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Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT

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

 

For the Quarter Ended June 30, 2014

 

001-08931

Commission File Number

 

CUBIC CORPORATION

Exact Name of Registrant as Specified in its Charter

 

Delaware

 

95-1678055

State of Incorporation

 

IRS Employer Identification No.

 

9333 Balboa Avenue
San Diego, California 92123
Telephone (858) 277-6780

 

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Small Reporting Company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Exchange Act). Yes o No x

 

As of July 22, 2014, registrant had only one class of common stock of which there were 26,788,525 shares outstanding (after deducting 8,945,300 shares held as treasury stock).

 

 

 



Table of Contents

 

CUBIC CORPORATION

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended June 30, 2014

 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Statements of Income

3

 

Condensed Consolidated Statements of Comprehensive Income

4

 

Condensed Consolidated Balance Sheets

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to the Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

30

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

40

Item 4.

Controls and Procedures

40

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

41

Item 1A.

Risk Factors

41

Item 6.

Exhibits

41

 



Table of Contents

 

EXPLANATORY NOTE REGARDING RESTATEMENT

 

This Quarterly Report on Form 10-Q of Cubic Corporation (“Company”, “we”, and “us”) for the three- and nine-month periods ended June 30, 2014, includes our restated Condensed Consolidated Balance Sheet as of September 30, 2013 and our restated Condensed Consolidated Statements of Income, Comprehensive Income, and Cash Flows for the three- and nine-month periods ended June 30, 2013. The restatement resulted from our identification of certain errors in our recognition of revenue for one of our wholly owned subsidiaries. See Note 2, “Restatement of Condensed Consolidated Financial Statements” of the Notes to Condensed Consolidated Financial Statements in Part I Item 1 for a detailed discussion of the errors and effect of the restatement.

 

The restatement is more fully described in our Annual Report on Form 10-K/A for the year ended September 30, 2013.

 



Table of Contents

 

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

 

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(amounts in thousands, except per share data)

 

 

 

Nine Months Ended

 

Three Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

(As Restated)

 

 

 

(As Restated)

 

Net sales:

 

 

 

 

 

 

 

 

 

Products

 

$

405,419

 

$

429,436

 

$

136,649

 

$

127,682

 

Services

 

596,567

 

591,195

 

203,708

 

209,544

 

 

 

1,001,986

 

1,020,631

 

340,357

 

337,226

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Products

 

305,245

 

310,043

 

108,301

 

91,011

 

Services

 

480,906

 

461,669

 

156,726

 

164,278

 

Selling, general and administrative

 

131,508

 

126,393

 

46,489

 

44,130

 

Restructuring costs

 

227

 

6,198

 

24

 

114

 

Research and development

 

13,822

 

19,346

 

3,949

 

6,426

 

Amortization of purchased intangibles

 

17,056

 

12,192

 

5,653

 

4,362

 

 

 

948,764

 

935,841

 

321,142

 

310,321

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

53,222

 

84,790

 

19,215

 

26,905

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

958

 

1,279

 

595

 

530

 

Interest expense

 

(3,117

)

(2,447

)

(1,504

)

(925

)

Other income (expense) - net

 

(1,058

)

(764

)

(1,098

)

(813

)

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

50,005

 

82,858

 

17,208

 

25,697

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

13,240

 

20,437

 

4,992

 

7,292

 

 

 

 

 

 

 

 

 

 

 

Net income

 

36,765

 

62,421

 

12,216

 

18,405

 

 

 

 

 

 

 

 

 

 

 

Less noncontrolling interest in income of VIE

 

79

 

149

 

10

 

24

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Cubic

 

$

36,686

 

$

62,272

 

$

12,206

 

$

18,381

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to Cubic

 

 

 

 

 

 

 

 

 

Basic

 

$

1.37

 

$

2.33

 

$

0.46

 

$

0.69

 

Diluted

 

$

1.36

 

$

2.33

 

$

0.45

 

$

0.69

 

 

 

 

 

 

 

 

 

 

 

Dividends per common share

 

$

0.12

 

$

0.12

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used in per share calculations:

 

 

 

 

 

 

 

 

 

Basic

 

26,786

 

26,736

 

26,789

 

26,736

 

Diluted

 

26,901

 

26,745

 

26,921

 

26,762

 

 

See accompanying notes.

 

3



Table of Contents

 

CUBIC CORPORATION

CONDENSED CONSOLIDATED

STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

 

 

 

Nine Months Ended

 

Three Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

(As Restated)

 

 

 

(As Restated)

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

36,765

 

$

62,421

 

$

12,216

 

$

18,405

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

19,107

 

(15,765

)

7,245

 

(1,776

)

Net unrealized gain (loss) on available-for-sale, net of tax

 

0

 

(5

)

0

 

(5

)

Change in net unrealized gains/losses from cash flow hedges:

 

 

 

 

 

 

 

 

 

Change in fair value of cash flow hedges, net of tax

 

(261

)

3,557

 

(80

)

4894

 

Adjustment for net gains/losses realized and included in net income, net of tax

 

(231

)

1,146

 

(208

)

(188

)

Total change in unrealized gains/losses from cash flow hedges, net of tax

 

(492

)

4703

 

(288

)

