| Table of Contents |
| Consolidated Interim Financial Statements |
| Consolidated statement of financial position | 1 |
| Consolidated income statement | 2 |
| Consolidated statement of comprehensive income | 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 | 9 |
| Note 4 – Investment in equity accounted investees | 10 |
| Note 5 – Operating segments and geographic information | 10 |
| Note 6 – Other gains – net | 12 |
| Note 7 – Debt facilities and finance expense – net | 12 |
| Note 8 – Government participation | 13 |
| Note 9 – Share capital, earnings per share and dividends | 13 |
| Note 10 – Supplementary cash flows information | 14 |
| Note 11 – Fair value of financial instruments | 14 |
| Note 12 – Related party transactions | 15 |
| Consolidated Interim Financial Statements |
| Consolidated Statement of Financial Position (Unaudited) | December 31 | March 31 |
| (amounts in millions of Canadian dollars)Notes | 2019 | (1) | 2019 |
| AssetsCash and cash equivalents |
| $ | | | 278.5 | $ | 446.1 |
| Accounts receivable | | | | 497.9 | 496.0 |
| Contract assets | | | | 505.2 | 523.5 |
| Inventories | | | | 607.4 | 537.0 |
| Prepayments | | | | 54.1 | 57.4 |
| Income taxes recoverable | | | | 55.6 | 33.6 |
| Derivative financial assets | | | | 25.3 | 19.3 |
| Total current assets | $ 2,024.0 | $ | 2,112.9 |
| Property, plant and equipment | | | | 1,991.3 | 2,149.3 |
| Right-of-use assets | | | | 388.6 | — |
| Intangible assets | | | | 2,014.4 | 2,027.9 |
| Investment in equity accounted investees | | | 4 | 431.4 | 312.1 |
| Deferred tax assets | | | | 82.3 | 71.0 |
| Derivative financial assets | | | | 11.4 | 12.8 |
| Other assets | | | | 501.2 | 479.5 |
| Total assets | $ 7,444.6 | $ | 7,165.5 |
| Liabilities and equityAccounts payable and accrued liabilities |
| $ | | | 839.5 | $ | 883.8 |
| Provisions | | | | 24.8 | 28.7 |
| Income taxes payable | | | | 23.9 | 25.7 |
| Contract liabilities | | | | 715.3 | 670.2 |
| Current portion of long-term debt | | | 7 | 123.1 | 264.1 |
| Derivative financial liabilities | | | | 7.9 | 17.0 |
| Total current liabilities | $ 1,734.5 | $ | 1,889.5 |
| Provisions | | | | 27.9 | 36.3 |
| Long-term debt | | | 7 | 2,462.0 | 2,064.2 |
| Royalty obligations | | | | 132.8 | 136.2 |
| Employee benefits obligations | | | | 251.3 | 212.6 |
| Deferred gains and other liabilities | | | | 241.6 | 267.0 |
| Deferred tax liabilities | | | | 147.1 | 147.0 |
| Derivative financial liabilities | | | | 1.5 | 2.7 |
| Total liabilities | $ 4,998.7 | $ | 4,755.5 |
| EquityShare capital |
| $ | | | 675.8 | $ | 649.6 |
| Contributed surplus | | | | 26.7 | 24.8 |
| Accumulated other comprehensive income | | | | 135.1 | 199.0 |
| Retained earnings | | | | 1,524.8 | 1,457.9 |
| Equity attributable to equity holders of the Company | $ 2,362.4 | $ | 2,331.3 |
| Non-controlling interests | | | | 83.5 | 78.7 |
| Total equity | $ 2,445.9 | $ | 2,410.0 |
| Total liabilities and equity | $ 7,444.6 | $ | 7,165.5 |
| (1) Refer to Note 2 – Changes in accounting policies for the impact of adopting IFRS 16. |
| The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
| 1 I CAE Third Quarter Report 2020 |
| Consolidated Interim Financial Statements |
| | Consolidated Income Statement |
| | Nine months ended December 31 | | Three months ended | Nine months ended |
| December 31 | | | | | | December 31 | (Unaudited)(amounts in millions of Canadian dollars, except per share amounts) |
| | | 2019 | (1) | 2018 | | | | | 2019 | (1) | | 2018 |
| | Revenue | 5 | $ | 923.5 | $ | | | | | | | | $ | 2,645.9 | $ | 2,282.1 |
| | Cost of sales | | 632.0 | 583.0 | | | | | 1,874.0 | | 1,628.6 |
| | Gross profit | | $ | 291.5 | $ | | | | | | | | $ | 771.9 | $ | 653.5 |
| | Research and development expenses | | 33.6 | 31.1 | | | | | 101.3 | | 91.5 |
| | Selling, general and administrative expenses | | 118.3 | 101.4 | | | | | 329.6 | | 292.0 |
| | Other gains – net | 6 | (3.5) | (2.5) | | | | | (15.3) | | (17.1) |
| | After tax share in profit of equity accounted investees | 5 | (11.8) | (9.7) | | | | | (34.3) | | (23.1) |
| | Operating profit | | $ | 154.9 | $ | | | | | | | | $ | 390.6 | $ | 310.2 |
| | Finance expense – net | 7 | 36.7 | 19.3 | | | | | 105.9 | | 55.2 |
| | Earnings before income taxes | | $ | 118.2 | $ | | | | | | | | $ | 284.7 | $ | 255.0 |
| | Income tax expense | 10 | 18.4 | 14.2 | | | | | 46.9 | | 40.3 |
| | Net income | | $ | 99.8 | $ | | | | | | | | $ | 237.8 | $ | 214.7 |
| | Attributable to: | | | | | | | | | |
| | Equity holders of the Company | | $ | 97.7 | $ | | | | | | | | $ | 233.0 | $ | 207.7 |
| | Non-controlling interests | | 2.1 | 1.9 | | | | 4.8 | | 7.0 |
| | Earnings per share attributable to equity holders of the CompanyBasic |
| | | 9 | $ | 0.37 | $ | | | | | | | | $ | 0.88 | $ | 0.78 |
| | Diluted | 9 | $ | 0.37 | $ | | | | | | | | $ | 0.87 | $ | 0.77 |
| | (1) Refer to Note 2 – Changes in accounting policies for the impact of adopting IFRS 16. |
| | The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
| CAE Third Quarter Report 2020 I 2 |
| Consolidated Interim Financial Statements |
| Consolidated Statement of Comprehensive Income |
| Nine months ended December 31 | Three months ended | | Nine months ended |
| | December 31 | | December 31 | (Unaudited)(amounts in millions of Canadian dollars) |
| 2019 | | | | 2018 | 2019 | | | 2018 |
| Net income | | | | | | | $ | 99.8 | $ | | | 79.5 | | | $ | 237.8 | $ | | 214.7 |
| Items that may be reclassified to net income |
| Foreign currency differences on translation of foreign operations | | | | | | | $ | (10.2) | $ | | | 137.9 | | | $ | (98.2) | $ | | 51.8 |
