CAE Inc Presentation About the COVID-19 Situation and its Impact Hosted By RBC Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : Great. Marc, we did have a little bit of difficulty with your line there. So we will continue to unpack a lot of those comments, but it did clear at the end. I guess just digging right into it, just in terms of operations, what's going on with your training facilities right now? How many of those centers have been forced to be closed? Can the pilots still get to those centers? And what difficulties are you facing in providing the training in this environment?

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : Hold on. I'm having difficulty hearing.

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : Yes, please do, Andrew.

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : Okay. I think Marc touched on this in his opening comments earlier, just around the regulations around pilot training. Can you maybe talk a little bit about or explain why the airlines are continuing and need to continue training pilots over the next while, even if their flights are grounded for the time being?

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : That's great. It's a much better line, Marc.

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : Okay, great points. And just in terms of prioritizing our time, I think I'll jump to some balance sheet and liquidity topics now, which has obviously been very topical with investors. You ended last quarter with debt-to-EBITDA of around 2.7. Debt to cap just above your target range. How should we be thinking about CAE's leverage right now, your debt maturities coming up? And any covenants on that debt?

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : Okay. Good. So Marc mentioned earlier some steps you're taking on capital spending to conserve liquidity. Can you maybe comment a little more detail on what those measures might be?

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : Okay. I guess, moving into that area, R&D and other operating expenses. Obviously, extraordinary times, but it sounds like some of the layoff efforts have begun. Can you maybe elaborate on the degree and nature of those things and time lines that you're looking at?

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : Yes. No, that's some aggressive moves, very early. And appreciate what you're doing there. I guess, just looking at that a little bit further, you mentioned earlier the magic questions, how deep and how long. When you do stress testing of your model or run just bridge scenarios, what kind of stress tests are you looking at? Or what kind of metrics do you look at in the business as you go through this?

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : Certainly taking a lot of measures, it sounds like, to control all the controllables, your customers, the airlines facing these and perhaps even more serious situations. And they're looking for support from the government and all those discussions are underway. Is that something that CAE can also pursue with the Canadian or U.S. or other governments to help weather this?

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : Okay. Makes sense. We've had a few questions coming from investors here and I'll just grab a couple of these. Back on the simulator orders, you touched on this earlier, both Marc and Sonya. Just -- how firm are these orders? Should we be looking at airlines? Do they have the ability to cancel these orders in some way? I understand deposits have been made. But how about order deliveries, order cancellations and new order activity?

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : Just in terms -- another question that came in from the line here as well that we've talked about, just how variable is your cost structure? Sonya, you mentioned earlier you could run with lower utilization rates and still make money. What kind of utilization would you look at as breakeven, for example? Or just general comments on the variable versus fixed components of your cost structure.

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : How about business aviation? It's been a bigger part of CAE for the past year or 2. And how has that been affected so far?

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : Okay. How about the defense business, the large backlog there and presumably pretty steady, but what kind of impact has that seen so far?

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : We're running close on the clock. But maybe just stepping back a little bit in bigger picture. CAE and the training business, in particular, lived through 9/11, The Global Financial Crisis in '08, '09, stretching it to '10, '11, I guess, how different is CAE positioned today versus then? And what lessons from that area are you carrying forward?

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : Change creates opportunity, maybe coming out of this, I don't know if it's wise to be optimistic at this stage, but is it reasonable to think that the airlines themselves might relook at all of their cost structures and businesses? And might there be more opportunities for you with more partnerships or full outsourcing of some of these airlines as everybody regroups? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : We are running up against the clock, but that in itself might be a good way to wrap. But are there any other closing comments or thoughts that you'd like to leave with the investors in here?

Question: Steven Arthur - RBC Capital Markets, Research Division - Analyst : Great. That's terrific color. Very much appreciate that today. It's very busy times, and we do respect and appreciate your time. So thanks, Marc, Sonya and Andrew. And please stay well. Thank you. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.