Cubic Reports Third Quarter Fiscal Year 2013 Results

  Cubic Reports Third Quarter Fiscal Year 2013 Results

  *Sales of $340.4 million
  *Net income of $18.4 million
  *Earnings per share of $0.69
  *Total backlog of $2.87 billion

Business Wire

SAN DIEGO -- August 1, 2013

Cubic Corporation (NYSE: CUB) today reported its results for the third quarter
of fiscal year 2013. Sales for the third quarter of 2013 were $340.4 million
compared to $365.4 million in the third quarter of 2012, a decrease of 7
percent. Net income attributable to Cubic shareholders was $18.4 million, or
$0.69 per share compared to $26.7 million, or $1.00 per share, in the third
quarter of 2012.

Operating income was $27.0 million compared to $38.6 million last year. In
comparison to last year, operating income for the third quarter of 2013 was
down due to a defense systems contract settlement that occurred in the third
quarter of 2012. This settlement resulted in higher operating income and
higher sales of $12.5 million for the third quarter of 2012.

Total backlog of $2.87 billion for the quarter ended June 30, 2013 increased
from $2.83 billion at September 30, 2012, reflecting strong domestic and
international contract award activity in our two defense segments. The
negative changes in currency exchange rates for the nine months ended June 30,
2013 reduced backlog by $69.9 million.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
(Adjusted EBITDA), a non-GAAP measure (as described below), was $33.4 million
in this year’s third quarter compared to $44.4 million last year.

“We have said 2013 would be a transition year compared to our record year in
2012. The transportation segment’s performance for the year has been very good
while the defense segments are facing a challenging DoD environment. Despite
the challenges, we are encouraged by contract awards in our two defense
segments and improved operating profit performance in defense systems in the
third quarter compared to earlier in the fiscal year,” said William Boyle,
Chief Executive Officer of Cubic Corporation.

Reportable Segment Results

Transportation Systems (39% of consolidated sales)

                                                     
                                 Nine Months Ended       Three Months Ended
                                 June 30,                June 30,
                                 2013      2012         2013      2012     
                                 (in millions)
Transportation Systems Segment   $ 391.2    $ 383.3      $ 133.8    $ 125.8  
Sales
                                                                             
Transportation Systems Segment   $ 63.6     $ 60.5       $ 18.2     $ 19.2   
Operating Income
                                                                             

Cubic Transportation Systems (CTS) develops and delivers innovative fare
collection systems and services for public transit authorities worldwide. In
the third quarter of this year, CTS sales increased 6 percent to $133.8
million compared to $125.8 million in the same period last year. The increase
resulted from higher sales on contracts in the U.S., including a contract for
a suburban bus system near Chicago, and transit system contracts in
Minneapolis, and New York. NextBus, a real-time passenger information system
business the company acquired in January 2013, contributed sales of $3.1
million for the third quarter of this year.

Operating income from CTS in the third quarter of this year was $18.2 million
compared to $19.2 million last year, a decrease of 5 percent. During the
quarter, operating margins declined due to a decrease in work on U.K.
development contracts, and due to an increase in the estimated costs to
complete the electronic ticketing system in Sydney, Australia. These decreases
in operating income were partially offset for the quarter by higher operating
income on increased work on contracts in the U.S. described above as well as a
settlement from a European service contract claim. CTS total backlog decreased
to $1.54 billion at June 30, 2013 from $1.66 billion as of September 30, 2012,
about half of the decrease was due to negative changes in currency exchange
rates.

Mission Support Services (36% of consolidated sales)

                                                     
                                  Nine Months Ended       Three Months Ended
                                  June 30,                June 30,
                                  2013     2012         2013      2012    
                                  (in millions)
Mission Support Services          $ 359.4   $ 356.8      $  123.8   $ 122.4 
Segment Sales
                                                                             
Mission Support Services          $ 11.4    $ 15.0       $  3.6     $ 5.9   
Segment Operating Income
                                                                             

Mission Support Services (MSS) is a leading provider of highly specialized
support services to the U.S. government and allied nations. Sales from MSS
increased 1 percent to $123.8 million in the third quarter of this year,
compared to $122.4 million in the third quarter of last year. Sales generated
by NEK, a Special Operation Forces training business acquired in
December2012, totaled $11.4 million in the quarter ended June30, 2013. MSS
had lower sales on certain contracts in the quarter due to a decrease in DoD
activity.

