SOURCE: Cubic Corporation

Cubic Corporation

February 11, 2013 16:01 ET

Cubic Reports Financial Results for the Quarter Ended December 31, 2012

SAN DIEGO, CA--(Marketwire - Feb 11, 2013) -  Cubic Corporation (NYSE: CUB) today reported its financial results for the quarter ended December 31, 2012. Net income attributable to Cubic shareholders for the first quarter of fiscal 2013 was $12.4 million, or 47 cents per share this year compared to $20.7 million, or 77 cents per share last year. Sales for the quarter decreased from $316.8 million to $313.4 million, a decrease of 1 percent. Operating income was $18.2 million in this year's first quarter compared to $27.8 million last year, a decrease of 34 percent. Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA), a non-GAAP measure (as described below), for the first quarter this year was $23.0 million, compared to $33.6 million last year.

"While our first quarter reflected some unusual cost items and lower profitability, we continue to make progress on major long-term transit projects and have completed two acquisitions that will provide growth opportunities in our defense and transportation segments in key strategic focus areas," said William W. Boyle, Chief Executive Officer of Cubic Corporation.  "I believe our diversification and strategic focus will differentiate Cubic over the long term."

Transportation Systems

Cubic Transportation Systems (CTS) develops and delivers innovative fare collection systems and services for public transit authorities worldwide. In the first quarter of this year, CTS sales decreased 6 percent to $118.6 million compared to $125.8 million in the same period last year, primarily due to reduced work on a contract to design and build a system in Vancouver. Last year's first quarter revenues were higher on the project as we were producing a significant amount of the hardware for the system, while this year we are in the latter stages of system delivery. This decrease was partially offset by higher sales from a contract to design and build a system in Sydney, Australia. CTS is currently in the design and build phase for three major projects to design, build and operate transit fare systems in Sydney, Vancouver and Chicago.

Operating income from CTS decreased 26 percent in the first quarter this year to $13.2 million, compared to $17.9 million in the first quarter of last year. In addition to the impact on operating income caused by the decrease in sales, we are currently incurring costs in excess of revenues on our contract in Sydney, Australia due to the transition of portions of the system into full operations. We anticipate improved profitability on the Sydney contract as the systems complete the transition phase and move into full operations.

Mission Support Services

Mission Support Services (MSS) is a leading provider of highly specialized support services to the U.S. government and allied nations. Sales from MSS increased 5 percent to $113.4 million in the first quarter this year, from $107.5 million in the first quarter of last year. Sales growth was driven by an increase in activity during the first quarter at the Joint Readiness Training Center (JRTC) in Fort Polk, Louisiana and by higher sales from Abraxas, a company Cubic acquired in fiscal year 2011.

MSS operating income decreased 7 percent to $4.2 million in the first quarter this year from $4.5 million in the first quarter of last year. NEK, a Special Operations Forces Training company we acquired in December 2012, had an operating loss of $0.5 million in the first quarter of fiscal 2013 primarily due to the incurrence of $0.4 million of acquisition-related costs.

Defense Systems

Cubic Defense Systems (CDS) is focused on two primary lines of business: training systems and secure communications. Training systems sales increased 1 percent in the first quarter this year to $65.6 million while operating income decreased 48 percent for the quarter from $4.8 million last year to $2.5 million this year. Although total training systems sales increased, the sales of higher margin small arms training systems and air combat training systems to a customer in the Far East decreased, which decreased operating income.

Secure communications sales decreased 23 percent in the first quarter this year to $11.6 million compared to $15.0 million in the first quarter of last year. Secure communications operating income decreased to $0.3 million in the first quarter this year from $3.2 million in the first quarter of last year. Decreased profitability on lower data link sales, including the impact of a $1.2 million cost increase on a U.S. government contract, contributed to the decrease in operating income.

Segment Results

The following table presents sales, operating profits, and depreciation and amortization for each of the three business segments, in millions.

       
    Three Months Ended  
    December 31,  
    2012     2011  
Sales:                
  Transportation Systems   $ 118.6     $ 125.8  
  Mission Support Services     113.4       107.5  
  Defense Systems     81.2       83.3  
  Other     0.2       0.2  
Total sales   $ 313.4     $ 316.8  
                 
Operating income (loss):                
  Transportation Systems   $ 13.2     $ 17.9  
  Mission Support Services     4.2       4.5  
  Defense Systems     1.2       6.0  
  Unallocated corporate expenses and other     (0.4 )     (0.6 )
Total operating income   $ 18.2     $ 27.8  
                 
Depreciation and amortization:                
  Transportation Systems   $ 0.5     $ 0.9  
  Mission Support Services     3.1       3.5  
  Defense Systems     0.8       1.2  
  Other     0.3       0.2  
Total depreciation and amortization   $ 4.7     $ 5.8  
                 

Total backlog

Total backlog decreased $15.2 million from $2,831.6 million at September 30, 2012 to $2,816.4 million at December 31, 2012. Backlog in our defense businesses has been impacted in part due to the budgetary uncertainties experienced by our U.S. governmental agency customers and shorter-term contract awards.

