CUBIC CORP /DE/ - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended September 30, 1994

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

Common Stock American Stock Exchange, Inc.
------------ ----------------------------
Title of each class Name of exchange on which registered

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
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K.
Yes X No
--- ---

The aggregate market value of voting stock held by non-affiliates of the
registrant is: $63,180,671 as of December 13, 1994.

Number of shares of common stock outstanding as of December 13, 1994:
5,987,474 (after deducting 1,938,140 shares held as treasury stock).

Part III incorporates information by reference from the Registrant's definitive
proxy statement which will be filed no later than 120 days after the close of
the Registrant's year-end, and no later than 30 days prior to the Annual
Shareholders' Meeting.

Cubic Corporation - SEC Form 10-K Page 2
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PART I
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ITEM 1. BUSINESS.
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(a) GENERAL DEVELOPMENT OF BUSINESS.
-------------------------------

The Registrant, CUBIC CORPORATION, was incorporated in the State of California
in 1949 and began operations in 1951.

In 1984, Registrant moved its Corporate domicile to the State of Delaware.

The Registrant, its subsidiaries and divisions, design, develop and manufacture
products which are mainly electronic in nature, such as:

Electronic equipment for use in customized military range instrumentation,
training and applications systems, communications and surveillance systems,
HF and VHF/UHF surveillance receivers, avionics systems, space RF/digital
products and cellular call boxes for public use on freeways and in parking
lots.

Automatic revenue collection equipment, ticket-vending machines and
passenger gates for mass transit systems, airlines, buses, toll roads, and
bridges.

The Registrant also performs a variety of services, such as computer simulation
training, distributed interactive simulation, development of training doctrine,
as well as field operations and maintenance services related to products
previously produced and products produced by others. Registrant also
manufactures replacement parts for its own such products. In addition,
Registrant operates a corrugated paper converting facility through its
subsidiary, Consolidated Converting Company.

During 1994, Registrant increased its sales volume through acquisitions, one in
the defense segment and the other in the automatic revenue collection systems
segment. The acquisition, in April 1994, of the Titan Applications and Titan
Services International divisions of the Titan Corporation helped to reverse the
downward sales trend in recent years in the defense segment. Automatic revenue
collection systems segment sales increased due to the acquisition, in January
1994, of voting control of the Registrant's fifty-percent owned subsidiary,
Westinghouse Cubic Ltd. This change in control resulted in the consolidation of
the accounts of this subsidiary with the Registrant. Work continues on major
revenue collection systems for the New York City Transit Authority, the London
Underground, the Washington Metropolitan Transit Authority, the Florida
Department of Transportation and the Chicago Transit Authority, as well as other
transportation agencies.

During fiscal year 1994, approximately 40 percent of the Registrant's total
business was done, either directly or indirectly, with various agencies of the
United States Government. The remaining 60 percent of the business is
classified by the Registrant as industrial.

The Registrant's products and services are sold almost entirely by Registrant's
employees. Overseas sales are made either directly or through representatives
or licensees.

Cubic Corporation - SEC Form 10-K Page 3
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(b) FINANCIAL INFORMATION RELATING TO INDUSTRY
SEGMENTS AND CLASSES OF PRODUCTS OR SERVICES.
--------------------------------------------

Information regarding the amounts of revenue, operating profit and loss and
identifiable assets attributable to each of the Registrant's industry segments,
is set forth in Note M to the Consolidated Financial Statements for the year
ended September 30, 1994, and follows at Item 14(a)(1) of this filing, on pages
34 through 36.

(c) NARRATIVE DESCRIPTION OF BUSINESS.
---------------------------------

DEFENSE
- -------

The defense segment's products include customized military range
instrumentation, training and applications systems, communications and
surveillance systems, HF and UHF/VHF surveillance receivers, avionics systems
and space RF/digital products. Services provided by the segment include
computer simulation training, distributed interactive simulation, development of
training doctrine and field operations and maintenance.

Cubic Defense Systems, Inc. is best known for its combat training systems for
military field exercises. These systems use lasers or computer software to
simulate live fire, plus instrumentation to record the force-on-force
engagement. When the missions are completed, computer data is replayed on
display screens for review by the instructors and personnel involved. The TACTS
(Tactical Aircrew Combat Training System) is used by the United States Navy and
Marine Corps, and ACMI (Air Combat Maneuvering Instrumentation) by the Air
Force. Instrumented training ranges at the CMTC (Combat Maneuver Training
Center) and JRTC (Joint Readiness Training Center) are for the U. S. Army.

Cubic Defense Systems, Inc. also produces the SRS (Sonobuoy Reference System)
for anti-submarine aircraft for the United States and foreign Navies and a data
link for the Joint STARS reconnaissance system being built for the Air Force by
Grumman. Avionics products, such as the PLS (Personnel Locator System) for
helicopters, and a GCAS (Ground Collision Avoidance System) which provides
warnings for flight safety, are built for the U. S. military, aircraft prime
contractors and foreign governments.

Cubic Applications Inc., was formed in April 1994 from the acquisition of
certain net assets of the Titan Applications and Titan Services International
divisions of the Titan Corporation. This subsidiary is a tactical knowledge
based service company that teaches commanders to make correct decisions in
battle situations by using computer simulation for training.

Cubic Communications Inc. designs and produces HF and VHF/UHF surveillance
receivers primarily for the U. S. and foreign military markets.

RAW MATERIALS:
- -------------

The principal raw materials used by the defense segment are sheet aluminum and
steel, copper electrical wire, and composite products. A significant portion of
the segment's end product is composed of purchased components and subcontracted
parts and supplies. These items are primarily procured from commercial sources.
In general, supplies of raw materials and purchased parts are presently adequate
to meet the requirements of the segment.

Cubic Corporation - SEC Form 10-K Page 4
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BACKLOG:
- -------

The defense segment's sales backlog at September 30, 1994 was $102,400,000
compared to $62,700,000 at September 30, 1993. Approximately $13,000,000 is not
expected to be completed by September 30, 1995.

COMPETITION:
- -----------

The defense segment competes with concerns of varying size, including some of
the largest corporations in the country. It is not possible to predict the
extent of competition which present or future activities will encounter,
particularly since many of the segment's activities are subject to rapidly
changing competitive conditions, customer requirements and technological
developments. However, it is expected that United States government spending
for defense programs will continue at a lower level than in the past decade,
resulting in continued heavy competition for this segment.

AUTOMATIC REVENUE COLLECTION SYSTEMS
- ------------------------------------

The automatic revenue collection systems segment includes five subsidiaries
which work together to design, produce and service three revenue collection
product lines: rail systems, toll products and bus systems. These include four
wholly-owned subsidiaries, Cubic Automatic Revenue Collection Group, Cubic Toll
Systems, Inc., Southern Cubic Pty. Ltd. and New York Revenue Automation, Inc. as
well as the Registrant's 50% owned subsidiary in England, Westinghouse Cubic
Limited. This group of companies together are the acknowledged leader in a
market that serves rapid transit systems, bus, parking and tollway needs the
world over.

The rail system product line, headquartered in San Diego, designs computerized
systems for rapid transit rail systems. The manufacture of these systems is
accomplished at the Tullahoma, Tennessee facility. The Registrant and its
subsidiaries, Cubic Automatic Revenue Collection Group and Westinghouse Cubic
Ltd., have been awarded large contracts by the cities of New York, Chicago,
London, and Sydney, Australia, as well as a major system enhancement for the
Washington, D.C. Metro. These programs provide a solid base of current business
and the potential for additional future business as the programs are expanded.

Cubic Automatic Revenue Collection Group is also a major supplier of bus
fareboxes. Public bus systems across the United States are being equipped with
computerized fareboxes, which accept all denominations of coins, $1 bills and
magnetically encoded passes.

Cubic Toll Systems, Inc. and Cubic Automatic Revenue Collection Group together
provide computerized toll collection and ticketing equipment for bridges and
tunnels, revenue control systems for parking lots, and advanced equipment to
collect fares on toll roads and turnpikes. Equipment is either sold or leased
to more than 150 authorities worldwide. The Florida Turnpike Toll System
project is the largest contract for this type of equipment to date. The Texas
Turnpike Authority, the Harris County Toll Authority and the Virginia Department
of Transportation are also significant customers.

There is a worldwide need for improved revenue management in all forms of public
transit. The Registrant's automatic revenue collection systems segment will
continue to provide the technology and leadership to give the world fare
collection market quality products and quality service.

Cubic corporation - SEC Form 10-K Page 5
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RAW MATERIALS:
- -------------

Raw materials used in this segment include sheet steel, composite products,
copper electrical wire and castings. All of these items are procured from
commercial sources. In general, supplies of raw materials and purchased parts
are presently adequate to meet the requirements of the segment.

BACKLOG:
- -------

The automatic revenue collection systems segment sales backlog at September 30,
1994 was $296,600,000, compared to $177,000,000 at September 30, 1993.
Approximately $135,000,000 is not expected to be completed by September 30,
1995.

