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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

(Mark One)

OR

ECC INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    þ YES   o 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 registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   þ

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)   o YES   þ NO

As of December 31, 2002, the aggregate market value of the Registrant’s Common Stock held by non-affiliates of the Registrant was $24,424,474. (This figure was computed on the basis of the closing price for the Registrant’s Common Stock on December 31, 2002 using the number of shares held by stockholders who are not officers, directors or record holders of 10% or more of the Registrant’s outstanding Common Stock. The characterization of such officers, directors and 10% stockholders as affiliates is for purposes of the computation only and should not be construed as an admission for any purpose whatsoever that any of such persons are, in fact, affiliates of the Registrant.)

As of August 20, 2003, there were 7,908,022 shares of the Registrant’s Common Stock, $0.10 par value per share, outstanding.

The Exhibit Index is located on pages 46 through 49.

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PART I

Item 1 Business

Recent Developments

On August 21, 2003, it was announced that the Company and Cubic Corporation (“Cubic”) signed a definitive agreement and plan of merger. Under the terms of the agreement, CDA Acquisition Corporation (“CDA”), a wholly owned subsidiary of Cubic, will make a tender offer for all of the outstanding shares of ECC common stock at a price of $5.25 per share, which will, if completed, result in an aggregate consideration to ECC’s stockholders of approximately $42.3 million. The offer commenced on August 27, 2003 and will expire, if not extended by CDA, at midnight Eastern Time on September 24, 2003. The tender offer, if successful, will be followed by a merger of CDA into ECC, with ECC being the surviving corporation and a wholly owned subsidiary of Cubic.

The Board of Directors of ECC has unanimously approved the transaction and is recommending that stockholders tender their shares of ECC common stock to CDA in the tender offer. In addition, certain stockholders, including Warren Lichtenstein and Steel Partners II, L.P., holding approximately 36.6 percent of the outstanding common stock of ECC have agreed to tender their shares to CDA in the tender offer. The tender offer is subject to certain customary conditions, including the tender of at least a majority of ECC’s common stock on a fully diluted basis.

(a)		General Development of Business
(1)		ECC International Corp. (the “Company” or “ECC”), a Delaware corporation organized in 1969, designs, manufactures and markets computer controlled simulators used primarily for training personnel to perform maintenance and operator procedures on military weapons systems. The Company’s simulators measure performance as a trainee operates the equipment, conducts equipment tests, diagnoses programmed malfunctions and takes corrective actions. The Company’s equipment is used by all four branches of the U.S. Department of Defense as well as numerous foreign governments for operator training and maintenance training for aircraft, missiles, tanks, combat vehicles and small arms weapons. The Company’s systems also have potential commercial application in areas such as law enforcement training.
		To support its training systems, the Company also develops training curricula, conducts training courses, develops instruction handbooks and operates a logistics support center.
		The Company designs and manufactures a significant portion of the components of its simulator systems, with the exception of certain equipment which is commercially available, such as computers, monitors, modified weapons, projectors, and printers, which it purchases. The Company is not dependent on any one supplier for raw materials or computer related equipment used in or sold as part of its systems. The Company’s systems are marketed through a direct sales force and independent international sales representatives.
		During fiscal year 1999, the Company completed the wind-down of its U.K. operation, ECC Simulation Limited, (the “U.K. operation”).
(2)		Not applicable.
(b)		Financial Information about Industry Segments
		The Company operates only in the training segment. This segment includes the design and manufacture of training simulators and the development of training programs and curricula. See note 12 in the Notes to the Consolidated Financial Statements.

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(c)

Narrative Description of Business

	(1)		(i)       Principal Products, Services and Revenue Sources
			See the information set forth above in Item 1(a) and (b).

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(d)		Financial Information about Foreign and Domestic Operations and Export Sales
		Export sales were immaterial to the Company’s gross sales. See note 12 in the Notes to the Consolidated Financial Statements.

Item 2 Properties

The Company owns its simulation development and manufacturing facilities, which are situated on 25 acres in Orlando, Florida. The main plant facility totals 398,086 square feet and ancillary buildings on the property total 69,847 square feet. The Company considers the capacity of its facilities to exceed its present needs of 90,000 square feet and is in the process of attempting to lease the facilities to third parties. The Company has hired Latham Management, LLC to manage the properties and to oversee the leasing activities.

