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, 1995
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 (619) 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
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As of January 30, 1996, Registrant had only one class of common stock of which
there were 5,987,466 shares outstanding (after deducting 1,938,148 shares held
as treasury stock).
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CUBIC CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME (UNAUDITED)
(amounts in thousands, except per share data)
Three Months Ended
December 31
1995 1994
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Revenues:
Net sales $93,964 $69,607
Other income 1,156 897
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95,120 70,504
Costs and expenses:
Cost of sales 74,695 51,516
Selling, general and
administrative expenses 13,942 12,675
Research and development 1,983 1,999
Interest 697 627
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91,317 66,817
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Income before income taxes and minority interest 3,803 3,687
Income taxes 1,300 1,400
Minority interest in income of subsidiary 337 429
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Net income $2,166 $ 1,858
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Net income per share $ .36 $ .31
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Average shares of common
stock outstanding 5,987 5,987
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See accompanying notes.
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CUBIC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(thousands of dollars)
December 31 September 30
1995 1995
(Unaudited) (See note below)
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ASSETS
Current assets:
Cash and cash equivalents $ 18,463 $ 20,705
Marketable securities, available-for-sale 3,240 3,405
Accounts receivable 159,135 153,582
Inventories:
Finished products 3,365 2,846
Work in process 5,009 6,850
Raw material and purchased parts 9,596 9,299
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17,970 18,995
Deferred income taxes and other current assets 9,781 11,070
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Total current assets 208,589 207,757
Property, plant and equipment - net 35,753 34,711
Toll equipment under operating leases - net 11,570 10,933
Preferred stock of U. S. Elevator Corp. 20,000 20,000
Cost in excess of net tangible assets of
purchased businesses, less amortization 17,061 16,886
Miscellaneous other assets 8,831 9,407
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$301,804 $299,694
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 72,381 $ 79,888
Income taxes payable 5,216 4,172
Current portion of long-term debt 5,000 5,000
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Total current liabilities 82,597 89,060
Long-term debt 45,000 39,000
Deferred income taxes and other 5,523 5,304
Minority interest 6,726 6,465
Shareholders' equity:
Common stock 234 234
Additional paid-in capital 12,123 12,123
Retained earnings 183,831 181,665
Foreign currency translation adjustment (507) (434)
Treasury stock at cost (33,723) (33,723)
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161,958 159,865
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$301,804 $299,694
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Note: The balance sheet at September 30, 1995 has been derived from the
audited financial statements at that date.
See accompanying notes.
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CUBIC CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(thousands of dollars)
Three Months Ended
December 31
1995 1994
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Operating Activities:
Net income $ 2,166 $ 1,858
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 2,785 2,506
Minority interest 337 429
Changes in operating assets and liabilities (8,385) (14,778)
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NET CASH USED IN OPERATING ACTIVITIES (3,097) (9,985)
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Investing Activities:
Decrease in marketable securities 165 735
Net additions to property, plant and equipment
and toll equipment under operating leases (3,845) (2,331)
Other items - net (1,394) (59)
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NET CASH USED IN INVESTING ACTIVITIES (5,074) (1,655)
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Financing Activities:
Principal payments on long-term debt (1,000) (1,000)
Long-term borrowing 7,000 -
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 6,000 (1,000)
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Effect of exchange rates on cash (71) (46)
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NET DECREASE IN CASH
AND CASH EQUIVALENTS (2,242) (12,686)
Cash and cash equivalents at the
beginning of the period 20,705 25,782
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CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD $18,463 $13,096
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See accompanying notes.
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CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
December 31, 1995
A. 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, 1996.
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, 1995.
B. PER SHARE AMOUNTS
Per share amounts are based upon the weighted average number of shares
of common stock outstanding.
C. 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.
D. LEGAL MATTERS
In 1991, the government of Iran commenced an arbitration proceeding
against the Company seeking $12.9 million for reimbursement of payments
made for equipment that was to comprise an Air Combat Maneuvering Range
pursuant to a contract executed in 1977, and an additional $15 million for
unspecified damages. The Company believes that Iran defaulted on the
agreement and has brought a counterclaim for compensatory damages of $10.4
million, plus interest. The Company is vigorously contesting Iran's claim
and believes its defenses and counterclaim are strong and that the ultimate
outcome of the matter will not have a material effect on the Company's
financial statements.
