CAE Inc (CAE) 2007 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the CAE second quarter conference call. Please be advised that this conference is being recorded. I would now like the turn the meeting over to Mr. Andrew Arnovitz. You may now proceed, Mr. Arnovitz.

Thank you. Good afternoon, everyone, and thank you for joining us today. Before we begin, I need to read the following: certain statements made during this conference including, but not limited to, statements that not historical facts are forward-looking and are subject to important risks, uncertainties and assumptions. The results or events predicted in these forward-looking statements may differ materially from the actual results or events. These statements do not reflect the potential impact of any nonrecurring or other special item, or events that are announced or completed after the date of this conference including mergers, acquisitions, or other business combinations and divestitures. You will find more information about the risks and uncertainties associated with our business in the MD& A section of our annual report, and the annual information form for the year ended March 31st, 2006. These documents have been filed with the Canadian Securities Commission and are available on our website, cae.com and on SEDAR.com. They have also been filed with the U.S. Securities & Exchange Commission under Form 40-F and are available on EDGAR. Forward-looking statements in this conference represent our expectations as of November 9th, 2006, and accordingly, are subject to change after this date. We do not updated or revise forward-looking information, even if new information becomes available unless legislation requires us to do so. You should not place undue reliance on forward-looking statements.

Robert E. Brown, CAE's President and Chief Executive Officer, and Alain Raquepas, our Chief Financial Officer, are participating in the call today. Following the remarks, we will invite questions from financial analysts and institutional investors. Once we concluded the question-and-answer period with analysts and institutional investors, we will then invite questions from the media. For your convenience, this conference call will be archived on CAE's website. Let me now turn the line over to Bob.

Thank you, Andrew. And thank you, everyone, for joining us today. Let me begin with a few comments about our second quarter performance, and then Alain will take you through some specific financial results. Following Alain's remarks, I will conclude with a few words on the remainder of the fiscal year.

Overall, our financial performance reflects a strong aerospace industry and our solid market position. Revenues remained in line with last year at $280 million. Net earnings increased 81% year-over-year, to reach $31 million. Earnings from continuing operations reached $0.12 per share, a 50% improvement over last year on a normalized basis. These positive results were achieved while we continued to redeploy our simulators, and we were impacted by a stronger Canadian dollar. This quarter, we received more than $420 million of new orders, which included some new customers which I will discuss later. We generated close to $11 million of free cash flow this quarter, compared to a negative free cash flow of $6 million last quarter.

Now let's look at the business segments and our activities for the second quarter. In Simulation Products/Civil we had announced orders for 1 full flight simulators and other training devices from customers in Europe and the United States. We welcomed UPS as a first-time customer, and we won a contract from a longstanding customer, Continental Airlines. This is the first order from a U.S. legacy carrier since 9/11. Also, we continue to broaden our relationship with Ryanair, with whom we signed a long-term contract for 5 simulators. On November the 7th, FedEx announced it was cancelling its order for A-380s and was ordering Boeing 777s. We are in discussion with FedEx concerning the 2 A-380 simulators they ordered from us in July. Considering this situation, our total simulator orders year-to-date is 17.

Higher order intake in previous quarters is now translating into higher revenue, particularly since we have shortened our cycle times. Our operating margin this quarter was higher than average, at 22.1%, due to several factors. We delivered a high number of simulators, coupled with a favorable mix of programs and improvements in program execution. We also received a contribution from Investissement Quebec for our Phoenix Project relating to costs incurred since June 2005. We do not anticipate benefiting from all of these factors on a regular basis going forward.

