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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, 1995
1-8931
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Commission File Number
CUBIC CORPORATION
Exact Name of Registrant as Specified in its Charter
Delaware 95-1678055
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State of Incorporation IRS Employer Identification No.
9333 Balboa Avenue
San Diego, California 92123
Telephone (619) 277-6780
Common Stock American Stock Exchange, Inc.
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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: $85,271,622 as of December 6, 1995.
Number of shares of common stock outstanding as of December 6, 1995: 5,987,466
(after deducting 1,938,148 shares held as treasury stock).
Parts I and III incorporate 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.
PART I
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ITEM 1. BUSINESS.
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(A) GENERAL DEVELOPMENT OF BUSINESS.
-------------------------------
The Registrant, CUBIC CORPORATION (the Company), was incorporated in the State
of California in 1949 and began operations in 1951. In 1984, the Company moved
its Corporate domicile to the State of Delaware.
The Company, 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 Company also performs a variety of services, such as computer simulation
training, distributed interactive simulation and development of training
doctrine, as well as field operations and maintenance services related to
products previously produced and products produced by others. The Company also
manufactures replacement parts for its own such products. In addition, it
operates a corrugated paper converting facility through its subsidiary,
Consolidated Converting Company.
Sales volume increased by 42% in fiscal 1995, compared to fiscal 1994, to a
record high for the Company. This substantial growth is the result of
acquisitions made in 1994 and 1995, increased sales volume from automatic
revenue collection systems customers such as the New York City Transit Authority
and the London Underground, and a turnaround in the defense segment from the
downward trend of recent years.
Research and development expenditures over the past few years by the defense
segment have resulted in the winning of several major new defense contracts and
cause the outlook for the Company's future in defense contracting to be bright.
The most notable contract awarded during the year is a contract with the U.S.
Army called MILES 2000, which could surpass $500 million in revenue over the
next five to six years, if all contract options are exercised.
The Company continues work on automatic revenue collection systems for the
customers mentioned above, in addition to many other large local government
agencies and municipalities world-wide. The revenue collection market continues
to provide many significant opportunities for the Company to continue the growth
of this business in the future.
During fiscal year 1995, approximately 40% of the Company's total business was
done, either directly or indirectly, with various agencies of the United States
government. The remaining 60% of the business is classified as industrial.
The Company's products and services are sold almost entirely by its employees.
Overseas sales are made either directly or through representatives or licensees.
2
(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 Company's industry segments, is
set forth in Note M to the Consolidated Financial Statements for the year ended
September 30, 1995, and follows at Item 14(a)(1) of this filing, on pages 36
and 37.
(C) NARRATIVE DESCRIPTION OF BUSINESS.
---------------------------------
DEFENSE
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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 U. S. Navy and Marine
Corps, and ACMI (Air Combat Maneuvering Instrumentation) by the Air Force. A
new generation of air ranges based on the GPS (Global Positioning System) is now
being developed for 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 the
air/ground 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.
In 1995, the company was selected by the U.S. Army for the Multiple Integrated
Laser Engagement System (MILES) 2000 program. MILES is a family of products
that uses lasers to realistically simulate weapons firing and detection systems,
to register hits or kills without endangering the target. These products will
be used by U.S. Army and Marine Corp. personnel as well as allied forces in
realistic force-on-force combat training exercises.
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 and direction finders primarily for the U. S. and foreign military
markets.
3
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 electronic 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.
BACKLOG:
- -------
The defense segment's sales backlog at September 30, 1995 was $124,600,000
compared to $102,400,000 at September 30, 1994. Approximately $21,000,000 is
not expected to be completed by September 30, 1996.
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, resulting
in continued heavy competition for this segment.
AUTOMATIC REVENUE COLLECTION SYSTEMS
- ------------------------------------
The automatic revenue collection systems segment includes six subsidiaries which
work together to design, produce and service three revenue collection product
lines: rail systems, toll products and bus systems. These include five wholly-
owned subsidiaries, Cubic Automatic Revenue Collection Group, Cubic Toll
Systems, Inc., Southern Cubic Pty. Ltd., New York Revenue Automation, Inc. and
Scanpoint Technology A/S, as well as the Company's 50% owned subsidiary in
England, Westinghouse Cubic Limited. This group of companies is 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 Company 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.
Additional orders from customers in Singapore and Hong Kong are received
annually.
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. Contracts with New York and Chicago are currently
in production.
4
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. 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 Company'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.
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,
1995 was $252,000,000, compared to $296,600,000 at September 30, 1994.
Approximately $73,000,000 is not expected to be completed by September 30, 1996.
COMPETITION:
- -----------
The Company'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, the Company 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. Incident to the sale of its
automatic revenue collection systems products, the Company'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 produced by the Company's subsidiary, Cubic
Communications, Inc., for use on freeways, golf courses and in parking lots.
5
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, 1995 was
$6,300,000, compared to $7,500,000 at September 30, 1994. Approximately
$3,000,000 is not expected to be completed by September 30, 1996.
COMPETITION:
- -----------
In the industrial operations segment, the subsidiaries of the Company 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 Company's subsidiaries are subject to rapidly changing
competitive conditions.
GENERAL
- -------
The Company 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 Company 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 $46,000,000,
$35,000,000 and $46,000,000 in 1995, 1994 and 1993, respectively. Dollar
amounts of research and development activities sponsored by the Company and its
subsidiaries were $10,753,000, $7,440,000 and $3,597,000 in 1995, 1994 and
1993, respectively.
The Company 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 the Company or any of its subsidiaries.
There were approximately 3,300 persons employed by the Company and its
subsidiaries at September 30, 1995.
Typically, the Company'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 Company's working capital
requirements on those contracts.
6
(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, 1995, and follows at Item 14(a)(1) of this filing, on pages 36 and
37.
ITEM 2. PROPERTIES.
