NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| | Nature of operationsCAE Inc. and its subsidiaries (or the Company) design, manufacture and supply simulation equipment, provide training, and develop integrated training solutions for defence and security markets, commercial airlines, business aircraft operators, helicopter operators, aircraft manufacturers and for healthcare education and service providers. 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 a database of airports, other landing areas, flying environments, mission-specific environments, and motion and sound cues. 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 with locations around the world. |
| | The Company’s operations are managed through three segments: |
| | (i) | Civil Aviation Training Solutions – Provides comprehensive training solutions for flight, cabin, maintenance and ground personnel incommercial, business and helicopter aviation, a range of flight simulation training devices, as well as ab initio pilot training and crewsourcing services; |
| | (ii) | Defence and Security – Is a training and mission support solutions provider for defence forces across the air, land and naval domains,and for government organizations responsible for public safety; |
| | (iii) Healthcare – Provides integrated education and training solutions including surgical and imaging simulations, curriculum, audiovisual |
| | and centre management platforms and patient simulators to healthcare students and clinical professionals across the professionallife cycle, and to support the COVID-19 pandemic, designs and manufactures ventilators to provide life support to intensive carepatients (see Note 3). |
| | 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 (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 Civil Aviation Training Solutions segment sells equipment directly to airlines and to the extent that the entire commercial airline industry is affected by cycles of expansion and contraction, the Company’s performance will also be affected. The segment activities are also historically affected by the seasonality of its industry – in times of peak travel (such as holidays), airline and business jet pilots are generally occupied flying aircraft rather than attending training sessions. The opposite also holds true – slower travel periods tend to be more active training periods for pilots. Therefore, the Company has historically experienced lower demand during the second quarter. |
| | However, results are not expected to follow historical patterns during the year ending March 31, 2021 due to the impact of the COVID-19 pandemic (see Note 3). |
| | 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, 2020, 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, 2020. |
| | 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, 2020. |
| CAE First Quarter Report 2021 I 7 |
| Notes to the Consolidated Interim Financial Statements |
| The COVID-19 pandemic and the resulting measures taken in response to its spread have resulted in significant temporary disruptions to the Company business operations (see Note 3). The rapidly evolving situation has created a high level of uncertainty and risk that has resulted in significant impacts on the Company’s business, financial performance and operations. |
| The uncertainties created by the COVID-19 pandemic required the use of judgements and estimates in the areas set out below. 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. |
| Impairment of non-financial assetsThe Company has considered the impact of the COVID-19 pandemic on its assessment of impairment indicators, which required significant judgement. The Company has reviewed its property, plant and equipment, right-of-use assets, intangible assets, investment in equity accounted investees as well as other assets such as inventories and deferred tax assets. Judgements, estimates and assumptions used were based on the available information as at June 30, 2020. |
| As a result of this review, impairment charges of $98.0 million on non-financial assets have been recorded as at June 30, 2020 in relation to the COVID-19 pandemic (see Note 5). |
