Andrew Arnovitz - VP Strategy and IR Marc Parent - President and CEO Stéphane Lefebvre - Chief Financial Officer.

Steve Arthur - RBC Capital Market Cameron Doerksen - National Bank Financial David Newman - Cormark Turan Quettawala - Scotiabank David Tyerman - Canaccord Genuity Anthony Scilipoti - Veritas Investment Kristine Liwag - Bank of America.

Good day ladies and gentlemen. Welcome to the CAE Fourth Quarter Conference Call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Mr. Andrew Arnovitz. You may now proceed Mr. Arnovitz..

Good afternoon and thank you for joining us today. Before I begin, I will need to read the following. Certain statements made during this conference including but not limited to statements that are not historical facts are forward-looking and are subject to important risks, uncertainties and assumptions.

These include statements about our activities, events and developments that we expect to or anticipate may occur in the future including for example statements about our vision strategies, market trends, and outlook future revenues, capital spending expansions and new initiatives, financial obligations and expected sales.

By their nature forward-looking statements require us to make assumptions that are subject to inherent risks and uncertainties associated with our business which may cause actual results in future periods to differ materially from results indicated in forward-looking statements.

While the statements are based on management’s expectations and assumptions regarding historical trends, current conditions and expected future development as well as other factors that we believe are reasonable and appropriate in the circumstances.

Listeners are cautioned not to place undue reliance on these forward-looking statements and there is a risk that may not be accurate except as required by law we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information future events or otherwise.

The forward-looking information and statements contained in this presentation are expressly qualified as a cautionary statement. You’ll find more information about the risks and uncertainties associated with our business in our fourth quarter fiscal 2014 MD&A and our annual information form for the year ended March 31, 2013.

These documents have been filed with the Canadian securities commissions and are available on our website at cae.com and on SEDAR. They have also been filed with the U.S. Securities and Exchange Commission under Form 40-F and are available on EDGAR.

Forward-looking statements in this conference represent our expectations as of today, May 15, 2014, and accordingly, are subject to change after this date. On the call with me this afternoon are Marc Parent, CAE's President and Chief Executive Officer; and Stéphane Lefebvre, our Chief Financial Officer.

After comments from Marc and Stéphane, we will take questions from financial analysts and institutional investors. Following the conclusion of that Q&A period we will open the line to members of the media. Let me now turn the call over to Marc..

Thank you, Andrew, and good afternoon to everyone joining us on the call. I’ll first take a few minutes to review some highlights of the quarter and for the year and then Stéphane will provide a more detailed look at our financial results. I'll conclude the formal portion of the call by talking about the way forward.

I'm pleased with our performance in the fourth quarter and the overall progress we have made during the year. Our operational discipline and customer focus continue to drive positive results in terms of higher profitability and we continue to lead in a competitive market.

In the last half of the year we reached the key performance milestones in civil and military that we provided in our outlook and we set new records with $2.1 billion of annual revenue and $4.2 billion order backlog.

We also had good cash performance this year, with 105% conversion of net income to free cash flow which gave us the ability to further strengthen our already solid balance sheet. In civil, we are back on track with operating margins in high teens for the second half and nearly 18% in the fourth quarter.

We continue to ramp up recently deployed assets in our training network as well as simulators that had been moved to new locations. We had fewer simulators moves during the quarter and while there is still relocations remaining to be completed, the vast majority are now behind us.

The higher margin in the quarter comes from our ongoing operational improvements, higher volume and the seasonally strong Q4. Training utilization increased from 69% last quarter to 71% this quarter.

We are proud to have reached an all time record of 48 full-flight simulator sales this year, which included eight in the fourth quarter for long standing customers such as Southwest Airlines and Lufthansa Flight Training. The face of the competition has changed quite a bit over the last couple of years.

In that context, our continued market leadership is testament to the strength of the CAE brands which is synonymous with technology leadership, quality and reliability and best in class customer support.

We strive to be our customer’s partner of choice and they value the fact that we’re the only company of our kind solely dedicated to their simulation based training needs.

