SOURCE: Cubic Corporation

May 03, 2007 14:49 ET

Cubic Corporation Reports Record High Sales and Higher Earnings for the Quarter Ended March 31, 2007

SAN DIEGO, CA -- (MARKET WIRE) -- May 3, 2007 -- Cubic Corporation (AMEX: CUB) today announced record high sales and higher earnings for the quarter ended March 31, 2007. Sales for the company's second fiscal quarter were $230.0 million compared to $206.6 million last year, an increase of 11 percent. Net income was $11.2 million or $.42 per share compared to $0.7 million or $.03 per share in the same quarter last year.

Operating income for the second fiscal quarter was $17.8 million, a substantial improvement compared to $1.5 million in the second quarter last year. This year's operating income growth reflects strong performance from the defense segment, which more than doubled its operating income compared to last year's second quarter, and improved results from the transportation segment, which generated operating income of $6.9 million for the second quarter this year compared to an operating loss of $2.8 million last year. Approximately $5.1 million of the increase in operating income for the quarter came from settlements with customers of amounts that were previously disputed. Of this amount, $1.2 million was from defense and $3.9 million from transportation systems contracts.

Six-Month Results

For the six months ended March 31, 2007, sales grew by 8 percent to $433.0 million from $401.7 million last year. Net income was $19.5 million for the six-month period, or $0.73 per share compared to last year's net income of $11.2 million, or $0.42 per share. This year's six-month earnings results were primarily from operations, while last year's net income included a gain on the sale of real estate of approximately $4.3 million, after applicable income taxes, or about $0.16 per share. Operating income nearly tripled for the six-month period, increasing from $10.1 million in 2006 to $29.5 million in 2007.

Cash flows from operations for the first six months of the fiscal year were $38 million, with both segments contributing to the positive result.

Defense Segment

In the second quarter of 2007, defense segment sales increased by 13 percent from $145.2 million last year to $164.8 million this year. Defense sales were also up 13 percent for the first six months of the fiscal year, from $272.7 million to $308.1 million. Higher sales from Mission Support services and Readiness Systems (formerly called Training Systems) contributed to the increase. Sales in Communications and Electronic Systems were down for the quarter and first six months of the fiscal year.

Operating income in the defense segment more than doubled in the second quarter to $11.9 million from $5.2 million last year with the biggest improvement from Readiness Systems, which had incurred an operating loss in the second quarter last year. For the six-month period, operating income was up by $10.3 million over the prior year, increasing from $11.1 million in 2006 to $ 21.4 million this year. The Mission Support services business continued its strong performance, while the Readiness Systems Business Unit improved from break-even to operating income of $8.1 million for the six-month period.

Transportation Systems Segment

Transportation Systems posted higher sales in the second quarter of 2007 of $62.0 million compared to $57.8 million last year due to increased sales from its European operations. For the first six months of the fiscal year, sales decreased 3 percent from $121.5 million to $118.0 million, resulting primarily from lower sales on system installation contracts in North America and Australia.

Operating income in the transportation segment improved during the second quarter to $6.9 million, compared to a loss of $2.8 million last year, due to settlements reached with customers and bonuses earned from the Prestige contract for system usage, despite cost growth of $4.7 million in the quarter to complete several North American contracts. For the six-month period, operating income increased to $9.2 million this year from $0.4 million last year.

Backlog

Total backlog increased to $1.558 billion at March 31, 2007 compared to $1.478 billion at September 30, 2006. The growth in backlog came from both segments.

Cubic Corporation is the parent company of two major business segments: defense and transportation. The Cubic Defense Applications group is a world leader in realistic combat training systems, mission support services and defense electronics. Cubic Transportation Systems designs and manufactures automatic fare collection systems for public transit authorities. For more information about Cubic, see the company's Web site at www.cubic.com.

In addition to historical matters, this release may contain forward-looking statements which are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These forward-looking statements involve predictions of future results. Investors are cautioned that forward-looking statements involve risks and uncertainties which may affect the Company's business and prospects. These include the effects of politics on negotiations and business dealings with government entities, economic conditions in the various countries in which the Company does or hopes to do business, competition and technology changes in the defense and transit industries, and other competitive and technological factors.

Any statements about the Company's expectations, beliefs, plans, objectives, assumptions or future events or future financial and/or operating performance are not historical and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as "may," "will," "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "predict," "potential," "opportunity" and similar words or phrases or the negatives of these words or phrases. These statements involve estimates, assumptions and uncertainties.

Since actual results or outcomes may differ materially from those expressed in any forward-looking statements made by the Company, investors should not place undue reliance on any forward-looking statements. In addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance and investors should not use the Company's historical performance to anticipate results or future period trends. Further, any forward-looking statement speaks only as of the date on which it is made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for the Company to predict which factors will arise. In addition, the Company cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.


