- Sales of $1.398 billion for fiscal year
2014, and record sales of $396.4 million for the fourth
quarter
- Net income of $69.5 million, or $2.59
per diluted share for the year, and record net income for the
fourth quarter of $32.8 million, or $1.22 per diluted share
- Adjusted EBITDA (1) of $122.9 million
for fiscal year 2014
- Cash provided by operating activities
of $114.8 million for the year
- Strong contract awards in the fourth
quarter led to record backlog of $3.180 billion as of September 30,
2014
- Sales guidance of $1.425 billion to
$1.465 billion; EPS guidance of $2.60 to $2.85 for 2015
- Increase in semi-annual dividend from
$0.12 to $0.135 per share approved by Board of Directors and
expected to be declared in February 2015
Cubic Corporation (NYSE: CUB) today reported its financial
results for the fiscal year ended September 30, 2014.
Fourth Quarter Fiscal 2014
Record fourth quarter sales of $396.4 million in 2014 were 16
percent higher than sales of $340.8 million in the corresponding
quarter last year. Sales grew for the quarter for both the
Transportation Systems (CTS) and Defense Systems (CDS) segments,
but decreased for the Mission Support Services (MSS) segment. The
increase in sales for the fourth quarter was principally due to
strong CTS segment sales in the U.K. and Australia, as well as
increased training system sales from CDS. Revenue from two
businesses acquired by Cubic during the year totaled $16.2 million
in the fourth quarter of 2014.
Record net income in the fourth quarter of 2014 totaling $32.8
million, or $1.22 per diluted share, was driven by the growth in
operating income for the quarter. Operating income was $39.3
million for the fourth quarter compared to an operating loss of
$44.1 million in 2013. The 2014 operating income was positively
impacted by the higher margins from increased sales in the U.K.,
Australia, and the U.S. Increased international sales of air combat
training systems for the CDS segment also drove the increase in
operating profit for the quarter. The operating loss in 2013
resulted from a goodwill impairment charge of $50.9 million within
the MSS segment.
Full Year Fiscal 2014
Sales in fiscal year 2014 were $1.398 billion compared to $1.361
billion in 2013, an increase of 3 percent. Sales increased for the
year from both CTS and CDS, but declined from MSS. Organic sales
decreased 3 percent, while businesses acquired in 2014 and 2013
increased sales by $73.6 million.
Operating income was $92.5 million for the year compared to
$40.7 million in 2013, which included the goodwill impairment
charge noted above. Operating income increased in 2014 for the MSS
and CDS segments, but declined slightly for CTS, due to increases
in cost estimates on a contract to design and build a
transportation fare system for a customer in Vancouver, and due to
losses recognized on a transportation services contract in
Chicago.
Net income attributable to Cubic shareholders was $69.5 million
for the year, or $2.59 per diluted share, compared to $25.1
million, or $0.94 per diluted share for fiscal year 2013. The
increase in net income was driven by growth in operating income as
well as a decrease in the 2014 effective tax rate. Cubic’s 2014
effective tax rate decreased from last year primarily because 2013
had included a partially nondeductible goodwill impairment
loss.
Adjusted EBITDA (1) increased to $122.9 million in fiscal year
2014 from $117.0 million in 2013, and was 9 percent of sales in
both years.
Total backlog was a record-high $3.180 billion at the end of
fiscal year 2014, compared to $2.647 billion in the prior year, an
increase of $534 million. The increase in backlog was primarily
driven by a contract award of $704.2 million to CTS to operate and
maintain a fare collection system in London, U.K. for seven years
beginning in August 2015.
“We are very proud of our record-setting quarter in sales,
earnings, and backlog, which contributed to strong overall annual
performance,” said Bradley H. Feldmann, president and chief
executive officer of Cubic Corporation. “We are humbled and
thankful for the continued trust of our customers and the superb
performance of our great employees. We expect our results to
improve as we grow Cubic and expand our global market leading
positions in the transportation and defense markets.”
