Cae Inc. · TSX:CAE
Cae — Investor Day (September 2006)
72 slides from Cae's investor day presentation, Sep 20, 2006
Slide 1: CAE Investor Day 2006
CAE Restructuring for growth CAE Investor Day 2006 September 20, 2006 1
Slide 2: Agenda
Agenda y Welcome y CEO’s introduction – Robert E. Brown y CFO’s highlights – Alain Raquepas y Group Presidents’ presentations y Civil Training & Services and Innovation – Jeff Roberts y Simulation Products and Military Simulation & Training – Marc Parent y Q&A session y Facility tour and technology
Slide 3: Robert E. Brown, President and CEO
Robert E. Brown President and CEO CAE Inc. Confidential and/or Proprietary Information 3
Slide 4: Objectives
Objectives y Provide in-depth presentations from business group leaders y Elaborate on financial condition and governance y Articulate strategic priorities and explain key market drivers y Showcase technology and methodology behind training solutions y Provide orientation and context for new growth
Slide 5: Lead up to growth
Lead up to growth y Restructured to market realities y Consolidated functions and footprint y Rationalized assets worldwide y Bolstered management team y Launched Project Phoenix y Restored financial health y Segmented business with individual P&L and balance sheets y Strengthened balance sheet and
Slide 6: Global footprint
Global footprint Amsterdam Fassburg* Burgess Hill Holzdorf* Vancouver Toronto Benson Moscow Seattle Montreal Bueckeburg* New Jersey* Brussels Denver Rome Washington Evora Sesto Calende Phoenix Charlotte Madrid Tampa Doha Dallas Miami Dubai Zhuhai Kuala Lumpur Singapore São Paulo Santiago Sydney Civi
Slide 7: Key strengths
Key strengths y Global reach y Total array of training solutions – suite of products and services y Highly innovative workforce y Excellent technology base y Extensive global installed base y Solid global reputation and high brand value y Diversified business mix – geography, markets, products, serv
Slide 8: Diversified business mix
Diversified business mix Percentage revenue by segment Percentage SOI by segment Fiscal 2006 Fiscal 2006 $400 $70 Millions CDN$ Millions CDN$ $350 30% 29% $60 43% $300 23% $50 $250 18% $40 $200 $30 22% 21% $150 $20 14% $100 $50 $10 $0 $0 SPC SPM TSC TSM SPC SPM TSC TSM y 53% products / 47% training
Slide 9: Priorities
Priorities y Finalize remaining few elements of restructuring y Pursue innovation to capitalize on capabilities and new markets y Bolster technology leadership through new product development y Expand relationships with major OEMs y Focus training business in value-added segments and emerging market
Slide 10: Agenda
Agenda y Welcome y CEO’s introduction – Robert E. Brown y CFO’s highlights – Alain Raquepas y Group Presidents’ presentations y Civil Training & Services and Innovation – Jeff Roberts y Simulation Products and Military Simulation & Training – Marc Parent y Q&A session y Facility tour and technology
Slide 11: Alain Raquepas, Vice President Finance and CFO
Alain Raquepas Vice President Finance and CFO CAE Inc. Confidential and/or Proprietary Information 11
Slide 12: Finance priorities and objectives
Finance priorities and objectives Improve Support disclosure business Value Creation and development transparency Implement improved governance and tools Strengthen Define & balance sheet monitor and optimize restructuring capital structure September 2006 Time CAE Inc. Confidential and/or Proprietar
Slide 13: Improved disclosure and transparency
Improved disclosure and transparency Improve disclosure and transparency y GAAP plus other information useful to assess Company’s performance y Restructuring charges, non-recurring items, off-balance sheet obligations (operating leases), etc. New segmentation y Four segments (P&L, capital employed,
Slide 14: Improve governance and tools
Improve governance and tools y ERP system (Fusion) y Short Term Incentive Plan y Governance model and S-Ox certification CAE Inc. Confidential and/or Proprietary Information 14
Slide 15: Fusion project (ERP)
Fusion project (ERP) y Implementing Oracle-based ERP system to improve y Transparency y Accountability y Information flow y Civil Training & Services sites now run on single accounting, training information, and scheduling tool hosted and maintained in Montreal CAE Inc. Confidential and/or Proprieta
Slide 16: Support Economic Value Creation (EVC)