COMPETITION:
- -----------

Registrant's automatic revenue collection systems segment is a leading
manufacturer of automatic fare collection systems for rail, bus and toll
applications. Although competition is intense, Registrant believes that its
state-of-the-art systems and equipment, together with continuing research and
development, will enable it to maintain its leading position in these areas of
the industry for the immediate foreseeable future. As an incident to the sale
of its automatic revenue collection systems products, Registrant's subsidiaries
are subject to possible liability by reason of warranties against defects in
design, material and workmanship.

INDUSTRIAL OPERATIONS
- ---------------------

The primary business included in the industrial operations segment is
Consolidated Converting Co. which converts corrugated paper stock into high-
quality packaging and shipping containers and converts paper stock into seat
covers.

The segment also includes call boxes for use on freeways, golf courses and in
parking lots produced by the Registrant's subsidiary, Cubic Communications, Inc.

RAW MATERIALS:
- -------------

Raw materials used in the industrial operations segment include sheet aluminum
and steel, paper and composite products. All of these items are procured from
commercial sources. In general, supplies of raw materials and purchased parts
are presently adequate to meet the requirements of the segment. Paper shortages
could delay completion of the segment's contracts in the future.

BACKLOG:
- -------

The industrial operations segment sales backlog at September 30, 1994 was
$7,500,000, compared to $6,200,000 at September 30, 1993. Approximately
$3,000,000 is not expected to be completed by September 30, 1995.

Cubic Corporation - SEC Form 10-K Page 6
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COMPETITION:
- -----------

In the industrial operations segment, the subsidiaries of the Registrant compete
with concerns of varying size, including some of the largest corporations in the
country. It is not possible to predict the extent of the competition which
present or future activities will encounter, particularly since many of the
activities of the Registrant's subsidiaries are subject to rapidly changing
competitive conditions.

GENERAL
- -------

The Registrant pursues a policy of seeking patent protection for its products,
where deemed advisable, but it does not regard itself as materially dependent on
its patents for the maintenance of its competitive position.

The Registrant does not engage in any business that is seasonal in nature.

The estimated dollar amounts spent for customer sponsored research activities
relating to the development of new products or services, was $35,000,000,
$46,000,000 and $51,000,000 in 1994, 1993, and 1992, respectively. The dollar
amounts of Registrant and subsidiary sponsored research and development activity
was $7,440,000, $3,597,000 and $3,803,000 in 1994, 1993, and 1992,
respectively.

Registrant and its subsidiaries must comply with Federal, State and local laws
and regulations regarding discharge of materials into the environment and the
handling and disposal of materials classed as hazardous and/or toxic. Such
compliance has no material effect upon the capital expenditures, earnings or
competitive position of Registrant or any of its subsidiaries.

There were approximately 2,650 persons employed by the Registrant and its
subsidiaries at the close of the fiscal year ending September 30, 1994.

Typically, Registrant's contracts, through its defense systems segment and for
its revenue collection systems installations, provide for progress or advance
payments which provide assistance in financing the Registrant's working capital
requirements on those contracts.

(d) FINANCIAL INFORMATION ABOUT FOREIGN
AND DOMESTIC OPERATIONS AND EXPORT SALES
----------------------------------------

Information regarding foreign and domestic operations and export sales is set
forth in Note M to the Consolidated Financial Statements for the year ended
September 30, 1994, and follows at Item 14(a)(1) of this filing, on pages 34
through 36.

Cubic Corporation - Sec Form 10-K Page 7
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ITEM 2. PROPERTIES.
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Registrant's Corporate Headquarters and part of its subsidiary, Cubic Defense
Systems, Inc., are located in a 100,000 square-foot facility, situated on a
Registrant-owned, 8-1/2 acre parcel in the City of San Diego, California.

The Registrant owns an approximately 100,000 square-foot, two-story facility
adjacent to the Corporate Headquarters and located on the westerly portion of
the parcel referred to above. The facility is used primarily by the
Registrant's subsidiary, Cubic Defense Systems, Inc., for engineering and office
space.

Adjacent to the Corporate headquarters is a Registrant owned, 127,000 square-
foot office and manufacturing facility on a fourteen-acre parcel which is used
almost entirely by Registrant's subsidiary, Cubic Defense Systems, Inc.

A four-acre parcel, located adjacent and south of the above facility, is owned
by Registrant and contains a plant facility consisting of approximately 60,000
square feet used by Cubic Communications, Inc.

The Registrant also owns the property in which its Cubic Automatic Revenue
Collection Group headquarters is located, consisting of approximately twenty
acres and 78,000 square feet of plant and office facilities, of which
approximately 20,000 square feet are leased to the former owner.

The Registrant's 50% owned subsidiary, Westinghouse Cubic Ltd., owns a 60,000
square foot plant and office facility located on a two acre parcel in Merstham
Surrey, approximately 30 miles north of London, England.

The Registrant leases approximately 90,000 square feet of manufacturing and
office space in Teterboro, New Jersey. These facilities are shared by the
Precision Electro-Optical Division of Cubic Defense Systems, Inc. and Cubic
Automatic Revenue Collection Group.

In addition, Registrant leases a 56,000 square-foot facility in Hauppauge, New
York, which is used for manufacturing, warehouse and office space by Cubic
Automatic Revenue Collection Group.

A 100,000 square-foot facility, located on sixteen acres in Tullahoma,
Tennessee, is owned by Registrant and used by Cubic Automatic Revenue Collection
Group.

The Registrant and its subsidiaries own and lease additional plant and office
facilities, individually under 50,000 square feet in size, at various locations
around the United States for terms having varied expiration dates, mostly of
short-term duration.

Total square footage either owned or under lease comprises approximately 1.3
million square feet. Approximately forty percent of the total square footage of
the facilities of the Registrant is utilized for manufacturing and the remainder
is utilized for administrative and engineering purposes. All owned and leased
properties used by the Registrant are generally well maintained in good
operating condition.

Cubic Corporation - SEC Form 10-K Page 8
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ITEM 3. LEGAL PROCEEDINGS.
-----------------
In October 1991, the California Environmental Protection Agency notified the
Registrant and two of its subsidiaries that they had been identified as three of
approximately ninety potentially responsible parties with respect to alleged
hazardous substances released into the environment at a used oil and solvent
recycling facility in San Diego County. The Registrant and its subsidiaries are
not in the business of transporting or disposing of waste materials. The
Registrant and the involved subsidiaries sold and/or delivered for recycling
certain waste materials generated by them to the owners of the recycling
facility. After receipt of the materials by the owners of the recycling
facility, the Registrant and the involved subsidiaries were not further involved
in the transportation, treatment, or disposal of the materials. It is the
Registrant's understanding that alleged hazardous materials from at least ninety
other parties were allegedly released at the facility. Under Federal and
California law, the Registrant and the involved subsidiaries are "potentially
responsible parties" and, therefore, potentially liable for response costs even
though they were not involved in the transport or disposal of the materials.
The Registrant has been informed that the State of California has already
incurred response costs of approximately $7.9 million with respect to the site.
Removal and remediation activities have not yet been completed, and the eventual
costs of such activities are expected to be substantially in excess of the
amount spent to date.

Registrant and its involved subsidiaries have joined a group of other
potentially responsible parties to share costs and resources and to undertake a
unified course of action in response to their potential liability as potentially
responsible parties and have, without admission of liability, entered into a
Consent Order with the State to remove the most contaminated ground water and to
develop a remedial action plan. A second Consent Order is contemplated to
conduct the site remediation in accordance with the plan.

Several of Registrant's insurance carriers have entered into settlements whereby
they have agreed to pay approximately three-quarters of the costs of Registrant
and its involved subsidiaries, estimated to be necessary for the completion of
the work specified in the first Consent Order. Registrant believes that its
insurance policies provide coverage for any additional costs it may incur under
the contemplated second Consent Order, and will pursue its claims for that
coverage in a timely manner. It is management's opinion that any possible
liability resulting from this situation will not have a material effect on the
Registrant's financial statements.

The government of Iran commenced an arbitration proceeding against the
Registrant seeking $12.9 million for reimbursement of payments made for
equipment that was to comprise an Air Combat Maneuvering Range pursuant to a
contract executed in 1977, and an additional $15 million for unspecified
damages. The Registrant believes that Iran defaulted on the agreement and has
brought a counterclaim for compensatory damages of $10.4 million, plus interest.
A hearing was held by the arbitral panel in June 1994 on issues involving the
applicability of the statute of limitations and liability. No decision has been
rendered by the panel. The Registrant is vigorously contesting Iran's claim and
believes its defenses and counterclaim are strong and that the ultimate outcome
of the matter will not have a material effect on the Registrant's financial
statements.

