Andrew Arnovitz - Vice President of Investor Relations & Strategy Marc Parent - Chief Executive Officer, President, Director and Member of Executive Committee Stephane Lefebvre - Chief Financial Officer and Vice President of Finance

Hamzah Mazari - Crédit Suisse AG, Research Division Cameron Doerksen - National Bank Financial, Inc., Research Division David F. Newman - Cormark Securities Inc., Research Division Steven Arthur - RBC Capital Markets, LLC, Research Division Ben Cherniavsky - Raymond James Ltd., Research Division Tim James - TD Securities Equity Research Turan Quettawala - Scotiabank Global Banking and Markets, Research Division Ronald J. Epstein - BofA Merrill Lynch, Research Division Stephen Riccio Chris Bowes - Canaccord Genuity, Research Division

Good day, ladies and gentlemen, and welcome to the CAE Third 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. Please proceed.

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 are 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 actual results or events. These statements do not reflect the potential impact of any nonrecurring or other special items or events that are announced or completed after the date of this conference, including mergers, acquisitions or other business combinations and divestitures. You'll find more information about the risks and uncertainties associated with our business in the MD&A section of our annual report and Annual Information Form for the year ended March 31, 2012. These documents have been filed with the Canadian Securities Commission 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, February 13, 2013, and accordingly are subject to change after this date. We do not update 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. On the call with me this afternoon are Marc Parent, CAE's President and Chief Executive Officer; and Stephane Lefebvre, our Chief Financial Officer. After comments from Marc and Stephane, we will take questions from financial analysts and institutional investors. Following the conclusion of that Q&A period, we will open the call 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 go through some of the highlights of the quarter, and then Stephane will provide more details about our segment results. I'll come back at the end to talk about our outlook. Things went largely the way we expected this quarter, given the integration and restructuring efforts underway in both our Civil and Military markets. We continued to lead the market during the quarter, with 6 more simulator sales in Civil, which contributes to our year-to-date total of 30. In Civil training, the integration of Oxford is progressing as planned. In military, our restructuring is underway in Europe, and our profitability has improved. The amount of orders we booked in the quarter still reflects the environment we're in, where we've come to expect delays, but we had a good win rate on those contracts that were awarded. Looking more specifically at Civil, revenue for our combined Civil segments was up 41% in the quarter to $287 million, and our operating margin was 16.4%. The integration of Oxford remains a priority and has continued to occupy a large part of our Civil organization over the last couple of quarters. Oxford represented over 3.5% dilution to our combined Civil operating margin, which we expected given the majority of synergies we target are still to come. Utilization normally picks up in our third quarter, and this time was no exception. Overall, the rate was 69%, up from 65% last quarter, which is a typical Q2-to-Q3 increase, albeit, a little lighter than normal. I mean, that's understandable, however, since we've been ramping up 4 recently operationalized training centers, and we have 4 more underway. As well, we've continued to relocate a number of the Oxford simulators we recently acquired. It typically takes several months to a year for newly installed simulators to reach a desired level of utilization. In Military, combined segment revenue was down 7% year-over-year in the quarter to $206 million, and our operating margin was 13.1%. Profitability was a little better than we'd anticipated, partially helped by the restructuring underway, but mainly because of a better mix of programs compared to last quarter. We won our fair share of contracts on programs that moved forward to award, but order delays have been persistent. We had another U.S. foreign Military sales order for MH-60R Seahawk simulators this time for the Royal Australian Navy. We got product upgrade and long-term services contracts from the United Kingdom Ministry of Defence in relation to the Medium Support Aircrew Training Facility at Royal Air Force Base Benson. And we also saw a renewed commitment from customers involving simulation technology updates and aircrew training services contracts on enduring aircraft platforms like the C-130, C-5 and KC-135. These are tangible examples of customers upgrading and extending their training systems to be able to do more training using simulators. In New Core Markets, revenue was up 6% in the quarter to $28.7 million, and operating income was $1.7 million. In CAE Healthcare, we made good progress with international sales of our products to support new simulation centers in China, and we sold surgical simulators in Japan. In the U.S., we continued to have good success with sales of our full suite of patient simulator products and centre management systems in key customers. In CAE Mining, we sold our resource modeling and mine planning software solutions to major mining customers in Africa, Brazil, Mexico and Russia. Stephane will now take you through the financials.

