UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 2000
1-8931
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Commission File Number
CUBIC CORPORATION
Exact Name of Registrant as Specified in its Charter
Delaware 95-1678055
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State of Incorporation IRS Employer Identification No.
9333 Balboa Avenue
San Diego, California 92123
Telephone (858) 277-6780
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes |X| No |_|
As of May 1, 2000, Registrant had only one class of common stock of which there
were 8,906,704 shares outstanding (after deducting 2,981,539 shares held as
treasury stock).
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CUBIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(amounts in thousands, except per share data)
Six Months Ended Three Months Ended
March 31, March 31,
2000 1999 2000 1999
---------------- ---------------- ----------------- --------------
Revenues:
Sales $260,331 $238,402 $144,933 $139,644
Other income 3,279 1,606 1,775 817
---------------- ---------------- ----------------- --------------
263,610 240,008 146,708 140,461
Costs and expenses:
Cost of sales 204,934 186,877 116,722 112,241
Selling, general and
administrative expenses 39,479 37,171 20,083 19,217
Research and development 3,039 3,922 1,711 2,336
Goodwill amortization 1,040 1,048 519 521
Interest 1,835 1,945 918 1,166
---------------- ---------------- ----------------- --------------
250,327 230,963 139,953 135,481
---------------- ---------------- ----------------- --------------
Income before income taxes 13,283 9,045 6,755 4,980
Income taxes 4,600 3,150 2,200 1,750
---------------- ---------------- ----------------- --------------
Net income $ 8,683 $ 5,895 $ 4,555 $ 3,230
================ ================ ================= ==============
Net income per common share $ 0.97 $ 0.66 $ 0.51 $ 0.36
================ ================ ================= ==============
Dividends per common share $ 0.19 $ 0.19 $ 0.19 $ 0.19
================ ================ ================= ==============
Average shares of common
stock outstanding 8,907 8,907 8,907 8,907
================ ================ ================= ==============
SEE ACCOMPANYING NOTES.
2
CUBIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
March 31 September 30
2000 1999
(Unaudited) (See note below)
--------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 63,353 $ 61,540
Marketable securities, available-for-sale 1,776 1,802
Accounts receivable - Note 4 136,180 133,252
Inventories - Note 5 30,161 36,400
Deferred income taxes and other current assets 14,784 16,540
--------------- ---------------
Total current assets 246,254 249,534
Property, plant and equipment - net 41,613 42,976
Goodwill, less amortization 23,049 23,273
Deferred income taxes and other assets 11,564 14,378
--------------- ---------------
$322,480 $330,161
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ - $ 6,457
Accounts payable 11,281 13,761
Customer advances 21,870 23,460
Salaries and wages, and amounts withheld from
employees' compensation 15,433 17,757
Other current liabilities 24,589 20,219
Income taxes payable 1,813 4,671
Current portion of long-term debt 5,000 5,000
--------------- ---------------
Total current liabilities 79,986 91,325
Long-term debt 50,000 50,000
Deferred income taxes and other liabilities 4,717 5,871
Shareholders' equity:
Common stock 234 234
Additional paid-in capital 12,123 12,123
Retained earnings 213,338 206,347
Accumulated other comprehensive income (loss) (1,856) 317
Treasury stock at cost (36,062) (36,056)
--------------- ---------------
187,777 182,965
--------------- ---------------
$322,480 $330,161
=============== ===============
Note: The balance sheet at September 30, 1999 has been derived from the audited
financial statements at that date.
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CUBIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Six Months Ended
March 31
2000 1999
--------------- ---------------
Operating Activities:
Net income $ 8,683 $ 5,895
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 5,122 5,041
Changes in operating assets and liabilities 2,127 (15,218)
--------------- ---------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 15,932 (4,282)
--------------- ---------------
Investing Activities:
Sales of marketable securities - 343
Acquisiton of business, net of cash acquired (4,615) -
Net additions to property, plant and equipment (2,560) (5,113)
Other items - net (226) (427)
--------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES (7,401) (5,197)
--------------- ---------------
Financing Activities:
Change in short-term borrowings (6,325) (24,930)
Change in long-term borrowings - 50,000
Purchases of treasury stock (6) -
Dividends paid - (1,692)
--------------- ---------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (6,331) 23,378
--------------- ---------------
Effect of exchange rates on cash (387) (245)
--------------- ---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,813 13,654
Cash and cash equivalents at the
beginning of the period 61,540 3,500
--------------- ---------------
CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD $ 63,353 $ 17,154
=============== ===============
SEE ACCOMPANYING NOTES.