In September 1993, the Registrant and its subsidiary, Cubic Defense Systems,
Inc., filed a lawsuit against British Aerospace PLC in the United States
District Court for the District of Columbia seeking $9.9 million in compensatory
damages, plus interest, and unspecified punitive damages for breach of contract
and fiduciary duty. The suit also alleges fraudulent misrepresentation in
connection with the construction of an Air Combat Maneuvering Range in the North
Sea. In 1994, British Aerospace PLC filed a counterclaim for $95 million in
damages for misrepresentation and breach of fiduciary duty. Discovery is in
progress and trial is set for April 3, 1995. The Registrant believes the
counterclaim is without merit and is vigorously pursuing its lawsuit.

Neither the Registrant nor any of its subsidiaries are presently a party to any
material pending proceedings other than ordinary litigation incidental to the
business, the outcome of which will not, in management's opinion, have a
materially adverse effect on the financial position of the Registrant.

Cubic Corporation - SEC Form 10-K Page 9
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS.
--------------------

None.

PART II
-------

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS.
-----------------------------------

The principal market on which the Registrant's common stock is being traded is
the American Stock Exchange, Inc. The high and low sales prices for the stock,
as reported in the consolidated transaction reporting system on the American
Stock Exchange, Inc. for the quarterly periods during the past two fiscal years,
and dividend information for those periods, are as follows:

Sales Price of Common Shares Dividends per Share
---------------------------- -------------------

1994 1993 1994 1993
------------- ------------- ---- ----

Quarter ended: High Low High Low

December 31 21-7/8 19-1/8 19-1/2 14-3/8 - -
March 31 23-3/4 20-3/8 22-3/8 18-1/4 $.265 $.265
June 30 21-7/8 18-1/4 23-1/8 20-1/4 - 1.00
September 30 20-1/2 17-3/4 22-7/8 20 .265 .265

On December 13, 1994, the closing price of Registrant's common stock on the
American Stock Exchange, Inc. was $17.88.

The terms of the Registrant's note payable to an insurance company includes
provisions for maintenance of working capital and tangible net worth and
limitations on the level of debt, lease commitments, outstanding letters of
credit, loans to subsidiaries and certain investments. At September 30, 1994,
the covenant relating to the maintenance of tangible net worth leaves
consolidated retained earnings of $11.7 million available for the payment of
dividends to shareholders, purchases of the Company's common stock and other
charges to shareholders' equity.

There were approximately 2,200 shareholders of record of the Registrant's common
stock as of December 13, 1994.

Cubic Corporation -SEC Form 10-K Page 10
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ITEM 6. SELECTED FINANCIAL DATA.
-----------------------

FINANCIAL HIGHLIGHTS AND SUMMARY OF CONSOLIDATED OPERATIONS

(Amounts in thousands, except per share data)

Year ended September 30 1994 1993 1992 1991 1990
- ----------------------- -------- -------- -------- -------- -------

Net sales $260,622 $221,437 $237,505 $198,857 $227,568
Cost of sales 200,549 178,491 178,921 144,124 152,625
Selling, general and administrative
expense 52,071 42,347 51,384 37,084 43,458
Interest expense 2,535 2,294 4,223 5,146 5,374
Income taxes (benefit) 825 (450) 1,100 7,200 12,750
Income from continuing operations 2,533 2,210 4,080 12,668 18,856
Income (loss) from discontinued operations (153) 20,071 2,931 1,366 4,176
Cumulative effect of accounting change 1,379 - - - -
Net income 3,759 22,281 7,011 14,034 23,032

Average number of shares of common
stock outstanding 6,023 6,095 6,295 6,524 6,932

Per Share Data:
Income from continuing operations $ .42 $ .36 $ .65 $ 1.94 $ 2.72
Income (loss) from discontinued operations (.03) 3.30 .46 .21 .60
Cumulative effect of accounting change .23 - - - -
Net income .62 3.66 1.11 2.15 3.32
Cash dividends .53 1.53 .53 .53 .48

Year-End Data:
Shareholders' equity $157,645 $159,552 $147,639 $150,768 $143,482
Equity per share 26.33 26.22 24.02 23.17 21.41
Total assets 288,673 264,568 244,084 269,184 274,272
Long-term debt 35,000 35,500 13,600 41,829 49,954
Shares of common stock outstanding 5,987 6,086 6,146 6,506 6,702

This summary should be read in conjunction with the related consolidated
financial statements and accompanying notes.

Cubic Corporation - SEC Form 10-K Page 11
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ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
---------------------------------------------

FISCAL 1994 COMPARED TO FISCAL 1993
- -----------------------------------

In April 1994, the Company acquired certain contracts and net assets of the
Titan Applications and Titan Services International divisions of Titan
Corporation in a move to enhance the Company's capabilities as a premier
contractor to the Department of Defense for computer simulation training,
systems instrumentation, training doctrine development and field operations and
maintenance. The transaction was accounted for as a purchase as described in
Note B to the consolidated financial statements. In January 1994, an amendment
to the shareholder agreement for Westinghouse Cubic Limited (WCL), a fifty-
percent owned subsidiary in the United Kingdom, was executed which granted
voting control to Cubic in recognition of certain contract performance
guarantees provided by the Company. Accordingly, the accounts of WCL have been
consolidated in the accompanying financial statements from January 1994. The
above events contributed $51 million and $3.7 million to consolidated sales and
consolidated operating profits, respectively, for the year ended September 30,
1994.

Primarily as a result of the above mentioned events, sales increased by 18% to
$261 million while operating profits increased 33% to $11 million from last
year.

Along with the addition of the Titan Applications Group to our defense segment's
training capabilities, the Company made significant investments in research and
development, engineering computing tools and manufacturing equipment for this
segment in 1994. Development of new technology for combat training ranges,
communications technology and related systems amounted to over $6.5 million,
while investments in engineering work stations, other computer-aided engineering
tools, and computer-aided manufacturing equipment amounted to $2.8 million. This
$9.3 million investment compares to approximately $5.1 million spent for such
items in the prior year. Although the acquired company added to the operating
profits of this segment, the overall decrease of $2.6 million in operating
profits is attributable to the investment in research and development. We
believe that the U. S. Government will provide the funding necessary for the
Department of Defense to sustain quality training support for our Armed
Services. We also believe that Cubic's defense segment, currently a significant
DOD contractor in training activities, will be a stronger, more effective
competitor and will earn a profitable return on this investment.

In the fourth quarter of fiscal 1994, the New York City Transit Authority
(NYCTA) exercised Option Two under a contract with Cubic Automatic Revenue
Collection Group (CARCG) to provide additional automated turnstiles and other
revenue collection equipment for the balance of the system. In addition, claims
for additional costs incurred on Option One were settled. All together,
including inter-modal bus fareboxes and other enhancements, the value under
contract with NYCTA exceeds $200 million. Progress on the contract, now over 50%
complete, is ahead of schedule and projected to be profitable.

As mentioned above, operating profits in this segment include WCL on a
consolidated basis from January 1994 and, after elimination of the minority
interest in the operating profits of WCL, reflect a 75% improvement over last
year.

A decrease in cost of sales as a percent of sales from 81% to 77% resulted from
lower costs of contract performance in both major segments. At 20% of sales,
selling, general and administrative expenses reflect a modest increase over last
year's 19% resulting from increased bid and proposal and other marketing efforts
in the defense segment.

Cubic Corporation - SEC Form 10-K Page 12
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As explained in Note A, the Company adopted, as of October 1, 1993, Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". Among
other changes, this statement changes the recognition and measurement criteria
for certain deferred tax assets, which previously were excluded by Statement
No. 96. As a result, net income for 1994 was increased by $1.4 million, or
$.23 per share.

FISCAL 1993 COMPARED TO FISCAL 1992
- -----------------------------------

In February 1993, the company sold 100% of the common stock of United States
Elevator Corp.(USEC) for $40 million in cash and $20 million in preferred stock,
as well as possible additional future consideration for the common stock. This
consideration, if triggered by a decision of the purchaser of USEC, would be the
greater of $20 million or an amount equal to a multiple of 4.25 times the
average pretax earnings of USEC over any three consecutive year period less $20
million. If triggered by a decision of Cubic, the additional consideration
would be the greater of the amount determined by the multiple as described
above, or zero, through December 1997 (for example, a three year average pretax
income of $8.2 million, equal to USEC's actual performance for the years 1988-
90, would result in an additional $15 million of consideration for the common
stock). After December 1997, the consideration would be based solely on the
amount determined by the multiple and could be negative. The contingent payment
provision can run as long as 16 years, after which it is triggered
automatically. In any event, the contingent payment provision, when exercised,
requires the redemption of the preferred stock. The sale of USEC, which
resulted in an initial net gain of $20 million, and the results of operations of
USEC, were reported as a discontinued operation in the accompanying financial
statements.

In addition, in August 1993, management decided to dispose of its Precision
Electro-Optical Systems Division and continues to be in discussion with
potential buyers of this business. The results of operations of this division
and a provision for disposal costs were also reported as a discontinued
operation. In total, 1993 income from discontinued operations amounted to $3.30
per share of common stock.