----------
The Company's corporate headquarters and part of its subsidiary, Cubic Defense
Systems, Inc., are located in a 100,000 square-foot facility, situated on a
Company-owned, 8-1/2 acre parcel in the City of San Diego, California.
The Company 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 Company's
subsidiary, Cubic Defense Systems, Inc., for engineering and office space.
Adjacent to the corporate headquarters is a Company owned, 127,000 square-foot
office and manufacturing facility on a fourteen acre parcel which is used almost
entirely by the Company's subsidiary, Cubic Defense Systems, Inc.
A four-acre parcel, located adjacent and south of the above facility, is owned
by the Company and contains a plant facility consisting of approximately 60,000
square feet used by Cubic Communications, Inc.
The Company leases approximately 57,000 square feet of manufacturing and office
space near the Corporate headquarters in San Diego. This facility is used by
the Company's subsidiary, Cubic Defense Systems, Inc.
The Company 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 Company'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 Company 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 and Cubic Automatic Revenue Collection Group.
A 100,000 square-foot facility, located on sixteen acres in Tullahoma,
Tennessee, is owned by the Company and used by Cubic Automatic Revenue
Collection Group.
The Company 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 1.1
million square feet. Approximately forty percent of the total square footage of
the facilities of the Company is utilized for manufacturing and the remainder is
utilized for administrative and engineering purposes. All owned and leased
properties used by the Company are generally well maintained in good operating
condition.
7
ITEM 3. LEGAL PROCEEDINGS.
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In October 1991, the California Environmental Protection Agency notified the
Company 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 Company and its subsidiaries are
not in the business of transporting or disposing of waste materials. The
Company and the involved subsidiaries sold 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 Company and the involved
subsidiaries were not further involved in the transportation, treatment, or
disposal of the materials. It is the Company's understanding that alleged
hazardous materials from at least ninety other parties were allegedly released
at the facility. Under Federal and California law, the Company 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. Removal and remediation activities have not yet been
completed but the eventual costs of such activities are expected to be
substantial.
The Company and its involved subsidiaries have joined a group of other
potentially responsible parties (PRP Group) 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. The PRP Group has approved
a budget of approximately $14 million for completion of the work required under
the Consent Order (which budget includes $4 million which the PRP Group has
agreed to pay to the State of California for response costs incurred with
respect to the site). Approximately $12 million of the $14 million budgeted had
been spent to date. The share of these costs currently attributable to the
Company and its involved subsidiaries is approximately 2 percent. A second
Consent Order is contemplated to conduct the site remediation in accordance with
the plan.
Several of the Company's insurance carriers have entered into settlements
whereby they have agreed to pay approximately three-quarters of the costs of the
Company and its involved subsidiaries, estimated to be necessary for the
completion of the work specified in the first Consent Order. The Company
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 Company's financial statements.
In 1991, 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. 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.
8
ITEM 3. LEGAL PROCEEDINGS-CONTINUED.
---------------------------
In 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 claims 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, which was subsequently reduced
to $69.4 million. Discovery on the allegations of both the original lawsuit and
the counterclaim is virtually complete and trial is currently set for June 3,
1996. The Company believes the counterclaim is without merit and will not have
a material effect on the Company's financial statements, and is vigorously
pursuing its lawsuit.
In July 1995, UDT Sensors, Inc. a potential subcontractor, filed a lawsuit
against Cubic Defense Systems, Inc. in the Superior Court of the State of
California in Los Angeles, alleging breach of a written contract, fraud and
deceit, among other related charges. The lawsuit claims damages in the amount
of $20 million and more according to proof at trial, exemplary damages in an
amount to be determined at trial, pre-judgement interest and costs of suit. The
claims allegedly arise out of a strategic supplier agreement in which UDT
Sensors, Inc. alleges it was to receive a subcontract to provide certain product
if Cubic Defense Systems, Inc. was selected by the United States Army as the
prime contractor for a certain government program. After winning the prime
contract, Cubic Defense Systems, Inc. was unable to reach a subcontract with UDT
Sensors, Inc. and the lawsuit was filed. Written and deposition discovery has
been initiated but no trial date has yet been set. The Company believes the
lawsuit is without merit and will not have a material effect on the Company's
financial statements, and is vigorously pursuing its defense.
Neither the Company 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 Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS.
-------------------
Information regarding submission of matters to a vote of security holders 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.
9
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS.
-----------------------------------
The principal market on which the Company'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
--------------------------------- -------------------
1995 1994 1995 1994
--------------- --------------- -------- --------
Quarter ended: High Low High Low
December 31 19-7/8 17-3/8 21-7/8 19-1/8 - -
March 31 20-7/8 17-1/8 23-3/4 20-3/8 $.265 $.265
June 30 24-1/4 19-3/8 21-7/8 18-1/4 - -
September 30 25-1/4 22-1/2 20-1/2 17-3/4 .265 .265
On December 6, 1995, the closing price of the Company's common stock on the
American Stock Exchange, Inc. was $24.125.
The terms of the Company's credit facilities include provisions that require
and/or limit, among other financial ratios and measurements, the permitted
levels of working capital, debt and tangible net worth and coverage of fixed
charges. At September 30, 1995, the most restrictive covenant leaves
consolidated retained earnings of $11.8 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 1,950 shareholders of record of the Company's common
stock as of December 6, 1995.
10
ITEM 6. SELECTED FINANCIAL DATA.
