Restatement of Interim Period Financial Statements within Fiscal Year 2010

9 Months Ended

Jun. 30, 2011

Restatement of Interim Period Financial Statements within Fiscal Year 2010

Restatement of Interim Period Financial Statements within Fiscal Year 2010

Note 7 — Restatement of Interim Period Financial Statements within Fiscal Year 2010

During the third fiscal quarter of 2011, we identified errors in our consolidated financial statements for the three months ended March 31, 2010, the nine months ended June 30, 2010, and for the three months ended September 30, 2010. The errors relate to our historical accounting treatment of U.S. dollar denominated money market investments that are held by our wholly-owned subsidiary in the United Kingdom that has the British Pound as its functional currency. These investments were purchased during the quarter ended March 31, 2010 and we have historically recorded the impact of changes in exchange rates on these investments in other comprehensive income as we viewed this to be an economic hedge. Upon reviewing the accounting treatment for these investments we have concluded that these changes in exchange rates did not meet the requirements for hedge accounting treatment and therefore should have been recorded in other non-operating income.

As a result of these errors other non-operating income was understated by $5.0 million for the quarter ended March 31, 2010 and non-operating income was overstated by a similar amount for the quarter ended September 30, 2010. We evaluated the materiality of the errors from a qualitative and quantitative perspective and concluded that they were material to the interim periods previously presented and have restated these amounts. We also concluded that since the understatement of non-operating income in the quarter ended March 31, 2010 approximated the overstatement in the quarter ended September 30, 2010, the errors were not material to our consolidated financial statements for the fiscal year ended September 30, 2010. These restatements had no impact on the consolidated financial statements for the nine months ended June 30, 2011 or any interim financial statements within that period.

Throughout this Report on Form 10-Q, amounts presented from prior periods and prior period comparisons have been revised and labeled as “restated” and reflect the balances and amounts on a restated basis.

The following table summarizes the effects of the restatements on the specific line items presented in our historical condensed consolidated statement of income for the nine months ended June 30, 2010 (in thousands):

	(As previously
Nine Months ended June 30, 2010:	reported)			(As restated)
Other income (expense)	$	(8	)	$	5,031
Income before income taxes	79,206			84,245
Income taxes	25,450			26,861
Net income	53,756			57,384
Net income attributable to Cubic	53,756			57,384
Basic and diluted net income per common share	2.01			2.15

The restatements had no impact on the financial statement amounts previously reported for our revenues or operating costs and expenses for the nine months ended June 30, 2010.

The following table summarizes the effects of the restatements on the specific line items presented in our historical condensed consolidated statement of cash flows for the nine months ended June 30, 2010 (in thousands):

	(As previously
Nine Months ended June 30, 2010:	reported)			(As restated)
Net income	$	53,756		$	57,384
Adjustments to reconcile net income to net cash provided by operating activities:
Changes in operating assets and liabilities	(7,667		)	(6,256		)
Net cash provided by operating activities	57,329			62,368
Effect of exchange rates on cash	(2,625		)	(7,664		)

The following is a summary of our restated quarterly results of operations for the year ended September 30, 2010:

	Quarter Ended								YTD
	December 31		March 31		June 30		September 30		September 30
	(in thousands, except per share data)
			As Restated				As Restated
Fiscal 2010
Net sales	$	250,684	$	264,559	$	331,240	$	347,706	$	1,194,189
Operating income	20,374		26,132		32,636		26,383		105,525
Net income	13,663		21,019		22,702		13,252		70,636
Net income per share	0.51		0.79		0.85		0.49		2.64