| Reclassification to income of foreign currency differences | (8.0) | | | | (2.0) | (19.9) | | | (17.9) |
| Net gain (loss) on cash flow hedges | 5.9 | | | | (27.0) | 15.4 | | | (22.7) |
| Reclassification to income of (losses) gains on cash flow hedges | (0.1) | | | | 0.1 | (3.2) | | | 0.7 |
| Net gain (loss) on hedges of net investment in foreign operations | 22.7 | | | | (26.3) | 32.6 | | | (27.7) |
| Income taxes | (2.0) | | | | 3.9 | 7.8 | | | 8.6 |
| | | | | | | $ | 8.3 | $ | | | 86.6 | | | $ | (65.5) | $ | | (7.2) |
| Items that will never be reclassified to net income |
| Remeasurement of defined benefit pension plan obligations | | | | | | | $ | 30.9 | $ | | | (14.6) | | | $ | (29.5) | $ | | 18.5 |
| Net gain on financial assets carried at fair value through OCI | 0.1 | | | | 0.1 | — | | | — |
| Income taxes | (8.2) | | | | 3.9 | 7.8 | | | (4.9) |
| | | | | | | $ | 22.8 | $ | | | (10.6) | | | $ | (21.7) | $ | | 13.6 |
| Other comprehensive income (loss) | | | | | | | $ | 31.1 | $ | | | 76.0 | | | $ | (87.2) | $ | | 6.4 |
| Total comprehensive income | | | | | | | $ | 130.9 | $ | | | 155.5 | | | $ | 150.6 | $ | | 221.1 |
| Attributable to:Equity holders of the Company |
| | | | | | | $ | 129.0 | $ | | | 150.6 | | | $ | 147.4 | $ | | 209.9 |
| Non-controlling interests | 1.9 | | | | 4.9 | 3.2 | | | 11.2 |
| The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
| 3 I CAE Third Quarter Report 2020 |
| Consolidated Interim Financial Statements Consolidated Statement of Cash Flows |
| (Unaudited)Nine months ended December 31(amounts in millions of Canadian dollars) |
| 2019 | (1) | 2018 |
| Operating activitiesNet income |
| | | | | 237.8 | $ | 214.7 |
| Adjustments for: |
| Depreciation and amortization | 226.9 | | 153.7 |
| After tax share in profit of equity accounted investees | | (34.3) | | (23.1) |
| Deferred income taxes | 6.9 | | 24.9 |
| Investment tax credits | | 6.3 | | (8.0) |
| Share-based compensation | | 13.3 | | 3.4 |
| Defined benefit pension plans | | 12.5 | | 12.4 |
| Other non-current liabilities | | (32.0) | | (22.1) |
| Derivative financial assets and liabilities – net | | (7.4) | | 4.4 |
| Other | | 2.1 | | 3.5 |
| Changes in non-cash working capital | (133.3) | | 0.3 |
| Net cash provided by operating activities | | | | | 298.8 | $ | 364.1 |
| Investing activitiesBusiness combinations, net of cash acquired |
| 3 | | | | (10.1) | $ | (33.5) |
| Acquisition of investment in equity accounted investees | (113.5) | | — |
| Addition of assets through the monetization of royalties— | | (202.7) |
| Additions to property, plant and equipment | (199.4) | | (155.6) |
| Proceeds from disposal of property, plant and equipment | | 0.4 | | 2.5 |
| Additions to intangible assets | (69.7) | | (62.1) |
| Net payments to equity accounted investees | | (10.3) | | (27.0) |
| Dividends received from equity accounted investees | | 22.6 | | 7.1 |
| Other | | 0.8 | | 2.9 |
| Net cash used in investing activities | | | | | (379.2) | $ | (468.4) |
| Financing activitiesNet proceeds from borrowing under revolving unsecured credit facilities |
| | | | | 135.3 | $ | — |
| Proceeds from long-term debt | 161.4 | | 84.3 |
| Repayment of long-term debt | (229.6) | | (66.6) |
| Repayment of lease liabilities | (64.5) | | (8.3) |
| Dividends paid | | (82.2) | | (74.3) |
| Issuance of common shares | | 22.5 | | 11.6 |
| Repurchase of common shares | (32.8) | | (92.8) |
| Changes in restricted cash | 15.7 | | — |
| Other | | (1.3) | | — |
| Net cash used in financing activities | | | | | (75.5) | $ | (146.1) |
| Effect of foreign exchange rate changes on cash and cash equivalents | | | | | (11.7) | $ | 0.6 |
| Net decrease in cash and cash equivalents | | | | | (167.6) | $ | (249.8) |
| Cash and cash equivalents, beginning of period | | 446.1 | | 611.5 |
| Cash and cash equivalents, end of period | | | | | 278.5 | $ | 361.7 |
| Supplemental information: |
| Interest paid | | | | | 75.5 | $ | 38.0 |
| Interest received | | 7.8 | | 10.5 |
| Income taxes paid | | 25.5 | | 23.4 |
| (1) Refer to Note 2 – Changes in accounting policies for the impact of adopting IFRS 16. |
| The accompanying notes form an integral part of these Consolidated Interim Financial Statements. |
| 5 I CAE Third Quarter Report 2020 |
| 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 February 7, 2020. NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| | Nature of operations | |
| | CAE Inc. and its subsidiaries (or the Company) design, manufacture and supply simulation equipment, 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 in |
| | commercial, business and helicopter aviation, a range of flight simulation training devices, as well as ab initio pilot training and crew sourcing services; |
| | (ii) Defence and Security – Is a training systems integrator for defence forces across the air, land and naval domains, and for government |
| | organizations responsible for public safety; |
| | (iii) Healthcare – Designs and manufactures simulators, audiovisual and simulation centre management solutions, develops courseware |
| | and offers services for training of medical, nursing and allied healthcare students as well as medical practitioners worldwide. |
| | CAE is a limited liability company incorporated and domiciled in Canada. The address of the main office is 8585 Côte-de-Liesse, Saint-Laurent, Québec, Canada, H4T 1G6. CAE shares are traded on the Toronto Stock Exchange and on the New York Stock Exchange. 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 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. 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, 2019, 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, 2019. 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, 2019, except for the changes presented in Note 2. |
