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

: Good afternoon, everyone and thank you for joining us today. Before we begin, I'd like to remind you that today's remarks including management's outlook for fiscal year 2017 and answers to questions contained forward-looking statements. These forward-looking statements represent our expectations as of today May 19, 2016 and accordingly are subject to change. Such statements are based on assumptions, that may not materialize and are subject to risks and uncertainties. Actual results may differ materially unless there is caution not to place undue reliance on these forward-looking statements. A description of the risks factors and assumptions that may affect future results as contained in CAE's annual MD&A available on our corporate website and on our filings with the Canadian Securities Administrators of SEDAR at www.sedar.com and the U.S. Securities and Exchange Commission on EDGAR at www.sec.gov. On the call with me this afternoon are Marc Parent, CAE's President and Chief Executive Officer; Stéphane Lefebvre, our Chief Financial Officer; and Sonya Branco, who become CAE's new CFO effective Monday May 23, 2016. After remarks 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 call to questions from 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. CAE had a strong performance in the fourth quarter, and for the fiscal year and I'm especially pleased with the positive response we have from customers to our training solutions in all three of our segments. We reported double-digit top and bottom line annual growth for the company overall. And for the year, we generated nearly $250 million of free cash flow. This provided us with great support for our three capital allocation priorities, mainly market led growth, increased shareholder returns and maintenance of our solid financial position. During the year, we continued to invest in accretive opportunities by keeping pace with our customer needs. We also increased our dividend and introduced a share repurchase plan, and in terms of financial position, we further strengthened and our already solid balance sheet. We also saw CAE win its fair share of new business, which is – with its innovative training solutions. Annual order in-take was up 18% this year to $2.8 billion and our backlog increased by over $1 million to $6.4 billion. Now looking specifically at each of our business segments. As anticipated, the company's growth was led by civil, which saw higher demand for training in the fourth quarter drive the utilization rate of our training centers up to 76%. Underscoring the high degree of operating leverage in training, this translated into a civil operating margin of 19.1% for the quarter and 16.6% for the year, both figures exceeding the prior – exceeding prior year margins. Demand for commercial full-flight simulators was strong as well. We sold 20 more in the quarter to operators, including Southwest Airlines and Lion Air, who ordered five each. And I'm proud to say that despite aggressive competition, we’ve held…

: Thanks, Stéphane. And I have to say I very much appreciate your kind words and professionalism. It's really been absolute pleasure to have you as part of my team and I really value the contribution you've made to help maintain CAE's solid financial position and the growth that we've had over the years. We'll miss you. And I'm also very pleased to welcome Sonya Branco in her new role as our Chief Financial Officer. Her appointment to me is testament to the quality of CAE's executive succession plan. Sonya is a highly skilled and successful financial executive and already a strong leader within CAE. Just lastly, the Québec Chapter of Financial Executives International Canada recognized Sonya with the prestigious Aces of Finance award, which is conferred upon outstanding financial executive. We're really fortunate to have someone of Sonya's caliber to join the executive team, she has participated in our growth and putting us where we are today and to serve as CFO to bright continuity to CAE's excellent financial stewardship. At our recent Investor Day at the end of march, we highlighted CAE's six pillars of strength. They are the fundamentals that defines CAE's investment thesis and underpin our strategy namely, CAE has the advantages of a high degree of recurring visitors; a strong competitive mode, ample headroom in large markets; underlying secular tailwinds; potential for superior returns and what I always call CAE's secret sauce; our culture of innovation. These six strengths together with CAE singular vision focused on being the training partner of choice or the basis of our positive long-term view for sustainable growth. We're working from a solid position with a large backlog in Civil and Defense and a robust bid pipeline across all segments, our unique comprehensive training solutions a global reach give us…

: Thank you, Marc. Operator, we'll now ask you to open the lines if there are any questions from financial analysts and institutional investors. :

: Certainly. [Operator Instructions] And we'll proceed with our first question from the line of Fadi Chamoun from BMO. Go right ahead.

: Good afternoon. And all the best Stéphane in your new role, we appreciated your help over the years. A - Stéphane Lefebvre: : Thank you.

