Cubic Reports Second Quarter Fiscal Year 2013 Results

  Cubic Reports Second Quarter Fiscal Year 2013 Results

  *Sales increased 7 percent over second quarter 2012 to $364.3 million
  *Net income of $27.2 million compared to $23.4 million in the same period
    last year
  *Earnings per share of $1.02 compared to $0.88 in the same period last year
  *Total backlog of $2.80 billion at March 31, 2013 compared to $2.83 billion
    at September 30, 2012
  *Net Income was positively impacted by retroactive federal R&D tax credit
    of $1.9 million
  *Results were negatively impacted by restructuring and other charges
    totaling $7.4 million, before taxes

Business Wire

SAN DIEGO -- May 02, 2013

Cubic Corporation (NYSE: CUB) today reported its results for the second
quarter of fiscal year 2013. Sales for the second quarter of 2013 were $364.3
million, an increase of 7 percent compared to $339.6 million in the second
quarter of 2012. Net income attributable to Cubic shareholders rose 16 percent
to $27.2 million, or $1.02 per share, from $23.4 million, or $0.88 per share,
in the second quarter of 2012. The benefit from retroactive renewal of the
U.S. federal research and development tax credit was approximately $1.9
million and contributed $0.07 to earnings per share. Operating income was
$34.6 million, up 6 percent from $32.5 million last year. Adjusted Earnings
Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA), a
non-GAAP measure (as described below), was $41.5 million in this year’s second
quarter compared to $38.0 million last year, an increase of 9 percent.

The second quarter of 2013 included a charge of $6.1 million, before
applicable income taxes, for restructuring costs due to workforce reductions
at Cubic Defense Systems. The global realignment was necessitated due to
delayed U.S. government procurement decisions and a change in business mix.
The realignment is expected to result in operating profit margin improvements
during the remainder of the fiscal year.

“Overall we had a good quarter led by a strong performance in our
transportation segment,” said William W. Boyle, Chief Executive Officer of
Cubic Corporation. “Despite the unsettling DoD environment, we continue to win
U.S. defense contracts and expand our transportation segment into new market
areas. We remain encouraged for the remainder of the year due to our strong
pipeline of international opportunities.”

Reportable Segment Results

Transportation Systems (38% of consolidated sales)

Cubic Transportation Systems (CTS) develops and delivers innovative fare
collection systems and services for public transit authorities worldwide. In
the second quarter of this year, CTS sales increased 5 percent to $138.8
million compared to $131.7 million in the same period last year. The increase
resulted from higher sales on contracts in the U.K., including an annual
system usage incentive, as well as higher U.S. sales on a bus contract and
sales from the recently acquired NextBus, Inc.

Operating income from CTS in the second quarter this year increased 38 percent
to $32.2 million from $23.4 million in the second quarter of last year,
primarily due to higher sales in the U.K. and Australia, an increase in the
annual system usage incentive mentioned above, and a more favorable mix of
higher margin sales in the quarter compared to last year.


                  Six Months Ended              Three Months Ended
                   March 31,                      March 31,
                   2013     2012     % Change   2013     2012     % Change
                   (in millions)                  (in millions)
Transportation
Systems Segment    $ 257.4   $ 257.5   0    %     $ 138.8   $ 131.7   5    %
Sales
                                                                      
Transportation
Systems Segment    $ 45.4    $ 41.3    10   %     $ 32.2    $ 23.4    38   %
Operating Income


CTS total backlog decreased from $1,663.7 million as of September 30, 2012 to
$1,616.3 million at March 31, 2013, primarily due to negative changes in
currency translation.

Mission Support Services (34% of consolidated sales)

Mission Support Services (MSS) is a leading provider of highly specialized
support services to the U.S. government and allied nations. Sales from MSS
decreased 4 percent to $122.2 million in the second quarter this year,
compared to $126.9 million in the second quarter of last year. The decrease in
sales was primarily due to lower activity at the Joint Readiness Training
Center (JRTC) in Fort Polk, Louisiana, which was partially offset by higher
sales on contracts for the national security community and from NEK Special
Programs Group LLC (NEK), a company acquired in December 2012 that provides
training to the Special Forces community.