| CAE Third Quarter Report 2020 I 6 |
| Notes to the Consolidated Interim Financial Statements |
| NOTE 2 – CHANGES IN ACCOUNTING POLICIES |
| New and amended standards adopted by the Company |
| IFRS 16 - LeasesIn January 2016, the IASB released IFRS 16 - Leases, which replaced IAS 17 - Leases and related interpretations. The new standard introduces a single lessee accounting model and eliminates the classification of leases as either operating or finance leases. It requires the lessee to recognize a right-of-use asset and a lease liability for substantially all leases. Lessors continue to classify leases as operating leases or finance leases as IFRS 16 substantially carries forward the current lessor accounting requirements. |
| IFRS 16 was adopted effective April 1, 2019. The Company elected to use the modified retrospective approach. Under this approach, the comparative information was not restated and the cumulative effect of initially applying IFRS 16 was recognized in equity at the date of initial application, on April 1, 2019. |
| The Company has elected to apply the following transitional practical expedients: |
| – | Maintain previous assessment of whether a contract is, or contains, a lease at the date of initial application; |
| – | Use of hindsight when evaluating the lease term if a contract contains options to extend or terminate the lease; |
| – | Recognize short-term leases and leases of low-value assets as a lease expense on a straight-line basis, consistent with current IAS 17 accounting; |
| – | Account for leases for which the remaining lease term ends within 12 months of the effective date as short-term leases; |
| – | Adjust the right-of-use asset by the amount of the previously assessed IAS 37 onerous contract provision as an alternative to an impairment review; |
| – | Exclude initial direct costs from the measurement of the right-of-use asset at the date of initial application; |
| – | Measure the right-of-use asset as if IFRS 16 had been applied since the lease commencement date using the incremental borrowing rate at the date of initial application. |
| Where the Company is a lessee, IFRS 16 resulted in on-balance sheet recognition of most of its leases that were previously considered operating leases under IAS 17 unless they met the short-term or low-value exemption. |
| For the consolidated statement of financial position, this resulted in the recognition of new right-of-use assets of $226.8 million and new lease liabilities of $265.8 million, presented as part of the long-term debt, discounted using the incremental borrowing rate as at April 1, 2019 (weighted average rate applied was 5.4%). In addition, the Company had existing finance lease assets of $206.0 million under IAS 17 that were reclassified to right-of-use assets. |
| For the consolidated income statement, depreciation expense on the right-of-use assets and interest expense on the lease liabilities are incurred, replacing the operating lease expense previously recognized under IAS 17 accounting. For the consolidated statement of cash flows, the principal repayments of the lease liabilities are presented in financing activities, whereas previously operating lease payments under IAS 17 accounting were presented in operating activities. |
| The cumulative effect of the impacts of adopting IFRS 16 on the consolidated statement of financial position as at April 1, 2019 are presented in the table below: |
| | March 31 | IFRS 16 | April 1 |
| (amounts in millions) | | 2019 | Adjustments | 2019 |
| AssetsTotal current assets |
| | $ | 2,112.9 | $ | (3.3) | | $ | 2,109.6 |
| Property, plant and equipment | | 2,149.3 | (206.0) | 1,943.3 |
| Right-of-use assets— | 432.8 | 432.8 |
| Investment in equity accounted investees | | 312.1 | (3.7) | 308.4 |
| Other non-current assets | | 2,591.2 | 0.3 | 2,591.5 |
| Total assets | | $ | 7,165.5 | $ | 220.1 | | $ | 7,385.6 |
| Liabilities and equityCurrent portion of long-term debt |
| | $ | 264.1 | $ | 31.8 | | $ | 295.9 |
| Other current liabilities | | 1,625.4 | (4.3) | 1,621.1 |
| Total current liabilities | | $ | 1,889.5 | $ | 27.5 | | $ | 1,917.0 |
| Long-term debt | | 2,064.2 | 234.0 | 2,298.2 |
| Other non-current liabilities | | 801.8 | (13.9) | 787.9 |
| Total liabilities | | $ | 4,755.5 | $ | 247.6 | | $ | 5,003.1 |
| Total equity | | $ | 2,410.0 | $ | (27.5) | | $ | 2,382.5 |
| Total liabilities and equity | | $ | 7,165.5 | $ | 220.1 | | $ | 7,385.6 |
| 7 I CAE Third Quarter Report 2020 |
| Notes to the Consolidated Interim Financial Statements |
| | The difference between the amount of new lease liabilities recognized as at April 1, 2019 and the future aggregate minimum lease payments under non-cancellable operating leases of the Company as at March 31, 2019, which amounted to $274.1 million, is mainly due to the discounting factors applied to the lease payments, the inclusion of optional renewal period reasonably certain to be exercised, and the exclusion of leases payments for short-term lease and low-value lease. |
| | The key changes to the Company’s accounting policies are summarized below: |
| | LeasesAt inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. |
| | The Company as a lesseeThe Company recognizes a right-of-use asset and liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. |