MSS operating income was $3.6 million in the third quarter of this year
compared to $5.9 million in the third quarter of last year, a decrease of 39
percent. The operating income decrease reflects lower sales on certain
contracts for the U.S. military, an operating loss of $0.7 million from NEK
inclusive of amortization expense of $0.9 million, and the impact of lower
margins due to contracts being awarded by the U.S. government based on low
price technically acceptable criteria.

Total backlog for MSS was $800.6 million this quarter compared to $737.0
million at September 30, 2012. The increase in backlog includes $23.9 million
of backlog from the acquisition of NEK.

Defense Systems (25% of consolidated sales)

                                                     
                              Nine Months Ended           Three Months Ended
                              June 30,                    June 30,
                              2013      2012          2013     2012    
                              (in millions)
Defense Systems Segment
Sales
Training systems              $ 222.6     $ 243.1        $ 69.4     $ 108.1
Secure communications          44.6      37.8         13.4     8.8   
                              $ 267.2    $ 280.9       $ 82.8    $ 116.9 
                                                                     
Defense Systems Segment
Operating Income
Training systems              $ 17.7      $ 31.4         $ 8.8      $ 19.1
Secure communications           (3.0  )     (4.7  )        (1.7 )     (4.5  )
Restructuring costs            (6.2  )    -             (0.1 )    -     
                              $ 8.5      $ 26.7        $ 7.0     $ 14.6  
                                                                             

Cubic Defense Systems (CDS) is focused on two primary lines of business:
training systems and secure communications. In the third quarter, training
systems sales were $69.4 million compared to $108.1 million last year, a
decrease of 36 percent, which reflects lower sales from ground combat training
systems and virtual small arms training systems partially offset by higher
sales of air combat training systems. Operating income was down 54 percent to
$8.8 million this year from $19.1 million last year primarily due to a defense
systems contract settlement that occurred in the third quarter of 2012. This
settlement resulted in higher operating income and higher sales of $12.5
million for the third quarter of 2012.

Certain CDS product lines previously categorized as “Other” have been
reclassified into “Secure Communications” due to management realignment.
Secure Communications sales increased 52 percent to $13.4 million this year
from $8.8 million last year due to higher sales from personnel locator systems
and data link products. Secure Communications operating loss decreased to $1.7
million in the third quarter from $4.5 million last year. The overall
operating loss for Secure Communications is primarily due to the results of
operations of our asset tracking and cyber security product lines. In the
third quarter of 2013, increased margins on higher sales of data link products
were primarily responsible for the reduction in the overall Secure
Communications operating loss.

CDS backlog increased to $521.8 million from $430.9 million at September 30,
2012. The increase in backlog includes several international awards and $30
million in task order funding for the recently awarded Littoral Combat Ship
ID/IQ contract received during the third quarter.

Conference Call

Cubic management will host a conference call to discuss the company’s third
quarter fiscal year 2013 results today, Thursday August 1, 2013 at 4:30 ET
(1:30 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 September 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 and secure communications systems. 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.

                                                         
                      Nine Months Ended                Three Months Ended
                      June 30,                         June 30,
                      2013           2012              2013           2012
                      (in thousands)
Reconciliation:
Net income
attributable to       $ 57,968       $ 70,812          $ 18,364       $ 26,721
Cubic
Add:
Provision for           19,859         29,538            7,416          11,338
income taxes
Interest
expense                 1,159          (1,524  )         392            (476   )
(income), net
Other income,           764            (95     )         813            950
net
Noncontrolling
interest in             149            149               24             53
income of VIE
Depreciation
and                    18,014        17,140          6,417         5,843  
amortization
ADJUSTED EBITDA       $ 97,913       $ 116,020        $ 33,426       $ 44,429 
                                                                               

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.

