UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
March 19, 2013
Date of Report (date of earliest event reported)
Cubic Corporation
(Exact name of registrant as specified in its charter)
Delaware (State of incorporation or organization) |
1-8931 (Commission File No.) |
95-1678055 (I.R.S. Employer Identification No.) |
||
9333 Balboa Avenue |
||||
San Diego, California (Address of principal executive offices) |
92123 (Zip Code) |
Registrant's telephone number, including area code: (858) 277-6780
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
This Current Report on Form 8-K is being filed by Cubic Corporation (the "Company") in connection with the filing of a Registration Statement on Form S-8 relating to shares of the Company's common stock that may be issued under the Company's equity incentive plan, for the purpose of reflecting the retrospective adoption of the Financial Accounting Standards Board Accounting Standards Update ("ASU") No. 2011-05, Presentation of Comprehensive Income (the "Updated Standards"), with respect to its audited consolidated financial statements as of September 30, 2012, September 30, 2011 (restated), September 30, 2010 (restated) and September 30, 2009 (restated) and for each of the years then ended. Such financial statements are consistent with the financial statements for such periods included in the Company's Annual Report on Form 10-K for the year ended September 30, 2012, filed with the Securities and Exchange Commission on December 14, 2012, except (i) the report of Ernst & Young LLP accompanying such financial statements has been reissued to reflect the retrospective adoption of the Updated Standards and (ii) the financial statements and accompanying notes have been updated to reflect the retrospective adoption of the Updated Standards, to clarify certain disclosures in "Note 1Summary of Significant Accounting Policies" and to include an unaudited footnote describing certain events that occurred subsequent to the Company's fiscal year end.
Item 9.01. Financial Statements and Exhibits.
Exhibit Number |
Description of Exhibit | ||
---|---|---|---|
23.1 | Consent of Independent Registered Public Accounting Firm. | ||
99.1 |
Audited Consolidated Financial Statements of Cubic Corporation. |
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101.INS |
XBRL Instance Document. |
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101.SCH |
XBRL Taxonomy Extension Schema Document. |
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101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB |
XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document. |
2
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 hereunto duly authorized.
Date: March 19, 2013 |
CUBIC CORPORATION | |||||||
|
By: |
/s/ James R. Edwards |
||||||
|
Name: | James R. Edwards | ||||||
|
Title: | Senior Vice President, General Counsel & Secretary |
3
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-127493) pertaining to the Cubic Corporation Employees' Profit Sharing Plan, the Cubic Applications, Inc. 401(k) Retirement Plan and the Cubic Corporation 1998 Stock Option Plan of our report dated December 14, 2012 (except for the retrospective adoption of amendments to the accounting standard relating to the reporting and display of comprehensive income as described in Note 1, as to which the date is February 25, 2013) with respect to the consolidated financial statements of Cubic Corporation included in this Current Report (Form 8-K) to be filed on or about March 19, 2013.
/s/ Ernst & Young LLP
San
Diego, California
March 18, 2013
Report of independent registered public accounting firm
The Board of Directors and Shareholders of Cubic Corporation
We have audited the accompanying consolidated balance sheets of Cubic Corporation as of September 30, 2012, September 30, 2011 (restated), September 30, 2010 (restated) and September 30, 2009 (restated), and the related consolidated statements of income, comprehensive income, cash flows and changes in shareholders' equity for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cubic Corporation at September 30, 2012, September 30, 2011 (restated), September 30, 2010 (restated) and September 30, 2009 (restated), and the consolidated results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, Cubic Corporation has restated previously issued financial statements as of September 30, 2011, September 30, 2010 and September 30, 2009, and for the years then ended.
As discussed in Note 1 to the consolidated financial statements, Cubic Corporation changed its method of accounting for revenue recognition with the adoption of amendments to the Financial Accounting Standards Board Accounting Standards Codification resulting from Accounting Standards Update No. 2010-13, Multiple-Deliverable Revenue Arrangements, and Accounting Standards Update No. 2010-14, Certain Revenue Arrangements That Include Software Elements, both adopted effective October 1, 2009.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Cubic Corporation's internal control over financial reporting as of September 30, 2012, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 14, 2012 expressed an adverse opinion thereon.
/s/ Ernst & Young LLP |
San Diego, California
December 14, 2012,
except for the retrospective adoption of amendments to the accounting standard relating to the
reporting and display of comprehensive income as described in Note 1, as to which the date is
February 25, 2013
F-2
Cubic Corporation
Consolidated statements of income
|
Years ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(amounts in thousands, except per share data) |
|||||||||||||
2012 |
2011 |
2010 |
2009 |
||||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
Net sales: |
|||||||||||||
Products |
$ | 663,287 | $ | 600,933 | $ | 607,756 | $ | 508,167 | |||||
Services |
718,208 | 694,648 | 590,436 | 517,757 | |||||||||
|
1,381,495 | 1,295,581 | 1,198,192 | 1,025,924 | |||||||||
Costs and expenses: |
|||||||||||||
Products |
451,573 | 418,279 | 430,417 | 378,052 | |||||||||
Services |
594,662 | 564,062 | 511,014 | 418,292 | |||||||||
Selling, general and administrative expenses |
163,688 | 159,791 | 124,306 | 119,108 | |||||||||
Research and development |
28,722 | 25,260 | 18,976 | 8,173 | |||||||||
Amortization of purchased intangibles |
14,828 | 14,681 | 6,846 | 6,432 | |||||||||
|
1,253,473 | 1,182,073 | 1,091,559 | 930,057 | |||||||||
Operating income |
128,022 | 113,508 | 106,633 | 95,867 | |||||||||
Other income (expense): |
|||||||||||||
Interest and dividend income |
2,994 | 2,568 | 1,590 | 1,664 | |||||||||
Interest expense |
(1,550 | ) | (1,461 | ) | (1,755 | ) | (2,031 | ) | |||||
Other incomenet |
821 | 1,662 | 3,637 | 661 | |||||||||
Income before income taxes |
130,287 | 116,277 | 110,105 | 96,161 | |||||||||
Income taxes |
38,183 | 32,373 | 38,011 | 33,016 | |||||||||
Net income |
92,104 | 83,904 | 72,094 | 63,145 | |||||||||
Less noncontrolling interest in income of VIE |
204 | 310 | | | |||||||||
Net income attributable to Cubic |
$ | 91,900 | $ | 83,594 | $ | 72,094 | $ | 63,145 | |||||
Basic and diluted net income per common share |
$ | 3.44 | $ | 3.13 | $ | 2.70 | $ | 2.36 | |||||
Average number of common shares outstanding |
26,736 | 26,736 | 26,735 | 26,731 | |||||||||
See accompanying notes.
F-3
Cubic Corporation
Consolidated statements of comprehensive income
|
Years ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
Net income |
$ | 92,104 | $ | 83,904 | $ | 72,094 | $ | 63,145 | |||||
Other comprehensive income (loss): |
|||||||||||||
Adjustment to pension liability, net of taxes |
(5,585 | ) | (3,285 | ) | (2,713 | ) | (15,991 | ) | |||||
Foreign currency translation |
10,688 | (1,250 | ) | (868 | ) | (5,059 | ) | ||||||
Net unrealized gain (loss) from cash flow hedges |
242 | (5,618 | ) | 1,483 | 112 | ||||||||
Total other comprehensive income (loss) |
5,345 | (10,153 | ) | (2,098 | ) | (20,938 | ) | ||||||
Total comprehensive income |
$ | 97,449 | $ | 73,751 | $ | 69,996 | $ | 42,207 | |||||
See accompanying notes.
F-4
Cubic Corporation
Consolidated balance sheets
|
September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
ASSETS |
|||||||||||||
Current assets: |
|||||||||||||
Cash and cash equivalents |
$ | 212,267 | $ | 329,148 | $ | 295,434 | $ | 244,074 | |||||
Restricted cash |
68,749 | | | | |||||||||
Short-term investments |
| 25,829 | 84,081 | 8,127 | |||||||||
Accounts receivable: |
|||||||||||||
Trade and other receivables |
17,543 | 20,259 | 11,594 | 12,833 | |||||||||
Long-term contracts |
333,617 | 207,426 | 201,898 | 222,709 | |||||||||
Allowance for doubtful accounts |
(463 | ) | (395 | ) | (663 | ) | (4,558 | ) | |||||
|
350,697 | 227,290 | 212,829 | 230,984 | |||||||||
Recoverable income taxes |
7,083 |
24,917 |
6,810 |
249 |
|||||||||
Inventories |
52,366 | 38,359 | 40,653 | 57,605 | |||||||||
Deferred income taxes |
7,587 | 9,483 | 14,290 | 20,191 | |||||||||
Prepaid expenses and other current assets |
13,977 | 21,080 | 26,127 | 29,957 | |||||||||
Total current assets |
712,726 | 676,106 | 680,224 | 591,187 | |||||||||
Long-term contract receivables |
22,070 |
23,700 |
28,080 |
13,400 |
|||||||||
Long-term capitalized contract costs |
26,875 | | | | |||||||||
Property, plant and equipmentnet |
55,327 | 48,467 | 47,469 | 48,895 | |||||||||
Deferred income taxes |
16,364 | 12,824 | 19,288 | 14,504 | |||||||||
Goodwill |
146,933 | 146,355 | 64,142 | 59,433 | |||||||||
Purchased intangiblesnet |
39,374 | 54,139 | 26,295 | 28,618 | |||||||||
Miscellaneous other assets |
6,648 | 4,933 | 6,021 | 7,536 | |||||||||
Total assets |
$ |
1,026,317 |
$ |
966,524 |
$ |
871,519 |
$ |
763,573 |
|||||
See accompanying notes.
F-5
Cubic Corporation
Consolidated balance sheets (Continued)
|
September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||||||||
Current liabilities: |
|||||||||||||
Trade accounts payable |
$ | 47,917 | $ | 43,984 | $ | 39,085 | $ | 32,542 | |||||
Customer advances |
100,764 | 134,316 | 98,515 | 83,978 | |||||||||
Accrued compensation |
52,680 | 49,513 | 48,994 | 49,134 | |||||||||
Other current liabilities |
55,988 | 57,006 | 61,091 | 59,644 | |||||||||
Income taxes payable |
20,733 | 18,716 | 27,219 | 12,099 | |||||||||
Current maturities of long-term debt |
4,561 | 4,541 | 4,545 | 4,554 | |||||||||
Total current liabilities |
282,643 | 308,076 | 279,449 | 241,951 | |||||||||
Long-term debt |
6,942 |
11,377 |
15,949 |
20,570 |
|||||||||
Accrued pension liability |
46,382 | 41,166 | 39,855 | 33,762 | |||||||||
Deferred compensation |
8,619 | 7,884 | 8,508 | 7,902 | |||||||||
Income taxes payable |
4,862 | 12,129 | 9,961 | 11,001 | |||||||||
Other non-current liabilities |
6,527 | 6,582 | 4,748 | | |||||||||
Commitments and contingencies |
|||||||||||||
Shareholders' equity: |
|||||||||||||
Preferred stock, no par value: |
|||||||||||||
Authorized5,000 shares |
|||||||||||||
Issued and outstandingnone |
| | | | |||||||||
Common stock, no par value: |
|||||||||||||
Authorized50,000 shares |
|||||||||||||
2012, 2011 and 2010Issued 35,682 shares, outstanding26,736 shares |
|||||||||||||
2009Issued 35,677 shares, outstanding26,732 shares |
12,574 | 12,574 | 12,574 | 12,530 | |||||||||
Retained earnings |
715,043 | 629,560 | 553,452 | 486,170 | |||||||||
Accumulated other comprehensive loss |
(21,148 | ) | (26,493 | ) | (16,340 | ) | (14,242 | ) | |||||
Treasury stock at cost8,945 shares |
(36,078 | ) | (36,078 | ) | (36,074 | ) | (36,071 | ) | |||||
Shareholders' equity attributable to Cubic |
670,391 | 579,563 | 513,612 | 448,387 | |||||||||
Noncontrolling interest in variable interest entity |
(49 | ) | (253 | ) | (563 | ) | | ||||||
Total shareholders' equity |
670,342 | 579,310 | 513,049 | 448,387 | |||||||||
Total liabilities and shareholders' equity |
$ |
1,026,317 |
$ |
966,524 |
$ |
871,519 |
$ |
763,573 |
|||||
See accompanying notes.
F-6
Cubic Corporation
Consolidated statements of cash flows
|
Years ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
Operating Activities: |
|||||||||||||
Net income |
$ | 92,104 | $ | 83,904 | $ | 72,094 | $ | 63,145 | |||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|||||||||||||
Depreciation and amortization |
22,857 | 22,341 | 14,469 | 15,586 | |||||||||
Deferred income taxes |
(1,486 | ) | 2,512 | 1,130 | 5,320 | ||||||||
Provision for doubtful accounts |
| | (3,889 | ) | 3,038 | ||||||||
Changes in operating assets and liabilities, net of effects from acquisitions: |
|||||||||||||
Accounts receivable |
(118,164 | ) | 3,566 | 25,225 | 41,077 | ||||||||
Inventories |
(13,636 | ) | 2,442 | 17,304 | (7,734 | ) | |||||||
Prepaid expenses and other current assets |
7,574 | 5,122 | 4,167 | 5,751 | |||||||||
Long-term capitalized contract costs |
(26,875 | ) | | | | ||||||||
Accounts payable and other current liabilities |
8,525 | (1,547 | ) | (24,141 | ) | 15,083 | |||||||
Customer advances |
(37,999 | ) | 37,143 | 18,462 | 34,619 | ||||||||
Income taxes |
11,929 | (23,713 | ) | (13,628 | ) | (675 | ) | ||||||
Other itemsnet |
494 | (2,676 | ) | 3,799 | 1,614 | ||||||||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
(54,677 | ) | 129,094 | 114,992 | 176,824 | ||||||||
Investing Activities: |
|||||||||||||
Acquisition of businesses, net of cash acquired |
| (126,825 | ) | (8,250 | ) | (19,965 | ) | ||||||
Consolidation of variable interest entity |
| | 38,264 | | |||||||||
Proceeds from sales or maturities of short-term investments |
25,829 | 58,252 | 82,992 | | |||||||||
Purchases of short-term investments |
| | (158,946 | ) | (8,127 | ) | |||||||
Purchases of property, plant and equipment |
(14,226 | ) | (8,728 | ) | (6,878 | ) | (5,332 | ) | |||||
Other itemsnet |
| | | 41 | |||||||||
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |
11,603 | (77,301 | ) | (52,818 | ) | (33,383 | ) | ||||||
Financing Activities: |
|||||||||||||
Principal payments on long-term debt |
(4,549 | ) | (4,555 | ) | (4,541 | ) | (5,970 | ) | |||||
Proceeds from issuance of common stock |
| | 44 | 45 | |||||||||
Purchases of treasury stock |
| (4 | ) | (3 | ) | | |||||||
Net change in restricted cash |
(68,584 | ) | | | | ||||||||
Dividends paid to shareholders |
(6,417 | ) | (7,486 | ) | (4,812 | ) | (4,811 | ) | |||||
NET CASH USED IN FINANCING ACTIVITIES |
(79,550 | ) | (12,045 | ) | (9,312 | ) | (10,736 | ) | |||||
Effect of exchange rates on cash |
5,743 |
(6,034 |
) |
(1,502 |
) |
(1,327 |
) |
||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
(116,881 |
) |
33,714 |
51,360 |
131,378 |
||||||||
Cash and cash equivalents at the beginning of the year |
329,148 |
295,434 |
244,074 |
112,696 |
|||||||||
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR |
$ |
212,267 |
$ |
329,148 |
$ |
295,434 |
$ |
244,074 |
|||||
See accompanying notes
F-7
Cubic Corporation
Consolidated statements of changes in shareholders' equity
(in thousands except per share amounts) |
Common stock |
Retained earnings |
Accumulated other comprehensive income (loss) |
Treasury stock |
Noncontrolling interest in VIE |
Number of shares outstanding |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
September 30, 2008 (previously reported) |
$ | 12,485 | $ | 404,868 | $ | 7,570 | $ | (36,071 | ) | $ | | 26,727 | |||||||
Adjustments to opening shareholders' equity |
|
22,968 |
(874 |
) |
|
|
|
||||||||||||
September 30, 2008 (as restated) |
$ | 12,485 | $ | 427,836 | $ | 6,696 | $ | (36,071 | ) | $ | | 26,727 | |||||||
Net income (as restated) |
|
63,145 |
|
|
|
|
|||||||||||||
Other comprehensive loss |
| | (20,938 | ) | | | | ||||||||||||
Stock issued under equity incentive plan |
45 | | | | | 5 | |||||||||||||
Cash dividends paid$.18 per share of common stock |
| (4,811 | ) | | | | | ||||||||||||
September 30, 2009 (as restated) |
12,530 | 486,170 | (14,242 | ) | (36,071 | ) | | 26,732 | |||||||||||
Net income (as restated) |
|
72,094 |
|
|
|
|
|||||||||||||
Other comprehensive loss |
| | (2,098 | ) | | | | ||||||||||||
Consolidation of variable interest entity |
| | | | (563 | ) | | ||||||||||||
Stock issued under equity incentive plan |
44 | | | | | 4 | |||||||||||||
Purchase of treasury stock |
| | | (3 | ) | | | ||||||||||||
Cash dividends paid$.18 per share of common stock |
| (4,812 | ) | | | | | ||||||||||||
September 30, 2010 (as restated) |
12,574 | 553,452 | (16,340 | ) | (36,074 | ) | (563 | ) | 26,736 | ||||||||||
Net income (as restated) |
|
83,594 |
|
|
310 |
|
|||||||||||||
Other comprehensive loss |
| | (10,153 | ) | | | | ||||||||||||
Purchase of treasury stock |
| | | (4 | ) | | | ||||||||||||
Cash dividends paid$.28 per share of common stock |
| (7,486 | ) | | | | | ||||||||||||
September 30, 2011 (as restated) |
12,574 | 629,560 | (26,493 | ) | (36,078 | ) | (253 | ) | 26,736 | ||||||||||
Net income |
|
91,900 |
|
|
204 |
|
|||||||||||||
Other comprehensive income |
| | 5,345 | | | | |||||||||||||
Cash dividends paid$.24 per share of common stock |
| (6,417 | ) | | | | | ||||||||||||
September 30, 2012 |
$ | 12,574 | $ | 715,043 | $ | (21,148 | ) | $ | (36,078 | ) | $ | (49 | ) | 26,736 | |||||
See accompanying notes.
F-8
Cubic Corporation
Notes to consolidated financial statements
September 30, 2012
Note 1Summary of significant accounting policies
Organization and nature of the business: We design, develop and manufacture products which are mainly electronic in nature, provide government services and services related to products previously produced by us and others. Our principal lines of business are defense systems, defense services and transportation fare collection systems and services. Our principal customers for defense products and services are the United States and foreign governments. Our transportation fare collection systems and services are sold primarily to large local government agencies worldwide.
Principles of consolidation: The consolidated financial statements include the accounts of Cubic Corporation, its majority-owned subsidiaries and, as of March 5, 2010, its 50% owned variable interest entity, Transaction Systems Limited (TranSys). We consolidate variable interest entities (VIE) when we determine that Cubic is the primary beneficiary of the VIE. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidation of foreign subsidiaries requires translation of their assets and liabilities into U.S. dollars at year-end exchange rates. We translate our statements of income and cash flows at the average exchange rates for each year. Transaction gains on advances to foreign subsidiaries amounted to $1.1 million, $0.1 million, $0.8 million and $1.8 million in 2012, 2011, 2010 and 2009, respectively.
Cash equivalents: We consider highly liquid investments with maturity of three months or less when purchased to be cash equivalents.
Restricted cash: Restricted cash represents cash that is restricted as to withdrawal usage for legal or contractual reasons. Restricted cash is classified either as current or non-current, depending upon the date of the availability.
Concentration of credit risk: We have established guidelines pursuant to which our cash and cash equivalents are diversified among various money market instruments and investment funds. These guidelines emphasize the preservation of capital by requiring minimum credit ratings assigned by established credit organizations. We achieve diversification by specifying maximum investments in each instrument type and issuer. The majority of these investments are not on deposit in federally insured accounts.
Short-term investments: Short-term investments include marketable U.S. government agency securities and pre-refunded tax exempt bonds that may be purchased at a discount or premium, may have callable options, and are categorized as available-for-sale securities. We record short-term investments at fair value and we record any net differences between fair market value and cost in accumulated other comprehensive income (loss) on the consolidated balance sheets.
Accounts receivable: Receivables consist primarily of amounts due from U.S. and foreign governments for defense products and services and local government agencies for transportation systems. Due to the nature of our customers, we generally do not require
F-9
collateral. We have limited exposure to credit risk as we have historically collected substantially all of our receivables from government agencies. We generally require no allowance for doubtful accounts for these customers.
Inventories: We state our inventories at the lower of cost or market. We determine cost using the first-in, first-out (FIFO) method, which approximates current replacement cost. We value our work in process at the actual production and engineering costs incurred to date, including applicable overhead. For contracts with the U.S. government our work in process also includes general and administrative costs. Any inventoried costs in excess of estimated realizable value are immediately charged to cost of sales. Where contracts include advances, performance-based payments and progress payments, we reflect the advances as an offset against any related inventory balances.
Long-term capitalized contract costs: Long-term capitalized contract costs include costs incurred on a contract to develop and manufacture a transportation fare system for a customer for which revenue will not be recognized until delivery of the system.
Property, plant and equipment: We carry property, plant and equipment at cost. We provide depreciation in amounts sufficient to amortize the cost of the depreciable assets over their estimated useful lives. Generally, we use straight-line methods for depreciable real property over estimated useful lives or the term of the underlying lease for leasehold improvements. We use accelerated methods (declining balance and sum-of-the-years-digits) for machinery and equipment over their estimated useful lives.
Goodwill and purchased intangibles: We evaluate goodwill for potential impairment annually as of July 1, or when circumstances indicate that the carrying value may not be recoverable. The test is performed by comparing the fair value of a reporting unit to its carrying value, including recorded goodwill. If the carrying value exceeds the fair value, we would measure impairment by comparing the implied fair value of goodwill to its carrying value, and any impairment determined would be recorded in the current period. To date there has been no impairment of our recorded goodwill. Our purchased intangible assets are subject to amortization and we use a combination of straight-line and accelerated methods, based on the expected cash flows from the assets.
Impairment of long-lived assets: We generally evaluate the carrying values of long-lived assets other than goodwill for impairment only if events or changes in facts and circumstances indicate that carrying values may not be recoverable. If we determined there was any impairment, we would measure it by comparing the fair value of the related asset to its carrying value and record the difference in the current period. Fair value is generally determined by identifying estimated discounted cash flows to be generated by those assets. We have not recorded any material impairments for the years ended September 30, 2012, 2011, 2010 and 2009.
Customer advances: We receive advances, performance-based payments and progress payments from customers that may exceed revenues recognized on certain contracts, including contracts with agencies of the U.S. government. We classify such advances, other than those reflected as a reduction of receivables or inventories, as current liabilities.
Contingencies: We establish reserves for loss contingencies when, in the opinion of management, the likelihood of liability is probable and the extent of such liability is reasonably
F-10
estimable. Estimates, by their nature, are based on judgment and currently available information and involve a variety of factors, including the type and nature of the litigation, claim or proceeding, the progress of the matter, the advice of legal counsel, our defenses and our experience in similar cases or proceedings as well as our assessment of matters, including settlements, involving other defendants in similar or related cases or proceedings. We may increase or decrease our legal reserves in the future, on a matter-by-matter basis, to account for developments in such matters.
Derivative financial instruments: All derivatives are recorded at fair value, however, the classification of gains and losses resulting from changes in the fair values of derivatives are dependent on the intended use of the derivative and its resulting designation. If a derivative is designated as a fair value hedge, then a change in the fair value of the derivative is offset against the change in the fair value of the underlying hedged item and only the ineffective portion of the hedge, if any, is recognized in cost of sales. If a derivative is designated as a cash flow hedge, then the effective portion of a change in the fair value of the derivative is recognized as a component of accumulated other comprehensive income until the underlying hedged item is recognized in cost of sales, or the forecasted transaction is no longer probable of occurring. If a derivative does not qualify as a highly effective hedge, a change in fair value is immediately recognized in earnings. We formally document hedging relationships for all derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transactions.
Defined benefit pension plans: Some of our employees are covered by defined benefit pension plans. The net periodic cost of our plans is determined using several actuarial assumptions, the most significant of which are the discount rate and the long-term rate of return on plan assets. We recognize on a plan-by-plan basis the funded status of our defined benefit pension plans as either an asset or liability on our balance sheets, with a corresponding adjustment to accumulated other comprehensive income (loss), net of tax, in shareholders' equity. The funded status is measured as the difference between the fair value of the plan assets and the benefit obligation of the plan.
Revenue recognition: We generate revenue from the sale of products such as mass transit fare collection systems, air and ground combat training systems, and secure communications products. We provide services such as specialized military training exercises, including live, virtual and constructive training exercises and support, and we operate and maintain fare systems for mass transit customers. We classify sales as products or services in our Consolidated Statements of Income based on the attributes of the underlying contracts.