Sales from continuing operations of $221 million, a 7% decrease from 1992,
included a 25% decrease in defense systems and a 17% increase in automatic
revenue collection systems. This reflected the emphasis the company made over
the past few years toward industry leadership in automatic revenue collection
systems. The growth in this segment's sales did not include the significant
growth experienced by Westinghouse Cubic Limited, a 50% owned subsidiary
operating in the United Kingdom. The decrease in the defense segment followed a
trend in recent years which reflected the downsizing of the defense industrial
base by the Department of Defense.

The decrease in operating profits from continuing operations was attributed not
only to the downsizing mentioned above, but also to generally lower profit
margins which resulted from increased competition in the smaller overall defense
market. A new management team was put in place to address the business issues in
this segment. Defense systems instrumentation and training continue to represent
a significant market despite the reduced United States defense budget. The
company's strength in this market segment justifies its continued commitment to
it.

Although operating profit increased in automatic revenue collection systems
during 1993, the level of increase was inhibited by contract changes and
customer delays on major programs. Efforts were made to improve profits in this
segment by relocating some manufacturing activities to lower cost areas, such as
Tennessee.

Cost of sales as a percentage of sales increased from 75% to 81% as a result of
the lower operating margins mentioned above. Selling, general and
administrative expenses as a percentage of sales returned to 19%, as the unusual
litigation and bid and proposal expenses incurred in 1992 were not repeated in
1993. Income taxes reflected a net credit for the year due primarily to foreign
source income and tax exempt interest and dividend income.

Cubic Corporation - SEC Form 10-K Page 13
- --------------------------------------------------------------------------------

FINANCIAL POSITION AND LIQUIDITY

During 1994, operating activities generated $19 million in cash, primarily as a
result of improved cash flow on automatic revenue collection contracts. The
principal use of cash was for the acquisition of the Titan Applications Group
which was financed from cash on hand and the liquidation of $13 million of
marketable securities. Investments in capital equipment, including toll
equipment under operating leases, of $8 million accounts for the use of the
balance of cash generated by operating activities. The net cash position was
virtually unchanged from the beginning to the end of the year.

The significant growth in receivables which occurred in fiscal 1993, primarily
relating to the Florida Turnpike project, should liquidate in 1995 and generate
approximately $20 million more than will be required by new sales. In addition
the Company's liquidity position is strengthened by the Cubic Toll Systems, Inc.
$30 million credit agreement, $20 million of which is currently available.
Further, at year end, the Company had $107 million in working capital which
includes $31 million in cash and marketable securities. Management believes that
this strong financial position and liquidity provide adequate resources to meet
anticipated financing needs at this time. See Note E to the consolidated
financial statements for a discussion of the Company's financing arrangements.

Cubic Corporation - SEC Form 10-K Page 14
- --------------------------------------------------------------------------------

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
------------------------------------------

The following consolidated financial statements of the Registrant and its
subsidiaries, for the year ended September 30, 1994, are attached hereto, marked
Pages 15 and 20 through 36.

Report of Independent Auditors
See Page 15

Consolidated Balance Sheet
September 30, 1994 and 1993
See Pages 20 and 21

Consolidated Statement of Income
Years ended September 30, 1994, 1993 and 1992
See Page 22

Consolidated Statement of Retained Earnings
Years ended September 30, 1994, 1993 and 1992
See Page 23

Consolidated Statement of Cash Flows
Years ended September 30, 1994,1993, and 1992
See Page 24

Notes to Consolidated Financial Statements
September 30, 1994
See Pages 25 through 36

ITEM 9. DISAGREEMENTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
------------------------

None.

Cubic Corporation - SEC Form 10-K Page 15
- --------------------------------------------------------------------------------

Report of Independent Auditors

Board of Directors and Shareholders
Cubic Corporation

We have audited the accompanying consolidated balance sheet of Cubic Corporation
as of September 30, 1994 and 1993, and the related consolidated statements of
income, retained earnings and cash flows for each of the three years in the
period ended September 30, 1994. Our audits also included the financial
statement schedule listed in the index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance that 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Cubic
Corporation at September 30, 1994 and 1993, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1994, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

Ernst & Young LLP

San Diego, California
December 5, 1994

Cubic Corporation - SEC Form 10-K Page 16
- --------------------------------------------------------------------------------

PART III
--------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
--------------------------------------------------

Information regarding directors and executive officers is incorporated herein by
reference from the Company's definitive Proxy Statement, which will be filed no
later than 30 days prior to the date of the Annual Meeting of Shareholders.

ITEM 11. EXECUTIVE COMPENSATION.
----------------------

Information regarding executive compensation is incorporated herein by reference
from the Company's definitive Proxy Statement, which will be filed no later than
30 days prior to the date of the Annual Meeting of Shareholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------

Information regarding security ownership of certain beneficial owners and
management is incorporated herein by reference from the Company's definitive
Proxy Statement, which will be filed no later than 30 days prior to the date of
the Annual Meeting of Shareholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
----------------------------------------------

Information regarding "Certain Relationships and Related Transactions" is
included in Note K to the Consolidated Financial Statements for the year ended
September 30, 1994, and follows at Item 14(a)(1) of this filing, on page 33.

Cubic Corporation - SEC Form 10-K Page 17
- --------------------------------------------------------------------------------

PART IV
-------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K.
---------------------------------

(a) Documents filed as part of this Report:

(1) The following consolidated financial statements of Cubic
Corporation and subsidiaries, as referenced in Item 8:

Consolidated Balance Sheet
September 30, 1994 and 1993

Consolidated Statement of Income
Years ended September 30, 1994, 1993 and 1992

Consolidated Statement of Retained Earnings
Years ended September 30, 1994, 1993 and 1992

Consolidated Statement of Cash Flows
Years ended September 30, 1994, 1993 and 1992

Notes to Consolidated Financial Statements
September 30, 1994

(2) The following consolidated financial statement schedules of Cubic
Corporation and subsidiaries, as referenced in Item 14(d):

Schedule II -- Amounts Receivable from Related Parties and
Underwriters, Promoters, and Employees Other
Than Related Parties

All other schedules, for which provision is made in the applicable accounting
rules and regulations of the Securities and Exchange Commission, are not
required under the related instructions or are not applicable and, therefore,
have been omitted.

(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.

(c) Exhibits:

21. List of Subsidiaries

27. Financial Data Schedule

(d) Financial Statement Schedules

Schedule II -- Amounts Receivable from Related Parties and Underwriters,
Promoters, and Employees Other Than Related Parties

Cubic Corporation - SEC Form 10-K Page 18
- --------------------------------------------------------------------------------

SIGNATURES
----------

Pursuant to the requirements of Sections 13 or 15(d) 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:

(Registrant) CUBIC CORPORATION

12/21/94 /s/ Walter J. Zable
- ------------ ------------------------------------------------------------
Date WALTER J. ZABLE, President
- --------------------------------------------------------------------------------

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

12/21/94 /s/ Walter J. Zable
- ------------ ------------------------------------------------------------
Date WALTER J. ZABLE, President, Chief
Executive Officer and Chairman of the
Board of Directors

12/21/94 /s/ Walter C. Zable
- ------------ ------------------------------------------------------------
Date WALTER C. ZABLE, Vice President and
Vice Chairman of the Board of Directors

12/21/94 /s/ Jackson D. Arnold
- ------------ ------------------------------------------------------------
Date JACKSON D. ARNOLD, Director

12/21/94 /s/ Thomas P. Moran
- ------------ ------------------------------------------------------------
Date THOMAS P. MORAN, Director

12/21/94 /s/ Richard G. Duncan
- ------------ ------------------------------------------------------------
Date RICHARD G. DUNCAN, Director

12/21/94 /s/ Robert T. Monagan
- ------------ ------------------------------------------------------------
Date ROBERT T. MONAGAN, Director

12/21/94 /s/ Raymond E. Peet
- ------------ ------------------------------------------------------------
Date RAYMOND E. PEET, Director

12/21/94 /s/ Thomas A. Baz
- ------------ ------------------------------------------------------------
Date THOMAS A. BAZ, Vice President and
Corporate Controller

12/21/94 /s/ William W. Boyle
- ------------ ------------------------------------------------------------
Date WILLIAM W. BOYLE, Vice President of
Finance & Chief Financial Officer

Cubic Corporation - SEC Form 10-K Page 19
- --------------------------------------------------------------------------------

ITEM 8, ITEM 14(A)(1) AND (2),(C) AND (D)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

EXHIBITS

FINANCIAL STATEMENT SCHEDULE

Cubic Corporation

Year Ended September 30, 1994

San Diego, California

Cubic Corporation - SEC Form 10-K Page 20
------------------------------------------------------------------------------

CUBIC CORPORATION

CONSOLIDATED BALANCE SHEET

September 30
1994 1993
-------- --------
(in thousands)