                                                  
                     Nine Months Ended                   Three Months Ended
                     June 30,                            June 30,
                     2013           2012              2013         2012
Sales:
Transportation       $ 391.2           $ 383.3           $ 133.8         $ 125.8
Systems
Mission
Support                359.4             356.8             123.8           122.4
Services
Defense                267.2             280.9             82.8            116.9
Systems
Other                 0.3             0.8             -             0.3   
Total sales          $ 1,018.1        $ 1,021.8        $ 340.4        $ 365.4 
                                                                         
Operating
income (loss):
Transportation       $ 63.6            $ 60.5            $ 18.2          $ 19.2
Systems
Mission
Support                11.4              15.0              3.6             5.9
Services
Defense                8.5               26.7              7.0             14.6
Systems
Unallocated
corporate             (3.6    )        (3.3    )        (1.8  )        (1.1  )
expenses and
other
Total
operating            $ 79.9           $ 98.9           $ 27.0         $ 38.6  
income
                                                                         
Depreciation
and
amortization:
Transportation       $ 2.7             $ 2.8             $ 1.2           $ 1.1
Systems
Mission
Support                10.0              9.6               3.5             3.1
Services
Defense                4.4               3.9               1.5             1.4
Systems
Other                 0.9             0.8             0.2           0.2   
Total
depreciation         $ 18.0           $ 17.1           $ 6.4          $ 5.8   
and
amortization
                                                                         
                                                                         

                                                                    
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,
                       2013                2012                2013              2012
                                                                                 
Net sales:
  Products             $ 432,226           $ 498,829           $ 131,557         $ 189,743
  Services              585,895           522,979           208,888         175,654 
                         1,018,121           1,021,808           340,445           365,397
                                                                                 
Costs and
expenses:
  Products               311,964             338,564             93,946            118,431
  Services               462,075             430,602             164,458           153,552
  Selling,
  general and            126,447             121,010             44,130            42,751
  administrative
  Research and           19,346              21,395              6,426             8,427
  development
  Amortization
  of purchased           12,192              11,357              4,362             3,650
  intangibles
  Restructuring         6,198             -                 114             -       
  costs
                        938,222           922,928           313,436         326,811 
                                                                                 
Operating income         79,899              98,880              27,009            38,586
                                                                                 
Other income
(expense):
  Interest and
  dividend               1,279               2,423               530               697
  income
  Interest               (2,438    )         (899      )         (922    )         (221    )
  expense
  Other income
  (expense) -           (764      )        95                (813    )        (950    )
  net
                                                                                 
Income before            77,976              100,499             25,804            38,112
income taxes
                                                                                 
Income taxes            19,859            29,538            7,416           11,338  
                                                                                 
Net income               58,117              70,961              18,388            26,774
                                                                                 
Less
noncontrolling          149               149               24              53      
interest in
income of VIE
                                                                                 
Net income
attributable to        $ 57,968           $ 70,812           $ 18,364         $ 26,721  
Cubic
                                                                                 
Net income per
share
attributable to
Cubic
  Basic                $ 2.17              $ 2.65              $ 0.69            $ 1.00
  Diluted              $ 2.17              $ 2.65              $ 0.69            $ 1.00
                                                                                 
Dividends per          $ 0.12              $ 0.12              $ -               $ -
common share
                                                                                 
Weighted average
shares used in
per share
calculations:
  Basic                  26,736              26,736              26,736            26,736
  Diluted                26,745              26,736              26,762            26,736
                                                                                 
                                                                                 

                                                     
CUBIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
                                                                 
                                   June 30,                      September 30,
                                   2013                          2012
ASSETS
Current assets:
Cash and cash equivalents          $ 212,451                     $ 212,267
Restricted cash                      68,853                        68,749
Marketable securities                4,049                         -
Accounts receivable - net            388,436                       350,697
Recoverable income taxes             6,673                         7,083
Inventories - net                    48,312                        52,366
Deferred income taxes and           17,035                      21,564    
other current assets
Total current assets                745,809                     712,726   
                                                                 
