Cubic 8-K Cubic Completes Divestiture of Cubic Global Defense Services to Valiant Integrated Services

Exhibit 99.2 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On May 31, 2018, Nova Global Supply & Services, LLC (“Purchaser”), an entity affiliated with GC Valiant, LP, completed the previously announced purchase from Cubic Corporation (“Cubic”) of all of the issued and outstanding capital stock of Cubic Global Defense, Inc. and Omega Training Group, Inc., each a subsidiary of Cubic (collectively “CGD Services”), resulting in Purchaser owning all of the issued and outstanding capital stock of CGD Services (the “Sale”).

The following unaudited pro forma financial statements of Cubic are presented to comply with Article 11 of Regulation S-X and follow prescribed Securities and Exchange Commission guidelines. The unaudited pro forma financial statements are presented for informational purposes only and do not purport to present what Cubic’s results would have been had the Sale actually occurred on the dates presented or to project Cubic’s results from operations or financial position for any future period.

The unaudited pro forma condensed consolidated balance sheet as of March 31, 2018, presents pro forma effects of the Sales as if it had occurred on March 31, 2018. The unaudited pro forma condensed consolidated statements of income (loss) for the fiscal years ended September 30, 2017, 2016, and 2015 present the pro forma effects as if the Sale occurred on October 1, 2014. An unaudited pro forma condensed consolidated statement of income (loss) for the six months ended March 31, 2018 has not been presented because such a pro forma statement of income (loss) would be the same as the statement of income (loss) for the six months ended March 31, 2018 filed in Item 1 of Form 10-Q for the quarter ended March 31, 2018. 

The prescribed guidelines limit pro forma adjustments to those that are directly attributable to the disposition on a factually supportable basis. The pro forma effects of cost saving actions that could have been taken by management if the Sale had occurred in prior periods are not reflected in the pro forma condensed consolidated statements of income (loss), nor is any reduction of interest expense reflected for cash proceeds of the Sale that could have been used to pay debt had the Sale occurred in prior periods. 

These unaudited pro forma financial statements and accompanying notes should be read together with Cubic’s audited consolidated financial statements and accompanying notes filed in Item 8 of Form 10-K for the year ended September 30, 2017 and Cubic’s unaudited consolidated financial statements and the accompanying notes filed in Item 1 of Form 10-Q for the quarter ended March 31, 2018.

CUBIC CORPORATION

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

As of March 31, 2018

(Amounts in thousands)

(Unaudited)

			Pro Forma
	As Reported		Adjustments		Notes		Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	56,419	$	131,168		(A)	$	187,587
Restricted cash		14,710		—				14,710
Accounts receivable:
Long-term contracts		294,168		—				294,168
Allowance for doubtful accounts		(863)		—				(863)
		293,305		—				293,305
Recoverable income taxes		2,013		—				2,013
Inventories		105,747		—				105,747
Other current assets		40,683		—				40,683
Current assets of discontinued operations		175,978		(175,978)		(B)		—
Total current assets		688,855		(44,810)				644,045
Long-term contract receivables		16,568		—				16,568
Long-term capitalized contract costs		61,574		—				61,574
Property, plant and equipment, net		116,135		—				116,135
Deferred income taxes		8,238		—				8,238
Goodwill		330,538		—				330,538
Purchased intangibles, net		82,157		—				82,157
Other assets		8,910		—				8,910
Total assets	$	1,312,975	$	(44,810)			$	1,268,165
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	77,000	$	—			$	77,000
Trade accounts payable		82,565		—				82,565
Customer advances		70,731		—				70,731
Accrued compensation and other current liabilities		93,212		—				93,212
Income taxes payable		3,752		—				3,752
Current liabilities of discontinued operations		44,810		(44,810)		(B)		—
Total current liabilities		372,070		(44,810)				327,260
Long-term debt		199,777		—				199,777
Other long-term liabilities		61,553		—				61,553
Shareholders’ equity:
Common stock		40,079		—				40,079
Retained earnings		779,012		—				779,012
Accumulated other comprehensive loss		(103,438)		—				(103,438)
Treasury stock at cost		(36,078)		—				(36,078)
Total shareholders’ equity		679,575		—				679,575
Total liabilities and shareholders’ equity	$	1,312,975	$	(44,810)			$	1,268,165