Item 3 Legal Proceedings

Currently, the Company is not a party to any material pending legal proceedings.

Item 4 Submissions of Matters to a Vote of Security Holders

There was no vote of security holders during the fourth quarter of the fiscal year.

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Executive Officers and Key Management Employees of the Registrant

Each of the following officers and key management employees of the Company was elected by the Board of Directors and serves at the discretion of the Board.

Mr. Collins assumed his position in March 2003; Ms. Van Valkenburgh assumed her position in March 1999; and Ms. Kohl assumed her position in July 2002.

Mr. Collins was most recently the President of Taper-lok Corporation. Prior to this he spent 7 years with Compaq Computer Corporation and 16 years with Star Technologies. He served as a naval aviator in the United States Marine Corps until 1977.

Ms. Van Valkenburgh is a Certified Public Accountant who most recently was Controller of Applied Materials Incorporated at their Austin, Texas site. She previously served for 17 years at Rockwell International where she was Controller of several of its Defense Electronic Divisions. Prior to that, she worked in public accounting with Deloitte & Touche for 5 years.

Ms. Kohl has worked for ECC International Corp., since 1985. She began as a Simulation Analyst and advanced through several positions over the years, including Deputy Program Manager and Director of Contracts. Her most recent position with the Company was as Business Area Director for Engagement Skills Training Systems.

*     Key management employees who are not “officers” for the purposes of Section 16 of the Securities Exchange Act of 1934 and the rules and regulations thereunder.

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PART II

Item 5 Market for the Registrant’s Common Stock and Related Stockholder Matters

(a)  Market Information

The Common Stock of the Company is currently listed on the American Stock Exchange (symbol ECC). The price range of the common stock during the last two fiscal years was as follows:

Common stock prices shown above are the daily sales prices on the American Stock Exchange. During the fiscal year ended June 30, 2001, the Company repurchased 727,000 shares of common stock through open-market purchases. There were no stock repurchases during fiscal years 2002 and 2003.

(b)  Holders

As of August 20, 2003, the Company had approximately 751 stockholders of record of its common stock based on the transfer agent’s listings. The Company believes its shares are beneficially held by several thousand additional stockholders based on broker dealer demand for proxy materials in 2002.

(c)  Dividends

No cash dividends have been declared on the Company’s common stock during the last eight years. Under the Company’s Credit Facility which expired on June 24, 2003, the Company was not permitted to pay cash dividends. See note 7 in the Notes to the Consolidated Financial Statements.

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Item 6 Selected Financial Data

(In Thousands, Except Per Share Data)

Item 7 Management’s Discussion and Analysis of Financial Conditions and Results of Operations

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. There are a number of factors that could cause the Company’s actual results to differ materially from those indicated by such forward-looking statements. These factors include, without limitation, those set forth below under the caption “Certain Factors That May Affect Future Operating Results.”

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(a)  (1) and (2) Liquidity and Capital Resources

During both fiscal years 2002 and 2003, the Company’s principal source of cash was from operations. The principal use of funds in fiscal year 2003 was for additions to property, plant, and equipment. The principal use of funds in fiscal year 2002 was to pay down the revolving Credit Facility. There were no borrowings against the Credit Facility in fiscal year 2003.

Cash provided by operating activities was $1.5 million in fiscal year 2003 compared to $6.8 million for fiscal year 2002 and $627,000 for fiscal year 2001. Fiscal year 2003 operating cash flow reflects the Company’s net income of $7.5 million partially offset by an increase in working capital requirements due to the increasing volume of EST-2000 sales.

Cash used for investing activities, primarily in additions to property, plant and equipment, was $395,000 in fiscal year 2003 compared to $411,000 in fiscal year 2002 and $381,000 in fiscal year 2001.

The Company’s financing activities generated $307,000 of cash in fiscal year 2003 as a result of the exercise of options and repayment of a promissory note by the former CEO. Financing activities used $111,000 in fiscal year 2002 and $2.6 million in fiscal year 2001. In fiscal year 2001, $2.9 million was utilized to repurchase treasury stock.