Conference Call

Cubic's management will hold its first-ever earnings conference call on Monday, February 11, 2013 at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to review the company's financial results for the first quarter ended December 31, 2012 and provide a company update. The company's prepared remarks will be followed by a question and answer period. Please refer to the company's press release for more details.

About Cubic

Cubic Corporation is the parent company of three business segments: Transportation Systems, Mission Support Services, and Defense Systems. Transportation Systems is a leading provider of automated fare collection systems and services for public transit authorities worldwide. Mission Support Services is a leading provider of training, operations, maintenance, technical and other support services to the U.S. and allied nations. Defense Systems is a leading provider of realistic combat training systems and secure communications, including data links, cyber technologies, asset tracking solutions, and defense electronics. For more information about Cubic, see the company's Web site at www.cubic.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to the safe harbor created by such Act. Forward-looking statements include, among others, statements about our expectations regarding future events or our future financial and/or operating performance. 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 risks, estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in these statements, including, among others: our dependence on U.S. and foreign government contracts; delays in approving U.S. and foreign government budgets and cuts in U.S. and foreign government defense expenditures; the ability of certain government agencies to unilaterally terminate or modify our contracts with them; our ability to successfully integrate new companies into our business and to properly assess the effects of such integration on our financial condition; the U.S. government's increased emphasis on awarding contracts to small businesses, and our ability to retain existing contracts or win new contracts under competitive bidding processes; the effects of politics and economic conditions on negotiations and business dealings in the various countries in which we do business or intend to do business; competition and technology changes in the defense and transportation industries; our ability to accurately estimate the time and resources necessary to satisfy obligations under our contracts; the effect of adverse regulatory changes on our ability to sell products and services; our ability to identify, attract and retain qualified employees; business disruptions due to cyber security threats, physical threats, terrorist acts, acts of nature and public health crises; our involvement in litigation, including litigation related to patents, proprietary rights and employee misconduct; our reliance on subcontractors and on a limited number of third parties to manufacture and supply our products; our ability to comply with our development contracts and to successfully develop, introduce and sell new products, systems and services in current and future markets; defects in, or a lack of adequate coverage by insurance or indemnity for, our products and systems; and changes in U.S. and foreign tax laws, exchange rates or our economic assumptions regarding our pension plans. In addition, please refer to the risk factors contained in our SEC filings available at www.sec.gov, including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Because the risks, estimates, assumptions and uncertainties referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements, you should not place undue reliance on any forward-looking statements. Any forward-looking statement speaks only as of the date hereof, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date hereof.

Use of Non-GAAP Financial Information

To supplement our consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), we use Adjusted EBITDA which represents net income attributable to Cubic before interest, taxes, non-operating income, depreciation and amortization. We believe that the presentation of Adjusted EBITDA provides useful information to investors with which to analyze our operating trends and performance and ability to service and incur debt. Also, Adjusted EBITDA is a factor we use in measuring our performance and compensating certain of our executives. Further, we believe Adjusted EBITDA facilitates company-to-company operating performance comparisons by backing out potential differences caused by variations in capital structures (affecting net interest expense), taxation and the age and book depreciation of property, plant and equipment (affecting relative depreciation expense), and non-operating expenses which may vary for different companies for reasons unrelated to operating performance. In addition, we believe that Adjusted EBITDA is frequently used by securities analysts, investors and other interested parties in their evaluation of companies, many of which present an Adjusted EBITDA measure when reporting their results. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to net income as a measure of performance. In addition, other companies may define Adjusted EBITDA differently and, as a result, our measure of Adjusted EBITDA may not be directly comparable to Adjusted EBITDA of other companies. Furthermore, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP.

Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally. You are cautioned not to place undue reliance on Adjusted EBITDA. 

The following table reconciles Adjusted EBITDA to net income attributable to Cubic, which we consider to be the most directly comparable GAAP financial measure to Adjusted EBITDA.