4,706

 

Total other comprehensive income (loss)

 

18,615

 

(11,067

)

6,957

 

2,925

 

Total comprehensive income

 

$

55,380

 

$

51,354

 

$

19,173

 

$

21,330

 

 

4



Table of Contents

 

CUBIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

 

 

 

June 30,

 

September 30,

 

 

 

2014

 

2013

 

 

 

 

 

(As Restated)

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

166,841

 

$

203,892

 

Restricted cash

 

69,028

 

69,381

 

Marketable securities

 

 

4,055

 

Accounts receivable - net

 

403,401

 

379,002

 

Recoverable income taxes

 

17,719

 

7,885

 

Inventories - net

 

53,768

 

59,746

 

Deferred income taxes and other current assets

 

30,844

 

18,638

 

Total current assets

 

741,601

 

742,599

 

 

 

 

 

 

 

Long-term contract receivables

 

16,690

 

19,021

 

Long-term capitalized contract costs

 

77,560

 

68,963

 

Property, plant and equipment - net

 

64,360

 

56,305

 

Deferred income taxes

 

18,057

 

19,322

 

Goodwill

 

187,595

 

136,094

 

Purchased intangibles - net

 

70,257

 

57,542

 

Other assets

 

11,527

 

9,772

 

 

 

$

1,187,647

 

$

1,109,618

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Short-term borrowings

 

$

8,000

 

$

 

Trade accounts payable

 

23,527

 

40,310

 

Customer advances

 

84,338

 

84,307

 

Accrued compensation and other current liabilities

 

139,856

 

109,253

 

Income taxes payable

 

13,148

 

12,731

 

Current portion of long-term debt

 

591

 

557

 

Total current liabilities

 

269,460

 

247,158

 

 

 

 

 

 

 

Long-term debt

 

102,066

 

102,363

 

Other long-term liabilities

 

43,602

 

43,017

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common stock

 

19,104

 

15,825

 

Retained earnings

 

773,468

 

740,002

 

Accumulated other comprehensive income (loss)

 

15,812

 

(2,803

)

Treasury stock at cost

 

(36,078

)

(36,078

)

Shareholders’ equity related to Cubic

 

772,306

 

716,946

 

Noncontrolling interest in variable interest entity

 

213

 

134

 

Total shareholders’ equity

 

772,519

 

717,080

 

 

 

$

1,187,647

 

$

1,109,618

 

 

See accompanying notes.

 

5



Table of Contents

 

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

 

 

Nine Months Ended

 

Three Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

(As Restated)

 

 

 

(As Restated)

 

Operating Activities:

 

 

 

 

 

 

 

 

 

Net income

 

$

36,765

 

$

62,421

 

$

12,216

 

$

18,405

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

22,740

 

18,014

 

7,511

 

6,417

 

Share-based compensation expense

 

4,370

 

1,634

 

1,785

 

1,575

 

Changes in operating assets and liabilities, net of effects from acquisitions

 

(27,138

)

(88,899

)

44,524

 

22,744

 

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 

36,737

 

(6,830

)

66,036

 

49,141

 

 

 

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

 

 

 

Acquisition of businesses, net of cash acquired

 

(83,456

)

(60,649

)

(3,773

)

(7,377

)

Purchases of property, plant and equipment

 

(13,536

)

(6,209

)

(2,589

)

(2,348

)

Purchases of marketable securities

 

 

(4,054

)

 

(4,054

)

Proceeds from sales or maturities of marketable securities

 

4,055

 

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

 

(92,937

)

(70,912

)

(6,362

)

(13,779

)

 

 

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

 

 

 

Proceeds from short-term borrowings

 

38,000

 

70,000

 

8,000

 

 

Principal payments on short-term borrowings

 

(30,000

)

(70,000

)

(30,000

)

(25,000

)

Proceeds from long-term borrowings

 

 

100,000

 

 

50,000

 

Principal payments on long-term debt

 

(431

)

(8,407

)

(147

)

(134

)

Proceeds from issuance of common stock

 

113

 

 

 

 

Dividends paid

 

(3,215

)

(3,208

)

 

 

Net change in restricted cash

 

353

 

(104

)

(44

)

(20

)

Contingent consideration payments related to acquisitions of businessess

 

(2,368

)

(224

)

(1,251

)

(224

)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

 

2,452

 

88,057

 

(23,442

)

24,622

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rates on cash

 

16,697

 

(10,131

)

5,266

 

3,862

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

(37,051

)

184

 

41,498

 

63,846

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the beginning of the period

 

203,892

 

212,267

 

125,343

 

148,605

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD

 

$

166,841

 

$

212,451

 

$

166,841

 

$

212,451

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liability incurred to acquire NEK, net

 

$

 

$

12,108

 

$

 

$

 

Liability incurred to acquire Intific, net

 

$

1,173

 

$

 

$

 

$

 

 

See accompanying notes.