On June 24, 1999, the Company entered into a four-year revolving credit facility (“Credit Facility”) totaling $12.5 million, with Mellon Bank, N. A., which was subsequently purchased by LaSalle Business Credit. Proceeds from the Credit Facility were used to pay the outstanding balance under the Company’s loan facility with its previous primary lender. There was no outstanding balance under the Credit Facility at June 24, 2003 when it expired. The Company is currently in discussions with several banks regarding a new credit facility.

There have been no borrowings since July 13, 2001, and during the fiscal year the Company maintained an average cash balance of approximately $5.0 million. Management believes that operational cash requirements will continue to be funded internally through the next fiscal year based on the cash balance of $7.7 million at June 30, 2003 and the positive cash projections for fiscal year 2004.

During fiscal year 2004, the Company anticipates spending approximately $700,000 to continue refurbishing the Orlando, Florida facility and for the purchase of new machinery and equipment. In order to improve productivity and efficiency, the Company consolidated into approximately 90,000 square feet during fiscal year 2003. This consolidation also included outsourcing of certain activities and the disposition of excess equipment and machinery, the majority of which was fully depreciated. In addition, the Company disposed of excess and obsolete raw materials inventory which was fully reserved.

During fiscal year 2001, the Company reduced its operating costs by eliminating 105 employees or 35% of the total number of employees. Termination benefits associated with the reductions were approximately $1,418,000. Annual compensation savings associated with these actions were $4,300,000. All employee termination benefits related to the fiscal year 2001 reductions in workforce were paid by October 31, 2001.

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During fiscal year 2002, the Company reduced its operating costs by eliminating approximately 35 employees or 25% of the total remaining employees. Annual compensation savings associated with these actions were approximately $2,200,000. The employee termination benefits associated with the reductions were approximately $272,000. All termination benefits related to the fiscal year 2002 reductions in workforce were paid in fiscal year 2002.

In April 2002, the Company announced that Dr. James C. Garrett, President and Chief Executive Officer, would leave the Company at the end of June 2002. Severance costs of approximately $255,000, which includes one year of salary and health benefits, were recorded in June 2002 and included in Accrued Expenses and Other. These costs were paid during fiscal year 2003.

In July 2002, the Company further reduced its operating costs by eliminating 15 employees or 11% of the remaining employees. The employee termination benefits associated with the reductions were approximately $197,000. Annual compensation savings associated with these actions were approximately $1,200,000.

During the first quarter of fiscal year 2003, retention agreements were implemented in order to temporarily retain 11 key employees whose jobs would be outsourced due to the consolidation of the workforce into a smaller space. Severance payments and retention bonuses were earned as the employees were terminated based on the employees remaining with the Company through completion dates ranging from November 2002 through March 2003. As of March 31, 2003, all of these employees left the Company and severance payments and retention bonuses totaling $100,000 were paid.

Management’s plans to improve future profitability include: (1) a continuation of both direct and indirect cost reduction initiatives and improvement of operating performance, (2) an aggressive focus on obtaining follow-on awards to existing business, and (3) the implementation of strategies to procure new business.

Other than as stated above, the Company has no other material commitments for capital expenditures. Management believes that with the funds available under its projected cash flow, the Company will have sufficient resources to meet planned operating commitments through the next fiscal year.

On August 23, 2002, the Board of Directors approved a plan to repurchase up to $1.5 million of common stock. No purchases were made as of June 30, 2003.

On August 21, 2003, it was announced that the Company and Cubic Corporation (“Cubic”) signed a definitive agreement and plan of merger. Under the terms of the agreement CDA Acquisition Corporation (“CDA”), a wholly owned subsidiary of Cubic, will make a tender offer for all of the outstanding shares of ECC common stock at a price of $5.25 per share, which will, if completed, result in an aggregate consideration to ECC’s stockholders of approximately $42.3 million. The offer commenced on August 27, 2003 and will expire, if not extended by CDA, at midnight, Eastern Time on September 24, 2003. The tender offer, if successful, will be followed by a merger, of CDA into ECC, with ECC being the surviving corporation and a wholly owned subsidiary of Cubic.