-----------------------
FINANCIAL HIGHLIGHTS AND SUMMARY OF CONSOLIDATED OPERATIONS
(Amounts in thousands, except per share data)
Year ended September 30 1995 1994 1993 1992 1991
- ---------------------------------------------- -------- --------- --------- -------- --------
Net sales $370,065 $260,622 $221,437 $237,505 $198,857
Cost of sales 290,441 200,549 178,491 178,921 144,124
Selling, general and administrative
expenses 58,939 52,071 42,347 51,384 37,084
Interest expense 2,995 2,535 2,294 4,223 5,146
Income taxes (benefit) 3,437 825 (450) 1,100 7,200
Income from continuing operations 5,392 2,533 2,210 4,080 12,668
Income (loss) from discontinued operations - (153) 20,071 2,931 1,366
Cumulative effect of accounting change - 1,379 - - -
Net income 5,392 3,759 22,281 7,011 14,034
Average number of shares of common
stock outstanding 5,987 6,023 6,095 6,295 6,524
Per Share Data:
Income from continuing operations $ .90 $ .42 $ .36 $ .65 $ 1.94
Income (loss) from discontinued operations - (.03) 3.30 .46 .21
Cumulative effect of accounting change - .23 - - -
Net income .90 .62 3.66 1.11 2.15
Cash dividends .53 .53 1.53 .53 .53
Year-End Data:
Shareholders' equity $159,865 $157,645 $159,552 $147,639 $150,768
Equity per share 26.70 26.33 26.22 24.02 23.17
Total assets 299,694 288,673 264,568 244,084 269,184
Long-term debt 39,000 35,000 35,500 13,600 41,829
Shares of common stock outstanding 5,987 5,987 6,086 6,146 6,506
This summary should be read in conjunction with the related consolidated
financial statements and accompanying notes.
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
---------------------------------------------
FISCAL 1995 COMPARED TO FISCAL 1994
- -----------------------------------
Fiscal 1995 was a year of significant growth in revenue for the Company. Sales
increased by 42% from the fiscal 1994 level. The businesses acquired in 1994
and 1995 contributed to this growth, along with increased sales volume from
automatic revenue collection systems customers in New York City and London, and
a turnaround in the defense segment from the downward trend of recent years.
Along with the increase in sales came increased operating profits, which grew
from $11 million in fiscal 1994 to $15.1 million in fiscal 1995. This increase
of $4.1 million came despite a change in the company's method of allocating
corporate expenses, which decreased 1995 operating profits of the automatic
revenue collection systems segment by $3.0 million from what they would have
been under the previous allocation method. Thus, on a comparable basis, overall
operating profits increased by $7.1 million from $11 million to $18.1 million, a
65% improvement.
The 48% increase in the defense segment's sales from fiscal 1994 to fiscal 1995
was primarily attributable to Cubic Applications, Inc., the business acquired in
April 1994. Sales for 1994 include the sales of this subsidiary only from the
date of acquisition, however, sales of the subsidiary also increased on an
annualized basis by 42% from 1994 to 1995. Cubic Defense Systems, Inc. also
experienced a 15% increase in sales, ending a decline that began ten years ago.
The Company continued its increased level of spending for research and
development activities in the defense segment. The Company invested $9.7
million into the development of new technology for combat training ranges,
surveillance receivers and related systems during fiscal 1995, compared to $6.5
million in fiscal 1994 and $3.0 million in fiscal 1993. These investments have
begun to pay off for the Company, as three major contracts which apply this new
technology were awarded in 1995. The upswing in revenues from the defense
segment over the past two years is expected to continue as a result of these
contract awards and the anticipated exercise of contract options by the
customers, as well as the award of related new contracts in the future.
Operating profits in the defense segment improved moderately from 1994 to 1995
as a result of higher profits contributed by Cubic Applications, Inc. and Cubic
Communications, Inc., the subsidiary which provides high technology surveillance
receivers to the U.S. and foreign governments. These improved profits were
partially offset by a loss incurred by Cubic Environmental Technologies, Inc., a
venture which the Company discontinued during the year. Profits at Cubic
Defense Systems, Inc. remained at a low level due to the expenditures to develop
new products and rebuild the subsidiary's capabilities, as mentioned above. As
expenditures for research and development return to a more normal level in
fiscal 1996 and as sales volume increases, it is expected that operating profits
from the defense segment will continue to improve.
Work on the New York City Transit Authority (NYCTA) contract progressed well
during the year and contributed significantly to the increase in sales volume
and operating profits of the automatic revenue collection systems segment.
Sales in 1995 to another major customer, the London Underground, also increased
notably over the 1994 level and added to the operating profits of this segment.
The London Underground is a customer of the Company's 50% owned but consolidated
subsidiary, Westinghouse Cubic Ltd. Work is progressing on a large new system
for the Chicago Transit Authority, in addition to other important customers in
large cities around the world.
12
As mentioned previously, the Company changed its method of allocating certain
corporate expenses to its subsidiaries in fiscal 1995. This change primarily
effected the automatic revenue collection systems segment, which would have had
operating profit of $12.8 million, without the change. On a comparable basis,
operating profit improved by 66% from 1994 to 1995, representing a significant
performance improvement in this segment.
The improvement in operating profit of the automatic revenue collection systems
segment was accomplished despite poor performance from the Company's toll
product line which incurred operating losses of $6 million in fiscal 1995.
Management believes no further losses will be incurred by this product line.
Cost of sales increased as a percent of sales from 77% to 78%, reflecting the
losses from the toll road business mentioned above. Selling, general and
administrative expenses increased by $7 million as a result of the acquisitions
made in 1994 and in support of the increase in sales volume of both major
segments of the Company. However, these expenses decreased from 20% of sales in
1994 to 16% in 1995.
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 the 1993
level.
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 compared 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 was 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.
13
In the fourth quarter of fiscal 1994, NYCTA exercised Option Two under a
contract with Cubic Automatic Revenue Collection Group 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.
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 1993.
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 costs and other marketing
efforts in the defense segment.
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 changed 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.
FINANCIAL POSITION AND LIQUIDITY
During 1995, the Company entered into a two-year, $35 million unsecured
revolving credit agreement with a group of banks (see Note E to the consolidated
financial statements). This credit facility provides the Company liquidity to
assure adequate working capital is available. In addition to this credit
facility, the Company continues to have available the $30 million revolving
credit agreement of its subsidiary, Cubic Toll Systems, Inc., $18 million of
which was unutilized at September 30, 1995.