 

6



Table of Contents

 

CUBIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

June 30, 2014

 

Note 1 — Basis for Presentation

 

Cubic Corporation (“we”, “us”, and “Cubic”) has prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

 

In our opinion, all adjustments necessary for a fair presentation of these financial statements have been included, and are of a normal and recurring nature as well as all adjustments discussed in Note 2, “Restatement of Condensed Consolidated Financial Statements,” considered necessary to fairly state the financial position of Cubic Corporation at June 30, 2014 and September 30, 2013; the results of its operations for the three- and nine-month periods ended June 30, 2014 and 2013; and its cash flows for the three- and nine-month periods ended June 30, 2014 and 2013. Operating results for the three- and nine-month periods ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending September 30, 2014. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K/A for the year ended September 30, 2013.

 

The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

There have been no material changes to our significant accounting policies as compared with the significant accounting policies described in our Annual Report on Form 10-K/A for the year ended September 30, 2013.

 

Recent Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers.” ASU 2014-09 outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. ASU 2014-09 will be effective for us starting in the first quarter of fiscal 2018. ASU 2014-09 allows for two methods of adoption: (a) “full retrospective” adoption, meaning the standard is applied to all periods presented, or (b) “modified retrospective” adoption, meaning the cumulative effect of applying ASU 2014-09 is recognized as an adjustment to the fiscal 2018 opening retained earnings balance. We are in the process of determining the adoption method as well as the effects the adoption of ASU 2014-09 will have on our consolidated financial statements.

 

Note 2—Restatement of Condensed Consolidated Financial Statements

 

As is more fully described in our Annual Report on Form 10-K/A for the year ended September 30, 2013, on May 12, 2014 we restated our Condensed Consolidated Balance Sheet at September 30, 2013 and our Condensed Consolidated Statements of Income, Comprehensive Income, and Cash Flows for the three- and nine-month periods ended June 30, 2013.

 

The cumulative adjustments to correct the errors in the consolidated financial statements for all periods prior to October 1, 2012 are recorded as adjustments to retained earnings and accumulated other comprehensive income (loss) at September 30, 2012. The cumulative effect of those adjustments increased previously reported retained earnings by $6.3 million and reduced previously reported accumulated other comprehensive loss by $0.5 million at September 30, 2012.

 

The following tables present the summary impacts of the restatement adjustments on our previously reported consolidated retained earnings at September 30, 2012 and consolidated net income for the three and nine months ended June 30, 2013 (in thousands):

 

Retained earnings at September 30, 2012 - As previously reported

 

$

715,043

 

Adjustments

 

6,290

 

Retained earnings at September 30, 2012 - As restated

 

$

721,333

 

 

7



Table of Contents

 

 

 

Nine Months Ended

 

Three Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2013

 

2013

 

Net Income - As previously reported

 

$

57,968

 

$

18,364

 

Adjustments

 

4,304

 

17

 

Net Income - As restated

 

$

62,272

 

$

18,381

 

 

Description of Adjustments

 

On February 10, 2014, we announced that we would be restating certain previously issued audited consolidated financial statements and unaudited condensed consolidated financial statements primarily to correct two errors in the recognition of revenue.

 

In 2012, we restated our financial statements for the years ended September 30, 2011, 2010 and 2009, the quarters ended March 31, 2012 and December 31, 2011 and each of the prior quarters of 2011 and 2010. This previous restatement was the result of our determination that we had made errors in the calculation of revenues for a significant number of our contracts due to incorrect application of GAAP. In the course of our financial statement closing process for the quarter ended December 31, 2013, we identified two errors related to revenue recognition for two contracts with the same customer that date back to the previous restatement period. The first error was related to the computation of revenues for a contract that was entered into in 2011. The error resulted from a miscalculation in a revenue recognition model that was created during the previous restatement activity. The second error relates to a contract entered into in 2007 and was the result of a failure to appropriately update the contract value in our revenue accounting system as well as a failure to properly account for a 2008 amendment to this contract. Upon modification of this second contract in 2008, the cost-to-cost percentage of completion method should no longer have been used, and revenue should have been recognized using a service-based model.

 

In addition to the errors described above, we also made adjustments related to other individually immaterial errors including certain corrections that had been previously identified but not recorded because they were not material, individually or in the aggregate, to our consolidated financial statements. These corrections included certain accrued liabilities and reserves and miscellaneous reclassification entries; adjustments to various income tax and indirect tax accrual accounts; and adjustments to sales and cost of sales to correct cutoff on immaterial revenue recognition transactions.

 

8



Table of Contents

 

The following tables present the impact of the restatement on the our previously issued Condensed Consolidated Balance Sheet as of September 30, 2013, and our Condensed Consolidated Statements of Income, Comprehensive Income and Cash Flows for the three and nine months ended June 30, 2013:

 

 

 

Condensed Consolidated Balance Sheet
September 30, 2013

 

 

 

Previously
Reported

 

Adjustments

 

As
Restated

 

 

 

(in thousands)

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

203,892

 

$

 

$

203,892

 

Restricted cash

 

69,381

 

 

69,381

 

Marketable securities

 

4,055

 

 

4,055

 

Accounts receivable - net

 

376,143

 

2,859

 

379,002

 

Recoverable income taxes

 

7,885

 

 

7,885

 

Inventories - net

 

54,400

 

5,346

 

59,746

 

Deferred income taxes and other current assets

 

18,638

 

 

18,638

 

Total current assets

 

734,394

 

8,205

 

742,599

 

 

 

 

 

