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 December 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 January 26, 2001, Registrant had only one class of common stock of
which there were 8,906,689 shares outstanding (after deducting 2,981,554
shares held as treasury stock).
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CUBIC CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(amounts in thousands, except per share data)
Three Months Ended
December 31,
2000 1999
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Revenues:
Sales $120,334 $115,398
Other income 3,375 1,504
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123,709 116,902
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Costs and expenses:
Cost of sales 94,493 88,212
Selling, general and
administrative expenses 18,597 19,397
Research and development 2,005 1,328
Goodwill amortization 661 521
Interest 884 917
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116,640 110,375
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Income before income taxes 7,069 6,527
Income taxes 2,400 2,400
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Net income $4,669 $4,127
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Net income per share $0.52 $0.46
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Average shares of common stock
outstanding 8,907 8,907
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SEE ACCOMPANYING NOTES
2
CUBIC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
December 31, September 30,
2000 2000
(Unaudited) (See note below)
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ASSETS
Current assets:
Cash and cash equivalents $ 59,207 $ 69,753
Marketable securities, available-
for-sale 1,496 3,586
Accounts receivable 136,094 123,410
Inventories -- Note 3 25,641 29,499
Deferred income taxes and other
current assets 23,392 23,495
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Total current assets 245,830 249,743
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Property, plant and equipment - net 37,817 38,469
Goodwill, less amortization 22,597 23,193
Other assets 11,265 10,945
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$ 317,509 $ 322,350
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 10,647 $ 18,749
Customer advances 26,022 29,976
Other current liabilities 36,908 36,286
Income taxes payable 7,688 6,265
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Total current liabilities 81,265 91,276
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Long-term debt 50,000 50,000
Deferred compensation 5,446 5,051
Shareholders' equity:
Common stock 234 234
Additional paid-in capital 12,123 12,123
Retained earnings 208,306 203,637
Accumulated other comprehensive loss (3,802) (3,908)
Treasury stock at cost (36,063) (36,063)
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180,798 176,023
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$ 317,509 $ 322,350
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NOTE: THE BALANCE SHEET AT SEPTEMBER 30, 2000 HAS BEEN DERIVED FROM THE
AUDITED FINANCIAL STATEMENTS AT THAT DATE.
SEE ACCOMPANYING NOTES
3
CUBIC CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended
December 31,
2000 1999
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Operating Activities:
Net income $ 4,669 $ 4,127
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,480 2,496
Changes in operating assets and liabilities (16,245) 10,888
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NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (9,096) 17,511
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Investing Activities:
Net additions to property, plant and equipment (1,125) (1,326)
Proceeds from sale of marketable securities 2,310 -
Other items - net (3,044) (194)
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NET CASH USED IN INVESTING ACTIVITIES (1,859) (1,520)
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Financing Activities:
Change in short-term borrowings - (4,747)
Purchases of treasury stock - (6)
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NET CASH USED IN FINANCING ACTIVITIES - (4,753)
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Effect of exchange rates on cash 409 105
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NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (10,546) 11,343
Cash and cash equivalents at the
beginning of the period 69,753 61,540
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CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD $ 59,207 $ 72,883
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SEE ACCOMPANYING NOTES
4
CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
December 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 ending September 30, 2001. 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, 2000.
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.
NOTE 2 - PER SHARE AMOUNTS
Per share amounts are based upon the weighted average number of shares of
common stock outstanding.
NOTE 3 - DERIVATIVE FINANCIAL INSTRUMENTS
The Company adopted Financial Accounting Standards Board Statement No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (SFAS 133)
effective October 1, 2000. Adoption of SFAS 133 has not materially affected
the results of operations or financial position of the Company.
The Company's use of derivative financial instruments is limited to foreign
exchange forward and option contracts used to hedge significant contract
sales and purchase commitments that are denominated in currencies other than
the functional currency of the subsidiary responsible for the commitment.
Gains and losses from hedging activities are recognized when the hedged sale
or purchase commitment is settled and the hedge is closed out. At December
31, 2000, the Company had foreign exchange contracts with a notional value of
$22.6 million outstanding. The net amount of deferred gains and losses at
that date was immaterial.
