-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ICnDwHuSlv/hZC8+rUGz9GRdlqFPKHLtl9vDabWPwVgI9+XZgZDxTbSxQr5VfhU0 CY4WHWCf7AG8rxevvDxOsA== 0001047469-98-020627.txt : 19980518 0001047469-98-020627.hdr.sgml : 19980518 ACCESSION NUMBER: 0001047469-98-020627 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CUBIC CORP /DE/ CENTRAL INDEX KEY: 0000026076 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 951678055 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08931 FILM NUMBER: 98624181 BUSINESS ADDRESS: STREET 1: 9333 BALBOA AVE CITY: SAN DIEGO STATE: CA ZIP: 92123 BUSINESS PHONE: 6192776780 MAIL ADDRESS: STREET 1: PO BOX 85587 CITY: SAN DIEGO STATE: CA ZIP: 92186-5587 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended March 31, 1998 1-8931 ------ COMMISSION FILE NUMBER CUBIC CORPORATION EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER DELAWARE 95-1678055 STATE OF INCORPORATION IRS Employer Identification No. 9333 Balboa Avenue San Diego, California 92123 Telephone (619) 277-6780 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES /X/ NO / / --- --- As of May 1, 1998, Registrant had only one class of common stock of which there were 8,907,158 shares outstanding (after deducting 2,981,085 shares held as treasury stock). PART I--FINANCIAL INFORMATION ITEM 1--FINANCIAL STATEMENTS CUBIC CORPORATION CONSOLIDATED CONDENSED STATEMENT OF INCOME (UNAUDITED) (amounts in thousands, except per share data)
Six Months Ended Three Months Ended March 31 March 31 ---------------------- -------------------- 1998 1997 1998 1997 ---------- ---------- --------- --------- Revenues: Net sales............................................... $ 181,577 $ 180,245 $ 89,825 $ 96,187 Other income............................................ 2,528 2,994 1,134 1,820 ---------- ---------- --------- --------- 184,105 183,239 90,959 98,007 Costs and expenses: Cost of sales........................................... 145,700 138,566 76,895 74,997 Selling, general and administrative expenses............ 37,402 30,923 19,408 16,380 Research and development................................ 4,293 4,172 2,591 2,016 Interest................................................ 982 858 479 439 ---------- ---------- --------- --------- 188,377 174,519 99,373 93,832 ---------- ---------- --------- --------- Income (loss) before income taxes....................... (4,272) 8,720 (8,414) 4,175 Income taxes (benefit).................................. (1,250) 3,150 (2,750) 1,500 ---------- ---------- --------- --------- Net income (loss)....................................... $ (3,022) $ 5,570 $ (5,664) $ 2,675 ---------- ---------- --------- --------- ---------- ---------- --------- --------- Net income (loss) per common share...................... $ (0.34) $ 0.62 $ (0.64) $ 0.30 ---------- ---------- --------- --------- ---------- ---------- --------- --------- Dividends per common share.............................. $ 0.19 $ 0.19 $ 0.19 $ 0.19 ---------- ---------- --------- --------- ---------- ---------- --------- --------- Average shares of common stock outstanding.............. 8,927 8,981 8,910 8,981 ---------- ---------- --------- --------- ---------- ---------- --------- ---------
See accompanying notes to financial statements. 2 CONSOLIDATED CONDENSED BALANCE SHEET (thousands of dollars)
March 31 September 30 1998 1997 (Unaudited) (See note below) ----------- ---------------- ASSETS Current assets: Cash and cash equivalents...................................... $ 35,653 $ 53,257 Marketable securities, available-for-sale...................... 2,392 2,426 Accounts receivable............................................ 108,843 107,807 Inventories--Note C............................................ 36,486 20,955 Deferred income taxes and other current assets................. 16,956 15,783 ----------- --------------- Total current assets........................................... 200,330 200,228 Property, plant and equipment--net............................. 39,840 40,110 Cost in excess of net tangible assets of purchased businesses, less amortization............................................ 26,213 27,281 Miscellaneous other assets..................................... 14,493 14,663 ----------- --------------- $ 280,876 $ 282,282 ----------- --------------- ----------- --------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings.......................................... $ 7,173 $ 9,620 Accounts payable and other current liabilities................. 47,575 46,270 Customer advances.............................................. 34,423 30,896 Income taxes payable........................................... 1,845 206 Current portion of long-term debt.............................. 5,000 5,000 ----------- --------------- Total current liabilities...................................... 96,016 91,992 Long-term debt................................................. 10,000 10,000 Deferred income taxes and other................................ 5,294 4,970 Shareholders' equity: Common stock................................................... 234 234 Additional paid-in capital..................................... 12,123 12,123 Retained earnings.............................................. 193,499 198,213 Foreign currency translation adjustment........................ (238) (557) Treasury stock at cost......................................... (36,052) (34,693) ----------- --------------- 169,566 175,320 ----------- --------------- $ 280,876 $ 282,282 ----------- --------------- ----------- ---------------
Note: The balance sheet at September 30, 1997 has been derived from the audited financial statements at that date. See accompanying notes to financial statements. 3 CUBIC CORPORATION CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED) (thousands of dollars)