We recognize sales and profits under our long-term fixed-price contracts, which generally require a significant amount of development effort in relation to total contract value, using the cost-to-cost percentage-of-completion method of accounting. We record sales and profits based on the ratio of contract costs incurred to estimated total contract costs at completion. Contract costs include material, labor and subcontracting costs, as well as an allocation of indirect costs. For contracts with the U.S. federal government, general and administrative costs are included in contract costs; however, general and administrative costs are not considered contract costs for any other customers. Cost are recognized as incurred for contracts accounted for under the cost-to-cost percentage-of-completion method.
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For certain other long-term, fixed price production contracts not requiring substantial development effort we use the units-of-delivery percentage-of-completion method as the basis to measure progress toward completing the contract and recognizing sales. The units-of-delivery measure recognizes revenues as deliveries are made to the customer generally using unit sales values in accordance with the contract terms. Costs of sales are recorded as deliveries are made. We estimate profit as the difference between total estimated revenue and total estimated cost of a contract and recognize that profit over the life of the contract based on deliveries.
For long-term fixed price contracts, we only include amounts representing contract change orders, claims or other items in the contract value when they can be reliably estimated and we consider realization probable. Changes in estimates of sales, costs and profits are recognized using the cumulative catch-up method of accounting. This method recognizes in the current period the cumulative effect of the changes on current and prior periods. A significant change in one or more of these estimates could have a material effect on our consolidated financial position or results of operations.
Changes in estimates on contracts for which revenue is recognized using the cost-to-cost percentage-of-completion method increased operating profit by approximately $17.5 million in 2012, $17.0 million in 2011, $8.8 million in 2010, and $3.6 million in 2009. These adjustments increased net income by approximately $12.0 million ($0.45 per share) in 2012, $11.5 million ($0.43 per share) in 2011, $5.8 million ($0.22 per share) in 2010, and $2.7 million ($0.10 per share) in 2009.
We record sales under cost-reimbursement-type contracts as we incur the costs. The Federal Acquisition Regulations provide guidance on the types of costs that we will be reimbursed in establishing the contract price. We consider incentives or penalties and awards applicable to performance on contracts in estimating sales and profits, and record them when there is sufficient information to assess anticipated contract performance. We do not recognize incentive provisions that increase or decrease earnings based solely on a single significant event until the event occurs.
We occasionally enter into contracts that include multiple deliverables such as the construction or upgrade of a system and subsequent services to operate and maintain the delivered system. For multiple element contracts that were entered prior to October 1, 2009, a delivered item was considered a separate unit of accounting when it had value to the customer on a stand-alone basis and there was objective and reliable evidence of the fair value of the undelivered items. For contracts where we are unable to conclude there were separate units of accounting, we combine the deliverables and recognize revenue once the final item has been delivered or, if the final element is a service, over the period of performance.
We elected to adopt authoritative accounting guidance for multiple-element arrangements effective October 1, 2009 on a prospective basis. This guidance affected the accounting conclusion as to whether a deliverable under a contract is considered a separate unit of accounting, and also affected the method that is used to allocate arrangement consideration to each separate unit of accounting. The new guidance eliminates the requirement for objective and reliable evidence of fair value to exist for the undelivered items in order for a delivered item to be treated as a separate unit of accounting. The new guidance also requires arrangement consideration to be allocated at the inception of the arrangement to all
F-12
deliverables using the relative-selling-price method and eliminates the use of the residual method of allocation. Under the relative-selling-price method, the selling price for each deliverable is determined using vendor specific objective evidence (VSOE) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence of selling price exists for a deliverable, which is typically the case for our contracts, the guidance requires us to determine the best estimate of the selling price, which is the price at which we would sell the deliverable if it were sold on a standalone basis. In estimating the selling price of the deliverable on a standalone basis, we consider our overall pricing models and objectives, including the factors we contemplate in negotiating our contracts with our customers. The pricing models and objectives that we use are generally based upon a cost-plus margin approach, with the estimated margin based in part on qualitative factors such as perceived customer pricing sensitivity and competitive pressures.
Once the contract value is allocated to the separate deliverables under a multiple-element arrangement, revenue recognition guidance relevant to each contractual element is followed. For example, for the long-term construction portion of a contract we use the percentage-of-completion method and for the services portion we recognize the service revenues on a straight-line basis over the contractual service period or based on measurable units of work performed or incentives earned.
Revenue under our service contracts with the U. S. government is recorded under the cost-to-cost percentage-of-completion method. Award fees and incentives related to performance under these service contracts are accrued during the performance of the contract based on our historical experience and estimates of success with such awards.
Revenue under contracts for services other than those with the U. S. government and those associated with design, development, or production activities is recognized either as services are performed or when a contractually required event has occurred, depending on the contract. For such contracts that contain measurable units of work performed we recognize sales when the units of work are completed. Certain of our transportation systems service contracts contain service level or system usage incentives, for which we recognize revenues when the incentive award is fixed or determinable. These contract incentives are generally based upon monthly service levels or monthly performance and become fixed or determinable on a monthly basis. However, one of our transportation systems service contracts contains annual system usage incentives which are based upon system usage compared to annual baseline amounts. For this contract the annual system usage incentives are not considered fixed or determinable until the end of the contract year for which the incentives are measured, which falls within the second quarter of our fiscal year. Revenue under such contracts that do not contain measurable units of work performed, which is generally the case for our service contracts, is recognized on a straight-line basis over the contractual service period, unless evidence suggests that the revenue is earned, or obligations fulfilled, in a different manner. Costs incurred under these services contracts are expensed as incurred.
We make provisions in the current period to fully recognize any anticipated losses on contracts. If we receive cash on a contract prior to revenue recognition or in excess of inventoried costs, we classify it as a customer advance on the balance sheet.
Research and development: We record the cost of company sponsored research and development (R&D) activities as the expenses are incurred. The cost of product development
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activities incurred in connection with the performance of work on our contracts is included in cost of sales as they are directly related to contract performance.
Other income (expense): We hold U.S. dollar denominated investments at our wholly-owned subsidiary in the U.K., that has the British pound as its functional currency. The impact of exchange rates on these investments is recorded as other non-operating income and resulted in a loss of $0.4 million in 2012, and a gain of $0.5 million and $2.6 million in 2011 and 2010, respectively. We did not hold U.S. dollar denominated investments at our U.K. subsidiary in 2009.
Income taxes: Our provision for income taxes includes federal, state, local and foreign income taxes. We recognize tax credits, primarily for R&D, as a reduction of our provision for income taxes in the year in which they are available for tax purposes. We provide deferred income taxes on temporary differences between assets and liabilities for financial reporting and tax purposes as measured by enacted tax rates we expect to apply when the temporary differences are settled or realized. We establish valuation allowances for deferred tax assets when the amount of future taxable income we expect is not likely to support the use of the deduction or credit. Annually we evaluate the capital requirements of our foreign subsidiaries and determine the amount of excess capital, if any, that is available for distribution. We provide for U.S. taxes on the amount we determine to be excess capital available for distribution. U.S. taxes are not provided on amounts we consider to be indefinitely reinvested.
Earnings per share: We calculate per share amounts based upon the weighted average number of shares of common stock outstanding.
Recent accounting pronouncements: In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS, which amends Accounting Standards Codification (ASC) Topic 820, Fair Value Measurement. ASU 2011-04 clarified the intent about the application of existing fair value measurement requirements and changed certain requirements for measuring fair value and for disclosing information about fair value measurements. We adopted ASU 2011-04 in the quarter ended March 31, 2012. This adoption had no material impact to our financial statements.
In September 2011, the FASB issued ASU 2011-08, IntangiblesGoodwill and Other, which amends the existing guidance on goodwill impairment testing. The new standard allows an entity the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If this is the case, the entity will need to perform a more detailed two-step goodwill impairment test which is used to identify potential goodwill impairments and to measure the amount of goodwill impairment losses to be recognized, if any. The standard is effective for annual or interim goodwill impairment tests performed by us after December 31, 2011, and did not have an effect on our measurement for potential goodwill impairment.
In May 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, which changed the requirement for presenting "Comprehensive Income" in the consolidated financial statements. The update requires an entity to present the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The update is effective for fiscal years, and interim periods within
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those years, beginning after December 15, 2011 and is required to be applied retrospectively. We adopted this new guidance effective October 1, 2012.
Use of estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates include the estimated total costs at completion of our long-term contracts, estimated loss contingencies, estimated self-insurance liabilities, estimated discounted cash flows of our reporting units used for goodwill impairment testing, and estimated rates of return and discount rates related to our defined benefit pension plans. Actual results could differ from our estimates.
Risks and uncertainties: We are subject to the normal risks and uncertainties of performing large, multiyear, often fixed-price contracts. In addition, we are subject to audit of incurred costs related to many of our U.S. government contracts. These audits could produce different results than we have estimated; however, our experience has been that our costs are acceptable to the government.
Note 2Restatement of consolidated financial statements
We have restated our Consolidated Balance Sheets at September 30, 2011, 2010 and 2009 and our Consolidated Statements of Income, Changes in Shareholders' Equity and Cash Flows for the years then ended including the cumulative impact of corrected errors for periods prior to October 1, 2008.
The cumulative adjustments to correct the errors in the consolidated financial statements for all periods prior to October 1, 2008 are recorded as adjustments to retained earnings and accumulated other comprehensive income (loss) at September 30, 2008, as shown in the consolidated statements of changes in shareholders' equity. The cumulative effect of those adjustments increased previously reported retained earnings by $23.0 million and reduced previously reported accumulated other comprehensive income by $0.9 million at September 30, 2008.
The following tables present the summary impacts of the restatement adjustments on the Company's previously reported consolidated retained earnings at September 30, 2008 and consolidated net income for the years ended September 30, 2011, 2010 and 2009 (in thousands):
Retained earnings at September 30, 2008As previously reported |
$ | 404,868 | ||
Revenue Recognition Adjustments, net of taxes on revenue recognition adjustments |
25,587 | |||
Other Adjustments |
(2,619 | ) | ||
Retained earnings at September 30, 2008As restated |
$ | 427,836 | ||
F-15
|
For the years ended September 30, |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2011 |
2010 |
2009 |
|||||||
Net IncomeAs previously reported |
$ | 85,078 | $ | 70,636 | $ | 55,686 | ||||
Revenue Recognition Adjustments, net of taxes on revenue recognition adjustments |
2,321 | 31 | 9,900 | |||||||
Other Adjustments |
(3,495 | ) | 1,427 | (2,441 | ) | |||||
Net IncomeAs restated |
$ | 83,904 | $ | 72,094 | $ | 63,145 | ||||
In the table above, we have separately identified the impact of errors related to revenue recognition, and the impact related to other individually immaterial errors on net income. Descriptions of the restatement adjustments related to revenue recognition matters follow:
Revenue recognition adjustments
Historically, we recognized sales and profits for development contracts using the cost-to-cost percentage-of-completion method of accounting, modified by a formulary adjustment. Under the cost-to-cost percentage-of-completion method of accounting, sales and profits are based on the ratio of costs incurred to estimated total costs at completion. We have consistently applied a formulary adjustment to the percentage completion calculation for development contracts that had the effect of deferring a portion of the indicated revenue and profits on such contracts until later in the contract performance period. The cost-to-cost percentage-of-completion method as described in ASC 605-35 (formerly SOP 81-1) does not support the practice of using a formulary calculation to defer a portion of the indicated revenue and profits on such contracts. Instead, sales and profits should have been recognized based on the ratio of costs incurred to estimated total costs at completion, without using a formulary adjustment. As such, revenue has been restated for development contracts using the cost-to-cost percentage-of completion-method of accounting to eliminate the formulary adjustment.
We also evaluated the Company's long-standing practice of using the cost-to-cost percentage-of-completion method to recognize revenues for many of its service contracts. Under the accounting literature the cost-to-cost percentage of completion method is acceptable for U.S. government service contracts but not for service contracts with commercial customers other governmental customers, whether domestic or foreign. As such, revenue has been restated for service contracts with non-U.S. government customers to record revenue generally on a straight-line basis. In addition, in some cases our contracts with non-U.S. government customers may also include multiple deliverables, including service deliverables. During the course of our revenue review we noted situations in which we did not historically identify the units of accounting in accordance with the appropriate authoritative guidance. For example, for certain contracts that we entered with a customer prior to the adoption of Accounting Standards Update 2010-13, Multiple-Deliverable Revenue Arrangements (ASU 2010-13), to design and build a system for the customer and to operate and maintain the system for the customer after its delivery, we inappropriately separately accounted for the unit of accounting related to the designing and building of the system and the unit of accounting related to providing services for operating and maintaining the system without having vendor specific objective evidence, which was a requirement for separating units of accounting prior to the adoption of ASU 2010-13. In these cases, in connection with our restatement, we considered the multiple-element revenue recognition guidance in existence at the time that the
F-16
transaction was entered into or materially modified and revenue was restated to recognize revenue based upon either the individual elements of the arrangement or the combined unit of accounting when the elements were not separable.
The Company's historical policy has been to allocate and capitalize general and administrative (G&A) costs on its U.S. government units-of-delivery type contracts, as permitted by SOP 81-1 and the AICPA Audit and Accounting Guide for Federal Government Contractors. During our review of revenue recognition for the issues identified above it was determined that from fiscal 2007 through March of 2012 this policy was inconsistently applied so that G&A costs were not inventoried on certain U.S. government contracts in accordance with the policy. As such, inventory and cost of sales have been restated for these types of contracts with the U.S. government to include G&A costs in inventory until sales are recognized.
Historically the Company has allocated G&A costs to all of its contracts with the U.S. government and with other domestic or foreign governmental agencies. These costs were included in the calculation of percentage completion as well as the measurement of losses on contracts. SOP 81-1 generally does not permit G&A costs to be included as contract costs which are used to measure progress towards completion on percentage-of-completion contracts and to estimate losses, though it does include an exception for government contractors. The Company has historically considered itself to be a government contractor and followed this exception for virtually all of its contracts accounted for on a cost-to-cost percentage-of-completion basis. However, we now recognize that this exception was intended to apply only to contracts with the U.S. federal government and not to contracts with other governmental entities, such as governmental transit agencies and foreign governments. Consequently, for contracts with customers other than the U.S. federal government, revenue is being restated to reflect the impact of excluding general and administrative costs from the calculation of the percentage-of-completion and projected losses on long-term development projects.
We determined the amounts of the revenue recognition adjustments on a contract-by-contract basis and did not calculate or accumulate the errors by type of revenue error because certain errors are interrelated and the adjustments to many contracts were impacted by more than one of the types of revenue recognition error described above. The aggregate impact of these revenue adjustments and the related adjustments made to income tax expense as a result of the revenue recognition adjustments described above are included in the "Revenue Recognition Adjustments" columns in the following tables for the Consolidated Statements of Income.
Other adjustments
In addition to the errors related to revenue recognition described above, we also made adjustments related to other individually immaterial errors including certain corrections that had been previously identified but not recorded because they were not material, individually or in the aggregate, to the Company's consolidated financial statements. These corrections included certain accrued liabilities and reserves and miscellaneous reclassification entries; entries to correct errors in the treatment of return-to-provision income tax reconciliation items; adjustments to various income tax and indirect tax accrual accounts; adjustments to participant compensation used in computing pension liability; and adjustments related to the impact of exchange rates on our U.S. dollar denominated investments held by our wholly-owned subsidiary in the U.K., that has the British pound as its functional currency.
F-17
Reclassifications
In the first quarter of fiscal year 2012, we revised our method of categorizing sales and the related cost of sales between products and services. We reconsidered whether certain projects related predominantly to product or service sales. The "Reclassifications" column in the following tables includes the reclassifications of sales and cost of sales for products and services in the consolidated statements of income in order to conform to the current year presentation, and to correct certain errors in classification of cost of sales between products and services. For the year ended September 30, 2011 $13.9 million of costs were erroneously classified as product costs. As such, these costs were reclassified to service costs.
Goodwill impairment assessment date disclosure error
In our consolidated financial statements for the year ended September 30, 2011 and previous years we had disclosed that we evaluated goodwill for potential impairment annually as of June 30, or when circumstances indicate that the carrying value may not be recoverable. However, our annual goodwill impairment evaluation date is July 1 of each year rather than June 30. This was an error in disclosure only and had no impact on our assessment of goodwill impairment, our financial condition, results of operations or cash flows.
The following tables present the impact of the restatement on the our previously issued consolidated balance sheets as of September 30, 2011, 2010 and 2009, and our consolidated statements of income and cash flows for the years then ended:
|
Consolidated balance sheet September 30, 2011 |
Consolidated balance sheet September 30, 2010 |
Consolidated balance sheet September 30, 2009 |
|||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
Previously reported |
Adjustments |
As restated |
Previously reported |
Adjustments |
As restated |
Previously reported |
Adjustments |
As restated |
|||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | 329,148 | $ | | $ | 329,148 | $ | 295,434 | $ | | $ | 295,434 | $ | 244,074 | $ | | $ | 244,074 | ||||||||||
Short-term investments |
25,829 | | 25,829 | 84,081 | | 84,081 | 8,127 | | 8,127 | |||||||||||||||||||
Accounts receivable: |
||||||||||||||||||||||||||||
Trade and other receivables |
20,259 | | 20,259 | 11,594 | | 11,594 | 12,833 | | 12,833 | |||||||||||||||||||
Long-term contracts |
204,120 | 3,306 | 207,426 | 199,353 | 2,545 | 201,898 | 223,186 | (477 | ) | 222,709 | ||||||||||||||||||
Allowance for doubtful accounts |
(395 | ) | | (395 | ) | (663 | ) | | (663 | ) | (4,558 | ) | | (4,558 | ) | |||||||||||||
|
223,984 | 3,306 | 227,290 | 210,284 | 2,545 | 212,829 | 231,461 | (477 | ) | 230,984 | ||||||||||||||||||
Recoverable income taxes |
20,725 |
4,192 |
24,917 |
8,320 |
(1,510 |
) |
6,810 |
|
249 |
249 |
||||||||||||||||||
Inventories |
36,729 | 1,630 | 38,359 | 32,820 | 7,833 | 40,653 | 49,107 | 8,498 | 57,605 | |||||||||||||||||||
Deferred income taxes |
13,778 | (4,295 | ) | 9,483 | 17,825 | (3,535 | ) | 14,290 | 22,132 | (1,941 | ) | 20,191 | ||||||||||||||||
Prepaid expenses and other current assets |
20,452 | 628 | 21,080 | 25,893 | 234 | 26,127 | 29,957 | | 29,957 | |||||||||||||||||||
Total current assets |
670,645 | 5,461 | 676,106 | 674,657 | 5,567 | 680,224 | 584,858 | 6,329 | 591,187 | |||||||||||||||||||
Long-term contract receivables |
23,700 | | 23,700 | 28,080 | | 28,080 | 13,400 | | 13,400 | |||||||||||||||||||
Property, plant and equipmentnet |
48,467 | | 48,467 | 47,469 | | 47,469 | 48,895 | | 48,895 | |||||||||||||||||||
Deferred income taxes |
11,318 | 1,506 | 12,824 | 18,570 | 718 | 19,288 | 14,082 | 422 | 14,504 | |||||||||||||||||||
Goodwill |
146,355 | | 146,355 | 64,142 | | 64,142 | 59,433 | | 59,433 | |||||||||||||||||||
Purchased intangibles |
54,139 | | 54,139 | 26,295 | | 26,295 | 28,618 | | 28,618 | |||||||||||||||||||
Other assets |
4,216 | 717 | 4,933 | 5,196 | 825 | 6,021 | 7,029 | 507 | 7,536 | |||||||||||||||||||
Total assets |
$ | 958,840 | $ | 7,684 | $ | 966,524 | $ | 864,409 | $ | 7,110 | $ | 871,519 | $ | 756,315 | $ | 7,258 | $ | 763,573 | ||||||||||
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|
Consolidated balance sheet September 30, 2011 |
Consolidated balance sheet September 30, 2010 |
Consolidated balance sheet September 30, 2009 |
|||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
Previously reported |
Adjustments |
As restated |
Previously reported |
Adjustments |
As restated |
Previously reported |
Adjustments |
As restated |
|||||||||||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||||||
Trade accounts payable |
$ | 38,870 | $ | 5,114 | $ | 43,984 | $ | 33,638 | $ | 5,447 | $ | 39,085 | $ | 28,626 | $ | 3,916 | $ | 32,542 | ||||||||||
Customer advances |
183,845 | (49,529 | ) | 134,316 | 139,723 | (41,208 | ) | 98,515 | 123,458 | (39,480 | ) | 83,978 | ||||||||||||||||
Accrued compensation |
49,513 | | 49,513 | 48,994 | | 48,994 | 49,134 | | 49,134 | |||||||||||||||||||
Other current liabilities |
53,826 | 3,180 | 57,006 | 60,041 | 1,050 | 61,091 | 60,402 | (758 | ) | 59,644 | ||||||||||||||||||
Income taxes payable |
7,902 | 10,814 | 18,716 | 20,107 | 7,112 | 27,219 | 3,491 | 8,608 | 12,099 | |||||||||||||||||||
Current portion of long-term debt |
4,541 | | 4,541 | 4,545 | | 4,545 | 4,554 | | 4,554 | |||||||||||||||||||
Total current liabilities |
338,497 | (30,421 | ) | 308,076 | 307,048 | (27,599 | ) | 279,449 | 269,665 | (27,714 | ) | 241,951 | ||||||||||||||||
Long-term debt |
11,377 | | 11,377 | 15,949 | | 15,949 | 20,570 | | 20,570 | |||||||||||||||||||
Accrued pension liability |
38,223 | 2,943 | 41,166 | 37,015 | 2,840 | 39,855 | 32,214 | 1,548 | 33,762 | |||||||||||||||||||
Deferred compendation |
7,884 | | 7,884 | 8,508 | | 8,508 | 7,902 | | 7,902 | |||||||||||||||||||