5
CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)-continued
December 31, 2000
NOTE 4 - INVENTORIES
Inventories consist of the following (in thousands):
December 31, September 30,
2000 2000
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Finished products $ 1,337 $ 1,239
Work in process 14,126 17,699
Raw material and purchased parts 10,178 10,561
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$ 25,641 $ 29,499
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NOTE 5 - COMPREHENSIVE INCOME
Comprehensive income is as follows (in thousands):
Three Months Ended
December 31,
2000 1999
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Net income 4,669 4,127
Foreign currency translation adjustments 570 (1,034)
Unrealized gains on marketable securities:
Unrealized holding gain (loss) arising during the period 445 (27)
Reclassification adjustment for gain included in net income (909) -
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$ 4,775 $ 3,066
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6
CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)-continued
December 31, 2000
NOTE 6 - BUSINESS SEGMENT INFORMATION
Business segment financial data is as follows (in millions):
Three Months Ended
December 31,
2000 1999
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REVENUES:
Transportation systems $ 50.3 $ 52.0
Defense 66.3 59.4
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Total for reportable segments 116.6 111.4
Other revenues 7.1 5.5
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$ 123.7 $ 116.9
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OPERATING PROFIT (LOSS):
Transportation systems $ 4.5 $ 3.3
Defense 0.6 3.2
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Total for reportable segments 5.1 6.5
Other profit 2.9 0.9
Interest expense (0.9) (0.9)
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Income before income taxes $ 7.1 $ 6.5
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NOTE 7 - 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.
7
CUBIC CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
December 31, 2000
RESULTS OF OPERATIONS
Revenues for the first quarter of fiscal 2001 were 6% higher than the first
quarter of fiscal 2000, as the result of increased sales in the defense
segment that offset slightly lower sales in the transportation segment. Other
revenues increased primarily due to a gain of $1.4 million, before applicable
income taxes, realized when the Company sold marketable equity securities.
The increase in defense segment sales for the quarter resulted from
acquisitions made in fiscal 2000 and from growth in the computerized
battlefield simulation business. The 3% decline in transportation systems
sales reflected a 10% decrease in the translation rate of British Pounds to
U.S. Dollars, from the quarter ended December 31, 1999 to the quarter ended
December 31, 2000, rather than a real decline in operating activities of the
segment. This translation difference negatively impacted sales by
approximately $3.3 million, as more than half of the transportation segment's
revenues came from its European operations.
Although this translation difference also negatively impacted operating
profits of the transportation segment by nearly $300 thousand, increased
profits from contracts in North America and the Far East, as well as European
service contracts, improved the profit performance of this segment in the
current year. Defense segment operating profits in the first quarter were
lower than last year, due to legal and consulting costs incurred in the
preparation of a claim for the MILES 2000 contract situation described in
previous reports. In addition, defense segment profits were negatively
impacted by certain costs incurred related to an air combat training range
the Company had hoped to sell to the Australian Ministry of Defence. Although
the Company had previously been selected to perform this work, budgetary
funding issues in the Australian government, which arose during the quarter,
caused the award of the contract to be postponed indefinitely, resulting in
the expensing of pre-contract costs incurred by the Company.
Other profits in the first quarter increased by $2 million over the previous
year as a result of the sale of certain marketable securities at a profit, as
mentioned above, and due to generally higher interest rates earned on the
Company's cash investments in the current year.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities for the quarter resulted in negative cash flow, as
accounts receivable related to certain U.S. government contracts increased.
This increase is expected to turn around in the second quarter of the fiscal
year and generate positive cash flow from operations.
The Company's financial condition remains strong with working capital of
$164.6 million and a current ratio of 3.0 to 1 at December 31, 2000. The
Company expects that cash on hand and its unused debt capacity will be
adequate to meet its working capital requirements for the foreseeable future.
The backlog of orders at December 31, 2000 was $760 million compared to $802
million at September 30, 2000 and $843 million at December 31, 1999.
8
CUBIC CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - continued
December 31, 2000
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.
9
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is included herein:
15--Independent Accountants' Review Report
(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 February 5, 2001 /s/ W. W. Boyle
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W. W. Boyle
Vice President and CFO
Date February 5, 2001 /s/ T. A. Baz
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T. A. Baz
Vice President and Controller
10