(1)
Adjusted EBITDA is a Non-GAAP
metric - see the table included in the section titled “Use of
Non-GAAP Financial Information” for a reconciliation of these GAAP
and non-GAAP financial measures)
Reportable Segment Results
Transportation Systems (43 percent of
fiscal 2014 consolidated sales)
Years ended September 30,
2014 2013 (in millions)
Transportation Systems Sales $ 599.7 $ 529.5
Transportation Systems Operating Income $ 65.9 $ 66.8
CTS sales increased 13 percent in 2014 to $599.7 million from
$529.5 million last year. Businesses acquired by CTS in fiscal
years 2014 and 2013 contributed sales of $53.8 million in 2014
compared to $7.8 million in 2013. In 2014, sales increased on
expanded system development work in the U.K. and on a system
development and services contract for a customer in Chicago.
Revenue comparisons were also positively impacted for the year by
$6.0 million in foreign currency exchange rate differences.
CTS operating income was down 1 percent to $65.9 million for
fiscal 2014 compared to $66.8 million last year. In 2014, operating
income decreased due to changes in cost estimates on a Vancouver
contract and due to losses on services provided to a Chicago
customer. These decreases in operating income were partially offset
by growth in operating profits from the increased development work
in the U.K. mentioned above. The average exchange rates between the
prevailing currency in CTS’ foreign operations and the U.S. dollar
resulted in an increase in CTS operating income of $6.1 million for
2014 compared to 2013.
Mission Support Services (28 percent of
fiscal 2014 consolidated sales)
Years ended September 30,
2014 2013 (in millions)
Mission Support Services Sales $ 398.1 $ 468.7
Mission Support Services Operating Income (Loss) $ 7.8 $ (36.1 )
MSS sales decreased 15 percent in 2014 to $398.1 million from
$468.7 million in 2013. Sales in 2014 were lower due in part to the
U.S. government’s shut down in October 2013 and reductions in
spending by the U.S. government.
MSS operating income increased to $7.8 million in 2014 from an
operating loss of $36.1 million in 2013. Excluding the impact of
the $50.9 million goodwill impairment recorded in 2013, MSS
operating income decreased from 2013 to 2014 by 47 percent. The
operating income in 2014 was impacted by the sales decreases
described above and reduced profit margins on contracts due to
competitive pressures driving down bid prices.
Defense Systems (29 percent of fiscal
2014 consolidated sales)
Years ended September 30,
2014 2013 (in millions)
Defense Systems Sales $ 400.6 $ 363.0 Defense Systems
Operating Income $ 26.8 $ 14.2
CDS sales increased 10 percent in 2014 to $400.6 million from
$363.0 million in 2013. Businesses acquired by CDS in fiscal years
2014 and 2013 contributed sales of $17.9 million for 2014 compared
to $3.7 million in 2013. Sales increased from a new ground combat
training system development contract in the Far East, from tactical
engagement simulation system contracts and from simulator
contracts, including a new contract to develop simulation trainers
for the U.S. Navy Littoral Combat Ships.
Operating income in 2014 for CDS was $26.8 million compared to
$14.2 million in 2013. Businesses acquired by CDS in fiscal years
2014 and 2013 had operating losses of $8.0 million for 2014,
including a transaction-related $3.7 million charge for
compensation expense related to amounts paid to employees of one of
the acquired companies upon the close of the acquisition. In 2014,
CDS had higher operating income on increased sales from the ground
combat training system, simulator and development contracts
mentioned above. Profit margins on a number of training system
contracts improved in fiscal 2014 due to the restructuring activity
in the third quarter of 2013, which reduced ongoing costs. The 2013
CDS restructuring activity resulted in a charge of $7.8 million in
2013.
Cash Flows
Operating activities provided cash of $114.8 million in 2014,
while operating activities used cash of $13.3 million in 2013. In
2014, all three segments contributed to positive operating cash
flows, with CTS providing the largest positive cash flows.