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The Board of Directors of ECC has unanimously approved the transaction and is recommending that stockholders tender their shares of ECC common stock to CDA in the tender offer. In addition, certain stockholders, including Warren Lichtenstein and Steel Partners II, L.P., holding approximately 36.6 percent of the outstanding common stock of ECC have agreed to tender their shares to CDA in the tender offer. The tender offer is subject to certain customary conditions, including the tender of at least a majority of ECC’s common stock on a fully diluted basis.

(3)  Results of Operations

2003 Compared with 2002

Net sales decreased $1.4 million (4%) in fiscal year 2003 compared to fiscal year 2002. This decrease is primarily due to lower sales from the multi-year Javelin EPBST contract which is in its final year of production as well as lower volume on the C-17 and CCTT programs. These decreases were partially offset by higher EST-2000 and SIMNET sales.

Gross margin as a percentage of sales was 33% in fiscal year 2003 compared to 34% in fiscal year 2002.

Selling, general and administrative expenses decreased $545,000 (8%) in fiscal year 2003 compared to fiscal year 2002, due primarily to reduced salaries and bonuses resulting from staffing reductions.

Independent research and development (IR&D) expense decreased $471,000 (29%) in fiscal year 2003 compared to fiscal year 2002 primarily due to decreased projects related to the EST-2000 product.

Deferred tax assets increased $4.6 million in fiscal year 2003 compared to fiscal year 2002 due primarily to an assessment of the ultimate realization of these assets based on historical and projected financial performance. As a result of the assessment, the tax valuation allowance was reversed in fiscal 2003 resulting in an income tax benefit in the Company’s Consolidated Statements of Operations. Due to uncertainty as to the ultimate realization of these assets, the Company had provided a valuation reserve against its deferred tax assets in fiscal 2001 and 2002.

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2002 Compared with 2001

Net sales increased $3.2 million (11%) in fiscal year 2002 compared to fiscal year 2001. This increase is primarily due to revenues resulting from the $15.6 million Javelin Missile Field Tactical Trainer (FTT) award, which was announced in October 2001.

Gross margin as a percentage of sales increased to 34% in fiscal year 2002 compared to 14% in fiscal year 2001. The higher margins are primarily a result of improvement in gross margins due to performance efficiencies on several programs including CCTT, Javelin FTT and Javelin BST. Overhead expenses were also significantly reduced in fiscal year 2002 due to reductions in the workforce and other cost reduction initiatives which took place in fiscal year 2001 and early fiscal year 2002.

Selling, general and administrative expenses decreased $3.4 million (34%) in fiscal year 2002 compared to fiscal year 2001. This decrease is primarily a result of decreased bid and proposal expenses and reductions in the workforce that took place in fiscal year 2001. There were several major pursuits of long-term programs in fiscal year 2001, which required significant investments.

Independent research and development (IR&D) expense increased $640,000 (67%) in fiscal year 2002 compared to fiscal year 2001 primarily due to increased research projects related to the EST-2000 product.

Deferred tax assets decreased $1.1 million (16%) in fiscal year 2002 compared to fiscal year 2001 due primarily to increased tax deductions due to the disposal of excess and obsolete inventory. The tax valuation allowance was decreased by the same amount. Due to uncertainty as to the ultimate realization of these assets, the Company had provided a valuation reserve against its deferred tax assets. Based on tax law changes, which extended the carryback period for net operating losses and changed certain alternative minimum tax liability rules, a net $216,000 tax benefit was recorded in fiscal year 2002.

Critical Accounting Policies

The Company considers that certain accounting policies are critical due to the estimation process involved in each of them. The assumptions and judgement utilized in developing these estimates are based on the information available at the time including an assessment of the risks and uncertainties. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. The significant accounting policies, which the Company believes are the most critical to aid in fully understanding and evaluating our reported financial results, include the following:

		Revenue Recognition
		Contract sales and anticipated profits are recognized using the percentage of completion method measured by the ratio of costs incurred to date to estimated total costs. The Company reevaluates the estimated costs to complete on the entire contract on a quarterly basis. Any revisions in estimated costs or contract value during the progress of the work may affect the estimated gross margin percentage for the