| | The right-of-use asset is subsequently depreciated from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term through a purchase option. If it is reasonably certain that the Company will obtain ownership by the end of the lease term, the leased asset is depreciated over its useful life. The depreciation periods, residual values (only applicable when it is reasonably certain that the Company will obtain ownership by the end of the lease term) and depreciation methods are as follows: |
| | | Method | Amortization rate/period |
| | Buildings and land | Straight-line | | | | | 1 to 40 years |
| | Simulators | | | | Straight-line (10% residual) | Not exceeding 25 years |
| | Machinery and equipment | | | | Declining balance/Straight-line | Not exceeding 7 years |
| | In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. |
| | The lease liability is initially measured at the present value of the lease payments at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the lessee’s incremental borrowing rate. Lease payments comprise of fixed payments, including in-substance fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period that the Company is reasonably certain to exercise and penalties for early termination of a lease if the Company is reasonably certain to terminate. |
| | The lease liability is subsequently measured at amortized cost using the effective interest method and is remeasured when there is a change in future lease payments arising from a change in an index or rate, the estimate of the amount expected to be payable under a residual value guarantee or the Company’s assessment of whether it will exercise a purchase, renewal or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. |
| | Short-term leases and leases of low-value assetsThe Company recognizes the payments associated with short-term leases and leases of low-value assets as an expense on a straight-line basis over the lease term. |
| | Sale and leaseback transactionIn a sale and leaseback transaction the transfer of an asset is recognized as a sale when the customer has obtained control of the underlying asset which is aligned with the Company’s revenue recognition policy, otherwise the Company continues to recognize the transferred asset on the balance sheet and record a financial liability equal to the proceeds transferred. When the transfer of an asset satisfies the Company’s revenue recognition policy to be accounted for as revenue, a partial recognition of the profit from the sale is recorded immediately after the sale, which is equivalent to the proportion of the asset not retained by the Company through the lease. The proportion of the asset retained by the Company through the lease is recognized as a right-of-use asset and the lease liability is measured as the present value of future lease payments. |
| | The Company as a lessorThe Company determines, at lease commencement, whether each lease is a finance or an operating lease. Leases in which substantially all the risks and rewards of ownership are transferred are classified as finance leases. All other leases are accounted for as operating leases. |
| CAE Third Quarter Report 2020 I 8 |
| Notes to the Consolidated Interim Financial Statements |
| With regards to finance leases, the asset is derecognized at the commencement of the lease. The net present value of the minimum lease payments and any discounted unguaranteed residual value are recognized as non-current receivables. Finance income is recognized over the term of the lease based on the effective interest method. Revenue from operating leases is recognized on a straight-line basis over the term of the corresponding lease. |
| When the Company subleases one of its leases it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. |
| Use of judgments, estimates and provisionsLeases, the Company as a lesseeThe application of IFRS 16 requires the Company to make judgements and estimates that affect the value of the right-of-use assets and the lease liabilities which mainly relate to the implicit and incremental rates of borrowing and to whether purchase, renewal or termination options are reasonably certain of being exercised. |
| IFRIC 23 - Uncertainty over income tax treatmentsIn June 2017, the IASB released IFRIC 23 - Uncertainty over Income Tax Treatments, which addresses how to determine the taxable profit (loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12 - Income Taxes. It specifically considers whether tax treatments should be considered independently or collectively and assumptions for taxation authorities’ examinations in regards to taxable profit (loss), tax bases, unused tax losses, unused tax credits or tax rates. |
| IFRIC 23 was adopted effective April 1, 2019 and resulted in no significant adjustment. |
| Amendment to IAS 19 - Employee benefitsIn February 2018, the IASB released an amendment to IAS 19 - Employee Benefits, which clarifies how to account for plan amendments, curtailments and settlements on defined benefits plans. The amendment requires the use of updated actuarial assumptions to determine current service cost and net interest for the period after a plan amendment, curtailment or settlement. |
| This amendment to IAS 19 was adopted April 1, 2019 and will apply to plan amendments, curtailments or settlements occurring after April 1, 2019. |
| NOTE 3 – BUSINESS COMBINATIONS |
| Pelesys Learning Systems Inc.On April 26, 2019, the Company acquired the remaining 55% equity interest in Pelesys Learning Systems Inc. (Pelesys) for cash consideration (net of cash acquired) of $4.0 million and a long-term payable of $5.7 million. |