Operating activities of the Company used cash of $15.3 million during 1995 due
primarily to liquidation of advances and growth in amounts receivable from
NYCTA. The Company is working to resolve this situation and expects that cash
flow from operations will be positive for fiscal 1996. In May 1995, the Company
acquired all of the outstanding stock of Scanpoint Technology A/S, a Danish
company, for the nominal purchase price of one dollar (see Note B to the
consolidated financial statements). The acquired subsidiary had cash of $14.7
million at the date of acquisition, which will be used to fund the cost of
contract performance obligations in excess of realizable contract revenue. Cash
was used for normal additions to property, plant and equipment, the building of
toll equipment to be leased, a scheduled debt payment and the payment of
dividends. Cash of $9 million was provided by borrowings under the revolving
credit agreements mentioned above.
At September 30, 1995 the Company had working capital of $119 million, including
cash and marketable securities of $24 million. Management believes that this
strong financial position and liquidity and the revolving credit agreements
provide adequate resources to meet anticipated financing needs at this time.
14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
------------------------------------------
The following consolidated financial statements of the Company and its
subsidiaries, for the year ended September 30, 1995, are attached hereto, marked
Pages 16 and 21 through 38.
Report of Ernst & Young LLP, Independent Auditors
See Page 16
Consolidated Balance Sheet
September 30, 1995 and 1994
See Pages 21 and 22
Consolidated Statement of Income and Retained Earnings
Years ended September 30, 1995, 1994 and 1993
See Page 23
Consolidated Statement of Cash Flows
Years ended September 30, 1995, 1994 and 1993
See Page 24
Notes to Consolidated Financial Statements
September 30, 1995
See Pages 25 through 38
ITEM 9. DISAGREEMENTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
------------------------
None.
15
Report of Ernst & Young LLP, Independent Auditors
Board of Directors and Shareholders
Cubic Corporation
We have audited the accompanying consolidated balance sheet of Cubic Corporation
as of September 30, 1995 and 1994, and the related consolidated statements of
income, retained earnings and cash flows for each of the three years in the
period ended September 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements 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, 1995 and 1994, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1995, in conformity with generally accepted accounting principles.
Ernst & Young LLP
San Diego, California
November 29, 1995
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, 1995, and follows at Item 14(a)(1) of this filing, on page 34.
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, 1995 and 1994
Consolidated Statement of Income
Years ended September 30, 1995, 1994 and 1993
Consolidated Statement of Retained Earnings
Years ended September 30, 1995, 1994 and 1993
Consolidated Statement of Cash Flows
Years ended September 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
September 30, 1995
(2) The following consolidated financial statement schedules of Cubic
Corporation and subsidiaries, as referenced in Item 14(d):
None
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
None
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
12/20/95 /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:
12/20/95 /s/ Walter J. Zable
- ------------- --------------------------------------------------------------
Date WALTER J. ZABLE, President, Chief
Executive Officer and Chairman of the
Board of Directors
12/20/95 /s/ Walter C. Zable
- ------------- --------------------------------------------------------------
Date WALTER C. ZABLE, Vice President and
Vice Chairman of the Board of Directors
12/20/95 /s/ Jackson D. Arnold
- ------------- --------------------------------------------------------------
Date JACKSON D. ARNOLD, Director
12/20/95 /s/ Richard G. Duncan
- ------------- --------------------------------------------------------------
Date RICHARD G. DUNCAN, Director
12/20/95 /s/ Robert T. Monagan
- ------------- --------------------------------------------------------------
Date ROBERT T. MONAGAN, Director
12/20/95 /s/ Raymond E. Peet
- ------------- --------------------------------------------------------------
Date RAYMOND E. PEET, Director
12/20/95 /s/ William W. Boyle
- -------------- --------------------------------------------------------------
Date WILLIAM W. BOYLE, Director, Vice President of
Finance & Chief Financial Officer
12/20/95 /s/ Thomas A. Baz
- ------------- --------------------------------------------------------------
Date THOMAS A. BAZ, Vice President and
Corporate Controller, Principal Accounting Officer
19
ITEM 8, ITEM 14(a)(1) AND (2),(c) AND (d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
EXHIBITS
Cubic Corporation
Year Ended September 30, 1995
San Diego, California
20
CUBIC CORPORATION
CONSOLIDATED BALANCE SHEET
September 30
1995 1994
-------- --------
(in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 20,705 $ 25,782
Marketable securities, available-for-sale 3,405 4,814
Accounts receivable:
Trade and other receivables 18,166 13,213
Long-term contracts - Note C 136,781 119,019
Allowance for doubtful accounts (1,365) (1,456)
-------- --------
153,582 130,776
Inventories - Note D 18,995 18,269
Recoverable income taxes - 1,600
Deferred income taxes - Note H 7,314 5,645
Prepaid expenses and other current assets 3,756 3,266
-------- --------
TOTAL CURRENT ASSETS 207,757 190,152
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements 12,797 13,693
Buildings and improvements 20,510 21,129
Machinery and other equipment 55,273 50,322
Leasehold improvements 2,376 2,307
Allowance for depreciation and amortization (56,245) (53,326)
-------- --------
34,711 34,125
OTHER ASSETS
Toll equipment under operating leases, net - Notes E and G 10,933 15,990
Preferred stock of United States Elevator Corp. - Note J 20,000 20,000
Cost in excess of net tangible assets of purchased
businesses, less amortization - Notes A and B 16,886 18,150
Miscellaneous other assets 9,407 10,256
-------- --------
57,226 64,396
-------- --------
TOTAL ASSETS $299,694 $288,673
======== ========
21
September 30
1995 1994
-------- --------
(in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 19,832 $ 20,761
Customer advances and reserve for contract performance
obligations in excess of realizable revenue 40,643 35,342
Salaries and wages, and amounts withheld from
