- Sales of $1.361 billion for fiscal year
2013
- Net income of $19.8 million, or $0.74
per diluted share for fiscal year 2013
- Non-cash goodwill impairment of $50.9
million, or $1.61 per diluted share, net of applicable taxes,
recorded in the fourth quarter of 2013
- Non-GAAP Adjusted EBITDA of $112.6
million for fiscal year 2013
- Backlog of $2.669 billion as of
September 30, 2013
Cubic Corporation (NYSE: CUB) today reported its financial
results for the fiscal year ended September 30, 2013.
Sales in fiscal year 2013 were $1.361 billion compared to $1.381
billion in 2012, a decrease of 1%. Four acquisitions made during
the fiscal year added $43.1 million in sales, while organic sales
decreased 5%.
Operating income was $36.4 million for the year compared to
$128.0 million in 2012. Operating income decreased in all three
operating segments. The largest contributor to lower operating
income was a goodwill impairment charge of $50.9 million taken in
the fourth quarter within our Mission Support Services (MSS)
segment. In addition, the decline was driven by an 8% decrease in
gross profit margins on product sales, partially offset by a 4%
increase in gross profit margins for services revenues. The
decrease in product gross profit was due in part to growth in
estimated costs to complete transportation projects in Sydney,
Australia, and Vancouver, B.C. Canada, that impacted operating
income by $17.2 million in the fourth quarter. In addition, during
the year we incurred $8.1 million in restructuring charges
primarily in our Defense Systems (CDS) segment.
Non-GAAP Adjusted EBITDA was $112.6 million or 8% of sales in
fiscal year 2013 compared to $150.9 million or 11% of sales in
2012. The product gross margin decrease and restructuring charges,
mentioned above, contributed to the decrease in Adjusted EBITDA
(see the table included in the section titled “Use of Non-GAAP
Financial Information” for a reconciliation of GAAP and non-GAAP
financial measures).
Net income was $19.8 million, or $0.74 per share, in fiscal year
2013 compared to $91.9 million last year, or $3.44 per share,
reflecting lower operating income, including the goodwill
impairment, and a higher effective income tax rate. Our effective
tax rate increased this year due to an unfavorable impact
associated with the goodwill impairment because a large portion of
our goodwill is not deductible for income tax purposes. In
addition, we increased our valuation allowance by $3.9 million in
the fourth quarter of 2013 for a deferred tax asset related to our
Australian operations.
Backlog was $2.669 billion at the end of fiscal year 2013
compared to $2.832 billion in the prior year, a decrease of $162.7
million. The decrease was due to lower backlog in our
Transportation Systems (CTS) and MSS segments due to sales in 2013
in excess of new contract orders added, partially offset by an
increase in CDS backlog, which was driven by more than $125 million
of new contracts in the Asia Pacific region in 2013.
“Fiscal year 2013 was a transition year for the company, which
concluded with a very difficult fourth quarter,” said William W.
Boyle, Chief Executive Officer of Cubic Corporation. “While our
performance in 2013 was poor, it was an important year in terms of
positioning the businesses for the long-term. We believe fiscal
2014 will be a much better year with a turnaround in operating
income and cash flows, as major design and build projects in the
transportation segment move into the services phase. We also expect
the restructuring and realignment of the defense systems business
coupled with recently awarded contracts with the Navy and
international customers to improve margins in defense systems. Next
year we expect sales to grow from $1.361 billion to a range of
$1.42 billion to $1.45 billion and EPS to grow from $0.74 per share
to somewhere between $2.60 and $2.75 per share.”
Reportable Segment Results
Transportation Systems (38% of fiscal 2013 consolidated
sales)
Years ended September 30, 2013
2012 (in millions)
Transportation Systems Sales $ 516.9 $ 513.6
Transportation Systems Operating Income $ 62.4 $ 76.3
CTS sales increased 1% in 2013 to $516.9 million from $513.6
million last year. During 2013 we had higher sales from transit
system contracts in North America and a $7.8 million sales
contribution from NextBus which was acquired in January 2013. These
increases were partially offset by a decrease in design and build
activities in Sydney, Vancouver and with UK train operating
companies. Revenue comparisons were also negatively impacted for
the year by $6.6 million in foreign currency exchange rate
differences.
CTS operating income was down 18% to $62.4 million for fiscal
2013 compared to $76.3 million last year. The major cause for the
decrease was growth in estimated costs to complete design and build
projects in Sydney, Australia and Vancouver, B.C. Canada, as
mentioned above.
Mission Support Services (34% of fiscal 2013 consolidated
sales)
Years ended September 30, 2013
2012 (in millions) Mission
Support Services Sales $ 468.5 $ 491.4
Mission Support Services Operating Income (Loss) $ (36.1 ) $ 21.9
MSS sales decreased 5% in 2013 to $468.5 million from $491.4
million in 2012. During the year we acquired NEK Services which
contributed $31.6 million in sales. The decline in organic sales
for MSS was 11% for the year. MSS sales declined 28% in the fourth
quarter of 2013 compared to 2012, excluding NEK sales.