Together with long term training and services agreements with airlines and operators in Europe and the Americas, we received $350 million in civil orders this quarter for a book-to-sales ratio of 1.08 times. This enabled us to reach a new record $2.2 billion of civil backlog.

In military, the challenges for the industry involving defense budget constraints and sluggish procurements are well known.

In that context, we have been communicating the ways our military business is unique in terms of the intrinsic benefits of simulation based-training, the range of geographies we serve and the enduring platforms that make up most of our businesses.

Owing to these three CAE specific attributes and our solid backlog, we remain resilient with fourth quarter revenue increasing by 6% and full year revenue by 2%. We’ve been executing a strategy to develop more revenue sources involving long-term recurring contracts.

The military operating margin was 12.2% this quarter, reflecting the mix of business for the period. Trailing 12 months results usually give a better picture of military performance. And for the year as a whole, military's operating margin was 13.1%. This is where we expected to be on average at current volume levels.

In terms of new business, we booked orders during the quarter for four more P-8A operational flight trainers for the U.S. Navy, which is a prime example of the kind of enduring platforms that underlie our business. We also saw more demand for upgrades globally on the C130 Hercules, another key enduring platform for CAE.

We also signed long-term training support and maintenance services contracts in Germany and in Malaysia. And we've continued to expand our platform coverage with contracts for our comprehensive ground-based training system for the T-6C aircraft for the Royal New Zealand Air Force and the Mexican Air Force.

We also sold an SW-4 helicopter full-flight simulator to the Polish Air Force. In total, we received $189 million in military orders this quarter, representing a book-to-sales ratio of 0.82 times. Fourth quarter military backlog was $2 billion. And in addition to that, we had another $407 million of unfunded backlog.

Looking now at new core markets; in CAE Healthcare, we continue to invest in the development of new products and in broadening our sales capabilities. We introduced our new maternal fetal simulator earlier this year and we already have 40 of them in advance of production that have been presold.

Also in healthcare, we booked product sales with universities and hospitals in the UK, the U.S. and the Middle East for a range of solutions including our ultrasound, surgical and patient simulators, as well as our center management system. In CAE Mining, we sold resource, modeling and mine planning systems to customers globally.

With that, I'll now turn the call over to Stéphane..

Thank you, Marc and good afternoon everyone. Consolidated revenue for the quarter was up 3% year-over-year at $583.4 million. And net income attributable to equity holders was $60 million or $0.23 per share. For the year, revenue was $2.1 billion, up 4% and net income was $191.1 million or $0.73 per share.

We had very good cash performance in the quarter and for the year, with $200.6 million of free cash flow generated to the end of March, which is $117.1 million higher than last year. The improvement came mainly from favorable changes in non-cash working capital and an increase in cash provided by our operating activities.

Fourth quarter capital expenditures totaled $65.7 million and for the year it was $157.4 million, which is in line with our outlook. Growth capital expenditures represented 71% of total CapEx this year.

Net debt was $856.2 million as at March 31, 2014 compared to $886.5 million at the end of December, further strengthening our balance sheet with our net debt-to-capital ratio decreasing to 36.6%. Income taxes this quarter were $10 million representing an effective tax rate of 14%, which compares to 19% last quarter and 8% last year.

The decrease from last quarter was mainly due to the favorable settlement of tax audits and adjustment resulting from future changes in the statutory tax rates for Germany, the UK and Norway, as well as a change in the mix of income from various jurisdictions.

Excluding the effect of the changes in tax rates and the settlement of tax audits, the income tax rate for the quarter would have been 21%. Now looking at our segmented financial performance; for civil, fourth quarter revenue was $323.5 million stable year-over-year.

Operating income for the quarter was up 14% year-over-year to $58 million, only mainly to operational improvements realized over the course of the year, as well as higher volume and utilization. This represents an operating margin of 17.9%.

For the year, civil revenue was up 5% at $1.2 billion and operating income was 5% lower at $179.8 million for a margin of 15.3%. In military, fourth quarter revenue was up 6% year-over-year at $230.3 million. Operating income for the quarter was stable year-over-year at $28 million for a margin of 12.2%.

