<PAGE>
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, 1997
1-8931
Commission File Number
CUBIC CORPORATION
Exact Name of Registrant as Specified in its Charter
DELAWARE 95-1678055
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
--- ---
As of April 30, 1997, Registrant had only one class of common stock of which
there were 8,980,889 shares outstanding (after deducting 2,907,354 shares held
as treasury stock).
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CUBIC CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME (UNAUDITED)
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
March 31 March 31
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Net sales $180,245 $204,834 $96,187 $110,870
Other income 2,994 2,488 1,820 1,322
-------- -------- ------- --------
183,239 207,322 98,007 112,202
Costs and expenses:
Cost of sales 140,493 162,669 75,623 87,974
Selling, general and
administrative expenses 30,096 30,822 16,012 16,880
Research and development 3,072 4,104 1,758 2,121
Interest 858 1,865 439 1,168
-------- -------- ------- --------
174,519 199,460 93,832 108,143
-------- -------- ------- --------
Income before income taxes and minority interest 8,720 7,862 4,175 4,059
Income taxes 3,150 2,850 1,500 1,550
Minority interest in income of subsidiary - 360 - 23
-------- -------- ------- --------
Net income $ 5,570 $ 4,652 $ 2,675 $ 2,486
-------- -------- ------- --------
-------- -------- ------- --------
Net income per share $ .62 $ .52 $ .30 $ .28
-------- -------- ------- --------
-------- -------- ------- --------
Dividends per share $ .19 $ .1767 $ .19 $ .1767
-------- -------- ------- --------
-------- -------- ------- --------
Average shares of common
stock outstanding 8,981 8,981 8,981 8,981
-------- -------- ------- --------
-------- -------- ------- --------
</TABLE>
See accompanying notes.
1
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CUBIC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(thousands of dollars)
<TABLE>
<CAPTION>
March 31 September 30
1997 1996
(Unaudited) (See note below)
----------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 24,438 $ 20,062
Marketable securities, available-for-sale 2,718 2,759
Accounts receivable 132,678 125,750
Inventories -- Note C 17,696 15,233
Deferred income taxes and other current assets 14,336 14,684
-------- --------
Total current assets 191,866 178,488
Property, plant and equipment - net 38,345 38,329
Preferred stock of U. S. Elevator Corp. -- Note D - 20,000
Cost in excess of net tangible assets of
purchased businesses, less amortization 18,116 18,847
Miscellaneous other assets 15,573 10,974
-------- --------
$263,900 $266,638
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 66,414 $ 71,844
Income taxes payable 699 2,564
Current portion of long-term debt 5,000 5,000
-------- --------
Total current liabilities 72,113 79,408
Long-term debt 15,000 15,000
Deferred income taxes and other 4,968 4,563
Shareholders' equity:
Common stock 234 234
Additional paid-in capital 12,123 12,123
Retained earnings 193,293 189,429
Foreign currency translation adjustment (105) (393)
Treasury stock at cost (33,726) (33,726)
-------- --------
171,819 167,667
-------- --------
$263,900 $266,638
-------- --------
-------- --------
</TABLE>
Note: The balance sheet at September 30, 1996 has been derived from the
audited financial statements at that date.
See accompanying notes.
2
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CUBIC CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(thousands of dollars)
Six Months Ended
March 31
1997 1996
---- ----
Operating Activities:
Net income $ 5,570 $ 4,652
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 4,000 5,839
Minority interest - 360
Changes in operating assets and liabilities (32,454) (500)
------- -------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (22,884) 10,351
------- -------
Investing Activities:
Sales of marketable securities 41 290
Proceeds from sale of U. S. Elevator Corp. 31,996 -
Net additions to property, plant and equipment
and toll equipment under operating leases (3,273) (5,644)
Other items - net 443 (917)
------- -------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 29,207 (6,271)
------- -------
Financing Activities:
Credit line borrowings - 5,800
Purchases of treasury stock - (3)
Dividends paid (1,706) (1,587)
------- -------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (1,706) 4,210
------- -------
Effect of exchange rates on cash (241) (402)
------- -------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 4,376 7,888
Cash and cash equivalents at the
beginning of the period 20,062 20,705
------- -------
CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD $24,438 $28,593
------- -------
------- -------
See accompanying notes.
3
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CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1997
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, 1997.
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, 1996.
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.
B. PER SHARE AMOUNTS
Per share amounts are based upon the weighted average number of shares
of common stock outstanding. Prior year per share amounts have been restated
to reflect a 3-for-2 stock split distributed in August 1996.
C. INVENTORIES
March 31 September 30
1997 1996
---- ----
Inventories consist of the following:
Finished products $ 2,776 $ 3,170
Work in process 6,600 3,634
Raw material and purchased parts 8,320 8,429
------- -------
$17,696 $15,233
------- -------
------- -------
4
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CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--continued
March 31, 1997
D. PREFERRED STOCK OF U. S. ELEVATOR CORP.
On December 30, 1996, the Company exercised its option to require
Thyssen Holding Corporation (Thyssen) to purchase from the Company all of the
preferred stock of U.S. Elevator Corp. (USEC). In accordance with the terms
of the agreement, proceeds from the sale of the stock of $20 million were
received by the Company in February 1997.
In addition to the sale of the stock, the agreement provided for
additional consideration to be paid by Thyssen, based on the earnings of USEC
from October 1, 1992 to December 30, 1996. This consideration, amounting to
approximately $12 million, was received on March 31, 1997 and will be used to
offset the costs of certain product liability and warranty obligations which
were incorporated in the original sale agreement. Therefore, no additional
gain or loss has been realized by the Company in connection with this
transaction.