In Training and Services/Civil we signed more than $100 million in new training contracts, including a 4-year contract extension with Flight Options for approximately $33 million, and a series of contracts valued at more than $10 million from new customers for our training center in Dubai. Annualized average revenue per simulator was $3.2 million on the base of 99 revenue simulator equivalent units. Training volume increased in our network, but revenue was consistent with the same period last year, due in part to the appreciation of the Canadian dollar against the U.S. dollar and the Euro. We redeployed 2 more simulators this quarter, and we are in the process of ramping up others we have already moved. As a result, the operating margin was 14.4% for the quarter, similar to last year's 14.6%. High operating leverage is characteristic of the training segment in general, and our second and third quarters are usually softer, as flight crews train less during the busy travel season.

For the combined military segments we received nearly $220 million of orders this quarter. Most of this was related to simulation products. We won contracts for operational trainers, and upgrades from the U.S. Navy and Air Force, and from the U.K. Royal Navy. We were also awarded a contract for land-based trainers for the British Army. We hope to leverage this program as the U.K. continues to assess its training requirements for armored vehicles. For the combined military segments, our book to sales ratio this quarter was higher than usual, at 1.9 to 1. In the military segments we normally experience variations in revenues and order flow from one quarter to the next. And we see a more stable performance over a full year. This quarter was no exception, as revenue from programs and simulation products was lower than last quarter and the second quarter of last year, which saw higher activity on the German NH90 program and some North American programs. With that, I will ask Alain to take you through some of our financial results.

Thank you, Bob. Good afternoon, everyone. In the second quarter, consolidated revenue was $280 million, consistent with the second quarter of last year, and down 7% from the first quarter of this year. This is mainly due to lower revenue in Simulation Product/Military because of variations in revenue from large programs from one quarter to the next. Also, as Bob mentioned, revenues were seasonally lower in Training and Services/Civil which we expect at this time of the year. Net earnings for the quarter were $30.9 million or $0.12 per share, compared to $17.1 million or $0.07 per share in the same quarter last year. Nonrecurring items this quarter included after-tax restructuring costs of $1.1 million, mainly for the ongoing redeployment of our simulators. This charge was offset by interest revenue on the early repayment of a note receivable for $1.4 million. Adjusting for nonrecurring items, earning from continuing operations were $0.12 per share compared to $0.08 last year.

The appreciation of the Canadian dollar since the second quarter of last year was a challenge, but our revenue remained level, despite a 7% appreciation against the U.S. dollar and a 3% appreciation against the Euro. We had capital expenditure of $41 million during the quarter, mainly for the Dassault program and additional spending related to the NH90 program in Europe. As we indicated at the beginning of the fiscal year, our budget for capital spending is higher than the $130 million of CapEx we recorded last year, because we are experiencing favorable market condition and are looking at the number of growth initiatives requiring additional investment. Our level of capital expenditure will also be dependent upon our ability to secure non-recourse financing.

During the quarter we generated $59.6 million of cash from continuing operations. Higher investment in non-cash working capital for $16 million, together with $40.9 million of capital expenditure, partly offset by a $6.9 million of non-recourse financing resulted in free cash flow of $10.7 million in the quarter. Thank you for your attention. Now I will turn it back to you, Bob.

Thanks, Alain. We are beginning to see tangible signs that our structure is working effectively. The main objective of our restructuring was to establish a well diversified base of business, balanced between civil and military markets, and between products and services. The first half of our fiscal year benefited from a number of factors that are part of our ongoing business, but that we do not anticipate on a regular quarterly basis going forward. First, we received a contribution from Investissement Quebec in the second quarter, which relates to R&D costs incurred since June, 2005. This contribution enhanced the operating performance of civil and military product segments. Going forward, the quarterly contribution from Investissement Quebec and TPC will be in line with our quarterly R&D costs.

Second, we delivered a higher than usual number of civil full-flight simulators in the second quarter, and we benefited from a particularly good mix of programs since the start of the fiscal year. As a result, our operating margin this quarter and the first half of the year was higher than average, Finally, in the first quarter our Training and Services/Military segment was awarded a high margin U.K. contract involving the sale of intellectual property rights. Normally operating margins on military programs are in the low double-digit range. The civil training market continues to be active, and our growth initiatives are progressing well. These include a broad scope of value-added services for customers, as well as our ability to leverage our global presence by taking advantage of new simulator deployment opportunities.