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CUBIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 2000
NOTE 1 - BASIS FOR PRESENTATION
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all information and footnotes required by generally accepted
accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the quarter are not necessarily
indicative of the results that may be expected for the year ended
September 30, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's
annual report on Form 10-K for the year ended September 30, 1999.
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Certain prior period amounts have been reclassified to conform to
current period classifications.
NOTE 2 - PER SHARE AMOUNTS
Per share amounts are based upon the weighted average number of shares
of common stock outstanding.
NOTE 3 - ACQUISITION
On March 31, 2000, the Company acquired all of the outstanding shares
of Applied Data Technology, Inc. and its affiliate, ADT Global
Services, Inc., for approximately $4.6 million cash (net of cash
acquired) in a transaction accounted for as a purchase. The acquired
companies provide defense-related products and services including
military simulation and air combat training, as well as operation and
maintenance services, and will be integrated into the Company's defense
segment.
5
CUBIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) -- continued
March 31, 2000
NOTE 4 - ACCOUNTS RECEIVABLE
During the quarter, the Company revised its estimate to complete the
MILES 2000 program. While this program will not be completed for nearly
two years, the Company's current estimates indicate that costs at
completion will be higher than previously expected. In management's
opinion, based on information currently available, the potential
outcome could range from an unrecognized loss of $20 million, before
applicable income tax benefit, to full recovery. The Company has not
recorded any additional losses at this time, as management believes
there is a reasonable basis for recovery of the additional costs.
NOTE 5 - INVENTORIES
Inventories consist of the following (in thousands):
March 31, September 30,
2000 1999
------------------- -------------------
Finished products $ 1,472 $ 1,515
Work in process 16,347 22,926
Raw material and purchased parts 12,342 11,959
------------------- -------------------
$ 30,161 $ 36,400
=================== ===================
NOTE 6 - COMPREHENSIVE INCOME
Comprehensive income is as follows (in thousands):
Six Months Ended Three Months Ended
March 31, March 31,
2000 1999 2000 1999
------------ ------------ ------------- ------------
Net income $ 8,683 $ 5,895 $ 4,555 $ 3,230
Foreign currency translation adjustment (2,147) (2,518) (1,113) (1,357)
Unrealized holding gain (loss)
on marketable securities (26) - 1 -
------------ ------------ ------------- ------------
$ 6,510 $ 3,377 $ 3,443 $ 1,873
============ ============ ============= ============
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CUBIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) -- continued
March 31, 2000
NOTE 7 - BUSINESS SEGMENT INFORMATION
Business segment financial data is as follows (in millions):
Six Months Ended Three Months Ended
March 31, March 31,
2000 1999 2000 1999
------------ ------------ ------------- ------------
Revenues:
Transportation systems $124.7 $128.0 $ 72.7 $ 85.0
Defense 127.3 101.3 67.9 49.4
Software development - 1.8 - 1.3
------------ ------------ ------------- ------------
Total for reportable segments 252.0 231.1 140.6 135.7
Other revenues 11.6 8.9 6.1 4.8
------------ ------------ ------------- ------------
$263.6 $240.0 $146.7 $140.5
============ ============ ============= ============
Operating profit:
Transportation systems $ 9.2 $ 9.5 $ 5.9 $ 6.5
Defense 5.2 3.2 2.0 0.6
Software development - (1.7) - (0.8)
------------ ------------ ------------- ------------
Total for reportable segments 14.4 11.0 7.9 6.3
Other profit 0.7 (0.1) (0.2) (0.3)
Interest expense (1.8) (1.9) (0.9) (1.0)
------------ ------------ ------------- ------------
Income before income taxes $13.3 $ 9.0 $ 6.8 $ 5.0
============ ============ ============= ============
NOTE 8 - REVIEW BY INDEPENDENT ACCOUNTANTS
A review of the data presented was made by Ernst & Young LLP,
independent accountants, in accordance with established professional
standards and procedures, and their report is included herein.