For the year, military revenue was up 2% at $822 million and operating income was stable at $107.8 million for a margin of 13.1%. This reflects the operational improvements we made over the prior year. Finally looking at new core markets, revenue was $29.6 million for the quarter compared to $29 million in the fourth quarter of last year.

Operating income was $200,000 compared to $1.8 million last year. For the year, new core markets generated revenue of $116.2 million, up 4% over last year. Operating income was $4.2 million compared to $6.4 million last year.

Revenue growth and profits have been somewhat constraint by churn market conditions in the mining sector; as well we continue to invest profits back into healthcares, SG&A and new products with a view to a larger business in the future.

Before we move on, I want to mention that starting with our first quarter 2015 report, we will report our segments to reflect the way we manage our business, which is solutions oriented with customers requiring a mix of both products and services.

Beginning in August, we will report on our three core businesses specifically defense and security, civil simulation and training and healthcare and mining. We have in fact already been providing financial disclosure and outlook on these bases in our MD&A for a number of years.

And in an order to ensure continuity, we will continue to report on key operational metrics that we believe are the most relevant drivers of our business. With that I will turn the call back over to Marc..

Thanks Stéphane. Our progress in fiscal 2014 positions us well for the period ahead. And we have a positive outlook for each of our three core businesses. In civil, we expect to continue to lead the market and we anticipate more growth as we work our way to our record backlog.

We expect higher utilization in our training centers on higher demand and the ramp up of new and redeployed simulators in the network. The commercial aerospace cycle remains strong with robust air travel growth and high levels of aircraft deliveries coming off manufacturer’s production lines.

We see strong demand for our training solutions in North America, improving demand in Europe and stable demand in emerging markets. Taking together, we are in a prime position globally as the market leader within a highly regulated industry.

In military, our key success factors including our multiyear backlog involving enduring platform, our geographic reach and the intrinsic value of simulation-based training all remain highly relevant as we go forward.

Notwithstanding the challenges in the mature defense markets, we are continuing to build our bid pipeline with a wide range of comprehensive programs in both defense and security. We continue to find opportunities involving enduring platforms like P-8, C-130 and MH-60. And we expect to continue to add new platforms to our order book.

Our military business has proven to be resilient through some challenging market conditions. And as we consider our market position and the unique nature of CAE's business, we expect to continue to be resilient and deliver good performance for the year as a whole.

In new core markets, notwithstanding the cyclical downturn in the mining sector, we expect to see growth, mainly in the second half as we release new products like the maternal fetal simulator. We now have a leading position in a healthcare simulation market that has historically been limited to medical education.

We believe that like in aviation, future regulations will see the use of simulation-based training expand beyond education and into the clinical demand in order to help improve the quality of patient outcome. We look forward to a larger market opportunity to come.

To recap, we had a good quarter and a good year in terms of achieving our operational and strategic milestones. We forecast civil margins to reach the high-teens in the second half of the year and it did. We expect military to be resilient in the phase of a challenge defense market and it was.

We maintained our market leadership in the phase of sharper competition and we booked record full-flight simulator sales with a record backlog for the company overall. And we stayed true to our capital allocation priority. We continue to invest in market-led growth opportunities with attractive return profile.

We increased cash returns to shareholders with a dividend increase for the third year in a row last August. And we deleveraged our balance sheet with net debt-to-capital now at an even lower level than we originally targeted.

So to conclude, our progress in fiscal 2014 puts us in an even stronger position and I look forward to more success in fiscal 2015. We continue to expect solid growth for CAE overall with strong market conditions in civil, continued resilience in military and resumption of growth in new core markets. Thank you for your attention.

And we're now ready to take your questions.

Andrew?.

Operator we’d now be pleased to take questions from analysts and institutional investors. Before we open the line, let me first ask that in the interest of fairness, please limit yourself to a single one part question. If you have additional questions after that, if time permits, please feel free to reenter the queue.

Operator, we'll take the first question please..

Certainly, (Operator Instructions). And we’ll proceed with our first question, it is from the line of Steve Arthur from RBC Capital Markets. Go right ahead..