 

 

 

 

Long-term contract receivables

 

19,249

 

(228

)

19,021

 

Long-term capitalized costs

 

75,520

 

(6,557

)

68,963

 

Property, plant and equipment - net

 

56,305

 

 

56,305

 

Deferred income taxes

 

19,322

 

 

19,322

 

Goodwill

 

136,094

 

 

136,094

 

Purchased intangibles - net

 

57,542

 

 

57,542

 

Other assets

 

9,772

 

 

9,772

 

 

 

$

1,108,198

 

$

1,420

 

$

1,109,618

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Trade accounts payable

 

$

39,016

 

$

1,294

 

$

40,310

 

Customer advances

 

103,187

 

(18,880

)

84,307

 

Accrued compensation and other current liabilities

 

107,330

 

1,923

 

109,253

 

Income taxes payable

 

8,076

 

4,655

 

12,731

 

Current portion of long-term debt

 

557

 

 

557

 

Total current liabilities

 

258,166

 

(11,008

)

247,158

 

 

 

 

 

 

 

 

 

Long-term debt

 

102,363

 

 

102,363

 

Other long-term liabilities

 

42,742

 

275

 

43,017

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

Common stock

 

15,825

 

 

15,825

 

Retained earnings

 

728,424

 

11,578

 

740,002

 

Accumulated other comprehensive loss

 

(3,378

)

575

 

(2,803

)

Treasury stock at cost

 

(36,078

)

 

(36,078

)

Shareholders’ equity related to Cubic

 

704,793

 

12,153

 

716,946

 

Noncontrolling interest in variable interest entity

 

134

 

 

134

 

Total shareholders’ equity

 

704,927

 

12,153

 

717,080

 

 

 

$

1,108,198

 

$

1,420

 

$

1,109,618

 

 

9



Table of Contents

 

 

 

Condensed Consolidated Statement of Income

 

Condensed Consolidated Statement of Income

 

 

 

Nine Months Ended June 30, 2013

 

Three Months Ended June 30, 2013

 

 

 

Previously

 

 

 

As

 

Previously

 

 

 

As

 

 

 

Reported

 

Adjustments

 

Restated

 

Reported

 

Adjustments

 

Restated

 

 

 

(amounts in thousands, except per share data)

 

(amounts in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

432,226

 

$

(2,790

)

$

429,436

 

$

131,557

 

$

(3,875

)

$

127,682

 

Services

 

585,895

 

5,300

 

591,195

 

208,888

 

656

 

209,544

 

 

 

1,018,121

 

2,510

 

1,020,631

 

340,445

 

(3,219

)

337,226

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

311,964

 

(1,921

)

310,043

 

93,946

 

(2,935

)

91,011

 

Services

 

462,075

 

(406

)

461,669

 

164,458

 

(180

)

164,278

 

Selling, general and administrative

 

126,447

 

(54

)

126,393

 

44,130

 

 

44,130

 

Restructuring costs

 

6,198

 

 

6,198

 

114

 

 

114

 

Research and development

 

19,346

 

 

19,346

 

6,426

 

 

6,426

 

Amortization of purchased intangibles

 

12,192

 

 

12,192

 

4,362

 

 

4,362

 

 

 

938,222

 

(2,381

)

935,841

 

313,436

 

(3,115

)

310,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

79,899

 

4,891

 

84,790

 

27,009

 

(104

)

26,905

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

1,279

 

 

1,279

 

530

 

 

530

 

Interest expense

 

(2,438

)

(9

)

(2,447

)

(922

)

(3

)

(925

)

Other income (expense) - net

 

(764

)

 

(764

)

(813

)

 

(813

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

77,976

 

4,882

 

82,858

 

25,804

 

(107

)

25,697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

19,859

 

578

 

20,437

 

7,416

 

(124

)

7,292

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

58,117

 

4,304

 

62,421

 

18,388

 

17

 

18,405

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less noncontrolling interest in income of VIE

 

149

 

 

149

 

24

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Cubic

 

$

57,968

 

$

4,304

 

$

62,272

 

$

18,364

 

$

17

 

$

18,381

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to Cubic:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.17

 

$

0.16

 

$

2.33

 

$

0.69

 

$

0.00

 

$

0.69

 

Diluted

 

$

2.17

 

$

0.16

 

$

2.33

 

$

0.69

 

$

0.00

 

$

0.69

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per common share

 

$

0.12

 

$

 

$

0.12

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used in per share calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

26,736

 

 

26,736

 

26,736

 

 

26,736

 

Diluted

 

26,745

 

 

26,745

 

26,762

 

 

26,762

 

 

 

 

Condensed Consolidated Statement of Comprehensive Income

 

Condensed Consolidated Statement of Comprehensive Income

 

 

 

Nine Months Ended June 30, 2013

 

Three Months Ended June 30, 2013

 

 

 

Previously

 

 

 

As

 

Previously

 

 

 

As

 

 

 

Reported

 

Adjustments

 

Restated

 

Reported

 

Adjustments

 

Restated

 

 

 

(in thousands)

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

58,117

 

$

4,304

 

$

62,421

 

$

18,388

 

$

17

 

$

18,405

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

(15,185

)

(580

)

(15,765

)