: Quick question on the Civil side. So in terms of the guidance, the double-digit growth in EBIT, can you give us some color about what kind of revenue growth, you'd expecting for this fiscal year to drive that kind of performance this year?

I think I'll start. I think we're seeing the same kind of growth profile that we would see this year. I mean this continues to be to be the good rate of utilization in our training centers that aren't drive the majority of growth. Of course, the 53 simulators that we sold this year will also help as they drive through our production and we get them out. In terms of revenue, I think we focus more of our guidance on the operating income, but clearly, I think we will see probably in my mind revenue growth in line with – in low double digits as we see in this year.

: Okay. Okay. So revenue growth in the low double digit as well as EBIT in the low double digit, is that right then?

Is that right Stéphane or he puts right? A - Stéphane Lefebvre: : Okay. I think that's what we see Fadi. Sorry, we're really – I think we've explained when have the Investor Day. One of the big growth engines for us will be the utilization of our service – in our service business and you're seeing that in the fourth quarter has been very strong. And so, we see utilization continue being strong in this coming year. That's one of the big drivers of the growth that we see. The second driver will be as we talked about a few times, it's also us generating more yields out of our training business. So, us becoming whether and offering more with training. You've seen on the equipment side, the number of full-flight that we sold in fiscal 2016 and so we start-off with quite a solid backlog for fiscal 2017. So, the combination of a good backlog and the equipment side continued growth in utilization, that we see in our training service. And as well providing more with training. Combination of all that brings us to the guidance we've given of growth in both top line and bottom line in Civil.

: Okay. No, but as a point I'm trying to make is, I mean we understand you have a little bit more sort of operating leverage possibility than your training network and ultimately we would suspect that EBIT grows at a faster pace than the top line. In this case if you're growing revenues, I guess grow double digit, when we will expect that the EBIT will be growing a little bit stronger that probably from mid-teens? Was that be a fair assessment?

: I see, I see – sorry, Fadi. I see what you mean. We were in a [indiscernible]. A - Stéphane Lefebvre: Well, when you look at it, in the end, there is a range and we talk about low double digit. I think [indiscernible] we've got the outlook and that's the one thing I don't want to get off track of what we've got in our press release and what is our output we're sticking with and that's the low double-digit percentage operating income growth.

: Okay. That's great. The quick one also on the $100 million investment in the Defense, can you talk a little bit, I think, can you touch base a little bit on the Investor Day, but can you remind us what kind of rolling profile is associated with this investment, the timing of when you would sort of thought to see that comes through on an annualized basis, and also if there is any working capital requirement that's going to be needed for a [indiscernible] purchase project? A - Stéphane Lefebvre: So, we've given some indication of the amount of CapEx that we think we'll need to invest in successful years of a team for that program about $100 million. And the plan really for us is to execute the entire building of the infrastructure including, we need some aircraft to deliver sort or so, the plan is to get it all delivered in fiscal 2017 and be ready to start training in fiscal 2018. And I think as we said at the Investor Day and I think I've said it again in the remarks, the center will open up in fiscal 2018 and it will be start to be accretive as we start operating the business in 2018. As far as the working cap is concerned, I think you can expect some investment in working cap, but not a huge lot. I think it's par not different from any other service contracts that we have where we – you can plan on about a month or two of working cap investment but that's pretty much it.

Okay. Thank you.

: Thank you very much. We'll get to our next question on the line from Cameron Doerksen with National Bank Financial. Go ahead.

: Yeah. Good afternoon and I echo [indiscernible] best wishes to Stéphane. I guess my question just want to follow up on the commercial business Marc maybe you're able to maybe take a stab at what do you think the full flight simulator orders will be this year and maybe related to that can you talk about whether you've seen any changes in the competitive environment for equipment sales now that you've closed the acquisition of the Lockheed business?