Great. Thank you very much. Just want to follow-up on the Civil margins 17.9% in the quarter, big improvement and essentially delivered on what you were targeting over the past number of quarters.

I guess looking ahead when we look at the utilization rates in the demand environment, do you foresee things sustainable at that level? Is there further room for improvement? And when do you see these things trending over the kind of three to five year timeframe?.

Well I think there is definitely further improvement possible. I don’t think that as I said in my notes Steve that utilization is improved but I think there is room to go higher than it is currently, I mean maybe useful fact is we’re 71% for Q4.

If you’d look at 10 year average for utilization in the fourth quarter you’d see 73% just as an idea just normal kind of seasonal trends. You would expect 2%, just we look back at Q4, so you definitely see some more potential of increased utilization.

We see the demand is there for that, at the same time we have simulators as we recently deployed and moved to new locations that are starting to ramp up but they’re not finished ramping up in lot of cases there is still room to grow.

So I think look I think we’ll definitely see if I look at the year as a whole in civil we had 15% and definitely think that we’ll be seeing higher average margins for the year as a whole. And I think we’ll see higher peak margins.

It will be seasonal, seasonal because if you look at utilization for example in the summer it usually trails off because people are flying and they’re not [training] and that’s the time we shut off, we’ve closed down the factory, that’s just one example there.

But on average I think we’ll see a higher margin for the year and we should see higher peak margins as well..

Okay. If the utilization kind of hits historical levels do you have any kind of the target margin level for the civil business I don’t know three or four years out..

No wonder we can really say right now Steve I think it will be higher for sure.

I think previously I think that we said is that peak margins at top of the market when things are betting on all cylinders including business aircraft being bagged, badly I think we have given an outlook before that we talked 19% was possible when we factor in the dilution by our park aviation business there.

I think my feeling right now was we’ll be going higher than that just on the basis that in this quarter here we just achieved 17.9% so I think a sense to reason we should be able to hit peak margins better than that and sustainable margins on average better when you look as a whole..

Good color, thanks very much..

Thank you..

And we’ll proceed with our next question, it is from the line of Cameron Doerksen from National Bank Financial. Go right ahead..

Yes thanks good afternoon.

Just before I ask my question just I could just get the utilization rate in the network for the full year?.

68% per year..

Yes. 68% per year Cameron..

So my question is just on the military looking at the training and services military specifically had a very good revenue number in that in the quarter quite a bit higher year-over-year.

I just wondering if there is any specific program that kicked in that was to drive that and what we should book from that sub segment of military as we look ahead to 2015?.

.

:.

No, I think you will see, you said that they are all related to some specific contracts that Marc mentioned. We used to see a, remember the time, when we use to see about $60 million a quarter in that side of the business then $65 million.

I think what we see is just that business is ramping up, what it tells me is that we are becoming more of a service business in military by strategy but as well these are in line with the trends that we see on the market place and as Marc said what I like about it is it gives more visibility on future revenue and it positions us well for future updates at that point..

Yes, I think the point that’s important I think to note as part of a solutions strategies, when your civil and military if you get in that and deliver services revenue and sometimes yet that especially on the military which you see, you tend to see lower margins in that sector but I think we got to look at it in the big picture is, once you are down with the customer, you can drive revenues coming out of products because they need to update the simulators and things like that.

And we’re definitely seeing those kind of trends..

Right, great. That’s very good. Thanks very much..

Welcome..

Thank you very much. We’ll proceed to our next questioner from the line of David Newman with Cormark. Go right ahead. .

Hi, guys. Just maybe first quick housekeeping one and then I’ll ask my question.

Just on the tax side; was there anything one-time in nature on the quarter with the audits or whatever and what should we be thinking about using going forward on the effective tax rate?.

Yes. There was actually David. And we put it in the MD&A. We have concluded -- we know that we always have a number of tax audits going on in the different parts of the world. We successfully concluded two of them in the quarter in Germany and in Canada. So that gave us a $3.4 million uptake in the specific to the quarter..

Okay..

Yes..