As part of our restructuring plan, we have redeployed 18 full-flight simulators to new locations, and the remaining 10 will be moved over the balance of the fiscal year. Once the simulators are reinstalled in new locations, additional time is required to ramp them back up to their expected capacity. In total, we will have redeployed about one-third of our installed base by the end of the fiscal year. We planned the redeployments with the objective of minimizing disruption to customers and to our business. We expect some disruption, however, as we complete this exercise.

Last quarter, we discussed the launch of the CAE Global Academy, a global alliance between CAE and flight training organizations, designed to address our global shortage of pilots. There are now more than 650 cadets enrolled in training programs throughout the CAE Global Academy. The alliance currently consists of 3 flight training organizations, and we expect to double that number by the end of the fiscal year. As we sign new training schools, we will update you on our progress.

In business aviation, there was considerable market interest in our service-based solutions at the recent NBA convention, where we launched our global training joint venture with Embraer, to provide comprehensive pilot and ground crew training services to operators of the new Phenom series of aircraft. This marks the first training program for CAE in the very light jet and light jet markets.

In Simulation Products/Civil, we are enjoying the benefits of a positive commercial aerospace cycle, and we continue to bring CAE's best in class solutions to the market. We remain focused on reducing costs and shortening delivery cycles for simulators. This increases our competitiveness and allows us to better meet the needs of our customers. We are also committed to continuing our development of new products to further enhance our customer's operational efficiency, and the safety of their operations. To date, we have orders for 17 full-flight simulators. Market conditions remain strong. Given our current assessment of market opportunities, we are revising our outlook for the year to 25 full-flight simulators. We will continue to update you as the year progresses.

In our military segments, we continue to monitor the trend towards the increasing use of synthetic training, which presents a range of opportunities where CAE is well positioned. We feel the military segment should operate to achieve modest top line growth and low double-digit EBIT margins. We continue to enjoy success in the critical U.S. defense market, as the U.S. Services acquire new aircraft and perform major upgrades on existing platforms. Both of which trigger a requirement for new or upgraded training systems. The U.S. Navy and the U.S. Air Force contracts that we secured this quarter are consistent with this trend.

In summary, we are well positioned to continue benefiting from the strength of the aerospace and defense markets. We will build on our diversified structure, and we will focus on growth and execution. Our objective is to reduce cyclicality and secure CAE's future by offering our clients the full range of products and services to meet their specific needs. Thanks for your attention. I think we're ready now to take questions. Over to you, Andrew. Thanks. Operator, we would now be pleased to take questions from analysts and institutional investors, and following that, from the media. Before we open the lines, let me first ask, in the interest of fairness, that you limit yourself to 1 question. And if you have additional questions and time permits, please feel free to re-enter the queue.

[OPERATOR INSTRUCTIONS] Cameron Jeffreys, Credit Suisse.

Alain, wondering if you could please quantify by division what the contribution was from IQ and TPC in the quarter?

Okay. Let's start with IQ first, because that's the special element of the quarter. The first thing you have to note was there was some [reto] activity in the IQ contribution. And what I would say about that is the reto activity aspect related to last year would be one person point in both the product segments, and at the EPS I would say $0.005 at the EPS level. The balance of the IQ contribution belongs to the year. And for TPC, you have in the note of the financial statement the total contribution to date at page 8 of the notes, the total amount credited to income for both IQ and TPC as stated in the notice is year-to-date $19.7 million.

And it was 13.7 in the quarter, correct?

You're right, the same note identified the amount for the quarter, yes.

Okay. Secondly, can you just talk about bigger picture on the A-380 side? How much roughly speaking in terms of assets or money that CAE itself has spent, I guess, irrespective of what partners have contributed, and TPC and IQ might contribute in terms of countering some of the R&D expenditure? I mean, how much would you guys be exposed to, I guess, on the A-380 just in case Airbus does have more significant programs down the road than they've already gotten, and that program ends up being in more difficulty than it is currently in?