Well we just closed a very recently but a bit early to talk about that. I mean I haven't seen change so far you wouldn't expect it to see so far on this and we'll keep – we'll let you know I think clearly I think it's going to have some effect for sure and we'll see what happens this sort of number of competitors there but clearly have one less. So I think that we should help clearly. In terms of numbers of simulators for the year, I think look I'm going to start at the same point, I started this year and to say that we started the year around 40% and that I think I would stick with that for the moment. And really because it's based on the our basis for providing that outlook is really delivery of aircraft part of the OEMs and sometimes we get multiyear sales like we've had a couple of this year, if you think of Southwest Airlines about five at once and then we have another airline by five at once. So and that's not going to happen every year. So I would say we'll start with 40 and we'll update as we go.

: Okay. And just quickly following up on the Lockheed, is there any material restructuring cost required with that business?

Look, I think we're going to update you Cameron and the rest of the finance community when we report our Q1 report. We just closed the deal at the beginning. I think that you – I mean like in any other acquisition, I think you would expect some restructuring cost, but all-in, you've seen the price that we paid for it. It's – I think we consider this as a small bolt-on acquisition. We're pleased with the deal that we've made and we're convinced that the enterprise value will get to what we need out of it.

: Okay. Thank you.

: Thank you very much. We'll get to our next question on the line from Steve Arthur with RBC Capital Markets. Go right ahead.

: Great. Thank you very much. Just want to follow-up on the couple of specifics on the Civil business again. Looking at that 19.1% margin number, obviously driven quite a bit higher by the utilization rate, but as well as any sense of – if there was also an impact there from the improvement in the manufacturing side of the business, are those efficiency programs kicking in yet or is that a fiscal 2017 function?

Very small season, it's just started to kick in. It's just starting to, let's say globally, should see the bulk of that starting to kick in as we get into the second half of this year.

: So, that gives us some idea of the leverage then to the utilization rate. Just bigger picture looking ahead of utilization rates and margins over the next few years, if we've seen the leverage there presumably as time goes forward and not a huge increase in capacity in the training network, utilization ticks higher. Any sense of what the target margin levels would be and would we see as reasonable looking further out or they have three year or five year timeframe?

Higher. No, I'm not trying to be – no, I'm not tried to be glib, but clearly I mean look I'm not getting a target on that. But suffice to say we've given for the year in terms of low double digit percentage operating income growth for the year. But clearly, we've demonstrated that, we're able to generate 19% that was over the question we get that, we get the 19%, where we've demonstrated that this quarter of 76% utilization, would you clearly say we can do that, so I think that's north of 20% is a new, I see that for sure. Of course, you have to be in a quarter high utilization. But look I think the demand is strong and as you said I think at the beginning of your question clearly I think this – the results in Civil clearly demonstrate where we've been saying for a while about deliver effect of increased utilization – our training centers and we would expect that to continue and especially as things get wetter i.e., we do more of the actual training, which of course is our vision, because you're actually doing more – more work on the existing – with the existing simulator. So, it's not just a question of the utilization itself, because if you get wetter, they're actually doing a courses, so you're adding value with the same asset.

Okay. So in stronger quarters with more wet training and utilization approaching 80s over time something with the – starting with the two, isn't unreasonable thing to look for?

No, for sure yes.

Okay, thanks. Over to queue.

Thank you.

: Thank you very much. And before proceeding to our next question [Operator Instructions] And our next question is from the line of Benoit Poirier with Desjardins Capital Markets. Go right ahead.

: Yeah, good morning, and congratulations Stéphane for your new role.

Thank you Benoit.

: Just in terms of the seasonality on Civil, could you let us know whether we should see typical seasonality playing out for Civil in Fiscal 2017? A - Stéphane Lefebvre: : Yes. I think – I'm sorry I think – I think we will Benoit it typically you have seen that in two reasons mainly for that. Number one is the time when the airlines are very busy, pilots tend to train less and so you tend to see that in spring and summer time, that's one reason. And the other reason is you tend to see we always had the shutdown in our manufacturing plant in some weeks in summer. And so, it tends to put pressure a little bit in Q1 mainly in Q2, and then the business picks up in Q3 and Q4 usually. So I've seen that in many years that, that seasonal trend shouldn't change this year.