Income taxes payable |
4,479 | 7,650 | 12,129 | 3,382 | 6,579 | 9,961 | 5,119 | 5,882 | 11,001 | |||||||||||||||||||
Other long-term liabilities |
6,582 | | 6,582 | 4,748 | | 4,748 | | | | |||||||||||||||||||
Shareholders' equity: |
||||||||||||||||||||||||||||
Preferred stock, no par value: |
||||||||||||||||||||||||||||
Authorized5,000 shares |
||||||||||||||||||||||||||||
Issued and outstandingnone |
| | | | | | | | | |||||||||||||||||||
Common stock, no par value: |
||||||||||||||||||||||||||||
Authorized50,000 shares |
||||||||||||||||||||||||||||
2011 and 2010Issued 35,682 shares, outstanding26,736 shares, 2009Issued 35,677 shares, outstanding26,732 shares |
12,574 | | 12,574 | 12,574 | | 12,574 | 12,530 | | 12,530 | |||||||||||||||||||
Retained earnings |
598,849 | 30,711 | 629,560 | 521,567 | 31,885 | 553,452 | 455,743 | 30,427 | 486,170 | |||||||||||||||||||
Accumulated other comprehensive loss |
(23,294 | ) | (3,199 | ) | (26,493 | ) | (9,745 | ) | (6,595 | ) | (16,340 | ) | (11,357 | ) | (2,885 | ) | (14,242 | ) | ||||||||||
Treasury stock at cost |
||||||||||||||||||||||||||||
2011 and 20108,945 shares |
(36,078 | ) | | (36,078 | ) | (36,074 | ) | | (36,074 | ) | (36,071 | ) | | (36,071 | ) | |||||||||||||
Shareholders' equity attributable to Cubic |
552,051 | 27,512 | 579,563 | 488,322 | 25,290 | 513,612 | 420,845 | 27,542 | 448,387 | |||||||||||||||||||
Noncontrolling interest in variable interest entity |
(253 | ) | | (253 | ) | (563 | ) | | (563 | ) | | | | |||||||||||||||
Total shareholders' equity |
551,798 | 27,512 | 579,310 | 487,759 | 25,290 | 513,049 | 420,845 | 27,542 | 448,387 | |||||||||||||||||||
Total liabilities and shareholders' equity |
$ | 958,840 | $ | 7,684 | $ | 966,524 | $ | 864,409 | $ | 7,110 | $ | 871,519 | $ | 756,315 | $ | 7,258 | $ | 763,573 | ||||||||||
F-19
|
Consolidated statement of income Year ended September 30, 2011 |
Consolidated statement of income Year ended September 30, 2010 |
Consolidated statement of income Year ended September 30, 2009 |
|||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(amounts in thousands, except per share data) |
Previously reported |
Revenue recognition adjustments |
Other adjustments |
Reclassifications |
As restated |
Previously reported |
Revenue recognition adjustments |
Other adjustments |
Reclassifications |
As restated |
Previously reported |
Revenue recognition adjustments |
Other adjustments |
Reclassifications |
As restated |
|||||||||||||||||||||||||||||||
Net sales: |
||||||||||||||||||||||||||||||||||||||||||||||
Products |
$ | 618,924 | $ | (10,844 | ) | $ | 1,357 | $ | (8,504 | ) | $ | 600,933 | $ | 636,739 | $ | 239 | $ | 147 | $ | (29,369 | ) | $ | 607,756 | $ | 526,879 | $ | (7,505 | ) | $ | (992 | ) | $ | (10,215 | ) | $ | 508,167 | ||||||||||
Services |
666,279 | 19,215 | 650 | 8,504 | 694,648 | 557,450 | 1,971 | 1,646 | 29,369 | 590,436 | 489,778 | 21,549 | (3,785 | ) | 10,215 | 517,757 | ||||||||||||||||||||||||||||||
|
1,285,203 | 8,371 | 2,007 | | 1,295,581 | 1,194,189 | 2,210 | 1,793 | | 1,198,192 | 1,016,657 | 14,044 | (4,777 | ) | | 1,025,924 | ||||||||||||||||||||||||||||||
Costs and expenses: |
||||||||||||||||||||||||||||||||||||||||||||||
Products |
437,992 | 4,164 | 1,047 | (24,924 | ) | 418,279 | 457,651 | 678 | (90 | ) | (27,822 | ) | 430,417 | 394,478 | (2,004 | ) | (839 | ) | (13,583 | ) | 378,052 | |||||||||||||||||||||||||
Services |
539,973 | 1,195 | 646 | 22,248 | 564,062 | 484,343 | 1,306 | | 25,365 | 511,014 | 411,038 | 1,850 | (2,139 | ) | 7,543 | 418,292 | ||||||||||||||||||||||||||||||
Selling, general and administrative |
154,962 | | 2,153 | 2,676 | 159,791 | 120,848 | | 1,001 | 2,457 | 124,306 | 111,828 | | 1,240 | 6,040 | 119,108 | |||||||||||||||||||||||||||||||
Research and development |
25,260 | | | | 25,260 | 18,976 | | | | 18,976 | 8,173 | | | | 8,173 | |||||||||||||||||||||||||||||||
Amortization of purchased intangibles |
14,681 | | | | 14,681 | 6,846 | | | | 6,846 | 6,432 | | | | 6,432 | |||||||||||||||||||||||||||||||
|
1,172,868 | 5,359 | 3,846 | | 1,182,073 | 1,088,664 | 1,984 | 911 | | 1,091,559 | 931,949 | (154 | ) | (1,738 | ) | | 930,057 | |||||||||||||||||||||||||||||
Operating income |
112,335 | 3,012 | (1,839 | ) | | 113,508 | 105,525 | 226 | 882 | | 106,633 | 84,708 | 14,198 | (3,039 | ) | | 95,867 | |||||||||||||||||||||||||||||
Other income (expense): |
||||||||||||||||||||||||||||||||||||||||||||||
Interest and dividend income |
2,568 | | | | 2,568 | 1,590 | | | | 1,590 | 1,664 | | | | 1,664 | |||||||||||||||||||||||||||||||
Interest expense |
(1,461 | ) | | | | (1,461 | ) | (1,755 | ) | | | | (1,755 | ) | (2,031 | ) | | | | (2,031 | ) | |||||||||||||||||||||||||
Other income (expense)net |
4,205 | (171 | ) | (2,372 | ) | | 1,662 | 561 | (95 | ) | 3,171 | | 3,637 | 899 | (20 | ) | (218 | ) | | 661 | ||||||||||||||||||||||||||
Income before income taxes |
117,647 | 2,841 | (4,211 | ) | | 116,277 | 105,921 | 131 | 4,053 | | 110,105 | 85,240 | 14,178 | (3,257 | ) | | 96,161 | |||||||||||||||||||||||||||||
Income taxes |
32,569 | 520 | (716 | ) | | 32,373 | 35,285 | 100 | 2,626 | | 38,011 | 29,554 | 4,278 | (816 | ) | | 33,016 | |||||||||||||||||||||||||||||
Net income |
85,078 | 2,321 | (3,495 | ) | | 83,904 | 70,636 | 31 | 1,427 | | 72,094 | 55,686 | 9,900 | (2,441 | ) | | 63,145 | |||||||||||||||||||||||||||||
Less noncontrolling interest in income of VIE |
310 | | | | 310 | | | | | | | | | | | |||||||||||||||||||||||||||||||
Net income attributable to Cubic |
$ | 84,768 | $ | 2,321 | $ | (3,495 | ) | $ | | $ | 83,594 | $ | 70,636 | $ | 31 | $ | 1,427 | $ | | $ | 72,094 | $ | 55,686 | $ | 9,900 | $ | (2,441 | ) | $ | | $ | 63,145 | ||||||||||||||
Basic and diluted net income per common share |
$ | 3.17 | $ | 0.09 | $ | (0.13 | ) | $ | | $ | 3.13 | $ | 2.64 | $ | | $ | 0.06 | $ | | $ | 2.70 | $ | 2.08 | $ | 0.37 | $ | (0.09 | ) | $ | | $ | 2.36 | ||||||||||||||
Average number of common shares outstanding |
26,736 | | | | 26,736 | 26,735 | | | | 26,735 | 26,731 | | | | 26,731 | |||||||||||||||||||||||||||||||
F-20
|
Consolidated statement of cash flows September 30, 2011 |
Consolidated statement of cash flows September 30, 2010 |
Consolidated statement of cash flows September 30, 2009 |
|||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
Previously reported |
Adjustments |
As restated |
Previously reported |
Adjustments |
As restated |
Previously reported |
Adjustments |
As restated |
|||||||||||||||||||
Operating Activities: |
||||||||||||||||||||||||||||
Net income |
$ | 85,078 | $ | (1,174 | ) | $ | 83,904 | $ | 70,636 | $ | 1,458 | $ | 72,094 | $ | 55,686 | $ | 7,459 | $ | 63,145 | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||||||||||||||||||
Depreciation and amortization |
22,341 | | 22,341 | 14,469 | | 14,469 | 15,586 | | 15,586 | |||||||||||||||||||
Deferred income taxes |
4,048 | (1,536 | ) | 2,512 | (164 | ) | 1,294 | 1,130 | 3,346 | 1,974 | 5,320 | |||||||||||||||||
Provision for doubtful accounts |
| | | (3,889 | ) | | (3,889 | ) | 3,038 | | 3,038 | |||||||||||||||||
Changes in operating assets and liabilities net of effects from acquisitions: |
||||||||||||||||||||||||||||
Accounts receivable |
4,219 | (653 | ) | 3,566 | 28,565 | (3,340 | ) | 25,225 | 36,211 | 4,866 | 41,077 | |||||||||||||||||
Inventories |
(3,760 | ) | 6,202 | 2,442 | 16,638 | 666 | 17,304 | (4,275 | ) | (3,459 | ) | (7,734 | ) | |||||||||||||||
Prepaid expenses and other current assets |
5,516 | (394 | ) | 5,122 | 4,401 | (234 | ) | 4,167 | 5,141 | 610 | 5,751 | |||||||||||||||||
Accounts payable and other current liabilities |
(3,387 | ) | 1,840 | (1,547 | ) | (27,498 | ) | 3,357 | (24,141 | ) | 14,175 | 908 | 15,083 | |||||||||||||||
Customer advances |
45,517 | (8,374 | ) | 37,143 | 20,672 | (2,210 | ) | 18,462 | 48,663 | (14,044 | ) | 34,619 | ||||||||||||||||
Income taxes |
(24,205 | ) | 492 | (23,713 | ) | (14,614 | ) | 986 | (13,628 | ) | (2,890 | ) | 2,215 | (675 | ) | |||||||||||||
Other itemsnet |
(2,779 | ) | 103 | (2,676 | ) | 2,507 | 1,292 | 3,799 | 1,352 | 262 | 1,614 | |||||||||||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES |
132,588 | (3,494 | ) | 129,094 | 111,723 | 3,269 | 114,992 | 176,033 | 791 | 176,824 | ||||||||||||||||||
Investing Activities: |
||||||||||||||||||||||||||||
Acquisition of businesses, net of cash acquired |
(126,825 | ) | | (126,825 | ) | (8,250 | ) | | (8,250 | ) | (19,965 | ) | | (19,965 | ) | |||||||||||||
Consolidation of variable interest entity |
| | | 38,264 | | 38,264 | | | | |||||||||||||||||||
Proceeds from sales or maturities of short-term investments |
58,252 | | 58,252 | 82,992 | | 82,992 | | | | |||||||||||||||||||
Purchases of short-term investments |
| | | (158,946 | ) | | (158,946 | ) | (8,127 | ) | | (8,127 | ) | |||||||||||||||
Purchases of property, plant and equipment |
(8,728 | ) | | (8,728 | ) | (6,878 | ) | | (6,878 | ) | (5,332 | ) | | (5,332 | ) | |||||||||||||
Other items |
| | | | | | 41 | | 41 | |||||||||||||||||||
NET CASH USED IN INVESTING ACTIVITIES |
(77,301 | ) | | (77,301 | ) | (52,818 | ) | | (52,818 | ) | (33,383 | ) | | (33,383 | ) | |||||||||||||
Financing Activities: |
||||||||||||||||||||||||||||
Principal payments on long-term debt |
(4,555 | ) | | (4,555 | ) | (4,541 | ) | | (4,541 | ) | (5,970 | ) | | (5,970 | ) | |||||||||||||
Proceeds from issuance of common stock |
| | | 44 | | 44 | 45 | | 45 | |||||||||||||||||||
Purchases of treasury stock |
(4 | ) | | (4 | ) | (3 | ) | | (3 | ) | | | | |||||||||||||||
Dividends paid to shareholders |
(7,486 | ) | | (7,486 | ) | (4,812 | ) | | (4,812 | ) | (4,811 | ) | | (4,811 | ) | |||||||||||||
NET CASH USED IN FINANCING ACTIVITIES |
(12,045 | ) | | (12,045 | ) | (9,312 | ) | | (9,312 | ) | (10,736 | ) | | (10,736 | ) | |||||||||||||
Effect of exchange rates on cash |
(9,528 |
) |
3,494 |
(6,034 |
) |
1,767 |
(3,269 |
) |
(1,502 |
) |
(536 |
) |
(791 |
) |
(1,327 |
) |
||||||||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS |
33,714 |
|
33,714 |
51,360 |
|
51,360 |
131,378 |
|
131,378 |
|||||||||||||||||||
Cash and cash equivalents at the beginning of the year |
295,434 |
|
295,434 |
244,074 |
|
244,074 |
112,696 |
|
112,696 |
|||||||||||||||||||
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR |
$ |
329,148 |
$ |
|
$ |
329,148 |
$ |
295,434 |
$ |
|
$ |
295,434 |
$ |
244,074 |
$ |
|
$ |
244,074 |
||||||||||
F-21
Note 3Acquisitions
On December 20, 2010 we acquired all of the outstanding capital stock of Abraxas Corporation (Abraxas), a company that provides services that are complementary to our Mission Support Services (MSS) business including risk mitigation services, and subject matter and operational expertise for law enforcement and homeland security clients. The results of Abraxas' operations have been included in our consolidated financial statements since the acquisition date.
We paid $126.0 million in cash from our existing cash resources to acquire Abraxas. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):
Customer relationships |
$ | 20.1 | ||
Backlog |
11.5 | |||
Corporate trade names |
5.7 | |||
Non-compete agreements |
5.2 | |||
Recoverable income taxes |
4.3 | |||
Deferred tax liabilities, net |
(7.6 | ) | ||
Net tangible assets acquired |
5.1 | |||
Net identifiable assets acquired |
44.3 | |||
Goodwill |
81.7 | |||
Net assets acquired |
$ | 126.0 | ||
The recoverable income taxes are primarily related to carryback claims for the tax benefit of acquired net operating losses. The net deferred tax liabilities were recorded to reflect the tax impact of the identified intangible assets that will not generate tax deductible amortization expense, net of the future tax benefit of acquired net operating loss carryforwards. The intangible assets, which include trade name, customer relationships, non-compete agreements and backlog, will be amortized using a combination of straight-line and accelerated methods based on the expected cash flows from the assets, over a weighted average useful life of 6 years from the date of acquisition.
The following unaudited pro forma information presents our consolidated results of operations as if Abraxas had been included in our consolidated results since October 1, 2009 (in millions):
|
Years ended September 30, |
||||||
---|---|---|---|---|---|---|---|
|
2011 |
2010 |
|||||
Net sales |
$ | 1,309.0 | $ | 1,256.1 | |||
Net income attributable to Cubic |
83.6 |
72.4 |
|||||
The pro forma information includes adjustments to give effect to pro forma events that are directly attributable to the acquisition and have a continuing impact on operations including the amortization of purchased intangibles and the elimination of interest expense for the repayment of Abraxas' debt. No adjustments were made for transaction expenses, other adjustments that do not reflect ongoing operations or for operating efficiencies or synergies. The pro forma financial information is not necessarily indicative of what the consolidated
F-22
financial results of our operations would have been had the acquisition been completed on October 1, 2009, and it does not purport to project our future operating results.
Note 4Investment in variable interest entity
Prior to March 5, 2010, we owned 37.5% of the common stock of Transaction Systems Limited (TranSys), a U.K. company formed in 1998 which, beginning in 1998, outsourced most of the functions of the Transport for London (TfL) fare collection system. Prior to March 5, 2010 we did not consolidate TranSys because we were not the primary beneficiary of this VIE. All of the work performed by TranSys was subcontracted to us and the other primary shareholder and the arrangement provided for the pass-through of virtually all revenues from TfL to the two primary shareholders until August 2010. Beginning in August 2010 we began performing the services formerly provided by TranSys under a new contract with TfL.
As a result of a change in ownership of TranSys that occurred on March 5, 2010, we conducted a new evaluation of the primary beneficiary of TranSys. We determined that Cubic became the primary beneficiary of TranSys on March 5, 2010, and consolidated TranSys on that date.
As a result of becoming the primary beneficiary of TranSys, the consolidation of TranSys was treated as an acquisition in our financial statements. The fair value of the enterprise was virtually the same as the fair value of the assets and liabilities acquired, therefore, no gain or loss was recorded from the transaction.
The fair value of assets and liabilities acquired at March 5, 2010 were as follows (in millions):
Cash and cash equivalents |
$ | 38.3 | ||
Other current assets |
16.9 | |||
Purchased intangibles |
0.2 | |||
Income taxes payable |
(20.7 | ) | ||
Other current liabilities |
(35.8 | ) | ||
|
$ | (1.1 | ) | |
The activities of TranSys included in our consolidated results from the date of acquisition are as follows (in millions):
|
Years ended September 30, |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 |
2011 |
2010 |
|||||||
Sales |
$ | 4.5 | $ | 4.4 | $ | 29.9 | ||||
Operating income |
0.6 | 0.9 | | |||||||
Cash used in operating activities |
| 18.4 | 19.9 | |||||||
The total assets and total liabilities, respectively, of TranSys included in our Consolidated Balance Sheets were $0.7 million and $0.8 million at September 30, 2012, $0.4 million and $0.9 million at September 30, 2011, and $18.8 million and $19.9 million at September 30, 2010.
F-23
Note 5Fair value of financial instruments
The valuation techniques required to determine fair value are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. The two types of inputs create the following fair value hierarchy:
The fair value of cash equivalents and short term investments approximates their cost. The fair value of tax exempt bonds and U.S. government agency securities are generally determined using standard observable inputs, including reported trades, quoted market prices, broker/dealer quotes and issuer spreads. The maturity dates of tax exempt bonds are within the next year. Derivative financial instruments are measured at fair value, the material portions of which are based on active or inactive markets for identical or similar instruments or model-derived valuations whose inputs are observable. Where model-derived valuations are appropriate, the company uses the applicable credit spread as the discount rate. Credit risk related to derivative financial instruments is considered minimal and is managed by requiring high credit standards for counterparties and through periodic settlements of positions.
The following table presents assets and liabilities measured and recorded at fair value on our balance sheets on a recurring basis (in thousands):
|
September 30, 2012 | September 30, 2011 | September 30, 2010 | September 30, 2009 | |||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Level 1 |
Level 2 |
Total |
Level 1 |
Level 2 |
Total |
Level 1 |
Level 2 |
Total |
Level 1 |
Level 2 |
Total |
|||||||||||||||||||||||||
Assets |
|||||||||||||||||||||||||||||||||||||
Cash equivalents |
$ | 171,300 | $ | | $ | 171,300 | $ | 266,842 | $ | | $ | 266,842 | $ | 129,756 | $ | | $ | 129,756 | $ | 178,893 | $ | | $ | 178,893 | |||||||||||||
Short-term investmentsU.S. government agency securities |
| | | | | | | 36,000 | 36,000 | | 8,127 | 8,127 | |||||||||||||||||||||||||
Short-term investmentstax exempt bonds |
| | | | 25,829 | 25,829 | | 48,081 | 48,081 | | | | |||||||||||||||||||||||||
Current derivative assets |
| 3,779 | 3,779 | | 7,466 | 7,466 | | 11,428 | 11,428 | | 18,106 | 18,106 | |||||||||||||||||||||||||
Non-current derivative assets |
| 3,713 | 3,713 | | | | | | | | | | |||||||||||||||||||||||||
Total assets measured at fair value |
171,300 | 7,492 | 178,792 | 266,842 | 33,295 | 300,137 | 129,756 | 95,509 | 225,265 | 178,893 | 26,233 | 205,126 | |||||||||||||||||||||||||
Liabilities |
|||||||||||||||||||||||||||||||||||||
Current derivative liabilities |
| 6,839 | 6,839 | | 7,522 | 7,522 | | 3,193 | 3,193 | | 17,933 | 17,933 | |||||||||||||||||||||||||
Non-current derivative liabilities |
| 6,498 | 6,498 | | 6,164 | 6,164 | | 4,748 | 4,748 | | | | |||||||||||||||||||||||||
Total liabilities measured at fair value |
$ | | $ | 13,337 | $ | 13,337 | $ | | $ | 13,686 | $ | 13,686 | $ | | $ | 7,941 | $ | 7,941 | $ | | $ | 17,933 | $ | 17,933 | |||||||||||||
We carry financial instruments, including cash equivalents, accounts receivable, accounts payable and accrued liabilities at cost, which we believe approximates fair value because of the short-term maturity of these instruments. The fair value of long-term debt is calculated by discounting the value of the note based on market interest rates for similar debt instruments,
F-24
which is a Level 2 technique. The following table presents the estimated fair value and carrying value of our long-term debt (in millions):
|
September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 |
2011 |
2010 |
2009 |
|||||||||
Fair value |
$ | 12.5 | $ | 17.5 | $ | 21.6 | $ | 25.1 | |||||
Carrying value |
11.5 | 15.9 | 20.5 | 25.1 | |||||||||
Note 6Accounts receivable
The components of accounts receivable under long-term contracts are as follows (in thousands):
|
September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
U.S. government contracts: |
|||||||||||||
Amounts billed |
$ | 48,387 | $ | 64,672 | $ | 50,925 | $ | 62,093 | |||||
Recoverable costs and accrued profits on progress completednot billed |
95,764 | 50,748 | 54,403 | 43,022 | |||||||||
|
144,151 | 115,420 | 105,328 | 105,115 | |||||||||
Commercial customers: |
|||||||||||||
Amounts billed |
42,745 | 24,384 | 31,753 | 41,907 | |||||||||
Recoverable costs and accrued profits on progress completednot billed |
168,791 | 91,322 | 92,897 | 89,087 | |||||||||
|
211,536 | 115,706 | 124,650 | 130,994 | |||||||||
|
355,687 | 231,126 | 229,978 | 236,109 | |||||||||
Less unbilled amounts not currently duecommercial customers |
(22,070 | ) | (23,700 | ) | (28,080 | ) | (13,400 | ) | |||||
|
$ | 333,617 | $ | 207,426 | $ | 201,898 | $ | 222,709 | |||||
A portion of recoverable costs and accrued profits on progress completed is billable under progress or milestone payment provisions of the related contracts. The remainder of these amounts is billable upon delivery of products or furnishing of services, with an immaterial amount subject to retainage provisions of the contracts. Contract terms, including payment terms on our long-term development contracts are generally customized for each contract based upon negotiations with the respective customer. It is anticipated that we will bill and collect substantially the entire unbilled portion of receivables identified as current assets under progress billing provisions of the contracts or upon completion of milestones and/or acceptance by the customers during fiscal 2013. The amount classified as not currently due is an estimate of the amount of long-term contract accounts receivable that will not be collected within one year from September 30, 2012 under transportation systems contracts in the U.S., Australia and the U.K. The non-current balance at September 30, 2011 represented non-current amounts due from customers in the same countries. The non-current balances at September 30, 2010 and 2009 relate to transportation systems contracts in the U.S., Australia and the U.K., and a defense systems contract in Canada.
F-25
Note 7Inventories
Significant components of inventories are as follows (in thousands):
|
September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
Finished products |
$ | | $ | | $ | | $ | 55 | |||||
Work in process and inventoried costs under long-term contracts |
78,796 | 71,855 | 79,529 | 105,460 | |||||||||
Customer advances |
(27,288 | ) | (34,582 | ) | (41,575 | ) | (49,734 | ) | |||||
Materials and purchased parts |
858 | 1,086 | 2,699 | 1,824 | |||||||||
|
$ | 52,366 | $ | 38,359 | $ | 40,653 | $ | 57,605 | |||||
At September 30, 2012, work in process and inventoried costs under long-term contracts includes approximately $1.9 million in costs incurred outside the scope of work or in advance of a contract award, compared to $1.2 million, $0.1 million and $0.9 million as of September 30, 2011, 2010 and 2009, respectively. We believe it is probable that we will recover the costs inventoried at September 30, 2012, plus a profit margin, under contract change orders or awards within the next year.
Costs we incur for certain U.S. federal government contracts include general and administrative costs as allowed by government cost accounting standards. The amounts remaining in inventory at September 30, 2012, 2011, 2010 and 2009 were $4.7 million, $4.8 million, $4.0 million and $5.0 million, respectively.
Note 8Property, plant and equipment
Significant components of property, plant and equipment are as follows (in thousands):
|
September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 |
2011 |
2010 |
2009 |
|||||||||
Land and land improvements |
$ | 16,045 | $ | 15,963 | $ | 15,821 | $ | 15,292 | |||||
Buildings and improvements |
44,376 | 43,416 | 42,754 | 42,661 | |||||||||
Machinery and other equipment |
94,113 | 84,953 | 82,129 | 80,018 | |||||||||
Leasehold improvements |
8,688 | 5,707 | 4,829 | 4,685 | |||||||||
Accumulated depreciation and amortization |
(107,895 | ) | (101,572 | ) | (98,064 | ) | (93,761 | ) | |||||
|
$ | 55,327 | $ | 48,467 | $ | 47,469 | $ | 48,895 | |||||
Our provisions for depreciation of plant and equipment and amortization of leasehold improvements amounted to $8.0 million, $7.7 million, $7.6 million and $9.2 million in 2012, 2011, 2010 and 2009, respectively. Generally, we use straight-line methods for real property over estimated useful lives ranging from 15 to 39 years or the term of the underlying lease for leasehold improvements. We use accelerated methods (declining balance and sum-of-the-years-digits) for machinery and equipment over estimated useful lives ranging from 5 to 10 years.
F-26
Note 9Goodwill and purchased intangible assets
The changes in the carrying amount of goodwill for the four years ended September 30, 2012 are as follows (in thousands):
|
Transportation systems |
Defense systems |
Mission support services |
Total |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balances at October 1, 2008 |
$ | 8,210 | $ | 16,087 | $ | 36,735 | 61,032 | ||||||
Reduction of acquired tax accrual |
| (1,083 | ) | | (1,083 | ) | |||||||
Foreign currency exchange rate changes |
(772 | ) | 256 | | (516 | ) | |||||||
Balances at September 30, 2009 |
7,438 | 15,260 | 36,735 | 59,433 | |||||||||
Goodwill acquired during the year |
| 4,767 | | 4,767 | |||||||||
Foreign currency exchange rate changes |
(115 | ) | 57 | | (58 | ) | |||||||
Balances at September 30, 2010 |
7,323 | 20,084 | 36,735 | 64,142 | |||||||||
Goodwill acquired during the year |
| 435 | 81,698 | 82,133 | |||||||||
Foreign currency exchange rate changes |
(54 | ) | 134 | | 80 | ||||||||
Balances at September 30, 2011 |
7,269 | 20,653 | 118,433 | 146,355 | |||||||||
Foreign currency exchange rate changes |
248 | 330 | | 578 | |||||||||
Balances at September 30, 2012 |
$ | 7,517 | $ | 20,983 | $ | 118,433 | $ | 146,933 | |||||
Purchased intangible assets: The table below summarizes our purchased intangible assets (in thousands):
|
September 30, 2012 | September 30, 2011 | September 30, 2010 | September 30, 2009 | |||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Gross carrying amount |
Accumulated amortization |
Net carrying amount |
Gross carrying amount |
Accumulated amortization |
Net carrying amount |
Gross carrying amount |
Accumulated amortization |
Net carrying amount |
Gross carrying amount |
Accumulated amortization |
Net carrying amount |
|||||||||||||||||||||||||
Contract and program intangibles |
$ | 71,145 | $ | (40,785 | ) | $ | 30,360 | $ | 70,159 | $ | (27,921 | ) | $ | 42,238 | $ | 38,560 | $ | (15,170 | ) | $ | 23,390 | $ | 35,614 | $ | (8,875 | ) | $ | 26,739 | |||||||||
In-process research & development |
| | | 798 | | 798 | 1,671 | | 1,671 | | | | |||||||||||||||||||||||||
Other purchased intangibles |
14,560 | (5,546 | ) | 9,014 | 14,560 | (3,457 | ) | 11,103 | 2,787 | (1,553 | ) | 1,234 | 2,787 | (908 | ) | 1,879 | |||||||||||||||||||||
Total |
$ | 85,705 | $ | (46,331 | ) | $ | 39,374 | $ | 85,517 | $ | (31,378 | ) | $ | 54,139 | $ | 43,018 | $ | (16,723 | ) | $ | 26,295 | $ | 38,401 | $ | (9,783 | ) | $ | 28,618 | |||||||||
F-27
The table below shows our expected amortization for purchased intangibles as of September 30, 2012, for each of the next five years and thereafter (in thousands):
|
Transportation systems |
Defense systems |
Mission support services |
Total |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
$ | 1,671 | $ | 1,019 | $ | 9,556 | $ | 12,246 | |||||
2014 |
1,671 | 593 | 7,066 | 9,330 | |||||||||
2015 |
1,476 | 209 | 4,810 | 6,495 | |||||||||
2016 |
1,380 | 66 | 2,356 | 3,802 | |||||||||
2017 |
1,380 | | 582 | 1,962 | |||||||||
Thereafter |
2,415 | | 3,124 | 5,539 | |||||||||
|
$ | 9,993 | $ | 1,887 | $ | 27,494 | $ | 39,374 | |||||
Our purchased intangible assets are subject to amortization and we use a combination of straight-line and accelerated methods, based on the expected cash flows from the assets, over a weighted average period of 6 years. Total amortization expense for 2012, 2011, 2010 and 2009 was $14.8 million, $14.7 million, $6.8 million and $6.4 million, respectively.