| Impairment of financial assetsThe Company has considered the impact of the COVID-19 pandemic on the expected credit loss of its financial instruments (mainly trade receivable and contract assets). The Company applied judgment based on the type of customers, many of which are established companies and government agencies, the segments in which such customers operate and other indicators that could lead to currently unidentified credit losses. The amount and timing of the expected credit losses, as well as the probability assigned thereto, has been based on the available information as at June 30, 2020. |
| NOTE 2 – CHANGES IN ACCOUNTING POLICIES |
| New and amended standards adopted by the Company |
| Amendment to IFRS 3 - Business combinationsIn October 2018, the IASB issued an amendment to IFRS 3 - Business combinations, which clarifies the definition of a business, with the objective of assisting entities in determining whether a transaction should be accounted for as a business combination or as an asset acquisition. The amended standard has a narrower definition of a business, which could result in the recognition of fewer business combinations than under the previous standard. |
| This amendment to IFRS 3 was adopted April 1, 2020 and will apply to transactions occurring subsequent to April 1, 2020. |
| Amendment to IFRS 16 - LeasesIn May 2020, the IASB issued an amendment to IFRS 16 - Leases, with the objective of providing practical relief to lessees in accounting for rent concessions arising as a result of the COVID-19 pandemic. The amendment introduces an optional practical expedient for lessees to not account for rent concessions as lease modifications if they are a direct consequence of the COVID-19 pandemic and meet certain conditions. |
| This amendment to IFRS 16 was adopted effective on April 1, 2020. The Company has elected to apply the practical expedient. |
| NOTE 3 – IMPACT OF THE COVID-19 PANDEMIC |
| The COVID-19 pandemic has created unprecedented uncertainty in the global economy, the global air transportation environment, air passenger travel and to CAE’s business. Several of its customers are facing significant challenges, with airlines and business jet operators having to ground many aircraft in response to travel bans, border restrictions, and lower demand for air travel. The Company continues to take measures to protect the health and safety of its employees, work with its customers to minimize potential disruptions and support its community in addressing the challenges posed by this global pandemic. This outbreak has had an important and immediate impact on all its businesses, especially in the Civil Aviation Training Solutions segment, as a result of an unprecedented shock to demand together with significant disruptions to its own operations, including temporary facility closures, supply chain disruptions, program execution delays, slower procurement decisions and changes to its customers’ acquisition priorities. |
| For the Civil Aviation Training Solutions segment, the impacts of the COVID-19 pandemic resulted in the temporary closure of certain training centre operations, lower utilization of its simulators in the network due to reduced demand from aviation customers and interruptions in the execution of its products backlog. At the worst point during the first quarter of fiscal 2021, more than half of its Civil training locations worldwide had totally suspended operations or operated at significantly reduced capacity. However, as at June 30, 2020, all training centre locations have re-opened at full or reduced capacities. |
| For the Defence and Security segment, delays in the awarding of new contracts and in the execution and advancement of certain programs are being experienced. |
| 8 I CAE First Quarter Report 2021 |
| Notes to the Consolidated Interim Financial Statements |
| | For the Healthcare segment, customers continue to be focused on managing the acute operational demands of this healthcare crisis, which resulted in less budget for normal operations and training projects. |