Thank you, Marc. Good afternoon, everyone. Consolidated revenue for the quarter was up 15% year-over-year at $522 million. And net income attributable to equity holders was $37.8 million or $0.15 per share. We had an $8.8 million after-tax impact from restructuring, integration and acquisition costs this quarter. And excluding these costs, net income attributable to equity holders was $46.6 million or $0.18 per share. During the quarter, we incurred expenses of $9.5 million related to the restructuring of our Military operations, mainly in Europe. As we announced last quarter, the majority of our restructuring expenses are being incurred in the third and fourth quarters. Income taxes this quarter were $9.4 million, representing an effective tax rate of 20% compared to 25% last year. The tax rate was lower than usual this quarter because of the change in the mix of income from various jurisdictions and the recognition of a tax asset generated from profits in one of our foreign operations. We had good free cash flow performance this quarter at positive $90.7 million. Compared to last year, we had favorable changes in non-cash working capital and lower maintenance expenditures. Total capital expenditures this quarter were $32.9 million, including $24 million in support of growth and $8.9 million for maintenance. Our net debt position also improved, moving down to $965 million at December 31, compared with $995 million at the end of the prior quarter. As a result, our net debt to total capitalization has moved from 49% to 47%. At the end of December, we issued $349 million in debt by way of our private placement to refinance our existing debt. The fixed portion of this financing totals nearly $300 million and is in trenches of 7 to 15 years, bearing interest rates ranging from 3.6% to 4.2%. The refinancing enhances our capital structure by giving us a mix of currencies, terms and interest rates that fit our strategy and give us some flexibility to further strengthen our balance sheet in the future. Now looking at our segmented financial performance. In our combined Civil segments, third quarter revenue increased 41% year-over-year, reaching $287 million. Combined Civil operating income was up 12% to $47 million for an operating margin of 16.4%. This compares to reported 16% in the second quarter, but recall this included a one-time foreign exchange gain. So on a comparable basis, the margin this quarter is actually 2.3 percentage points higher. In our combined Military segments, third quarter revenue was 7% lower year-over-year at $206 million, and we generated a 13.1% operating margin. Margin last quarter was 10.4% before the benefit of non-recurring gains. So here again, we've seen sequential improvement in profitability. In New Core Markets, the third quarter results put us well on track to deliver what we said we would do for the full year. We expected to generate at least $100 million in revenue and to be profitable for the year as a whole. Year-to-date, we generated $83.1 million of revenue and $4.6 million of operating income. With that, I'll turn the call back to you, Marc.

Thanks, Stephane. Looking ahead, we're continuing to see the same sort of themes in relation to our market drivers as we saw last quarter. In Civil, we continued to see solid fundamentals with industry forecasts for long-term annual passenger growth continuing to be around 5%. Growth in regions like the emerging markets is still significantly outpacing developed markets, and CAE is well positioned in both. Record aircraft backlogs are translating into record aircraft deliveries, with Airbus and Boeing projecting more than 1,200 deliveries this year. This bodes especially well for our Simulation Products business and supports our expectation that we'll finish this fiscal year with mid-30s full-flight simulator sales. As we get into fiscal 2014, we'll be in a position to provide you with our outlook for the year ahead. In business aviation, the utilization of aircraft remains stable in 2012, and the percentage of used aircraft for sale decreased, which is a positive sign for the market overall. This is an attractive area for CAE, and we'll continue to invest in business aviation to keep pace with the market, especially internationally. Oxford has been and continues to be a top priority for our organization in terms of the integration and deriving the significant cost and revenue synergies we've targeted. Overall, we continue to expect combined Civil segment margins to improve as we move beyond the current fiscal year and into next, as synergies with Oxford are realized and utilization improves. In Military, the issues related to government budgeting and persistent contracting delays remain essentially the same. And because of the late order intake, we still expect to finish the fiscal year with lower revenue than last year. The long-term fundamentals for CAE in the defense market remain attractive, and we expect to grow the business over the long term. We have a Military backlog of over $2.1 billion. And in terms of future opportunities, we currently have over $2.7 billion of Military bids and proposals submitted and pending. As governments eventually make bid decisions, we expect that we'll continue to win our fair share. Finally, in New Core Markets, we're doing more to expand our reach outside of traditional markets and into emerging economies like China. We're tracking above our target of $100 million of revenue for the year, and we'll continue to invest to grow the business and expect to remain profitable. To conclude, our priorities are clear, and we have a sharp executional focus. We're working diligently to integrate Oxford and derive significant synergies. We're in the process of restructuring our European Military operations, and this will progress well into the next fiscal year and we'll continue to lead in our markets by offering the best products and services to our customers. 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. [Operator Instructions]

