one step ahead

136 Pages·2008·5.1 MB·English

Annual Report
for the year ended March 31,
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cae.com
one step ahead
1 Corporate Profile
2 Chairman’s Message
4 Message to Shareholders
7 Financial Overview
8 Group Presidents
9 Four Balanced Reporting Segments
10 CAE Global Reach
12 Training and Services/Civil
14 Simulation Products/Civil
16 Simulation Products/Military
18 Training and Services/Military
20 CAE Professional Services & Presagis
21 Pilot Provisioning
22 Emerging Markets
23 Bandwidth
24 Community
25 Financial Review
27 Management’s Discussion and Analysis
73 Management’s Report on Internal
Control over Financial Reporting
73 Independent Auditors’ Report
75 Consolidated Financial Statements
79 Notes to Consolidated Financial Statements
130 Board of Directors and Officers
131 Shareholder and Investor Information
132 Forward-Looking Statements
Corporate
Profile
CAE is a world leader in providing simulation and modelling technologies and integrated training solutions for
the civil aviation industry and defence forces around the globe. With annual revenues exceeding C$1.4 billion,
CAE employs more than 6,000 people at more than 75 sites and training locations in 20 countries. We have
the largest installed base of civil full-flight simulators and training devices. Through our global network of
27 civil aviation and military training centres, we train more than 75,000 crewmembers yearly. We also offer
modelling and simulation software to various market segments and, through CAE’s professional services
division, we assist customers with a wide range of simulation-based needs. www.cae.com
2008 financial highlights
(amounts in millions, except per share amounts) 2008 2007 2006
Operating results
Continuing operations
Revenue 1,423.6 1,250.7 1,107.2
Earnings 164.8 129.1 69.6
Net earnings 152.7 127.4 63.6
Financial position
Total assets 2,253.2 1,956.2 1,716.1
Total debt, net of cash 124.1 133.0 190.2
Per share
Earnings from continuing operations 0.65 0.51 0.28
Net earnings 0.60 0.51 0.25
Dividends 0.04 0.04 0.04
Shareholders’ equity 3.74 3.30 2.69
GEOGGREAOPGHRICAPHIC REVERNEUVEENUE
DISTRDIIBSUTTRIIOBNUTION BY BUBSYI NBEUSSSINESS
OF REOVFE RNEUVEENUE SEGMSEENGTMENT
CANADCAANA7D%A 7%
TRAINITNRGA AINNIND GS EARNVDIC SEESR/VCIICVEILS/2C7IV%IL 27%

UNITEDU NSTITAETDE SST3A3T%ES 33%
TRAINITNRGA AINNIND GS EARNVDIC SEESR/VMICILEITSA/RMYILI1T6A%RY 16%
UNITEDU NKIINTEGDD OKIMNGD7O%M 7%
GERMAGNEYRM1A1N%Y 11%
SIMULASTIMIOUNL APTRIOODNU PCRTOSD/CUICVTILS/3C0IV%IL 30%
NETHENRELTAHNEDRSLAN7%DS 7%
OTHERO ETUHREORP EEUARNO CPOEAUNN TCROIEUSNT1R0I%ES 10%
CHINACH5IN%A 5%
UNITEDU NARITAEBD EAMRIARBA TEEMSIRA4T%ES 4%
OTHERO ATSHIEARN ACSOIAUNN TCROIEUSNTR6I%ES 6% SIMULASTIMIOUNL APTRIOODNU PCRTOSD/MUCILTITSA/RMYILI2T7A%RY 27%
AUSTRAAULISATRA6L%IA 6%
OTHERO CTOHUERN TCROIEUSNTR4I%ES 4%
CCAAEE AAnnnnuuaall RReeppoorrtt 22000088 || 11
CAE Annual Report 2008 | 1

Chairman’s
Message
Lynton R. Wilson, Chairman of the Board
BAlANCE, DivERSiTy AND TEAm SpiRiT: ThESE quAliTiES
hAvE uNDERpiNNED ThE SuCCESS of CAE foR mANy
yEARS. iN fiSCAl 2008, CAE REpoRTED STRoNg gRoWTh
iN All mARkET SEgmENTS, AND WAS AlSo RECogNizED
foR ExCEllENCE iN CoRpoRATE govERNANCE.
CAE Annual Report 2008 | 2 CAE Annual Report 2008 | 2
Chairman’s
Message
During fiscal 2008, CAE continued to diversify its activities in both the civil and military markets, among
products and services, as well as in the various regions of the world. initiatives such as pilot provisioning,
expansion in emerging markets and a focus on leveraging modelling and simulation technologies helped
to provide earnings stability and strategic flexibility.