Note 10Financing arrangements
Long-term debt consists of the following (in thousands):
|
September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 |
2011 |
2010 |
2009 |
|||||||||
Unsecured notes payable to a group of insurance companies, with annual principal payments of $4.0 million due in November. Interest at 6.31% is payable semiannually in November and May. |
$ | 8,000 | $ | 12,000 | $ | 16,000 | $ | 20,000 | |||||
Mortgage note from a U.K. financial institution, with quarterly installments of principal and interest at 6.48% |
3,503 | 3,918 | 4,494 | 5,124 | |||||||||
|
11,503 | 15,918 | 20,494 | 25,124 | |||||||||
Less current portion |
(4,561 | ) | (4,541 | ) | (4,545 | ) | (4,554 | ) | |||||
|
$ | 6,942 | $ | 11,377 | $ | 15,949 | $ | 20,570 | |||||
Maturities of long-term debt for each of the five years in the period ending September 30, 2017, are as follows: 2013$4.6 million; 2014$4.6 million; 2015$0.6 million; 2016$0.6 million; 2017$0.6 million.
Interest paid amounted to $7.4 million, $1.1 million, $1.4 million and $1.8 million in 2012, 2011, 2010 and 2009, respectively. Interest paid in 2012 included $5.9 million of interest in connection with our payment to the U.S. District Court in April 2012 for an arbitration award with the Ministry of Defense for the Armed Forces of the Islamic Republic of Iran (See Note 16 for further information.)
F-28
The terms of the notes payable include provisions that require and/or limit, among other financial ratios and measurements, the permitted levels of debt and tangible net worth and coverage of fixed charges. At September 30, 2012, this agreement leaves consolidated retained earnings of $375.1 million available for the payment of dividends to shareholders, purchases of our common stock and other charges to shareholders' equity. As a result of our restatement, we have been unable to comply with covenants requiring us to provide our lenders with audited financial statements and interim financial information on a timely basis. However, we have entered into amendments to our financing arrangements which have included waivers to extend the dates by which the Company is required to deliver its audited financial statements and interim financial information to December 31, 2012, and as such we are not in default under our lending arrangements or credit agreements.
We maintain short-term borrowing arrangements in New Zealand and Australia totaling $0.5 million New Zealand dollars (equivalent to approximately $0.4 million) and $10 million Australian dollars (equivalent to approximately $10.4 million) to help meet the short-term working capital requirements of our subsidiaries in those countries. At September 30, 2012, no amounts were outstanding under these borrowing arrangements.
In May 2012 we entered into a committed five-year revolving credit agreement with a group of financial institutions in the amount of $200 million, expiring in May 2017 (Revolving Credit Agreement). This five-year revolving credit agreement replaced a revolving credit agreement in the amount of $150 million which would have expired in December 2012. The available line of credit is reduced by any letters of credit issued under the Revolving Credit Agreement. As of September 30, 2012, there were no borrowings under this agreement; however, there were letters of credit outstanding under the agreement totaling $23.5 million, which reduce the available line of credit to $176.5 million.
On January 12, 2012 we entered into a secured letter of credit facility agreement with a bank (Secured Credit Facility). At September 30, 2012 there were letters of credit outstanding under this agreement of $64.3 million. In support of the Secured Letter of Credit Facility, we have $68.7 million of our cash on deposit in the U.K. as collateral in a restricted account with the bank providing the facility. We are required to leave the cash in the restricted account so long as the bank continues to maintain associated letters of credit under the facility. The maximum amount of letters of credit currently allowed by the facility is $66.7 million, and any increase above this amount would require bank approval and additional restricted funds to be placed on deposit. The initial term of the facility is one year; however we may choose at any time to terminate the facility and move the associated letters of credit to another credit facility. Letters of Credit outstanding under the Secured Letter of Credit Facility do not reduce the available line of credit under the Revolving Credit Agreement.
As of September 30, 2012, we had letters of credit and bank guarantees outstanding totaling $100.8 million, including the letters of credit described above outstanding under the Revolving Credit Agreement and the Secured Credit Facility, which guarantee either our performance or customer advances under certain contracts. In addition, we had financial letters of credit outstanding totaling $7.2 million as of September 30, 2012, which primarily guarantee our payment of certain self-insured liabilities. We have never had a drawing on a letter of credit instrument, nor are any anticipated; therefore, we estimate the fair value of these instruments to be zero.
F-29
Our self-insurance arrangements are limited to certain workers' compensation plans, automobile liability and product liability claims. Under these arrangements, we self-insure only up to the amount of a specified deductible for each claim. Self-insurance liabilities included in other current liabilities on the balance sheet amounted to $8.7 million, $8.4 million, $8.2 million and $7.6 million as of September 30, 2012, 2011, 2010 and 2009 respectively.
Note 11Commitments
We lease certain office, manufacturing and warehouse space, vehicles, and other office equipment under noncancelable operating leases expiring in various years through 2024. These leases, some of which may be renewed for periods up to 10 years, generally require us to pay all maintenance, insurance and property taxes. Several leases are subject to periodic adjustment based on price indices or cost increases. Rental expense (net of sublease income of $0.4 million in 2012 and $0.6 million in 2011, 2010 and 2009 respectively) for all operating leases amounted to $10.2 million, $9.1 million, $8.0 million and $6.6 million in 2012, 2011, 2010 and 2009 respectively.
Future minimum payments, net of minimum sublease income, under noncancelable operating leases with initial terms of one year or more consist of the following at September 30, 2012 (in thousands):
2013 |
$ | 8,734 | ||
2014 |
7,082 | |||
2015 |
5,311 | |||
2016 |
3,904 | |||
2017 |
4,987 | |||
Thereafter |
6,691 | |||
|
$ | 36,709 | ||
Note 12Income taxes
Significant components of the provision for income taxes are as follows:
|
Years ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
Current: |
|||||||||||||
Federal |
$ | 15,190 | $ | (999 | ) | $ | 14,891 | $ | 9,006 | ||||
State |
1,927 | 810 | 4,392 | 3,207 | |||||||||
Foreign |
19,323 | 22,740 | 17,960 | 16,078 | |||||||||
Total current |
36,440 | 22,551 | 37,243 | 28,291 | |||||||||
Deferred: |
|||||||||||||
Federal |
331 | 9,356 | 992 | 3,714 | |||||||||
State |
328 | 299 | 340 | 591 | |||||||||
Foreign |
1,085 | 167 | (564 | ) | 420 | ||||||||
Total deferred provision |
1,743 | 9,822 | 768 | 4,725 | |||||||||
Total income tax expense |
$ | 38,183 | $ | 32,373 | $ | 38,011 | $ | 33,016 | |||||
F-30
We calculate deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, and measure them using the enacted tax rates and laws that we expect will be in effect when the differences reverse.
Significant components of our deferred tax assets and liabilities are as follows:
|
September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
Deferred tax assets: |
|||||||||||||
Accrued employee benefits |
$ | 9,153 | $ | 9,303 | $ | 9,112 | $ | 8,064 | |||||
Long-term contracts and inventory valuation reductions |
9,062 | 8,215 | 7,115 | 7,580 | |||||||||
Allowances for loss contingencies |
5,339 | 6,883 | 6,223 | 5,316 | |||||||||
Deferred compensation |
3,756 | 3,444 | 3,246 | 3,306 | |||||||||
Book over tax depreciation |
471 | 709 | 1,373 | 1,357 | |||||||||
Adjustment to pension liability |
17,886 | 15,226 | 12,925 | 11,716 | |||||||||
California research and development credit carryforward |
3,882 | 2,750 | 3,484 | 2,529 | |||||||||
Net operating losses |
10,909 | 2,424 | 1,457 | 638 | |||||||||
Foreign currency mark-to-market |
2,192 | 2,177 | 1,529 | | |||||||||
Other |
395 | 2,199 | 513 | 5,419 | |||||||||
Subtotal |
63,045 | 53,330 | 46,977 | 45,925 | |||||||||
Valuation allowance |
(4,205 | ) | (2,750 | ) | (3,484 | ) | (2,529 | ) | |||||
Deferred tax assets |
58,840 | 50,580 | 43,493 | 43,396 | |||||||||
Deferred tax liabilities: |
|||||||||||||
Amortization of goodwill and intangibles |
8,608 | 12,344 | 1,964 | 4,839 | |||||||||
Deferred revenue |
25,277 | 14,408 | 1,761 | 414 | |||||||||
Foreign currency mark-to-market |
269 | 284 | 673 | 630 | |||||||||
State taxes |
146 | | 3,421 | 60 | |||||||||
Other |
589 | 1,237 | 2,096 | 2,758 | |||||||||
Deferred tax liabilities |
34,889 | 28,273 | 9,915 | 8,701 | |||||||||
Net deferred tax asset |
$ | 23,951 | $ | 22,307 | $ | 33,578 | $ | 34,695 | |||||
As of September 30, 2012, we had $33.8 million of foreign operating loss carryforwards and $8.9 million of unused state tax credits that are not subject to expiration.
F-31
The reconciliation of income tax computed at the U.S. federal statutory tax rate to income tax expense is as follows:
|
Years ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
Tax at U.S. statutory rate |
$ | 45,601 | $ | 40,697 | $ | 38,536 | $ | 33,656 | |||||
State income taxes, net of federal tax effect |
1,364 | 1,297 | 3,042 | 2,672 | |||||||||
Nondeductible expenses |
286 | 893 | 1,366 | 107 | |||||||||
Change in reserve for uncertain tax positions |
(2,909 | ) | 1,504 | (832 | ) | 430 | |||||||
Tax effect from foreign dividend |
2,773 | | | 3,063 | |||||||||
Foreign earnings taxed at less than statutory rate |
(7,153 | ) | (6,415 | ) | (2,548 | ) | (3,760 | ) | |||||
R&D credits generated in the current year |
(906 | ) | (2,696 | ) | (491 | ) | (3,395 | ) | |||||
Reinstatement of federal research and development credit |
| (1,406 | ) | | | ||||||||
Other |
(873 | ) | (1,501 | ) | (1,062 | ) | 243 | ||||||
|
$ | 38,183 | $ | 32,373 | $ | 38,011 | $ | 33,016 | |||||
We are subject to ongoing audits from various taxing authorities in the jurisdictions in which we do business. As of September 30, 2012, the tax years open under the statute of limitations in significant jurisdictions include 2007-2011 in the U.K., 2006-2011 in New Zealand and 2008-2011 in the U.S. We have effectively settled all tax matters with the IRS for fiscal years prior to and including fiscal year 2010. We believe we have adequately provided for uncertain tax issues we have not yet resolved with federal, state and foreign tax authorities. Although not more likely than not, the most adverse resolution of these issues could result in additional charges to earnings in future periods. Based upon a consideration of all relevant facts and circumstances, we do not believe the ultimate resolution of uncertain tax issues for all open tax periods will have a material adverse effect upon our financial condition or results of operations.
F-32
We have recorded liabilities for unrecognized tax benefits related to permanent and temporary tax adjustments as set forth below. The net changes in the liability were as follows:
|
Years ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
Balance at October 1 |
$ | 10,715 | $ | 8,958 | $ | 9,958 | $ | 8,881 | |||||
Decrease related to tax positions in prior years: |
|||||||||||||
Recognition of benefits from expiration of statutes |
(1,227 | ) | (1,172 | ) | (1,747 | ) | (1,555 | ) | |||||
Recognition of benefits from settlement with tax authorities |
(1,257 | ) | | | (259 | ) | |||||||
Other |
(585 | ) | | | | ||||||||
Tax positions related to the current year |
409 | 2,452 | 778 | 3,142 | |||||||||
Tax positions related to current year acquisitions |
| 484 | | | |||||||||
Currency translation adjustment |
212 | (7 | ) | (31 | ) | (251 | ) | ||||||
Balance at September 30 |
$ | 8,267 | $ | 10,715 | $ | 8,958 | $ | 9,958 | |||||
At September 30, 2012, the amount of unrecognized tax benefits from permanent tax adjustments that, if recognized, would affect the effective tax rate was $6.3 million. During the next 12 months, it is reasonably possible that resolution of reviews by taxing authorities, both domestic and international, could be reached with respect to approximately $4.5 million of the unrecognized tax benefits depending on the timing of examinations, expiration of statute of limitations, either because the Company's tax positions are sustained or because the Company agrees to their disallowance and pays the related income tax. The amount of net interest and penalties recognized as a component of income tax expense during 2012, 2011, 2010 and 2009 was not material. Interest and penalties accrued at September 30, 2012, 2011, 2010 and 2009 amounted to $3.1 million, $3.0 million, $2.3 million and $2.0 million, respectively, bringing the total liability for uncertain tax issues to $11.3 million, $13.7 million, $11.2 million and $11.9 million, respectively, as of September 30, 2012, 2011, 2010 and 2009 respectively.
We made income tax payments, net of refunds, totaling $25.4 million, $42.1 million, $30.0 million and $28.8 million in 2012, 2011, 2010 and 2009, respectively.
Income before income taxes includes the following components (in thousands):
|
Years ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
United States |
$ | 38,428 | $ | 33,955 | $ | 59,984 | $ | 38,729 | |||||
Foreign |
91,859 | 82,322 | 50,121 | 57,432 | |||||||||
Total |
$ | 130,287 | $ | 116,277 | $ | 110,105 | $ | 96,161 | |||||
We evaluate our capital requirements in our foreign subsidiaries on an annual basis to determine what level of capital is needed for the long-term operations of the businesses. We
F-33
provide U.S. taxes on the amount of capital that is determined to be in excess of the long-term requirements of the business and is, therefore, available for distribution. During 2012, we determined that 40 million New Zealand was excess capital in New Zealand and paid a dividend of that amount in 2012 to the U.S. parent company. Additional U.S. taxes provided on this dividend amounted to approximately $2.8 million in 2012.
Undistributed earnings of all our foreign subsidiaries amounted to approximately $272.2 million at September 30, 2012. We consider those earnings to be indefinitely reinvested and, accordingly, we have not provided for U.S. federal and state income taxes thereon and have determined that no amounts of undistributed earnings are available for distribution. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to both U.S. income taxes and withholding taxes payable to the foreign countries, but would also be able to offset unrecognized foreign tax credit carryforwards. It is not practicable for us to determine the total amount of unrecognized deferred U.S. income tax liability because of the complexities associated with its hypothetical calculation.
Note 13Derivative instruments and hedging activities
In order to manage our exposure to fluctuations in interest and foreign currency exchange rates we utilize derivative financial instruments such as forward starting swaps and foreign currency forwards. We do not use any derivative financial instruments for trading or other speculative purposes.
All derivatives are recorded at fair value, however, the classification of gains and losses resulting from changes in the fair values of derivatives are dependent on the intended use of the derivative and its resulting designation. If a derivative is designated as a fair value hedge, then a change in the fair value of the derivative is offset against the change in the fair value of the underlying hedged item and only the ineffective portion of the hedge, if any, is recognized in earnings. If a derivative is designated as a cash flow hedge, then the effective portion of a change in the fair value of the derivative is recognized as a component of accumulated other comprehensive income until the underlying hedged item is recognized in earnings, or the forecasted transaction is no longer probable of occurring. If a derivative does not qualify as a highly effective hedge, any change in fair value is immediately recognized in earnings. We formally document all hedging relationships for all derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transactions. We classify the fair value of all derivative contracts as current or non-current assets or liabilities, depending on the realized and unrealized gain or loss position of the hedged contract at the balance sheet date, and the timing of future cash flows. The cash flows from derivatives treated as hedges are classified in the Consolidated Statements of Cash Flows in the same category as the item being hedged.
F-34
The following table shows the notional principal amounts of our outstanding derivative instruments as of September 30, 2012, 2011, 2010 and 2009 (in thousands):
|
September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 |
2011 |
2010 |
2009 |
|||||||||
Instruments designated as accounting hedges: |
|||||||||||||
Foreign currency forwards |
$ | 382,500 | $ | 290,400 | $ | 232,500 | $ | 148,300 | |||||
Forward starting swap |
58,415 | | | | |||||||||
Instruments not designated as accounting hedges: |
|||||||||||||
Foreign currency forwards |
5,945 | 3,644 | 7,794 | 8,148 | |||||||||
The notional principal amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of the Company's exposure to credit or market loss. Credit risk represents the Company's gross exposure to potential accounting loss on derivative instruments that are outstanding or unsettled if all counterparties failed to perform according to the terms of the contract, based on then-current interest or currency exchange rates at each respective date. The Company's exposure to credit loss and market risk will vary over time as a function of interest and currency exchange rates. The amount of credit risk from derivative instruments and hedging activities was not material for the years ended September 30, 2012, 2011, 2010 and 2009. Although the table above reflects the notional principal amounts of the Company's forward starting swaps and foreign exchange instruments, it does not reflect the gains or losses associated with the exposures and transactions that the forward starting swaps and foreign exchange instruments are intended to hedge. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.
The Company generally enters into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. The Company presents its derivative assets and derivative liabilities at their gross fair values. The Company did not have any derivative instruments with credit-risk related contingent features that would require it to post collateral as of September 30, 2012, 2011, 2010, or 2009.
The table below presents the fair value of the Company's derivative financial instruments that qualify for hedge accounting as well as their classification on the consolidated balance sheets as of September 30, 2012, 2011, 2010 and 2009 (in thousands):
|
|
Fair value | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Balance sheet location |
September 30, 2012 |
September 30, 2011 |
September 30, 2010 |
September 30, 2009 |
||||||||||
Asset derivatives: |
|||||||||||||||
Foreign currency forwards |
Other current assets | $ | 3,779 | $ | 7,466 | $ | 11,428 | $ | 18,106 | ||||||
Foreign currency forwards |
Other non-current assets | 3,713 | | | | ||||||||||
|
$ | 7,492 | $ | 7,466 | $ | 11,428 | $ | 18,106 | |||||||
Liability derivatives: |
|||||||||||||||
Foreign currency forwards |
Other current liabilities | $ | 6,839 | $ | 7,522 | $ | 3,193 | $ | 17,933 | ||||||
Foreign currency forwards |
Other non-current liabilities | 6,407 | 6,164 | 4,748 | | ||||||||||
Forward starting swap |
Other non-current liabilities | 91 | | | | ||||||||||
Total |
$ | 13,337 | $ | 13,686 | $ | 7,941 | $ | 17,933 | |||||||
F-35
The tables below present gains and losses recognized in OCI for the years ended September 30, 2012, 2011, 2010 and 2009 related to derivative financial instruments designated as cash flow hedges, as well as the amount of gains and losses reclassified into earnings during those periods (in thousands):
|
September 30, 2012 | September 30, 2011 | September 30, 2010 | September 30, 2009 | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Derivative type |
Gain (loss) recognized in OCI |
Gain (loss) reclassified into earnings effective portion |
Gain (loss) recognized in OCI |
Gain (loss) reclassified into earnings effective portion |
Gain (loss) recognized in OCI |
Gain (loss) reclassified into earnings effective portion |
Gain (loss) recognized in OCI |
Gain (loss) reclassified into earnings effective portion |
|||||||||||||||||
Forward currency forwards |
$ | 152 | $ | (4,309 | ) | $ | (5,618 | ) | $ | 3,420 | $ | 1,483 | $ | 1,838 | $ | 112 | $ | 53 | |||||||
Forward starting swap |
91 | | | | | | | | |||||||||||||||||
The amount of gains and losses from derivative instruments and hedging activities classified as not highly effective did not have a material impact on the results of operations for the years ended September 30, 2012, 2011, 2010 and 2009. The amount of estimated unrealized net gains from cash flow hedges which are expected to be reclassified to earnings in the next twelve months is $2.0 million, net of income taxes.
Forward starting swap
In connection with a transportation systems contract that we entered in December 2011, we will incur significant costs to develop the customer's fare collection system before we begin receiving payments under the contract. In order to finance certain of these costs, we plan to issue approximately $83 million of 10-year fixed rate debt on or about January 1, 2014. We are concerned that market interest rates for the 10-year forward period of January 1, 2014 to January 1, 2024 will change through January 1, 2014, exposing the LIBOR benchmark component of each of the 20 projected semi-annual interest cash flows of that future 10-year period to risk of variability. Therefore, in July 2012 we entered a forward-starting 10-year swap contract with a bank to reduce the interest rate variability exposure of the projected interest cash flows. The forward-starting swap has a notional amount of $58.4 million, a termination date of January 1, 2014 and a pay 1.698% fixed rate, receive 3-month LIBOR, with fixed rate payments due semi-annually on the first day each June and December commencing June 1, 2014 through December 2023, floating payments due quarterly on the first day of each quarter commencing March 1, 2014 through December 2023, and floating reset dates 2 days prior to the first day of each calculation period. The swap contracts accrual period, January 1, 2014 to December 1, 2023 is designed to match the tenor of the planned debt issuance.
Foreign currency forwards
In order to limit our exposure to foreign currency exchange rate risk we generally hedge those commitments greater than $50,000 by using foreign currency exchange forward and option contracts that are denominated in currencies other than the functional currency of the subsidiary responsible for the commitment, typically the British pound, Canadian dollar, Singapore dollar, euro, Swedish krona, New Zealand dollar and Australian dollar. These contracts are designed to be effective hedges regardless of the direction or magnitude of any foreign currency exchange rate change, because they result in an equal and opposite income or cost stream that offsets the change in the value of the underlying commitment.
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Note 14Pension, profit sharing and other benefit plans
Deferred compensation plans
Deferred compensation includes amounts due under an arrangement in which participating members of management may elect to defer receiving payment for a portion of their compensation a minimum of five years, or until periods after their respective retirements. We accrue interest on deferred compensation at market rates, until such time as it is paid in full. For the year ended September 30, 2012, the average interest rate used to accrue interest on our deferred compensation was 2.0%.
Defined contribution plans
We have profit sharing and other defined contribution retirement plans that provide benefits for most U.S. employees. Certain of these plans require the company match a portion of eligible employee contributions up to specified limits. These plans also allow for additional company contributions at the discretion of the Board of Directors. In 2012, 2011, 2010 and 2009, more than half of our contributions to these plans were discretionary contributions. Effective October 1, 2010, we adopted a new defined contribution plan for European employees that were formerly eligible for the European defined benefit plan described below. Under this plan, the company matches a portion of the eligible employee contributions up to limits specified in the plan. Company contributions to defined contribution plans aggregated $18.6 million, $18.4 million, $15.9 million and $15.4 million in 2012, 2011, 2010 and 2009, respectively.
Defined benefit pension plans
Certain employees in the U.S. are covered by a noncontributory defined benefit pension plan for which benefits were frozen as of December 31, 2006 (curtailment). The effect of the U.S. plan curtailment is that no new benefits have been accrued after that date. Approximately one-half of our European employees are covered by a contributory defined benefit pension plan for which benefits were frozen as of September 30, 2010. Although the effect of the European plan curtailment is that no new benefits will accrue after September 30, 2010, the plan is a final pay plan, which means that benefits will be adjusted for increases in the salaries of participants until their retirement or departure from the company. U.S. and European employees hired subsequent to the dates of the curtailment of the respective plans are not eligible for participation in the defined benefit plans. In 2010 we recorded a loss on the curtailment of the European plan of $0.7 million, which is reflected in the following disclosures.