employees' compensation 13,135 9,891
Accrual for claims related to discontinued operation 1,730 7,644
Other current liabilities 4,548 4,543
Income taxes payable 4,172 -
Current portion of long-term debt 5,000 5,000
-------- --------
TOTAL CURRENT LIABILITIES 89,060 83,181
LONG-TERM DEBT, less current portion - Note E 39,000 35,000
OTHER LIABILITIES
Deferred income taxes - Note H 3,663 6,388
Deferred compensation 1,641 1,177
-------- --------
5,304 7,565
MINORITY INTEREST - Note B 6,465 5,282
COMMITMENTS AND CONTINGENCIES - Notes F and L
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 181,665 179,446
Foreign currency translation adjustment (434) (435)
Treasury stock at cost:
1995 - 1,938,148 shares
1994 - 1,938,140 shares (33,723) (33,723)
-------- --------
159,865 157,645
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $299,694 $288,673
======== ========
See accompanying notes
22
CUBIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Year Ended September 30
1995 1994 1993
-------- -------- --------
(in thousands, except per share data)
Revenue:
Net sales $370,065 $260,622 $221,437
Interest and dividends 3,171 3,987 2,648
Other income - Note B 1,025 2,840 4,404
-------- -------- --------
374,261 267,449 228,489
Costs and expenses:
Cost of sales 290,441 200,549 178,491
Selling, general and administrative expenses 58,939 52,071 42,347
Research and development 10,753 7,440 3,597
Interest 2,995 2,535 2,294
-------- -------- --------
363,128 262,595 226,729
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES, MINORITY INTEREST AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 11,133 4,854 1,760
Income taxes (credit) - Note H 3,437 825 (450)
Minority interest in income of subsidiary - Note B 2,304 1,496 -
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 5,392 2,533 2,210
Discontinued operations:
Income from operations, net of applicable
income taxes of $343,000 - - 568
Net gain (loss) on disposal - Note J - (153) 19,503
Cumulative effect of accounting change - Note A - 1,379 -
-------- -------- --------
NET INCOME 5,392 3,759 22,281
Cash dividends paid (per share of common stock:
1995 - $.53, 1994 - $.53 and 1993 - $1.53) (3,173) (3,180) (9,311)
Retained earnings at the beginning of the year 179,446 178,867 165,897
-------- -------- --------
RETAINED EARNINGS AT THE END OF THE YEAR $181,665 $179,446 $178,867
======== ======== ========
Per share amounts:
Income from continuing operations $ .90 $ .42 $ .36
Income (loss) from discontinued operations - (.03) 3.30
Cumulative effect of accounting change - .23 -
-------- -------- --------
NET INCOME PER SHARE $ .90 $ .62 $ 3.66
======== ======== ========
Average number of shares outstanding 5,987 6,023 6,095
======== ======== ========
See accompanying notes
23
CUBIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended September 30
1995 1994 1993
-------- -------- --------
Operating Activities: (in thousands)
Net income $ 5,392 $ 3,759 $ 22,281
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 12,547 9,938 9,371
Minority interest 2,304 1,496 -
Deferred income taxes (4,394) 1,970 (1,114)
Undistributed earnings of affiliates, net of distributions (126) (47) (1,265)
Net loss (gain) on disposal of discontinued operations - 153 (19,503)
Cumulative effect of accounting change - (1,379) -
Changes in operating assets and liabilities,
net of effects from acquisitions:
Accounts receivable (22,395) 766 (25,054)
Inventories 359 (625) (6,027)
Prepaid expenses (490) 655 (518)
Accounts payable and other current liabilities (15,518) 7,287 (1,386)
Income taxes 5,746 (4,676) 1,247
Other items - net 1,229 (91) (646)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (15,346) 19,206 (22,614)
-------- -------- --------
Investing Activities:
Acquisition of businesses, net of cash acquired 14,712 (20,367) -
Proceeds from the sale of U. S. Elevator Corp. - - 40,000
Sale of marketable securities 1,409 12,569 4,708
Additions to toll equipment under operating leases (1,360) (1,763) (5,370)
Purchases of property, plant and equipment (6,583) (6,040) (12,574)
Proceeds from the sale of property, plant and equipment 2,120 - -
Other items - net 36 (738) (2,434)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 10,334 (16,339) 24,330
-------- -------- --------
Financing Activities:
Proceeds from issuance of long-term debt 9,000 4,500 30,000
Principal payments on long-term debt (5,000) (100) (27,978)
Purchases of treasury stock - (2,051) (1,057)
Dividends paid to minority interest (1,229) (961) -
Dividends paid to shareholders (3,173) (3,180) (9,311)
-------- -------- --------
NET CASH USED IN FINANCING ACTIVITIES (402) (1,792) (8,346)
-------- -------- --------
Effect of exchange rates on cash 337 211 -
-------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (5,077) 1,286 (6,630)
Cash and cash equivalents at the beginning of the year 25,782 24,496 31,126
-------- -------- --------
CASH AND CASH EQUIVALENTS AT
THE END OF THE YEAR $ 20,705 $ 25,782 $ 24,496
======== ======== ========
See accompanying notes
24
CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of the Business: Cubic Corporation (the Company), was
- ----------------------------------------
incorporated in the State of California in 1949 and began operations in 1951.
In 1984, the Company moved its corporate domicile to the State of Delaware. The
Company's subsidiaries design, develop and manufacture products which are mainly
electronic in nature and provide services related to products previously
produced and products produced by others. The Company's principal lines of
business are defense electronics and automatic revenue collection systems, which
are about equal in size based on sales. Principal customers for defense
products and services are the United States and foreign governments. Automatic
revenue collection systems are sold primarily to large local government agencies
in the United States and world-wide.
Consolidation: The consolidated financial statements include the accounts of
- --------------
the Company and all of its subsidiaries, including Westinghouse Cubic Limited
(WCL) subsequent to December 31, 1993. As explained in Note B, WCL is 50% owned
but became 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, Available-for-Sale: In May 1993 the Financial Accounting
- ------------------------------------------
Standards Board (FASB) issued Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities." The
Company began applying the new rules October 1, 1994. Marketable securities are
classified as available-for-sale and are stated at cost at September 30, 1995
and 1994, as the difference between cost and fair value of the securities is
immaterial.