(1,872

)

96

 

(1,776

)

Net unrealized gain (loss) on available-for-sale securities, net of tax

 

(5

)

 

(5

)

(5

)

 

(5

)

Change in net unrealized gains/losses from cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of cash flow hedges, net of tax

 

3,557

 

 

3,557

 

4,894

 

 

4,894

 

Adjustment for net gains/losses realized and included in net income, net of tax

 

1,146

 

 

1,146

 

(188

)

 

(188

)

Total change in unrealized gains/losses realized from cash flow hedges, net of tax

 

4,703

 

 

4,703

 

4,706

 

 

4,706

 

Total other comprehensive income (loss)

 

(10,487

)

(580

)

(11,067

)

2,829

 

96

 

2,925

 

Total comprehensive income (loss)

 

47,630

 

3,724

 

51,354

 

21,217

 

113

 

21,330

 

 

10



Table of Contents

 

 

 

Condensed Consolidated Statement of Cash Flows

 

Condensed Consolidated Statement of Cash Flows

 

 

 

Nine Months Ended June 30, 2013

 

Three Months Ended June 30, 2013

 

 

 

Previously

 

 

 

As

 

Previously

 

 

 

As

 

 

 

Reported

 

Adjustments

 

Restated

 

Reported

 

Adjustments

 

Restated

 

 

 

(in thousands)

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

58,117

 

$

4,304

 

$

62,421

 

$

18,388

 

$

17

 

$

18,405

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

18,014

 

 

18,014

 

6,417

 

 

6,417

 

Share-based compensation expense

 

1,634

 

 

1,634

 

1,575

 

 

1,575

 

Changes in operating assets and liabilities, net of effects from acquisitions

 

(84,595

)

(4,304

)

(88,899

)

22,761

 

(17

)

22,744

 

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 

(6,830

)

 

(6,830

)

49,141

 

 

49,141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of businesses, net of cash acquired

 

(60,649

)

 

(60,649

)

(7,377

)

 

(7,377

)

Net additions to property, plant and equipment

 

(6,209

)

 

(6,209

)

(2,348

)

 

(2,348

)

Purchases of short-term investments

 

(4,054

)

 

(4,054

)

(4,054

)

 

(4,054

)

NET CASH USED IN INVESTING ACTIVITIES

 

(70,912

)

 

(70,912

)

(13,779

)

 

(13,779

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from short-term borrowings

 

70,000

 

 

70,000

 

 

 

 

Principal payments on short-term borrowings

 

(70,000

)

 

(70,000

)

(25,000

)

 

(25,000

)

Proceeds from long-term borrowings

 

100,000

 

 

100,000

 

50,000

 

 

50,000

 

Principal payments on long-term debt

 

(8,407

)

 

(8,407

)

(134

)

 

(134

)

Contingent consideration payments related to acquisitions of businesses

 

(224

)

 

(224

)

(224

)

 

(224

)

Dividends paid to shareholders

 

(3,208

)

 

(3,208

)

 

 

 

Change in restricted cash

 

(104

)

 

(104

)

(20

)

 

(20

)

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

88,057

 

 

88,057

 

24,622

 

 

24,622

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rates on cash

 

(10,131

)

 

(10,131

)

3,862

 

 

3,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

184

 

 

184

 

63,846

 

 

63,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the beginning of the period

 

212,267

 

 

212,267

 

148,605

 

 

148,605

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD

 

$

212,451

 

$

 

$

212,451

 

$

212,451

 

$

 

$

212,451

 

 

Financial information in the accompanying footnotes to the condensed consolidated financial statements reflects the effects of the preceding discussions and tables.

 

11



Table of Contents

 

Note 3 — Acquisitions

 

Each of the following acquisitions has been treated as a business combination for accounting purposes. The results of operations of each acquired business has been included in our consolidated financial statements since the respective date of each acquisition.

 

Intific

 

On February 28, 2014 we acquired all of the outstanding capital stock of Intific Inc. (Intific). Intific is focused on software and game-based solutions in modeling and simulation, training and education, cyber warfare, and neuroscience. The acquisition of Intific expands the portfolio of services and customer base of our Cubic Defense Systems (CDS) segment.

 

For the three months ended June 30, 2014, the amount of Intific’s sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $1.9 million and $1.7 million, respectively.

 

For the nine months ended June 30, 2014, the amount of Intific’s sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $2.7 million and $3.8 million, respectively. Included in Intific’s operating results for the nine months ended June 30, 2014 are $0.2 million of transaction and acquisition related costs, and $3.7 million of compensation expense which was paid to Intific employees upon the close of the acquisition.

 

The purchase agreement states that the cost of the acquisition is approximately $12.1 million, adjusted by the difference between the net working capital acquired and the targeted working capital amounts. The acquisition date fair value of the consideration transferred is estimated to be $12.4 million. Through June 30, 2014, we have paid cash of approximately $11.2 million to the seller and as of June 30, 2014 we have accrued a liability of $1.2 million as an estimate of the remaining cash to be paid.