[Operator Instructions] Our first question comes from the line of Hamzah Mazari of Crédit Suisse. Hamzah Mazari - Crédit Suisse AG, Research Division: My question is on the Oxford business. Could you maybe give some color as to whether the dilution from that is higher than expected? And how investors should think about the integration of the asset? You did give some color on -- it takes about a year for some of these newly installed simulators to get up to full utilization. Any color on how folks should think about how that business will fully integrate and the benefits there?

I think, Hamzah, the dilution is pretty much what we expected. There's a lot of factors playing -- that call you to play this quarter, which I mentioned some of them, the 4 training centers that are ramping up and the 4 more that we have underway, the assets that we're moving. And overall, I mean, -- let's be honest, I mean, the whole -- there's disruption associated with this size of move of acquisition and integration into the organization, all of which affects the SOI. But overall, the dilution is pretty much what we expected and so are the benefits. I'm quite pleased with the progress that we've made to not only identify, but secure the synergies and we're still on the way, but we definitely are on track to realize the full synergies that we expected from that business. And I think, to me, within the timeframe that we've talked about, we had said that we would expect that it would take about 15 months approximately for the synergies to fully ramp up. I think we're about 9 months in, and I think that timescale is probably pretty much on track.

Our next question comes from the line of Cameron Doerksen of National Bank Financial. Cameron Doerksen - National Bank Financial, Inc., Research Division: My question is just on the Military segment. And I guess, maybe some comments on the impact of the issues with the budget in the U.S. and the sequestration potential. Have you seen any, I guess, delays? Particularly, on the training part of the business in the U.S., have you seen any, sort of, delays or reductions in training so far? And I guess within the contracts that you have there in the U.S., if the sequestration does go through and has an impact on training, do you have any kind of minimum guarantees with any of your contracts in the U.S.?

Well, I think the short answer is, I'm not aware of any reductions in training. I have seen some increases, though, over this past year. Specifically, in the U.S., I haven't seen any drops. We don't, as far as I know, have any guarantees of training. I could be wrong here, but we may have to check. But I don't believe so. But -- so, I mean -- yes, we'll know -- I think we're days away from knowing what is happening with this whole sequestration issue, which, of course, is a huge momentous event. So we'll see what happens after that. If anything, I would expect something. I mean, going forward, it's almost like we kind of expect sequestration is almost baseline now. The question is how will it be implemented. So it's really -- I don't think I've seen any disruptions so far. I would anticipate some, if it happens. But I think, Cameron, what I would really be looking at more is that not as much training being reduced is the delays in -- further delay in orders being placed because of this disruption in the Military procurement agencies.

Our next question comes from the line of David Newman with Cormark Securities. David F. Newman - Cormark Securities Inc., Research Division: Just on the -- back to Hamzah's question on the movement of the sims that you've actually moved out of Europe and then you have another tranche of them to go. Just in general, how do the markets compare between the markets that you're taking -- the motives in the markets that you're putting it into overall in terms of RSEU or utilization or any of the metrics? I mean, what -- how busy are they in the new markets, and how lagged are they in the -- I guess, in the legacy markets?