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
costs incurred for certain government contracts include general and
administrative costs, the amounts remaining in inventory were not material at
September 30, 1995 and 1994.
Property, Plant and Equipment and Toll Equipment Under Operating Leases:
- ------------------------------------------------------------------------
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 $11,206,000, $9,430,000, and
$9,637,000 in 1995, 1994 and 1993, respectively.
25
CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Cost in Excess of Net Tangible Assets of Purchased Businesses: Cost in excess of
- --------------------------------------------------------------
net tangible assets of purchased businesses is amortized on a straight-line
basis over a period of 15 years. Accumulated amortization at September 30, 1995
and 1994 was $1,925,000 and $661,000, respectively.
Long-Lived Assets: In March 1995, FASB issued Statement No. 121, "Accounting for
- ------------------
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," which requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt Statement
121 in the quarter ending December 31, 1995 and, based on current circumstances,
does not believe the effect of adoption will be material.
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.
Income Taxes: Income taxes are accounted for under the provisions of FASB
- -------------
Statement No. 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. The cumulative effect of adopting
Statement 109, as of October 1, 1993, increased net income by $1,379,000, or
$.23 per share, in the year ended September 30, 1994.
Use of Estimates: The preparation of financial statements in conformity with
- -----------------
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassification: Certain prior year amounts have been reclassified to conform
- ----------------
to current year classifications.
26
CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE B - ACQUISITIONS
In May 1995, the Company acquired all of the outstanding stock of Scanpoint
Technology A/S, a Danish company, for the nominal purchase price of one dollar.
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 purchase included assets of $20.3 million, $14.7 million of
which was cash, and liabilities assumed of $20.3 million, including a reserve
for contract performance obligations in excess of realizable revenue of $14.7
million. The acquired company is engaged in revenue collection equipment
design, fabrication, and installation, primarily in Europe. The results of
operations from the date of acquisition to September 30, 1995 have been included
in the accompanying consolidated financial statements as a part of the automatic
revenue collection systems segment.
In April 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 is being amortized over a
period of 15 years using the straight-line method. The acquired entity provides
training, applications and operations services to the United States Army. The
results of operations from the date of acquisition to September 30, 1995 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 50% 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 equity share of the net income
of WCL for the quarter ended December 31, 1993 and for the year ended September
30, 1993 was $474,000 and $1,699,000, respectively, and is included in other
income for each of those periods.
Unaudited pro forma results of the Company's operations, assuming the
acquisitions had occurred as of October 1, 1994, 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.
Year Ended
September 30
1995 1994 1993
-------- -------- --------
Net sales $376,077 $305,253 $290,420
Income from continuing operations 5,392 3,485 3,378
Net income 5,392 4,711 23,449
Net income per share .90 .78 3.85
27
CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE C - ACCOUNTS RECEIVABLE
The components of accounts receivable for long-term contracts at September 30
are as follows:
1995 1994
-------- --------
(in thousands)
U.S. Government Contracts:
Amounts billed $ 26,806 $ 20,063
Recoverable costs and accrued profits on
progress completed - not billed 30,632 33,901
-------- --------
57,438 53,964
Commercial Customers:
Amounts billed 18,174 12,814
Recoverable costs and accrued profits on
progress completed - not billed 61,169 52,241
-------- --------
79,343 65,055
-------- --------
$136,781 $119,019
======== ========
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, 1995 will be billed during 1996 as units are
delivered and those from commercial customers will be billed upon completion of
performance tests and/or acceptance by the customers in 1996.
NOTE D - INVENTORIES
Inventories at September 30 are classified as follows:
1995 1994
------- -------
(in thousands)
Finished products $ 2,846 $ 1,172
Work in process 6,850 6,425
Materials and purchased parts 9,299 10,672
------- -------
$18,995 $18,269
======= =======
28
CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE E - FINANCING ARRANGEMENTS
Long-term debt at September 30 consists of the following:
1995 1994
------- -------
(in thousands)
Revolving credit agreement $ 7,000 $ -
Revolving credit agreement of Cubic Toll
Systems, Inc. (CTS), a wholly-owned subsidiary 12,000 10,000
Unsecured note payable to an insurance company,
due $5,000,000 annually on June 30, plus
interest at 6.09% payable semi-annually 25,000 30,000
------- -------
44,000 40,000
Less current portion 5,000 5,000
------- -------
$39,000 $35,000
======= =======
During the year ended September 30, 1995, the company entered into a $35 million
unsecured revolving credit agreement with a group of banks which expires in
August 1997. Borrowings under this agreement bear interest at rates indexed to
either the prime rate or LIBOR, selected at the Company's option. The terms of
the credit agreement provide for commitment fees of 1/4 of 1% per annum of the
available unutilized balance. As of September 30, 1995, the interest rate on the
$7 million debt outstanding was 6.75% per annum.
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 agreement 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, 1995, the present value
of these future revenues approximated 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, 1995, the
interest rate on the $12 million debt outstanding was 6.49% per annum.
The terms of the credit facilities include provisions that require and/or limit,
among other financial ratios and measurements, the permitted levels of working
capital, debt and tangible net worth and coverage of fixed charges. At
September 30, 1995, the most restrictive covenant leaves consolidated retained
earnings of $11.8 million available for the payment of dividends to
shareholders, purchases of the Company's common stock and other charges to
shareholders' equity.
Maturities of long-term debt for each of the five years in the period ending
September 30, 2000, are as follows: 1996 - $5,000,000; 1997 - $12,000,000;
1998 - $17,000,000; 1999 - $5,000,000; 2000 - $5,000,000. Interest paid amounted
to $3,063,000, $2,377,000 and $2,107,000 in 1995, 1994 and 1993, respectively.
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 2001. 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 $2,833,000, $2,591,000, and $2,699,000 in
1995, 1994 and 1993, respectively.