CUBIC CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Year Ended September 30, 2017

(Amounts in thousands, except per share data)

(Unaudited)

			(C)		Pro Forma
	As Reported		CGD Services		Adjustments		Notes		Pro Forma
Net sales:
Products	$	681,559	$	—	$	—			$	681,559
Services		804,302		(378,152)		—				426,150
		1,485,861		(378,152)		—				1,107,709
Costs and expenses:
Products		473,670		—		—				473,670
Services		648,472		(342,819)		—				305,653
Selling, general and administrative expenses		258,088		(25,708)		8,221		(D)		240,601
Research and development		52,652		—		—				52,652
Amortization of purchased intangibles		32,997		(2,752)		—				30,245
Restructuring costs		2,468		(208)		—				2,260
		1,468,347		(371,487)		8,221				1,105,081
Operating income		17,514		(6,665)		(8,221)				2,628
Other income (expenses):
Interest and dividend income		994		(41)		—				953
Interest expense		(15,027)		—		—				(15,027)
Other income (expense), net		369		(5)		—				364
Income (loss) before income taxes		3,850		(6,711)		(8,221)				(11,082)
Income tax provision		15,059		—		(401)		(E)		14,658
Net loss	$	(11,209)	$	(6,711)	$	(7,820)			$	(25,740)
Net loss per share:
Basic	$	(0.41)							$	(0.95)
Diluted	$	(0.41)							$	(0.95)
Weighted average shares used in per share calculations:
Basic		27,106								27,106
Diluted		27,106								27,106

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

CUBIC CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Year Ended September 30, 2016

(Amounts in thousands, except per share data)

(Unaudited)

			(C)		Pro Forma
	As Reported		CGD Services		Adjustments		Notes		Pro Forma
Net sales:
Products	$	661,904	$	—	$	—			$	661,904
Services		799,761		(391,064)		—				408,697
		1,461,665		(391,064)		—				1,070,601
Costs and expenses:
Products		473,444		—		—				473,444
Services		643,462		(350,429)		—				293,033
Selling, general and administrative expenses		269,593		(24,119)		7,689		(D)		253,163
Research and development		31,976		—		—				31,976
Amortization of purchased intangibles		34,120		(4,764)		—				29,356
Restructuring costs		1,852		(574)		—				1,278
		1,454,447		(379,886)		7,689				1,082,250
Operating income (loss)		7,218		(11,178)		(7,689)				(11,649)
Other income (expenses):
Interest and dividend income		1,476		(60)		—				1,416
Interest expense		(11,199)		—		—				(11,199)
Pension settlement loss		(2,671)		—		—				(2,671)
Other income (expense), net		(2,301)		(33)		—				(2,334)
Loss before income taxes		(7,477)		(11,271)		(7,689)				(26,437)
Income tax benefit		(9,212)		—		(5,145)		(F)		(14,357)
Net income (loss)	$	1,735	$	(11,271)	$	(2,544)			$	(12,080)
Net income (loss) per share:
Basic	$	0.06							$	(0.45)
Diluted	$	0.06							$	(0.45)
Weighted average shares used in per share calculations:
Basic		26,976								26,976
Diluted		27,040								26,976

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

CUBIC CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Year Ended September 30, 2015

(Amounts in thousands, except per share data)

(Unaudited)