Well, there has been some change. The way I would characterize it -- I think, if I go back maybe a year, I think I would've characterized it -- and I think I did at the time by saying the market was like white-hot. We had like some of our centers, and member [ph], operating at well over capacity, and we're having to add simulators just to -- just because we just couldn't meet the demand. It's less hot now, but I would still characterize it as hot. And it's normal that things move around. It always does even quarter-to-quarter because airlines are not the same everywhere, and their dynamics are not the same. So more specifically, lately, what we've seen, I mean, Europe is difficult. I mean, it's been difficult throughout the year. But having said that, it's grown this year -- continues to grow, although pretty modestly, probably around the 2% range. Asia has been very hot. You've seen the amount of simulators we've sold in China alone this year is pretty much of a proxy to which you would see what kind of training increase we've seen in those markets. South America has been slower, still good but slower. It still look -- I think there's ebbs and flows, but I think overall it's still growing quite a bit. And long term, we're still looking at 5% overall passenger growth, which is a pretty good passenger growth, of course, stronger in emerging markets. David F. Newman - Cormark Securities Inc., Research Division: Okay. Just a quick one, if I could slide it in there. Just the -- on the KC-46 program, where does that stand overall?

Well, I think that will depend, I guess, again. Again, you're a couple of days -- not a couple but probably 2 weeks away from a decision on sequestration. So far, the KC-46 decision, they say that they would be making a decision relatively shortly. And I think at this moment, I think I've heard last night that they said that if sequestration happens, that KC-46 decision could be protracted. So look, we'll see, I guess, it all depends. So far what we expect is the decision within the next couple -- I think it's 2 to 6 months is what I believe. David F. Newman - Cormark Securities Inc., Research Division: And you feel pretty confident, Marc?

As confident as I am about considering that the U.S. Congress will make a decision about sequestration. And obviously, that's as far as I could go. But if you're asking about how confident I am about the deal -- is that what you're asking about? David F. Newman - Cormark Securities Inc., Research Division: Yes, absolutely. Yes.

Well, look, I think we've got -- I think we have a very competitive bid. We have great past performance on the KC-135 aircrew trainings because we are the aircrew training company for the U.S. Air Force on the current tanker fleet, which will be replaced by the KC-46. So our chances are very good. But, I mean, this will be very competitive and every company will be in this. So I think it will be a shootout for sure. I think our chances are good.

Our next question comes from the line of Steve Arthur with RBC Capital Markets. Steven Arthur - RBC Capital Markets, LLC, Research Division: You've addressed some of this, but I just want to clarify a couple of points further on the Oxford business. I guess, just -- is there any change to the level of -- now that you're further into it, any change to the level of synergies or mid-term margins that you were looking at? I think you were discussing something like $22 million in cost synergies. So is that still the case? And any further color on revenue opportunities or synergies that are materializing?

No, I think the $22 million has an impact. And I think revenue synergies -- again, a little too early to talk about material numbers right now. But what I see is good. As expected, the fact that we have, for example, contracts or have relationships with the majority of the airlines in the world is good, for example, for our Parc business, where it provides pilots. So the amount of leads that we're able to provide to our Parc business, I think, has improved dramatically. So we have to convert those into dollars, and we've started to. So I feel good about that. I feel good about the opportunities with OEMs as well for that same business. So I think early days, but I'm quite positive on what I see so far. Steven Arthur - RBC Capital Markets, LLC, Research Division: Okay. With Parc, specifically, are you thinking more revenue synergies or more margins moved there materially as well would you think?

I think both. I think materially is a big word, I think. But certainly, we'd like to see that improvement on the 2%, 3% business that we inherited. I mean, it is notwithstanding is a no capital-invested business, we'd still like to do better there, and then that's going to be our target.

Our next question comes from the line of Ben Cherniavsky of Raymond James. Ben Cherniavsky - Raymond James Ltd., Research Division: Can you -- I guess, the question I'll ask is just a housekeeping one. There were some gains on the full-flight simulators. Can you quantify that?