MSS had an operating loss of $36.1 million in 2013 compared to
an operating profit of $21.9 million in 2012. The loss was
primarily related to a goodwill impairment charge taken in the
fourth quarter. The impacts of sequestration and other changes in
the business environment caused significant impacts on MSS
beginning late in 2013. In light of this, during our strategic and
financial planning process late in 2013, we made downward revisions
in our estimates of future revenues and margins. As a result, in
the fourth quarter of 2013 we estimated that there was a decline in
the estimated fair value of MSS, which resulted in the recognition
of goodwill impairment totaling $50.9 million.
Defense Systems (28% of fiscal 2013 consolidated
sales)
Years ended September 30, 2013
2012 (in millions) Defense
Systems Sales $ 375.1 $ 375.4 Defense
Systems Operating Income $ 14.2 $ 34.6
CDS sales were virtually unchanged in 2013 from 2012 at $375.1
million. Included in sales for 2013 was $3.7 million in sales from
two small acquisitions completed during the year. During the year
CDS was awarded a new $298.5 million indefinite delivery/indefinite
quantity (ID/IQ) contract for immersive game based training for the
U.S. Navy’s Littoral Combat Ship program. For the fiscal year CDS
had $4.4 million in sales associated with this contract.
Operating income in 2013 for CDS was $14.2 million compared to
$34.6 million in 2012. In 2012 operating income was higher by $12.5
million due to a favorable change in estimate on a ground combat
training system. Negatively impacting operating income in 2013 was
a higher operating loss in the secure communications business. The
increased loss this year was attributable to cost growth on an
Intelligence, Surveillance and Reconnaissance (ISR) data link
program and a $2.8 million inventory valuation write down for the
global tracking product line. In addition, operating income in 2013
was negatively impacted by restructuring costs of $7.8 million.
Conference Call
Cubic management will host a conference call to discuss the
company’s fourth quarter and fiscal year 2013 results today,
Thursday, December 5, 2013 at 4:30 PM ET (1:30 PM 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 for approximately 30 days following the live
webcast.
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, including, but not limited to,
statements about future events or Cubic’s future financial and
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
Adjusted EBITDA represents net income attributable to Cubic
before interest, taxes, non-operating income, goodwill impairment
charges, depreciation and amortization. We believe that the
presentation of Adjusted EBITDA included in this report 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, the age and book depreciation of property,
plant and equipment (affecting relative depreciation expense),
goodwill impairment charges 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.
Year Ended September 30, 2013
2012 2011 (in thousands)
Reconciliation: Net
income attributable to Cubic $ 19,798 $ 91,900 $ 83,594 Add:
Provision for income taxes 14,205 38,183 32,373 Interest expense
(income), net 1,839 (1,444 ) (1,107 ) Other expense (income), net
367 (821 ) (1,662 ) Noncontrolling interest in income of VIE 183
204 310 Depreciation and amortization 25,359 22,857 22,341
Impairment of goodwill 50,865 - -
ADJUSTED EBITDA $ 112,616 $ 150,879 $ 135,849
Financial Statements
CUBIC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (amounts in
thousands, except per share data) Years Ended September 30,
2013 2012 2011 Net
sales: Products $ 568,442 $ 663,287 $ 600,933 Services
792,281 718,208 694,648
1,360,723 1,381,495 1,295,581 Costs and expenses: Products 429,494
451,573 418,279 Services 629,832 594,662 564,062
Selling, general and administrative
expenses
164,876 163,688 159,791 Restructuring costs 8,139 - - Impairment of
goodwill 50,865 - - Research and development 24,445 28,722 25,260
Amortization of purchased intangibles 16,680
14,828 14,681 1,324,331
1,253,473 1,182,073 Operating income
36,392 128,022 113,508 Other income (expenses):
Interest and dividend income
1,576 2,994 2,568 Interest expense (3,415 ) (1,550 ) (1,461 ) Other
income (expense) - net (367 ) 821 1,662
Income before income taxes 34,186 130,287 116,277
Income taxes 14,205 38,183
32,373 Net income 19,981 92,104 83,904
Less noncontrolling interest in income of VIE 183
204 310 Net income attributable
to Cubic $ 19,798 $ 91,900 $ 83,594 Net
income per share attributable to Cubic: Basic $ 0.74 $ 3.44 $ 3.13
Diluted 0.74 3.44 3.13 Weighted average shares used in per
share calculations: Basic 26,736 26,736 26,736 Diluted 26,760