ASSETS

CURRENT ASSETS
Cash and cash equivalents $ 25,782 $ 24,496
Marketable securities 4,814 17,383
Accounts receivable:
Trade and other receivables 13,213 11,121
Long-term contracts--Note C 116,108 104,506
Allowance for doubtful accounts (1,456) (1,339)
-------- --------
127,865 114,288

Inventories--Note D 21,180 17,913
Recoverable income taxes 1,600 -
Deferred income taxes--Note H 5,645 2,746
Prepaid expenses and other current assets 3,266 3,900
-------- --------
TOTAL CURRENT ASSETS 190,152 180,726

PROPERTY, PLANT AND EQUIPMENT
Land and land improvements 13,693 12,500
Buildings and improvements 21,129 18,019
Machinery and other equipment 50,322 45,345
Leasehold improvements 2,307 1,862
Allowance for depreciation and amortization (53,326) (49,688)
-------- --------
34,125 28,038

OTHER ASSETS
Toll equipment under operating leases, net--Notes E and G 15,990 19,952
Preferred stock of United States Elevator Corp.--Note J 20,000 20,000
Cost in excess of net tangible assets of purchased
businesses, less accumulated amortization of
$661,000 in 1994 and $97,000 in 1993 -- Note B 18,150 373
Miscellaneous other assets 10,256 15,479
-------- --------
64,396 55,804

TOTAL ASSETS $288,673 $264,568
======== ========

Cubic Corporation - SEC Form 10-K Page 21
- --------------------------------------------------------------------------------

September 30
1994 1993
-------- --------
(in thousands)

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Trade accounts payable $ 20,761 $ 16,414
Customer advances 35,342 22,898
Salaries and wages, and amounts withheld from
employees' compensation 9,891 7,472
Accrual for claims related to discontinued operation 7,644 10,641
Other current liabilities 4,543 7,139
Income taxes payable - 1,040
Current portion of long-term debt 5,000 100
-------- --------
TOTAL CURRENT LIABILITIES 83,181 65,704

LONG-TERM DEBT, less current portion--Note E
Cubic Toll Systems, Inc. 10,000 5,500
Other 25,000 30,000
-------- --------
35,000 35,500

OTHER LIABILITIES
Deferred income taxes--Note H 6,388 2,898
Deferred compensation 1,177 914
------- --------
7,565 3,812

MINORITY INTEREST--Note B 5,282 -

SHAREHOLDERS' EQUITY--Note E
Preferred stock, no par value:
Authorized--1,000,000 shares, none issued
Common stock, no par value:
Authorized--20,000,000 shares
Issued--7,925,614 shares 234 234
Additional paid-in capital 12,123 12,123
Retained earnings 179,446 178,867
Foreign currency translation adjustment (435)
Treasury stock at cost:
1994 -- 1,938,140 shares
1993 -- 1,839,795 shares (33,723) (31,672)
------- --------
157,645 159,552
COMMITMENTS AND CONTINGENCIES---Notes F and L
-------- --------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $288,673 $264,568
======== ========

See accompanying notes

Cubic Corporation - SEC Form 10-K Page 22
- --------------------------------------------------------------------------------

CUBIC CORPORATION

CONSOLIDATED STATEMENT OF INCOME

Year Ended September 30
1994 1993 1992
-------- -------- --------
(in thousands, except per share data)

Revenue:
Net sales $260,622 $221,437 $237,505
Interest and dividends 3,987 2,648 2,849
Other income--Note B 2,840 4,404 3,157
-------- -------- --------
267,449 228,489 243,511
Costs and expenses:
Cost of sales 200,549 178,491 178,921
Selling, general and administrative expenses 52,071 42,347 51,384
Research and development 7,440 3,597 3,803
Interest 2,535 2,294 4,223
-------- -------- --------
262,595 226,729 238,331
-------- -------- --------

INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES, MINORITY INTEREST AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 4,854 1,760 5,180

Income taxes (credit)--Note H 825 (450) 1,100
Minority interest in income of subsidiary--Note B (1,496) - -
-------- -------- --------

INCOME FROM CONTINUING OPERATIONS
BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 2,533 2,210 4,080

Discontinued operations:
Income from operations, net of applicable
income taxes of $343,000 in 1993 and
$1,900,000 in 1992 - 568 2,931
Net gain (loss) on disposal--Note J (153) 19,503 -
Cumulative effect of accounting change--Note A 1,379 - -
-------- -------- --------

NET INCOME $ 3,759 $ 22,281 $ 7,011
======== ======== ========

Per share amounts:
Income from continuing operations $ .42 $ .36 $ .65
Income (loss) from discontinued operations (.03) 3.30 .46
Cumulative effect of accounting change .23 - -
-------- -------- --------

NET INCOME PER SHARE $ .62 $ 3.66 $ 1.11
======== ======== ========

Average number of shares outstanding 6,023 6,095 6,295
======== ======== ========

See accompanying notes

Cubic Corporation - SEC Form 10-K Page 23
- --------------------------------------------------------------------------------

CUBIC CORPORATION

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

Year Ended September 30
1994 1993 1992
-------- -------- --------
(in thousands)

Balance at the beginning of the year $178,867 $165,897 $162,188
Cash dividends paid (per share of common stock:
1994--$.53, 1993--$1.53, 1992--$.53) (3,180) (9,311) (3,302)

Net income for the year 3,759 22,281 7,011
-------- -------- --------

BALANCE AT THE END OF THE YEAR $179,446 $178,867 $165,897
======== ======== ========

See accompanying notes

Cubic Corporation - SEC Form 10-K Page 24
- ---------------------------------------------------------------------------

CUBIC CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

Year Ended September 30
1994 1993 1992
-------- -------- --------
(in thousands)

Operating Activities:
Net income $ 3,759 $ 22,281 $ 7,011
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 9,938 9,371 9,880
Minority interest 1,496 - -
Deferred income taxes 1,970 (1,114) 2,132
Undistributed earnings of affiliates, net of distributions (47) (1,265) 434
Net loss (gain) on disposal of discontinued operations 153 (19,503) -
Cumulative effect of accounting change (1,379) - -
Changes in operating assets and liabilities:
Accounts receivable 766 (25,054) (11,790)
Inventory (625) (6,027) (473)
Prepaid expenses 655 (518) (554)
Accounts payable, customer advances
and other current liabilities 7,287 (1,386) (1,399)
Income taxes (4,676) 1,247 (1,811)
Other items - net (91) (646) 247
-------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 19,206 (22,614) 3,677
-------- -------- --------

Investing Activities:
Acquisition of businesses, net of cash acquired (20,367) - -
Proceeds from the sale of U. S. Elevator Corp. - 40,000 -
Sale (purchase) of marketable securities 12,569 4,708 (5,549)
Additions to toll equipment under operating leases (1,763) (5,370) (3,460)
Purchases of property, plant and equipment (6,040) (12,574) (3,869)
Other items - net (738) (2,434) (396)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (16,339) 24,330 (13,274)
-------- -------- --------

Financing Activities:
Proceeds from issuance of long-term debt 4,500 30,000 -
Principal payments on long-term debt (100) (27,978) (13,376)
Purchases of treasury stock (2,051) (1,057) (6,838)
Dividends paid to minority interest (961) - -
Dividends paid to shareholders (3,180) (9,311) (3,302)
-------- -------- --------
NET CASH USED IN FINANCING ACTIVITIES (1,792) (8,346) (23,516)
-------- -------- --------

Effect of exchange rates on cash 211 - -
-------- -------- --------

NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,286 (6,630) (33,113)

Cash and cash equivalents at the beginning of the year 24,496 31,126 64,239
-------- -------- --------

CASH AND CASH EQUIVALENTS AT
THE END OF THE YEAR $ 25,782 $ 24,496 $ 31,126
======== ======== ========

See accompanying notes

Cubic Corporation - SEC Form 10-K Page 25
- ---------------------------------------------------------------------------

CUBIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 1994

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation: The consolidated financial statements include the accounts of
- --------------
Cubic Corporation and all of its subsidiaries (the Company), including
Westinghouse Cubic Limited (WCL) subsequent to December 31, 1993. As explained
in note B, WCL is fifty-percent owned but is controlled by the Company as of
January 1994. WCL is a United Kingdom company engaged in revenue collection
equipment design, fabrication, and installation. All significant intercompany
transactions are eliminated in consolidation.

Cash Equivalents: The Company considers all highly liquid investments with a
- -----------------
maturity of three months or less when purchased to be cash equivalents.

Marketable Securities: In May 1993 the Financial Accounting Standards Board
- ----------------------
issued Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." The Company will apply the
new rules starting in the quarter ending December 31, 1994, however, application
of the new rules will not have a material effect on shareholders' equity as of
October 1, 1994, as there is an immaterial difference between the cost and
market value of securities held at that date.

Inventories: Inventories are stated at the lower of cost or market. Cost is
- ------------
determined using primarily the first-in, first-out (FIFO) method, which
approximates current replacement cost. The last-in, first-out (LIFO) method is
used to determine cost for an immaterial amount of inventories.