First of all, there are no capitalized costs in R&D.

Okay.

So it is 0 there. Secondly, if you look at the contracts, we've got a couple of simulators delivered to Airbus. So that's done. We have the FedEx situation, and I think this is as much an opportunity for us, as an issue. So I don't really think that there will be any real impact there. We've delivered an A-380 to Qantas, and it is in the final stages of acceptance, and is basically paid up for the work that we've done. And the other one is for -- we have a couple with Emirates, where we are in a similar kind of situation. So there's not a -- I don't really see a large exposure there.

Okay. And just for clarification, you did pull the FedEx out of your order total for the year-to-date. Correct?

I took them out.

You took the 2 out. Right. Okay.

When I reduced it, we had 19, and I reduced it to 17.

Okay. And there is nothing to say that you guys couldn't get a 777 order from them either, correct? If it comes to that?

Let's see how things unfold. They're a good customer of ours. They only use our equipment, and I think we have good relations. We'll see what happens.

Great. Thanks.

Ben Cherniavsky, Raymond James.

I just have a question, or maybe a request for clarification. When you talk about your capital expenditures and that you're seeing favorable market conditions, and looking at a number of growth initiatives, more specifically is that really related to spending on more simulators for your fleet?

That's a big part of it, yes. I think now that we've got our cycle times and our costs in place, that that presents an opportunity. We're still looking at opportunities in developing markets. We're looking at a pilot provisioning opportunity. So it is all of those kinds of things that we're looking at.

And can you remind me what the capital expenditures budget is for this year again?

I think what we said is that we would be higher than where we were last year, but we're not really in a position yet to say exactly where it is. I think when we get to third quarter, we'll be in a better position. But we've been -- what we're doing now is you've seen that we're breaking down what relates to the ongoing business and what relates to growth. So you should be able to devine from that where we're likely to come out at the end of the year. And we're trying to, as much as we can, fund those opportunities through the generation of cash.

Right. I was just wondering if I had missed something there. But you haven't disclosed a CapEx budget, then?

No. We've just said that it is above for now. And it's going to be based, as opportunities present themselves and they make sense, then we're going to proceed with them, and we've been identifying to the market what we think is growth and what is ongoing.

Okay. Thanks very much.

Nick Morton, RBC Capital Markets.

I wonder if you would be good enough just to review this Project Phoenix, and how the government payments are expected to be received and how they're offset against expenses?

Okay. Well, there is 2 programs, TPC and IQ. The TPC program is giving us 30% contribution on the total R&D expenditure. And the Quebec program is giving us 5% of the R&D expenditure, to bring the total contribution to roughly 35% of our total spending. This is not the end of it. As you know, we normally get income tax credit, which are now reduced because we're getting the TPC and the IQ funding. So you have to take that into account.

Okay. So the effect on your quarter you said in cents per share from this abnormal payment -- ?

We said it was less -- .

It was less than $0.01?

Just under $0.005.

Okay. That's good. Can you clarify a little bit about your plans to expand your flight training schools?

Yes. I think, you know we've announced relations or agreements with 3 of them. And we've said by the end of the year we should be able to double that. And we've currently -- when we do all of that, we think we would have about 1,000 cadets that would be in the system, and our objective is to be higher than that. But I think we want to start prudently. So that's what we're trying to do before the end of this fiscal year, and -- .

Is that why the capital costs could be -- your CapEx could be substantially above the 130? Is it in that area you're talking?

No, I think here, Nick, the way that we're involved is we set the standard for the school. We would do the course, the curriculum and the standards for the instructors. And so a cadet would go through a process that may take a year, 18 months, something like that, where they would become -- get a pilot's license essentially. And then they have to get a type certificate for an airplane, typically a 737 or an A-320. And that's where they would go into simulators. So we're looking at what the throughput might be, when it would occur and do we have enough capacity in the system that we have to handle them. And depending on how many cadets we might have going in the future, there could be a requirement for some simulators here.