E. SUBSEQUENT EVENT
On April 9, 1997, the Company acquired all of the outstanding capital
shares of Thorn Transit Systems International Limited and Thorn Transit
Korean Holdings Limited, which were wholly-owned subsidiaries of EMI Group
plc, a United Kingdom corporation, for cash in the amount of $12.9 million.
The Company intends that the assets of the acquired companies will continue
to be devoted to the automatic revenue collection systems business.
F. LEGAL MATTER
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.
G. 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.
5
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CUBIC CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
March 31, 1997
Sales for the six month period ended March 31, 1997 were 12% below the same
period of fiscal 1996, primarily because of the sale of the toll collection
product line in May 1996. As a result of the sale of this product line, the
automatic revenue collection systems segment generated lower overall sales
than in the previous year, while the defense segment experienced a moderate
increase in sales.
Operating profits in the automatic revenue collection systems segment for
both the quarter and six months ended March 31, 1997 were lower than the
prior year because of the sale of the toll collection product line. This
product line had contributed operating profits in the second quarter of
fiscal 1996, so its elimination reduced operating profits in the current
year. Operating profits in the first six months of the fiscal year, for the
remaining product lines of this segment, were comparable with the same period
in fiscal 1996.
Operating profits in the defense segment were somewhat lower in the first six
months of the year, than in the previous year, primarily as the result of
cost growth on the contract to develop the new MILES 2000 (Multiple
Integrated Laser Engagement System) technology. This resulted from greater
than expected costs to resolve technical issues in the development of the
system. It is anticipated that this product will be ready for full production
by the end of the fiscal year. The J-STARS Data Link and Personnel Locator
System product lines continued to generate higher profits than in the
previous fiscal year, helping to mitigate the impact of the MILES 2000 cost
issues.
Despite the lower operating profits described above, net income for both the
quarter and six months ended March 31, 1997 was higher than in the
corresponding periods of fiscal 1996. This resulted from of a significant
reduction in interest expense in the first half of fiscal 1997 because of the
repayment of $24 million in long-term debt during the third quarter of fiscal
1996. In addition, during the quarter ended March 31, 1997 the company
realized a modest gain on the sale of its call box product line, which is
included in other income on the consolidated condensed statement of income.
FINANCIAL POSITION AND LIQUIDITY
During the six month period ended March 31, 1997, operating activities used
$23 million in cash, due primarily to growth in long-term contract
receivables, the liquidation of certain customer advances during the period
and the above described cost growth on the MILES 2000 contract. This use of
cash was more than offset by the receipt of $32 million from the exercise of
the company's option to sell its preferred stock in U.S. Elevator Corp. and
obtain additional consideration from the purchaser of the former subsidiary,
as described in note D to the consolidated condensed financial statements.
6
<PAGE>
CUBIC CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- continued
March 31, 1997
The Company's financial condition remains strong with working capital of
$119.8 million and a current ratio of 2.7 to 1 at March 31, 1997. 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 March 31, 1997 was $343 million compared to $313
million at September 30, 1996 and $326 million at March 31, 1996. The backlog
at March 31, 1996 included $46 million of backlog in the toll collection
systems product line, which was sold in May 1996.
Except for historical matters contained herein, statements in this discussion
and analysis are forward-looking and are made pursuant to 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, including economic, competitive, governmental,
technological and other factors.
7
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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 9, 1997 /s/ W. W. Boyle
--------------- -------------------------------
W. W. Boyle
Vice President Finance and CFO
Date May 9, 1997 /s/ T. A. Baz
--------------- -------------------------------
T. A. Baz
Vice President and Controller
8
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EXHIBIT 15 -- INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
Cubic Corporation
We have reviewed the accompanying consolidated condensed balance sheet of
Cubic Corporation as of March 31, 1997, and the related consolidated
condensed statement of income for the three and six-month periods ended March
31, 1997 and 1996, and consolidated condensed statement of cash flows for the
six-month periods ended March 31, 1997 and 1996. These financial statements
are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated condensed financial
statements referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Cubic Corporation as of
September 30, 1996, and the related consolidated statements of income,
retained earnings, and cash flows for the year then ended (not presented
herein) and in our report dated December 4, 1996, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated condensed balance
sheet at September 30, 1996, is fairly stated in all material respects in
relation to the consolidated balance sheet from which it has been derived.
ERNST & YOUNG LLP
May 2, 1997
San Diego, California
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AS OF MARCH 31, 1997 AND THE RELATED
CONSOLIDATED CONDENSED STATEMENT OF INCOME FOR THE SIX MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 24,438
<SECURITIES> 2,718
<RECEIVABLES> 132,678
<ALLOWANCES> 0
<INVENTORY> 17,696
<CURRENT-ASSETS> 191,866
<PP&E> 38,345
<DEPRECIATION> 0
<TOTAL-ASSETS> 263,900
<CURRENT-LIABILITIES> 72,113
<BONDS> 0
0
0
<COMMON> 234
<OTHER-SE> 171,585
<TOTAL-LIABILITY-AND-EQUITY> 163,900
<SALES> 180,245
<TOTAL-REVENUES> 183,239
<CGS> 140,493
<TOTAL-COSTS> 140,493
<OTHER-EXPENSES> 33,168
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 858
<INCOME-PRETAX> 8,720
<INCOME-TAX> 3,150
<INCOME-CONTINUING> 5,570
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,570
<EPS-PRIMARY> .62
<EPS-DILUTED> 0
</TABLE>
