- Sales of $334.7 million for the first
quarter up, 7 percent from last year.
- Net loss of $2.9 million or $0.11 per
share for the quarter, improving 49 percent from last year.
- Adjusted EBITDA(1) of $20.1
million for the quarter, up 78 percent from last year.
- Cash flows provided by operating
activities of $7.1 million for the quarter, significantly improved
from last year.
- Total backlog of $2.705 billion as of
December 31, 2016.
Cubic Corporation (NYSE: CUB) today reported its financial
results for the quarter ended December 31, 2016.
“We are pleased with our operating performance in the first
quarter as sales, gross margin, Adjusted EBITDA, and operating cash
flow showed strong growth over last year,” said Bradley H.
Feldmann, president and chief executive officer of Cubic
Corporation. “We remain confident in our strategy; we are well
positioned for revenue and operating profit growth, and expect our
phased ERP implementation to drive further margin expansion going
forward.”
Financial Results
Comparison
First Quarter Fiscal 2017 Results
First quarter sales of $334.7 million in 2017 were 7 percent
higher than sales of $313.8 million in the corresponding quarter
last year. Sales for the first quarter would have been $8.7 million
higher this year absent the negative impact from changes in foreign
currency rates compared to last year. Businesses acquired in fiscal
2017 and 2016, which were all in the Cubic Global Defense Systems
(CGD Systems) segment, had sales of $25.5 million for the three
months ended December 31, 2016 and had no significant sales for the
first three months of last year. Sales increased for the quarter
for CGD Systems and Cubic Transportation Systems (CTS), and were
slightly lower for Cubic Global Defense Services (CGD
Services).
Our operating loss decreased 49 percent to $4.1 million for the
first quarter of 2017 compared to $8.1 million in the first quarter
of 2016. Operating margins improved for CTS and CGD Systems, while
CGD Services operating loss increased marginally. Foreign currency
exchange translation reduced operating income by $1.4 million in
the quarter compared to last year. Unallocated corporate expenses
increased in the first quarter of 2017 as compared to last year.
Unallocated corporate expenses incurred in the first quarter of
2017 for strategic and IT system resource planning as part of the
One Cubic initiative totaled $8.7 million compared to $6.5 million
in the first quarter of last year.
Adjusted EBITDA(1), which excludes acquisition-related expenses,
expenses related to enterprise resource planning (ERP) system
development and supply chain process redesign, restructuring costs,
gains and losses on real estate sales, and non-operating income and
expenses, was $20.1 million or 6 percent of sales for the
quarter compared to $11.3 million or 4 percent of sales in the
first quarter of fiscal 2016.
Total backlog decreased $235.0 million to $2.705 billion at
December 31, 2016, compared to $2.940 billion at September 30,
2016, as sales outpaced new business orders for all three business
segments in the first quarter of fiscal 2017. Changes in exchange
rates between the prevailing currency in the company’s foreign
operations and the U.S. dollar as of December 31, 2016 decreased
backlog by $57.1 million compared to September 30, 2016.
(1) EBITDA and Adjusted EBITDA are non-GAAP financial
measures - see the section titled “Use of Non-GAAP Financial
Information” for additional information regarding these non-GAAP
financial measures.
Reportable Segment Results
Cubic Transportation Systems (39
percent of fiscal 2017 first quarter consolidated sales)
Three Months Ended December 31, 2016
2015 (in millions) Transportation Systems
Segment Sales $ 131.9 $ 125.8 Transportation Systems Segment
Operating Income $ 9.7 $ 3.6
CTS sales increased 5 percent in the first quarter to $131.9
million compared to $125.8 million last year. The average exchange
rates between the prevailing currency in our foreign operations and
the U.S. dollar resulted in a decrease in sales of $9.2 million for
the first quarter compared to the same period last year, primarily
due to the weakening of the British Pound against the U.S. dollar.
For the quarter, sales were higher in Australia primarily due to
additional system development and services provided to our customer
in Sydney. These higher sales were partially offset by slightly
lower sales in the U.S. and decreased sales in the U.K. caused by
unfavorable exchange rate translation.