Sorry, go ahead..

No, that’s why you saw this 14% tax rate in the quarter. Now, I guess you were going forward..

Yes..

I think what I see look, normalizing the tax rate for Q4 as well as for the year, we get to about 21%. And I saw in the last number of quarters the tax rate being quite volatile, but I have used -- I used to use 25% internally here. I think with the way the business has performed in the past year, given that we see some growth in the U.S.

and as well as the markets picked up in Europe, places where we tend to have usually the higher tax rate jurisdictions. So I don’t think that 21% is necessarily a good proxy. But we’re probably lower than 25% right now, so 22%, 23% is probably a good number to use. It will very some quarter to the other, David..

Okay, that’s good color. And just on the civil sim manufacturing side, the margins were pretty good, obviously training you had a great quarter. The civil sim manufacturing was a little bit softer to me. Is there anything going on, you talked about partially manufactured sims et cetera.

But given the higher orders and then you had and I would assume production rates to increase your absorption.

Anything at play here; is the pricing from the competitors, is pricing become difficult or anything at all that’s a play in the civil sim side?.

I think that -- it’s Marc here. I think it’s -- what you’re seeing normal mix and in that normal mix is obviously some contracts that we have lower pricing. We talked about that and previously about there has been pressure on pricing, which I think is more sensible now. So you’re seeing some of that.

But I think to me, I wouldn’t say it’s a disproportion effect. And I think we factored that in and we have been factoring that in; it’s not unexpected because obviously these sim orders on our backlog, it’s not orders that we got last week.

So that’s been factored into the outlook that we’ve given for the sim -- not the sim but the civil margins to be in a high-teens by the end of the year. And it’s also factored into the outlook I gave and the first question to Steve Arthur..

Okay.

And just squeeze quick one here; next year can we expect the production rates to go up Marc or…?.

We don’t, we really don’t talk in terms of production rate; I’d rather just look at revenue.

And the reason for that is that there is the higher number of new aircraft involved in the backlog and also multiyear contracts and sometimes multiyear contracts first of all, if you look at orders on the 350, well 350 is still in development; the people are ramping up, there were (inaudible) of simulate -- of aircraft and their air stimulators so it’s hard to talk in terms of production line like for example an aircraft manufacturer would.

But clearly, I think the level of revenue you see now is more in line. I think it will very seasonably and I think you’ll see it’s gradually going up..

Very good. Thanks guys..

Thank you very much. We’ll go to our next questioner from the line of Turan Quettawala from Scotiabank. Go right ahead with your question..

Yes, good afternoon. I guess my question on the military side; I think about a year or so ago Stéphane you talked a little bit about improvement in military margins. I think you’d said about 200 basis points on the restructuring and then more I guess if revenue came back. On an annualized basis so far your margins are pretty much flat here.

So I guess my question is should we expect some improvement in margins here on the military side in fiscal ‘15? And then considering the revenue is trending up a little bit, does that actually accelerate the improvement?.

That’s true Turan. It really, the way I look at it is you’re right, we’ve executed our restructuring program last year and at one point we generated margins that were quite low. And I remember in the second quarter of last year, we went as low as I think around 10% or something like that.

And I said, as our restructuring program goes through, you should see about 200 basis points of improvement in margin. And that’s pretty much where I think we’re at right now. We have a portfolio and that’s probably running at 12% -- maybe 12%, 13% margin as of now.

What we would need to where we could see some meaningful improvement in margin is some additional orders coming on the equipment side of the house. Just looking at the -- for the year as a whole, we generated 13.1% EBIT margin in military and that’s an improvement from the EBIT margin that we had last year.

We generated if I recall, 12.5% normalizing for some, the one-time benefit that we disclosed to you guys last year. So we saw some improvement in margin. And I think we are at 12%, 13% right now. There will be some ups and downs depending on the quarter.

You see that this is a business that’s quite lumpy from quarter-to-quarter, could be 100, 200 basis points up and down. But I think where we landed for the year is a reflection of the portfolio that we have in our hand..

So I guess in the near-term then there is not really any significant margin improvement coming on the military side, is that fair?.