| | The Company continued to operate with several flexible measures implemented to protect its financial position and preserve liquidity, including the reduction of capital expenditures and R&D investments, strict cost containment measures, salary freezes, salary reductions, reduced work weeks, layoffs, as well as a suspension of its common share dividend and share repurchase plan in response to the impact of the COVID-19 pandemic. Additionally, the Company has worked with defence customers to secure more favorable terms for milestone payments as well as offer contract modifications to increase work scope and with suppliers for extended payment terms. |
| | 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, adapting its global workforce and adjusting its business to correspond with the expected lower level of demand for certain of its products and services. These measures also include the introduction and acceleration of new digitally enhanced processes (see Note 12). |
| | 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 segmentThe 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 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 June 30 | 2020 | | | | 2019 | 2020 | 2019 | 2020 | | | | | | | | 2019 | 2020 | 2019 |
| | External revenue | | | | | | | | $ | 248.0 | $ | | | | 477.6 | $ | 280.2 | $ | 320.5 | | | | $ | 22.3 | $ | | | | | | | | 27.5 | $ | 550.5 | $ | 825.6 |
| | Depreciation and amortization | 67.6 | | | | 55.9 | 14.3 | 14.1 | 3.7 | | | | 3.8 | 85.6 | 73.8 |
| | Impairment of non-financial assets - net | 77.2 | | | | — | 21.4 | 0.1 | 0.1 | | | | — | 98.7 | 0.1 |
| | Impairment of accounts receivable – net | 4.7 | | | | 0.2 | — | | | | — | 0.1 | | | | 0.1 | 4.8 | 0.3 |
| | Share of after-tax (loss) profit of | | | | | | | | | | | | | | | | | | | | | |
| | equity accounted investees | (7.6) | | | | 8.9 | (0.1) | 3.2 | — | | | | — | (7.7) | 12.1 |
| | Segment operating (loss) income | (97.9) | | | | 98.6 | (9.2) | 15.1 | (3.2) | | | | | | | | (2.8) | (110.3) | 110.9 |
| | Capital expenditures by segment, which consist of additions to property, plant and equipment and intangible assets, are as follows: |
| | Three months ended June 30 | | | 2020 | 2019 |
| | Civil Aviation Training Solutions | | | $ $ | 20.0 $ $ | 89.0 |
| | Defence and Security | | | 4.7 | 19.0 |
| | Healthcare | | | 11.1 | 3.7 |
| | Total capital expenditures | | | $ $ | 35.8 $ $ | 111.7 |
| CAE First Quarter Report 2021 I 9 |
| Notes to the Consolidated Interim Financial Statements |
| 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 |
| | 2020 | 2020 |
| Assets employed | | |
| Civil Aviation Training Solutions | $ | 4,865.2 | $ | 5,089.5 |
| Defence and Security | 1,664.2 | 1,767.5 |
| Healthcare | 264.7 | 253.9 |
| Assets not included in assets employed | 815.4 | 1,372.7 |
| Total assets | $ | 7,609.5 | $ | 8,483.6 |
| Liabilities employed | | | | |
| Civil Aviation Training Solutions | $ | 1,093.9 | $ | 1,219.9 |
| Defence and Security | 554.3 | 613.5 |
| Healthcare | 59.9 | 45.9 |
| Liabilities not included in liabilities employed | 3,562.1 | 4,026.0 |
| Total liabilities | $ | 5,270.2 | $ | 5,905.3 |
| Products and services informationThe Company's revenue from external customers for its products and services are as follows: |
| Three months ended June 30 | 2020 | 2019 |
| Products | $ | 190.1 | $ | 294.6 |
| Training and services | 360.4 | $ | 531.0 |
| Total external revenue | $ | 550.5 | $ | 825.6 |
| Contract with Government of Canada for CAE Air1 ventilatorsOn April 10, 2020, the Company concluded an agreement with the Government of Canada to design and manufacture 10,000 CAE Air1 ventilators to provide life support to patients in intensive care to support the COVID-19 pandemic. On June 17, 2020, the Company announced that its CAE Air1 ventilator has been certified by Health Canada. Deliveries are expected to start in the second quarter of fiscal 2021. |
| 10 I CAE First Quarter Report 2021 |
| 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 attributed to geographical regions based on the Company’s allocation of the related purchase price. The Company has retrospectively revised the geographic information for the comparative period to conform to the current presentation. |