The year was marked not only by continued financial success, but also by recognition for improvements
in corporate governance. in January 2008, CAE was named co-winner in the large enterprise category
of Excellence in Corporate governance, an initiative by the korn/ferry international firm and Commerce
magazine. The award is based on the corporate governance practices of a Board of Directors and
management among companies headquartered in quebec. for CAE, the balance, diversity and team
spirit exhibited by the Board and management were cited among the winning attributes, as was the
Company’s focus on transparency.
on behalf of the Board, i would like to salute the CAE management team, under the leadership
of mr. Robert Brown, and all CAE employees. We remain confident in the Company’s future.
Lynton R. Wilson
Chairman of the Board
CAE Annual Report 2008 | 3 CAE Annual Report 2008 | 3
Message to
Shareholders
Robert E. Brown, president and Chief Executive officer
CAE hAS gENERATED ExCEllENT RESulTS WiTh STEADy
gRoWTh iN REvENuE, EARNiNgS AND NEW oRDER ACTiviTy
iN BoTh miliTARy AND Civil SECToRS.
CAE Annual Report 2008 | 4 CAE Annual Report 2008 | 4
Message to
Shareholders
Revenues increased 14% to reach $1.4 billion, approximately 60% of which was generated outside
North America. our earnings from continuing operations also increased by 28% to total $164.8 million,
and we continued to strengthen our financial position, finishing the year with a positive free cash flow
of $173.4 million.
The strategy that we announced in february 2005 has paid off. Since then, we have successfully
increased revenues and earnings. We achieved these results while improving our balance sheet and
maintaining our business portfolio’s balance between the military and civil activities, and products and
services. At the same time, we improved our geographic diversification. for this fiscal year, our revenues
originated one third from North America, one third from Europe and one third from the emerging regions
comprising Asia-pacific, the middle East and South America. orders generated were closely divided
between military and civil, totalling $746.1 million and $919.4 million respectively.
During 2008, CAE’s position strengthened around the world. in the Asia-pacific region, we signed
a 10-year pilot training agreement with AirAsia and selected kuala lumpur as our Southeast Asian
training hub. in india, we are increasing our footprint by building a training centre and partnering with the
government of india for pilot training in two national flight academies. We acquired one of india’s leading
military simulation companies and are developing a helicopter training centre with joint venture partner
hindustan Aeronautics limited. We increased our training capacity in our Dubai joint venture training
centre and expanded our training centres in the u.k., the Netherlands and China. in North America,
we opened a business aviation training centre in New Jersey and signed contracts for training centre
operations services with Air Canada and upS. We announced training programs to address 90% of
all business aviation aircraft fleets.
CAE sold 37 full-flight simulators – a near record – to airlines, oEms and aircraft operators in Asia,
Europe, North America, the middle East and Australia. our investment in innovation continued and
we launched a number of new technological firsts. CAE continued to lead the industry in developing
prototype simulators for new aircraft, and our new breakthrough simulator, the CAE 5000 Series,
which was designed specifically to address emerging training requirements and markets, was also
put into service.
on the military side, CAE’s position was strengthened in key programs for the u.S. Navy and CAE
won contracts in the Netherlands, Singapore, france, germany, and the u.k. New Nh90 program
contracts were signed in Australia and Europe, while in Canada the CAE-led team was qualified as the
only team compliant for the C-130J and Ch-47 aircrew training capability. Contracts were also signed
to develop prototype simulators for a variety of oEms, including Boeing for the p-8A poseidon and
Alenia Aermacchi for the m-346 advanced lead-in fighter trainer.
The 2008 results strengthened our balance sheet, and we are confident about our ability to face the
future. CAE has the flexibility to pursue growth initiatives and continue to do some acquisitions to
grow our military modelling and simulation capabilities as well as our training and services business.
This flexibility has also permitted us to increase the dividend from $0.01 to $0.03 per quarter.
CAE Annual Report 2008 | 5 CAE Annual Report 2008 | 5
OutLOOk
fiscal 2009 will bring its own challenges, such as the continued strengthening of the Canadian dollar,
the fund markets in the u.S., the ever-increasing price of oil and the ongoing situation of world airlines,
particularly in the u.S.
Challenges aside, however, this new year will also present many opportunities. The aerospace and
defence sectors remain strong despite the economic and financial market volatility. Worldwide aircraft
traffic is expected to double in the next 20 years. The business jet market is seeing unprecedented
growth with all manufacturers reporting historically high orders. on the commercial side, after the last
three years of record order intake, Airbus and Boeing forecast between 22,000 and 27,000 aircraft
deliveries over the next 20 years. They are receiving strong orders from the Asia-pacific region and the
middle East. Compounding this demand is an industry-wide expected shortage of 18,000 pilots per
year for the next 20 years, with a high proportion of these pilots coming from emerging markets. on
the military side, the nature of warfare is changing. forces are relying more and more on synthetic
training. for armed forces everywhere, the benefits of training in simulators include reduced cost, lower
risk, and less wear and tear on aircraft already experiencing high operational use. more importantly,
simulation is increasingly used for mission rehearsal to prepare personnel before they go into combat.
CAE is developing products and services to help meet these growing needs.
CAE is also increasingly well positioned for the future because we’ve modernized the way we work.