Okay, but that is not a major part of your CapEx thinking?

Not yet.

Your CapEx thinking is more focused on buying technology or buying existing an company?

It is focused on how, given where we are in the market right now, how can we best deploy resources in the business aircraft and the civil part of the market in our global network, to make sure that we're well positioned. And I guess as I said before, because of the cost we have now and the cycle time on the simulators, we can make decisions quite rapidly here.

Okay. Thanks very much.

Robert Fay, Canaccord Adams.

Question regarding in the quarter I guess, on the whole civil business, there was 2 sets of words that were used. 1, that there was higher than usual civil simulator deliveries in the quarter. And then later on in the press release there was also a comment about unusual proportion of cost savings opportunities related to the first half that were realized in the second quarter. Can you give us some numbers on those 2 things?

Well, I think we've talked in the past about the margin in the business. And I think Alain has already made a comment about the impact of Investissement Quebec. And we still stay on an ongoing basis with what we talked about before, which is a margin in the sort of the mid-teens. And we can't expect -- we just happened with the particular programs that we had going through during this period, that the performance was very, very good by the people. And every deal is different that you do here. So it was a combination of those things that gave us the better result.

Okay. But when you were talking, I guess the cost savings opportunities that you got in the second quarter, what's the order of magnitude that we're talking in dollar terms? And also when you talk about civil deliveries, how much off trend were we on the revenue line based on the deliveries in the quarter, relative to what you should be getting in the next couple quarters?

I think the way I would look at it is that on a margin basis, just take the difference between the numbers I gave you, and where I think we're coming out overall on the year. And it is too soon to say where we're going to be, Bob. We're trying to be prudent here and make sure that we can perform on an ongoing basis, and I think that we've seen a good result here. But let's wait a couple of quarters and see where we end up.

Okay. But the way you're suggesting with the margin in the mid-teens, you recorded a margin of 22% in the quarter. That's 7 points over what you think you're going to be averaging for the year?

Yes, that's correct. That's our position right now, and now we may come out a little higher than that. But let's wait and see where we are.

Okay. But what about on the revenue line? Is $85 million sort of what we should be using on a quarterly basis? Or was that an unusually high number?

I don't think we've really given guidance on that before. And I think it will depend on the mix of the simulators that are coming through. And I think the other thing that you're start to go see the impact of is the shortening cycle times that we're being able to achieve on the delivery of these simulators. And let's see if we can continue to do that in the future. So before I really make a comment on that, I would like to let, as I said, a couple of quarters go by and see if we can continue to achieve what we've achieved up until now.

Okay. The other thing is, you're moving an awful lot of simulators in the back half of the year within your training network. I mean, 10 out of your 28. There was only 2 moved in the quarter in civil training now. Isn't there a danger that you're going to have further -- like fairly significant disruptions, especially if you're in those relatively busy training periods, and you're trying to move the sims at the same time? Given that you had a seasonal downturn, why didn't you move more sims in this quarter, or try to get them moved around a little faster?

Well, it all relates to the customer requirements, and our ability to manage it in a way that it is effective for the market. And also we have to -- we've been waiting for the Northeast training center to come online, because a number of them were going into that location. And as well, we're finalizing the acceptance of our building, our new building in Madrid. So we had to have a time with those 2, with the completion of those 2 centers. And I think as I said before, you're going to see some disruption that's going to continue into the third quarter, which tends to be, like the second quarter, a little weaker. You're going to see that going towards the end of year, as well. But that's the reasons that it happened.

Okay. I will go back into the queue.

Marko Pencak, GMP Securities.