26,736 26,736
CUBIC CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, 2013 2012
ASSETS Current assets: Cash and cash equivalents $ 203,892 $
212,267 Restricted cash 69,381 68,749 Marketable securities 4,055 -
Accounts receivable: Trade and other receivables 17,976 17,543
Long-term contracts 358,825 333,617 Allowance for doubtful accounts
(658 ) (463 ) 376,143 350,697 Recoverable
income taxes 7,885 7,083 Inventories 54,400 52,366 Deferred income
taxes 8,354 7,587 Prepaid expenses and other current assets
10,284 13,977 Total current assets
734,394 712,726 Long-term contract
receivables 19,249 22,070 Long-term capitalized contract costs
75,520 26,875 Property, plant and equipment, net 56,305 55,327
Deferred income taxes 19,322 16,364 Goodwill 134,851 146,933
Purchased intangibles, net 57,542 39,374 Miscellaneous other assets
9,772 6,648 Total assets $
1,106,955 $ 1,026,317
CUBIC CORPORATION CONSOLIDATED BALANCE
SHEETS—continued (in thousands) September 30, 2013
2012 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Trade accounts payable $ 39,016 $
47,917 Customer advances 103,187 100,764 Accrued compensation
43,394 52,680 Other current liabilities 62,693 55,988 Income taxes
payable 8,076 20,733 Current maturities of long-term debt
557 4,561 Total current liabilities
256,923 282,643 Long-term debt 102,363
6,942 Accrued pension liability 20,785 46,382 Deferred compensation
9,792 8,619 Income taxes payable 6,769 4,862 Other non-current
liabilities 5,396 6,527 Commitments and contingencies
Shareholders' equity: Preferred stock, no par value:
Authorized--5,000 shares Issued and outstanding--none - - Common
stock, no par value: Authorized--50,000 shares 2013 and
2012--Issued 35,682 shares, outstanding--26,736 shares 15,825
12,574 Retained earnings 728,424 715,043 Accumulated other
comprehensive loss (3,378 ) (21,148 ) Treasury stock at cost -
8,945 shares (36,078 ) (36,078 ) Shareholders' equity
related to Cubic 704,793 670,391 Noncontrolling interest in
variable interest entity 134 (49 ) Total
shareholders' equity 704,927 670,342
Total liabilities and shareholders' equity $ 1,106,955
$ 1,026,317
CUBIC CORPORATION CONSOLIDATED
STATEMENTS OF CASH FLOWS (in thousands) Years Ended
September 30, 2013 2012 2011
Operating Activities: Net income $ 19,981
$ 92,104
$ 83,904 Adjustments to reconcile net income to net cash provided
by (used in) operating activities: Depreciation and amortization
25,359 22,857 22,341 Share-based compensation expense 3,251 - -
Inventory write-down
2,760 - -
Impairment of goodwill
50,865 - - Deferred income taxes (7,508 ) (1,486 ) 2,512 Changes in
operating assets and liabilities, net of effects from acquisitions:
Accounts receivable (14,588 ) (118,164 ) 3,566 Inventories (4,219 )
(13,636 ) 2,442 Prepaid expenses and other current assets 3,485
7,574 5,122 Long-term capitalized contract costs (48,645 ) (26,875
) - Accounts payable and other current liabilities (27,587 ) 8,525
(1,547 ) Customer advances 3,006 (37,999 ) 37,143 Income taxes
(19,027 ) 11,929 (23,713 ) Other items, net (409 )
494 (2,676 ) NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (13,276 ) (54,677 ) 129,094
Investing Activities: Acquisition of businesses, net of cash
acquired (63,691 ) - (126,825 ) Purchases of marketable securities
(4,050 ) - - Proceeds from sales or maturities of short-term
investments - 25,829 58,252 Purchases of property, plant and
equipment (9,052 ) (14,226 ) (8,728 ) NET CASH
PROVIDED BY (USED IN) INVESTING ACTIVITIES (76,793 )
11,603 (77,301 ) Financing Activities:
Proceeds from short term borrowings 70,000 - - Payments from short
term borrowings (70,000 ) - - Proceeds from long term borrowings
100,000 - - Principal payments on long-term borrowings (8,543 )
(4,549 ) (4,555 ) Contingent consideration payments related to
acquisition of businesses (7,842 ) - - Net change in restricted
cash (158 ) (68,584 ) - Dividends paid to shareholders (6,417 )
(6,417 ) (7,486 ) Purchases of treasury stock -
- (4 ) NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 77,040 (79,550 )
(12,045 ) Effect of exchange rates on cash 4,654
5,743 (6,034 ) NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS (8,375 ) (116,881 ) 33,714
Cash and cash equivalents at the beginning of the year
212,267 329,148 295,434
CASH AND CASH EQUIVALENTS AT THE END OF
THE YEAR
$ 203,892 $ 212,267 $ 329,148
Supplemental disclosure of non-cash investing and financing
activities: Liability incurred to acquire NEK, net $ 4,490 - -
Cubic CorporationMedia:John D. Thomas,
858-505-2989orInvestors:Diane Dyer, 858-505-2907
Cubic (NYSE:CUB)
Historical Stock Chart
From Apr 2024 to May 2024
Cubic (NYSE:CUB)
Historical Stock Chart
From May 2023 to May 2024