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 June 30, 1996
1-8931
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 August 1, 1996, Registrant had only one class of common stock of which
there were 8,981,070 shares outstanding (after deducting 2,907,351 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)
Nine Months Ended Three Months Ended
June 30 June 30
1996 1995 1996 1995
---- ---- ---- ----
Revenues:
Net sales $303,501 $255,970 $98,667 $94,395
Other income 3,986 3,647 1,498 1,255
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307,487 259,617 100,165 95,650
Costs and expenses:
Cost of sales 237,834 197,981 75,165 73,621
Selling, general and
administrative expenses 48,263 44,202 17,441 15,659
Research and development 5,791 7,223 1,687 2,703
Interest 2,215 2,243 350 838
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294,103 251,649 94,643 92,821
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Income before income taxes and
minority interest 13,384 7,968 5,522 2,829
Income taxes 4,800 2,750 1,950 950
Minority interest in income of
subsidiary 796 1,798 436 691
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Net income $ 7,788 $ 3,420 $ 3,136 $ 1,188
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Net income per share $ .87 $ .38 $ .35 $ .13
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Dividends per share $ .1767 $ .1767 $ - $ -
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Average shares of common
stock outstanding 8,981 8,981 8,981 8,981
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See accompanying notes.
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CUBIC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(thousands of dollars)
June 30 September 30
1996 1995
(Unaudited) (See note below)
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ASSETS
Current assets:
Cash and cash equivalents $ 24,729 $ 20,705
Marketable securities, available-for-sale 3,115 3,405
Accounts receivable 135,962 153,582
Inventories -- Note C 15,927 18,995
Deferred income taxes and other current assets 9,912 11,070
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Total current assets 189,645 207,757
Property, plant and equipment - net 36,348 34,711
Toll equipment under operating leases - net - 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 16,412 16,886
Miscellaneous other assets 7,159 9,407
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$269,564 $299,694
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 69,382 $ 79,888
Income taxes payable 2,189 4,172
Current portion of long-term debt 5,000 5,000
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Total current liabilities 76,571 89,060
Long-term debt 15,000 39,000
Deferred income taxes and other 4,829 5,304
Minority interest 7,185 6,465
Shareholders' equity:
Common stock 234 234
Additional paid-in capital 12,123 12,123
Retained earnings 187,866 181,665
Foreign currency translation adjustment (518) (434)
Treasury stock at cost (33,726) (33,723)
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165,979 159,865
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$269,564 $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)
Nine Months Ended
June 30
1996 1995
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Operating Activities:
Net income $ 7,788 $ 3,420
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 7,974 8,271
Minority interest 796 1,798
Changes in operating assets and liabilities 5,203 (19,763)
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NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 21,761 (6,274)
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Investing Activities:
Acquisition of business, net of cash acquired - 14,712
Proceeds from sale of toll collection product line 17,731 -
Sales of marketable securities 290 795
Net additions to property, plant and equipment
and toll equipment under operating leases (8,939) (5,711)
Other items - net (651) 178
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NET CASH PROVIDED BY INVESTING ACTIVITIES 8,431 9,974
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Financing Activities:
Short-term borrowings - 5,000
Long-term borrowings - 5,000
Principal payments on long-term debt (24,000) (5,000)
Purchases of treasury stock (3) -
Dividends paid to minority interest - (1,229)
Dividends paid (1,587) (1,587)
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (25,590) 2,184
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Effect of exchange rates on cash (578) 771
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NET INCREASE IN CASH
AND CASH EQUIVALENTS 4,024 6,655
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 $24,729 $32,437
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See accompanying notes.
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CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 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. All per share amounts have been restated to
reflect a 3-for-2 stock split approved by the shareholders on July 23,
1996, and distributed on August 7, 1996 to shareholders of record on
August 1, 1996.
C. INVENTORIES
June 30 September 30
1996 1995
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Inventories consist of the following:
Finished products $ 2,920 $ 2,846
Work in process 3,863 6,850
Raw material and purchased parts 9,144 9,299
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$15,927 $18,995
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CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--continued
June 30, 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 June 1996, the Company's lawsuit against British Aerospace PLC was
settled and British Aerospace's counterclaim was dropped.
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,
unjust enrichment, 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.
E. 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
June 30, 1996
Sales for the nine month period ended June 30, 1996 increased by 19% over the
same period of the previous year, reflecting higher sales in all segments of the
company. In the third quarter of the fiscal year the most significant increase
in sales was in the defense segment, resulting primarily from increased combat
training systems sales.
Operating profits in the defense segment were higher than in the previous year
for both the three and nine month periods as a result of higher sales volume and
because of reduced expenditures for research and development. The automatic
revenue collection systems segment also produced higher operating profits than
last year, due to higher sales volume and a turnaround in operating
profitability of the toll collection product line which incurred losses in the
quarter and nine months ended June 30, 1995. During the quarter ended June 30,
1996, the company sold its toll collection product line, resulting in a modest
gain, which is included in other income on the consolidated condensed statement
of income. The Company will continue to manufacture toll collection equipment
for the purchaser of the product line, but will no longer be involved in the
sale or leasing of toll collection systems.
For both the three and nine month periods, selling, general and administrative
expenses increased over the level of fiscal 1995 in support of higher sales
volume, however, as a percent of sales decreased from 17% to 16% for the nine
months ended June 30.
As mentioned in Note C to the consolidated condensed financial statements, all
per share amounts have been restated to reflect a 3-for-2 stock split approved
by the shareholders on July 23, 1996, and distributed on August 7, 1996 to
shareholders of record on August 1, 1996
FINANCIAL POSITION AND LIQUIDITY
During the nine month period ended June 30, 1996, operating activities provided
$21.8 million of positive cash flow, resulting largely from collections of
accounts receivable during the period. In addition, the sale of the toll
collection product line during the quarter ended June 30, 1996 generated $17.7
million, which was used primarily to repay the revolving credit line related to
the toll business. In addition, the Company repaid all borrowings under its
revolving credit facility during the third quarter of the fiscal year, as well
as making a scheduled $5 million long-term debt payment.
The Company's financial condition remains strong with working capital of $113.1
million and a current ratio of 2.5 to 1 at June 30, 1996. At that date the
company had only $20 million of long-term debt outstanding, including $5 million
classified as current, while cash and cash equivalents totaled nearly $25
million. The Company expects that cash on hand and available through its line
of credit facility will be adequate to meet its short-term financing needs.
The backlog of orders at June 30, 1996 was $282 million, which reflects a
reduction resulting from the sale of the toll systems business, as compared to
$383 million at September 30, 1995 and $393 million at June 30, 1995.
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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 August 8, 1996 /s/ W. W. Boyle
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W. W. Boyle
Vice President Finance and CFO
Date August 8, 1996 /s/ T. A. Baz
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T. A. Baz
Vice President and Controller
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