 

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

 

Customer relationships

 

$

2.0

 

Technology

 

0.7

 

Backlog

 

0.7

 

Other intangible assets

 

0.2

 

Accounts receivable

 

1.5

 

Deferred tax liabilities, net

 

(0.5

)

Accounts payable and accrued expenses

 

(0.6

)

Other net assets acquired

 

0.7

 

Net identifiable assets acquired

 

4.7

 

Goodwill

 

7.7

 

Net assets acquired

 

$

12.4

 

 

The estimated fair values of the net deferred tax liabilities are preliminary estimates pending the finalization of our valuation analyses. The net deferred tax liabilities were primarily recorded to reflect the tax impact of amortization related to identified intangible assets that is not expected to be deductible for tax purposes, net of acquisition consideration that is a tax deductible expense.

 

The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. The customer relationships and backlog valuation used the excess earnings approach and the technology valuation used the replacement cost approach.

 

The intangible assets will be amortized using a combination of straight-line and accelerated methods based on the expected cash flows from the assets, over a weighted average useful life of two years from the date of acquisition and is not expected to be deductible for tax purposes.

 

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of Intific with our existing CDS business and the acquired assembled workforce. The anticipated synergies include the ability to expand services offerings and cost reductions. The amount recorded as goodwill is allocated to our CDS segment and is not expected to be deductible for tax purposes.

 

12



Table of Contents

 

Based upon the preliminary estimate of the fair value of identifiable intangible assets, the estimated amortization expense related to the intangible assets recorded in connection with our acquisition of Intific for fiscal years 2014 through 2018 is as follows (in millions):

 

Year Ended
September 30,

 

 

 

2014

 

$

0.6

 

2015

 

0.9

 

2016

 

0.7

 

2017

 

0.6

 

2018

 

0.5

 

 

ITMS

 

On November 26, 2013 we acquired all of the outstanding capital stock of Intelligent Transport Management Solutions Limited (ITMS) from Serco Limited. ITMS is a provider of traffic management systems technology, traffic and road enforcement and maintenance of traffic signals, emergency equipment and other critical road and tunnel infrastructure. The acquisition of ITMS expands the portfolio of services and customer base of our Cubic Transportation Systems (CTS) segment.

 

For the three months ended June 30, 2014, the amount of ITMS’ sales and net income after taxes included in our Condensed Consolidated Statement of Income were $12.8 million and $0.5 million, respectively.

 

For the nine months ended June 30, 2014, the amount of ITMS’ sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $30.1 million and $0.2 million, respectively. Included in ITMS’ operating results are $0.5 million of transaction costs incurred during the nine months ended June 30, 2014.

 

The purchase agreement states that the cost of the acquisition is approximately $69.0 million, adjusted by the difference between the net working capital acquired and the targeted working capital amounts. The acquisition date fair value of the consideration transferred was estimated to be $72.2 million. In November 2013, we paid cash of $69.0 million and in May 2014, we paid cash of $3.2 million as settlement of the working capital with the seller.

 

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

 

Customer relationships

 

$

15.7

 

Intellectual property

 

1.6

 

Backlog

 

5.7

 

Supplier relationships

 

0.6

 

Agreements with seller

 

1.3

 

Accounts receivable - billed

 

4.4

 

Accounts receivable - unbilled

 

6.9

 

Deferred tax liabilities, net

 

(0.2

)

Deferred revenue

 

(2.6

)

Accounts payable and accrued expenses

 

(4.6

)

Other net assets acquired

 

2.6

 

Net identifiable assets acquired

 

31.4

 

Goodwill

 

40.8

 

Net assets acquired

 

$

72.2

 

 

The net deferred tax liabilities were primarily recorded to reflect the difference in timing of recognizing deferred revenue for tax purposes

 

The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. The customer relationships and backlog valuation used the excess earnings approach and the non-compete agreement and seller agreements valuations used the with and without approach. The supplier relationship and intellectual property valuations used the replacement cost approach.

 

13



Table of Contents

 

The intangible assets will be amortized using a combination of straight-line and accelerated methods based on the expected cash flows from the assets, over a weighted average useful life of two years from the date of acquisition. Future amortization of approximately $19.2 million of purchased intangibles is not expected to be deductible for tax purposes.

 

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of ITMS with our existing CTS business and the acquired assembled workforce. The anticipated synergies include the ability to expand services offerings and cost reductions. The amount recorded as goodwill is allocated to our CTS segment and is expected to be deductible for tax purposes.

 

The estimated amortization expense related to the intangible assets recorded in connection with our acquisition of ITMS for fiscal years 2014 through 2018 is as follows (in millions):

 

Year Ended
September 30, 

 

 

 

2014

 

$

6.6

 

2015

 

6.2

 

2016

 

5.2

 

2017

 

4.1

 

2018

 

3.0

 

 

AIS

 

On July 1, 2013 we acquired certain assets of Advanced Interactive Systems (AIS) and all of the capital stock of its foreign subsidiaries through a bankruptcy auction. AIS is a supplier of live fire specialized range facilities, virtual simulation products, engineering design and project management services for counter-terrorism, law enforcement and military forces worldwide. For the three months ended June 30, 2014 the amount of AIS’ sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $3.1 million and $0.2 million, respectively. For the nine months ended June 30, 2014, the amounts of AIS’ sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $6.2 million and $0.6 million, respectively.