| Pelesys is a global leader in the provision of aviation training solutions and courseware. The acquisition will strengthen the Company’s courseware offering and consolidate its cadet-to-captain training delivery across its global network. Prior to this transaction, the Company's 45% ownership interest in Pelesys was accounted for using the equity method. |
| Luftfartsskolen ASOn June 26, 2019, the Company acquired the shares of Luftfartsskolen AS, an ab-initio flight school located in Oslo, Norway, for cash consideration (net of cash acquired) of $3.5 million. This acquisition will strengthen the Company’s leadership and global reach in civil aviation training by growing its flight academy network and extending its portfolio of aviation training solutions. |
| The purchase prices of Pelesys and Luftfartsskolen AS are mainly allocated to goodwill and intangible assets. The net assets, including intangibles, arising from the acquisitions of Pelesys and Luftfartsskolen AS are included in Civil Aviation Training Solutions segment. The purchase price allocations are preliminary as at December 31, 2019. |
| OtherOn November 12, 2019, the Company invested in a healthcare software company that enables increased efficiency of learning, through a controlling 50% equity interest, for cash consideration of $0.9 million. |
| During the nine months ended December 31, 2019, the Company completed its final assessment of the fair value of assets acquired and liabilities assumed of Avianca’s Training Business, Logitude, Indian Training Centres and Bombardier's Business Aircraft Training Business acquired in fiscal 2019. Adjustments to the determination of net identifiable assets acquired and liabilities assumed for acquisitions realized in fiscal 2019 resulted in an increase of intangible assets of $6.2 million, a decrease of deferred tax assets of $4.7 million and a decrease of other net assets of $1.5 million. |
| During the nine months ended December 31, 2019, an additional net cash consideration of $1.7 million was paid for acquisitions realized in fiscal 2019. |
| 9 I CAE Third Quarter Report 2020 |
| Notes to the Consolidated Interim Financial Statements |
| | NOTE 4 – INVESTMENT IN EQUITY ACCOUNTED INVESTEES |
| | Partnership with Directional Aviation CapitalOn November 4, 2019, the Company concluded a strategic partnership with Directional Aviation Capital (DAC) including a 15-year exclusive business aviation training services agreement with DAC affiliates and the acquisition of a 50% equity interest in SIMCOM Holdings, Inc. for cash consideration of $113.5 million [US $86.3 million]. The Company obtained joint control over SIMCOM, therefore the joint venture is accounted for using the equity method. SIMCOM operates simulators and training devices representative of a wide range of jet, turboprop and piston powered aircraft and is headquartered in Orlando, Florida. |
| | Over the course of the 15-year business aviation training services agreement, DAC's affiliated business aircraft operators, which include Flexjet, Flight Options, Flairjet, Sirio, Nextant Aerospace and Corporate Wings, will train exclusively with SIMCOM and CAE. |
| | NOTE 5 – 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 location 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 December 31 | 2019 | | | | 2018 | 2019 | 2018 | 2019 | | | | | | | | 2018 | 2019 | 2018 |
| | External revenue | | | | | | | | $ | 558.1 | $ | | | | 458.4 | $ | 332.4 | $ | 330.2 | | | | $ | 33.0 | $ | | | | | | | | 27.7 | $ | 923.5 | $ | 816.3 |
| | Depreciation and amortization | 59.8 | | | | 37.7 | 14.1 | 11.8 | 3.8 | | | | 3.4 | 77.7 | 52.9 |
| | Write-downs of inventories – net | 0.4 | | | | 0.2 | 0.3 | | | | 0.3 | — | | | | — | 0.7 | 0.5 |
| | Write-downs of accounts receivable – net | 0.5 | | | | 0.1 | — | | | | — | — | | | | — | 0.5 | 0.1 |
| | After tax share in profit of equity | | | | | | | | | | | | | | | | | | | | | |
| | accounted investees | 8.4 | | | | 7.8 | 3.4 | | | | 1.9 | — | | | | — | 11.8 | 9.7 |
| | Segment operating income | 123.0 | | | | 87.2 | 31.3 | 25.2 | 0.6 | | | | 0.6 | 154.9 | 113.0 |
| | | Civil Aviation | Defence | | | | | | | | | | |
| | | Training Solutions | and Security | Healthcare | | | | | Total |
| | Nine months ended December 31 | 2019 | | | | 2018 | 2019 | 2018 | 2019 | | | | | | | | 2018 | 2019 | 2018 |
| | External revenue | | | | | | | | $ 1,565.6 | $ 1,282.4 | | | | | $ | 989.4 | $ | 918.8 | | | | $ | 90.9 | $ | | | | | | | | 80.9 | $ 2,645.9 | $ 2,282.1 |
| | Depreciation and amortization | 173.0 | | | | 109.7 | 42.8 | 34.1 | 11.1 | | | | | | | | 9.9 | 226.9 | 153.7 |
| | Write-downs of inventories – net | 1.1 | | | | 0.4 | 0.8 | | | | | | | | | | | | 0.6 | — | | | | | | | | 0.1 | 1.9 | 1.1 |
| | Write-downs of accounts receivable – net | 2.3 | | | | 0.4 | — | | | | | | | | | | | | 0.4 | 0.1 | | | | — | 2.4 | 0.8 |
| | After tax share in profit of equity | | | | | | | | | | | | | | | |
| | accounted investees | 25.0 | | | | 15.4 | 9.3 | | | | | | | | | | | | 7.7 | — | | | | — | 34.3 | 23.1 |
| | Segment operating income (loss) | 321.8 | | | | 228.8 | 72.4 | 80.8 | (3.6) | | | | | | | | 0.6 | 390.6 | 310.2 |
| | Capital expenditures by segment, which consist of additions to property, plant and equipment and intangible assets, are as follows: |
| | | | Three months ended | Nine months ended |
| December 31 | | | | | December 31 |
| | Nine months ended December 31 | 2019 | | | | | | | | 2018 | 2019 | 2018 |