| | Three months ended June 30 | 2020 | 2019 |
| | External revenue | | |
| | Canada | $ | | 53.4 | | $ | 107.6 |
| | United States | 287.3 | 335.8 |
| | United Kingdom | 25.7 | 43.4 |
| | Rest of Americas | 12.2 | 24.3 |
| | Europe | 86.1 | 160.9 |
| | Asia | 67.7 | 138.6 |
| | Oceania and Africa | 18.1 | 15.0 |
| $ | | 550.5 | | $ | 825.6 |
| | | June 30 | March 31 |
| | | 2020 | 2020 |
| | Non-current assets other than financial instruments and deferred tax assets | | |
| | Canada | $ | | 1,400.3 | | $ | 1,449.4 |
| | United States | 1,730.0 | 1,845.5 |
| | United Kingdom | 376.2 | 403.3 |
| | Rest of Americas | 233.7 | 250.4 |
| | Europe | 761.9 | 801.0 |
| | Asia | 549.3 | 586.9 |
| | Oceania and Africa | 37.9 | 35.1 |
| $ | | 5,089.3 | | $ | 5,371.6 |
| | NOTE 5 – IMPAIRMENT AND OTHER (GAINS) AND LOSSES |
| | Three months ended June 30 | 2020 | 2019 |
| | Impairment of non-financial assets | | | | $ | 98.0 | | $ | — |
| | Net gain on foreign currency exchange differences | (3.1) | (0.7) |
| | Other | 1.7 | 0.4 |
| | Impairment and other (gains) and losses | | | | $ | 96.6 | | $ | (0.3) |
| | Impairment of non-financial assetsGiven the negative impacts of the COVID-19 pandemic on the global economy, the Company’s main markets, its product offering and its customers, the Company considered the evolving conditions and impacts from the COVID-19 pandemic as part of its review of impairment indicators for non-financial assets. As a result of this review, the Company recorded impairment charges totaling $98.0 million on non financial assets as at June 30, 2020. |
| | For the Civil Aviation Training Solutions segment, the reduced demand from aviation customers, shifts in aircraft fleet type operated by our customers and reduced activity in helicopter training in relation to the COVID-19 pandemic resulted in impairment charges of $43.9 million of property, plant and equipment, mostly simulators and parts, $21.8 million of intangibles assets, including capitalized development costs and customer relationships, and $11.2 million of inventories. |
| | For the Defence and Security segment, the market was impacted by the evolving conditions of the COVID-19 pandemic which led to changes in customers focus and in the expected recoverability of certain technologies and products and resulted in impairment charges of $12.6 million of intangible assets, mostly capitalized development costs, and $8.5 million of inventories. |
| CAE First Quarter Report 2021 I 11 |
| Notes to the Consolidated Interim Financial Statements |
| NOTE 6 – DEBT FACILITIES AND FINANCE EXPENSE – NET |
| New unsecured revolving credit facilityOn April 9, 2020, the Company concluded a new two-year $500.0 million unsecured revolving credit facility. The facility bears interest at variable rates, plus a margin that is determined based on the usage of the facility and the Company’s credit rating. The new facility will provide access to additional liquidity and is added to the current US $850.0 million unsecured revolving credit facility. |
| Amendment to the receivable purchase programOn May 19, 2020, the Company concluded an agreement to increase the limit of its receivable purchase program from US$300.0 million to US$400.0 million. |
| Finance expense – net |
| Three months ended June 30 | 2020 | 2019 |
| Finance expense: |
| Long-term debt (other than lease liabilities) | | | $ | 27.0 | | | $ | 24.6 |
| Lease liabilities | 5.5 | 6.2 |
| Royalty obligations | 2.5 | 2.9 |
| Employee benefits obligations | 1.6 | 1.3 |
| Other | 2.5 | 3.8 |
| Borrowing costs capitalized | (0.7) | (1.5) |
| Finance expense | | | $ | 38.4 | | | $ | 37.3 |
| Finance income: |
| Loans and investment in finance leases | | | $ | (2.6) | | | $ | (1.7) |
| Other | (0.7) | (0.7) |
| Finance income | | | $ | (3.3) | | | $ | (2.4) |
| Finance expense – net | | | $ | 35.1 | | | $ | 34.9 |
| NOTE 7 – GOVERNMENT PARTICIPATION |
| Government contributions, other than COVID-19 government support programs, were recognized as follows: |
| Three months ended June 30 | 2020 | 2019 |
