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UNITED STATES
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, 2000
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 (858) 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 4, 2000, Registrant had only one class of common stock of
which there were 8,906,689 shares outstanding (after deducting 2,981,554
shares held as treasury stock).
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CUBIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
June 30, June 30,
2000 1999 2000 1999
---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Sales $ 393,395 $ 367,691 $ 133,064 $ 129,289
Other income 5,866 3,649 2,587 2,043
--------- --------- --------- ---------
399,261 371,340 135,651 131,332
Costs and expenses:
Cost of sales 310,655 293,963 105,721 107,086
Selling, general and
administrative expenses 59,169 52,342 19,690 15,171
Goodwill amortization 1,674 1,590 634 542
Research and development 4,517 5,639 1,478 1,717
Interest 2,749 3,170 914 1,225
--------- --------- --------- ---------
378,764 356,704 128,437 125,741
--------- --------- --------- ---------
Income before income taxes 20,497 14,636 7,214 5,591
Income taxes 7,100 5,000 2,500 1,850
--------- --------- --------- ---------
Net income $ 13,397 $ 9,636 $ 4,714 $ 3,741
========= ======== ======== ========
Net income per common share $ 1.50 $ 1.08 $ 0.53 $ 0.42
========= ======== ======== ========
Dividends per common share $ 0.19 $ 0.19 $ - $ -
========= ======== ======== ========
Average number of common
shares outstanding 8,907 8,907 8,907 8,907
========= ======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES.
2
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CUBIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
(Unaudited) (See note below)
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 56,848 $ 61,540
Marketable securities, available-for-sale 3,212 1,802
Accounts receivable 147,454 133,252
Inventories - Note 3 32,185 36,400
Deferred income taxes and other current assets 14,008 16,540
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Total current assets 253,707 249,534
Property, plant and equipment - net 40,004 42,976
Goodwill, less amortization 21,957 23,273
Miscellaneous other assets 10,916 14,378
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$326,584 $ 330,161
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ - $ 6,457
Accounts payable 8,647 13,761
Customer advances 24,936 23,460
Salaries and wages, and amounts withheld from
employees' compensation 19,325 17,757
Other current liabilities 23,444 20,219
Income taxes payable 3,475 4,671
Current portion of long-term debt - 5,000
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Total current liabilities 79,827 91,325
Long-term debt 50,000 50,000
Deferred compensation and other 5,140 5,871
Shareholders' equity:
Common stock 234 234
Additional paid-in capital 12,123 12,123
Retained earnings 218,052 206,347
Accumulated other comprehensive income (loss) (2,729) 317
Treasury stock at cost (36,063) (36,056)
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191,617 182,965
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$326,584 $ 330,161
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</TABLE>
Note: The balance sheet at September 30, 1999 has been derived from the audited
financial statements at that date.
SEE ACCOMPANYING NOTES.
3
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CUBIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(thousands of dollars)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
2000 1999
--------------- ---------------
<S> <C> <C>
Operating Activities:
Net income $ 13,397 $ 9,636
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,936 7,481
Changes in operating assets and liabilities (4,928) (7,179)
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NET CASH PROVIDED BY
OPERATING ACTIVITIES 16,405 9,938
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Investing Activities:
Sales of marketable securities - 343
Acquisition of business, net of cash acquired (4,798)
Net additions to property, plant and equipment (3,461) (7,173)
Other items - net - 1,104
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NET CASH USED IN
INVESTING ACTIVITIES (8,259) (5,726)
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Financing Activities:
Change in short-term borrowings (6,220) (18,706)
Change in long-term borrowings (5,000) 45,000
Purchases of treasury stock (7) -
Dividends paid to shareholders (1,692) (1,692)
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (12,919) 24,602
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Effect of exchange rates on cash 81 195
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NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (4,692) 29,009
Cash and cash equivalents at the
beginning of the period 61,540 3,500
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CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD $ 56,848 $ 32,509
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES.
4
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CUBIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 2000
NOTE 1 - 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, 2000. 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, 1999.
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.
NOTE 2 - PER SHARE AMOUNTS
Per share amounts are based upon the weighted average number of shares
of common stock outstanding.
NOTE 3 - ACCOUNTS RECEIVABLE
During the second quarter, the Company revised its estimate to complete
the MILES 2000 program. While this program will not be completed for
nearly two years, the Company's current estimates indicate that costs
at completion will be higher than previously expected. In management's
opinion, based on information currently available, the potential
outcome could range from an unrecognized loss of $25 million, before
applicable income tax benefit, to full recovery. The Company has not
recorded any additional losses at this time, as management believes
there is a reasonable basis for recovery of the additional costs.