MSS operating income was $3.6 million in the second quarter this year compared
to $4.6 million in the second quarter of last year. The decrease was from
increased personnel costs on a flight simulator training contract and an
operating loss of $0.3 million from NEK inclusive of acquisition-related costs
of $0.4 million.


                  Six Months Ended              Three Months Ended
                   March 31,                      March 31,
                   2013     2012     % Change   2013     2012     % Change
                   (in millions)                  (in millions)
Mission Support
Services Segment   $ 235.6   $ 234.4   1     %    $ 122.2   $ 126.9   -4    %
Sales
                                                                      
Mission Support
Services Segment   $ 7.8     $ 9.1     -14   %    $ 3.6     $ 4.6     -22   %
Operating Income


Total backlog for MSS increased 9 percent or $69.6 million from $737.0 million
to $806.6 million, partially due to the addition of backlog from the
acquisition of NEK and the recently won U.S. Navy training services contract
valued at $134.0 million.

Defense Systems (28% of consolidated sales)

Cubic Defense Systems (CDS) is focused on two primary lines of business:
training systems and secure communications. In the second quarter, training
systems sales were up 25 percent to $87.6 million from $70.3 million last year
while operating income was down 10 percent to 7.0 million this year from $7.8
million last year.

Certain CDS product lines previously categorized as “Other” have been
reclassified into “Secure communications” due to a management realignment.
Secure communications sales increased 50 percent from $10.4 million last year
to $15.6 million this year, reflecting higher sales from personnel locator
systems. Secure communications operating loss decreased to $0.6 million in the
second quarter from $1.7 million last year primarily due to the increase in
higher margin personnel locator system sales, which was partially offset by a
loss on a data link contract.


                Six Months Ended                Three Months Ended
                 March 31,                        March 31,
                 2013       2012       %        2013       2012      %
                                         Change                          Change
                 (in millions)                    (in millions)
Defense
Systems
Segment Sales
Training         $ 153.2     $ 135.0     13   %   $ 87.6      $ 70.3     25   %
systems
Secure            31.2      29.0     8    %    15.6      10.4    50   %
communications
                 $ 184.4    $ 164.0    12   %   $ 103.2    $ 80.7    28   %

Defense
Systems
Segment
Operating
Income
Training         $ 8.9       $ 12.3      -28  %   $ 7.0       $ 7.8      -10  %
systems
Secure             (1.3  )     (0.2  )   550  %     (0.6  )     (1.7 )   -65  %
communications
Restructuring     (6.1  )    -                  (6.1  )    -    
costs
                 $ 1.5      $ 12.1     -88  %   $ 0.3      $ 6.1     -95  %


CDS backlog is being negatively impacted by delays in contract awards and
extensions, which are due in part to the budgetary uncertainties that our U.S.
government customers are experiencing. CDS backlog was $381.1 million at March
31, 2013, down from $430.9 million at September 30, 2013.

Conference Call

Cubic management will host a conference call to discuss the company’s second
quarter fiscal year 2013 results today, Thursday, May 2, 2013 at 4:30 p.m. ET
(1:30 p.m. PT) that will be simultaneously broadcast over the Internet.
William W. Boyle, chief executive officer, and John “Jay” D. Thomas, chief
financial officer, will host the call. Listeners may access the conference
call live over the Internet at the company’s website under the “Investor
Relations” tab at www.cubic.com.

Please allow 15 minutes prior to the call to visit our website to download any
necessary audio software. For those unable to listen to the live broadcast, an
archived version will be available at the same location through June 3, 2013.

About Cubic

Cubic Corporation is globally diversified in transportation and defense
markets. The company’s Transportation segment is a leading systems integrator
that develops and provides fare collection infrastructure, services and
technology for public transit authorities and operators worldwide. Cubic’s
Mission Support Services segment is a leading provider of training,
operations, maintenance, technical and other support services to the U.S. and
allied nations. The Defense Systems segment is a leading provider of realistic
combat training systems, cyber technologies, asset tracking solutions, and
defense electronics. For more information about Cubic, see the company’s web
site at www.cubic.com .

