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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, 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 January 27, 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)
Three Months Ended
December 31
1996 1995
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Revenues:
Net sales $84,058 $93,964
Other income 1,174 1,156
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85,232 95,120
Costs and expenses:
Cost of sales 64,870 74,695
Selling, general and
administrative expenses 14,084 13,942
Research and development 1,314 1,983
Interest 419 697
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80,687 91,317
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Income before income taxes and minority
interest 4,545 3,803
Income taxes 1,650 1,300
Minority interest in income of subsidiary - 337
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Net income $ 2,895 $ 2,166
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Net income per share $ .32 $ .24
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Average shares of common
stock outstanding 8,981 8,981
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See accompanying notes.
1
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CUBIC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(thousands of dollars)
December 31 September 30
1996 1996
(Unaudited) (See note below)
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ASSETS
Current assets:
Cash and cash equivalents $ 12,793 $ 20,062
Marketable securities, available-for-sale 2,759 2,759
Accounts receivable 123,733 125,750
Inventories -- Note C 17,332 15,233
Preferred stock of U. S. Elevator Corp.
-- Note D 20,000 -
Deferred income taxes and other current assets 14,184 14,684
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Total current assets 190,801 178,488
Property, plant and equipment - net 38,221 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 18,481 18,847
Miscellaneous other assets 11,079 10,974
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$258,582 $266,638
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current
liabilities $ 59,710 $ 71,844
Income taxes payable 2,706 2,564
Current portion of long-term debt 5,000 5,000
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Total current liabilities 67,416 79,408
Long-term debt 15,000 15,000
Deferred income taxes and other 4,885 4,563
Shareholders' equity:
Common stock 234 234
Additional paid-in capital 12,123 12,123
Retained earnings 192,324 189,429
Foreign currency translation adjustment 326 (393)
Treasury stock at cost (33,726) (33,726)
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171,281 167,667
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$258,582 $ 266,638
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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)
Three Months Ended
December 31
1996 1995
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Operating Activities:
Net income $ 2,895 $ 2,166
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 2,013 2,785
Minority interest - 337
Changes in operating assets and liabilities (10,556) (8,385)
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NET CASH USED IN OPERATING ACTIVITIES (5,648) (3,097)
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Investing Activities:
Sales of marketable securities - 165
Net additions to property, plant and equipment
and toll equipment under operating leases (1,520) (3,845)
Other items - net - (1,394)
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NET CASH USED IN INVESTING ACTIVITIES (1,520) (5,074)
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Financing Activities:
Credit line borrowings - 7,000
Principal payments on credit line - (1,000)
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NET CASH PROVIDED BY FINANCING ACTIVITIES - 6,000
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Effect of exchange rates on cash (101) (71)
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NET DECREASE IN CASH
AND CASH EQUIVALENTS (7,269) (2,242)
Cash and cash equivalents at the
beginning of the period 20,062 20,705
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CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD $12,793 $18,463
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See accompanying notes.
3
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CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
December 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, 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
December 31 September 30
1996 1996
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Inventories consist of the following:
Finished products $ 2,423 $ 3,170
Work in process 5,544 3,634
Raw material and purchased parts 9,365 8,429
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$17,332 $15,233
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4
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CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--continued
December 31, 1996
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
will be received by the Company within 10 days of the Company meeting
certain guarantee obligations under the agreement. This is expected to
occur in February 1997.
In addition to the sale of the stock, the agreement provides for
additional consideration to be paid by Thyssen, based on the earnings of
USEC from October 1, 1992 to December 30, 1996. The exact amount of this
additional payment has not yet been determined nor agreed upon between the
parties, but could exceed $10 million. This additional consideration 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 will be realized by the Company in
connection with this transaction.
E. 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.
F. 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
December 31, 1996
Sales for the first quarter of fiscal 1997 were 10% below the first quarter of
fiscal 1996, primarily because of the sale, in May 1996, of the toll collection
product line. The elimination of this product line resulted in lower overall
sales in the automatic revenue collection systems segment, which were partially
offset by somewhat higher sales in the defense segment.
Operating profits in the automatic revenue collection systems segment for the
quarter ended December 31, 1996 were comparable to the prior year. The toll
collection product line, which was sold, had contributed no operating profit in
the first quarter of fiscal 1996, therefore, its elimination had little impact
on operating profits in the current year.
Operating profits in the defense segment were higher than in the previous year,
for the first quarter, as a result of higher operating profits in product lines
such as the J-STARS Data Link and Personnel Locator Systems, in addition to
reduced research and development expenditures for combat training systems.
However, cost growth on the contract to develop the new MILES 2000 (Multiple
Integrated Laser Engagement System) technology limited the increase in operating
profits in this segment. This cost growth is the result of technical issues in
the development of the system, which management believes have now been resolved
and should not impact the prospects for follow-on production orders and
expansion into international markets.
FINANCIAL POSITION AND LIQUIDITY
During the three month period ended December 31, 1996, operating activities used
$5.6 million in cash, due primarily to the liquidation of certain customer
advances during the period. Normal expenditures for capital equipment used $1.5
million, resulting in a decrease in cash and cash equivalents of $7.3 million.
As described in Note D, the Company should receive in excess of $30 million
during fiscal 1997, related to the sale of its former subsidiary, U. S. Elevator
Corp. The Company expects that this cash payment, along with cash on hand and
available through its line of credit facility, will be adequate to meet its
short-term financing needs.
The Company's financial condition remains strong with working capital of $123.4
million and a current ratio of 2.8 to 1 at December 31, 1996.
The backlog of orders at December 31, 1996 was $320 million compared to $313
million at September 30, 1996 and $358 million at December 31, 1995. The
reduction from December 31, 1995 to December 31, 1996, reflects the sale of the
toll product line.
6
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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 10, 1997 /s/ W. W. Boyle
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W. W. Boyle
Vice President Finance and CFO
Date February 10, 1997 /s/ T. A. Baz
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T. A. Baz
Vice President and Controller
7
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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 December 31, 1996, and the related consolidated condensed
statements of income and cash flows for the three-month periods ended December
31, 1996 and 1995. 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
February 3, 1997
San Diego, California
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AS OF DECEMBER 31, 1996 AND THE RELATED
CONSOLIDATED CONDENSED STATEMENT OF INCOME FOR THE THREE MONTHS THEN ENDED AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 12,793
<SECURITIES> 2,759
<RECEIVABLES> 123,733
<ALLOWANCES> 0
<INVENTORY> 17,332
<CURRENT-ASSETS> 190,801
<PP&E> 38,221
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<TOTAL-ASSETS> 258,582
<CURRENT-LIABILITIES> 67,416
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0
0
<COMMON> 234
<OTHER-SE> 171,047
<TOTAL-LIABILITY-AND-EQUITY> 258,582
<SALES> 84,058
<TOTAL-REVENUES> 85,232
<CGS> 64,870
<TOTAL-COSTS> 64,870
<OTHER-EXPENSES> 15,398
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<INTEREST-EXPENSE> 419
<INCOME-PRETAX> 4,545
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