Support Economic Value Creation (EVC) y Implemented new Short Term Incentive Plan based on EVC in FY06 to foster value creation behaviour y Includes all management employees worldwide y Incentives based on EVC at segment level and company level y Bonuses issued only if economic value is created CAE
Slide 17: Implement governance model: obtain S-Ox certification
Implement governance model: obtain S-Ox certification y S-Ox certification is progressing y CAE governance model now in place CAE Inc. Confidential and/or Proprietary Information 17
Slide 18: Improve quality & strength of balance sheet
Improve quality & strength of balance sheet y Quality of Balance Sheet y Addressed by FY’05 impairment y Tighter controls and more conservative approach to items that could be capitalized y Quantified and the amount of off Balance Sheet debt y Strength of the Balance Sheet y Divested non-core busine
Slide 19: Capital structure
Capital structure y CAE within its targeted capital structure y Total net recourse debt-to-equity 37 to 63% (3/31/2006) y In market expansion CAE could sustain even higher leverage y Continued emphasis on protecting Balance Sheet y Plan to secure non-recourse financing as provisioned under revolver
Slide 20: Support growth and strategy
Support growth and strategy More growth options than we intend to undertake y Creates issues / challenges around y Selection y Execution y Finance priorities y Develop comprehensive criteria for selecting growth options y Ensure performance system implemented to provide accountability and measure pr
Slide 21: Finance summary
Finance summary y Improving disclosure and governance y Focussed on economic value creation y Defined targeted capital structure y Sustaining good financial condition and healthy Balance Sheet Organized to effectively support CAE’s strategy CAE Inc. Confidential and/or Proprietary Information 21
Slide 22: Agenda
Agenda y Welcome y CEO’s introduction – Robert E. Brown y CFO’s highlights – Alain Raquepas y Group Presidents’ presentations y Civil Training & Services and Innovation – Jeff Roberts y Simulation Products and Military Simulation & Training – Marc Parent y Q&A session y Facility tour and technology
Slide 23: Jeff Roberts, Group President
Jeff Roberts Group President Civil Training & Services and Innovation CAE Inc. Confidential and/or Proprietary Information 23
Slide 24: Transformation goals
Civil Training & Services and Innovation Transformation goals y Streamline leadership structure to get closer to the market y Rationalize footprint to eliminate redundancy y Reposition assets to maximize returns y Refine go-to-market strategy to de-commoditize commercial training y Drive customer ce
Slide 25: Restructuring successes
Civil Training & Services and Innovation Restructuring successes Major Initiatives Actions • Improve efficiency • Restructured organization for efficiency • De-layered management • Redeployed assets for optimal results • Streamlined facilities • Client centric • Training advisory group • Customer ad
Slide 26: Performance
Civil Training & Services and Innovation Performance Civil Training & Services Civil Training & Services Revenue SOI $350 Millions CDN$ $322 $60 Millions CDN$ 18% $307 $300 $269 $50 $58 $250 13% $40 $200 $30 11% $40 $150 $20 $28 $100 $50 $10 $0 $0 FY'04 FY'05 FY'06 FY'04 FY'05 FY'06 y 10% revenue CA
Slide 27: Mission
Civil Training & Services and Innovation Mission To be the most trusted partner to key industries by continually working with our clients to deliver innovative solutions that enhance the safety of their operations and improve efficiency CAE Inc. Confidential and/or Proprietary Information 27
Slide 28: Market presence
Civil Training & Services and Innovation Market presence y 22 training centers in 14 countries y 105 full-flight simulators deployed y More than 4,000 customers y Training and Services segments addressed y Commercial y Regional y Business y General aviation Global market reach across all market segm
Slide 29: Bringing training and services to customers
Civil Training & Services and Innovation Bringing training and services to customers Trained over 50,000 crew members in FY 2006 CAE Inc. Confidential and/or Proprietary Information 29
Slide 30: Market drivers
Civil Training & Services and Innovation Market drivers Training Services Civil Technical Services / Business Training Training Center Ops Regional & Services Delivery Services Demand Aircraft Maintenance Training General Flight Crew Requirements Mitigates Risk Drives Efficiency In-service Global Ai