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		contract. Estimated costs may be adjusted favorably or unfavorably based on projected changes in areas such as labor efficiencies, material price negotiations, supplier delivery schedules, design and development progress and overhead rate projections. Changes in gross margin percentages have the effect of adjusting the current period earnings applicable to performance in prior periods.
		Anticipated losses on contracts in progress are recorded in the period in which the losses are identified. Claims would be included as a component of contract value for purposes of revenue recognition at such time as the amount is reasonably determinable and probable.
		Inventories
		The Company values raw materials at the lower of average cost or market. On a quarterly basis, inventory items are evaluated to identify slow-moving, excess or obsolete parts. An assessment of potential use on future programs including spare parts orders, repairs and warranty work, is the basis for the establishment of a reserve for excess and obsolete inventory. Potential usage assessments may be impacted favorably or unfavorably by changes in the Company’s projected contracts, parts obsolescence and level of spares and repairs.
		Deferred Tax Assets
		Through June 30, 2002, the Company had provided a full valuation reserve against its deferred tax assets. As of June 30, 2003, an evaluation concluded that the Company has the ability to realize the benefit of the deferred tax assets. The Company reduced its valuation allowances to zero resulting in income tax benefits in the Company’s Consolidated Statements of Operations. Management evaluates the realizability of the deferred tax assets quarterly and assesses the valuation allowance quarterly.
		In December 2002, the Financial Accounting Standards Board issued SFAS No. 148 “Accounting for Stock Based Compensation – Transition and Disclosure – an Amendment of FAS 123” which amends SFAS No. 123 “Accounting for Stock Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS 123 to require prominent disclosure of the method of accounting for stock based compensation and the effect of the method on reported results.
		The disclosure requirements have been included in the following table (In Thousands, Except Per Share Data):

Certain Factors That May Affect Future Operating Results

The following important factors, among others, could cause actual results to differ materially from those indicated by forward-looking statements made in this Annual Report on Form 10-K and presented elsewhere by management from time to time. All forward-looking statements included in this Form 10-K are based on information available to the Company on the date hereof, and the Company assumes no obligation to update such forward-looking statements.

A number of uncertainties exist that could affect the Company’s future operating results including, without limitation, the ability of CDA to complete the tender offer, general economic conditions, changes in government spending, cancellation of weapons programs, delays in contract awards, delays in the acceptance process of contract deliverables, the Company’s continued ability to develop and introduce products, the introduction of new products by competitors, pricing practices of competitors, the cost and availability of parts and the Company’s ability to control costs.

To date, a substantial portion of the Company’s revenues have been attributable to long-term contracts with various government agencies. As a result, any factor adversely affecting procurement of long-term government contracts could have a material adverse effect on the

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Company’s financial condition and results of operations.

Because of these and other factors, past financial performance should not be considered an indication of future performance. The Company’s future quarterly operating results may vary significantly. Investors should not use historical trends to anticipate future results and should be aware that the trading price of the Company’s Common Stock may be subject to wide fluctuations in response to quarterly variations in operating results and other factors, including those discussed above.

Item 7A Quantitative and Qualitative Disclosures about Market Risk

The Company had a variable rate revolving Credit Facility and, as such, had exposure to interest rate fluctuations. Under current market conditions, the impact of an increase or decrease in the prevailing interest rates would not materially effect the Company’s consolidated financial position or results of operations. The Credit Facility expired on June 24, 2003.

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Item 8 Financial Statements and Supplementary Data

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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Shareholders and the
Board of Directors of
ECC International Corp.

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of ECC International Corp. and its Subsidiaries (the “Company”) at June 30, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2003 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule 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 of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Orlando, Florida
August 11, 2003

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ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended June 30, 2003, 2002 and 2001
(In Thousands, Except Per Share Data)

See accompanying notes to the consolidated financial statements

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ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30, 2003 and 2002
(In Thousands, Except Share and Per Share Data)

See accompanying notes to the consolidated financial statements

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ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Years Ended June 30, 2003, 2002 and 2001
(In Thousands, Except Share Data)

Common shares outstanding at June 30, 2003, 2002, and 2001 were 7,905,022, 7,850,608, and 7,830,285 shares, respectively.

See accompanying notes to the consolidated financial statements

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ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended June 30, 2003, 2002 and 2001
(In Thousands)

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ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended June 30, 2003, 2002 and 2001
(In Thousands)