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CUBIC CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
March 31, 2000
RESULTS OF OPERATIONS
Total revenues for the first half of fiscal 2000 were up nearly 10% compared to
1999, while second quarter revenues increased approximately 4% from the second
quarter of the previous year. The revenue increase came almost entirely from the
defense segment, primarily as the result of combat training systems contracts
awarded to the Company in recent quarters. Transportation systems sales were
somewhat lower than in the prior year as certain automatic fare collection
systems contracts in the United Kingdom neared completion. Other revenues
increased from the prior year for the first six months, primarily due to
increased investment income resulting from higher available cash balances.
Positive cash flows in fiscal 1999 and the first quarter of fiscal 2000 provided
the additional cash balances.
During the quarter, the Company revised its estimate to complete MILES 2000, a
program in the defense segment. While this program will not be completed for
nearly two years, the Company's current estimates indicate that costs at
completion will be higher than previously expected. The customer has been
advised of this increase in estimated costs and, as the product already
delivered is performing well in the field, is working with the Company to
mitigate its financial impact. In management's opinion, based on information
currently available, the potential outcome could range from an unrecognized loss
of $20 million, before applicable income tax benefit, to full recovery. The
Company has not recorded any additional losses at this time, as management
believes there is a reasonable basis for recovery of the additional costs.
Operating profits in the transportation segment were comparable to the previous
year on somewhat lower sales volume. Operating margins from the PRESTIGE
contract in London have increased modestly as progress continues on the
equipment supply phase of the contract. Mature programs such as the New York
City Transit Authority contract continue to provide a solid base of revenues and
operating profits.
The discontinuance of the video email segment, in the fourth quarter of fiscal
1999, accounts for the second quarter and year-to-date segment operating losses,
incurred in FY 1999, not being repeated this year.
Selling, general and administrative expenses for the three months ended March
31, 2000 were equivalent to the previous quarter and increased modestly from the
comparable periods in the prior year. The increased spending resulted primarily
from selling costs in both the defense and transportation systems segments as
proposal activity related to new business prospects increased.
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CUBIC CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - continued
March 31, 2000
LIQUIDITY AND CAPITAL RESOURCES
The $15.9 million in cash provided by operating activities resulted primarily
from accelerated collections of accounts receivable in both the defense and
transportation segments. This included the collection of a significant portion
of the amounts related to contract claims in the transportation segment that had
been outstanding for more than a year.
The Company's financial condition remains strong with working capital of $166
million and a current ratio of 3.1 to 1 at March 31, 2000. The Company expects
that cash on hand will be adequate to meet its short-term working capital
requirements for the foreseeable future. The backlog of orders at March 31, 2000
was $837 million compared to $843 million at December 31, 1999 and $970 million
at March 31, 1999. The decrease in backlog compared to the previous year is
primarily attributable to ongoing completion of work on the PRESTIGE contract in
the United Kingdom.
FORWARD-LOOKING STATEMENTS
In addition to historical matters, this report contains forward-looking
statements. They can be identified by words such as MAY, LIKELY, ANTICIPATE,
HOPE, ESTIMATE, PLAN, POTENTIAL, FEEL, EXPECT, SHOULD, and CONFIDENT. These
forward-looking statements are made pursuant to the safe harbor provisions of
the Securities Litigation Reform Act of 1995. Investors are cautioned that
forward-looking statements involve risks and uncertainties which may affect the
Company's business and prospects. These include the effects of politics on
negotiations and business dealings with government entities, reductions in
defense budgets, economic conditions in the various countries in which the
Company does or hopes to do business, competition and technology changes in the
defense and transportation industries, and other competitive and technological
factors.
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PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
15--Independent Accountants' Review Report
27--Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CUBIC CORPORATION
Date May 10, 2000 /s/ W. W. Boyle
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W. W. Boyle
Vice President and CFO
Date May 10, 2000 /s/ T. A. Baz
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T. A. Baz
Vice President and Controller
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