: Okay. And just related to the 20% Civil EBIT margin we just briefly discussed, just wondering if it's something you might achieve in fiscal 2018 or more for let's say a quarter with high utilization rate? A - Stéphane Lefebvre: : I think we associated -- those kind of results would be necessarily achieved with high utilization rates, so we'd have to be kind of winter quarter, because I mean it will be driven – it will be driven by higher utilization and therefore higher profits in our Training Center Network for sure.

: Okay. And on the military side, I would assume the new investment, the $100 million investment will be mostly growth CapEx. Just wondering, when the contract will start to contribute on the results in fiscal 2018, what kind of impact we might see on revenue and margin on the yearly basis?

Well, I can't get you a precise figure Benoit on these top line and bottom line of the contract, but the plan for us is to get everything ready for training at the end of fiscal 2017, and ready to start operating the business in fiscal – the beginning of fiscal year 2018.

Okay, okay, perfect. And the last question for me, just in terms of tax rate, what should we be using going forward? A - Stéphane Lefebvre: I think I hasn't been using the 22%, 23% guidance for a little while. We finish the quarter at 24%. We've – I looked at the past few quarters. Last year, we had a 22% normalized tax rate. It looks like we're – we keep going being in that range. So I think we're there at the same range that I have given in the past, 22%, 23% tax rate.

Perfect. Thanks.

: Thank you very much. And we'll get to our next question on the line for Ben Cherniavsky from Raymond James. Go right ahead.

: Good morning, guys.

Good morning. A - Stéphane Lefebvre: Hi.

: Could you just quantify, I couldn't see it in the MD&A, I apologize, if it was in there, but what was the FX impact on the contribution on revenue and EBIT?

I think you've got it Ben, the beginning of the MD&A. Let me just make sure I get the figure right here, the translation of the revenue is $126 million and net impact, the impact on net income is $11 million that's from the translation of all of our current operations into Canadian dollars. I think you got that at the beginning to front end of the MD&A [indiscernible].

Okay. I apologize for that.

Page 11.

Okay. I will take that up. And then some of the revaluation of certain contracts in the backlog in that – in some of the changes there, could you just elaborate on that a little bit?

The backlog itself if you look at each segments, you will see the FX adjustment in our backlog and we report that every quarter as an adjustment to the total backlog, so you can...

I'm sorry, can you may be able to talk in a different way, what – what is that causing you to revalue the backlog if it's not FX, that seems to be recorded separately?

I mean most of the time it is FX. You will have in certain cases, it's been the case in the trends when we acquired, they are the bombardier military aviation training facility so the NFTC training outfit in the mostly on Cold Lake. There is a backlog that comes with it and so we don't consider – we don't treat this as an [indiscernible] it takes to revolve the business. So you would see, you'd see a positive adjustment on our – in our backlog in Defense when we do an acquisition. But I mean most of the time it's either acquisition, FX and in rare cases where we have had a cancellation of contract and we take it out.

Okay. And then on the healthcare side, the margin compression from year-over-year to stay in the MD&A, it was a function of mostly a higher SG&A what exactly where you – what exactly accounted for that because you did get revenue increase as well.

Yes, we did and I think we've put in the MD&A as well but or I may have mentioned in my remarks. But we've invested especially in Q4 we had more selling and marketing cost. I know that we through a major selling event a large conference over a number of days that was of high value for the business but of course it was quite expensive and when you look at a business of the size of the healthcare, these things tend to have a bigger impact on the margin percentage so that's what's happened. We are looking at is really continued growth in the business so you see the kind of top line growth of the business is getting and of course the income will grow with it.

: Thank you very much. [Operator Instructions] And our next question on the line is from Turan Quettawala from Scotia Bank. Go ahead.

: Yes. Good afternoon and Stéphane congratulations on new role there. I guess my questions on the Defense side of the business. If you look at the last year here, you've had some decent revenue growth and I know B. Mat has been kind of hurting the margin a little bit as well. I am just wondering in terms of your guidance for next year, how should we think about revenue and maybe some color on whether margins will continue to get compressed here or not next year?

