<PAGE>
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 December 31, 1999
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 (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 January 26, 2000, Registrant had only one class of common stock of which
there were 8,906,704 shares outstanding (after deducting 2,981,539 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>
Three Months Ended
December 31
1999 1998
--------------- --------------
<S> <C> <C>
Revenues:
Sales $ 115,398 $ 98,758
Other income 1,504 789
--------------- --------------
116,902 99,547
--------------- --------------
Costs and expenses:
Cost of sales 88,212 74,636
Selling, general and
administrative expenses 19,396 17,954
Research and development 1,328 1,586
Goodwill amortization 521 527
Interest 917 779
--------------- --------------
110,374 95,482
--------------- --------------
Income before income taxes 6,527 4,065
Income taxes 2,400 1,400
--------------- --------------
Net income $ 4,127 $ 2,665
=============== ==============
Net income per share $ .46 $ .30
=============== ==============
Average shares of common stock outstanding 8,907 8,907
=============== ==============
</TABLE>
SEE ACCOMPANYING NOTES
2
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CUBIC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
December 31 September 30
1999 1999
(Unaudited) (See note below)
------------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 72,883 $ 61,540
Marketable securities, available-for-sale 1,775 1,802
Accounts receivable 119,581 133,252
Inventories -- Note 3 32,186 36,400
Deferred income taxes and other current assets 14,621 16,540
------------------- -----------------
Total current assets 241,046 249,534
------------------- -----------------
Property, plant and equipment - net 42,181 42,976
Goodwill, less amortization 22,531 23,273
Deferred income taxes and other assets 12,363 14,378
------------------- -----------------
$318,121 $330,161
=================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 1,619 $ 6,457
Trade accounts payable 9,026 13,761
Customer advances 24,348 23,460
Other current liabilities 33,347 37,976
Income taxes payable 3,910 4,671
Current portion of long-term debt 5,000 5,000
------------------- -----------------
Total current liabilities 77,250 91,325
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Long-term debt 50,000 50,000
Deferred income taxes and other liabilities 4,846 5,871
Shareholders' equity:
Common stock 234 234
Additional paid-in capital 12,123 12,123
Retained earnings 210,474 206,347
Accumulated other comprehensive income (loss) (744) 317
Treasury stock at cost (36,062) (36,056)
------------------- -----------------
186,025 182,965
------------------- -----------------
$318,121 $330,161
=================== =================
</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
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
December 31
1999 1998
---------------- ----------------
<S> <C> <C>
Operating Activities:
Net income $ 4,127 $ 2,665
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 2,496 2,514
Changes in operating assets and liabilities 10,888 (34,490)
---------------- ----------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 17,511 (29,311)
---------------- ----------------
Investing Activities:
Net additions to property, plant and equipment (1,326) (2,586)
Other items - net (194) (378)
---------------- ----------------
NET CASH USED IN INVESTING ACTIVITIES (1,520) (2,964)
---------------- ----------------
Financing Activities:
Change in short-term borrowings (4,747) (9,081)
Change in long-term borrowings - 50,000
Purchases of treasury stock (6) -
---------------- ----------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (4,753) 40,919
---------------- ----------------
Effect of exchange rates on cash 105 (33)
---------------- ----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 11,343 8,611
Cash and cash equivalents at the
beginning of the period 61,540 3,500
---------------- ----------------
CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD $72,883 $12,111
================ ================
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 1999
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 - INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31 September 30
1999 1999
------------------- -------------------
<S> <C> <C>
Finished products $ 1,356 $ 1,515
Work in process 16,004 22,926
Raw material and purchased parts 14,826 11,959
------------------- -------------------
$ 32,186 $ 36,400
=================== ===================
</TABLE>
5
<PAGE>
CUBIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)--continued
December 31, 1999
NOTE 4 -- COMPREHENSIVE INCOME
Comprehensive income is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
December 31
1999 1998
--------------- --------------
<S> <C> <C>
Net income $ 4,127 $ 2,665
Foreign currency translation adjustment (1,034) (1,161)
Unrealized holding loss on marketable securities (27) -
--------------- --------------
$ 3,066 $ 1,504
=============== ==============
</TABLE>
NOTE 5 -- BUSINESS SEGMENT INFORMATION
Business segment financial data is as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended
December 31
1999 1998
--------------- --------------
<S> <C> <C>
REVENUES:
Transportation systems $ 52.0 $ 43.0
Defense 59.4 51.9
Software development - 0.5
--------------- --------------
Total for reportable segments 111.4 95.4
Other revenues 5.5 4.1
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$116.9 $ 99.5
=============== ==============
OPERATING PROFIT (LOSS):
Transportation systems $ 3.3 $ 3.0
Defense 3.2 2.6
Software development - (0.9)
--------------- --------------
Total for reportable segments 6.5 4.7
Other profit 0.9 0.2
Interest expense (0.9) (0.8)
--------------- --------------
Income before income taxes $ 6.5 $ 4.1
=============== ==============
</TABLE>
NOTE 6 -- 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.