It will really depend on the equipment orders that we will come in Turan. I think Marc mentioned it earlier we are positioned well on a number of programs especially with some position in training services. So as updates and new programs come in, then we could start seeing some improvement in margins..

Yes. I would add to that. I think that’s why I think you got to take what I said resilient. And I think that speaks in terms of top end, bottom line. So I guess that implies stability in terms of margin; you could expect that.

But as Stéphane was saying it’s highly dependent on order intake and that’s why the higher is possible there is no doubt about that but at this point in time, we will stick with resilient, as we have for all this year..

Okay, thank you very much.

And if I could just quickly sneak in one more on the cash side I think the cash generation has been pretty strong here, the balance sheet I guess is coming in, if I look at the numbers in the net debt to cap is coming in below your targets now, so really looking quite good I would say, I know you give us the dividend, is there anything else you could talk about with regard to cash return to shareholders?.

Not at this time, we have said before that I think time that, we would be opened to looking at various possibilities, I mean dividends, I mean you see that we have increased three times in last three times in the last three years.

And though we don’t have a policy, I mean you could see by our actions that we seem to be happy with a certain level of payout and yield.

So I think probably that is reasonable to strength that we might consider and again if the conditions are right, and we say we likely open to do other things like buybacks, but we don’t have a normal course issue right now, and we would have to bring that to our Broad of Directors and we are not there at the moment..

Okay, thank you..

Thank you very much. And we will get to our question is from the line of David Tyerman from Canaccord Genuity. Go right ahead..

Yes, good afternoon. Quick question on the military side, are your backlogs being flat in sort of the 2 billion area for I think about four and five years now, which would suggest to me that the sales are likely to remain flat unless you are going to see a sudden pickup in orders. Is that a fair way of thinking things..

Not totally, because what you are not seeing there is, I think maybe just the time you are going to highlight as JVs I think that I mean the effect of JV.

But I think the more important one is you are probably not factoring in and there is the unfunded backlog and we did highlight the number there in my notes here that what the unfunded backlog number is and probably about 20% of our number.

So and what we mean by unfunded backlog just to clarify again is mainly contracts involving, service contracts we do with the U.S. government like for example, Predator contract, well that's a multiyear contract. And at any one time, we will only put in backlog, the revenue we anticipate for the year that we're in for the sole reason that the U.S.

government approves their budget once a year as we saw last year, when they didn't vote the budget and they had basically to shutdown the museums and other places. So, we're conservative and we don't include that. But the reality is the unfunded backlog turns into revenue, our experience on that is must be 99%..

Right. Okay. So, just to recap that.

It sounds like you do expect some growth when you take into account both the funded and unfunded?.

Well, as I said before, I think that that was, it might sound like a broken record here, I remain focused on being resilient that's as far as I can see this year, I mean the backlog involves long-term training contract, we see the increase in revenue there this year that's pretty significant.

And I think we have, there is no doubt that we have to continue to win orders every year, no matter what size our backlog is, we have to feed the beast. And I'm confident that we can. And that might imply growth as well, but it will; it's always sensitive to the orders you get in a year.

And I really don't have any more visibility beyond the next two, three quarters to be able to tell you whether or not we would have growth or not. And this was sensible version, a sensible number to be able to commit too..

Okay. Very good..

What I do know is that the pipeline of opportunities that we're bidding is as large as it’s ever been and our win rate is good. So sometimes what you can’t control is the timing. Timing tends to move more often right than left.

So, I think we're being safe by saying at this time, in this environment I think as we said all year and I think we turned out not pretty -- not bad this year will be -- to my mind, I’m focusing on get the book to bill as high as we can and that should translate into resiliency at least this year..

Okay, that's helpful. Thank you..

Thank you very much. Now we’ll go to our next questioner, it’s from the line of Anthony Scilipoti from Veritas Investment. Go right ahead..

Thank you, good morning, or good afternoon I should say. Sorry.

I was -- if I understand correctly that disclosure is going to change just so clear, so then there will be basically three segments and so civil will be both products and training, military products and training and then new core; is that how we should look at the business going forward?.