Future minimum payments under noncancelable operating leases with initial terms
of one year or more consist of the following at September 30, 1995 (in
thousands):
1996 $3,072
1997 2,243
1998 1,607
1999 1,348
2000 597
Thereafter 43
------
$8,910
======
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 equipment. The cost of equipment under operating
leases at September 30, 1995 and 1994 totaled $52,517,000 and $51,157,000,
respectively, including costs incurred to date for equipment in production
totalling $2,459,000 and $3,937,000, respectively, while accumulated
depreciation at the same dates amounted to $41,584,000 and $35,167,000.
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, 1995 (in thousands):
1996 $13,682
1997 11,976
1998 7,925
1999 4,117
2000 2,828
Thereafter 2,052
-------
$42,580
=======
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, are as
follows:
1995 1994
------- -------
(in thousands)
Deferred tax assets:
Accrued employee benefits $ 2,884 $ 2,607
Inventory reserves and long-term contract accounting 3,338 2,194
Self-insurance reserves 846 748
Other 2,937 2,350
------- -------
Total deferred tax assets 10,005 7,899
Valuation allowance for deferred tax assets (171) (178)
------- -------
Net deferred tax assets 9,834 7,721
------- -------
Deferred tax liabilities:
Tax over book depreciation 1,093 2,432
Leveraged lease accounting 2,673 3,816
Other 2,417 2,216
------- -------
Total deferred tax liabilities 6,183 8,464
------- -------
Net deferred tax asset (liability) $ 3,651 $ (743)
======= =======
Significant components of the provision for income taxes attributable to
continuing operations are as follows:
1995 1994 1993
------- ------- -------
(in thousands)
Current (credit):
Federal $ 4,787 $(2,007) $ 620
State 640 (613) 44
Foreign 2,404 1,475 -
------- ------- -------
Total current 7,831 (1,145) 664
Deferred (credit):
Federal (3,834) 1,412 (798)
State (519) 558 (316)
Foreign (41) - -
------- ------- -------
Total deferred (4,394) 1,970 (1,114)
------- ------- -------
$ 3,437 $ 825 $ (450)
======= ======= =======
31
CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE H - INCOME TAXES - Continued
Income from continuing operations before income taxes, minority interest and
cumulative effect of accounting change include the following components:
1995 1994 1993
------- ------ ------
(in thousands)
United States $ 3,452 $ 386 $1,760
Foreign 7,681 4,468 -
------- ------ ------
Total $11,133 $4,854 $1,760
======= ====== ======
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:
1995 1994 1993
------- ------- ------
(in thousands)
Taxes on income based on statutory
federal income tax rate $3,785 $1,650 $ 598
State income taxes (credit), net of
federal tax benefit 79 (37) (51)
------ ------ -----
3,864 1,613 547
Increases (decreases) resulting from:
Effect of recording equity in net
income of Westinghouse Cubic Ltd. - (210) (609)
Tax exempt interest and
dividend income (504) (391) (462)
Foreign sales corporation
tax benefit (182) (244) (154)
Non-deductible expenses 214 420 452
Other 45 (363) (224)
------ ------ -----
(427) (788) (997)
------ ------ -----
$3,437 $ 825 $(450)
====== ====== =====
The Company made income tax payments, net of refunds, totalling $2,085,000,
$3,246,000, and $1,259,000, in 1995, 1994 and 1993, respectively.
32
CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE I - PENSION AND OTHER RETIREMENT PLANS
The Company maintains a defined benefit pension plan covering substantially all
non-union U.S. employees of 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, tax
considerations and investment opportunities. Plan assets include equities,
short and long-term debt instruments and real estate investments.
Net pension cost for this plan included the following components:
1995 1994 1993
-------- -------- --------
(in thousands)
------------------------------
Service cost--benefits earned during the period $ 1,398 $ 1,627 $ 1,970
Interest cost on projected benefit obligation 2,216 2,154 2,143
Actual loss (return) on plan assets (4,526) 752 (2,466)
Net amortization and deferral 2,513 (2,975) 277
------- ------- -------
Net Pension Cost $ 1,601 $ 1,558 $ 1,924
======= ======= =======
The following table sets forth the funded status and amounts recognized in the
Consolidated Balance Sheet as of September 30, 1995 and 1994, for the Company's
defined benefit pension plan:
1995 1994
------- -------
(in thousands)
Actuarial present value of benefit obligations:
Vested benefits $27,628 $21,227
Non vested benefits 682 413
------- -------
Accumulated Benefit Obligation $28,310 $21,640
======= =======
Projected benefit obligation for services
rendered to date $31,460 $24,372
Plan assets at fair value 27,560 23,291
------- -------
Projected benefit obligation in excess of
plan assets 3,900 1,081
Unrecognized net transition asset 176 227
Unrecognized prior service costs 47 5
Unrecognized net loss (3,028) (456)
------- -------
Pension Liability Recognized in the Consolidated Balance Sheet $ 1,095 $ 857
======= =======
Major assumptions at year-end are as follows:
1995 1994 1993
---- ---- ----
Discount rate 7.4% 8.5% 7.5%
Rate of increase in compensation level 4.5% 5.5% 4.5%
Expected long-term rate of return on assets 8.5% 8.5% 8.5%
Net periodic pension cost is determined using the assumptions as of the
beginning of the year. The funded status is determined using the assumptions as
of the end of the year. The reduction of the discount rate from 8.5% to 7.4% at
September 30, 1995 increased the accumulated benefit obligation by $3.9 million
and increased the projected benefit obligation by $4.0 million.
33
CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE I - PENSION AND OTHER RETIREMENT PLANS - Continued
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 these 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 these plans are discretionary with the Board of Directors.
Company contributions to the plans aggregated $5,606,000, $5,015,000, and
$4,906,000, in 1995, 1994 and 1993 respectively. The increase in contribution
for the year ended September 30, 1995 resulted from the addition of Cubic
Applications Inc., the business acquired in April 1994.