CTS operating income increased 169 percent in the first quarter
to $9.7 million compared to $3.6 million last year, despite the
negative impact of currency rates. The average exchange rates
between the prevailing currency in our foreign operations and the
U.S. dollar resulted in a decrease in operating income of $1.7
million for the first quarter compared to the same period last
year. Operating income for the quarter was higher in Australia and
the U.K., but was lower in the U.S. The higher Australian operating
income was primarily the result of the additional system
development and services work for our Sydney customer noted above.
In the U.K., operating profits in the first quarter of fiscal 2016
had been impacted by the transition to our follow-on fare
collection contract in London; however, margins on this contract
improved in the first quarter of fiscal 2017. The operating margin
increase was partially offset by a $3.8 million increase in
research and development expenditures for the first quarter of
fiscal 2017 compared to the first quarter of 2016 related to new
technologies being developed, partially to support our New York
City New Fare Payment System bid.
Cubic Global Defense Systems (34
percent of fiscal 2017 first quarter consolidated sales)
Three Months Ended December 31, 2016
2015
(in millions)
Cubic Global Defense Systems Segment Sales $ 112.5 $ 95.9
Cubic Global Defense Systems Segment Operating Loss $ (0.5 ) $ (3.4
)
CGD Systems sales increased 17 percent in the first quarter to
$112.5 million compared to $95.9 million last year. Revenues from
businesses we acquired in fiscal years 2017 and 2016, all within
our CGD Systems operating segment, had sales of $25.5 million in
the first quarter of fiscal 2017 and had no significant sales in
the first quarter of last year. Sales were higher in the first
quarter of fiscal 2017 from air combat training systems compared to
the first quarter of fiscal 2016. The increase in sales for the
quarter was partially offset by lower sales from ground combat
training systems and virtual and immersive training systems.
CGD Systems operating loss was $0.5 million in the first quarter
of fiscal 2017 compared to an operating loss of $3.4 million last
year. Including the impacts of business acquisition accounting and
amortization expense, the businesses we acquired in fiscal years
2017 and 2016 had operating losses of $1.8 million for both the
first quarter of fiscal 2017 and the first quarter of fiscal 2016.
Expense related to the amortization of CGD Systems intangible
assets totaled $6.8 million in the first quarter of 2017 compared
to $2.7 million in the first quarter last year. Operating income
was higher on increased sales of air combat training systems, but
was lower on decreased sales of ground combat training systems and
virtual and immersive training systems.
Cubic Global Defense Services (27
percent of fiscal 2017 first quarter consolidated sales)
Three Months Ended December 31, 2016
2015 (in millions) Cubic Global Defense
Services Segment Sales $ 90.3 $ 92.1 Cubic Global Defense
Services Segment Operating Income (Loss) $ (0.4 ) $ 0.2
CGD Services sales decreased 2 percent in the first quarter to
$90.3 million compared to $92.1 million last year. Sales for the
first quarter of fiscal 2017 were lower primarily because of
decreased activity on U.S. Army contracts, other than our contract
with the Joint Readiness Training Center, as well as lower activity
supporting Special Operations Forces training.
CGD Services operating loss was $0.4 million in the first
quarter compared to operating income of $0.2 million last year. The
decrease in operating income was primarily driven by the decreased
activity on the U.S. Army and Special Operations Forces training
contracts noted above. In addition, certain contracts that we
retained after recompete were won at reduced pricing due to an
extremely competitive bid environment. These reductions in
operating profit were partially offset by a decrease in the
amortization expense on purchased intangible assets which are
amortized based upon accelerated methods.
Conference Call
Cubic management will host a conference call to discuss the
company’s first quarter fiscal 2017 results today, Thursday,
February 9, 2017 at 4:30 p.m. EST/1:30 p.m. PST,
which 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) 407-9708 for domestic
callers
- (201) 689-8259 for international
callers
Please dial-in approximately 10 minutes prior to the start of
the call.
Audio Webcast
A live webcast of the conference call and presentation slides
will be accessible on our website under the “Investor Relations”
tab at www.cubic.com. Please visit the website at least 15 minutes
prior to the call in order to register, download and install
any streaming media software needed to listen to the
webcast. A replay of the broadcast will be available on the
“Investor Relations” tab of Cubic’s website.
