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, 1996
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 April 22, 1996, Registrant had only one class of common stock of which
there were 5,987,384 shares outstanding (after deducting 1,938,230 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)
Six Months Ended Three Months Ended
March 31 March 31
1996 1995 1996 1995
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Revenues:
Net sales $ 204,834 $ 161,575 $ 110,870 $ 91,968
Other income 2,488 2,392 1,332 1,495
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207,322 163,967 112,202 93,463
Costs and expenses:
Cost of sales 162,669 124,360 87,974 72,844
Selling, general and
administrative expenses 30,822 28,543 16,880 15,868
Research and development 4,104 4,520 2,121 2,521
Interest 1,865 1,405 1,168 778
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199,460 158,828 108,143 92,011
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Income before income taxes and
minority interest 7,862 5,139 4,059 1,452
Income taxes 2,850 1,800 1,550 400
Minority interest in income of
subsidiary 360 1,107 23 678
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Net income $ 4,652 $ 2,232 $ 2,486 $ 374
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Net income per share $ .78 $ .37 $ .42 $ .06
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Dividends per share $ .265 $ .265 $ .265 $ .265
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Average shares of common
stock outstanding 5,987 5,987 5,987 5,987
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See accompanying notes.
CUBIC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(thousands of dollars)
March 31 September 30
1996 1995
(Unaudited) (See note below)
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ASSETS
Current assets:
Cash and cash equivalents $ 28,593 $ 20,705
Marketable securities, available-for-sale 3,115 3,405
Accounts receivable 152,374 153,582
Inventories:
Finished products 3,147 2,846
Work in process 4,855 6,850
Raw material and purchased parts 8,654 9,299
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16,656 18,995
Deferred income taxes and other current assets 10,165 11,070
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Total current assets 210,903 207,757
Property, plant and equipment - net 35,503 34,711
Toll equipment under operating leases - net 10,909 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 16,737 16,886
Miscellaneous other assets 8,138 9,407
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$ 302,190 $ 299,694
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 75,252 $ 79,888
Income taxes payable 2,275 4,172
Current portion of long-term debt 5,000 5,000
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Total current liabilities 82,527 89,060
Long-term debt 44,800 39,000
Deferred income taxes and other 5,423 5,304
Minority interest 6,670 6,465
Shareholders' equity:
Common stock 234 234
Additional paid-in capital 12,123 12,123
Retained earnings 184,730 181,665
Foreign currency translation adjustment (591) (434)
Treasury stock at cost (33,726) (33,723)
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162,770 159,865
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$ 302,190 $ 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.
2
CUBIC CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(thousands of dollars)
Six Months Ended
March 31
1996 1995
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Operating Activities:
Net income $ 4,652 $ 2,232
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 5,839 5,392
Minority interest 360 1,107
Undistributed earnings of affiliates - (84)
Changes in operating assets and liabilities (500) (21,514)
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NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 10,351 (12,867)
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Investing Activities:
Sales of marketable securities 290 786
Net additions to property, plant and equipment
and toll equipment under operating leases (5,644) (3,593)
Other items - net (917) 23
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NET CASH USED IN INVESTING ACTIVITIES (6,271) (2,784)
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Financing Activities:
Long-term borrowings 5,800 6,000
Purchases of treasury stock (3) -
Dividends paid (1,587) (1,587)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 4,210 4,413
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Effect of exchange rates on cash (402) 252
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NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 7,888 (10,986)
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 $ 28,593 $ 14,796
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See accompanying notes.
3
CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1996
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.
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.
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.
4
CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--continued
March 31, 1996
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.
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.
In March 1996, the Superior Court dismissed the part of UDT Sensors'
claim dealing with breach of contract. The only remaining claims are ones
for fraud and unjust enrichment.
5
CUBIC CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
March 31, 1996
Sales for the first six months of fiscal 1996 increased by 27% over the same
period of the previous year. Sales continued to be higher in all segments of
the company, with the largest increase in the automatic revenue collection
systems segment. The increase in sales came primarily from the company's major
rail and bus system contracts and from combat training system contracts awarded
to the Company in 1995.
Operating profits in the defense segment were higher for the quarter ended March
31 and for the first six months of 1996, as a result of higher sales volume and
because of reduced expenditures for research and development. The automatic
revenue collection systems segment produced significantly higher operating
profits in the second quarter of the fiscal year, when compared to last year,
due to the non-recurrence of a toll systems loss incurred in the second quarter
of fiscal 1995. This, along with the higher sales volume, also resulted in
higher operating profits for the first six months of the fiscal year.
Selling, general and administrative expenses decreased as a percent of sales
from 18% in the six months ended March 31, 1995, to 15% in the same period of
fiscal 1996, as a result of the increase in sales volume, without the need for
corresponding increases in selling, general and administrative expenses.
FINANCIAL POSITION AND LIQUIDITY
During the six month period ended March 31, 1996, operating activities provided
$10.4 million of positive cash flow, resulting in an increase of cash and cash
equivalents of $7.9 million during the period. Cash was used to purchase
equipment and build toll equipment for lease, as well as pay a dividend to
shareholders. Toll equipment additions were financed by borrowings under the
line of credit facility of the Company's leasing subsidiary.
The Company's financial condition remains strong with working capital of $128.4
million and a current ratio of 2.6 to 1 at March 31, 1996. The Company expects
that cash on hand and available through its line of credit facilities will be
adequate to meet its short-term financing needs.
The backlog of orders was $326 million at March 31, 1996 compared to $383
million at September 30, 1995 and $385 million at March 31, 1995.
6
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 6, 1996 /s/ W. W. Boyle
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W. W. Boyle
Vice President Finance and CFO
Date May 6, 1996 /s/ T. A. Baz
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T. A. Baz
Vice President and Controller