Slide 31: Existing market drivers
Civil Training & Services and Innovation Existing market drivers Existing Market Drivers Economy ↔ Moderate GDP and corporate profit growth RPK ↑ Overall RPMs are healthy (6+% increase YTD) Aircraft Orders ↑ 2005 a record year for orders Active Fleet ↑ Wide Body, Narrow Body, Regional (+ 3% YoY) Gro
Slide 32: Expanding market drivers
Civil Training & Services and Innovation Expanding market drivers Expanding Market Drivers Pilot Shortages ↑ Military supply, emerging markets and attrition Rapid growth in air travel and fleet – India, China, Emerging Markets ↑ Middle East A380, A350, B787, B747-800, EMB190, 15 new New Platforms ↑
Slide 33: Training solutions for all customer segments
Civil Training & Services and Innovation Training solutions for all customer segments Customer maintains infrastructure 3rd-parties maintain infrastructure Customer seeks best Customer external / available delivers own training training CAE Inc. Confidential and/or Proprietary Information 33
Slide 34: Crew Member Training - customer value chain
Civil Training & Services and Innovation Crew Member Training - customer value chain CAE Customer Base Creating end-to-end customer value chain and de-commoditizing training CAE Inc. Confidential and/or Proprietary Information 34
Slide 35: Strategic priorities – Business Aviation Training (BAT)
Civil Training & Services and Innovation Strategic priorities – Business Aviation Training (BAT) y Doubling BAT centers from 2 to 4 y Increase “in-production aircraft” simulator fleet y About 50% of orders/deliveries going outside of North America y Capitalize on our international footprint y Unders
Slide 36: Strategic priorities – Commercial Aviation Training (CAT)
Civil Training & Services and Innovation Strategic priorities – Commercial Aviation Training (CAT) y Conversion: year-over-year improvement of 25% y Market adapting y New pilot demand y Keep pace with traditional market expansion y Over 60 deliveries for 737-NG and A320s per month y Emerging markets
Slide 37: Strategic priorities – Services
Civil Training & Services and Innovation Strategic priorities – Services Technical Services Delivery Services y Maintenance / engineering support y Curriculum y Just-in-time technicians y Books / Manuals y Spares support y CBT / SBT y Regulatory compliance Training Services y Train the trainer y Tra
Slide 38: Innovation Initiative
Civil Training & Services and Innovation Innovation Initiative Mitigates risks / enhances operational efficiency via Simulation, modelling and technical training By creating real time synthetic environments that allow you to “experience the inexperienceable” CAE Inc. Confidential and/or Proprietary
Slide 39: Innovation Initiative
Civil Training & Services and Innovation Innovation Initiative World is becoming more complex / dangerous Decreasing willingness to accept defects / failures Applicable to other industries ? Yes Medical, transportation, oil & gas, etc…? Are CAE’s 60 years of skills and capabilities transferable ? Ye
Slide 40: Innovation initiative established
Civil Training & Services and Innovation Innovation Initiative Innovation initiative established y To develop opportunities of material size y Portfolio approach y Short timeline y Partnering and strategic relationships y Move into high growth markets Progress to date y Research conducted on best pr
Slide 41: Conclusions
Civil Training & Services and Innovation Conclusions y Uniquely positioned y Transitioned the business y Clear focus on strategy y BAT y Network / geographic / platform / OEM expansion y CAT y Continue to convert, capitalize on new markets and pilot provisioning y Services y Partnering strategy and
Slide 42: Agenda
Agenda y Welcome y CEO’s introduction – Robert E. Brown y CFO’s highlights – Alain Raquepas y Group Presidents’ presentations y Civil Training & Services and Innovation – Jeff Roberts y Simulation Products and Military Simulation & Training – Marc Parent y Q&A session y Facility tour and technology
Slide 43: Marc Parent, Group President
Marc Parent Group President Simulation Products and Military Training & Services CAE Inc. Confidential and/or Proprietary Information 43
Slide 44: Transformation goals