| | Civil Aviation Training Solutions | | $ $ | 52.8 $ $ | | | | | | | | 65.6 $ $ | 204.5 $ $ | 165.0 |
| | Defence and Security | 16.7 | | | | | | | | 15.9 | 54.6 | 43.5 |
| | Healthcare | 3.4 | | | | | | | | 4.6 | 10.0 | 9.2 |
| | Total capital expenditures | | $ $ | 72.9 $ $ | | | | | | | | 86.1 $ $ | 269.1 $ $ | 217.7 |
| CAE Third Quarter Report 2020 I 10 |
| 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 assets. Liabilities employed include accounts payable and accrued liabilities, provisions, contract liabilities, deferred gains and other liabilities and derivative financial liabilities. |
| Assets and liabilities employed by segment are reconciled to total assets and liabilities as follows: |
| December 31 | March 31 |
| | | | 2019 | 2019 |
| Assets employed | | |
| Civil Aviation Training Solutions | $ | | 4,797.0 | $ | 4,373.0 |
| Defence and Security | | | 1,662.5 | 1,627.2 |
| Healthcare | | | 267.0 | 271.6 |
| Assets not included in assets employed | | | 718.1 | 893.7 |
| Total assets | $ | | 7,444.6 | $ | 7,165.5 |
| Liabilities employed | | | | |
| Civil Aviation Training Solutions | $ | | 1,062.5 | $ | 1,098.3 |
| Defence and Security | | | 588.1 | 595.2 |
| Healthcare | | | 42.3 | 48.8 |
| Liabilities not included in liabilities employed | | | 3,305.8 | 3,013.2 |
| Total liabilities | $ | | 4,998.7 | $ | 4,755.5 |
| Products and services informationThe Company's external revenue for its products and services are as follows: |
| | | | | Three months ended | Nine months ended |
| | | | | | December 31 | December 31 |
| Nine months ended December 31 | | | | | 2019 | | 2018 | 2019 | 2018 |
| Simulation products | | | | | | | | $ | 362.6 | $ | 348.2 | $ | | 1,064.0 | $ | 962.7 |
| Training and services | | | | | 560.9 | | 468.1 | 1,581.9 | $ | 1,319.4 |
| | | | | | | | | $ | 923.5 | $ | 816.3 | $ | | 2,645.9 | $ | 2,282.1 |
| Geographic informationThe Company markets its products and services globally. Revenues are attributed to countries based on the location of customers. Non current assets other than financial instruments and deferred tax assets are attributed to countries based on the location of the assets. |
| | | | | Three months ended | Nine months ended |
| | | | | | December 31 | December 31 |
| Nine months ended December 31 | | | | | 2019 | | 2018 | 2019 | 2018 |
| External revenue | | | | | | |
| Canada | | | | | | | | $ | 81.7 | $ | 59.5 | $ | | 245.9 | $ | 183.2 |
| United States | | | | | 365.6 | | 315.6 | 1,102.3 | 840.2 |
| United Kingdom | | | | | 49.8 | | 59.4 | 149.2 | 162.8 |
| Germany | | | | | 34.7 | | 28.0 | 116.9 | 79.2 |
| Netherlands | | | | | 14.2 | | 16.9 | 53.2 | 69.8 |
| Spain | | | | | 26.6 | | 28.2 | 86.6 | 65.6 |
| Other European countries | | | | | 83.1 | | 92.0 | 228.6 | 265.2 |
| United Arab Emirates | | | | | 41.0 | | 27.4 | 60.6 | 88.9 |
| China | | | | | 40.5 | | 74.9 | 143.5 | 179.7 |
| Other Asian countries | | | | | 94.4 | | 65.8 | 289.7 | 209.0 |
| Australia | | | | | 12.7 | | 10.4 | 35.2 | 38.4 |
| Other countries | | | | | 79.2 | | 38.2 | 134.2 | 100.1 |
| | | | | | | | | $ | 923.5 | $ | 816.3 | $ | | 2,645.9 | $ | 2,282.1 |
| 11 I CAE Third Quarter Report 2020 |
| Notes to the Consolidated Interim Financial Statements |
| | | December 31 | March 31 |
| | | | | 2019 | 2019 |
| | Non-current assets other than financial instruments and deferred tax assets | | | | |
| | Canada | $ | | 1,618.9 | $ | 1,557.0 |
| | United States | | | 1,710.9 | 1,580.7 |
| | Brazil | | | 111.7 | 116.4 |
| | United Kingdom | | | 387.3 | 285.2 |
| | Luxembourg | | | 183.7 | 187.0 |
| | Netherlands | | | 209.1 | 196.9 |
| | Other European countries | | | 391.3 | 336.5 |
| | Malaysia | | | 177.8 | 177.6 |
| | Other Asian countries | | | 170.4 | 177.8 |
| | Other countries | | | 171.3 | 176.4 |
| | | $ | | 5,132.4 | $ | 4,791.5 |
| | NOTE 6 – OTHER GAINS – NET |
| Three months endedNine months ended |
| | | | | | | December 31 | December 31 |
| | Nine months ended December 31 | 2019 | 2018 | | | | 2019 | 2018 |
| | Disposal of property, plant and equipment | $ | (0.3) | | | | | | | $ | 0.1 | | $ | | (0.3) | $ | | 1.2 |
| | Net foreign exchange gains (losses) | 7.7 | (0.2) | | | | 20.7 | 15.2 |
| | Remeasurement of investment – net | — | — | | | | 0.6 | — |
| | Other | (3.9) | 2.6 | | | | (5.7) | 0.7 |
| | Other gains – net | $ | 3.5 | | | | | | | $ | 2.5 | | $ | | 15.3 | $ | 17.1 |
| | NOTE 7 – DEBT FACILITIES AND FINANCE EXPENSE – NET |
| | Issuance of unsecured senior notesIn December 2019, the Company issued unsecured senior notes of $131.7 million [US $100.0 million], maturing in December 2034 and bearing interest of 4.9%. |
| | Reimbursement of unsecured senior notes, term loans and repurchase of assets previously financed under leaseIn May 2019, the Company repurchased an asset previously financed under lease for $12.5 million [US $9.3 million] acquired as part of the Bombardier Business Aircraft Training Business acquisition. |
| | In June 2019, the Company repaid unsecured senior notes amounting to $80.4 million [US $60.0 million], which matured during the monthand a term loan of $14.9 million [US $11.0 million]. |
| | In October 2019, the Company repurchased assets previously financed under lease for $9.8 million [US $7.5 million]. |
| | In December 2019, the Company repaid unsecured senior notes amounting to $95.0 million, which matured during the month and partially repaid a non-recourse term loan for an amount of $15.7 million [US $11.7 million] using restricted cash previously held as a collateral. |