| Credited to non-financial assets | | | $ | 3.4 | | | $ | 4.1 |
| Credited to income | 5.2 | 6.2 |
| | | $ | 8.6 | | | $ | 10.3 |
| COVID-19 government support programsGovernments around the world have responded to the COVID-19 pandemic by implementing a variety of financial relief measures and support programs for impacted businesses and employees. Government assistance programs that meet the definition of a government grant were accounted for under the specific requirements of IAS 20 - Accounting for Government Grants and Disclosure of Government Assistance. |
| The Company has accessed and is working to access government programs in countries in which it operates. On April 11, 2020, the Canada Emergency Wage Subsidy (CEWS) was brought into law in Canada, which is intended to help Canadian businesses keep employees on their payroll through the challenges posed by the COVID-19 pandemic. The Company qualified for the CEWS subsidy program during the three months ended June 30, 2020, which allowed the Company to recall previously furloughed employees. During the three months ended June 30, 2020, government contributions related to COVID-19 support programs, mainly provided as a reimbursement of employee wages, totaled $56.7 million, of which $12.3 million were credited to non-financial assets and $44.4 million were credited to income. |
| 12 I CAE First Quarter Report 2021 |
| Notes to the Consolidated Interim Financial Statements |
| | NOTE 8 – SHARE CAPITAL, EARNINGS PER SHARE AND DIVIDENDS |
| | Share capitalRepurchase and cancellation of common sharesOn February 7, 2020, the Company announced the renewal of the normal course issuer bid (NCIB) to purchase up to 5,321,474 of its common shares. The NCIB began on February 25, 2020 and will end on February 24, 2021 or on such earlier date when the Company completes its purchases or elects to terminate the NCIB. These purchases will be made on the open market plus brokerage fees through the facilities of the TSX and/or alternative trading systems at the prevailing market price at the time of the transaction, in accordance with the TSX’s applicable policies. All common shares purchased pursuant to the NCIB will be cancelled. On April 6, 2020, the Company announced that it has temporarily suspended its NCIB in response to the COVID-19 pandemic (see Note 3). |
| | During the three months ended June 30, 2020, no common shares were repurchased and cancelled under the NCIB (2019 – 58,131, at a weighted average price of $34.41 per common share). |
| | Earnings per share computationThe denominators for the basic and diluted earnings per share computations are as follows: |
| | Three months ended June 30 | 2020 | 2019 |
| | Weighted average number of common shares outstanding | | | 265,656,253 | 265,762,998 |
| | Effect of dilutive stock options | — | 1,847,944 |
| | Weighted average number of common shares outstanding |
| | for diluted earnings per share calculation | | | 265,656,253 | 267,610,942 |
| | For the three months ended June 30, 2020, options to acquire 6,897,029 common shares (2019 – 1,204,200) have been excluded from the above calculation since their inclusion would have had an anti-dilutive effect. |
| | DividendsOn April 6, 2020, the Company announced that it had temporarily suspended its common share dividends in response to the COVID-19 pandemic (see Note 3). |
| | During the three months ended June 30, 2020, no dividends were declared (2019 – $26.6 million or $0.10 per share). |
| | NOTE 9 – SUPPLEMENTARY CASH FLOWS INFORMATION |
| | Changes in non-cash working capital are as follows: |
| | Three months ended June 30 | 2020 | 2019 |
| | Cash (used in) provided by non-cash working capital: | | |
| | Accounts receivable | | | $ | 44.4 | | | $ | (59.0) |
| | Contract assets | 22.2 | (33.1) |
| | Inventories | (64.3) | (62.6) |
| | Prepayments | (4.0) | (3.6) |
| | Income taxes | (3.4) | (6.7) |
| | Accounts payable and accrued liabilities | (116.1) | (79.1) |
| | Provisions | (1.7) | (3.1) |
| | Contract liabilities | (2.4) | 49.4 |
| | | | | $ | (125.3) | | | $ | (197.8) |
| | Supplemental information: |
| | Three months ended June 30 | | | | | | 2020 | 2019 |