Conference Call
Cubic management will host a conference call to discuss the
company’s fourth quarter and fiscal year 2014 results today,
Tuesday November 25, 2014 at 4:30 PM ET (1:30 PM PT) that will be
simultaneously broadcast over the Internet. Bradley H. Feldmann,
president and chief executive officer and John “Jay” D. Thomas,
executive vice president and chief financial officer, will host the
call.
Conference Dial-In Information
Financial analysts and institutional investors interested in
participating in the call are invited to dial
- (877) 407-8293 for domestic
callers
- (201) 689-8349 for international
callers.
Please dial-in approximately 10 minutes prior to the start of
the call.
Audio Webcast
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. 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; risks associated
with the restatement of our prior consolidated financial
statements, including our identification of material weaknesses in
our internal control over financial reporting; 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, 2014
2013 2012 (in thousands)
Reconciliation: Net income attributable to Cubic $ 69,491 $
25,086 $ 97,427 Add: Provision for income taxes 19,831 14,502
40,332 Interest expense (income), net 2,688 1,851 (1,392 ) Other
expense (income), net 391 (887 ) (366 ) Noncontrolling interest in
income of VIE 89 183 204 Depreciation and amortization 30,440
25,359 22,857 Impairment of goodwill - 50,865
-
ADJUSTED EBITDA $ 122,930 $ 116,959 $
159,062
Financial Statements
CUBIC CORPORATION CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)
Years Ended September 30, 2014
2013 2012 Net sales: Products $ 583,937
$ 562,310 $ 677,328 Services 814,415 799,097
726,756 1,398,352 1,361,407 1,404,084 Costs
and expenses: Products 424,682 425,793 466,178 Services 657,853
629,520 593,962 Selling, general and administrative expenses
181,672 165,230 164,189 Research and development 17,959 24,445
28,722 Amortization of purchased intangibles 22,602 16,680 14,828
Restructuring costs 1,094 8,139 - Impairment of goodwill -
50,865 - 1,305,862
1,320,672 1,267,879 Operating
income 92,490 40,735 136,205 Other income (expenses):
Interest and dividend income 1,396 1,576 2,994 Interest expense
(4,084 ) (3,427 ) (1,602 ) Other income (expense), net (391
) 887 366 Income before income
taxes 89,411 39,771 137,963 Income taxes 19,831
14,502 40,332 Net income
69,580 25,269 97,631 Less noncontrolling interest in income
of VIE 89 183 204
Net income attributable to Cubic $ 69,491 $ 25,086 $
97,427 Net Income per share attributable to Cubic:
Basic $ 2.59 $ 0.94 $ 3.64 Diluted 2.59 0.94 3.64 Weighted
Average shares used in per share calculations: Basic 26,787 26,736
26,736 Diluted 26,845 26,760 26,736 CUBIC CORPORATION
CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, 2014 2013 ASSETS
Current assets: Cash and cash equivalents $ 215,849 $
203,892 Restricted cash 69,056 69,381 Marketable securities 1,196
4,055 Accounts receivable: Trade and other receivables 30,593
17,352 Long-term contracts 364,075 362,308 Allowance for doubtful
accounts (489 ) (658 ) 394,179 379,002
Recoverable income taxes 16,055 7,885 Inventories 38,775 59,746
Deferred income taxes 10,324 8,354 Prepaid expenses and other
current assets 19,953 10,284 Total
current assets 765,387 742,599
Long-term contract receivables 15,870 19,021 Long-term capitalized
contract costs 76,209 68,963 Property, plant and equipment, net
64,149 56,305 Deferred income taxes 17,849 19,322 Goodwill 184,141
136,094 Purchased intangibles, net 63,618 57,542 Miscellaneous
other assets 7,383 9,772 Total
assets $ 1,194,606 $ 1,109,618 CUBIC
CORPORATION CONSOLIDATED BALANCE SHEETS—continued (in
thousands) September 30, 2014