Work in process is stated at the actual production and engineering costs
incurred to date, including applicable overhead, and is reduced by charging any
amounts in excess of estimated realizable value to cost of sales. Although
certain government contracts include general and administrative costs, the
amounts of these costs remaining in inventory are not material.

Property, Plant and Equipment: Property, plant and equipment and toll equipment
- ------------------------------
under operating leases are carried at cost. Depreciation and amortization are
provided in amounts sufficient to amortize the cost of the depreciable assets
over their estimated useful lives. Straight-line and accelerated methods are
each used for approximately one-half of the depreciable plant and equipment.
Toll equipment under operating leases is depreciated using the straight-line
method. Provisions for depreciation and amortization of plant and equipment and
toll equipment under operating leases amounted to $9,430,000, $9,637,000, and
$9,595,000 in 1994, 1993 and 1992, respectively.

Revenue Recognition: Sales under long-term contracts are recognized as costs
- --------------------
are incurred and fees are earned on cost-plus-fee contracts, and as costs are
incurred and estimated profits are earned on long-term, fixed price contracts.
Such estimated profits are computed by applying the various percentages of
completion of the contracts to the estimated ultimate profits. Provisions are
made on a current basis to fully recognize any anticipated losses on contracts.

Cubic Corporation - SEC Form 10-K Page 26
- ---------------------------------------------------------------------------

CUBIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued

Income Taxes: The Company adopted the provisions of Financial Accounting
- -------------
Standards Board Statement No. 109, "Accounting for Income Taxes," as of October
1, 1993. Under Statement 109, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. As
permitted by the Statement, prior year financial statements have not been
restated. The cumulative effect of adoption, resulting from a change in the
recognition of certain deferred tax assets, increased net income by $1,379,000,
or $.23 per share. The adoption of the new standard had no material impact on
pretax income from operations in 1994.

Reclassification: Certain prior year amounts have been reclassified to conform
- ----------------
to current year classifications.

NOTE B--ACQUISITIONS

On April 8, 1994, the Company acquired certain assets and assumed certain
liabilities of the Titan Applications and Titan Services International divisions
of The Titan Corporation, for a cash price of approximately $23.6 million. The
acquisition has been accounted for by the purchase method, and the assets and
liabilities have been recorded at their estimated fair values at the date of
acquisition. The amount by which the purchase price exceeded the net book value
of tangible assets was approximately $18.3 million and will be amortized over a
period of 15 years using the straight-line method. The Company has devoted the
acquired assets to continuation of the business, which provides training,
applications and operations services to the United States Army. The results of
operations from the date of acquisition to September 30, 1994 have been included
in the accompanying consolidated financial statements as a part of the defense
segment.

In January 1994 an amendment to the WCL shareholder agreement was executed which
granted voting control of the fifty-percent owned subsidiary to Cubic
Corporation in recognition of certain contract performance guarantees provided
by the Company's subsidiary, Cubic Automatic Revenue Collection Group. As a
result of this acquisition of control, the accounts of WCL are consolidated in
these financial statements as of January 1, 1994.

The Company's fifty-percent share of the equity of WCL was $3,484,000 at
September 30, 1993 and is included in other assets in the consolidated balance
sheet at that date. The Company's equity share of the net income of WCL for the
quarter ended December 31, 1993 and for the years ended September 30, 1993 and
1992, was $474,000, $1,699,000 and $935,000, respectively, and is included in
other income for each of those periods.

Pro forma results of the Company's operations, assuming the acquisitions had
occurred as of October 1, 1993 and 1992, are presented below (in thousands,
except per share data). In addition to purchase accounting adjustments, the pro
forma amounts include certain adjustments to historical financial data,
including elimination of intercompany sales, reduction of nonrecurring general
and administrative expenses, reduction of interest income and the income tax
effect of these adjustments. The pro forma operating results may not be
indicative of the results that actually would have occurred if the acquisitions
had taken place on the dates indicated or which may occur in the future.

Cubic Corporation - SEC Form 10-K Page 27
- ---------------------------------------------------------------------------

CUBIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE B--ACQUISITION--Continued

Year Ended
September 30
1994 1993
------------ --------

Net sales $292,601 $290,420
Net income 4,711 23,449
Net income per share .78 3.85

NOTE C--ACCOUNTS RECEIVABLE

The following tabulation shows the components of accounts receivable for long-
term contracts at September 30:

1994 1993
-------- --------
(in thousands)

U.S. Government Contracts:
Amounts billed $ 20,063 $ 17,620
Recoverable costs and accrued profits on
progress completed--not billed 33,901 28,136
-------- --------
53,964 45,756
Commercial Customers:
Amounts billed 12,814 10,696
Recoverable costs and accrued profits on
progress completed--not billed 49,330 48,054
-------- --------
62,144 58,750
-------- --------
$116,108 $104,506
======== ========

A substantial portion of recoverable costs and accrued profits on progress
completed is billable under progress payment provisions of the related
contracts. The remainder of these amounts is billable upon delivery of products
or furnishing of services. It is anticipated that such receivables from the
U.S. Government at September 30, 1994, will be billed during 1995 as units are
delivered and those from commercial customers will be billed upon completion of
performance tests and/or acceptance by the customers in 1995.

NOTE D--INVENTORIES

Inventories at September 30 are classified as follows:

1994 1993
------- -------
(in thousands)

Finished products $ 1,172 $ 1,330
Work in process 9,336 8,475
Materials and purchased parts 10,672 8,108
------- -------
$21,180 $17,913
======= =======

Cubic Corporation - SEC Form 10-K Page 28
- ---------------------------------------------------------------------------

CUBIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE E--FINANCING ARRANGEMENTS

Long-term debt at September 30, other than the bank debt of the Company's
subsidiary, Cubic Toll Systems, Inc. (CTS), consists of the following:

1994 1993
-------- --------
(in thousands)

Note payable to an insurance company,
due $5,000,000 annually commencing June 30, 1995,
plus interest at 6.09% payable semi-annually $30,000 $30,000
Other - 100
------- -------
30,000 30,100
Less current portion 5,000 100
------- -------
$25,000 $30,000
======= =======

At September 30, 1994, the Company had outstanding intermediate-term interest
rate swap agreements. Under the agreements, the Company receives a fixed rate
of 6.11% on $15 million and pays a floating rate based on the London Interbank
Offered Rate (LIBOR), as determined in six month intervals. The transaction
effectively changes a portion of the Company's interest rate from a fixed rate
to a floating rate basis.

The terms of the note payable to an insurance company include provisions for
maintenance of working capital and tangible net worth, and limitations on the
level of debt, lease commitments, outstanding letters of credit, loans to
subsidiaries and certain investments. At September 30, 1994, the covenant
relating to the maintenance of tangible net worth leaves consolidated retained
earnings of $11.7 million available for the payment of dividends to
shareholders, purchases of the Company's common stock and other charges to
shareholders' equity.

CTS has a $30 million revolving credit agreement with a bank which expires in
December 1997. Borrowings under this agreement bear interest at rates indexed
to either the prime rate, the certificate of deposit rate, or LIBOR, selected at
CTS' option. The terms of the credit arrangement provide for commitment fees of
1/4 of 1% per annum of the available unutilized balance. Borrowings under the
agreement cannot exceed the present value of future revenues to be received
under certain toll equipment leases. At September 30, 1994, the present value
of these future revenues exceeded the credit facility maximum. The debt is
without recourse to Cubic Corporation and is secured by all of the leases,
leased equipment, and capital stock of CTS. As of September 30, 1994, CTS had
borrowed $10,000,000 under this revolving credit agreement with interest at
5.53% per annum.

Maturities of long-term debt, including debt of CTS, for each of the five years
in the period ending September 30, 1999, are as follows: 1995--$5,000,000; 1996-
- -$5,000,000; 1997--$5,000,000; 1998--$15,000,000; 1999--$5,000,000; thereafter--
$5,000,000.

Interest paid amounted to $2,377,000, $2,107,000 and $4,298,000 in 1994, 1993
and 1992, respectively.

Cubic Corporation - SEC Form 10-K Page 29
- --------------------------------------------------------------------------------

CUBIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE F--COMMITMENTS

The Company leases certain office, manufacturing and warehouse space and
miscellaneous office machines and other equipment under noncancelable operating
leases expiring in various years through 1999. These leases, some of which may
be renewed for periods up to 10 years, generally require the lessee to pay all
maintenance, insurance and property taxes. Several leases are subject to
periodic adjustment based on price indices or cost increases. Rental expense
for all operating leases amounted to $2,591,000, $2,699,000, and $3,103,000 in
1994, 1993 and 1992, respectively.