Six Months Ended March 31 -------------------- 1998 1997 --------- --------- Operating Activities: Net income (loss)...................................................... $ (3,022) $ 5,570 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization...................................... 4,891 4,000 Changes in operating assets and liabilities........................ (9,401) (32,454) --------- --------- NET CASH USED IN OPERATING ACTIVITIES.............................. (7,532) (22,884) --------- --------- Investing Activities: Sales of marketable securities......................................... 34 41 Proceeds from sale of U. S. Elevator Corp.............................. -- 31,996 Net additions to property, plant and equipment......................... (3,514) (3,273) Other items--net....................................................... (703) 443 --------- --------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES................ (4,183) 29,207 --------- --------- Financing Activities: Change in short-term borrowings........................................ (2,733) -- Purchases of treasury stock............................................ (1,359) -- Dividends paid......................................................... (1,692) (1,706) --------- --------- NET CASH USED IN FINANCING ACTIVITIES.............................. (5,784) (1,706) --------- --------- Effect of exchange rates on cash......................................... (105) (241) --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............... (17,604) 4,376 Cash and cash equivalents at the beginning of the period................. 53,257 20,062 --------- --------- CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD................. $ 35,653 $ 24,438 --------- --------- --------- ---------
See accompanying notes to financial statements. 4 CUBIC CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) March 31, 1998 A. Basis for Presentation The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the quarter are not necessarily indicative of the results that may be expected for the year ended September 30, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended September 30, 1997. The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain prior period amounts have been restated to reflect the current period classifications. B. Per Share Amounts Per share amounts are based upon the weighted average number of shares of common stock outstanding. 5 CUBIC CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)--continued March 31, 1998 C. Inventories
March 31 September 30 1998 1997 - -------------------------------------------------------------------- ----------- ------------ Inventories consist of the following: (In thousands) Finished products................................................... $ 2,084 $ 2,501 Work in process..................................................... 25,505 10,300 Raw material and purchased parts.................................... 8,897 8,154 ----------- ------------ $ 36,486 $ 20,955 ----------- ------------ ----------- ------------
Work in process at March 31, 1998 includes $8.4 million of inventoried long-term contract costs incurred as a result of customer-required work performed not specified in contract provisions. The recovery of this entire amount was successfully negotiated in April 1998 and a contract modification has been received. Work in process at March 31, 1998 also includes $4.7 million of inventoried costs incurred as pre-contract work performed at the Company's risk. Management believes the Company will ultimately recover this and any future amounts to be incurred through the award of the related contract. D. Legal Matter In July 1995, UDT Sensors, Inc. (UDT) a potential subcontractor, filed a lawsuit against Cubic Defense Systems, Inc. (CDS) in the Superior Court of the State of California in Los Angeles, alleging breach of a written contract, unjust enrichment, fraud and deceit, among other related charges. The claims allegedly arose out of a strategic supplier agreement under which UDT alleged it was to receive a subcontract to provide a certain product if CDS was selected by the United States Army as the prime contractor for a certain government program. After winning the prime contract, CDS was unable to reach agreement on certain terms and conditions for a subcontract with UDT. In April 1998, CDS reached a business settlement with UDT which provides that, among other lesser items, CDS will purchase from UDT, a minimum percentage of worldwide requirements for certain products at competitive prices. E. Review by Independent Accountants A review of the data presented was made by Ernst & Young LLP, independent accountants, in accordance with established professional standards and procedures, and their report is included herein. 