Let's see. A couple of devices, Ben, that were sold off our training and services Civil business. I think the profit that we recorded is $2.6 million on those transactions. [indiscernible] I'm sorry. Ben, it's part of our TSE segment results. Unlike what we've done in the past when we had similar transactions. And I guess, part of the process of looking at our overall portfolio of assets and managing them in the appropriate way, and then we make decisions on disposing of some once in a while. It's part of our business. Ben Cherniavsky - Raymond James Ltd., Research Division: Okay. Fair enough. But if I could squeeze in one other housekeeping one just on the restructuring cost. Do you have an estimate of what they'll be in the fourth quarter and if or how much they might carry into the next fiscal year?

The -- yes, so far, this year, we've incurred around $55 million overall across our different restructuring programs. The first one that we announced last spring, the Oxford integration cost and the -- more recently, the second phase of the Military restructuring in Germany. And across all the 3 restructuring efforts, we'll be within our guidance. We're -- as far as restructuring cost is concerned, we don't expect to -- I mean, we'll incur pretty much all of them in this side of the -- in this fiscal year.

Our next question comes from the line of Tim James with TD securities. Tim James - TD Securities Equity Research: What growth rate do you plan for your overall RSEU base over the next 2 years approximately relative to the third quarter period end level of 186 units?

Early days to say that. We -- it's customer driven. I think what we said before -- I mean, we're going to continue to invest. Obviously, our first priority for our cash is to -- I mean, we have 3 priorities, but, I mean, the first one is to invest in our business where we see growth opportunities that are going to give us a good return in relatively short term. So it's going to be customer-driven. You've seen us do some this year, and we'll continue to do that. But early days to be able to tell you exactly how many RSEUs that would be because it very much depends on the opportunities we'll see in front of us.

Our next question comes from the line of Turan Quettawala with Scotia Bank. Turan Quettawala - Scotiabank Global Banking and Markets, Research Division: I guess, I just had a question on the Military side as well. And I appreciate this might be a little bit hard to answer. But I'm just wondering if -- have you done any analysis in terms of looking at how much your footprint may need to shrink or maybe it doesn't need to shrink based on some of the scenarios that might play out in the U.S., particularly with sequestration?

Yes, we have, but it depends on -- you picked the scenario, right? As you say, it's a difficult question. And I mean, the good thing is that, overall, in the U.S., we have an ability, I think, to adapt our workforce easier than we would anywhere else. And not to say that we think we have to at this moment, it will depend on how if and when and how they implement sequestration. I mean, when they put in sequestration, this was never supposed to happen. It's very punitive. It was designed that way. It would have an overall disaster effect to U.S. GDP. I have trouble believing it will happen the way it's been planned. So if you take -- if you leave that aside for a second, if you -- if the services are allowed, which they're -- which is what they're looking for, if they are allowed to basically achieve the results by cutting in the targeted way and achieve the same results, I mean, that will have a different impact to us because I think the kind of things we're involved are mission-critical. So I think if you could make a scenario in there that we won't be affected at all. But I think, probably that would be rose-colored glasses. One day, you wouldn't be affected at all. But again, I really believe that this for us doesn't really change the dynamic that we've been over the last really 1.5 years to 2 years. It really is a question for us of this persistent order delays. And to the extent of how sequestration, if it's done, how it's implemented, how does that affect the people that place orders, the procurement agencies, that's really what we're watching. I think we're so close to this momentous event that I think we'll be in a lot better position to talk about that once this is over as we get onto the next call next -- in the next quarter. Turan Quettawala - Scotiabank Global Banking and Markets, Research Division: Okay, great. And maybe if could just ask again -- on last year, there was a bit of a bump in terms of revenues and, I guess, order flow in Q4. Is there something like that, Marc, that may be happens this year as well just based on some pent-up spending or something?