There is an entrepreneurial spirit and a culture of financial discipline throughout the organization.
hand in hand with our employees, we are learning to adapt quickly to the complex political and
business realities around the world.
Employee engagement levels have significantly improved and our commitment and efforts were
recognized when we were chosen in october 2007 by mediacorp Canada as one of Canada’s
Top 100 Employers and one of montreal’s Top 15 Employers, and by the Financial Post as one
of Canada’s 10 Best Companies to Work for.
in summary, we have solid financials, our business activities are well balanced and diversified, and
we have the flexibility to react quickly to changes and opportunities in the market. our people share
an entrepreneurial spirit and they are committed to taking CAE to the next level.
We have several priorities as we begin the new year. The Company will continue to maintain a solid
financial base, grow a strong management team and nurture employee engagement. We will execute
our current initiatives and grow our military and civil training and services sectors. And we will stay one
step ahead, offering innovative technologies that improve our clients’ operational efficiency, provide
them with the best synthetic training possible, and improve the safety of their flights.
in closing, i extend my appreciation to our CAE team around the world for a job well done, to our
CAE Board members for their counsel and to our shareholders for their continued confidence in CAE.
Robert E. Brown
president and Chief Executive officer
CAE Annual Report 2008 | 6 CAE Annual Report 2008 | 6
REVENUE 1,600
(in millions of dollars) 1,400
1,200
1,000
800
600
400
200
0
8 7 6
0 0 0
0 0 0
REVENUE 1,600 2 2 2
(in millions of dollars) 1,400
Financial NET DEBT 1,320000
(in millions of dollars)
1,205000
800
Overview 200
600
150
400
120000
0
50 8 7 6
0 0 0
0 0 0
0 2 2 2
8 7 6
0 0 0
0 0 0
2 2 2
NET DEBT 300
(in millions of dollars)
REVENUE 1,600 NET CASH PROVIDED 235000
(in millions of dollars) 1,400 BY CONTINUING
OPERATING ACTIVITIES 220500
1,200
(in millions of dollars)
1,000 125000
800 110500
600
15000
400
200 500
8 7 6
0 0 0
0 0 0 0 0
8 7 6 28 27 26
0 0 0 0 0 0
REVENUE 1,600 20 20 20 20 20 20
NET CASH PROVIDED 300
(in millions of dollars) 1,400 BY CONTINUING
NET DEBT 1,230000 OPERATING NAOCNTI-VCITAISEHS 2500
WORKING CAPITAL
(in millions of dollars) 1,020500 ((iinn mmiilllliioonnss ooff ddoollllaarrss)) 2-2000
800 -40
150
620000 -60
100
410500 -80
200 50
100 -100
0
50 08 07 06 -1200 8 7 6
0 0 0 0 0 0
2 2 2 -140 0 0 0
0 28 27 26
8 7 6 0 0 0
0 0 0 0 0 0
NET DEBT 300 20 20 20 NON-CASH 0 2 2 2
(in millions of dollars) WORKING CAPITAL
-20
NET CASH PROVIDED 235000 (in millions of dollars)
BY CONTINUING -40
OPERATING ACTIVITIES 220500
-60
(in millions of dollars) 125000
-80
110500 -100
15000 -120
500 -140
8 7 6 8 7 6
0 0 0 0 0 0
0 0 0 0 0 0
0 2 2 2 2 2 2
8 7 6
0 0 0
0 0 0
NET CASH PROVIDED 300 2 2 2
BY CONTINUING
OPERATING NAOCNTI-VCITAISEHS 2500
( iWn OmRillKioInNsG o Cf dAoPlIlTaArsL) 2-0200
(in millions of dollars)
1-5400
1-0600
-80
50
-100
0
-120 8 7 6
0 0 0
0 0 0
-140 2 2 2
8 7 6
0 0 0
NON-CASH 0 20 20 20
WORKING CAPITAL
-20
(in millions of dollars)
CAE Annual Report 2008 | 7 -40 CAE Annual Report 2008 | 7
-60
-80
-100
-120
-140
8 7 6
0 0 0
0 0 0
2 2 2
Group
Presidents
ThRoughouT ouR 60-yEAR hiSToRy, WE hAvE iNNovATED To hElp ouR
CuSTomERS STAy oNE STEp AhEAD iN ENhANCiNg ThE SAfETy, EffiCiENCy,
REliABiliTy AND READiNESS of ThEiR opERATioNS. WE CoNTiNuE To Do
ThiS iN ToDAy’S ComplEx gloBAl BuSiNESS ENviRoNmENT By REmAiNiNg
oNE STEp AhEAD iN iNNovATioN, iN ANTiCipATiNg ouR CliENTS’ NEEDS AND
iN ouR gloBAl REACh.
Marc Parent Jeff Roberts
group president group president
Simulation products and innovation and
military Training & Services Civil Training & Services
CAE Annual Report 2008 | 8 CAE Annual Report 2008 | 8