 

We paid cash of $2.0 million from our existing cash resources, net of cash acquired, for the assets of AIS. At September 30, 2013, the estimated fair value of liabilities for potential claims from customers were preliminary estimates pending the finalization of our valuation analyses. The finalization of the estimation of these values was completed in the quarter ended December 31, 2013 as further information was received from the customers as to the facts and circumstances that existed as of the July 1, 2013 acquisition date. As a result of this additional information, we have estimated that the fair value of the potential customer claims was $1.3 million. As a result, the carrying amount of the potential customer claims liabilities were retrospectively increased by $1.3 million on July 1, 2013, due to this new information, with a corresponding increase to goodwill.

 

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date including the retrospective adjustments described above (in millions):

 

Customer relationships

 

$

1.4

 

Technology

 

0.9

 

Backlog

 

0.6

 

Other net liabilities assumed

 

(2.8

)

Net identifiable assets acquired

 

0.1

 

Goodwill

 

1.9

 

Net assets acquired

 

$

2.0

 

 

The amount recorded as goodwill is allocated to our CDS segment and is not expected to be deductible for tax purposes.

 

PSMC

 

On July 1, 2013 we acquired certain assets of PS Management Consultants Pty Ltd. (PSMC). PSMC is a specialist project management and engineering enterprise, based in Canberra, Australia. For the three months ended June 30, 2014 the amount of PSMC’s sales and net income after taxes included in our Condensed Consolidated Statement of Income were $1.7 million and $0.3 million, respectively. For the nine months ended June 30, 2014, the amounts of PSMC’s sales and net income after taxes included in our Condensed Consolidated Statement of Income were $2.9 million and $0.6 million, respectively.

 

14



Table of Contents

 

We paid cash of $1.3 million from our existing cash resources to acquire PSMC. The following table summarizes the estimated fair values of the assets acquired at the acquisition date (in millions):

 

Customer relationships 

 

$

 0.6

 

Backlog

 

0.1

 

Net identifiable assets acquired

 

0.7

 

Goodwill

 

0.6

 

Net assets acquired

 

$

1.3

 

 

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of PSMC and our CDS business and the acquired assembled workforce. The anticipated synergies include the ability to expand services offerings and cost reductions. The amount recorded as goodwill is allocated to our CDS segment and is not expected to be deductible for tax purposes.

 

NextBus

 

On January 24, 2013, we acquired all of the outstanding capital stock of NextBus, Inc. (NextBus) from Webtech Wireless, Inc. NextBus provides products and services to transit agencies which provide real-time passenger information to transit passengers, expanding the portfolio of services and customer base of our CTS segment. For the three months ended June 30, 2014 the amount of NextBus’ sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $2.1 million and $0.3 million, respectively. For the nine months ended June 30, 2014, the amounts of NextBus sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $6.8 million and $0.8 million, respectively.

 

For the three months ended June 30, 2013 NextBus’ sales included in our Condensed Consolidated Statement of Income were $3.1 million. NextBus had no significant gain or loss after taxes for the three months ended June 30, 2013. For the nine months ended June 30, 2013, the amounts of NextBus’ sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $4.6 million and $0.3 million, respectively.

 

We paid the seller cash of $20.2 million for NextBus from our existing cash resources. The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

 

Customer relationships

 

$

8.8

 

Accounts receivable, net

 

2.2

 

Backlog

 

1.7

 

Acquired technology

 

1.3

 

Corporate trade names

 

1.0

 

Accounts payable and accrued expenses

 

(1.1

)

Deferred tax liabilities, net

 

(3.3

)

Other net liabilities assumed

 

(1.2

)

Net identifiable assets acquired

 

9.4

 

Goodwill

 

10.8

 

Net assets acquired

 

$

20.2

 

 

The net deferred tax liabilities were primarily recorded to reflect the tax impact of the identified intangible assets that will not generate tax deductible amortization expense. The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. Each of the valuation methodologies used were various methods under the income approach. The customer relationships and backlog valuations used the excess earnings approach. The trade names and technology valuations used the relief from royalty approach.

 

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of NextBus and our CTS business and the acquired assembled workforce. The anticipated synergies include the ability to expand services offerings and cost reductions. The amount recorded as goodwill is allocated to our CTS segment and is not expected to be deductible for tax purposes.

 

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The intangible assets are being amortized using a combination of accelerated and straight-line based on the expected cash flows from the assets, over a weighted average useful life of 5 years from the date of acquisition. The estimated amortization expense related to the intangible assets recorded in connection with our acquisition of NextBus for fiscal years 2014 through 2018 is as follows (in millions):

 

Year Ended
September 30,

 

 

 

2014

 

$

1.6

 

2015

 

1.5

 

2016

 

1.4

 

2017

 

1.3

 

2018

 

1.2

 

 

NEK

 

On December 14, 2012, we acquired from NEK Advanced Securities Group, Inc. (Seller) the customer contracts and operating assets of NEK Special Programs Group LLC (NEK), which consists of the Seller’s Special Operation Forces training business based in Fayetteville, North Carolina and Colorado Springs, Colorado.

 

For the three months ended June 30, 2014, the amounts of NEK’s sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $14.4 million and $0.1 million, respectively. For the three months ended June 30, 2013, the amounts of NEK’s sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $11.5 million and $0.5 million, respectively.