       
    Three Months Ended  
    December 31,  
    2012     2011  
    (in thousands)  
Reconciliation:                
Net income attributable to Cubic   $ 12,446     $ 20,694  
Add:                
  Provision for income taxes     5,400       8,353  
  Interest expense (income), net     425       (415 )
  Other income, net     (102 )     (923 )
  Noncontrolling interest in income of VIE     73       45  
  Depreciation and amortization     4,718       5,832  
    ADJUSTED EBITDA   $ 22,960     $ 33,586  
                 
   
CUBIC CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)  
(amounts in thousands, except per share data)  
             
    Three Months Ended  
    December 31,  
    2012     2011  
         
Net sales:                
  Products   $ 135,701     $ 153,310  
  Services     177,670       163,456  
      313,371       316,766  
                 
Costs and expenses:                
  Products     100,895       113,449  
  Services     143,851       131,408  
  Selling, general and administrative     40,997       35,220  
  Research and development     5,822       4,896  
  Amortization of purchased intangibles     3,564       4,039  
      295,129       289,012  
                 
Operating income     18,242       27,754  
                 
Other income (expense):                
  Interest and dividend income     437       762  
  Interest expense     (862 )     (347 )
  Other income (expense) - net     102       923  
                 
Income before income taxes     17,919       29,092  
                 
Income taxes     5,400       8,353  
                 
Net income     12,519       20,739  
                 
Less noncontrolling interest in income of VIE     73       45  
                 
Net income attributable to Cubic   $ 12,446     $ 20,694  
                 
Basic and diluted net income per common share   $ 0.47     $ 0.77  
                 
Average number of common shares outstanding     26,736       26,736  
                 
   
CUBIC CORPORATION  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(in thousands)  
             
 
 
 
 
 
 
December 31,
2012
(Unaudited)
 
 
 
 
 
 
September 30,
2012
(See note below)
 
 
 
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 174,116     $ 212,267  
  Restricted cash     68,829       68,749  
  Accounts receivable - net     359,301       350,697  
  Recoverable income taxes     4,817       7,083  
  Inventories - net     53,095       52,366  
  Deferred income taxes and other current assets     24,243       21,564  
Total current assets     684,401       712,726  
                 
Long-term contract receivables     21,460       22,070  
Long-term capitalized contract costs     40,146       26,875  
Property, plant and equipment - net     55,434       55,327  
Goodwill     173,734       146,933  
Purchased intangibles - net     54,188       39,374  
Other assets     21,390       23,012  
    $ 1,050,753     $ 1,026,317  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY          
Current liabilities:                
  Short-term borrowings   $ 25,000     $ -  
  Trade accounts payable     29,001       47,917  
  Customer advances     107,913       100,764  
  Accrued compensation and other current liabilities     122,316       108,668  
  Income taxes payable     8,715       20,733  
  Current portion of long-term debt     4,563       4,561  
Total current liabilities     297,508       282,643  
                 
Long-term debt     2,814       6,942  
Other long-term liabilities     65,533       66,390  
                 
Shareholders' equity:                
  Common stock     12,574       12,574  
  Retained earnings     727,489       715,043  
  Accumulated other comprehensive loss     (19,111 )     (21,148 )
  Treasury stock at cost     (36,078 )     (36,078 )
Shareholders' equity related to Cubic     684,874       670,391  
  Noncontrolling interest in variable interest entity     24       (49 )
Total shareholders' equity     684,898       670,342  
    $ 1,050,753     $ 1,026,317  
                 
                 
Note: The Balance Sheet at September 30, 2012 has been derived from the audited financial statements at that date.  
   
   
CUBIC CORPORATION  
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)  
(in thousands)  
    Three Months Ended  
    December 31,  
    2012     2011  
Operating Activities:                
  Net income   $ 12,519     $ 20,739  
  Adjustments to reconcile net income to net cash used in operating activities:                
    Depreciation and amortization     4,718       5,832  
    Changes in operating assets and liabilities     (43,353 )     (64,948 )
NET CASH USED IN OPERATING ACTIVITIES     (26,116 )     (38,377 )
                 
Investing Activities:                
  Acquisition of businesses, net of cash acquired     (33,095 )     -  
  Purchases of property, plant and equipment     (1,423 )     (5,249 )
  Proceeds from sales or maturities of short-term investments     -       6,957  
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES     (34,518 )     1,708  
                 
Financing Activities:                
  Proceeds from short-term borrowings     25,000       -  
  Principal payments on long-term debt     (4,140 )     (4,136 )
  Net change in restricted cash     229       -  
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES     21,089       (4,136 )
                 
Effect of exchange rates on cash     1,394       798  
                 
NET DECREASE IN CASH AND CASH EQUIVALENTS     (38,151 )     (40,007 )
                 
Cash and cash equivalents at the beginning of the period     212,267       329,148  
                 
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD   $ 174,116     $ 289,141  
                 
                 
Supplemental disclosure of non-cash operating and investing activities:  
                 
  Liability incurred to acquire NEK   $ 20,130     $ -  
                 

Contact Information

  • Contact:
    Diane Dyer
    Investor Relations
    Cubic Corporation
    (858) 505-2907