| | Amendment to the revolving credit facilityIn August 2019, the Company renegotiated its revolving unsecured term credit facility agreement, increasing the total amount available from US $550.0 million to US $850.0 million. The maturity date and the applicable interest rate of the revolving unsecured term credit facility remained unchanged. |
| CAE Third Quarter Report 2020 I 12 |
| Notes to the Consolidated Interim Financial Statements |
| Finance expense – net |
| Three months ended | | Nine months ended |
| | December 31 | | December 31 |
| Nine months ended December 31 | 2019 | | | | 2018 | 2019 | | | 2018 |
| Finance expense: |
| Long-term debt (other than lease liabilities) | | | | | | | $ | 26.8 | $ | | | 14.8 | | | $ | 76.5 | $ | | 44.4 |
| Lease liabilities | 5.8 | | | | 1.9 | 17.7 | | | 5.6 |
| Royalty obligations | 2.9 | | | | 3.0 | 8.7 | | | 9.0 |
| Employee benefits obligations | 1.4 | | | | 1.5 | 4.1 | | | 4.2 |
| Other | 3.6 | | | | 3.5 | 10.6 | | | 9.4 |
| Borrowing costs capitalized | (1.0) | | | | (1.4) | (3.8) | | | (3.5) |
| Finance expense | | | | | | | $ | 39.5 | $ | | | 23.3 | | | $ | 113.8 | $ | | 69.1 |
| Finance income: |
| Loans and finance lease contracts | | | | | | | $ | (2.1) | $ | | | (2.0) | | | $ | (5.7) | $ | | (6.7) |
| Other | (0.7) | | | | (2.0) | (2.2) | | | (7.2) |
| Finance income | | | | | | | $ | (2.8) | $ | | | (4.0) | | | $ | (7.9) | $ | | (13.9) |
| Finance expense – net | | | | | | | $ | 36.7 | $ | | | 19.3 | | | $ | 105.9 | $ | | 55.2 |
| NOTE 8 – GOVERNMENT PARTICIPATION |
| The aggregate information regarding contributions recognized and amounts not yet received for the projects New Core Markets, Innovate, SimÉco 4.0 and Project Digital Intelligence are as follows: |
| Three months ended | | Nine months ended |
| | December 31 | | December 31 |
| Nine months ended December 31 | 2019 | | | | 2018 | 2019 | | | 2018 |
| Contribution receivable, beginning of period | | | | | | | $ | 11.1 | $ | | | 16.3 | | | $ | 13.4 | $ | | 6.2 |
| Contributions | 7.4 | | | | 13.9 | 24.6 | | | 32.9 |
| Payments received | (9.2) | | | | (10.8) | (28.7) | | | (19.7) |
| Contribution receivable, end of period | | | | | | | $ | 9.3 | $ | | | 19.4 | | | $ | 9.3 | $ | | 19.4 |
| NOTE 9 – SHARE CAPITAL, EARNINGS PER SHARE AND DIVIDENDS |
| Share capitalRepurchase and cancellation of common sharesOn February 8, 2019, the Company announced the renewal of the normal course issuer bid (NCIB) to purchase up to 5,300,613 of its common shares. The NCIB began on February 25, 2019 and will end on February 24, 2020 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. |
| During the nine months ended December 31, 2019, the Company repurchased and cancelled a total of 978,431 common shares (2018 – 3,610,100) under the NCIB, at a weighted average price of $33.54 per common share (2018 – $25.71), for a total consideration of $32.8 million (2018 – $92.8 million). An excess of $30.4 million (2018 – $84.1 million) of the shares’ repurchase value over their carrying amount was charged to retained earnings as share repurchase premiums. |
| Earnings per share computationThe denominators for the basic and diluted earnings per share computations are as follows: |
| Three months ended | | Nine months ended |
| | December 31 | | December 31 |
| Nine months ended December 31 | 2019 | | | | 2018 | 2019 | | | 2018 |
| Weighted average number of common shares outstanding | | | | | | | 265,792,502 | 266,073,641 | | | | | | 265,913,468 | 267,050,425 |
| Effect of dilutive stock options | 1,769,947 | 1,407,901 | 1,748,854 | 1,504,036 |
| Weighted average number of common shares outstanding for diluted earnings per share calculation | | | | | | | 267,562,449 | 267,481,542 | | | | | | 267,662,322 | 268,554,461 |
| For the three months ended December 31, 2019, options to acquire 1,203,400 common shares (2018 – 1,722,800) have been excluded from the above calculation since their inclusion would have had an anti-dilutive effect. For the nine months ended December 31, 2019, options to acquire 1,203,400 common shares (2018 – 1,722,800) have been excluded from the above calculation since their inclusion would have had an anti-dilutive effect. |
| 13 I CAE Third Quarter Report 2020 |
| Notes to the Consolidated Interim Financial Statements |
| | DividendsThe dividends declared for the three months ended December 31, 2019 were $29.2 million or $0.11 per share (2018 – $26.5 million or $0.10 per share). For the nine months ended December 31, 2019, dividends declared were $85.1 million or $0.32 per share (2018 – $77.3 million or $0.29 per share). |
| | NOTE 10 – SUPPLEMENTARY CASH FLOWS INFORMATION |
| | Changes in non-cash working capital are as follows: |
| | Nine months ended December 31 | 2019 | 2018 |
| | Cash (used in) provided by non-cash working capital: | | |
| | Accounts receivable | | | $ | (24.4) | | | $ | (74.5) |
| | Contract assets | 8.3 | (38.5) |
| | Inventories | (84.9) | (77.6) |
| | Prepayments | (2.0) | (11.3) |
| | Income taxes | (21.5) | (23.1) |
| | Accounts payable and accrued liabilities | (50.7) | 175.9 |
| | Provisions | (5.0) | (9.1) |
| | Contract liabilities | 46.9 | 58.5 |
| | Changes in non-cash working capital | | | $ | (133.3) | | | $ | 0.3 |
| | NOTE 11 – FAIR VALUE OF FINANCIAL INSTRUMENTS |
