<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 June 30, 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 August 5, 1997, Registrant had only one class of common stock of which
there were 8,963,173 shares outstanding (after deducting 2,925,070 shares
held as treasury stock).
<PAGE>
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>
Nine Months Ended Three Months Ended
June 30 June 30
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 290,073 $ 303,501 $ 109,828 $ 98,667
Other income 4,869 3,986 1,875 1,498
------------ ------------ ------------ ------------
294,942 307,487 111,703 100,165
Costs and expenses:
Cost of sales 228,605 237,834 88,112 75,165
Selling, general and
administrative expenses 46,653 48,263 16,557 17,441
Research and development 4,838 5,791 1,766 1,687
Interest 1,269 2,215 411 350
------------ ------------ ------------ ------------
281,365 294,103 106,846 94,643
------------ ------------ ------------ ------------
Income before income taxes and
minority interest 13,577 13,384 4,857 5,522
Income taxes 4,750 4,800 1,600 1,950
Minority interest in income of subsidiary - 796 - 436
------------ ------------ ------------ ------------
Net income $ 8,827 $ 7,788 $ 3,257 $ 3,136
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per share $ 0.98 $ 0.87 $ 0.36 $ 0.35
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Dividends per share $ 0.19 $ 0.1767 $ - $ -
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Average shares of common
stock outstanding 8,981 8,981 8,981 8,981
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes.
2
<PAGE>
CUBIC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(thousands of dollars)
<TABLE>
<CAPTION>
June 30 September 30
1997 1996
(Unaudited) (See note below)
---------------- -------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 31,924 $ 20,062
Marketable securities, available-for-sale 2,391 2,759
Accounts receivable 130,745 125,750
Inventories -- Note C 15,679 15,233
Deferred income taxes and other current assets 18,218 14,684
---------------- -------------------
Total current assets 198,957 178,488
Property, plant and equipment - net 39,653 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 29,080 18,847
Miscellaneous other assets 14,509 10,974
---------------- -------------------
$ 282,199 $ 266,638
---------------- -------------------
---------------- -------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,504 $ 11,175
Customer advances 27,367 33,892
Other current liabilities 42,234 26,777
Income taxes payable 3,918 2,564
Current portion of long-term debt 5,000 5,000
---------------- -------------------
Total current liabilities 92,023 79,408
Long-term debt 10,000 15,000
Deferred income taxes and other 5,101 4,563
Shareholders' equity:
Common stock 234 234
Additional paid-in capital 12,123 12,123
Retained earnings 196,550 189,429
Foreign currency translation adjustment 16 (393)
Treasury stock at cost (33,848) (33,726)
---------------- -------------------
175,075 167,667
---------------- -------------------
$ 282,199 $ 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.
3
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CUBIC CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(thousands of dollars)
<TABLE>
<CAPTION>
Nine Months Ended
June 30
1997 1996
---------- ----------
<S> <C> <C>
Operating Activities:
Net income $ 8,827 $ 7,788
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 6,291 7,974
Minority interest - 796
Changes in operating assets and liabilities (12,649) 5,203
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,469 21,761
---------- ----------
Investing Activities:
Sales of marketable securities 368 290
Proceeds from sale of toll collection product line - 17,731
Proceeds from sale of U. S. Elevator Corp. 31,996 -
Acquisition of business, net of cash acquired (11,620) -
Net additions to property, plant and equipment
and toll equipment under operating leases (4,830) (8,939)
Other items - net 685 (651)
---------- ----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 16,599 8,431
---------- ----------
Financing Activities:
Principal payments on long-term debt (5,000) (24,000)
Purchases of treasury stock (122) (3)
Dividends paid (1,706) (1,587)
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (6,828) (25,590)
---------- ----------
Effect of exchange rates on cash (378) (578)
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 11,862 4,024
Cash and cash equivalents at the beginning of the period 20,062 20,705
---------- ----------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 31,924 $ 24,729
---------- ----------
---------- ----------
</TABLE>
See accompanying notes.
4
<PAGE>
CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 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.
C. INVENTORIES
<TABLE>
June 30 September 30
1997 1996
-------------- --------------
<S> <C> <C>
Inventories consist of the following:
Finished products $ 2,257 $ 3,170
Work in process 5,781 3,634
Raw material and purchased parts 7,641 8,429
-------------- --------------
$ 15,679 $ 15,233
-------------- --------------
-------------- --------------
</TABLE>
5
<PAGE>
CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--continued
June 30, 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 has been 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 was realized by the Company in connection with this
transaction.
E. ACQUISITION
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
acquisition has been accounted for by the purchase method, and the assets
and liabilities have been recorded at their estimated fair values at the
date of acquisition. The amount by which the purchase price exceeded the net
book value of tangible assets was approximately $11.5 million and will be
amortized over a period of 15 years using the straight-line method. The
Company intends that 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. In May 1997, the arbitration panel, based in
Switzerland, issued an award in favor of the government of Iran for $2.8
million, plus interest at the rate of 12% per annum, from September 1991
until May of 1997. The Company believes that it has been denied due process
in the arbitration proceeding and is vigorously contesting the basis of the
award. The Company and its outside counsel believe that the award is
unenforceable against the assets of the Company and that the likelihood of
ultimate payment by the Company is remote. Therefore, no provision for this
award has been made in the financial statements.