Future minimum payments under noncancelable operating leases with initial terms
of one year or more consist of the following at September 30, 1994 (in
thousands):

1995 $1,949
1996 1,423
1997 907
1998 767
1999 658
Thereafter 10
------
$5,714
======

NOTE G--TOLL EQUIPMENT UNDER OPERATING LEASES

CTS is the lessor of toll equipment primarily to governmental agencies or public
authorities under leases with terms of five to ten years. Most leases require
that CTS provide maintenance support for the leased equipment. The leases may
also provide for lessor penalties for equipment downtime, or for lessee
penalties for early removal of partial configurations. The cost of equipment
under operating leases at September 30, 1994 and 1993 totaled $51,157,000 and
$49,408,000, respectively, including costs incurred to date for equipment in
production totalling $3,937,000 and $3,342,000, respectively, while accumulated
depreciation at the same dates amounted to $35,167,000 and $29,456,000.

Future minimum lease payments receivable under operating leases, including
leases for toll equipment in production, which are noncancelable or for which
the exercise of a cancellation clause would cause a significant economic
detriment to the lessee are as follows at September 30, 1994 (in thousands):

1995 $15,712
1996 14,678
1997 12,574
1998 8,910
1999 5,606
Thereafter 4,373
-------
$61,853
=======

Cubic Corporation - SEC Form 10-K Page 30
- -------------------------------------------------------------------------------

CUBIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE H--INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of September 30, 1994
are as follows (in thousands):

Deferred tax liabilities:
Tax over book depreciation $ 2,432
Leveraged lease accounting 3,816
Other 2,216
-------
Total deferred tax liabilities 8,464
-------

Deferred tax assets:
Accrued employee benefits 2,607
Inventory reserves 2,194
Other 3,098
-------
Total deferred tax assets 7,899
Valuation allowance for deferred tax assets (178)
-------
Net deferred tax assets 7,721
-------
Net deferred tax liabilities $ 743
=======

Significant components of the provision for income taxes attributable to
continuing operations are as follows:

1994 1993 1992
-------- -------- --------
(in thousands)

Current (credit):
Federal $(2,007) $ 620 $(1,176)
State (613) 44 (136)
Foreign 1,475 - -
------- ------- -------
Total current (1,145) 664 (1,312)

Deferred (credit):
Federal 1,412 (798) 2,446
State 558 (316) (34)
------- ------- -------
Total deferred 1,970 (1,114) 2,412
------- ------- -------
$ 825 $ (450) $ 1,100
======= ======= =======

Income (loss) from continuing operations before income taxes, minority interest
and cumulative effect of accounting change include the following components:

1994 1993 1992
-------- -------- --------
(in thousands)

United States $ 386 $1,760 $5,180
Foreign 4,468 - -
------- ------ --------
Total $4,854 $1,760 $5,180
======= ====== ========

Cubic Corporation - SEC Form 10-K Page 31
- --------------------------------------------------------------------------------

CUBIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE H--INCOME TAXES--Continued

The components of the provision for deferred income taxes for the years ended
September 30, 1993 and 1992 are as follows:

1993 1992
--------- --------
(in thousands)

Differences between financial reporting and tax
methods of recognizing revenue on contracts $ 1,142 $2,067
Difference between accrued and
deductible expenses (2,094) (197)
Differences between financial reporting and tax
methods of recognizing revenue and expenses
related to leveraged leases 209 676
Other (371) (134)
------- ------
$(1,114) $2,412
======= ======

The reconciliation of income tax attributable to continuing operations computed
at the U.S. federal statutory tax rate to income tax expense is as follows:

1994 1993 1992
-------- ------- --------
(in thousands)

Taxes on income based on statutory
federal income tax rate $1,650 $ 598 $1,761
State income taxes (credit), net of
federal tax benefit (37) (51) 307
------ ----- ------
1,613 547 2,068
Increases (decreases) resulting from:
Effect of recording equity in net
income of Westinghouse Cubic Ltd. (210) (609) (280)
Tax exempt interest and
dividend income (391) (462) (778)
Foreign sales corporation
tax benefit (244) (154) (605)
Non-deductible expenses 420 452 1,041
Other (363) (224) (346)
------ ----- ------
(788) (997) (968)
------ ----- ------
$ 825 $(450) $1,100
====== ===== ======

The Company made income tax payments, net of refunds, totalling $3,246,000,
$1,259,000, and $2,547,000, in 1994, 1993 and 1992, respectively.

NOTE I--PENSION AND OTHER RETIREMENT PLANS

The Company maintains a defined benefit pension plan covering substantially all
non-union U.S. employees in certain of its subsidiaries. Benefits under this
plan are based on the employee's earnings during the period of employment. The
Company's policy is to fund this plan based on legal requirements and tax
considerations.

Cubic Corporation - SEC Form 10-K Page 32
- --------------------------------------------------------------------------------

CUBIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE I--PENSION AND OTHER RETIREMENT PLANS--Continued

Net pension cost for this plan included the following components:

1994 1993 1992
-------- -------- --------
(in thousands)

Service cost--benefits earned during the period $ 1,627 $ 1,970 $ 1,439
Interest cost on projected benefit obligation 2,154 2,143 1,971
Actual loss (return) on plan assets 752 (2,466) (2,255)
Net amortization and deferral (2,975) 277 178
--------- -------- --------
Net Pension Cost $ 1,558 $ 1,924 $ 1,333
========= ======= =======

The following table sets forth the funded status and amounts recognized in the
Consolidated Balance Sheet as of September 30, 1994 and 1993, for the Company's
defined benefit pension plan:

1994 1993
-------- --------
(in thousands)

Actuarial present value of benefit obligations:
Vested benefits $21,227 $24,466
Non vested benefits 413 600
------- -------
Accumulated Benefit Obligation $21,640 $25,066
======= =======

Projected benefit obligation for services
rendered to date $24,372 $28,740
Plan assets at fair value 23,291 26,624
------- -------
Projected benefit obligation in excess of
plan assets 1,081 2,116
Unrecognized net transition asset 227 279
Unrecognized prior service costs 5 7
Unrecognized net loss (456) (1,454)
------- -------
Pension Liability Recognized in the Consolidated Balance She $ 857 $ 948
======= =======

Plan assets include equities, short and long-term debt instruments and real
estate investments. The weighted average discount rate and the rate of increase
in future compensation levels used in determining the actuarial present value of
the projected benefit obligations were 8.5% and 5.5%, respectively, in 1994, and
7.5% and 4.5% in 1993. The long-term rate of return used to determine the
expected return on plan assets included in the net pension cost was 8.5% in each
of the three years presented.

The Company and certain of its subsidiaries also have other retirement plans
which provide benefits for participating employees. An employee is eligible to
participate in the plans after six months to one year of service, and may make
additional contributions to the plans. These plans provide for full vesting of
benefits over five to seven years. A substantial portion of Company
contributions to the plans are discretionary with the Board of Directors.
Company contributions to the plans aggregated $5,015,000, $4,906,000, and
$5,408,000, in 1994, 1993 and 1992 respectively.

Cubic Corporation - SEC Form 10-k Page 33
- --------------------------------------------------------------------------------

CUBIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE J--DISCONTINUED OPERATIONS

In 1993, the Company sold all of the outstanding common stock of its subsidiary,
United States Elevator Corp. (USEC), to Thyssen Holding Corporation (Thyssen).
Proceeds of the sale were $40 million in cash and $20 million of USEC 6%
cumulative, nonvoting, redeemable preferred stock which is required to be
repurchased by Thyssen at the option of the Company. The gain on the sale was
$20 million, net of applicable income taxes of $5 million. The agreement for
the sale of USEC also provides for possible additional consideration based on a
formula relating to the post-sale earnings of USEC. This contingent payment
provision, which would also require redemption of the preferred stock, could be
triggered by either party after December 31, 1995, or run as long as 16 years if
not triggered sooner.

Also in 1993, the Company's management made a decision to dispose of its
Precision Electro-Optical Systems Division. Provisions of $153,000 and $600,000,
net of applicable income taxes of $100,000 and $400,000, respectively, were made
in 1994 and 1993, respectively, for the expected costs of disposal of this
business and are included in the net gain (loss) on disposal of discontinued
operations on the income statement. The Company is continuing its efforts to
dispose of or liquidate the business. The remaining net assets, which consist
primarily of inventory, were immaterial as of September 30, 1994.

NOTE K--RELATED PARTY TRANSACTIONS

In the first quarter of fiscal 1994, the Company loaned $1.6 million to Mr.
Walter J. Zable, its Chairman and principal shareholder. The loan accrued
interest at a rate higher than the Company earned on its short-term investments
during the time the loan was outstanding. Subsequent to September 30, 1994, the
loan was repaid.

The Company leases certain manufacturing facilities in the County of San Diego
from co-owners Walter C. Zable, an officer and director of the Company, and his
sister, who are the children of Walter J. Zable. The facilities, which are
leased through July 1997, under a triple net lease at the rate of $168,000 per
year, have been used as manufacturing facilities for subsidiaries of the Company
and continue to be available as such.