Our funding policy for the defined benefit pension plans provides that contributions will be at least equal to the minimum amounts mandated by statutory requirements. Based on our known requirements for the U.S. and U.K. plans, as of September 30, 2012, we expect to make contributions of approximately $4.0 million in 2013. September 30 is used as the measurement date for these plans.
The unrecognized amounts recorded in accumulated other comprehensive income (loss) will be subsequently recognized as net periodic pension cost, consistent with our historical accounting policy for amortizing those amounts. We will recognize actuarial gains and losses that arise in future periods and are not recognized as net periodic pension cost in those periods as increases or decreases in other comprehensive income (loss), net of tax, in the period they arise. We
F-37
adjust actuarial gains and losses recognized in other comprehensive income (loss) as they are subsequently recognized as a component of net periodic pension cost. The unrecognized actuarial gain or loss included in accumulated other comprehensive income (loss) at September 30, 2012 and expected to be recognized in net pension cost during fiscal 2013 is a gain of $0.6 million ($0.4 million net of income tax). No plan assets are expected to be returned to us in 2013.
The projected benefit obligation, accumulated benefit obligation (ABO) and fair value of plan assets for the defined benefit pension plans in which the ABO was in excess of the fair value of plan assets were as follows (in thousands):
|
September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
Projected benefit obligation |
$ | 215,706 | $ | 185,485 | $ | 183,551 | $ | 166,170 | |||||
Accumulated benefit obligation |
209,135 | 180,156 | 178,658 | 149,545 | |||||||||
Fair value of plan assets |
169,323 | 144,319 | 143,696 | 132,408 | |||||||||
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The following table sets forth changes in the projected benefit obligation and fair value of plan assets and the funded status for these defined benefit plans (in thousands):
|
September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
Change in benefit obligations: |
|||||||||||||
Net benefit obligation at the beginning of the year |
$ | 185,485 | $ | 183,551 | $ | 166,170 | $ | 146,725 | |||||
Service cost |
508 | 550 | 4,167 | 2,614 | |||||||||
Interest cost |
9,565 | 9,387 | 9,121 | 9,759 | |||||||||
Actuarial loss (gain) |
22,761 | (1,327 | ) | 9,309 | 16,275 | ||||||||
Plan amendments |
57 | (712 | ) | 214 | | ||||||||
Participant contributions |
| | 1,210 | 1,124 | |||||||||
Gross benefits paid |
(5,928 | ) | (5,236 | ) | (5,562 | ) | (5,197 | ) | |||||
Foreign currency exchange rate changes |
3,258 | (728 | ) | (1,078 | ) | (5,130 | ) | ||||||
Net benefit obligation at the end of the year |
215,706 | 185,485 | 183,551 | 166,170 | |||||||||
Change in plan assets: |
|||||||||||||
Fair value of plan assets at the beginning of the year |
144,319 | 143,696 | 132,408 | 128,989 | |||||||||
Actual return on plan assets |
24,769 | 1,501 | 13,614 | 3,200 | |||||||||
Employer contributions |
4,354 | 5,352 | 3,374 | 9,500 | |||||||||
Participant contributions |
| | 1,210 | 1,123 | |||||||||
Gross benefits paid |
(5,928 | ) | (5,236 | ) | (5,562 | ) | (5,196 | ) | |||||
Administrative expenses |
(657 | ) | (470 | ) | (555 | ) | (701 | ) | |||||
Foreign currency exchange rate changes |
2,466 | (524 | ) | (793 | ) | (4,507 | ) | ||||||
Fair value of plan assets at the end of the year |
169,323 | 144,319 | 143,696 | 132,408 | |||||||||
Unfunded status of the plans |
(46,383 | ) | (41,166 | ) | (39,855 | ) | (33,762 | ) | |||||
Unrecognized net actuarial loss |
52,911 | 45,112 | 39,527 | 35,604 | |||||||||
Net amount recognized |
$ | 6,528 | $ | 3,946 | $ | (328 | ) | $ | 1,842 | ||||
Amounts recognized in Accumulated OCI |
|||||||||||||
Liability adjustment to OCI |
$ | (52,911 | ) | $ | (45,112 | ) | $ | (39,527 | ) | $ | (35,604 | ) | |
Deferred tax asset |
17,440 | 15,226 | 12,926 | 11,716 | |||||||||
Accumulated other comprehensive loss |
$ | (35,471 | ) | $ | (29,886 | ) | $ | (26,601 | ) | $ | (23,888 | ) | |
F-39
The components of net periodic pension cost were as follows (in thousands):
|
Years ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
Service cost |
$ | 508 | $ | 550 | $ | 4,167 | $ | 2,614 | |||||
Interest cost |
9,565 | 9,387 | 9,121 | 9,759 | |||||||||
Expected return on plan assets |
(10,091 | ) | (9,979 | ) | (9,334 | ) | (9,569 | ) | |||||
Amortization of actuarial loss |
1,593 | 985 | 917 | | |||||||||
Curtailment charge |
| | 693 | | |||||||||
Administrative expenses |
82 | 85 | 92 | 100 | |||||||||
Net pension cost |
$ | 1,657 | $ | 1,028 | $ | 5,656 | $ | 2,904 | |||||
|
Years ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 |
2011 |
2010 |
2009 |
|||||||||
Weighted-average assumptions used to determine benefit obligation at September 30: |
|||||||||||||
Discount rate |
4.3% | 5.2% | 5.2% | 5.6% | |||||||||
Rate of compensation increase |
3.8% | 4.3% | 4.3% | 4.5% | |||||||||
Weighted-average assumptions used to determine net periodic benefit cost for the years ended September 30: |
|||||||||||||
Discount rate |
5.2% | 5.2% | 5.6% | 7.3% | |||||||||
Expected return on plan assets |
7.0% | 7.0% | 7.2% | 7.8% | |||||||||
Rate of compensation increase |
4.3% | 4.3% | 4.5% | 4.8% | |||||||||
The long-term rate of return assumption represents the expected average rate of earnings on the funds invested or to be invested to provide for the benefits included in the benefit obligations. That assumption is determined based on a number of factors, including historical market index returns, the anticipated long-term asset allocation of the plans, historical plan return data, plan expenses, and the potential to outperform market index returns.
We have the responsibility to formulate the investment policies and strategies for the plans' assets. Our overall policies and strategies include: maintain the highest possible return commensurate with the level of assumed risk, and preserve benefit security for the plans' participants.
We do not direct the day-to-day operations and selection process of individual securities and investments and, accordingly, we have retained the professional services of investment management organizations to fulfill those tasks. The investment management organizations have investment discretion over the assets placed under their management. We provide each investment manager with specific investment guidelines by asset class.
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The target ranges for each major category of the plans' assets at September 30, 2012 are as follows:
Asset category |
Allocation range |
|
---|---|---|
Equity securities |
40% to 75% | |
Debt securities |
25% to 60% | |
Real estate and cash |
0% to 10% | |
Our defined benefit pension plans invest in cash and cash equivalents, equity securities, fixed income securities, pooled separate accounts and common collective trusts. The following tables present the fair value of the assets of our defined benefit pension plans by asset category and their level within the fair value hierarchy (in thousands). See Note 5 for a description of each level within the fair value hierarchy.
All assets classified as Level 2 or Level 3 in the table below are invested in pooled separate accounts or common collective trusts which do not have publicly quoted prices. The fair value of the pooled separate accounts and common collective trusts are determined based on the net asset value of the underlying investments. The fair value of the underlying investments held by the pooled separate accounts and common collective trusts, other than real estate investments, is generally based upon quoted prices in active markets. The fair value of the underlying investments comprised of real estate properties is determined through an appraisal process which uses valuation methodologies including comparisons to similar real estate and discounting of income streams. For investments in the pooled separate accounts and common collective trusts categorized as Level 2 below, there are no restrictions on the ability of our benefit plans to sell these investments. The investments in pooled separate accounts categorized as Level 3 below may be restricted as to the ability of our benefit plans to sell these investments based upon the availability of cash in the investment holdings at any point in time.
|
September 30, 2012 | September 30, 2011 | September 30, 2010 | September 30, 2009 | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Level 1 |
Level 2 |
Level 3 |
Total |
Level 1 |
Level 2 |
Level 3 |
Total |
Level 1 |
Level 2 |
Level 3 |
Total |
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||||||||||||||||||||||
Cash equivalents |
$ | | $ | 3,991 | $ | | $ | 3,991 | $ | | $ | 2,344 | $ | | $ | 2,344 | $ | | $ | 2,579 | $ | | $ | 2,579 | $ | | $ | 3,678 | $ | | $ | 3,678 | |||||||||||||||||
Equity: |
|||||||||||||||||||||||||||||||||||||||||||||||||
U.S. equity securities |
| 47,242 | | 47,242 | | 39,412 | | 39,412 | | 41,756 | | 41,756 | | 40,529 | | 40,529 | |||||||||||||||||||||||||||||||||
U.K. equity securities |
| 38,542 | | 38,542 | | 31,248 | | 31,248 | | 30,580 | | 30,580 | | 26,939 | | 26,939 | |||||||||||||||||||||||||||||||||
Other foreign equity securities |
| 26,715 | | 26,715 | | 22,444 | | 22,444 | | 22,625 | | 22,625 | | 20,343 | | 20,343 | |||||||||||||||||||||||||||||||||
Fixed Income: |
|||||||||||||||||||||||||||||||||||||||||||||||||
U.S. treasury securities |
| 13,647 | | 13,647 | | 14,679 | | 14,679 | | 15,509 | | 15,509 | | 14,848 | | 14,848 | |||||||||||||||||||||||||||||||||
U.K. treasury securities |
| 3,412 | | 3,412 | | 5,948 | | 5,948 | | 5,659 | | 5,659 | | 4,636 | | 4,636 | |||||||||||||||||||||||||||||||||
Corporate debt securities |
| 29,591 | 569 | 30,160 | 22,832 | 386 | 23,218 | | 20,917 | 552 | 21,469 | | 18,110 | 386 | 18,496 | ||||||||||||||||||||||||||||||||||
Real Estate |
| | 5,614 | 5,614 | | | 5,026 | 5,026 | | | 3,519 | 3,519 | | | 2,939 | 2,939 | |||||||||||||||||||||||||||||||||
Total |
$ | | $ | 163,140 | $ | 6,183 | $ | 169,323 | $ | | $ | 138,907 | $ | 5,412 | $ | 144,319 | $ | | $ | 139,625 | $ | 4,071 | $ | 143,696 | $ | | $ | 129,083 | $ | 3,325 | $ | 132,408 | |||||||||||||||||
F-41
The following table presents the changes in the fair value of plan assets categorized as Level 3 in the preceding table (in thousands):
|
Pooled separate accounts |
|||
---|---|---|---|---|
Balance as of October 1, 2008 |
$ | 7,881 | ||
Realized and unrealized losses, net |
(3,121 | ) | ||
Purchases, sales and settlements, net |
(1,435 | ) | ||
Balance as of September 30, 2009 |
3,325 | |||
Realized and unrealized gains, net |
47 | |||
Purchases, sales and settlements, net |
699 | |||
Balance as of September 30, 2010 |
4,071 | |||
Realized and unrealized gains, net |
633 | |||
Purchases, sales and settlements, net |
708 | |||
Balance as of September 30, 2011 |
5,412 | |||
Realized and unrealized gains, net |
381 | |||
Purchases, sales and settlements, net |
390 | |||
Balance as of September 30, 2012 |
$ | 6,183 | ||
The pension plans held no positions in Cubic Corporation common stock as of September 30, 2012, 2011, 2010 and 2009.
We expect to pay the following pension benefit payments, which reflect expected future service, as appropriate, (in thousands):
2013 |
$ | 6,893 | ||
2014 |
7,295 | |||
2015 |
7,730 | |||
2016 |
8,028 | |||
2017 |
8,487 | |||
2018-2022 |
49,988 | |||
Note 15Other comprehensive income
We present other comprehensive income (OCI) and its components in the statement of changes in shareholders' equity. Accumulated OCI (loss) consisted of the following (in thousands):
|
September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
Adjustment to pension liability |
$ | (35,471 | ) | $ | (29,886 | ) | $ | (26,601 | ) | $ | (23,888 | ) | |
Foreign currency translation |
18,104 | 7,416 | 8,666 | 9,534 | |||||||||
Net unrealized (losses) gains from cash flow hedges |
(3,781 | ) | (4,023 | ) | 1,595 | 112 | |||||||
|
$ | (21,148 | ) | $ | (26,493 | ) | $ | (16,340 | ) | $ | (14,242 | ) | |
F-42
The adjustment to the pension liability is shown net of a tax benefit of $17.4 million, $15.2 million, $12.9 million and $11.7 million at September 30, 2012, 2011, 2010 and 2009, respectively. Deferred income taxes are not recognized for translation-related temporary differences of foreign subsidiaries whose undistributed earnings are considered to be permanently invested.
Note 16Legal matters
In 1997, the Ministry of Defense for the Armed Forces of the Islamic Republic of Iran obtained a U.S. District Court judgment enforcing an arbitration award in its favor against us of $2.8 million, plus arbitration costs and interest related to a contract awarded to us by Iran in 1977. Both parties appealed to the 9th Circuit Court of Appeals. In December 2011, a decision was handed down upholding the arbitration award and requiring the district court to resolve outstanding issues related to the amount of interest to be paid and whether the plaintiff should be awarded attorney's fees. Under a 1979 Presidential executive order, all transactions by United States citizens with Iran are prohibited; however, in April 2012 we received a license from the U.S. Treasury Department allowing us to remit the arbitration award and related post-judgment interest owed totaling $8.8 million to the U.S. District Court on April 18, 2012. We had recorded a liability for the judgment amount in periods prior to 2012 and had accrued interest through the date of the payment, so there was no impact on 2012 earnings related to this matter other than interest accrued of $0.2 million. We are unable to determine whether the U.S. District Court will award additional pre-judgment interest, which the plaintiff has asserted should be $1.4 million, or reimbursement to the plaintiff for attorney's fees amounting to $0.1 million, because these are discretionary with the court. Therefore, we have not recorded a liability for these amounts as of September 30, 2012. The District Court heard argument from both parties on September 24, 2012 and we are awaiting their decision.
In November 2011, we received a claim from a public transit authority customer which alleges that the authority incurred a loss of transit revenue due to the inappropriate and illegal actions of one of our former employees, who has plead guilty to the charges. This individual was employed to work on a contract we acquired in a business combination in 2009 and had allegedly been committing these illegal acts from almost two years prior to our acquisition of the contract, until his arrest in May 2011. The transit system was designed and installed by a company unrelated to us. The claim seeks recoupment from us of the alleged lost revenue and an unspecified amount of fees and damages. In March 2012, the county superior court entered a default judgment against our former employee and others for $2.9 million based upon the estimated loss of revenue by the public transit authority customer. In the quarter ended March 31, 2012, we recorded an accrued cost of $2.9 million within general and administrative expense in the transportation systems segment based upon the court's assessment of these losses. We are currently unable to estimate the amount of any other fees or damages related to this matter in excess of the amount that has been recorded through September 30, 2012. Insurance may cover all, or a portion, of any losses we could ultimately incur for this matter. However, any potential insurance proceeds are treated as a gain contingency and will not be recognized in the financial statements until receipt of any such proceeds is assured.
We are not a party to any other material pending proceedings and we consider all other matters to be ordinary proceedings incidental to the business. We believe the outcome of these
F-43
other proceedings will not have a materially adverse effect on our financial position, results of operations, or cash flows.
Note 17Business segment information
We have three primary business segments: Cubic Transportation Systems (CTS), Cubic Defense Systems (CDS) and Mission Support Services (MSS). CTS designs, produces, installs and services electronic revenue collection systems for mass transit projects, including railways and buses. CDS performs work under U.S. and foreign government contracts relating to electronic defense systems and equipment. Products include customized military range instrumentation, laser based training systems, virtual simulation systems, communications products including datalinks, power amplifiers, avionics systems, multi-band communication tracking devices, and cross domain hardware solutions to address multi-level security requirements. MSS provides training, operations, intelligence, maintenance, technical and other services to the U.S. government and allied nations.
We evaluate performance and allocate resources based on total segment operating profit or loss. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Intersegment sales and transfers are immaterial and are eliminated in consolidation.
Our reportable segments are business units that offer different products and services and are each managed separately. Operating results for each segment are reported separately to senior corporate management to make decisions as to the allocation of corporate resources and to assess performance.
F-44
Business segment financial data is as follows (in millions):
|
Years ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
Sales: |
|||||||||||||
Transportation Systems |
$ | 513.6 | $ | 427.1 | $ | 383.0 | $ | 314.3 | |||||
Defense Systems |
375.4 | 390.7 | 368.2 | 287.5 | |||||||||
Mission Support Services |
491.4 | 476.5 | 444.9 | 420.6 | |||||||||
Other |
1.1 | 1.3 | 2.1 | 3.5 | |||||||||
Total sales |
$ | 1,381.5 | $ | 1,295.6 | $ | 1,198.2 | $ | 1,025.9 | |||||
Operating income: |
|||||||||||||
Transportation Systems |
$ | 76.3 | $ | 66.9 | $ | 51.8 | 56.4 | ||||||
Defense Systems |
34.6 | 29.8 | 31.6 | 19.9 | |||||||||
Mission Support Services |
21.9 | 23.9 | 27.9 | 25.9 | |||||||||
Unallocated corporate expenses and other |
(4.8 | ) | (7.1 | ) | (4.7 | ) | (6.3 | ) | |||||
Total operating income |
$ | 128.0 | $ | 113.5 | $ | 106.6 | $ | 95.9 | |||||
Assets: |
|||||||||||||
Transportation Systems |
$ | 269.9 | $ | 169.8 | $ | 163.1 | $ | 173.1 | |||||
Defense Systems |
122.5 | 144.0 | 161.7 | 162.7 | |||||||||
Mission Support Services |
212.8 | 213.0 | 124.1 | 141.2 | |||||||||
Corporate and other |
421.1 | 439.7 | 422.6 | 286.6 | |||||||||
Total assets |
$ | 1,026.3 | $ | 966.5 | $ | 871.5 | $ | 763.6 | |||||
Depreciation and amortization: |
|||||||||||||
Transportation Systems |
$ | 3.7 | $ | 3.6 | $ | 3.5 | $ | 2.4 | |||||
Defense Systems |
5.5 | 5.4 | 4.8 | 6.0 | |||||||||
Mission Support Services |
12.5 | 12.3 | 5.2 | 6.2 | |||||||||
Corporate and other |
1.2 | 1.0 | 1.0 | 1.0 | |||||||||
Total depreciation and amortization |
$ | 22.9 | $ | 22.3 | $ | 14.5 | $ | 15.6 | |||||
Expenditures for long-lived assets: |
|||||||||||||
Transportation Systems |
$ | 2.7 | $ | 2.2 | $ | 1.8 | $ | 1.2 | |||||
Defense Systems |
8.9 | 5.5 | 4.4 | 3.3 | |||||||||
Mission Support Services |
1.1 | 0.3 | 0.3 | | |||||||||
Corporate and other |
1.5 | 0.7 | 0.4 | 0.8 | |||||||||
Total expenditures for long-lived assets |
$ | 14.2 | $ | 8.7 | $ | 6.9 | $ | 5.3 | |||||
F-45
|
Years ended September 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2012 |
2011 |
2010 |
2009 |
|||||||||
|
|
(As restated) |
(As restated) |
(As restated) |
|||||||||
Geographic Information: |
|||||||||||||
Sales(a): |
|||||||||||||
United States |
$ | 729.5 | $ | 754.0 | $ | 790.9 | $ | 654.6 | |||||
United Kingdom |
273.1 | 244.0 | 200.3 | 196.9 | |||||||||
Canada |
54.9 | 27.5 | 9.4 | 18.7 | |||||||||
Australia |
182.5 | 101.1 | 56.3 | 41.3 | |||||||||
Middle East |
30.8 | 35.4 | 27.9 | 19.2 | |||||||||
Far East |
56.4 | 82.7 | 85.5 | 63.9 | |||||||||
Other |
47.1 | 50.9 | 27.9 | 31.3 | |||||||||
Total sales |
$ | 1,381.5 | $ | 1,295.6 | $ | 1,198.2 | $ | 1,025.9 | |||||
Long-lived assets, net: |
|||||||||||||
United States |
$ | 42.4 | $ | 40.5 | $ | 41.3 | $ | 43.7 | |||||
United Kingdom |
9.5 | 9.1 | 9.5 | 10.2 | |||||||||
Other foreign countries |
6.1 | 2.9 | 2.2 | 2.0 | |||||||||
Total long-lived assets, net |
$ | 58.0 | $ | 52.5 | $ | 53.0 | $ | 55.9 | |||||
(a) Sales are attributed to countries or regions based on the location of product or service delivery to customers.
MSS and CDS segment sales include $685.5 million, $728.2 million, $679.4 million and $608.4 million in 2012, 2011, 2010 and 2009, respectively, of sales to U.S. government agencies. CTS segment sales include $178.7 million, $170.2 million, $144.2 million and $115.2 million in 2012, 2011, 2010 and 2009, respectively, of sales under various contracts with our customer, TfL. No other customer accounts for 10% or more of our revenues for any periods presented.
Note 18Summary of quarterly results of operations (unaudited)
The following is a summary of our quarterly results of operations for the years ended September 30, 2012 and 2011:
|
Three months ended | |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Fiscal 2012 (in thousands, except per share data) |
Year ended September 30 |
|||||||||||||||
September 30 |
June 30 |
March 31 |
December 31 |
|||||||||||||
|
|
|
(As restated) |
(As restated) |
|
|||||||||||
Net sales |
$ | 359,687 | $ | 365,397 | $ | 339,645 | $ | 316,766 | $ | 1,381,495 | ||||||
Operating income |
29,142 | 38,586 | 32,540 | 27,754 | 128,022 | |||||||||||
Net income attributable to Cubic |
21,088 | 26,721 | 23,397 | 20,694 | 91,900 | |||||||||||
Net income per share |
0.79 | 1.00 | 0.88 | 0.77 | 3.44 | |||||||||||
F-46
|
Three months ended | |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Fiscal 2011 (in thousands, except per share data) |
Year ended September 30 |
|||||||||||||||
September 30 |
June 30 |
March 31 |
December 31 |
|||||||||||||
|
(As restated) |
(As restated) |
(As restated) |
(As restated) |
(As restated) |
|||||||||||
Net sales |
$ | 343,021 | $ | 322,787 | $ | 347,889 | $ | 281,884 | $ | 1,295,581 | ||||||
Operating income |
19,688 | 27,790 | 40,610 | 25,420 | 113,508 | |||||||||||
Net income attributable to Cubic |
14,625 | 22,050 | 28,785 | 18,134 | 83,594 | |||||||||||
Net income per share |
0.55 | 0.82 | 1.08 | 0.68 | 3.13 | |||||||||||
The following tables present the effects of adjustments made to our previously reported unaudited consolidated quarterly financial information for the quarters ended March 31, 2012, December 31, 2011, and each of the quarters in the years ended September 30, 2011. For further information regarding these adjustments, see Note 2.
For the three month periods ended September 30, 2011, and June 30, 2011, $5.0 million and $8.9 million, respectively, of costs were erroneously classified as product costs. As such, these costs were reclassified to service costs in the following tables.