Transformation goals y Restore and sustain profitability and growth y Maintain technology leadership y Drive customer-centricity throughout organization y Gain efficiencies in utilization of resources and consolidation of functions y Implement best practices and common processes y Transform organiza
Slide 45: Restructuring successes
Restructuring successes Major Initiatives Results • Restructured organization for efficiency • Profitability improved in all segments • Reduced Montreal footprint by 10% and • Positive returns on capital employed in all segments improved workflow • 20 to 30% reduction in cycle times • Bolstered mana
Slide 46: Positive results
Positive results Civil Products Revenue Military Products Revenue (Millions CDN$) Normalized results $257 Normalized results $327 $280 $350 $240 $213 $300 $279 $200 Up 19% $250 Up 17% $160 $200 $120 $150 $80 $100 $40 $50 $0 $0 2005 2006 2005 2006 Civil Products SOI Military Products SOI Normalized r
Slide 47: Simulation Products / Civil
Simulation Products / Civil CAE Inc. Confidential and/or Proprietary Information 47
Slide 48: Simulation Products / Civil market drivers
Simulation Products / Civil market drivers Demand for Full- Flight Simulators & Training Devices Demand for New Aircraft Fleet capacity growth Fleet Renewal Aircraft deliveries Demand for Air Travel Revenue passenger miles GDP – Regional growth rates Positive market cycle drives growth CAE Inc. Conf
Slide 49: Business climate
Business climate y Robust market with record aircraft orders creating extended simulator market y Re-fleet for increased efficiency y India and China airspace opening y Low-cost carriers continue to expand y Introduction of new aircraft driving market demand (i.e. A380, B787, EMB 190) y Long term tr
Slide 50: Product range
Product range used l ut ion al so d v isu r e an chain ftw a ing s o ai n l a tion the tr i m u ug h on s h ro m t C om Full-Flight Simulators FTDs/ CPTs Part task trainers Integrated Procedures Trainers Desktop trainers (CAE Simfinity) (CAE Simfinity) Most comprehensive product range supporting tot
Slide 51: Visual technology
Visual technology Satellite imagery is used to create a global database that provides seamless and uninterrupted flight worldwide High Definition Airport Scenes Advanced Weather CAE is the leader in true fidelity CAE Inc. Confidential and/or Proprietary Information 51
Slide 52: Simulation Products / Civil strategic priorities
Simulation Products / Civil strategic priorities y Maintain market leadership in established markets y Target growth in emerging markets (e.g. India and China) y Improve and expand product portfolio in consultation with customers y Bring to market the highest level of fidelity in simulation, yieldin
Slide 53: Simulation Products / Civil conclusions
Simulation Products / Civil conclusions y Positive market cycle y Strengthening simulator deliveries y Largest global simulator installed base resulting in broad-reaching customer intimacy y Leader in true fidelity solutions y Most comprehensive range of products CAE is positioned to grow with the m
Slide 54: Military
Military CAE Inc. Confidential and/or Proprietary Information 54
Slide 55: Military Training and Services: Global organization
Military Training and Services Global organization Global Presence Training devices y Patrol/transport aircraft y Rotary wing aircraft y Fighter/fast jet aircraft Training centers y Flight crew y Mission rehearsal y Aircraft Systems Maintenance Engineering services y CF-18 Flight Software Operations
Slide 56: Market trends and drivers
Military Training and Services Market trends and drivers Services Outsourcing Emphasis on Modelling • Maintenance & Simulation-based • Training delivery Training • Mission rehearsal Recognized cost effectiveness of simulation / Emphasis on efficiency Defence Spending • Expansion / replacement of pla
Slide 57: Business climate - defence budgets
Military Training and Services Business climate - defence budgets $14 $70 (billions $) $350 CAE UK $0 $0 CAE Canada 2005 2014 2005 2014 CAE GmbH Canada United $0 Kingdom 2005 2014 $500 Continental CAE USA Europe CAE Bangalore $45 $540 $0 2005 2014 U.S.A. $0 $0 2005 2014 2005 2014 Asia-Pacific India
Slide 58: Strategic relationships with major OEMs
Military Training and Services Strategic relationships with major OEMs OEM Aircraft Platform CAE relationship C-130 all variants Lockheed Martin partnership for the C-130J, USAF, Lockheed Martin US Coast Guard, USMC, USN, RAF, Italian AF, Royal Australian AF, Canadian AF, over 20 countries Boeing C1