2013 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Trade accounts payable $ 31,344 $ 40,310
Customer advances 91,690 84,307 Accrued compensation 48,812 43,394
Other current liabilities 84,555 65,859 Income taxes payable 12,737
12,731 Deferred income taxes 474 - Current maturities of long-term
debt 563 557 Total current liabilities
270,175 247,158 Long-term debt
101,827 102,363 Accrued pension liability 17,219 20,785 Deferred
compensation 9,501 9,792 Income taxes payable 6,324 6,434 Deferred
income taxes 1,152 - Other non-current liabilities 5,907 6,006
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 20,669 15,825 Retained earnings 803,059
740,002 Accumulated other comprehensive loss (5,372 ) (2,803 )
Treasury stock at cost - 8,945 shares (36,078 )
(36,078 ) Shareholders' equity related to Cubic 782,278 716,946
Noncontrolling interest in variable interest entity 223
134 Total shareholders' equity 782,501
717,080 Total liabilities and
shareholders' equity $ 1,194,606 $ 1,109,618
CUBIC CORPORATION CONSOLIDATED STATEMENTS OF CASH
FLOWS (in thousands) Years Ended
September 30, 2014 2013
2012 Operating Activities: Net income $ 69,580 $ 25,269 $
97,631 Adjustments to reconcile net income to net cash provided by
(used in) operating activities: Depreciation and amortization
30,440 25,359 22,857 Stock-based compensation expense 5,625 3,251 -
Inventory write-down 598 2,760 - Impairment of goodwill - 50,865 -
Deferred income taxes
2,684
(7,508 ) (1,486 ) Excess tax benefits from stock-based compensation
(310 ) - - Changes in operating assets and liabilities, net of
effects from acquisitions: Accounts receivable
(4,300
) (18,991 ) (122,984 ) Inventories
20,590
(19,890 ) 173 Prepaid expenses and other current assets
(8,114
) 3,867 7,432 Long-term capitalized contract costs (7,246 ) (42,088
) (26,875 ) Accounts payable and other current liabilities
6,505
(25,637 ) 9,630 Customer advances
7,304
8,990 (55,769 ) Income taxes
(9,768
) (19,114 ) 14,219 Other items, net
1,222
(409 ) 495 NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES 114,810 (13,276 )
(54,677 ) Investing Activities: Acquisition of
businesses, net of cash acquired (83,456 ) (63,691 ) - Purchases of
marketable securities (1,196 ) (4,050 ) - Proceeds from sales or
maturities of short-term investments 4,050 - 25,829 Purchases of
property, plant and equipment (16,620 ) (9,052 )
(14,226 ) NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (97,222 ) (76,793 ) 11,603
Financing Activities: Proceeds from short-term borrowings
38,000 70,000 - Principal payments on short-term borrowings (38,000
) (70,000 ) - Proceeds from long-term borrowings - 100,000 -
Principal payments on long-term borrowings (573 ) (8,543 ) (4,549 )
Proceeds from issuance of common stock 113 - - Purchase of common
stock (1,204 ) - - Excess tax benefits from stock-based
compensation 310 - - Contingent consideration payments related to
acquisitions of businesses (2,368 ) (7,842 ) - Net change in
restricted cash 325 (158 ) (68,584 ) Dividends paid to shareholders
(6,429 ) (6,417 ) (6,417 ) NET CASH PROVIDED
BY (USED IN) FINANCING ACTIVITIES (9,826 ) 77,040
(79,550 ) Effect of exchange rates on cash
4,195 4,654 5,743
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11,957 (8,375
) (116,881 ) Cash and cash equivalents at the beginning of
the year 203,892 212,267 329,148
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $
215,849 $ 203,892 $ 212,267
Supplemental disclosure of non-cash investing and financing
activities: Liability incurred to acquire NEK, net $ - $ 4,490 $ -
Liability incurred to acquire Intific, net $ 1,173 $ - $ -
Cubic CorporationMedia:John D. Thomas,
858-505-2989orInvestor Relations:Diane Dyer, 858-505-2907
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