Forward-Looking Statements

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

Use of Non-GAAP Financial Information

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

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

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


                            Six Months Ended          Three Months Ended
                             March 31,                   March 31,
                             2013        2012           2013      2012
                             (in thousands)
Reconciliation:
Net income attributable to   $ 39,604     $ 44,091       $ 27,158   $ 23,397
Cubic
Add:
Provision for income taxes     12,443       18,200         7,043      9,847
Interest expense (income),     767          (1,048 )       342        (633   )
net
Other income, net              (49    )     (1,045 )       53         (122   )
Noncontrolling interest in     125          96             52         51
income of VIE
Depreciation and              11,597     11,297       6,879     5,465  
amortization
ADJUSTED EBITDA              $ 64,487    $ 71,591      $ 41,527   $ 38,005 



CUBIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(amounts in thousands, except per share data)

                      Six Months Ended            Three Months Ended
                       March 31,                     March 31,
                       2013         2012            2013         2012
                                                                   
Net sales:
Products               $ 300,669     $ 309,086       $ 164,968     $ 155,776
Services                377,007     347,325       199,337     183,869 
                         677,676       656,411         364,305       339,645
                                                                   
Costs and expenses:
Products                 218,018       220,133         117,123       106,684
Services                 297,617       277,050         153,766       145,642
Selling, general and     82,317        78,259          41,320        43,039
administrative
Restructuring costs      6,084         -               6,084         -
Research and             12,920        12,968          7,098         8,072
development
Amortization of
purchased               7,830       7,707         4,266       3,668   
intangibles
                        624,786     596,117       329,657     307,105 
                                                                   
Operating income         52,890        60,294          34,648        32,540
                                                                   
Other income
(expense):
Interest and             749           1,726           312           964
dividend income
Interest expense         (1,516  )     (678    )       (654    )     (331    )
Other income            49          1,045         (53     )    122     
(expense) - net
                                                                   
Income before income     52,172        62,387          34,253        33,295
taxes
                                                                   
Income taxes            12,443      18,200        7,043       9,847   
                                                                   
Net income               39,729        44,187          27,210        23,448
                                                                   
Less noncontrolling
interest in income      125         96            52          51      
of VIE
                                                                   
Net income
attributable to        $ 39,604     $ 44,091       $ 27,158     $ 23,397  
Cubic
                                                                   
Net income per share
attributable to
Cubic
Basic                  $ 1.48        $ 1.65          $ 1.02        $ 0.88
Diluted                $ 1.48        $ 1.65          $ 1.02        $ 0.88
                                                                   
Dividends per common   $ 0.12        $ 0.12          $ 0.12        $ 0.12
share
                                                                   
Weighted average
shares used in per
share calculations:
Basic                    26,736        26,736          26,736        26,736
Diluted                  26,736        26,736          26,736        26,736


Summary Results

The company’s three reportable segments are: Transportation Systems, Mission
Support Services and Defense Systems. The following table presents sales,
operating profits, and depreciation and amortization for each of the three
business segments, in millions.


                              Six Months Ended        Three Months Ended
                               March 31,                 March 31,
                               2013       2012          2013       2012
Sales:
Transportation Systems         $ 257.4     $ 257.5       $ 138.8     $ 131.7
Mission Support Services         235.6       234.4         122.2       126.9
Defense Systems                  184.4       164.0         103.2       80.7
Other                           0.3       0.5         0.1       0.3   
Total sales                    $ 677.7    $ 656.4      $ 364.3    $ 339.6 
                                                                     
Operating income (loss):
Transportation Systems         $ 45.4      $ 41.3        $ 32.2      $ 23.4
Mission Support Services         7.8         9.1           3.6         4.6
Defense Systems                  1.5         12.1          0.3         6.1
Unallocated corporate           (1.8  )    (2.2  )      (1.5  )    (1.6  )
expenses and other
Total operating income         $ 52.9     $ 60.3       $ 34.6     $ 32.5  
                                                                     
Depreciation and
amortization:
Transportation Systems         $ 1.5       $ 1.7         $ 1.0       $ 0.8
Mission Support Services         6.5         6.5           3.4         3.0
Defense Systems                  2.9         2.5           2.1         1.3
Other                           0.7       0.6         0.4       0.4   
Total depreciation and         $ 11.6     $ 11.3       $ 6.9      $ 5.5   
amortization



CUBIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)

                                              March 31,       September 30,
                                               2013              2012
ASSETS
Current assets:
Cash and cash equivalents                      $ 148,605         $ 212,267
Restricted cash                                  68,833            68,749
Accounts receivable - net                        414,066           350,697
Recoverable income taxes                         5,600             7,083
Inventories - net                                50,992            52,366
Deferred income taxes and other current         16,754          21,564    
assets
Total current assets                            704,850         712,726   
                                                                 