Well, I wouldn't be -- I won't comment on orders because I know what we bid, but I know what I'm -- what I think will happen. But it's -- again, I don't control when they're going to actually make a decision. In terms of the revenue, look, I think that we've said that we'll be lower this year. We're lower 4%, I think, year-to-date; I think 7% on the quarter. I think it will -- we're going to be within those kind of ballparks for the year. I think that's what we anticipate.

Our next question comes from the line of Ron Epstein, Bank of America Merrill Lynch. Ronald J. Epstein - BofA Merrill Lynch, Research Division: Maybe a quick one on the commercial side. With the slowdown in 787 deliveries, have you seen any airlines come back to you, wanting to delay or slow down deliveries of flight simulators for 787?

No, I haven't seen any at all to that -- on that front, Ron. Ronald J. Epstein - BofA Merrill Lynch, Research Division: Okay, okay. And then not to kind of beat a dead horse, but it's come up a couple of times on the call, you probably know -- [indiscernible] to see if sequestration actually does play out, it happens. So when you think about -- strategically, you've been running your company in that side of your business. I mean, really, what do you do to face that? Or I mean, how do you think about -- what do you have to change to deal with that?

Well, look, I'm a bit with you. Look, I think sequestration, the way we're thinking, we're about -- we've almost pretty much accepted as our baseline. The question that we've also -- we also believe and certainly I always believe, is that -- and I hope I'm right, is that this will be done in a way that the cuts will be selected and not across-the-board. If it's across-the-board, I think we have a scenario that, in the end, we will be affected the same way as everybody else. I mean, we're halfway through the year. So flying hours will be cut. The U.S. Air Force, the U.S. Navy has already come out with how much it would cut flying orders -- hours, but we'll be affected. But on the other side, they have also said that they would try to maintain [indiscernible] in flight simulators. So I think we'd be affected. The question is how much would come back the other way. Either way, it's a pretty -- it's not a very big impact to us. Remember that 65% of CAE's business is outside of the U.S., first of all. That's one thing. But again, I think coming back to it, Ron, I really am more concerned, if anything, about sequestration about how that affects government decision-making with regards to placing contracts, so -- and for us how we would react, I think in the end, look, I think if our business and training goes down, we'll have to -- we'd have to probably furlough. We'd want to keep our people. You'd see scenarios, we go to 4-day-a-week that, kind of, thing in our training centers. And those are the kinds of measures we would take. But look, to me, as you know, we're about few days away from knowing which way this is going to go down, and then we'll be a lot smarter next quarter. Ronald J. Epstein - BofA Merrill Lynch, Research Division: And then maybe one more question maybe on the more constructive side. How would you expect it to play out, but you get it back, right? Because it's -- the thesis that you'd see more training in an environment -- simulator training in an environment where you're more cost-conscious makes a lot of sense. So how do you think that would reverse? I mean, I'm just -- what would we have to see to really start to see that -- I'm sorry, I'm struggling for words, but what would he have to see to have that really gain traction?

Well, look, I think we're already seeing it. And we're -- it's just -- in my mind, this is such a big event, I think. And I was talking to our U.S. Board, and some -- we have pretty senior people that are very connected to the U.S. Military and the dynamic there about how the training is done, and it's clear that mindsets are changing. And if under the dramatic cuts that were being considered, things are going to continue more. And here are some of the things that I would point to. If you look at the P-8, we are contracted to build the P-8 simulators for Boeing under their contract with the government. The numbers of simulators that we've been tasked to build for the P8 is literally an order of magnitude more than the equivalent number that the U.S. Navy would have for the P3. And the real -- and the -- when asked, it's very clear that the U.S. Navy has said that they're going to be using the aircraft for the mission and not for training. They're going to use simulators for training, which, of course, is the way we do it at this Civil business. We see that more and more. We've seen a lot of upgrades to programs this year, programs we have in place that people have been upgrading to simulators in order for them to be able to do more training using the sim. So, look, to me this is something that's going to accelerate, how long it's going to take, I think, we're cautious on that. But clearer to me, the trend is already in that direction thank you, and just one anecdote, I think it's public, the Air Force and the Navy have both said that they plan to increase use of simulation from 25% to 50%, and this is before, I think, the sequestration actually comes to 4 -- comes to play, I mean.