Yeah, that's quick Anthony. It's becoming more and more difficult for us to look at the variances on margins separately products and services. We don't really manage the business this way anymore. You get to a point where -- I mean we offer so much bundled solution to customers and we tend to offer some pricing on product and other pricing on services.

And it just -- we really manage the business altogether as a combined division. We don’t have such a leader that runs a training services organization whatsoever. So we’re really offering the full grown solution.

The other thing Anthony is and you’ll be very familiar with this is the -- since last year, fiscal year ‘14, what makes it even more difficult is to explain the volatility in the margin that’s driven by the change in the accounting rules for JVs.

And in second quarter and it was so obvious in Q3 of last year for instance, there was quite a large amount of profit recognized on the product side of the business that had to be eliminated on the service side of the business. And then when we turned around and explained the margins to our shareholder, it’s really becoming more difficult to do so.

But more importantly, we’re aligning the reporting with the way we manage the business, as simple as that.

The last thing I would say Anthony is we will continue providing some operation driven metrics, so we’ll continue reporting on the number of full flight sims that we sell; we will continue providing all the same information on the number of sims and operation; the simulator equivalent unit; the utilization rates so people don’t lose visibility on those key operational metrics.

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Okay. That’s helpful because I would say that’s kind of the way you used to report, how many year -- I again remember now, seven or so years ago was that way. And I would say your disclosure has been fantastic. So that’s good that you keep that up.

My question is if you think about the business over the last even at least one year and you look -- but I could even go back two, and you think about the multiple, and I think this is sort of asking a question that everyone seems to be wondering and that is how do we look forward into the growth because you look at what the stock is trading today both on with EPS being essentially flat when you adjust for the restructuring and EBITDA being essentially flat for the same adjustment, the stock has risen based on multiple.

So the question is what are we anticipating that’s coming; I see the backlog, we see the business, and maybe you can help us understand?.

Yes. I think Anthony when you look at the kind of multiple that people have today, there is an expectation of earnings in the future and that’s a given.

We have been in the last year, in fiscal ‘13, we have been really with all the issues that we had especially at the beginning of -- sorry I mean fiscal ‘14 with all the issues that we had at the beginning of fiscal ‘14, we really started off on a very difficult first half of the year to a point where we started the year with really tough earnings especially in our civil business, and it’s recovered in the second of the year.

Now if look for the year as a whole and you look at the different businesses as Marc said and I will just recap on this. On the civil side of the business, we will -- I mean this is a market that’s very strong; we see our margins continue to improve next year in fiscal ‘15 compared to fiscal ‘14.

In military, this is the place where we had a little bit less visibility but our earnings have been improving in fiscal ‘14 compared to fiscal ‘13. So I think that’s where the expectations are and the reason why people are using a high multiple..

I think that the other thing I would add is that in addition to what Stéphane was saying is, if you look at -- to use periods that you talked about Anthony, I mean think we are in a different place in terms of the market and our fortunes within it.

I mean there was a time where we were training for a long time around the $10 mark here to get the multiple that was. But first of all we’re trough earnings. And basically the thought was, you looked at our revenues and our earnings in military in a tough market, that was reducing and the people wondering well where is that going.

And I think we had to prove what we did is that because of the reasons of our differentiation within the military market that this business is not going off the cliff, and I think we demonstrated that and we continue believe that is the case and longer term the military is a growth business.

I can’t provide any more visibility than I did in answering to questions. But clearly longer term just because of our position in market, the platforms that we have on the geographies we serve and the fact that simulation-based training is a solution in a time of we are trying to maintain readiness in a budget cut environment.

So to me that’s one thing. Military is not going off the cliff; if anything is resilient, a growth story in the future. So there is something we said about that in terms of when you look at the multiple. The bigger case obviously is the civil business. The civil business, I mean it's highly regulated industry.

Arguably there has never been a better time in history in a commercial aviation sector. We are leaders in the commercial aviation sector in both selling products and the largest player by far in the delivery training services.