F-47
|
Consolidated statement of income Three months ended September 30, 2011 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(amounts in thousands, except per share data) |
Previously reported |
Revenue recognition adjustments |
Other adjustments |
Reclassifications |
As restated |
|||||||||||
Net sales: |
||||||||||||||||
Products |
$ | 177,762 | $ | (4,582 | ) | $ | 3,733 | $ | (4,834 | ) | $ | 172,079 | ||||
Services |
169,148 | (3,690 | ) | 650 | 4,834 | 170,942 | ||||||||||
|
346,910 | (8,272 | ) | 4,383 | | 343,021 | ||||||||||
Costs and expenses: |
||||||||||||||||
Products |
127,070 | 2,048 | 2,978 | (9,907 | ) | 122,189 | ||||||||||
Services |
134,285 | 505 | 646 | 9,021 | 144,457 | |||||||||||
Selling, general and administrative |
43,724 | | 550 | 886 | 45,160 | |||||||||||
Research and development |
7,453 | | | | 7,453 | |||||||||||
Amortization of purchased intangibles |
4,074 | | | | 4,074 | |||||||||||
|
316,606 | 2,553 | 4,174 | | 323,333 | |||||||||||
Operating income |
30,304 | (10,825 | ) | 209 | | 19,688 | ||||||||||
Other income (expense): |
||||||||||||||||
Interest and dividend income |
839 | | | | 839 | |||||||||||
Interest expense |
(306 | ) | | | | (306 | ) | |||||||||
Other income (expense)net |
3,681 | (48 | ) | (1,509 | ) | | 2,124 | |||||||||
Income before income taxes |
34,518 | (10,873 | ) | (1,300 | ) | | 22,345 | |||||||||
Income taxes |
10,369 | (3,028 | ) | 330 | | 7,671 | ||||||||||
Net income |
24,149 | (7,845 | ) | (1,630 | ) | | 14,674 | |||||||||
Less noncontrolling interest in income of VIE |
49 |
|
|
|
49 |
|||||||||||
Net income attributable to Cubic |
$ | 24,100 | $ | (7,845 | ) | $ | (1,630 | ) | $ | | $ | 14,625 | ||||
Basic and diluted net income per common share |
$ | 0.90 | $ | (0.29 | ) | $ | (0.06 | ) | $ | | $ | 0.55 | ||||
Average number of common shares outstanding |
26,736 | | | | 26,736 | |||||||||||
F-48
|
Consolidated statement of income Three months ended June 30, 2011 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(amounts in thousands, except per share data) |
Previously reported |
Revenue recognition adjustments |
Other adjustments |
Reclassifications |
As restated |
|||||||||||
Net sales: |
||||||||||||||||
Products |
$ | 148,441 | $ | (3,037 | ) | $ | 321 | $ | (3,670 | ) | $ | 142,055 | ||||
Services |
171,464 | 5,598 | | 3,670 | 180,732 | |||||||||||
|
319,905 | 2,561 | 321 | | 322,787 | |||||||||||
Costs and expenses: |
||||||||||||||||
Products |
114,325 | 487 | 722 | (14,048 | ) | 101,486 | ||||||||||
Services |
131,424 | 341 | | 13,227 | 144,992 | |||||||||||
Selling, general and administrative |
36,831 | | 329 | 821 | 37,981 | |||||||||||
Research and development |
6,281 | | | | 6,281 | |||||||||||
Amortization of purchased intangibles |
4,257 | | | | 4,257 | |||||||||||
|
293,118 | 828 | 1,051 | | 294,997 | |||||||||||
Operating income |
26,787 | 1,733 | (730 | ) | | 27,790 | ||||||||||
Other income (expense): |
||||||||||||||||
Interest and dividend income |
490 | | | | 490 | |||||||||||
Interest expense |
(374 | ) | | | | (374 | ) | |||||||||
Other income (expense)net |
767 | (44 | ) | 509 | | 1,232 | ||||||||||
Income before income taxes |
27,670 | 1,689 | (221 | ) | | 29,138 | ||||||||||
Income taxes |
6,800 | 443 | (211 | ) | | 7,032 | ||||||||||
Net income |
20,870 | 1,246 | (10 | ) | | 22,106 | ||||||||||
Less noncontrolling interest in income of VIE |
56 | | | | 56 | |||||||||||
Net income attributable to Cubic |
$ | 20,814 | $ | 1,246 | $ | (10 | ) | $ | | $ | 22,050 | |||||
Basic and diluted net income per common share |
$ | 0.78 | $ | 0.05 | $ | | $ | | $ | 0.82 | ||||||
Average number of common shares outstanding |
26,736 | | | | 26,736 | |||||||||||
F-49
|
Consolidated statement of income Three months ended March 31, 2012 |
Consolidated statement of income Three months ended March 31, 2011 |
|||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(amounts in thousands, except per share data) |
Previously reported |
Revenue recognition adjustments |
Other adjustments |
Reclassifications |
As restated |
Previously reported |
Revenue recognition adjustments |
Other adjustments |
Reclassifications |
As restated |
|||||||||||||||||||||
Net sales: |
|||||||||||||||||||||||||||||||
Products |
$ | 157,630 | $ | (2,026 | ) | $ | 172 | $ | | $ | 155,776 | $ | 157,350 | $ | (2,052 | ) | $ | 82 | $ | | $ | 155,380 | |||||||||
Services |
183,364 | 505 | | | 183,869 | 176,618 | 15,891 | | | 192,509 | |||||||||||||||||||||
|
340,994 | (1,521 | ) | 172 | | 339,645 | 333,968 | 13,839 | 82 | | 347,889 | ||||||||||||||||||||
Costs and expenses: |
|||||||||||||||||||||||||||||||
Products |
106,679 | 435 | 370 | (800 | ) | 106,684 | 106,510 | 928 | (86 | ) | (539 | ) | 106,813 | ||||||||||||||||||
Services |
145,787 | (145 | ) | | | 145,642 | 152,453 | (84 | ) | | | 152,369 | |||||||||||||||||||
Selling, general and administrative |
43,029 | | (790 | ) | 800 | 43,039 | 37,377 | | 598 | 539 | 38,514 | ||||||||||||||||||||
Research and development |
8,072 | | | | 8,072 | 5,271 | | | | 5,271 | |||||||||||||||||||||
Amortization of purchased intangibles |
3,668 | | | | 3,668 | 4,312 | | | | 4,312 | |||||||||||||||||||||
|
307,235 | 290 | (420 | ) | | 307,105 | 305,923 | 844 | 512 | | 307,279 | ||||||||||||||||||||
Operating income |
33,759 | (1,811 | ) | 592 | | 32,540 | 28,045 | 12,995 | (430 | ) | | 40,610 | |||||||||||||||||||
Other income (expense): |
|||||||||||||||||||||||||||||||
Interest and dividend income |
964 | | | | 964 | 375 | | | | 375 | |||||||||||||||||||||
Interest expense |
(331 | ) | | | | (331 | ) | (374 | ) | | | | (374 | ) | |||||||||||||||||
Other income (expense)net |
12 | (55 | ) | 165 | | 122 | (16 | ) | (39 | ) | (431 | ) | | (486 | ) | ||||||||||||||||
Income before income taxes |
34,404 | (1,866 | ) | 757 | | 33,295 | 28,030 | 12,956 | (861 | ) | | 40,125 | |||||||||||||||||||
Income taxes |
10,100 | (678 | ) | 425 | | 9,847 | 8,000 | 3,487 | (231 | ) | | 11,256 | |||||||||||||||||||
Net income |
24,304 | (1,188 | ) | 332 | | 23,448 | 20,030 | 9,469 | (630 | ) | | 28,869 | |||||||||||||||||||
Less noncontrolling interest in income of VIE |
51 | | | | 51 | 84 | | | | 84 | |||||||||||||||||||||
Net income attributable to Cubic |
$ | 24,253 | $ | (1,188 | ) | $ | 332 | $ | | $ | 23,397 | $ | 19,946 | $ | 9,469 | $ | (630 | ) | $ | | $ | 28,785 | |||||||||
Basic and diluted net income per common share |
$ | 0.91 | $ | (0.04 | ) | $ | 0.01 | $ | | $ | 0.88 | $ | 0.75 | $ | 0.35 | $ | (0.02 | ) | $ | | $ | 1.08 | |||||||||
Average number of common shares outstanding |
26,736 | | | | 26,736 | 26,736 | | | | 26,736 | |||||||||||||||||||||
F-50
|
Consolidated statement of income Three months ended December 31, 2011 |
Consolidated statement of income Three months ended December 31, 2010 |
|||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(amounts in thousands, except per share data) |
Previously reported |
Revenue recognition adjustments |
Other adjustments |
Reclassifications |
As restated |
Previously reported |
Revenue recognition adjustments |
Other adjustments |
Reclassifications |
As restated |
|||||||||||||||||||||
Net sales: |
|||||||||||||||||||||||||||||||
Products |
$ | 157,312 | $ | (3,153 | ) | $ | (849 | ) | $ | | $ | 153,310 | $ | 135,371 | $ | (1,173 | ) | $ | (2,779 | ) | $ | | $ | 131,419 | |||||||
Services |
161,435 | 2,671 | (650 | ) | | 163,456 | 149,049 | 1,416 | | | 150,465 | ||||||||||||||||||||
|
318,747 | (482 | ) | (1,499 | ) | | 316,766 | 284,420 | 243 | (2,779 | ) | | 281,884 | ||||||||||||||||||
Costs and expenses: |
|||||||||||||||||||||||||||||||
Products |
114,751 | 434 | (954 | ) | (782 | ) | 113,449 | 90,087 | 701 | (2,567 | ) | (430 | ) | 87,791 | |||||||||||||||||
Services |
132,243 | (189 | ) | (646 | ) | | 131,408 | 121,811 | 433 | | | 122,244 | |||||||||||||||||||
Selling, general and administrative |
34,637 | | (199 | ) | 782 | 35,220 | 37,030 | | 676 | 430 | 38,136 | ||||||||||||||||||||
Research and development |
4,896 | | | | 4,896 | 6,255 | | | | 6,255 | |||||||||||||||||||||
Amortization of purchased intangibles |
4,039 | | | | 4,039 | 2,038 | | | | 2,038 | |||||||||||||||||||||
|
290,566 | 245 | (1,799 | ) | | 289,012 | 257,221 | 1,134 | (1,891 | ) | | 256,464 | |||||||||||||||||||
Operating income |
28,181 | (727 | ) | 300 | | 27,754 | 27,199 | (891 | ) | (888 | ) | | 25,420 | ||||||||||||||||||
Other income (expense): |
|||||||||||||||||||||||||||||||
Interest and dividend income |
762 | | | | 762 | 864 | | | | 864 | |||||||||||||||||||||
Interest expense |
(347 | ) | | | | (347 | ) | (407 | ) | | | | (407 | ) | |||||||||||||||||
Other income (expense)net |
1,691 | (51 | ) | (717 | ) | | 923 | (227 | ) | (40 | ) | (941 | ) | | (1,208 | ) | |||||||||||||||
Income before income taxes |
30,287 | (778 | ) | (417 | ) | | 29,092 | 27,429 | (931 | ) | (1,829 | ) | | 24,669 | |||||||||||||||||
Income taxes |
8,800 | (338 | ) | (109 | ) | | 8,353 | 7,400 | (382 | ) | (604 | ) | | 6,414 | |||||||||||||||||
Net income |
21,487 | (440 | ) | (308 | ) | | 20,739 | 20,029 | (549 | ) | (1,225 | ) | | 18,255 | |||||||||||||||||
Less noncontrolling interest in income of VIE |
45 | | | | 45 | 121 | | | | 121 | |||||||||||||||||||||
Net income attributable to Cubic |
$ | 21,442 | $ | (440 | ) | $ | (308 | ) | $ | | $ | 20,694 | $ | 19,908 | $ | (549 | ) | $ | (1,225 | ) | $ | | $ | 18,134 | |||||||
Basic and diluted net income per common share |
$ | 0.80 | $ | (0.02 | ) | $ | (0.01 | ) | $ | | $ | 0.77 | $ | 0.74 | $ | (0.02 | ) | $ | (0.05 | ) | $ | | $ | 0.68 | |||||||
Average number of common shares outstanding |
26,736 | | | | 26,736 | 26,736 | | | | 26,736 | |||||||||||||||||||||
F-51
Note 19Subsequent Events (unaudited)
On January 24, 2013 we acquired all of the outstanding capital stock of NextBus, Inc. as well as certain contracts that were owned by the former owner of NextBus, for cash of $20.7 million. NextBus provides real-time passenger information systems to transit agencies.
On March 12, 2013, we entered into a Note Purchase and Private Shelf Agreement with Prudential Investment Management, Inc. and certain of Prudential's affiliates (collectively, the "Purchasers"). Pursuant to the agreement, we agreed to issue and sell to the Purchasers $50,000,000 aggregate principal of Series A Notes and $50,000,000 aggregate principal of Series B Notes. The Series A Notes and the Series B Notes are senior unsecured notes, bear interest at a rate of 3.35% and mature on March 12, 2025. The Series A Notes were purchased by certain of the Purchasers on March 12, 2013 and the Series B Notes will be purchased by such Purchasers on or about April 23, 2013, subject to the satisfaction of the closing conditions. In addition, pursuant to the agreement, we may from time to time issue and sell, and the Purchasers may in their sole discretion purchase, within the next three years, additional senior notes in aggregate principal amount of up to $25,000,000 that will have terms, including interest rate, as we and the Purchasers may agree upon at the time of issuance.
F-52
INCOME TAXES (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
|
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Income Taxes | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant components of the provision for income taxes | Significant components of the provision for income taxes are as follows:
|
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Significant components of deferred tax assets and liabilities |
|
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Reconciliation of income tax computed at the U.S. federal statutory tax rate to income tax expense |
|
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Net changes in the liability for unrecognized tax benefits |
|
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Components of income before income taxes | Income before income taxes includes the following components (in thousands):
|
INVENTORIES (Details) (USD $)
|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
Sep. 30, 2009
|
---|---|---|---|---|
INVENTORIES | ||||
Finished products | $ 55,000 | |||
Work in process and inventoried costs under long-term contracts | 78,796,000 | 71,855,000 | 79,529,000 | 105,460,000 |
Customer advances | (27,288,000) | (34,582,000) | (41,575,000) | (49,734,000) |
Materials and purchased parts | 858,000 | 1,086,000 | 2,699,000 | 1,824,000 |
Net inventories | 52,366,000 | 38,359,000 | 40,653,000 | 57,605,000 |
Costs incurred outside the scope of work or in advance of a contract award | 1,900,000 | 1,200,000 | 100,000 | 900,000 |
General and administrative amounts for certain government contracts remaining in inventory | $ 4,700,000 | $ 4,800,000 | $ 4,000,000 | $ 5,000,000 |
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (Details 2) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 12 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Jun. 30, 2012
|
Mar. 31, 2012
|
Dec. 31, 2011
|
Sep. 30, 2011
|
Jun. 30, 2011
|
Mar. 31, 2011
|
Dec. 31, 2010
|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
Sep. 30, 2009
|
|
Net sales: | ||||||||||||
Products | $ 155,776 | $ 153,310 | $ 172,079 | $ 142,055 | $ 155,380 | $ 131,419 | $ 663,287 | $ 600,933 | $ 607,756 | $ 508,167 | ||
Services | 183,869 | 163,456 | 170,942 | 180,732 | 192,509 | 150,465 | 718,208 | 694,648 | 590,436 | 517,757 | ||
Total net sales | 359,687 | 365,397 | 339,645 | 316,766 | 343,021 | 322,787 | 347,889 | 281,884 | 1,381,495 | 1,295,581 | 1,198,192 | 1,025,924 |
Costs and expenses: | ||||||||||||
Products | 106,684 | 113,449 | 122,189 | 101,486 | 106,813 | 87,791 | 451,573 | 418,279 | 430,417 | 378,052 | ||
Services | 145,642 | 131,408 | 144,457 | 144,992 | 152,369 | 122,244 | 594,662 | 564,062 | 511,014 | 418,292 | ||
Selling, general and administrative | 43,039 | 35,220 | 45,160 | 37,981 | 38,514 | 38,136 | 163,688 | 159,791 | 124,306 | 119,108 | ||
Research and development | 8,072 | 4,896 | 7,453 | 6,281 | 5,271 | 6,255 | 28,722 | 25,260 | 18,976 | 8,173 | ||
Amortization of purchased intangibles | 3,668 | 4,039 | 4,074 | 4,257 | 4,312 | 2,038 | 14,828 | 14,681 | 6,846 | 6,432 | ||
Total costs and expenses | 307,105 | 289,012 | 323,333 | 294,997 | 307,279 | 256,464 | 1,253,473 | 1,182,073 | 1,091,559 | 930,057 | ||
Operating income | 29,142 | 38,586 | 32,540 | 27,754 | 19,688 | 27,790 | 40,610 | 25,420 | 128,022 | 113,508 | 106,633 | 95,867 |
Other income (expense): | ||||||||||||
Interest and dividend income | 964 | 762 | 839 | 490 | 375 | 864 | 2,994 | 2,568 | 1,590 | 1,664 | ||
Interest expense | (331) | (347) | (306) | (374) | (374) | (407) | (1,550) | (1,461) | (1,755) | (2,031) | ||
Other income (expense) - net | 122 | 923 | 2,124 | 1,232 | (486) | (1,208) | 821 | 1,662 | 3,637 | 661 | ||
Income before income taxes | 33,295 | 29,092 | 22,345 | 29,138 | 40,125 | 24,669 | 130,287 | 116,277 | 110,105 | 96,161 | ||
Income taxes | 9,847 | 8,353 | 7,671 | 7,032 | 11,256 | 6,414 | 38,183 | 32,373 | 38,011 | 33,016 | ||
Net income | 23,448 | 20,739 | 14,674 | 22,106 | 28,869 | 18,255 | 92,104 | 83,904 | 72,094 | 63,145 | ||
Less noncontrolling interest in income of VIE | 51 | 45 | 49 | 56 | 84 | 121 | 204 | 310 | ||||
Net income attributable to Cubic | 21,088 | 26,721 | 23,397 | 20,694 | 14,625 | 22,050 | 28,785 | 18,134 | 91,900 | 83,594 | 72,094 | 63,145 |
Basic and diluted net income per common share (in dollars per share) | $ 0.79 | $ 1.00 | $ 0.88 | $ 0.77 | $ 0.55 | $ 0.82 | $ 1.08 | $ 0.68 | $ 3.44 | $ 3.13 | $ 2.70 | $ 2.36 |
Basic average number of common shares outstanding (in shares) | 26,736 | 26,736 | 26,736 | 26,736 | 26,736 | 26,736 | 26,736 | 26,736 | 26,735 | 26,731 | ||
Diluted average number of common shares outstanding (in shares) | 26,736 | 26,736 | 26,736 | 26,736 | 26,736 | 26,736 | 26,736 | 26,736 | 26,735 | 26,731 | ||
Revenue Recognition Adjustments
|
||||||||||||
Net sales: | ||||||||||||
Products | (2,026) | (3,153) | (4,582) | (3,037) | (2,052) | (1,173) | (10,844) | 239 | (7,505) | |||
Services | 505 | 2,671 | (3,690) | 5,598 | 15,891 | 1,416 | 19,215 | 1,971 | 21,549 | |||
Total net sales | (1,521) | (482) | (8,272) | 2,561 | 13,839 | 243 | 8,371 | 2,210 | 14,044 | |||
Costs and expenses: | ||||||||||||
Products | 435 | 434 | 2,048 | 487 | 928 | 701 | 4,164 | 678 | (2,004) | |||
Services | (145) | (189) | 505 | 341 | (84) | 433 | 1,195 | 1,306 | 1,850 | |||
Total costs and expenses | 290 | 245 | 2,553 | 828 | 844 | 1,134 | 5,359 | 1,984 | (154) | |||
Operating income | (1,811) | (727) | (10,825) | 1,733 | 12,995 | (891) | 3,012 | 226 | 14,198 | |||
Other income (expense): | ||||||||||||
Other income (expense) - net | (55) | (51) | (48) | (44) | (39) | (40) | (171) | (95) | (20) | |||
Income before income taxes | (1,866) | (778) | (10,873) | 1,689 | 12,956 | (931) | 2,841 | 131 | 14,178 | |||
Income taxes | (678) | (338) | (3,028) | 443 | 3,487 | (382) | 520 | 100 | 4,278 | |||
Net income | (1,188) | (440) | (7,845) | 1,246 | 9,469 | (549) | 2,321 | 31 | 9,900 | |||
Less noncontrolling interest in income of VIE | 310,000 | |||||||||||
Net income attributable to Cubic | (1,188) | (440) | (7,845) | 1,246 | 9,469 | (549) | 2,321 | 31 | 9,900 | |||
Basic and diluted net income per common share (in dollars per share) | $ (0.04) | $ (0.02) | $ (0.29) | $ 0.05 | $ 0.35 | $ (0.02) | $ 0.09 | $ 0.00 | $ 0.37 | |||
Other Adjustments
|
||||||||||||
Net sales: | ||||||||||||
Products | 172 | (849) | 3,733 | 321 | 82 | (2,779) | 1,357 | 147 | (992) | |||
Services | (650) | 650 | 650 | 1,646 | (3,785) | |||||||
Total net sales | 172 | (1,499) | 4,383 | 321 | 82 | (2,779) | 2,007 | 1,793 | (4,777) | |||
Costs and expenses: | ||||||||||||
Products | 370 | (954) | 2,978 | 722 | (86) | (2,567) | 1,047 | (90) | (839) | |||
Services | (646) | 646 | 646 | (2,139) | ||||||||
Selling, general and administrative | (790) | (199) | 550 | 329 | 598 | 676 | 2,153 | 1,001 | 1,240 | |||
Total costs and expenses | (420) | (1,799) | 4,174 | 1,051 | 512 | (1,891) | 3,846 | 911 | (1,738) | |||
Operating income | 592 | 300 | 209 | (730) | (430) | (888) | (1,839) | 882 | (3,039) | |||
Other income (expense): | ||||||||||||
Other income (expense) - net | 165 | (717) | (1,509) | 509 | (431) | (941) | (2,372) | 3,171 | (218) | |||
Income before income taxes | 757 | (417) | (1,300) | (221) | (861) | (1,829) | (4,211) | 4,053 | (3,257) | |||
Income taxes | 425 | (109) | 330 | (211) | (231) | (604) | (716) | 2,626 | (816) | |||
Net income | 332 | (308) | (1,630) | (10) | (630) | (1,225) | (3,495) | 1,427 | (2,441) | |||
Net income attributable to Cubic | 332 | (308) | (1,630) | (10) | (630) | (1,225) | (3,495) | 1,427 | (2,441) | |||
Basic and diluted net income per common share (in dollars per share) | $ 0.01 | $ (0.01) | $ (0.06) | $ (0.02) | $ (0.05) | $ (0.13) | $ 0.06 | $ (0.09) | ||||
Reclassifications
|
||||||||||||
Net sales: | ||||||||||||
Products | (4,834) | (3,670) | (8,504) | (29,369) | (10,215) | |||||||
Services | 4,834 | 3,670 | 8,504 | 29,369 | 10,215 | |||||||
Costs and expenses: | ||||||||||||
Products | (800) | (782) | (9,907) | (14,048) | (539) | (430) | (24,924) | (27,822) | 13,583 | |||
Services | 9,021 | 13,227 | 22,248 | 25,365 | 7,543 | |||||||
Selling, general and administrative | 800 | 782 | 886 | 821 | 539 | 430 | 2,676 | 2,457 | 6,040 | |||
Previously Reported
|
||||||||||||
Net sales: | ||||||||||||
Products | 157,630 | 157,312 | 177,762 | 148,441 | 157,350 | 135,371 | 618,924 | 636,739 | 526,879 | |||
Services | 183,364 | 161,435 | 169,148 | 171,464 | 176,618 | 149,049 | 666,279 | 557,450 | 489,778 | |||
Total net sales | 340,994 | 318,747 | 346,910 | 319,905 | 333,968 | 284,420 | 1,285,203 | 1,194,189 | 1,016,657 | |||
Costs and expenses: | ||||||||||||
Products | 106,679 | 114,751 | 127,070 | 114,325 | 106,510 | 90,087 | 437,992 | 457,651 | 39,478 | |||
Services | 145,787 | 132,243 | 134,285 | 131,424 | 152,453 | 121,811 | 539,973 | 484,343 | 411,038 | |||
Selling, general and administrative | 43,029 | 34,637 | 43,724 | 36,831 | 37,377 | 37,030 | 154,962 | 120,848 | 111,828 | |||
Research and development | 8,072 | 4,896 | 7,453 | 6,281 | 5,271 | 6,255 | 25,260 | 18,976 | 8,173 | |||
Amortization of purchased intangibles | 3,668 | 4,039 | 4,074 | 4,257 | 4,312 | 2,038 | 14,681 | 6,846 | 6,432 | |||
Total costs and expenses | 307,235 | 290,566 | 316,606 | 293,118 | 305,923 | 257,221 | 1,172,868 | 1,088,664 | 931,949 | |||
Operating income | 33,759 | 28,181 | 30,304 | 26,787 | 28,045 | 27,199 | 112,335 | 105,525 | 84,708 | |||
Other income (expense): | ||||||||||||
Interest and dividend income | 964 | 762 | 839 | 490 | 375 | 864 | 2,568 | 1,590 | 1,664 | |||
Interest expense | (331) | (347) | (306) | (374) | (374) | (407) | (1,461) | (1,755) | (2,031) | |||
Other income (expense) - net | 12 | 1,691 | 3,681 | 767 | (16) | (227) | 4,205 | 561 | 899 | |||
Income before income taxes | 34,404 | 30,287 | 34,518 | 27,670 | 28,030 | 27,429 | 117,647 | 105,921 | 85,240 | |||
Income taxes | 10,100 | 8,800 | 10,369 | 6,800 | 8,000 | 7,400 | 32,569 | 35,285 | 29,554 | |||
Net income | 24,304 | 21,487 | 24,149 | 20,870 | 20,030 | 20,029 | 85,078 | 70,636 | 55,686 | |||
Less noncontrolling interest in income of VIE | 51 | 45 | 49 | 56 | 84 | 121 | 310 | |||||
Net income attributable to Cubic | $ 24,253 | $ 21,442 | $ 24,100 | $ 20,814 | $ 19,946 | $ 19,908 | $ 84,768 | $ 70,636 | $ 55,686 | |||
Basic and diluted net income per common share (in dollars per share) | $ 0.91 | $ 0.80 | $ 0.90 | $ 0.78 | $ 0.75 | $ 0.74 | $ 3.17 | $ 2.64 | $ 2.08 | |||
Basic average number of common shares outstanding (in shares) | 26,736 | 26,736 | 26,736 | 26,736 | 26,736 | 26,736 | 26,736 | 26,735 | 26,731 | |||
Diluted average number of common shares outstanding (in shares) | 26,736 | 26,736 | 26,736 | 26,736 | 26,736 | 26,736 | 26,736 | 26,735 | 26,731 |
LEGAL MATTERS (Details) (USD $)
In Millions, unless otherwise specified |
1 Months Ended | 12 Months Ended |
---|---|---|
Nov. 30, 2011
item
|
Sep. 30, 2012
|
|
Contract awarded by Iran
|
||
Legal Matters | ||
Arbitration award amount | $ 2.8 | |
Amount of accrued liability | 8.8 | |
Amount of accrued interest | 0.2 | |
Amount of pre-judgment interest award | 1.4 | |
Amount of attorney's fees | 0.1 | |
Claim from public transit authority customer
|
||
Legal Matters | ||
Period prior to acquisition of contract during which a former employee was committing illegal acts | 2 years | |
Number of employees alleged for loss of revenue due to inappropriate and illegal actions | 1 | |
Estimated loss of revenue | $ 2.9 |
PROPERTY, PLANT AND EQUIPMENT (Details) (USD $)
|
12 Months Ended | |||
---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
Sep. 30, 2009
|
|
PROPERTY, PLANT AND EQUIPMENT | ||||
Accumulated depreciation and amortization | $ (107,895,000) | $ (101,572,000) | $ (98,064,000) | $ (93,761,000) |
Property, plant and equipment - net | 55,327,000 | 48,467,000 | 47,469,000 | 48,895,000 |
Depreciation of plant and equipment and amortization of leasehold improvements | 8,000,000 | 7,700,000 | 7,600,000 | 9,200,000 |
Land and land improvements
|
||||
PROPERTY, PLANT AND EQUIPMENT | ||||
Property, plant and equipment, Gross | 16,045,000 | 15,963,000 | 15,821,000 | 15,292,000 |
Buildings and improvements
|
||||
PROPERTY, PLANT AND EQUIPMENT | ||||
Property, plant and equipment, Gross | 44,376,000 | 43,416,000 | 42,754,000 | 42,661,000 |
Buildings and improvements | Minimum
|
||||
PROPERTY, PLANT AND EQUIPMENT | ||||
Property, plant and equipment, useful life | 15 years | |||
Buildings and improvements | Maximum
|
||||
PROPERTY, PLANT AND EQUIPMENT | ||||
Property, plant and equipment, useful life | 39 years | |||
Machinery and other equipment
|
||||
PROPERTY, PLANT AND EQUIPMENT | ||||
Property, plant and equipment, Gross | 94,113,000 | 84,953,000 | 82,129,000 | 80,018,000 |
Machinery and other equipment | Minimum
|
||||
PROPERTY, PLANT AND EQUIPMENT | ||||
Property, plant and equipment, useful life | 5 years | |||
Machinery and other equipment | Maximum
|
||||
PROPERTY, PLANT AND EQUIPMENT | ||||
Property, plant and equipment, useful life | 10 years | |||
Leasehold improvements
|
||||
PROPERTY, PLANT AND EQUIPMENT | ||||
Property, plant and equipment, Gross | $ 8,688,000 | $ 5,707,000 | $ 4,829,000 | $ 4,685,000 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) (Change in estimated total costs, USD $)
In Millions, except Per Share data, unless otherwise specified |
12 Months Ended | |||
---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
Sep. 30, 2009
|
|
Change in estimated total costs
|
||||
Revenue recognition | ||||
Increase in operating income | $ 17.5 | $ 17.0 | $ 8.8 | $ 3.6 |