So I think we should – as we've said in our outlook that we expect to continue modest growth in Defense and I think that when we look at Stephane if you can help me out, but I'm pretty confident at this that when you look at the basket of orders that we've won in the backlog that we have the margins we're seeing there are no different, as again as a range of what we've been seeing in the past, or a margin – our margin kind of outlook would be the same. So that should translate if we – revenue growth and accompanied by earnings growth? A - Stéphane Lefebvre: Yes. Margin profile of the backlog isn't significantly different from what we've had in the past and we've generated about 12%, and so that's kind of where we – what you can expect going forward?

: Okay. Thank you. And just one more clarification from me here on the process improvement program. Are you pretty much done on the restructuring side for that, or is that more come maybe on that side in Q1 or Q2? A - Stéphane Lefebvre: There will be more to come, Turan, but we're within what we've said. I think about a year ago, in Q1 of last year, when we gave an indication of how much we think we would spend in restructuring cost and when the restructuring would finish, and when of course the benefits would start to kicking in. And so, we're right in line. There's probably something around $5 million after tax in our program to go in the first half of fiscal 2017. And as we said, we'll start seeing some benefit. We quantified at $15 million to $20 million on an annualized basis, and we'll start seeing that towards the second half of fiscal 2017.

: That's great. Thank you very much.

: Thank you very much.

Operator, I think, we'll use the time remaining to extend the Q&A session to members of the media. I want to thank the members of the investment community for their questions. We'll now open the line please for members of media.

: Certainly. [Operator Instructions] And we do have a question queued up on the line from Ross Marowits from The Canadian Press. Go ahead.

Yes, I'm wondering if you could give a little bit more detail as to there is a lot of different parts but what is the core reason you think for the record results in 2016?

Well, I think a lot it has to do with our large increase in utilization of our training center network that has a lot. So basically more customers training in our existing network or training centers and what – when that happens not only you would get lot more revenue but because you are – a lot of your costs already covered a disproportionate amount of that revenue drops to the bottom line and as it doesn't explain all of it but it's a – it's a good part of it and a lot of that growth has become – as it comes out of the fact that there is a big demand for pilots, new pilots and pilot training and that's what's driving things. And I think those are the big reasons that we've seen in it in terms of order intake we've seen in both Civil and military the markets themselves are growing. In the Defence for example, we see government's looking to outsource, more of trainers they do to private enterprises and we're seeing them use more simulation as a way to rehearse not only pilot training but the way they rehearse their mission and finally in healthcare, we're subsequently present over 20% over 20% revenue growth is people are being very receptive to the new products that and services that we provide and as seen that as a very good way to train people to make sure that healthcare practitioners are well prepared to be able to conduct the jobs that they have. And if they – so sorry, it's going to have a disproportionate amount of benefit of patients safety, by borrowing the best practices that come from the aviation world, which of course we're experts at.

Where in the world is this utilization growth coming from mainly?

Really across the world really. I mean lot of activity in Europe, lot of activity in North America and quite still long – strong demands in Asia, so I think I've covered the world here. I think well, actually this South America has been softer because of all the issues, specifically in Brazil as you would imagine, but the rest of the world is pretty strong actually.

And finally, what are the risks that you see for not meeting your growth target for 2017?

Well, I think it would be usual risk that we cover in our financial disclosures, mainly at things that we don't control usually. Things that you can never predict, global what – think about stuff like for example a Pandemic that will hurt the passenger travel as an example, that's kind of things obviously you can't predict that. So I think it mainly associated we think with no control, that would be much biggest risk, but of course rest are covered. Of course, if you read our financial disclosures, you'll see all the risks that we've identified, but I think for the purposes of this call, I think it'd be lengthy to go through all of that.

Thanks so much.

You're welcome. Thanks Ross.

: Thank you very much. Mr. Arnovitz, we have no further questions on the line. I'll turn it back to you. End of Q&A:

: Okay. Great. I want to thank again members of the investment community for their time listening to our call today and for their questions and as well to the media for their participation. I would like to remind all participants, that a transcript of today's call can be found on CAE's website at www.cae.com. Thank you.