In October 1992, a trust established by Mr. and Mrs. Walter J. Zable, entered
into an agreement with the Company whereby the Company agreed to make advances
of premiums payable on a split-dollar life insurance policy purchased by the
trust on the life of Mrs. Zable. The agreement is so designed that if the
assumptions made as to mortality experience, policy dividends and other factors
are realized, at the death of Mrs. Zable the Company will recover all of its
insurance premium payments as well as other costs associated with the policy.
The advances are secured by a collateral assignment of the policy to the
Company. The agreement is intended to prevent the possibility of a large block
of the Company's common shares being put on the market, to the detriment of the
share price, in order for the beneficiaries to pay estate taxes. The Company may
cause the agreement to be terminated and the policy to be surrendered at any
time. The Company expensed a net $503,000 and $467,000 in 1994 and 1993,
respectively, related to the policy. This amount represents the difference
between policy premiums and other payments, and the increase in the cash
surrender value of the policy. The Company's accounting policy related to this
transaction is to expense this difference in the year incurred. However, should
the policy be held to maturity, all payments advanced to carry this policy will
be returned. Further, should the policy be held for nine years, it is presumed
that the cash surrender value will exceed all payments made, and amounts
previously expensed in the early years of the policy will have been reversed.

Cubic Corporation - SEC Form 10-K Page 34
- --------------------------------------------------------------------------------

CUBIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE L--LEGAL MATTERS

The government of Iran commenced an arbitration proceeding against the Company
seeking $12.9 million for reimbursement of payments made for equipment that was
to comprise an Air Combat Maneuvering Range pursuant to a contract executed in
1977, and an additional $15 million for unspecified damages. The Company
believes that Iran defaulted on the agreement and has brought a counterclaim for
compensatory damages of $10.4 million, plus interest. A hearing was held by the
arbitral panel in June 1994 on issues involving the applicability of the statute
of limitations and liability. No decision has been rendered by the panel. The
Company is vigorously contesting Iran's claim and believes its defenses and
counterclaim are strong and that the ultimate outcome of the matter will not
have a material effect on the Company's financial statements.

In September 1993, the Company and its subsidiary, Cubic Defense Systems, Inc.,
filed a lawsuit against British Aerospace PLC in the United States District
Court for the District of Columbia seeking $9.9 million in compensatory damages,
plus interest, and unspecified punitive damages for breach of contract and
fiduciary duty. The suit also alleges fraudulent misrepresentation in connection
with the construction of an Air Combat Maneuvering Range in the North Sea. In
1994, British Aerospace PLC filed a counterclaim for $95 million in damages for
misrepresentation and breach of fiduciary duty. Discovery is in progress and
trial is set for April 3, 1995. The Company believes the counterclaim is without
merit and is vigorously pursuing its lawsuit.

NOTE M--BUSINESS SEGMENT INFORMATION

The Company's operations are best grouped into three main product segments:
defense, automatic revenue collection systems, and industrial operations. A
description of each segment's primary activities follows:

Defense--work under U.S. and foreign government contracts relating to electronic
- -------
defense systems and equipment, computer simulation training, distributed
interactive simulation, development of training doctrine and field operations
and maintenance. Products include customized range instrumentation and training
systems, communications and surveillance systems, HF and UHF/VHF surveillance
receivers, avionics systems and space RF/digital products.

Automatic revenue collection systems--the design, production, leasing and
- ------------------------------------
servicing of electronic and mechanical revenue collection systems.

Industrial operations--includes the manufacture of freeway call boxes and paper
- ---------------------
products.

Business segment financial data for the three years ended September 30, 1994, is
presented below.

1994 1993 1992
-------- -------- --------
(in millions)

Revenue:
Defense $ 113.3 $ 92.4 $123.4
Automatic revenue collection systems 130.2 116.0 98.6
Industrial operations 17.6 15.4 17.0
------ ------ ------
261.1 223.8 239.0
Corporate 6.3 4.7 4.5
------ ----- ------
CONSOLIDATED TOTALS $267.4 $228.5 $243.5
====== ====== ======

Cubic Corporation - SEC Form 10-K Page 35
- --------------------------------------------------------------------------------

CUBIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE M--BUSINESS SEGMENT INFORMATION--Continued

1994 1993 1992
-------- -------- --------
(in millions)

Operating profit:
Defense $ 2.2 $ 4.8 $ 9.2
Automatic revenue collection systems 7.7 3.1 2.4
Industrial operations 1.1 0.4 0.9
------ ------ ------
CONSOLIDATED OPERATING PROFIT 11.0 8.3 12.5
Corporate (3.6) (4.2) (3.1)
Interest expense (2.5) (2.3) (4.2)
------ ------ ------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES, MINORITY INTEREST AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 4.9 $ 1.8 $ 5.2
====== ====== ======

Identifiable assets:
Defense $105.0 $ 75.8 $ 68.4
Automatic revenue collection systems 104.7 97.7 68.1
Industrial operations 3.6 2.3 5.6
------ ------ ------
213.3 175.8 142.1
Discontinued operations 1.4 2.8 28.9
Corporate 74.0 86.0 73.1
------ ------ ------
CONSOLIDATED TOTALS $288.7 $264.6 $244.1
====== ====== ======

Depreciation and amortization:
Defense $ 2.1 $ 1.1 $ 1.1
Automatic revenue collection systems 7.1 7.7 6.8
Industrial operations 0.3 0.5 0.5
------ ------ ------
9.5 9.3 8.4
Discontinued operations - - 1.5
Corporate 0.4 0.1
------ ------
CONSOLIDATED TOTALS $ 9.9 $ 9.4 $ 9.9
====== ====== ======

Gross capital expenditures:
Defense $ 2.9 $ 11.1 $ 0.8
Automatic revenue collection systems 4.5 6.4 5.1
Industrial operations 0.1 0.1 0.1
------ ------ ------
7.5 17.6 6.0
Discontinued operations - - 0.9
Corporate 0.3 0.3 0.4
------ ------ ------
CONSOLIDATED TOTALS $ 7.8 $ 17.9 $ 7.3
====== ====== ======

Intersegment sales are immaterial. Sales of $101.9 million, $76.8 million and
$100.4 million in 1994, 1993 and 1992, respectively, were made to United States
Government agencies by the defense segment. Automatic revenue collection systems
sales include $24.3 million, $42.3 million and $21.7 million in 1994, 1993 and
1992, respectively, to the New York City Transit Authority and $27.9 million in
1994 to the London Underground (LUL). No other single customer accounts for 10%
or more of the Company's revenue.

Cubic Corporation - SEC Form 10-K Page 36
- --------------------------------------------------------------------------------

CUBIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE M--BUSINESS SEGMENT INFORMATION--Continued

Domestic revenue includes $30.1 million, $32.2 million, and $47.6 million in
1994, 1993 and 1992, respectively, for export. The Company's foreign assets
represent less than 10% of total assets. Foreign revenue consists primarily of
$27.9 million in sales made by the Company's subsidiary, WCL, in 1994 (foreign
revenue was less than 10% of consolidated revenue in 1993 and 1992).
Consolidated operating profit includes $4.5 million in operating profit from WCL
in 1994.

NOTE N--SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly results of operations for the years
ended September 30, 1994 and 1993:

Quarter Ended
---------------------------------------------
December 31 March 31 June 30 September 30
----------- -------- ------- ------------
(in thousands, except per share data)
1994
----

Net sales $48,407 $59,467 $74,503 $78,245
Gross profit 10,816 15,450 16,936 16,871
Income from continuing operations 200 186 942 1,205
Loss from discontinued operation (153) - - -
Cumulative effect of accounting change 1,379 - - -
Net income 1,426 186 942 1,205
Per share data:
Income from continuing operations .03 .03 .16 .20
Loss from discontinued operations (.03) - - -
Cumulative effect of accounting change .23 - - -
Net income per share .23 .03 .16 .20

1993
----

Net sales $52,288 $50,931 $59,514 $58,704
Gross profit 12,132 6,934 12,411 11,469
Income (loss) from continuing operations 807 (2,202) 1,538 2,067
Income (loss) from discontinued operations 408 20,462 (78) (721)
Net income 1,215 18,260 1,460 1,346
Per share data:
Income (loss) from continuing operations .13 (.36) .25 .34
Income (loss) from discontinued operations .07 3.36 (.01) (.12)
Net income per share .20 3.00 .24 .22

The quarters ended March 31 and June 30, 1994, have been restated from those
previously reported to reflect the acquisition of control of WCL as of
January 1, 1994. This restatement resulted in changes to sales and gross profit
but had no impact on any of the other amounts presented above.

Cubic Corporation - SEC Form 10-K
- --------------------------------------------------------------------------------

Cubic Corporation

September 30, 1994

SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
- ----------- PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES

====================================================================
Col. A Col. B Col. C Col. D Col. E
- --------------------------------------------------------------------

Balance at Balance at
Name of Debtor Beginning of Additions Deductions End of
Period Period
(Current)

====================================================================

Walter J. Zable - $1,600,000 - $1,600,000

Note: The loan was paid in full in October 1994 and accrued interest at a rate
of 4% per annum.