Long-term contract receivables                   20,830            22,070
Long-term capitalized contract costs             51,805            26,875
Property, plant and equipment - net              54,732            55,327
Goodwill                                         185,589           146,933
Purchased intangibles - net                      62,930            39,374
Other assets                                    19,507          23,012    
                                               $ 1,100,243      $ 1,026,317 
                                                                 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings                          $ 25,000          $ -
Trade accounts payable                           33,322            47,917
Customer advances                                92,178            100,764
Accrued compensation and other current           128,096           108,668
liabilities
Income taxes payable                             7,094             20,733
Current portion of long-term debt               527             4,561     
Total current liabilities                       286,217         282,643   
                                                                 
Long-term debt                                   52,502            6,942
Other long-term liabilities                      67,918            66,390
                                                                 
Shareholders' equity:
Common stock                                     12,633            12,574
Retained earnings                                751,439           715,043
Accumulated other comprehensive loss             (34,464   )       (21,148   )
Treasury stock at cost                          (36,078   )      (36,078   )
Shareholders' equity related to Cubic            693,530           670,391
Noncontrolling interest in variable interest    76              (49       )
entity
Total shareholders' equity                      693,606         670,342   
                                               $ 1,100,243      $ 1,026,317 



CUBIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)

               Six Months Ended                Three Months Ended
                March 31,                          March 31,
                2013           2012              2013          2012
Operating
Activities:
Net income      $ 39,729         $ 44,187          $ 27,210        $ 23,448
Adjustments
to reconcile
net income to
net cash used
in operating
activities:
Depreciation
and               11,597           11,297            6,879           5,465
amortization
Changes in
operating        (107,297 )      (95,392 )        (63,944 )      (30,444 )
assets and
liabilities
NET CASH USED
IN OPERATING     (55,971  )      (39,908 )        (29,855 )      (1,531  )
ACTIVITIES
                                                                   
Investing
Activities:
Acquisition
of
businesses,       (53,272  )       -                 (20,177 )       -
net of cash
acquired
Purchases of
property,         (3,861   )       (10,150 )         (2,438  )       (4,901  )
plant and
equipment
Proceeds from
sales or
maturities of    -              17,934          -             10,977  
short-term
investments
NET CASH
PROVIDED BY
(USED IN)        (57,133  )      7,784           (22,615 )      6,076   
INVESTING
ACTIVITIES
                                                                   
Financing
Activities:
Proceeds from
short-term        70,000           -                 45,000          -
borrowings
Principal
payments on       (45,000  )       -                 (45,000 )       -
short-term
borrowings
Proceeds from
long-term         50,000           -                 50,000          -
borrowings
Principal
payments on       (8,273   )       (4,274  )         (4,133  )       (138    )
long-term
debt
Dividends         (3,208   )       (3,208  )         (3,208  )       (3,208  )
paid
Net change in
restricted       (84      )      (68,584 )        (313    )      (68,584 )
cash
NET CASH
PROVIDED BY
(USED IN)        63,435         (76,066 )        42,346        (71,930 )
FINANCING
ACTIVITIES
                                                                   
Effect of
exchange         (13,993  )      9,808           (15,387 )      9,010   
rates on cash
                                                                   
NET DECREASE
IN CASH AND       (63,662  )       (98,382 )         (25,511 )       (58,375 )
CASH
EQUIVALENTS
                                                                   
Cash and cash
equivalents
at the           212,267        329,148         174,116       289,141 
beginning of
the period
                                                                   
CASH AND CASH
EQUIVALENTS     $ 148,605       $ 230,766        $ 148,605      $ 230,766 
AT THE END OF
THE PERIOD
                                                                   
Supplemental
disclosure of
non-cash
investing and
financing
activities:
                                                                   
Liability
incurred to     $ 19,552         $ -               $ -             $ -
acquire NEK
Receivable
from the        $ 682            $ -               $ 682           $ -
seller of
NextBus


Contact:

Cubic Corporation
Media:
John D. Thomas, 858-505-2989
or
Investors:
Diane Dyer, 858-505-2907