| | The fair value of a financial instrument is determined by reference to the available market information at the reporting date. When no active market exists for a financial instrument, the Company determines the fair value of that instrument based on valuation methodologies as discussed below. In determining assumptions required under a valuation model, the Company primarily uses external, readily observable market data inputs. Assumptions or inputs that are not based on observable market data incorporate the Company’s best estimates of market participant assumptions. Counterparty credit risk and the Company’s own credit risk are taken into account in estimating the fair value of financial assets and financial liabilities. The following assumptions and valuation methodologies have been used to measure the fair value of financial instruments:(i) The fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying |
| | values due to their short-term maturities; |
| | (ii) The fair value of derivative instruments, which include forward contracts, swap agreements and embedded derivatives accounted |
| | for separately and is calculated as the present value of the estimated future cash flows using an appropriate interest rate yield curve and forward foreign exchange rate. Assumptions are based on market conditions prevailing at each reporting date. The fair value of derivative instruments reflect the estimated amounts that the Company would receive or pay to settle the contracts at the reporting date; |
| | (iii) The fair value of the equity investments, which does not have a readily available market value, is estimated using a discounted cash |
| | flow model, which includes some assumptions that are not based on observable market prices or rates; |
| | (iv) The fair value of non-current receivables is estimated based on discounted cash flows using current interest rates for instruments |
| | with similar risks and remaining maturities; |
| | (v) The fair value of long-term debts, royalties obligations and other non-current liabilities are estimated based on discounted cash flows |
| | using current interest rates for instruments with similar risks and remaining maturities. Upon adoption of IFRS 16 on April 1, 2019, fair value disclosures are no longer required for lease liabilities; |
| | (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 Third Quarter Report 2020 I 14 |
| Notes to the Consolidated Interim Financial Statements |
| The carrying values and fair values of financial instruments, by category, are as follows: |
| December 31 | March 31 |
| | | 2019 | 2019 |
| | | | 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 | $ | | 278.5 | $ | | 278.5 | | | $ | | 446.1 | $ | 446.1 |
| Restricted cash | | | | Level 1 | | | 11.4 | 11.4 | | | | | 27.3 | 27.3 |
| Embedded foreign currency derivatives | | | | Level 2 | — | | — | | | | | 0.1 | 0.1 |
| Equity swap agreements | | | | Level 2 | | | 1.9 | 1.9 | | | | | 10.4 | 10.4 |
| Forward foreign currency contracts | | | | Level 2 | | | 1.5 | 1.5 | | | | | (2.5) | (2.5) |
| Contingent consideration arising on business combinations | | | | Level 3 | | | (11.9) | (11.9) | | | | | (11.9) | (11.9) |
| Derivative assets (liabilities) designated in a hedge relationship Foreign currency swap agreements | | | | Level 2 | | | 9.8 | 9.8 | | | | | 11.1 | 11.1 |
| Forward foreign currency contracts | | | | Level 2 | | | 14.1 | 14.1 | | | | | (6.5) | (6.5) |
| Financial assets (liabilities) measured at amortized cost |
| Accounts receivable(1) | | | | Level 2 | | | 465.4 | 465.4 | | | | | 451.7 | 451.7 |
| Investment in finance leases | | | | Level 2 | | | 128.4 | 144.7 | | | | | 91.5 | 103.1 |
| Advances to a portfolio investment | | | | Level 2 | | | 29.1 | 29.1 | | | | | 29.5 | 29.5 |
| Other assets(2) | | | | Level 2 | | | 22.3 | 23.6 | | | | | 25.7 | 25.7 |
| Accounts payable and accrued liabilities(3) | | | | Level 2 | | | (624.5) | (624.5) | | | | | (770.8) | (770.8) |
| Total long-term debt(4) | | | | Level 2 | | | (2,115.0) | (2,335.6) | | | | | | | (2,335.4) | (2,470.7) |
| Other non-current liabilities(5) | | | | Level 2 | | | (171.2) | (199.4) | | | | | (164.0) | (184.6) |
| Financial assets measured at FVOCI |
| Equity investments | | | | Level 3 | | | 3.3 | 3.3 | | | | | 3.3 | 3.3 |
| | | | | $ | | (1,956.9) | $ | (2,188.1) | | | | | $ | | (2,194.4) | $ | (2,338.7) |
| (1) | Includes trade receivables, accrued receivables and certain other receivables. |
| (2) | Includes non-current receivables and certain other non-current assets. |
| (3) | Includes trade accounts payable, accrued liabilities, interest payable and current royalty obligations. |
| (4) | The carrying value excludes transaction costs. |
| (5) | Includes non-current royalty obligations and other non-current liabilities. |
| For the nine months ended December 31, 2019, the variance in level 3 financial instruments was nil. |
| NOTE 12 – RELATED PARTY TRANSACTIONS |
| The Company’s outstanding balances with its equity accounted investees are as follows: |
| | | | | | | December 31 | March 31 |
| | | | | | | | | 2019 | 2019 |
| Accounts receivable | | | | | | $ $ | | 40.3 $ $ | 33.9 |
| Contract assets | | | | | | | | 17.3 | 13.4 |
| Other assets | | | | | | | | 25.4 | 18.7 |
| Accounts payable and accrued liabilities | | | | | | | | 1.7 | 2.2 |
| Contract liabilities | | | | | | | | 32.4 | 30.7 |
| Other non-current liabilities | | | | | | | | 1.5 | 1.6 |
| The Company’s transactions with its equity accounted investees are as follows: |
| | | | | | | Three months ended | Nine months ended |
| December 31 | December 31 |
| Nine months ended December 31 | | | | | | | 2019 | 2018 | | | | | 2019 | 2018 |
| Revenue | | | | | $ $ | | 22.7 $ $ | 21.4 $ $ | | | | | 79.7 $ $ | 44.1 |
| Purchases | | | | | | | 0.2 | 0.6 | | | | | 0.9 | 1.8 |
| Other income | | | | | | | 0.2 | 0.4 | | | | | 0.7 | 1.1 |
| 15 I CAE Third Quarter Report 2020 |