6
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CUBIC CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
December 31, 1999
RESULTS OF OPERATIONS
Revenues for the first quarter of fiscal 2000 were 17% higher than the first
quarter of fiscal 1999, as the result of higher sales in both the defense and
transportation segments and increased investment income, due to increased cash
available for investment. The increase in sales came primarily from ground
combat training systems in the defense segment and from the PRESTIGE contract in
the transportation segment. The increase in cash available for investment was
the result of nearly $50 million in positive cash flow from operating activities
in fiscal 1999 and another $17.5 million provided by operating activities in the
quarter ended December 31, 1999.
Operating profits in the defense segment increased as the result of the increase
in sales volume and as the result of somewhat higher margins from the JSTARS
product line, which continues to perform well. Operating profits in the
transportation segment also increased due to the increased sales volume,
however, the operating margins contributed by the PRESTIGE contract continue to
be modest as the program is still in its early stages of completion. In
addition, an improvement in operating profits resulted from the Company having
discontinued the video email product line in the fourth quarter of fiscal 1999.
The increase in other profits reflects the higher investment income, as
described above.
For the three-month period, selling, general and administrative expenses
increased modestly, in support of the higher sales volume, but decreased as a
percentage of sales. The increased spending resulted primarily from selling
costs in both the defense and transportation systems segments as proposal
activity related to new business prospects increased.
LIQUIDITY AND CAPITAL RESOURCES
The $17.5 million in cash provided by operating activities resulted primarily
from accelerated collections of accounts receivable in both the defense and
transportation segments. This included the collection of a significant portion
of the amounts related to contract claims in the transportation segment that had
been outstanding for more than a year. The amounts remaining in accounts
receivable subject to contract claims were not significant at December 31, 1999.
The Company's financial condition remains strong with working capital of $164
million and a current ratio of 3.1 to 1 at December 31, 1999. 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
December 31, 1999 was $843 million compared to $907 million at September 30,
1999 and $966 million at December 31, 1998.
7
<PAGE>
CUBIC CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - continued
December 31, 1999
YEAR 2000 ISSUE
The Company has completed its Year 2000 (Y2K) Project as scheduled and the
possibility of significant interruptions of normal operations has been reduced.
As of January 27, 2000, the Company's products, computing, and communications
systems have operated without any significant problems and the Company believes
that its systems have successfully made the Y2K transition. The Company is also
not aware of any of its major customers or third-party suppliers having
experienced significant Y2K related problems. However, there can be no assurance
that the Company has discovered all possible failure points. Factors
contributing to this uncertainty include possible failure to identify all
systems, unprepared third parties whose systems and operations impact the
Company, and other similar uncertainties. Contingency plans are complete and
will be implemented if required.
Through December 31, 1999, the Company expensed approximately $1,000,000 of
incremental Y2K remedial costs, consisting primarily of internal labor. The
Company currently does not expect to incur any significant additional Y2K
related costs, and any such costs will continue to be expensed as incurred.
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.
8
<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) 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 8, 2000 /S/ W. W. BOYLE
------------------- -------------------------------
W. W. Boyle
Vice President Finance and CFO
Date FEBRUARY 8, 2000 /S/ T. A. BAZ
------------------- --------------------------------
T. A. Baz
Vice President and Controller
9
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EXHIBIT 15 - INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors and Shareholders
Cubic Corporation
We have reviewed the accompanying consolidated condensed balance sheet of Cubic
Corporation as of December 31, 1999, and the related consolidated condensed
statements of income and cash flows for the three-month periods ended December
31, 1999 and 1998. 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, 1999 and the related consolidated statements of income, changes in
shareholders' equity and cash flows for the year then ended (not presented
herein) and in our report dated November 29, 1999, 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, 1999, 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
February 8, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999 AND THE RELATED CONSOLIDATED
STATEMENT OF INCOME FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 72,883
<SECURITIES> 1,775
<RECEIVABLES> 119,581
<ALLOWANCES> 0
<INVENTORY> 32,186
<CURRENT-ASSETS> 241,046
<PP&E> 42,181
<DEPRECIATION> 0
<TOTAL-ASSETS> 318,121
<CURRENT-LIABILITIES> 77,250
<BONDS> 0
234
0
<COMMON> 0
<OTHER-SE> 185,791
<TOTAL-LIABILITY-AND-EQUITY> 318,121
<SALES> 115,398
<TOTAL-REVENUES> 116,902
<CGS> 88,212
<TOTAL-COSTS> 88,212
<OTHER-EXPENSES> 21,245
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 917
<INCOME-PRETAX> 6,527
<INCOME-TAX> 2,400
<INCOME-CONTINUING> 4,127
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,127
<EPS-BASIC> 0.46
<EPS-DILUTED> 0
</TABLE>