Increase in revenue | $ 12.0 | $ 11.5 | $ 5.8 | $ 2.7 |
Increase in net income per common share (in dollars per share) | $ 0.45 | $ 0.43 | $ 0.22 | $ 0.10 |
ACCOUNTS RECEIVABLE (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
|
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ACCOUNTS RECEIVABLE | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of accounts receivable under long-term contracts | The components of accounts receivable under long-term contracts are as follows (in thousands):
|
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (Details) (USD $)
|
3 Months Ended | 12 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Jun. 30, 2012
|
Mar. 31, 2012
|
Dec. 31, 2011
|
Sep. 30, 2011
|
Jun. 30, 2011
|
Mar. 31, 2011
|
Dec. 31, 2010
|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
Sep. 30, 2009
|
|
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) | ||||||||||||
Net sales | $ 359,687,000 | $ 365,397,000 | $ 339,645,000 | $ 316,766,000 | $ 343,021,000 | $ 322,787,000 | $ 347,889,000 | $ 281,884,000 | $ 1,381,495,000 | $ 1,295,581,000 | $ 1,198,192,000 | $ 1,025,924,000 |
Operating income | 29,142,000 | 38,586,000 | 32,540,000 | 27,754,000 | 19,688,000 | 27,790,000 | 40,610,000 | 25,420,000 | 128,022,000 | 113,508,000 | 106,633,000 | 95,867,000 |
Net income attributable to Cubic | 21,088,000 | 26,721,000 | 23,397,000 | 20,694,000 | 14,625,000 | 22,050,000 | 28,785,000 | 18,134,000 | 91,900,000 | 83,594,000 | 72,094,000 | 63,145,000 |
Net income per share (in dollars per share) | $ 0.79 | $ 1.00 | $ 0.88 | $ 0.77 | $ 0.55 | $ 0.82 | $ 1.08 | $ 0.68 | $ 3.44 | $ 3.13 | $ 2.70 | $ 2.36 |
Service Cost Erroneously Classified as Product Cost | $ 5,000,000 | $ 8,900,000 | $ 13,900,000 |
BUSINESS SEGMENT INFORMATION (Details) (USD $)
|
3 Months Ended | 12 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Jun. 30, 2012
|
Mar. 31, 2012
|
Dec. 31, 2011
|
Sep. 30, 2011
|
Jun. 30, 2011
|
Mar. 31, 2011
|
Dec. 31, 2010
|
Sep. 30, 2012
segment
|
Sep. 30, 2011
|
Sep. 30, 2010
|
Sep. 30, 2009
|
|
Segment Information | ||||||||||||
Number of primary business segments | 3 | |||||||||||
Revenue recognition | ||||||||||||
Sales | $ 359,687,000 | $ 365,397,000 | $ 339,645,000 | $ 316,766,000 | $ 343,021,000 | $ 322,787,000 | $ 347,889,000 | $ 281,884,000 | $ 1,381,495,000 | $ 1,295,581,000 | $ 1,198,192,000 | $ 1,025,924,000 |
Operating income | 29,142,000 | 38,586,000 | 32,540,000 | 27,754,000 | 19,688,000 | 27,790,000 | 40,610,000 | 25,420,000 | 128,022,000 | 113,508,000 | 106,633,000 | 95,867,000 |
Assets | 1,026,317,000 | 966,524,000 | 1,026,317,000 | 966,524,000 | 871,519,000 | 763,573,000 | ||||||
Depreciation and amortization | 22,857,000 | 22,341,000 | 14,469,000 | 15,586,000 | ||||||||
Expenditures for long-lived assets | 14,226,000 | 8,728,000 | 6,878,000 | 5,332,000 | ||||||||
Transportation Systems
|
||||||||||||
Revenue recognition | ||||||||||||
Sales | 513,500,000 | 427,100,000 | 383,000,000 | 314,300,000 | ||||||||
Operating income | 76,300,000 | 66,900,000 | 51,800,000 | 56,400,000 | ||||||||
Assets | 269,900,000 | 169,800,000 | 269,900,000 | 169,800,000 | 163,100,000 | 173,100,000 | ||||||
Depreciation and amortization | 3,700,000 | 3,600,000 | 3,500,000 | 2,400,000 | ||||||||
Expenditures for long-lived assets | 2,700,000 | 2,200,000 | 1,800,000 | 1,200,000 | ||||||||
Sales to TfL | 178,700,000 | 170,200,000 | 144,200,000 | 115,200,000 | ||||||||
MSS and CDS Segments
|
||||||||||||
Revenue recognition | ||||||||||||
Sales to U.S. government agencies | 685,500,000 | 728,200,000 | 679,400,000 | 608,400,000 | ||||||||
Defense Systems
|
||||||||||||
Revenue recognition | ||||||||||||
Sales | 375,400,000 | 390,700,000 | 368,200,000 | 287,500,000 | ||||||||
Operating income | 34,600,000 | 29,800,000 | 31,600,000 | 19,900,000 | ||||||||
Assets | 122,500,000 | 144,000,000 | 122,500,000 | 144,000,000 | 161,700,000 | 162,700,000 | ||||||
Depreciation and amortization | 5,500,000 | 5,400,000 | 4,800,000 | 6,000,000 | ||||||||
Expenditures for long-lived assets | 8,900,000 | 5,500,000 | 4,400,000 | 3,300,000 | ||||||||
Mission Support Services
|
||||||||||||
Revenue recognition | ||||||||||||
Sales | 491,400,000 | 476,500,000 | 4,449,000 | 420,600,000 | ||||||||
Operating income | 21,900,000 | 23,900,000 | 27,900,000 | 25,900,000 | ||||||||
Assets | 212,800,000 | 213,000,000 | 212,800,000 | 213,000,000 | 124,100,000 | 141,200,000 | ||||||
Depreciation and amortization | 12,500,000 | 12,300,000 | 5,200,000 | 6,200,000 | ||||||||
Expenditures for long-lived assets | 1,100,000 | 300,000 | 300,000 | |||||||||
Other
|
||||||||||||
Revenue recognition | ||||||||||||
Sales | 1,100,000 | 1,300,000 | 2,100,000 | 3,500,000 | ||||||||
Unallocated corporate expenses and other
|
||||||||||||
Revenue recognition | ||||||||||||
Operating income | (4,800,000) | (7,100,000) | (4,700,000) | (6,300,000) | ||||||||
Corporate and other
|
||||||||||||
Revenue recognition | ||||||||||||
Assets | 421,100,000 | 439,700,000 | 421,100,000 | 439,700,000 | 422,600,000 | 286,600,000 | ||||||
Depreciation and amortization | 1,200,000 | 1,000,000 | 1,000,000 | 1,000,000 | ||||||||
Expenditures for long-lived assets | $ 1,500,000 | $ 700,000 | $ 400,000 | $ 800,000 |
BUSINESS SEGMENT INFORMATION
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
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Segment Information | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BUSINESS SEGMENT INFORMATION | Note 17—Business segment information We have three primary business segments: Cubic Transportation Systems (CTS), Cubic Defense Systems (CDS) and Mission Support Services (MSS). CTS designs, produces, installs and services electronic revenue collection systems for mass transit projects, including railways and buses. CDS performs work under U.S. and foreign government contracts relating to electronic defense systems and equipment. Products include customized military range instrumentation, laser based training systems, virtual simulation systems, communications products including datalinks, power amplifiers, avionics systems, multi-band communication tracking devices, and cross domain hardware solutions to address multi-level security requirements. MSS provides training, operations, intelligence, maintenance, technical and other services to the U.S. government and allied nations. We evaluate performance and allocate resources based on total segment operating profit or loss. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Intersegment sales and transfers are immaterial and are eliminated in consolidation. Our reportable segments are business units that offer different products and services and are each managed separately. Operating results for each segment are reported separately to senior corporate management to make decisions as to the allocation of corporate resources and to assess performance. Business segment financial data is as follows (in millions):
(a) Sales are attributed to countries or regions based on the location of product or service delivery to customers. MSS and CDS segment sales include $685.5 million, $728.2 million, $679.4 million and $608.4 million in 2012, 2011, 2010 and 2009, respectively, of sales to U.S. government agencies. CTS segment sales include $178.7 million, $170.2 million, $144.2 million and $115.2 million in 2012, 2011, 2010 and 2009, respectively, of sales under various contracts with our customer, TfL. No other customer accounts for 10% or more of our revenues for any periods presented. |
OTHER COMPREHENSIVE INCOME (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
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OTHER COMPREHENSIVE INCOME | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of accumulated OCI (loss) | We present other comprehensive income (OCI) and its components in the statement of changes in shareholders' equity. Accumulated OCI (loss) consisted of the following (in thousands):
|
Subsequent Events (unaudited) (Details) (USD $)
|
0 Months Ended | ||||
---|---|---|---|---|---|
Sep. 30, 2012
Senior unsecured notes
|
Mar. 12, 2013
Subsequent event
Senior unsecured notes
Maximum
|
Mar. 12, 2013
Subsequent event
Series A notes
|
Mar. 12, 2013
Subsequent event
Series B notes
|
Jan. 24, 2013
Subsequent event
NextBus, Inc.
|
|
Subsequent events | |||||
Cash paid for acquisition | $ 20,700,000 | ||||
Principal amount of debt instrument | $ 25,000,000 | $ 50,000,000 | $ 50,000,000 | ||
Interest rate (as a percent) | 6.31% | 3.35% | 3.35% | ||
Period for issuance of senior notes | 3 years |
FINANCING ARRANGEMENTS (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
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Financing Arrangements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt | Long-term debt consists of the following (in thousands):
|
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) (USD $)
|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
Sep. 30, 2009
|
---|---|---|---|---|
Assets | ||||
Short-term investments | $ 25,829,000 | $ 84,081,000 | $ 8,127,000 | |
Debt instruments | ||||
Fair Value | 12,500,000 | 17,500,000 | 21,600,000 | 25,100,000 |
Carrying value of long-term debt | 11,503,000 | 15,918,000 | 20,494,000 | 25,124,000 |
Assets and liabilities measured at fair value on a recurring basis | Level 1
|
||||
Assets | ||||
Cash equivalents | 171,300,000 | 266,842,000 | 129,756,000 | 178,893,000 |
Total assets measured at fair value | 171,300,000 | 266,842,000 | 129,756,000 | 178,893,000 |
Assets and liabilities measured at fair value on a recurring basis | Level 2
|
||||
Assets | ||||
Current derivative assets | 3,779,000 | 7,466,000 | 11,428,000 | 18,106,000 |
Non-current derivative assets | 3,713,000 | |||
Total assets measured at fair value | 7,492,000 | 33,295,000 | 95,509,000 | 26,233,000 |
Liabilities | ||||
Current derivative liabilities | 6,839,000 | 7,522,000 | 3,193,000 | 17,933,000 |
Non-current derivative liabilities | 6,498,000 | 6,164,000 | 4,748,000 | |
Total liabilities measured at fair value | 13,337,000 | 13,686,000 | 7,941,000 | 17,933,000 |
Assets and liabilities measured at fair value on a recurring basis | Total
|
||||
Assets | ||||
Cash equivalents | 171,300,000 | 266,842,000 | 129,756,000 | 178,893,000 |
Current derivative assets | 3,779,000 | 7,466,000 | 11,428,000 | 18,106,000 |
Non-current derivative assets | 3,713,000 | |||
Total assets measured at fair value | 178,792,000 | 300,137,000 | 225,265,000 | 205,126,000 |
Liabilities | ||||
Current derivative liabilities | 6,839,000 | 7,522,000 | 3,193,000 | 17,933,000 |
Non-current derivative liabilities | 6,498,000 | 6,164,000 | 4,748,000 | |
Total liabilities measured at fair value | 13,337,000 | 13,686,000 | 7,941,000 | 17,933,000 |
Short-term investments - tax exempt bonds | Assets and liabilities measured at fair value on a recurring basis | Level 2
|
||||
Assets | ||||
Short-term investments | 25,829,000 | 48,081,000 | ||
Short-term investments - tax exempt bonds | Assets and liabilities measured at fair value on a recurring basis | Total
|
||||
Assets | ||||
Short-term investments | 25,829,000 | 48,081,000 | ||
Short-term investments -U.S. government agency | Assets and liabilities measured at fair value on a recurring basis | Level 2
|
||||
Assets | ||||
Short-term investments | 36,000,000 | 8,127,000 | ||
Short-term investments -U.S. government agency | Assets and liabilities measured at fair value on a recurring basis | Total
|
||||
Assets | ||||
Short-term investments | $ 36,000,000 | $ 8,127,000 |
INCOME TAXES (Details 2)
|
3 Months Ended | 12 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2012
USD ($)
|
Dec. 31, 2011
USD ($)
|
Sep. 30, 2011
USD ($)
|
Jun. 30, 2011
USD ($)
|
Mar. 31, 2011
USD ($)
|
Dec. 31, 2010
USD ($)
|
Sep. 30, 2012
USD ($)
|
Sep. 30, 2011
USD ($)
|
Sep. 30, 2010
USD ($)
|
Sep. 30, 2009
USD ($)
|
Sep. 30, 2012
NZD
|
Sep. 30, 2008
USD ($)
|
|
Reconciliation of income tax computed at the U.S. federal statutory tax rate to income tax expense | ||||||||||||
Tax at U.S. statutory rate | $ 45,601,000 | $ 40,697,000 | $ 38,536,000 | $ 33,656,000 | ||||||||
State income taxes, net of federal tax effect | 1,364,000 | 1,297,000 | 3,042,000 | 2,672,000 | ||||||||
Nondeductible expenses | 286,000 | 893,000 | 1,366,000 | 107,000 | ||||||||
Change in reserve for uncertain tax positions | (2,909,000) | 1,504,000 | (832,000) | 430,000 | ||||||||
Tax effect from foreign dividend | 2,773,000 | 3,063,000 | ||||||||||
Foreign earnings taxes at less than statutory rate | (7,153,000) | (6,415,000) | (2,548,000) | (3,760,000) | ||||||||
R&D credits generated in the current year | (906,000) | (2,696,000) | (491,000) | (3,395,000) | ||||||||
Reinstatement of federal research and development credit | (1,406,000) | |||||||||||
Other | (873,000) | (1,501,000) | (1,062,000) | 243,000 | ||||||||
Total income tax expense | 9,847,000 | 8,353,000 | 7,671,000 | 7,032,000 | 11,256,000 | 6,414,000 | 38,183,000 | 32,373,000 | 38,011,000 | 33,016,000 | ||
Net changes in the liability for unrecognized tax benefits | ||||||||||||
Balance at the beginning of the period | 10,715,000 | 8,958,000 | 10,715,000 | 8,958,000 | 9,958,000 | 8,881,000 | ||||||
Decrease related to tax positions in prior years: | ||||||||||||
Recognition of benefits from expiration of statutes | (1,227,000) | (1,172,000) | (1,747,000) | (1,555,000) | ||||||||
Recognition of benefits from settlement with tax authorities | (1,257,000) | (259,000) | ||||||||||
Other | (585,000) | |||||||||||
Tax positions related to the current year | 409,000 | 2,452,000 | 778,000 | 3,142,000 | ||||||||
Tax positions related to current year acquisitions | 484,000 | |||||||||||
Currency translation adjustment | 212,000 | (7,000) | (31,000) | (251,000) | ||||||||
Balance at the end of the period | 10,715,000 | 8,267,000 | 10,715,000 | 8,958,000 | 9,958,000 | 8,881,000 | ||||||
Unrecognized tax benefits from permanent tax adjustments that, if recognized, would affect the effective rate | 6,300,000 | |||||||||||
Increases related to settlements with taxing authorities | 4,500,000 | |||||||||||
Interest and penalties accrued | 3,000,000 | 3,100,000 | 3,000,000 | 2,300,000 | 2,000,000 | |||||||
Total liability for uncertain tax issues | 13,700,000 | 11,300,000 | 13,700,000 | 11,200,000 | 11,900,000 | |||||||
Income tax payments, net of refunds | 25,400,000 | 42,100,000 | 30,000,000 | 28,800,000 | ||||||||
Components of income before income taxes | ||||||||||||
United States | 38,428,000 | 33,955,000 | 59,984,000 | 38,729,000 | ||||||||
Foreign | 91,859,000 | 82,322,000 | 50,121,000 | 57,432,000 | ||||||||
Income before income taxes | 33,295,000 | 29,092,000 | 22,345,000 | 29,138,000 | 40,125,000 | 24,669,000 | 130,287,000 | 116,277,000 | 110,105,000 | 96,161,000 | ||
Excess capital in New Zealand | 40,000,000 | |||||||||||
U.S. taxes provided on dividend | 2,800,000 | |||||||||||
Approximate amount of undistributed earnings of all the entity's foreign subsidiaries | $ 272,200,000 |
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (Details) (USD $)
|
3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2012
|
Dec. 31, 2011
|
Sep. 30, 2011
|
Jun. 30, 2011
|
Mar. 31, 2011
|
Dec. 31, 2010
|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
Sep. 30, 2009
|
Sep. 30, 2008
|
Mar. 31, 2012
Revenue Recognition Adjustments
|
Dec. 31, 2011
Revenue Recognition Adjustments
|
Sep. 30, 2011
Revenue Recognition Adjustments
|
Jun. 30, 2011
Revenue Recognition Adjustments
|
Mar. 31, 2011
Revenue Recognition Adjustments
|
Dec. 31, 2010
Revenue Recognition Adjustments
|
Sep. 30, 2011
Revenue Recognition Adjustments
|
Sep. 30, 2010
Revenue Recognition Adjustments
|
Sep. 30, 2009
Revenue Recognition Adjustments
|
Sep. 30, 2008
Revenue Recognition Adjustments
|
Mar. 31, 2012
Other Adjustments
|
Dec. 31, 2011
Other Adjustments
|
Sep. 30, 2011
Other Adjustments
|
Jun. 30, 2011
Other Adjustments
|
Mar. 31, 2011
Other Adjustments
|
Dec. 31, 2010
Other Adjustments
|
Sep. 30, 2011
Other Adjustments
|
Sep. 30, 2010
Other Adjustments
|
Sep. 30, 2009
Other Adjustments
|
Sep. 30, 2008
Other Adjustments
|
Mar. 31, 2012
Previously Reported
|
Dec. 31, 2011
Previously Reported
|
Sep. 30, 2011
Previously Reported
|
Jun. 30, 2011
Previously Reported
|
Mar. 31, 2011
Previously Reported
|
Dec. 31, 2010
Previously Reported
|
Sep. 30, 2011
Previously Reported
|
Sep. 30, 2010
Previously Reported
|
Sep. 30, 2009
Previously Reported
|
Sep. 30, 2008
Previously Reported
|
Sep. 30, 2008
Previously Reported
Revenue Recognition Adjustments
|
Mar. 31, 2012
Adjustments
|
Dec. 31, 2011
Adjustments
|
Sep. 30, 2011
Adjustments
|
Jun. 30, 2011
Adjustments
|
Mar. 31, 2011
Adjustments
|
Dec. 31, 2010
Adjustments
|
Mar. 31, 2012
Adjustments
|
Mar. 31, 2011
Adjustments
|
Jun. 30, 2011
Adjustments
|
Sep. 30, 2011
Adjustments
|
Sep. 30, 2010
Adjustments
|
Sep. 30, 2009
Adjustments
|
Sep. 30, 2008
Adjustments
|
|
Increase in retained earnings | $ 23,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase in accumulated other comprehensive income | (900,000) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retained earnings | 629,560,000 | 715,043,000 | 629,560,000 | 553,452,000 | 486,170,000 | 427,836,000 | 25,587,000 | (2,619,000) | 598,849,000 | 598,849,000 | 521,567,000 | 455,743,000 | 404,868,000 | 30,711,000 | 30,711,000 | 31,885,000 | 30,427,000 | ||||||||||||||||||||||||||||||||||||||
Net Income | 23,448,000 | 20,739,000 | 14,674,000 | 22,106,000 | 28,869,000 | 18,255,000 | 92,104,000 | 83,904,000 | 72,094,000 | 63,145,000 | (1,188,000) | (440,000) | (7,845,000) | 1,246,000 | 9,469,000 | (549,000) | 2,321,000 | 31,000 | 9,900,000 | 332,000 | (308,000) | (1,630,000) | (10,000) | (630,000) | (1,225,000) | (3,495,000) | 1,427,000 | (2,441,000) | 24,304,000 | 21,487,000 | 24,149,000 | 20,870,000 | 20,030,000 | 20,029,000 | 85,078,000 | 70,636,000 | 55,686,000 | (856,000) | (748,000) | (9,475,000) | 1,236,000 | 8,839,000 | (1,774,000) | (2,343,000) | 7,757,000 | 8,956,000 | (1,174,000) | 1,458,000 | 7,459,000 | ||||||
Reclassification | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Service cost erroneously classified as product cost | 5,000,000 | 8,900,000 | 13,900,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 329,148,000 | 212,267,000 | 329,148,000 | 295,434,000 | 244,074,000 | 112,696,000 | 329,148,000 | 329,148,000 | 295,434,000 | 244,074,000 | 112,696,000 | 112,696,000 | |||||||||||||||||||||||||||||||||||||||||||
Short-term investments | 25,829,000 | 25,829,000 | 84,081,000 | 8,127,000 | 25,829,000 | 25,829,000 | 84,081,000 | 8,127,000 | |||||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade and other receivables | 20,259,000 | 17,543,000 | 20,259,000 | 11,594,000 | 12,833,000 | 20,259,000 | 20,259,000 | 11,594,000 | 12,833,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Long-term contracts | 207,426,000 | 333,617,000 | 207,426,000 | 201,898,000 | 222,709,000 | 204,120,000 | 204,120,000 | 199,353,000 | 223,186,000 | 3,306,000 | 3,306,000 | 2,545,000 | (477,000) | ||||||||||||||||||||||||||||||||||||||||||
Allowance for doubtful accounts | (395,000) | (463,000) | (395,000) | (663,000) | (4,558,000) | (395,000) | (395,000) | (663,000) | (4,558,000) | ||||||||||||||||||||||||||||||||||||||||||||||
Net accounts receivable | 227,290,000 | 350,697,000 | 227,290,000 | 212,829,000 | 230,984,000 | 223,984,000 | 223,984,000 | 210,284,000 | 231,461,000 | 3,306,000 | 3,306,000 | 2,545,000 | (477,000) | ||||||||||||||||||||||||||||||||||||||||||
Recoverable income taxes | 24,917,000 | 7,083,000 | 24,917,000 | 6,810,000 | 249,000 | 20,725,000 | 20,725,000 | 8,320,000 | 4,192,000 | 4,192,000 | (1,510,000) | 249,000 | |||||||||||||||||||||||||||||||||||||||||||
Inventories | 38,359,000 | 52,366,000 | 38,359,000 | 40,653,000 | 57,605,000 | 36,729,000 | 36,729,000 | 32,820,000 | 49,107,000 | 1,630,000 | 1,630,000 | 7,833,000 | 8,498,000 | ||||||||||||||||||||||||||||||||||||||||||
Deferred income taxes | 9,483,000 | 7,587,000 | 9,483,000 | 14,290,000 | 20,191,000 | 13,778,000 | 13,778,000 | 17,825,000 | 22,132,000 | (4,295,000) | (4,295,000) | (3,535,000) | (1,941,000) | ||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses and other current assets | 21,080,000 | 13,977,000 | 21,080,000 | 26,127,000 | 29,957,000 | 20,452,000 | 20,452,000 | 25,893,000 | 29,957,000 | 628,000 | 628,000 | 234,000 | |||||||||||||||||||||||||||||||||||||||||||
Total current assets | 676,106,000 | 712,726,000 | 676,106,000 | 680,224,000 | 591,187,000 | 670,645,000 | 670,645,000 | 674,657,000 | 584,858,000 | 5,461,000 | 5,461,000 | 5,567,000 | 6,329,000 | ||||||||||||||||||||||||||||||||||||||||||
Long-term contract receivables | 23,700,000 | 22,070,000 | 23,700,000 | 28,080,000 | 13,400,000 | 23,700,000 | 23,700,000 | 28,080,000 | 13,400,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment - net | 48,467,000 | 55,327,000 | 48,467,000 | 47,469,000 | 48,895,000 | 48,467,000 | 48,467,000 | 47,469,000 | 48,895,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Deferred income taxes | 12,824,000 | 16,364,000 | 12,824,000 | 19,288,000 | 14,504,000 | 11,318,000 | 11,318,000 | 18,570,000 | 14,082,000 | 1,506,000 | 1,506,000 | 718,000 | 422,000 | ||||||||||||||||||||||||||||||||||||||||||
Goodwill | 146,355,000 | 146,933,000 | 146,355,000 | 64,142,000 | 59,433,000 | 61,032,000 | 146,355,000 | 146,355,000 | 64,142,000 | 59,433,000 | |||||||||||||||||||||||||||||||||||||||||||||
Purchased intangibles | 54,139,000 | 39,374,000 | 54,139,000 | 26,295,000 | 28,618,000 | 54,139,000 | 54,139,000 | 26,295,000 | 28,618,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Other assets | 4,933,000 | 6,648,000 | 4,933,000 | 6,021,000 | 7,536,000 | 4,216,000 | 4,216,000 | 5,196,000 | 7,029,000 | 717,000 | 717,000 | 825,000 | 507,000 | ||||||||||||||||||||||||||||||||||||||||||
Total assets | 966,524,000 | 1,026,317,000 | 966,524,000 | 871,519,000 | 763,573,000 | 958,840,000 | 958,840,000 | 864,409,000 | 756,315,000 | 7,684,000 | 7,684,000 | 7,110,000 | 7,258,000 | ||||||||||||||||||||||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade accounts payable | 43,984,000 | 47,917,000 | 43,984,000 | 39,085,000 | 32,542,000 | 38,870,000 | 38,870,000 | 33,638,000 | 28,626,000 | 5,114,000 | 5,114,000 | 5,447,000 | 3,916,000 | ||||||||||||||||||||||||||||||||||||||||||
Customer advances | 134,316,000 | 100,764,000 | 134,316,000 | 98,515,000 | 83,978,000 | 183,845,000 | 183,845,000 | 139,723,000 | 123,458,000 | (49,529,000) | (49,529,000) | (41,208,000) | (39,480,000) | ||||||||||||||||||||||||||||||||||||||||||
Accrued compensation | 49,513,000 | 52,680,000 | 49,513,000 | 48,994,000 | 49,134,000 | 49,513,000 | 49,513,000 | 48,994,000 | 49,134,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Other current liabilities | 57,006,000 | 13,902,000 | 55,988,000 | 57,006,000 | 61,091,000 | 59,644,000 | 53,826,000 | 1,604,000 | 53,826,000 | 60,041,000 | 60,402,000 | 12,298,000 | 1,050,000 | (758,000) | |||||||||||||||||||||||||||||||||||||||||
Income taxes payable | 18,716,000 | 20,733,000 | 18,716,000 | 27,219,000 | 12,099,000 | 7,902,000 | 7,902,000 | 20,107,000 | 3,491,000 | 10,814,000 | 10,814,000 | 7,112,000 | 8,608,000 | ||||||||||||||||||||||||||||||||||||||||||
Current portion of long-term debt | 4,541,000 | 4,561,000 | 4,541,000 | 4,545,000 | 4,554,000 | 4,541,000 | 4,541,000 | 4,545,000 | 4,554,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Total current liabilities | 308,076,000 | 282,643,000 | 308,076,000 | 279,449,000 | 241,951,000 | 338,497,000 | 338,497,000 | 307,048,000 | 269,665,000 | (30,421,000) | (30,421,000) | (27,599,000) | (27,714,000) | ||||||||||||||||||||||||||||||||||||||||||
Long-term debt | 11,377,000 | 6,942,000 | 11,377,000 | 15,949,000 | 20,570,000 | 11,377,000 | 11,377,000 | 15,949,000 | 20,570,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Accrued pension liability | 41,166,000 | 46,382,000 | 41,166,000 | 39,855,000 | 33,762,000 | 38,223,000 | 38,223,000 | 37,015,000 | 32,214,000 | 2,943,000 | 2,943,000 | 2,840,000 | 1,548,000 | ||||||||||||||||||||||||||||||||||||||||||
Deferred compensation | 7,884,000 | 8,619,000 | 7,884,000 | 8,508,000 | 7,902,000 | 7,884,000 | 7,884,000 | 8,508,000 | 7,902,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Income taxes payable | 12,129,000 | 4,862,000 | 12,129,000 | 9,961,000 | 11,001,000 | 4,479,000 | 4,479,000 | 3,382,000 | 5,119,000 | 7,650,000 | 7,650,000 | 6,579,000 | 5,882,000 | ||||||||||||||||||||||||||||||||||||||||||