6
<PAGE>
CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--continued
June 30, 1997
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.
7
<PAGE>
CUBIC CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
June 30, 1997
RESULTS OF OPERATIONS
Sales for the nine month period ended June 30, 1997 were 4% 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 defense segment sales increased by nearly
10%. The increase in defense sales was the result of a new contract awarded
earlier in the year for the production of additional JSTARS Data Link
systems. For the quarter ended June 30, 1997, sales in both the revenue
collection systems and defense segments were higher than the previous year,
resulting in an overall increase of 11%. Defense sales were higher for the
reason described above while revenue collection sales increased due to the
acquisition of Thorn Transit Systems International (TTSI), as described in
note E.
As mentioned in previous quarters, operating profits in the defense segment
continued to be lower than in the previous year for both the three and nine
month periods ended June 30, 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. System integration testing
has been delayed by several months but it is anticipated that the product
will be ready for full production by the end of the calendar year. The
increase in J-STARS Data Link sales described above resulted in higher
profits for this product line than in the previous fiscal year, helping to
mitigate the impact of the MILES 2000 cost issues.
Operating profits in the automatic revenue collection systems segment for
both the quarter and nine months ended June 30, 1997 were lower than in the
prior year because of the disposal of the toll collection product line in May
1996. In the second and third quarters of fiscal 1996, the product line had
produced a profit, prior to its disposal. As a result, overall operating
profits for this segment have been lower in fiscal 1997 without the product
line. However, operating profits for the remaining product lines of the
segment were higher than in 1996, for the third quarter and first nine months
of fiscal 1997.
Despite lower operating profits in the two primary segments described above,
overall operating profits were comparable to last year, primarily because of
increased profits in the industrial operations segment. This increase was due
to a modest gain on the sale of the Company's optical tooling product line in
the third quarter and from the sale of the call box product line in the
second quarter. These gains are included in other income on the consolidated
condensed statement of income. In addition, a reduction in interest expense
in the first nine months of fiscal 1997 contributed to the increase in net
income for the period. This decrease in interest expense resulted from the
repayment of $24 million in long-term debt during the third quarter of fiscal
1996.
8
<PAGE>
CUBIC CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- continued
June 30, 1997
FINANCIAL POSITION AND LIQUIDITY
During the nine month period ended June 30, 1997, operating activities
generated $2.5 million in cash, including $25 million in the quarter ended
June 30. This positive cash flow was the result of large customer payments
received in the quarter, particularly from the New York City Transit
Authority. In addition, the Company received $32 million in the second
quarter from the exercise of its 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. As described in note E, the Company used approximately
$12 million during the third quarter for the acquisition of TTSI.
The Company's financial condition remains strong with working capital of $107
million and a current ratio of 2.2 to 1 at June 30, 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 June 30, 1997 was $368 million compared to $313
million at September 30, 1996 and $282 million at June 30, 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.
9
<PAGE>
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) Registrant filed a Form 8-K as of April 9, 1997 to report the
acquisition of Thorn Transit Systems International Limited and
Thorn Transit Korean Holdings Limited
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 12, 1997 /s/ W. W. Boyle
------------------- --------------------------------
W. W. Boyle
Vice President Finance and CFO
Date August 12, 1997 /s/ T. A. Baz
------------------- --------------------------------
T. A. Baz
Vice President and Controller
10
<PAGE>
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 June 30, 1997, and the related consolidated condensed
statement of income for the three and nine-month periods ended June 30, 1997
and 1996, and consolidated condensed statement of cash flows for the
nine-month periods ended June 30, 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
San Diego, California
August 5, 1997
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED
CONDENSED BALANCE SHEET AS OF JUNE 30, 1997 AND RELATED CONSOLIDATED STATEMENT
OF INCOME FOR THE NINE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 31,924
<SECURITIES> 2,391
<RECEIVABLES> 130,745
<ALLOWANCES> 0
<INVENTORY> 15,679
<CURRENT-ASSETS> 198,957
<PP&E> 39,653
<DEPRECIATION> 0
<TOTAL-ASSETS> 282,199
<CURRENT-LIABILITIES> 92,023
<BONDS> 0
0
0
<COMMON> 234
<OTHER-SE> 174,841
<TOTAL-LIABILITY-AND-EQUITY> 282,199
<SALES> 290,073
<TOTAL-REVENUES> 294,942
<CGS> 228,605
<TOTAL-COSTS> 228,605
<OTHER-EXPENSES> 51,491
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,269
<INCOME-PRETAX> 12,577
<INCOME-TAX> 4,750
<INCOME-CONTINUING> 8,827
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,827
<EPS-PRIMARY> .98
<EPS-DILUTED> 0
</TABLE>