6 CUBIC CORPORATION ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS March 31, 1998 RESULTS OF OPERATIONS Sales for the six month period ended March 31, 1998 were essentially flat as compared to the same period of fiscal 1997. Sales increased in the transportation systems segment, primarily due to the acquisition of Thorn Transit Systems International (TTSI) in April 1997, however, this increase was offset by lower sales volume on transportation system contracts in the United States and a decrease in defense segment sales. Sales for the three month period ended March 31, 1998 decreased 7% primarily as the result of the delayed award of the MILES 2000 (Multiple Integrated Laser Engagement System) production contract. A contract modification for the exercise of production options on MILES 2000 has now been received. During the second quarter, the Company established a $9.5 million reserve, before applicable income taxes, for estimated losses on several contracts in Asia, related to the TTSI subsidiary referred to above. Management believes the reserve is sufficient to cover all losses associated with the existing contracts of this subsidiary. In response to these losses, in April 1998, the Company commenced a restructuring of management in the United Kingdom to realign resources and address the operating issues which resulted in the losses. Operating profits in the transportation systems segment were also negatively impacted by lower sales volume and profit margins on contracts in the United States. However, award of the Prestige contract to privatize the London Transport fare collection system is expected within the next few months, which should increase sales and operating profits of this segment in future quarters. Operating profits in the defense segment for the six month period ended March 31, 1998 were 86% higher than in the previous year. The J-STARS Data Link product line continued to contribute significantly to the operating profits of this segment. In addition, during the first half of fiscal 1997, operating profits in the segment had been lower due to the recognition of losses caused by cost growth in the development of MILES 2000. In the current year, the MILES 2000 product line has operated at a break-even status, helping to improve overall operating profits as compared to the previous year. The Company has continued to invest in the development and promotion of its proprietary software technology which delivers compressed video and audio transmission over computer networks for applications including e-mail, intra-net based training and surveillance. This investment, which has resulted in losses in the commercial operations segment for both the three and six month periods, has amounted to approximately $1 million, before applicable income taxes, in each of the first two quarters of the fiscal year. 7 CUBIC CORPORATION ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED March 31, 1998 For the three and six month period ended March 31, 1998, selling, general and administrative expenses increased, both nominally and as a percentage of sales, over the level in fiscal 1997. This increase was in support of higher sales volume at the transportation systems segment, increased selling expenses incurred at the defense segment in pursuit of new contracts and selling expenses related to the video compression product mentioned above. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents decreased $17.6 million since year end, to $35.7 million at March 31, 1998. During the six month period ended March 31, 1998, operating activities used $7.5 million, due primarily to growth in inventoried costs as described in note C. Investing activities included planned expenditures for capital equipment, which used $3.5 million. Financing activities included a $2.7 million repayment of short-term borrowings in the United Kingdom, and $3.1 million used to purchase treasury stock and pay cash dividends to shareholders. The Company expects that cash on hand and its available debt capacity will be adequate to meet its short and long term working capital requirements. The Company's financial condition remains strong with working capital of $104.3 million and a current ratio of 2.1 to 1 at March 31, 1998. The backlog of orders at March 31, 1998 was $354 million, which is comparable to the $358 million at September 30, 1997 and a slight increase from $343 million at March 31, 1997. Except for historical matters contained herein, statements in this discussion and analysis are forward-looking and are made pursuant to the Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements involve risks and uncertainties which may affect the Company's business and prospects, including economic, competitive, governmental, technological and other factors. 8 PART II--OTHER INFORMATION ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are included herein: 15--Independent Accountants' Review Report 27-- Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CUBIC CORPORATION Date May 6, 1998 /s/ W. W. Boyle ---------------------------- W. W. Boyle VICE PRESIDENT FINANCE AND CFO Date May 6, 1998 /s/ T. A. Baz ---------------------------- T. A. Baz VICE PRESIDENT AND CONTROLLER 9 EXHIBIT 15--INDEPENDENT ACCOUNTANTS' REVIEW REPORT THE BOARD OF DIRECTORS CUBIC CORPORATION We have reviewed the accompanying consolidated condensed balance sheet of Cubic Corporation as of March 31, 1998, and the related consolidated condensed statement of income for the three and six-month periods ended March 31, 1998 and 1997, and the consolidated condensed statement of cash flows for the six-month periods ended March 31, 1998 and 1997. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated condensed financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Cubic Corporation as of September 30, 1997, and the related consolidated statements of income, retained earnings, and cash flows for the year then ended (not presented herein) and in our report dated December 4, 1997, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated condensed balance sheet at September 30, 1997, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. ERNST & YOUNG LLP SAN DIEGO, CALIFORNIA May 6, 1998 10 EX-27 2 EXHIBIT 27
5 1,000 6-MOS SEP-30-1998 MAR-31-1998 35,653 2,392 108,843 0 36,486 200,330 39,840 0 280,876 96,016 0 0 0 234 169,332 280,876 181,577 184,105 145,700 145,700 41,695 0 982 (4,272) (1,250) (3,022) 0 0 0 (3,022) (.34) (.34)
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