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D. LEGAL MATTERS-CONTINUED
In 1993, the Company and its subsidiary, Cubic Defense Systems, Inc.,
filed a lawsuit against British Aerospace PLC in the United States District
Court for the District of Columbia seeking $9.9 million in compensatory
damages, plus interest, and unspecified punitive damages for breach of
contract and fiduciary duty. The suit claims fraudulent misrepresentation
in connection with the construction of an Air Combat Maneuvering Range in
the North Sea. In 1994, British Aerospace PLC filed a counterclaim for $95
million in damages for misrepresentation and breach of fiduciary duty,
which was subsequently reduced to $69.4 million. Discovery on the
allegations of both the original lawsuit and the counterclaim is virtually
complete and trial is currently set for June 3, 1996. The Company believes
the counterclaim is without merit and will not have a material effect on
the Company's financial statements, and is vigorously pursuing its lawsuit.
In July 1995, UDT Sensors, Inc. a potential subcontractor, filed a
lawsuit against Cubic Defense Systems, Inc. in the Superior Court of the
State of California in Los Angeles, alleging breach of a written contract,
fraud and deceit, among other related charges. The lawsuit claims damages
in the amount of $20 million and more according to proof at trial,
exemplary damages in an amount to be determined at trial, pre-judgement
interest and costs of suit. The claims allegedly arise out of a strategic
supplier agreement in which UDT Sensors, Inc. alleges it was to receive a
subcontract to provide certain product if Cubic Defense Systems, Inc. was
selected by the United States Army as the prime contractor for a certain
government program. After winning the prime contract, Cubic Defense
Systems, Inc. was unable to reach a subcontract with UDT Sensors, Inc. and
the lawsuit was filed. Written and deposition discovery has been initiated
but no trial date has yet been set. The Company believes the lawsuit is
without merit and will not have a material effect on the Company's
financial statements, and is vigorously pursuing its defense.
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CUBIC CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
December 31, 1995
Sales for the quarter ended December 31, 1995 increased by 35% over the same
quarter of the previous year. Sales were higher in all segments of the Company,
with the most significant increase coming from the automatic revenue collection
systems segment. Sales in the defense segment were also higher, primarily
because of new combat training systems contracts awarded to the Company in
fiscal 1995.
Operating profits in the automatic revenue collection systems segment were
higher than in the same quarter of last year because of the increase in sales
volume. In accordance with its plan, the defense segment has continued
expenditures for research and development in the first quarter at the same level
as in the previous year. These expenditures are expected to decrease through
the remainder of the fiscal year, which should result in higher operating
margins from this segment in future quarters. The new combat training
contracts, although generating higher sales volume, have not yet begun adding to
the operating profit of this segment because they are in the early phases of
their performance.
Cost of sales increased from 74% to 79% of sales, reflecting lower margins on
certain contracts including the combat training systems contracts mentioned
above. Selling, general and administrative expenses for the quarter increased
moderately over the previous year in support of the higher sales volume,
however, as a percent of sales they decreased from 18% in the first quarter of
fiscal 1995 to 15% in 1996, due to the significant increase in sales.
FINANCIAL POSITION AND LIQUIDITY
The Company's financial condition remains strong with working capital of $126
million and a current ratio of 2.5 to 1 at December 31, 1995. The Company
expects that cash on hand and available through its lines of credit will be
adequate to meet its short-term financing needs.
A net $6 million was borrowed on the Company's lines of credit during the
quarter. Operating activities used $3.1 million, resulting from an increase in
accounts receivable and liquidation of advances from customers during the
quarter. Cash was also used for additions of machinery and equipment and the
construction of toll equipment for lease.
The backlog of orders was $358 million at December 31, 1995 compared to $383
million at September 30, 1995 and $404 million at December 31, 1994.
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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 February 12, 1996 /s/ W. W. Boyle
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W. W. Boyle
Vice President Finance and CFO
Date February 12, 1996 /s/ T. A. Baz
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T. A. Baz
Vice President and Controller
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