I just want follow-up on 1 of Bob's questions, and then ask of my own. With respect to the second part of what he originally asked, which is the unusual portion of costs related to the first half, realized in Q2. But I mean, once you realize those cost savings, you've presumably achieved a new sort of overall cost structure. That's not -- am I to infer from that, that you sort of achieved that new level and now it is sustainable? I am still a little bit unclear on what that language actually is supposed to mean.

What it means, Marko, or what I am trying to say, is every simulator tends to be unique unless it is one that's directly repeatable. We don't tend to have many of them. So there is always something different. And what we're saying is the performance has been very good, and we want to wait and see if we can sustain that going forward.

Okay. Second question, you disclosed a subsequent event to the quarter, which was the shifting of some cash and assets into your Emirates joint venture. Prospectively, how should we think about the impact of that on your P&L, your cash flow and your balance sheet? From a P&L perspective, is it just going to be, now that it is in this new entity, you're going to get your pro rata earnings reported as an equity pickup line? And then on cash flow, will there be cash actually coming into CAE? Or will that cash essentially remain parked within that entity?

I will take this one, Bob. What we've done Marko, there is we've simply officialized the relationship with our partner in Dubai. In the past, it was more a revenue sharing type of arrangement. Now we rolled all of our asset into a JV, which we own half and half. So I do not expect a lot of changes going through the P&L. We would account -- we would apply a proportionate consolidation to that JV. We would pick up 50% of it. And we've contributed, roughly speaking, 50% of the assets, and they brought 50% of their assets. So it is a bit officializing the same thing, but putting it into an official JV, instead of sharing on the top line.

So will you flow through the earnings from that business through your divisional, like segmented reporting? Or is there going to be a new line item on your P&L?

No, it will be accounted for into the training and services segment, the civil segment. As it is right now, by the way.

Right. Right. Okay. And the cash flow, are you going to be able to repatriate that cash?

No. In fact, there is no cash changing hands. We're contributing our assets, so the sim we have there, and the sim they have there, now we've rolled them into an official JV, so there will not be cash changing hands.

No, but I meant from the cash that's generated from the ongoing operations.

Sorry. On the cash generated over there, yes, eventually we would repatriate the cash, or reinvest if there is a good [apportionately] showing up.

And is there a utilization rate number for your civil training business you can give us for the quarter?

I think we said it was 73, 74%.

Oh, you did. Okay. I missed that. Great. Thank you.

Horst Hueniken, Westwind Partners.

I am wondering whether you could quantify for us the favorable annual labor rate adjustment related to the U.S. military contracts?

I don't know if we have that or not.

I do not have it -- .

Okay. Well, perhaps I can call you off line, then. That's fine. My other question relates to the comment in the press release that the Company faced delays in the booking of revenue of certain contracts with European customers, and in particular, the NH90 helicopter program. Just wondering whether you could highlight for us what that dynamic is, and what we can consequently expect for the coming quarters?

Where was that, Horst? In the press release?

It was in the press release, yes.

That there were delays related to -- I don't think -- I think it was more a reference to that last year at this time, there was the NH90, which was a bit of a blip in last year's results, and it was more normalized this year. It didn't reoccur this year. So there is no delay at all. It is just the comparison of one quarter to another.

Okay. Perhaps I misunderstood. I apologize.

Well, maybe we -- .

That's all for me. Thank you.

[Ben Venzitali], BMO Capital Markets.

I was wondering if you could quantify at all the bump in revenue that you're seeing in the relocation of simulators in your network?

I think, Ben, I think it is hard to do. I would say that we're starting to get back. We're going to be normalized fourth quarter this year, first quarter next year, when I think hopefully we'll be seeing some of the disruption coming to an end. So it will be towards the end of the fiscal year, the start of next year.

Okay. But what I meant was, you've relocated 16 -- sorry, 18 simulators so far.

Right.

And you must have been tracking what kind of increased revenue that movement has given to your network, right?