			(C)		Pro Forma
	As Reported		CGD Services		Adjustments		Notes		Pro Forma
Net sales:
Products	$	607,226	$	—	$	—			$	607,226
Services		823,819		(402,146)		—				421,673
		1,431,045		(402,146)		—				1,028,899
Costs and expenses:
Products		451,295		—		—				451,295
Services		640,031		(362,147)		—				277,884
Selling, general and administrative expenses		212,518		(25,135)		8,369		(D)		195,752
Research and development		17,992		—		—				17,992
Amortization of purchased intangibles		27,550		(7,690)		—				19,860
Restructuring costs		6,272		(559)		—				5,713
		1,355,658		(395,531)		8,369				968,496
Operating income		75,387		(6,615)		(8,369)				60,403
Other income (expenses):
Interest and dividend income		1,809		(65)		—				1,744
Interest expense		(4,400)		—		—				(4,400)
Other income (expense), net		(885)		(66)		—				(951)
Income before income taxes		71,911		(6,746)		(8,369)				56,796
Income tax provision		48,997		—		(2,371)		(F)		46,626
Net income		22,914		(6,746)		(5,998)				10,170
Less noncontrolling interest in income of VIE		29		—		—				29
Net income attributable to Cubic	$	22,885	$	(6,746)	$	(5,998)			$	10,141
Net income per share:
Basic	$	0.85							$	0.38
Diluted	$	0.85							$	0.38
Weighted average shares used in per share calculations:
Basic		26,872								26,872
Diluted		26,938								26,938

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

1. Basis of Presentation

On May 31, 2018, Cubic completed the previously announced Sale to the Purchaser. At the closing of the Sale, the Purchaser paid Cubic aggregate cash consideration of $135.0 million for the shares of CGD Services, subject to adjustments in respect of, among other things, cash and cash equivalents and the net working capital of CGD Services.  

In March 2018, all of the criteria were met for the classification of CGD Services as discontinued operations. As a result, the assets and liabilities of CGD Services were classified as assets and liabilities of discontinued operations in Cubic’s unaudited condensed consolidated balance sheet as of March 31, 2018 as reported in Item 1 of Form 10-Q for the quarter ended March 31, 2018. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2018, presents pro forma effects of the transaction as if the Sale had occurred on March 31, 2018.

Cubic’s consolidated statements of income (loss) for the fiscal years ended September 30, 2017, 2016, and 2015 as reported in Item 8 of Cubic’s Form 10-K for the year ended September 30, 2017 include the operations of CGD Services as part of Cubic’s continuing operations. The unaudited pro forma condensed consolidated statements of income (loss) for the fiscal years ended September 30, 2017, 2016, and 2015 present the pro forma effects as if the transaction occurred on October 1, 2014. 

The prescribed guidelines limit pro forma adjustments to those that are directly attributable to the disposition on a factually supportable basis. The pro forma effects of cost saving actions that could have been taken by management if the Sale had occurred in prior periods are not reflected in the pro forma condensed consolidated statements of income (loss), nor is any reduction of interest expense reflected for cash proceeds of the Sale that could have been used to pay debt had the Sale occurred in prior periods. 

2. Notes Regarding the Unaudited Pro Forma Adjustments

(A) This adjustment represents the receipt of cash consideration at the closing of the transaction less transaction costs.

(B) These adjustments reflect the elimination of assets and liabilities of CGD Services.  

(C) These adjustments reflect the elimination of sales, costs and expenses of CGD Services.

(D) These adjustments represent allocated corporate overhead costs that had previously been allocated to the CGD Services segment and are included in the adjustments in (C) above. These costs are not considered directly attributable to the disposition on a factually supportable basis, and have therefore been included in Cubic’s pro forma costs.  

(E) This adjustment is necessary to present the Pro Forma provision following ASC 740-270-45-8 guidance, which provides a ‘with and without’ approach for allocating the previously reported income tax (or benefit) between continuing and discontinued operations.

(F) These adjustments are necessary to present the Pro Forma provision following ASC 740-20-45-7 guidance, which provides an ‘exception’ to the general intra period allocation rules used to allocate the previously reported income tax (or benefit) between continuing and discontinued operations.