Slide 59: Training services outsourcing opportunities
Military Training and Services Training services outsourcing opportunities United Kingdom • MFTS • C-130J Rest of Europe • Future Lynx • Rotorsim AW139 • UK SAR • NH90 • Trainer Aircraft North America • Joint Cargo Aircraft Rest of the World • Canada: • UAE HATC • Tactical Airlift • UAE AF Training
Slide 60: Example of an Aircrew Training Facility
Military Training and Services Example of an Aircrew Training Facility RAF Benson TMIS Facility Aircrew Trainers Tactical Control Center Contractor-Run Chinook (3), Maintenance Merlin (2), Puma (1) State-of-the-Art Ground School CBT CAE Inc. Confidential and/or Proprietary Information 60
Slide 61: The future of simulation
The future of simulation Award winning new technology: a virtual world in real-time Database updated in real time Multiple Simulators at form multiple Data Sources locations various locations Satellite Imagery UAV Command & Control One common source One common standard Weather Updates CAE developing
Slide 62: Enhanced focus on Modelling & Simulation
Military Training and Services Enhanced focus on Modelling & Simulation Research Concept System & Operations Training Development Experimentation Development Systems SERVICES SOFTWARE PRODUCTS Capability Engineering Terrain Database Generation Tools Modelling & Simulation Synthetic Environment Tools
Slide 63: Expanding core capabilities
Military Training and Services Expanding core capabilities CAE core capabilities in simulation and real time synthetic environment Focus pre-90s 1990s 2000s + + SIMULATION MILITARY MODELLING & TRAINING SIMULATION EQUIPMENT SERVICES CAE historical core capabilities has expanded CAE Inc. Confidential
Slide 64: Leveraging core capabilities into new markets
Military Training and Services Leveraging core capabilities into new markets UAV training Onboard simulation Modelling & Homeland security simulation New Core Simulation Equipment Training Services COTS software Systems for Maintenance training training & operations CAE Inc. Confidential and/or Prop
Slide 65: Military Strategic priorities
Military Strategic priorities y Bolster success in US market – accounts for half the defence market y Enter new geographic markets – India, Asia Pacific, NATO countries y Expand training services to capture outsourcing opportunities y Further OEMs relationships y Become trusted advisor to sophistica
Slide 66: Military Conclusions
Military Conclusions y Continued growth in worldwide defence y Market forces favoring increased use of simulation and modelling y CAE’s core capabilities are creating unique differentiators y CAE’s global footprint enables us to develop locally-based solutions in key growth markets CAE poised for ex
Slide 67: Summary
Simulation Products and Military Summary y Solid team in place y New processes implemented y Business transformed from a quality and cost standpoint y Continuous improvement mindset y Fostering a customer-centric culture y Expanding our relationships with OEM’s y Ensuring technology leadership y Pos
Slide 68: Agenda
Agenda y Welcome y CEO’s introduction – Robert E. Brown y CFO’s highlights – Alain Raquepas y Group Presidents’ presentations y Civil Training & Services and Innovation – Jeff Roberts y Simulation Products and Military Simulation & Training – Marc Parent y Q&A session y Facility tour and technology
Slide 69: Agenda
Agenda y Welcome y CEO’s introduction – Robert E. Brown y CFO’s highlights – Alain Raquepas y Group Presidents’ presentations y Civil Training & Services and Innovation – Jeff Roberts y Simulation Products and Military Simulation & Training – Marc Parent y Q&A session y Facility tour and technology
Slide 70: Six tour groups
Six tour groups Group 2 Robert Leclerc Group 1 Group 3 Bruce Miles Mike Fedele Facility tour Simulator walk-on Demos Group 4 Group 6 Guillaume Hervé François Chagnon Group 5 Jean-Claude Siew CAE Inc. Confidential and/or Proprietary Information 70
Slide 71: Agenda
Agenda y Welcome y CEO’s introduction – Robert E. Brown y CFO’s highlights – Alain Raquepas y Group Presidents’ presentations y Civil Training & Services and Innovation – Jeff Roberts y Simulation Products and Military Simulation & Training – Marc Parent y Q&A session y Facility tour and technology
Slide 72: Thank You
Thank You CAE Inc. Confidential and/or Proprietary Information 72