Yes, to a certain extent. But I think it is hard to do because of all the movement we have in the disruption. And I apologize, but I think you're just going to have to be patient until we see the results, and we have a much better feel for what the disruption is going to be. It should be positive, but I really don't want to comment until I have a better handle on what -- how positive it might be.

Okay. Would you be able to give us an update on your 787 simulator, if there is any ongoing discussions, and what stage you've reached with the 787?

I think that you know we've launched 1 in the shop. And we have good relations, good discussions with Boeing, in terms of where we are. And I think we stick with our -- with what we said in the past, that we think we will have something by the end of the fiscal year.

An actual order?

There is a possibility we might have an order before the end of the fiscal year.

Okay. Lastly, I was wondering if you've taken a look at synthetic visual systems on actual aircraft, and if there is any possibilities for CAE to be doing some work in that realm?

That's one of the areas we're exploring.

Okay. So you wouldn't be able to go beyond that?

There are a whole bunch of things we're working on, and we don't want to say exactly what we're working on. But that's one area that could possibly be looked at.

All right. Thank you very much.

[OPERATOR INSTRUCTIONS] Cameron Doerksen, Versant Partners,

My question is just on the military product segment. We all understand it is a pretty lumpy business. But it seems to me that the NH90 has had a fairly significant impact on the revenues and that in the last several quarters. I just wonder if you could maybe talk about where we are in that program on NH90? And maybe should we expect that there are significant milestone payments coming up on that program in the next couple quarters? And maybe you could talk a little bit expanding on that, what other large scale military programs are you working on right now that would have a major contribution to revenue right now?

I don't think there is anything extraordinary coming up in the next while on the NH90, as it relates to the specific programs we have right now. I would say that there are a number of campaigns that are under way. And I really don't want to predict when governments will make decisions. But I would think we might have to wait until next year for them to start to make some decisions in this area. It is very, very hard to predict when they're going to move. But I can tell you I think that it is a good product, and that we're going to be able to piggyback on a number of sales when they occur. We're sort of the tail in all of this stuff unfortunately, Cameron, as you know.

I guess just I guess maybe you could talk just a bit about on the work you're doing right now on the NH90, I guess mainly for the German program, how far along are we in that program? Is it nearing completion? Are we halfway through? Just sort of where we are in it.

Yes, maybe I could volunteer a view comments here. It is a consortium by 4 partner, Cameron, that we have in Germany. The program was a [PF5 project finance initiatives] that was put by the German government. It is for the Army platform of the NH90 program. They're looking eventually at maybe having a Navy platform. And we're, I would say a bit more than halfway through that program in terms of work completed.

And there is an ongoing training component through that, once the center is built, correct?

You're right. It would be the similar model than the one we had in Benson for the British forces.

Okay. So about halfway through the actual, I guess, equipment or construction portion?

And a bit more, yes, a bit more.

Okay. That's helpful. That's all I had. Thank you.

Operator, I think that's all the time we have for investors. I would be more than happy to take any additional questions off line after the call. We would now like the open the lines for media.

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LuAnn LaSalle, Canadian Press.

-- a diversified base of business with a balance between civil and military markets. Going forward, do you foresee that balance staying fairly equal, or it tipping into one sector or the other?

No, we're working very hard to keep that balance. If you look at companies I think that have been successful in the aerospace and defense segments, they -- whether it is Boeing, companies like Rockwell Collins, that they have an excellent diversified base. And this is a model we're trying to reinforce that going forward, we can keep it more or less in line.

Okay. And is CAE going to be involved in any way in the Joint Striker program?

Too soon to say. We have some minor involvement at this point here, but it is clearly something that we would like to be involved in.

Okay. Thank you.

[OPERATOR INSTRUCTIONS]

Operator, I think if that's all the questions, we'll conclude the call for today. I would like to thank all participants, and remind you that a transcript of today's conference can be found on our website at www.cae.com.

Thank you. The conference has now ended. Please disconnect your line at this time. Thank you for your participation, and have a great day.