Long-term contract                   19,850                        22,070
receivables
Long-term capitalized                61,782                        26,875
contract costs
Property, plant and                  54,770                        55,327
equipment - net
Goodwill                             183,895                       146,933
Purchased intangibles - net          58,517                        39,374
Other assets                        20,974                      23,012    
                                   $ 1,145,597                  $ 1,026,317 
                                                                 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable             $ 31,293                      $ 47,917
Customer advances                    107,256                       100,764
Accrued compensation and             114,100                       108,668
other current liabilities
Income taxes payable                 7,229                         20,733
Current portion of long-term        529                         4,561     
debt
Total current liabilities           260,407                     282,643   
                                                                 
Long-term debt                       102,380                       6,942
Other long-term liabilities          66,412                        66,390
                                                                 
Shareholders' equity:
Common stock                         14,208                        12,574
Retained earnings                    769,803                       715,043
Accumulated other                    (31,635   )                   (21,148   )
comprehensive loss
Treasury stock at cost              (36,078   )                  (36,078   )
Shareholders' equity related         716,298                       670,391
to Cubic
Noncontrolling interest in          100                         (49       )
variable interest entity
Total shareholders' equity          716,398                     670,342   
                                   $ 1,145,597                  $ 1,026,317 
                                                                 
                                                                 

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

                    Nine Months Ended                    Three Months Ended
                    June 30,                             June 30,
                    2013              2012               2013              2012
Operating
Activities:
Net income          $ 58,117          $ 70,961           $ 18,388          $ 26,774
Adjustments
to reconcile
net income to
net cash
provided by
(used in)
operating
activities:
Depreciation
and                   18,014            17,140             6,417             5,843
amortization
Share-based
compensation          1,634             -                  1,575             -
expense
Changes in
operating            (84,595 )        (126,916 )        22,761          (31,524 )
assets and
liabilities
NET CASH
PROVIDED BY
(USED IN)            (6,830  )        (38,815  )        49,141          1,093   
OPERATING
ACTIVITIES
                                                                           
Investing
Activities:
Acquisition
of
businesses,           (60,649 )         -                  (7,377  )         -
net of cash
acquired
Purchases of
property,             (6,209  )         (13,244  )         (2,348  )         (3,094  )
plant and
equipment
Purchases of
marketable            (4,054  )         -                  (4,054  )         -
securities
Proceeds from
sales or
maturities of        -               25,829           -               7,895   
marketable
securities
NET CASH
PROVIDED BY
(USED IN)            (70,912 )        12,585           (13,779 )        4,801   
INVESTING
ACTIVITIES
                                                                           
Financing
Activities:
Proceeds from
short-term            70,000            -                  -                 -
borrowings
Principal
payments on           (70,000 )         -                  (25,000 )         -
short-term
borrowings
Proceeds from
long-term             100,000           -                  50,000            -
borrowings
Principal
payments on           (8,407  )         (4,411   )         (134    )         (137    )
long-term
debt
Dividends             (3,208  )         (3,208   )         -                 -
paid
Net change in
restricted            (104    )         (68,584  )         (20     )         -
cash
Contingent
consideration
payments             (224    )        -                (224    )        -       
related to
acquisitions
of businesses
NET CASH
PROVIDED BY
(USED IN)            88,057          (76,203  )        24,622          (137    )
FINANCING
ACTIVITIES
                                                                           
Effect of
exchange             (10,131 )        4,414            3,862           (5,394  )
rates on cash
                                                                           
NET INCREASE
(DECREASE) IN         184               (98,019  )         63,846            363
CASH AND CASH
EQUIVALENTS
                                                                           
Cash and cash
equivalents
at the               212,267         329,148          148,605         230,766 
beginning of
the period
                                                                           
CASH AND CASH
EQUIVALENTS         $ 212,451        $ 231,129         $ 212,451        $ 231,129 
AT THE END OF
THE PERIOD
                                                                           
                                                                           
Supplemental disclosure of non-cash investing and financing activities:
                                                                           
Liability
incurred to         $ 12,108          $ -                $ -               $ -
acquire NEK
                                                                           
                                                                           

Contact:

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