| | Interest paid | | | | | | $ | 11.2 | | | $ | 14.5 |
| | Interest received | | | | | | 2.9 | 2.3 |
| | Income taxes paid | | | | | | 5.4 | 10.2 |
| | 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. |
| CAE First Quarter Report 2021 I 13 |
| Notes to the Consolidated Interim Financial Statements |
| 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, 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, call options 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, royalty 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. |
| 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. |
| The carrying values and fair values of financial instruments, by category, are as follows: |
| | June 30 | March 31 |
| | 2020 | 2020 |
| | | | Level | Carrying value | Fair value | | | | Carrying value | Fair value |
| | | | | | | Total | Total | | | | | | Total | Total |
| Financial assets (liabilities) measured at FVTPL Cash and cash equivalents | | | | Level 1 | $ | | 363.3 | $ | 363.3 | | | | $ | | 946.5 | $ | 946.5 |
| Restricted cash | | | | Level 1 | | | 11.9 | 11.9 | | | | | | 12.4 | 12.4 |
| Equity swap agreements and call options | | | | Level 2 | | | (30.6) | (30.6) | | | | | | (55.5) | (55.5) |
| Forward foreign currency contracts | | | | Level 2 | | | (1.3) | (1.3) | | | | | | (7.2) | (7.2) |
| Derivative assets (liabilities) designated in a hedge relationship Foreign currency and interest rate swap agreements | | | | Level 2 | | | 10.2 | 10.2 | | | | | | (0.3) | (0.3) |
| Forward foreign currency contracts | | | | Level 2 | | | (1.9) | (1.9) | | | | | | (31.6) | (31.6) |
| Financial assets (liabilities) measured at amortized cost |
| Accounts receivable(1) | | | | Level 2 | | | 472.1 | 472.1 | | | | | | 514.5 | 514.5 |
| Investment in finance leases | | | | Level 2 | | | 146.6 | 161.6 | | | | | | 155.0 | 183.2 |
| Advances to a portfolio investment | | | | Level 2 | | | 28.5 | 28.5 | | | | | | 29.7 | 29.7 |
| Other assets(2) | | | | Level 2 | | | 24.6 | 23.2 | | | | | | 22.1 | 20.5 |
| Accounts payable and accrued liabilities(3) | | | | Level 2 | | | (539.4) | (539.4) | | | | | | (709.1) | (709.1) |
| Total long-term debt(4) | | | | Level 2 | | | (2,324.2) | (2,550.5) | | | | | | (2,830.6) | (2,960.4) |
| Other non-current liabilities(5) | | | | Level 2 | | | (176.8) | (175.2) | | | | | | (182.0) | (167.9) |
| Financial assets measured at FVOCI |
| Equity investments | | | | Level 3 | | | 3.2 | 3.2 | | | | | | 3.3 | 3.3 |
| | | | | $ | | (2,013.8) | $ | (2,224.9) | | | | $ | | (2,132.8) | $ | (2,221.9) |
| (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. |
| 14 I CAE First Quarter Report 2021 |
| Notes to the Consolidated Interim Financial Statements |
| | NOTE 11 – RELATED PARTY TRANSACTIONS |
| | The Company’s outstanding balances with its equity accounted investees are as follows: |
| | | June 30 | March 31 |
| | | 2020 | 2020 |
| | Accounts receivable | $ $ | | 56.0 $ $ | 51.2 |
| | Contract assets | 42.8 | 38.5 |
| | Other assets | 23.9 | 25.6 |
| | Accounts payable and accrued liabilities | 4.9 | | 5.7 |
| | Contract liabilities | 36.8 | 28.8 |
| | Other non-current liabilities | 1.6 | | 1.7 |
| | The Company’s transactions with its equity accounted investees are as follows: |
| | Three months ended June 30 | 2020 | 2019 |
| | Revenue | | | | $ | $ $ | | 38.3 $ $ | 33.2 |
| | Purchases | 0.5 | 0.3 |
| | Other income | 0.4 | 0.3 |
| | NOTE 12 – EVENT AFTER THE REPORTING PERIOD |
| | 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, adapting its global workforce and adjusting its business to correspond with the expected lower level of demand for certain of its products and services. These measures also include the introduction and acceleration of new digitally enhanced processes. |
| | As a result of these measures, the Company announced that it expects to record restructuring expenses of approximately $100 million over the next 12 months, consisting mainly of real estate costs, asset relocations and other direct costs related to the optimization of its footprint and employee termination benefits. |
| CAE First Quarter Report 2021 I 15 |