Other non-current liabilities | 6,582,000 | 6,527,000 | 6,582,000 | 4,748,000 | 6,582,000 | 6,582,000 | 4,748,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' equity: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, no par value: Authorized--5,000 shares Issued and outstanding--none | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock, no par value: Authorized--50,000 shares 2012, 2011 and 2010--Issued 35,682 shares, outstanding--26,736 shares 2009--Issued 35,677 shares, outstanding--26,732 shares | 12,574,000 | 12,574,000 | 12,574,000 | 12,574,000 | 12,530,000 | 12,574,000 | 12,574,000 | 12,574,000 | 12,530,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Retained earnings | 629,560,000 | 715,043,000 | 629,560,000 | 553,452,000 | 486,170,000 | 427,836,000 | 25,587,000 | (2,619,000) | 598,849,000 | 598,849,000 | 521,567,000 | 455,743,000 | 404,868,000 | 30,711,000 | 30,711,000 | 31,885,000 | 30,427,000 | ||||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive loss | (26,493,000) | (21,148,000) | (26,493,000) | (16,340,000) | (14,242,000) | (23,294,000) | (23,294,000) | (9,745,000) | (11,357,000) | (3,199,000) | (3,199,000) | (6,595,000) | (2,885,000) | ||||||||||||||||||||||||||||||||||||||||||
Treasury stock at cost - 8,945 shares | (36,078,000) | (36,078,000) | (36,078,000) | (36,074,000) | (36,071,000) | (36,078,000) | (36,078,000) | (36,074,000) | (36,071,000) | ||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' equity related to Cubic | 579,563,000 | 670,391,000 | 579,563,000 | 513,612,000 | 448,387,000 | 552,051,000 | 552,051,000 | 488,322,000 | 420,845,000 | 27,512,000 | 27,512,000 | 25,290,000 | 27,542,000 | ||||||||||||||||||||||||||||||||||||||||||
Noncontrolling interest in variable interest entity | (253,000) | (49,000) | (253,000) | (563,000) | (253,000) | (253,000) | (563,000) | ||||||||||||||||||||||||||||||||||||||||||||||||
Total shareholders' equity | 579,310,000 | 670,342,000 | 579,310,000 | 513,049,000 | 448,387,000 | 551,798,000 | 551,798,000 | 487,759,000 | 420,845,000 | 27,512,000 | 27,512,000 | 25,290,000 | 27,542,000 | ||||||||||||||||||||||||||||||||||||||||||
Total liabilities and shareholders' equity | $ 966,524,000 | $ 1,026,317,000 | $ 966,524,000 | $ 871,519,000 | $ 763,573,000 | $ 958,840,000 | $ 958,840,000 | $ 864,409,000 | $ 756,315,000 | $ 7,684,000 | $ 7,684,000 | $ 7,110,000 | $ 7,258,000 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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12 Months Ended |
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Sep. 30, 2012
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Basis for Presentation | |
Basis for Presentation | Note 1—Summary of significant accounting policies Organization and nature of the business: We design, develop and manufacture products which are mainly electronic in nature, provide government services and services related to products previously produced by us and others. Our principal lines of business are defense systems, defense services and transportation fare collection systems and services. Our principal customers for defense products and services are the United States and foreign governments. Our transportation fare collection systems and services are sold primarily to large local government agencies worldwide. Principles of consolidation: The consolidated financial statements include the accounts of Cubic Corporation, its majority-owned subsidiaries and, as of March 5, 2010, its 50% owned variable interest entity, Transaction Systems Limited (TranSys). We consolidate variable interest entities (VIE) when we determine that Cubic is the primary beneficiary of the VIE. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidation of foreign subsidiaries requires translation of their assets and liabilities into U.S. dollars at year-end exchange rates. We translate our statements of income and cash flows at the average exchange rates for each year. Transaction gains on advances to foreign subsidiaries amounted to $1.1 million, $0.1 million, $0.8 million and $1.8 million in 2012, 2011, 2010 and 2009, respectively. Cash equivalents: We consider highly liquid investments with maturity of three months or less when purchased to be cash equivalents. Restricted cash: Restricted cash represents cash that is restricted as to withdrawal usage for legal or contractual reasons. Restricted cash is classified either as current or non-current, depending upon the date of the availability. Concentration of credit risk: We have established guidelines pursuant to which our cash and cash equivalents are diversified among various money market instruments and investment funds. These guidelines emphasize the preservation of capital by requiring minimum credit ratings assigned by established credit organizations. We achieve diversification by specifying maximum investments in each instrument type and issuer. The majority of these investments are not on deposit in federally insured accounts. Short-term investments: Short-term investments include marketable U.S. government agency securities and pre-refunded tax exempt bonds that may be purchased at a discount or premium, may have callable options, and are categorized as available-for-sale securities. We record short-term investments at fair value and we record any net differences between fair market value and cost in accumulated other comprehensive income (loss) on the consolidated balance sheets. Accounts receivable: Receivables consist primarily of amounts due from U.S. and foreign governments for defense products and services and local government agencies for transportation systems. Due to the nature of our customers, we generally do not require collateral. We have limited exposure to credit risk as we have historically collected substantially all of our receivables from government agencies. We generally require no allowance for doubtful accounts for these customers. Inventories: We state our inventories at the lower of cost or market. We determine cost using the first-in, first-out (FIFO) method, which approximates current replacement cost. We value our work in process at the actual production and engineering costs incurred to date, including applicable overhead. For contracts with the U.S. government our work in process also includes general and administrative costs. Any inventoried costs in excess of estimated realizable value are immediately charged to cost of sales. Where contracts include advances, performance-based payments and progress payments, we reflect the advances as an offset against any related inventory balances. Long-term capitalized contract costs: Long-term capitalized contract costs include costs incurred on a contract to develop and manufacture a transportation fare system for a customer for which revenue will not be recognized until delivery of the system. Property, plant and equipment: We carry property, plant and equipment at cost. We provide depreciation in amounts sufficient to amortize the cost of the depreciable assets over their estimated useful lives. Generally, we use straight-line methods for depreciable real property over estimated useful lives or the term of the underlying lease for leasehold improvements. We use accelerated methods (declining balance and sum-of-the-years-digits) for machinery and equipment over their estimated useful lives. Goodwill and purchased intangibles: We evaluate goodwill for potential impairment annually as of July 1, or when circumstances indicate that the carrying value may not be recoverable. The test is performed by comparing the fair value of a reporting unit to its carrying value, including recorded goodwill. If the carrying value exceeds the fair value, we would measure impairment by comparing the implied fair value of goodwill to its carrying value, and any impairment determined would be recorded in the current period. To date there has been no impairment of our recorded goodwill. Our purchased intangible assets are subject to amortization and we use a combination of straight-line and accelerated methods, based on the expected cash flows from the assets. Impairment of long-lived assets: We generally evaluate the carrying values of long-lived assets other than goodwill for impairment only if events or changes in facts and circumstances indicate that carrying values may not be recoverable. If we determined there was any impairment, we would measure it by comparing the fair value of the related asset to its carrying value and record the difference in the current period. Fair value is generally determined by identifying estimated discounted cash flows to be generated by those assets. We have not recorded any material impairments for the years ended September 30, 2012, 2011, 2010 and 2009. Customer advances: We receive advances, performance-based payments and progress payments from customers that may exceed revenues recognized on certain contracts, including contracts with agencies of the U.S. government. We classify such advances, other than those reflected as a reduction of receivables or inventories, as current liabilities. Contingencies: We establish reserves for loss contingencies when, in the opinion of management, the likelihood of liability is probable and the extent of such liability is reasonably estimable. Estimates, by their nature, are based on judgment and currently available information and involve a variety of factors, including the type and nature of the litigation, claim or proceeding, the progress of the matter, the advice of legal counsel, our defenses and our experience in similar cases or proceedings as well as our assessment of matters, including settlements, involving other defendants in similar or related cases or proceedings. We may increase or decrease our legal reserves in the future, on a matter-by-matter basis, to account for developments in such matters. Derivative financial instruments: All derivatives are recorded at fair value, however, the classification of gains and losses resulting from changes in the fair values of derivatives are dependent on the intended use of the derivative and its resulting designation. If a derivative is designated as a fair value hedge, then a change in the fair value of the derivative is offset against the change in the fair value of the underlying hedged item and only the ineffective portion of the hedge, if any, is recognized in cost of sales. If a derivative is designated as a cash flow hedge, then the effective portion of a change in the fair value of the derivative is recognized as a component of accumulated other comprehensive income until the underlying hedged item is recognized in cost of sales, or the forecasted transaction is no longer probable of occurring. If a derivative does not qualify as a highly effective hedge, a change in fair value is immediately recognized in earnings. We formally document hedging relationships for all derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transactions. Defined benefit pension plans: Some of our employees are covered by defined benefit pension plans. The net periodic cost of our plans is determined using several actuarial assumptions, the most significant of which are the discount rate and the long-term rate of return on plan assets. We recognize on a plan-by-plan basis the funded status of our defined benefit pension plans as either an asset or liability on our balance sheets, with a corresponding adjustment to accumulated other comprehensive income (loss), net of tax, in shareholders' equity. The funded status is measured as the difference between the fair value of the plan assets and the benefit obligation of the plan. Revenue recognition: We generate revenue from the sale of products such as mass transit fare collection systems, air and ground combat training systems, and secure communications products. We provide services such as specialized military training exercises, including live, virtual and constructive training exercises and support, and we operate and maintain fare systems for mass transit customers. We classify sales as products or services in our Consolidated Statements of Income based on the attributes of the underlying contracts. We recognize sales and profits under our long-term fixed-price contracts, which generally require a significant amount of development effort in relation to total contract value, using the cost-to-cost percentage-of-completion method of accounting. We record sales and profits based on the ratio of contract costs incurred to estimated total contract costs at completion. Contract costs include material, labor and subcontracting costs, as well as an allocation of indirect costs. For contracts with the U.S. federal government, general and administrative costs are included in contract costs; however, general and administrative costs are not considered contract costs for any other customers. Cost are recognized as incurred for contracts accounted for under the cost-to-cost percentage-of-completion method. For certain other long-term, fixed price production contracts not requiring substantial development effort we use the units-of-delivery percentage-of-completion method as the basis to measure progress toward completing the contract and recognizing sales. The units-of-delivery measure recognizes revenues as deliveries are made to the customer generally using unit sales values in accordance with the contract terms. Costs of sales are recorded as deliveries are made. We estimate profit as the difference between total estimated revenue and total estimated cost of a contract and recognize that profit over the life of the contract based on deliveries. For long-term fixed price contracts, we only include amounts representing contract change orders, claims or other items in the contract value when they can be reliably estimated and we consider realization probable. Changes in estimates of sales, costs and profits are recognized using the cumulative catch-up method of accounting. This method recognizes in the current period the cumulative effect of the changes on current and prior periods. A significant change in one or more of these estimates could have a material effect on our consolidated financial position or results of operations. Changes in estimates on contracts for which revenue is recognized using the cost-to-cost percentage-of-completion method increased operating profit by approximately $17.5 million in 2012, $17.0 million in 2011, $8.8 million in 2010, and $3.6 million in 2009. These adjustments increased net income by approximately $12.0 million ($0.45 per share) in 2012, $11.5 million ($0.43 per share) in 2011, $5.8 million ($0.22 per share) in 2010, and $2.7 million ($0.10 per share) in 2009. We record sales under cost-reimbursement-type contracts as we incur the costs. The Federal Acquisition Regulations provide guidance on the types of costs that we will be reimbursed in establishing the contract price. We consider incentives or penalties and awards applicable to performance on contracts in estimating sales and profits, and record them when there is sufficient information to assess anticipated contract performance. We do not recognize incentive provisions that increase or decrease earnings based solely on a single significant event until the event occurs. We occasionally enter into contracts that include multiple deliverables such as the construction or upgrade of a system and subsequent services to operate and maintain the delivered system. For multiple element contracts that were entered prior to October 1, 2009, a delivered item was considered a separate unit of accounting when it had value to the customer on a stand-alone basis and there was objective and reliable evidence of the fair value of the undelivered items. For contracts where we are unable to conclude there were separate units of accounting, we combine the deliverables and recognize revenue once the final item has been delivered or, if the final element is a service, over the period of performance. We elected to adopt authoritative accounting guidance for multiple-element arrangements effective October 1, 2009 on a prospective basis. This guidance affected the accounting conclusion as to whether a deliverable under a contract is considered a separate unit of accounting, and also affected the method that is used to allocate arrangement consideration to each separate unit of accounting. The new guidance eliminates the requirement for objective and reliable evidence of fair value to exist for the undelivered items in order for a delivered item to be treated as a separate unit of accounting. The new guidance also requires arrangement consideration to be allocated at the inception of the arrangement to all deliverables using the relative-selling-price method and eliminates the use of the residual method of allocation. Under the relative-selling-price method, the selling price for each deliverable is determined using vendor specific objective evidence (VSOE) of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence of selling price exists for a deliverable, which is typically the case for our contracts, the guidance requires us to determine the best estimate of the selling price, which is the price at which we would sell the deliverable if it were sold on a standalone basis. In estimating the selling price of the deliverable on a standalone basis, we consider our overall pricing models and objectives, including the factors we contemplate in negotiating our contracts with our customers. The pricing models and objectives that we use are generally based upon a cost-plus margin approach, with the estimated margin based in part on qualitative factors such as perceived customer pricing sensitivity and competitive pressures. Once the contract value is allocated to the separate deliverables under a multiple-element arrangement, revenue recognition guidance relevant to each contractual element is followed. For example, for the long-term construction portion of a contract we use the percentage-of-completion method and for the services portion we recognize the service revenues on a straight-line basis over the contractual service period or based on measurable units of work performed or incentives earned. Revenue under our service contracts with the U. S. government is recorded under the cost-to-cost percentage-of-completion method. Award fees and incentives related to performance under these service contracts are accrued during the performance of the contract based on our historical experience and estimates of success with such awards. Revenue under contracts for services other than those with the U. S. government and those associated with design, development, or production activities is recognized either as services are performed or when a contractually required event has occurred, depending on the contract. For such contracts that contain measurable units of work performed we recognize sales when the units of work are completed. Certain of our transportation systems service contracts contain service level or system usage incentives, for which we recognize revenues when the incentive award is fixed or determinable. These contract incentives are generally based upon monthly service levels or monthly performance and become fixed or determinable on a monthly basis. However, one of our transportation systems service contracts contains annual system usage incentives which are based upon system usage compared to annual baseline amounts. For this contract the annual system usage incentives are not considered fixed or determinable until the end of the contract year for which the incentives are measured, which falls within the second quarter of our fiscal year. Revenue under such contracts that do not contain measurable units of work performed, which is generally the case for our service contracts, is recognized on a straight-line basis over the contractual service period, unless evidence suggests that the revenue is earned, or obligations fulfilled, in a different manner. Costs incurred under these services contracts are expensed as incurred. We make provisions in the current period to fully recognize any anticipated losses on contracts. If we receive cash on a contract prior to revenue recognition or in excess of inventoried costs, we classify it as a customer advance on the balance sheet. Research and development: We record the cost of company sponsored research and development (R&D) activities as the expenses are incurred. The cost of product development activities incurred in connection with the performance of work on our contracts is included in cost of sales as they are directly related to contract performance. Other income (expense): We hold U.S. dollar denominated investments at our wholly-owned subsidiary in the U.K., that has the British pound as its functional currency. The impact of exchange rates on these investments is recorded as other non-operating income and resulted in a loss of $0.4 million in 2012, and a gain of $0.5 million and $2.6 million in 2011 and 2010, respectively. We did not hold U.S. dollar denominated investments at our U.K. subsidiary in 2009. Income taxes: Our provision for income taxes includes federal, state, local and foreign income taxes. We recognize tax credits, primarily for R&D, as a reduction of our provision for income taxes in the year in which they are available for tax purposes. We provide deferred income taxes on temporary differences between assets and liabilities for financial reporting and tax purposes as measured by enacted tax rates we expect to apply when the temporary differences are settled or realized. We establish valuation allowances for deferred tax assets when the amount of future taxable income we expect is not likely to support the use of the deduction or credit. Annually we evaluate the capital requirements of our foreign subsidiaries and determine the amount of excess capital, if any, that is available for distribution. We provide for U.S. taxes on the amount we determine to be excess capital available for distribution. U.S. taxes are not provided on amounts we consider to be indefinitely reinvested. Earnings per share: We calculate per share amounts based upon the weighted average number of shares of common stock outstanding. Recent accounting pronouncements: In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS, which amends Accounting Standards Codification (ASC) Topic 820, Fair Value Measurement. ASU 2011-04 clarified the intent about the application of existing fair value measurement requirements and changed certain requirements for measuring fair value and for disclosing information about fair value measurements. We adopted ASU 2011-04 in the quarter ended March 31, 2012. This adoption had no material impact to our financial statements. In September 2011, the FASB issued ASU 2011-08, Intangibles—Goodwill and Other, which amends the existing guidance on goodwill impairment testing. The new standard allows an entity the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If this is the case, the entity will need to perform a more detailed two-step goodwill impairment test which is used to identify potential goodwill impairments and to measure the amount of goodwill impairment losses to be recognized, if any. The standard is effective for annual or interim goodwill impairment tests performed by us after December 31, 2011, and did not have an effect on our measurement for potential goodwill impairment. In May 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, which changed the requirement for presenting "Comprehensive Income" in the consolidated financial statements. The update requires an entity to present the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 and is required to be applied retrospectively. We adopted this new guidance effective October 1, 2012. Use of estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates include the estimated total costs at completion of our long-term contracts, estimated loss contingencies, estimated self-insurance liabilities, estimated discounted cash flows of our reporting units used for goodwill impairment testing, and estimated rates of return and discount rates related to our defined benefit pension plans. Actual results could differ from our estimates. Risks and uncertainties: We are subject to the normal risks and uncertainties of performing large, multiyear, often fixed-price contracts. In addition, we are subject to audit of incurred costs related to many of our U.S. government contracts. These audits could produce different results than we have estimated; however, our experience has been that our costs are acceptable to the government. |