And we've proven in both of them that even with what was a worry of people going back just over the past year that with all the increased competition would CAE be able to maintain their leads and maintain an excessive margin within that. And I think we've demonstrated we can.

And when you look – you listen to our outlook, I think it's pretty clear that we think we can continue to do that. And on top of that we think that we still have ways to go in terms of being able to increase the utilization in our training centers.

And there is as we can see just in the results that we have, there is a high degree of leverage within when you throw some more utilization at the network, the training centers that we have.

So, for all those reasons and I think the last one is the cash utilization, the business you've seen that we've been pretty clear on our capital allocation priorities and we’ve stayed true to them and we've delivered on them in terms of continuing to invest in growth and there is more opportunities for us for accretive growth to return to increase the return on capital, which is another, [gets a] little more earnings that we got, the business will be less capital intensive.

All things being said permit us to continue what we’ve said in terms of cash returns to shareholders and at the same time it gives us a pretty conservative balance sheet. So, I think for all those reasons I think I would -- I’m no expert, you’re an expert maybe better expert at the multiples than I am.

But when I look at our business, I think that we see a positive outlook that I think people are rewarding..

Okay. That's very helpful. Thanks very much..

Operator, we have time for one maybe two more questions before we open the lines to the media..

Certainly. We'll proceed with our next question is from the line of Ron Epstein with Bank of America. Go right ahead..

Hi, good afternoon. It's actually Kristine Liwag calling in for Ron this afternoon. Our question is with civil margins again.

I guess when we look at the past year, what's done better than what you expected and what really drove the outperformance in civil margins? Was it initial conservatism regarding your cost structure or whether really better than expected market demand that drove all that outperformance?.

I think its combination of all that. To be frank, I mean I think our team, we have a new team led by Nick Leontidis that Tim replaced this year and I think that Nick and his team put, I mean we put a pretty aggressive marker out there from the margins that we have the fourth quarter, I mean, sorry in the first quarter.

We had a bit of -- we had issues at the time, we had self-inflicted issues about the number of simulators we moved, maybe it’s a chaos. But certainly disruption that we created in our own training centers, we had some issues with market demand in Europe and in South America.

I think a lot of those issues have all [resulted] in a certain way incrementally, but I think the large part of it is just operational improvement. And the fact that by stabilizing the simulators that we are moving come almost pretty much at the end of these moves of simulators.

They start not only they stop costing us money, just because of the cost are moving up -- moving them, but it start earning revenues. So, all those factors have resulted in the number that we see. And they’re slightly higher than we thought.

We thought we’d maintain -- get to the high-teens and we got 17.9, but certainly for the last half of the year it meets our outlook of high-teens..

Thanks. And if I can ask the second question if that’s all right. For fiscal year ‘14, it looks like CapEx for growth was about $111 million.

Can you give us more color on what’s kind of the big moving pieces there and then how we should think about CapEx, the cadence of CapEx going forward?.

I think overall we’ve, while we finished the year with $157 of CapEx and it’s largely, I think 70% of that was growth CapEx which is pretty much in line with the guidance that we had given and that’s really offsetting, putting in our networks some simulators in certain regions where the demand coming from some of our existing customers was there.

Going forward, Kristine, I think you’ll see a very similar level of CapEx in fiscal ‘15. The mix maybe a little bit different. There is some good opportunities for us in business aviation. So I think you’ll see us continue to invest overall at a very similar level in ‘15 than ‘14, but maybe a little bit heavier on the business aviation side.

And certainly there are still some very good opportunities on a CAT side of our business..

Great, thank you..

Okay. Operator that is all the time we have for questions for members of the financial community. I would ask that you now open the lines for questions to members of the media..

Certainly. (Operator Instructions). And Mr. Arnovitz we seem to have no questions queued up at this time from the media..

Okay. Well then we’ll conclude the call at this point. I wish to thank all participants for joining us today and remind you that the transcript of today’s call can be found on CAE’s website shortly at cae.com..

Thank you very much. And ladies and gentlemen, this concludes conference call for today. We thank you for your participation and ask you to disconnect your lines. Have a good day everyone..