Our next question comes from the line of Steve Riccio with Buyside Research.

A question on the New Core Markets. And I missed the first part of the call, so I apologize if you already went over this. It looks like you sold out your modeling and mine planning software?

We've sold out? What do you mean?

That you -- did you sell that entire business? Or...

No, no, no. I'm just saying that we sold more of our software planning solutions. No, sorry. I hope I gave nobody else that impression. No, no. We're quite happy with our Mining business.

All right. A question then. What do you anticipate once you sort of scale up both Mining and Healthcare? What type of EBIT margins can we expect in this area?

More. I don't want to be glib about it, but what we said for -- I mean, look, the short answer is, I guess, I would tell you that it's not dilutive to the rest of CAE. I mean, that's what we're targeting. Now we're targeting a bigger business. I think what [indiscernible] said on this is we wouldn't be in this business -- in either of these businesses if we didn't think that New Core Markets could be at least $250 million within a reasonable timeframe. We've targeted to be $100 million this year, and we'll exceed that. We've targeted to be profitable this year, and we're going to -- and we're doing that. We're going to continue that way. So I think what you'll -- what you should expect is margins to continue to improve. But having said that, in order to be able to target the growth that we want to get, the actual revenue number we want to get, we're going to continue to invest in R&D and SG&A probably at a disproportionate level, which means you're not going to reach margins that are not dilutive to CAE probably now [ph] into next year. But you will continue to see better margins that you see now.

Got it. And the $250 million, that's per business line, like Healthcare and Mining? Or is it combined?

Combined.

Combined. And that would be basically just through organic growth without any sort of supplemental bolt-on acquisitions?

Well, you -- I wouldn't expect -- there are probably some acquisitions to gain some market access, some niche products like we did recently with acquiring Blue Phantom. But I wouldn't expect -- I would expect the bulk of it to be organic.

Operator, we have time for one more question from investors and analysts, and then we'll open the lines to members of the media.

The last question comes from the line of Chris Bowes of Canaccord Genuity. Chris Bowes - Canaccord Genuity, Research Division: Marc, you mentioned that profitability in Military was a little bit better than anticipated, owing to mix. I'm hoping you can talk about what drove the positive mix and maybe whether we can expect this sort of contextually good profitability to persist.

Maybe I'll get started with the spacing [ph]. As usual, Military is a bit lumpy, but [indiscernible] and that's part of the answer. I mean, when you execute a program in 1 quarter, that's operating a higher profitably, if you reach a milestone, then you tend to attract more profitability in that quarter than you would. So that's what we mean by mix of programs. But Stephane may have a better wholesome response.

Sure. And while just to maybe going with what Marc just said, taking you back to when we say it was better than what we had expected. When we look back at the second quarter of this year, really, our margins in NIM [ph] as we said was 10.4%. And quite frankly, by the time that we see the benefits of all the restructuring that we currently do, we could see the margins come pretty much being steady at around 10% to 11%. So that -- from that perspective, the profitability was better in Q2, Q3 than what we'd expected. Just on the -- I mean, on the mix of programs, it's really been both in product and service. And just as we have more effort on programs that are driving better margins, it tends to increase our profitability on the overall portfolio. So that's what happened in Q3. I think we'll -- as we said before, what I think we could see is Q4 of this year likely to still be soft in terms of profit margin. And I can see that the benefits of the restructuring being done in Europe, we'll see those benefits likely when the restructuring activity themselves are completed, which is likely to be second -- beginning of the second half of the next year.

I'd like to thank the members of the investment community for their attention and their questions. And, Operator, we'll now open the lines to members of the media.

[Operator Instructions]

Okay, operator, it appears that there are no questions.

There seems to be no questions at this time.

Okay. Then I will thank all participants again for participating and remind you that a transcript of today's call can be found on CAE's website at cae.com. Thank you.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Have a great day, everyone.