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, can be
triggered by either party after December 31, 1995, or run through 2009 if not
triggered sooner.
NOTE K - RELATED PARTY TRANSACTIONS
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 difference between policy premiums and other payments, and the
increase in the cash surrender value of the policy has been expensed in the year
incurred. The amounts expensed related to the policy were a net $390,000,
$503,000 and $467,000 in 1995, 1994 and 1993, respectively. 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 ten years, the Company
estimates 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.
34
CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE L - LEGAL MATTERS
In 1991, 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. 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 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 claims 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, which was subsequently reduced
to $69.4 million. Discovery on the allegations of both the original lawsuit and
the counterclaim is virtually complete and trial is currently set for June 3,
1996. The Company believes the counterclaim is without merit and will not have
a material effect on the Company's financial statements, and is vigorously
pursuing its lawsuit.
In July 1995, UDT Sensors, Inc. a potential subcontractor, filed a lawsuit
against Cubic Defense Systems, Inc. in the Superior Court of the State of
California in Los Angeles, alleging breach of a written contract, fraud and
deceit, among other related charges. The lawsuit claims damages in the amount
of $20 million and more according to proof at trial, exemplary damages in an
amount to be determined at trial, pre-judgement interest and costs of suit. The
claims allegedly arise out of a strategic supplier agreement in which UDT
Sensors, Inc. alleges it was to receive a subcontract to provide certain product
if Cubic Defense Systems, Inc. was selected by the United States Army as the
prime contractor for a certain government program. After winning the prime
contract, Cubic Defense Systems, Inc. was unable to reach a subcontract with UDT
Sensors, Inc. and the lawsuit was filed. Written and deposition discovery has
been initiated but no trial date has yet been set. The Company believes the
lawsuit is without merit and will not have a material effect on the Company's
financial statements, and is vigorously pursuing its defense.
35
CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
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, 1995, is
presented below.
1995 1994 1993
------ ------ ------
(in millions)
Revenue:
Defense $168.4 $113.3 $ 92.4
Automatic revenue collection systems 183.4 130.2 116.0
Industrial operations 18.7 17.6 15.4
------ ------ ------
370.5 261.1 223.8
Corporate 3.8 6.3 4.7
------ ------ ------
Consolidated Totals $374.3 $267.4 $228.5
====== ====== ======
Operating profit:
Defense $ 4.0 $ 2.2 $ 4.8
Automatic revenue collection systems 9.8 7.7 3.1
Industrial operations 1.3 1.1 0.4
------ ------ ------
Consolidated Operating Profit 15.1 11.0 8.3
Corporate (1.0) (3.6) (4.2)
Interest expense (3.0) (2.5) (2.3)
------ ------ ------
Income from Continuing Operations before Income Taxes,
Minority Interest and Cumulative Effect of Accounting Change $ 11.1 $ 4.9 $ 1.8
====== ====== ======
Beginning with the year ended September 30, 1995, the Company changed its method
of allocating certain corporate expenses to its subsidiaries. This change in
allocation of costs resulted in a decrease of approximately $3.0 million in
operating profit of the automatic revenue collection systems segment for the
year ended September 30, 1995, and a corresponding decrease in net corporate
expenses.
36
CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE M - BUSINESS SEGMENT INFORMATION - Continued
1995 1994 1993
------ ------ ------
(in millions)
Identifiable assets:
Defense $112.9 $105.0 $ 75.8
Automatic revenue collection systems 128.1 104.7 97.7
Industrial operations 3.5 3.6 2.3
------ ------ ------
244.5 213.3 175.8
Corporate 55.2 75.4 88.8
------ ------ ------
Consolidated Totals $299.7 $288.7 $264.6
====== ====== ======
Depreciation and amortization:
Defense $ 3.3 $ 2.1 $ 1.1
Automatic revenue collection systems 8.4 7.1 7.7
Industrial operations 0.3 0.3 0.5
------ ------ ------
12.0 9.5 9.3
Corporate 0.5 0.4 0.1
------ ------ ------
Consolidated Totals $ 12.5 $ 9.9 $ 9.4
====== ====== ======
Gross capital expenditures:
Defense $ 3.5 $ 2.9 $ 11.1
Automatic revenue collection systems 3.6 4.5 6.4
Industrial operations 0.2 0.1 0.1
------ ------ ------
7.3 7.5 17.6
Corporate 0.6 0.3 0.3
------ ------ ------
Consolidated Totals $ 7.9 $ 7.8 $ 17.9
====== ====== ======
Intersegment sales are immaterial. Sales of $154.6 million, $101.9 million and
$76.8 million in 1995, 1994 and 1993, respectively, were made to United States
Government agencies by the defense segment. Automatic revenue collection
systems sales include $57.1 million, $24.3 million and $42.3 million in 1995,
1994 and 1993, respectively, to the New York City Transit Authority in addition
to $48.2 million and $27.9 million in 1995 and 1994, respectively, to the London
Underground. No other single customer accounts for 10% or more of the Company's
revenue.
Domestic revenue includes $30.8 million, $30.1 million, and $32.2 million in
1995, 1994 and 1993, respectively, for export. The Company's foreign assets
represent less than 10% of total assets. Foreign revenue consists primarily of
$48.2 million and $27.9 million in sales made by the Company's subsidiary, WCL,
in 1995 and 1994, respectively (foreign revenue was less than 10% of
consolidated revenue in 1993). Consolidated operating profit includes $6.4
million and $4.5 million in operating profit from WCL in 1995 and 1994,
respectively.
37
CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
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, 1995 and 1994:
Quarter Ended
--------------------------------------------------
December 31 March 31 June 30 September 30
-------------- -------- ------- ------------
(in thousands, except per share data)
1995
----
Net sales $69,607 $91,968 $94,395 $114,095
Gross profit 18,091 19,124 20,774 21,635
Net income 1,858 374 1,188 1,972
Net income per share .31 .06 .20 .33
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
38