 

For the nine months ended June 30, 2014, the amounts of NEK’s sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $34.0 million and $0.5 million, respectively. For the nine months ended June 30, 2013, the amounts of NEK’s sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $21.1 million and $0.8 million, respectively.

 

Included in the NEK operating results are $0.4 million in transaction related costs incurred during the first quarter of fiscal 2013.

 

The acquisition agreement states that the cost of the acquisition will total $52.0 million, adjusted by the difference between the net working capital acquired and targeted working capital amounts, less amounts that will not be due if certain future events fail to occur. The acquisition-date fair value of consideration transferred is estimated to be $52.6 million. Through June 30, 2014 we have paid the Seller cash consideration of $52.0 million from our existing cash resources and we have recorded a current liability of approximately $0.6 million at June 30, 2014 as an estimate of additional cash consideration that is due to the Seller. A portion of the $52.0 million of cash consideration that was paid to the Seller was contingent upon certain events that occurred between the acquisition date and June 30, 2014, including the novation of certain of the Seller’s contracts to NEK.

 

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

 

Customer relationships

 

$

13.3

 

Corporate trade names

 

4.9

 

Non-compete agreements

 

0.2

 

Accounts receivable -billed

 

3.1

 

Accounts receivable -unbilled

 

7.7

 

Accounts payable

 

(3.0

)

Other net liabilities assumed

 

(0.4

)

Net identifiable assets acquired

 

25.8

 

Goodwill

 

26.8

 

Net assets acquired

 

$

52.6

 

 

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The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. Each of the valuation methodologies used were various methods under the income approach. The trade names valuation used the relief from royalty approach. The customer relationships valuation used the excess earnings approach and the non-compete agreements valuation used the with and without approach. The intangible assets are being amortized using a combination of straight-line and accelerated methods based on the expected cash flows from the assets, over a weighted average useful life of four years from the date of acquisition.

 

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of NEK and our Mission Support Services (MSS) business and the acquired assembled workforce. The anticipated synergies include the ability to expand services offerings and cost reductions. The amount recorded as goodwill is allocated to our MSS segment and is expected to be deductible for tax purposes.

 

The estimated amortization expense related to the intangible assets recorded in connection with our acquisition of NEK for fiscal years 2014 through 2018 is as follows (in millions):

 

Year Ended
September 30,

 

 

 

2014

 

$

3.4

 

2015

 

2.9

 

2016

 

2.4

 

2017

 

1.9

 

2018

 

1.4

 

 

Changes in goodwill for the nine months ended June 30, 2014 were as follows (in millions):

 

 

 

 

 

Mission

 

 

 

 

 

 

 

Transportation

 

Support

 

Defense

 

 

 

 

 

Systems

 

Services

 

Systems

 

Total

 

 

 

 

 

 

 

 

 

 

 

Balances at September 30, 2013

 

$

18.3

 

$

94.4

 

$

23.4

 

$

136.1

 

Acquisitions

 

40.8

 

 

7.7

 

48.5

 

Foreign currency exchange rate changes

 

2.5

 

 

0.5

 

3.0

 

Balances at June 30, 2014

 

$

61.6

 

$

94.4

 

$

31.6

 

$

187.6

 

 

Pro forma information

 

The following unaudited pro forma information presents our consolidated results of operations as if Intific, ITMS, NEK, NextBus, AIS and PSMC had been included in our consolidated results since October 1, 2012 (in millions):

 

 

 

Nine Months Ended

 

Three Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

(As Restated)

 

 

 

(As Restated)

 

Net sales

 

$

1,014.7

 

$

1,102.8

 

$

340.4

 

$

358.2

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Cubic

 

$

36.3

 

$

68.1

 

$

12.2

 

$

20.1

 

 

The pro forma information includes adjustments to give effect to pro forma events that are directly attributable to the acquisitions and have a continuing impact on operations including the amortization of purchased intangibles and the elimination of interest expense for the repayment of debt. No adjustments were made for transaction expenses, other adjustments that do not reflect ongoing operations or for operating efficiencies or synergies. The pro forma financial information is not necessarily indicative of what the consolidated financial results of our operations would have been had the acquisitions been completed on October 1, 2012, and it does not purport to project our future operating results.

 

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Note 4 — Net Income Per Share

 

Basic net income per share (EPS) is computed by dividing the net income for the period by the weighted average number of common shares outstanding during the period, including vested restricted stock units (RSUs).

 

Diluted EPS is computed by dividing the net income for the period by the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares consist of dilutive restricted stock units. Dilutive restricted stock units are calculated based on the average share price for each fiscal period using the treasury stock method. For RSUs with performance-based vesting, no common equivalent shares are included in the computation of diluted EPS until the related performance criteria have been met.

 

Basic and diluted EPS are computed as follows (amounts in thousands, except per share data).

 

 

 

Nine Months Ended

 

Three Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

(As Restated)

 

 

 

(As Restated)

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Cubic

 

$

36,686

 

$

62,272

 

$

12,206

 

$

18,381

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares - basic

 

26,786

 

26,736

 

26,789

 

26,736

 

Effect of dilutive securities