5
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CUBIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) -- continued
June 30, 2000
NOTE 4 - INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
--------- -------------
<S> <C> <C>
Finished products $ 1,387 $ 1,515
Work in process 19,574 22,926
Raw material and purchased parts 11,224 11,959
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$32,185 $36,400
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</TABLE>
NOTE 5 - COMPREHENSIVE INCOME
Comprehensive income is as follows (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net income $13,397 $ 9,636 $ 4,714 $ 3,741
Foreign currency translation adjustment (2,896) (2,490) (749) (1,332)
Unrealized holding gain on marketable
securities, net of applicable income taxes 294 - 320 -
------------ ------------ ------------- ------------
$10,795 $ 7,146 $ 4,285 $ 2,409
============ ============ ============= ============
</TABLE>
6
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CUBIC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) -- continued
June 30, 2000
NOTE 6 - BUSINESS SEGMENT INFORMATION
Business segment financial data is as follows (in millions):
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
June 30, June 30,
2000 1999 2000 1999
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Transportation systems $181.3 $197.0 $ 56.6 $ 69.0
Defense 199.9 157.5 72.6 56.3
Software development - 2.1 - 0.2
--------- ---------- ----------- ----------
Total for reportable segments 381.2 356.6 129.2 125.5
Other revenues 12.2 11.1 3.9 3.8
--------- ---------- ----------- ----------
$393.4 $367.7 $133.1 $129.3
========= ========== =========== ==========
Operating profit:
Transportation systems $ 13.3 $ 13.7 $ 4.0 $ 4.1
Defense 7.2 5.4 2.0 2.2
Software development - (3.2) - (1.5)
--------- ---------- ----------- ----------
Total for reportable segments 20.5 15.9 6.0 4.8
Other profit 2.7 1.9 2.1 2.0
Interest expense (2.7) (3.2) (0.9) (1.2)
--------- ---------- ----------- ----------
Income before income taxes $ 20.5 $ 14.6 $ 7.2 $ 5.6
========= ========== =========== ==========
</TABLE>
NOTE 7 - SUBSEQUENT EVENT - ACQUISITION
On July 31, 2000 the Company acquired all the outstanding common shares
of Oscmar International, Ltd. ("OSCMAR"), a New Zealand company, for
approximately $10 million cash. Goodwill resulting from the acquisition
of Oscmar will total approximately $3 million. Oscmar provides tactical
engagement simulation systems for use in military training for
customers throughout the world. Oscmar will be included in the
Company's defense segment.
NOTE 8 - 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
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CUBIC CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
June 30, 2000
RESULTS OF OPERATIONS
Total revenues for the first three quarters of fiscal 2000 were up 7% compared
to 1999, while third quarter revenues increased approximately 3% from the third
quarter of the previous year. The revenue increase came almost entirely from the
defense segment, as the result of combat training systems contracts awarded to
the Company in recent quarters and to increased revenues from its defense
related service businesses. Transportation systems sales were somewhat lower
than in the prior year as certain automatic fare collection systems contracts in
the United Kingdom neared completion. While revenues from the PRESTIGE contract
in London also declined somewhat, this decline is consistent with the planned
level of activity on the contract. Other revenues increased from the prior year
for the first nine months, primarily due to increased investment income
resulting from higher available cash balances.
During the second quarter, the Company revised its estimate to complete MILES
2000, a program in the defense segment. While this program will not be completed
for nearly two years, the Company's current estimates indicate that costs at
completion will be higher than previously expected. The customer has been
advised of this increase in estimated costs and, as the product already
delivered is performing well in the field, is working with the Company to
mitigate its financial impact. In management's opinion, based on information
currently available, the potential outcome could range from an unrecognized loss
of $25 million, before applicable income tax benefit, to full recovery. The
Company has not recorded any additional losses at this time, as management
believes there is a reasonable basis for recovery of the additional costs.
Operating profits in the transportation segment were comparable to the previous
year on somewhat lower sales volume. Operating margins from the PRESTIGE
contract increased modestly as progress continued on the equipment supply phase
of the contract. Mature programs such as the New York City Transit Authority
contract continued to provide a solid base of revenues and operating profits.
The discontinuance of the video email segment, in the fourth quarter of fiscal
1999, accounted for the third quarter and year-to-date segment operating losses,
incurred in fiscal 1999, not being repeated this year.
Selling, general and administrative expenses for the three and nine months ended
June 30, 2000 increased from the comparable periods in the prior year. The
increased spending resulted primarily from selling costs in both the defense and
transportation systems segments as proposal and selling activities related to
new business prospects increased.
8
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CUBIC CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - continued
June 30, 2000
LIQUIDITY AND CAPITAL RESOURCES
The $16 million in cash provided by operating activities for the nine-month
period reflected the profitability of the Company during the period, with only a
moderate increase in operating assets and liabilities. Investing activities
included nearly $5 million used for the acquisition made at the end of the
second quarter, while capital spending was somewhat less than in the previous
year. Financing activities included the repayment of short-term borrowings in
the United Kingdom, in addition to a scheduled payment on long-term borrowings.
The Company's financial condition remains strong with working capital of $171
million and a current ratio of 3.1 to 1 at June 30, 2000. The Company expects
that cash on hand will be adequate to meet its short-term working capital
requirements for the foreseeable future. The backlog of orders at June 30, 2000
was $785 million compared to $907 million at September 30, 1999 and $951 million
at June 30, 1999. The decrease in backlog compared to the previous year is
primarily attributable to ongoing completion of work on the PRESTIGE contract.
FORWARD-LOOKING STATEMENTS
In addition to historical matters, this report contains forward-looking
statements. They can be identified by words such as MAY, LIKELY, ANTICIPATE,
HOPE, ESTIMATE, PLAN, POTENTIAL, FEEL, EXPECT, SHOULD, and CONFIDENT. These
forward-looking statements are made pursuant to the safe harbor provisions of
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. These include the effects of politics on
negotiations and business dealings with government entities, reductions in
defense budgets, economic conditions in the various countries in which the
Company does or hopes to do business, competition and technology changes in the
defense and transportation industries, and other competitive and technological
factors.
9
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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 10, 2000 /s/ W. W. BOYLE
------------------ -----------------
W. W. Boyle
Vice President and CFO
Date August 10, 2000 /s/ T. A. BAZ
---------------- ----------------
T. A. Baz
Vice President and Controller
10