                            CUBIC CORPORATION
          CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
              (amounts in thousands, except per share data)


                                  Six Months Ended     Three Months Ended
                                      March 31,             March 31,
                                   2007       2006       2007       2006
                                ---------  ---------  ---------  ---------
                                  (amounts in thousands, except per share
                                                  data)

Net sales:
  Products                      $ 253,443  $ 245,944  $ 132,484  $ 121,354
  Services                        179,533    155,736     97,557     85,285
                                ---------  ---------  ---------  ---------
                                  432,976    401,680    230,041    206,639

Costs and expenses:
  Products                        206,805    213,224    107,716    109,035
  Services                        148,413    127,257     80,249     69,286
  Selling, general and
   administrative                  46,917     46,962     23,707     24,591
  Research and development          1,351      4,146        570      2,202
                                ---------  ---------  ---------  ---------
                                  403,486    391,589    212,242    205,114
                                ---------  ---------  ---------  ---------

Operating income                   29,490     10,091     17,799      1,525

Other income (expense):
  Gain on sale of investment
   real estate                          -      7,237          -          -
  Interest and dividends              898        651        464        405
  Interest expense                 (1,476)    (2,216)      (732)    (1,358)
  Other income                        530        619         48        (41)
  Minority interest in loss of
   subsidiary                         394        656        132        398
                                ---------  ---------  ---------  ---------

Income before income taxes         29,836     17,038     17,711        929

Income taxes                       10,300      5,800      6,500        200
                                ---------  ---------  ---------  ---------

Net income                      $  19,536  $  11,238  $  11,211  $     729
                                =========  =========  =========  =========

Basic and diluted net income
 per common share               $    0.73  $    0.42  $    0.42  $    0.03
                                =========  =========  =========  =========

Dividends per common share      $    0.09  $    0.09  $    0.09  $    0.09
                                =========  =========  =========  =========

Average number of common shares
 outstanding                       26,720     26,720     26,720     26,720
                                =========  =========  =========  =========


                            CUBIC CORPORATION
                  CONSOLIDATED CONDENSED BALANCE SHEETS
                              (in thousands)


                                              March 31,     September 30,
                                                 2007            2006
                                                              (See note
                                              (Unaudited)       below)
                                            --------------  --------------
ASSETS
Current assets:
 Cash and cash equivalents                  $       62,368  $       42,380
 Short-term investments                              8,426           8,874
 Accounts receivable, net                          314,275         330,447
 Inventories                                        21,885          20,209
 Deferred income taxes and other current
  assets                                            30,477          36,159
                                            --------------  --------------
Total current assets                               437,431         438,069
                                            --------------  --------------

Long-term contract receivables                      17,800           2,200
Property, plant and equipment - net                 54,641          54,564
Goodwill                                            35,458          34,750
Other assets                                        17,820          18,488
                                            --------------  --------------
                                            $      563,150  $      548,071
                                            ==============  ==============




LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
 Short-term borrowings                      $            -  $       10,000
 Trade accounts payable                             19,772          23,240
 Customer advances                                  56,611          43,752
 Other current liabilities                          63,434          64,095
 Accrued pension liability                           8,262           6,283
 Income taxes payable                                6,157           7,099
 Current portion of long-term debt                   6,112           6,078
                                            --------------  --------------
Total current liabilities                          160,348         160,547
                                            --------------  --------------

Long-term debt                                      32,762          38,159
Accrued pension liability                           17,368          18,208
Deferred compensation                                7,715           7,565
Minority interest                                        -             366

Shareholders' equity:
 Common stock                                          234             234
 Additional paid-in capital                         12,123          12,123
 Retained earnings                                 355,654         338,523
 Accumulated other comprehensive income             13,015           8,415
 Treasury stock at cost                            (36,069)        (36,069)
                                            --------------  --------------
                                                   344,957         323,226
                                            --------------  --------------
                                            $      563,150  $      548,071
                                            ==============  ==============

Note: The balance sheet at September 30, 2006 has been derived from the
 audited financial statements at that date.


                            CUBIC CORPORATION
        CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
              (amounts in thousands, except per share data)


                                     Six Months Ended   Three Months Ended
                                        March 31,           March 31,
                                      2007      2006      2007      2006
                                    --------  --------  --------  --------

Operating Activities:
 Net income                         $ 19,536  $ 11,238  $ 11,211  $    729
 Adjustments to reconcile net
  income to net cash
  provided by (used in) operating
  activities:
   Depreciation and amortization       4,520     4,600     2,179     2,282
   Gain on sale of investment real
    estate                                 -    (7,237)        -         -
   Changes in operating assets and
    liabilities                       13,609   (14,271)   28,931    12,576
                                    --------  --------  --------  --------
NET CASH PROVIDED BY (USED IN)
 OPERATING ACTIVITIES                 37,665    (5,670)   42,321    15,587
                                    --------  --------  --------  --------

Investing Activities:
 Net additions to property, plant
  and equipment                       (3,326)   (5,630)   (1,470)   (3,252)
 Proceeds from sale of investment
  real estate                              -     8,028         -         -
 Change in short-term investments,
  net                                    448         -    (8,426)        -
                                    --------  --------  --------  --------
NET CASH PROVIDED BY (USED IN)
 INVESTING ACTIVITIES                 (2,878)    2,398    (9,896)   (3,252)
                                    --------  --------  --------  --------

Financing Activities:
 Change in short-term borrowings,
  net                                (10,000)    8,698         -     9,699
 Principal payments on long-term
  borrowings                          (5,764)   (5,428)     (168)        -
                                    --------  --------  --------  --------
NET CASH PROVIDED BY (USED IN)
 FINANCING ACTIVITIES                (15,764)    3,270      (168)    9,699
                                    --------  --------  --------  --------

Effect of exchange rates on cash         965    (1,562)      348      (862)
                                    --------  --------  --------  --------

NET INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS                     19,988    (1,564)   32,605    21,172

Cash and cash equivalents at the
 beginning of the period              42,380    48,860    29,763    26,124
                                    --------  --------  --------  --------

CASH AND CASH EQUIVALENTS AT
 THE END OF THE PERIOD              $ 62,368  $ 47,296  $ 62,368  $ 47,296
                                    ========  ========  ========  ========

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