About Cubic
Cubic Corporation designs, integrates and operates systems,
products and services focused in the transportation, defense
training and secure communications markets. Cubic Transportation
Systems is a leading integrator of payment and information
technology and services to create intelligent travel solutions for
transportation authorities and operators. Cubic Global Defense is a
leading provider of live, virtual, constructive and game-based
training solutions, special operations and intelligence for the
U.S. and allied forces. Cubic Mission Solutions provides networked
Command, Control, Communications, Computers, Intelligence,
Surveillance and Reconnaissance (C4ISR) capabilities for defense,
intelligence, security and commercial missions. For more
information about Cubic, please visit the company’s website at
www.cubic.com or on Twitter @CubicCorp.
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; our anticipated revenue and operating
profit growth; and the ability of our phased ERP implementation to
drive further margin expansion. 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; the
effect of sequestration on our contracts; our assumptions
concerning behavior by public transit authorities; 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;
negative audits by the U.S. government; 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; the change in the way transit agencies
pay for transit systems; 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; our failure to properly implement our
ERP system; unforeseen problems with the implementation and
maintenance of our information systems; 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
We believe that the presentation of Earnings before interest,
taxes, depreciation, and amortization (EBITDA) and 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, we believe EBITDA
facilitates company-to-company operating performance comparisons by
backing out potential differences caused by variations in capital
structures (affecting net interest expense), taxation, variations
in organic vs. inorganic growth (affecting amortization expense)
and the age and book depreciation of property, plant and equipment
(affecting relative depreciation expense). We believe Adjusted
EBITDA further facilitates company-to-company operating comparisons
by backing out items that we believe are not part of our core
operating performance. Items backed out of Adjusted EBITDA are
comprised of expenses incurred in the development of our ERP system
and the redesign of our supply chain, business acquisition expenses
including retention bonus expenses, due diligence and consulting
costs incurred in connection with the acquisitions, expenses
recognized related to the change in the fair value of contingent
consideration for acquisitions, restructuring costs, gains and
losses on disposals of fixed assets, and income and expenses
classified as other non-operating income and expenses which may
vary for different companies for reasons unrelated to operating
performance.
In addition, EBITDA and Adjusted EBITDA are key drivers of the
company’s core operating performance and major factors in
management’s bonus compensation each year. Management has excluded
the effects of these items in these measures to assist investors in
analyzing and assessing our past and future core operating
performance.
In addition, we believe that EBITDA and Adjusted EBITDA are
frequently used by securities analysts, investors and other
interested parties in their evaluation of companies, many of which
present EBITDA, Adjusted EBITDA and/or other adjusted measures when
reporting their results.
EBITDA and Adjusted EBITDA are not measurements of financial
performance under GAAP and should not be considered as alternatives
to net income as a measure of performance. In addition, other
companies may define EBITDA and Adjusted EBITDA differently and, as
a result, our measures of EBITDA and Adjusted EBITDA may not be
directly comparable to EBITDA and Adjusted EBITDA of other
companies. Furthermore, EBITDA and Adjusted EBITDA have limitations
as analytical tools, and you should not consider either of them in
isolation, or as a substitute for analysis of our results as
reported under GAAP.
Because of these limitations, EBITDA and Adjusted EBITDA should
not be considered as measures 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
EBITDA and Adjusted EBITDA only supplementally. You are cautioned
not to place undue reliance on EBITDA or Adjusted EBITDA.
The following table reconciles EBITDA and Adjusted EBITDA to net
income (loss), which we consider to be the most directly comparable
GAAP financial measure to EBITDA and Adjusted EBITDA.
Three Months Ended December 31, 2016
2015 (in thousands) Net loss $ (2,868 ) $
(5,414 ) Add: Interest expense, net 3,293 940 Income taxes
(5,073 ) (3,428 ) Depreciation and amortization 13,444
8,948 EBITDA 8,796 1,046
Adjustments to EBITDA: Acquisition related expenses,
excluding amortization 796 4,297 ERP system development and supply
chain process redesign expense 8,665 6,506 Restructuring costs 891
(386 )
Loss on sale of fixed assets
405 - Other non-operating expense (income), net 547
(175 ) Adjusted EBITDA $ 20,100 $ 11,288
Financial Statements
CUBIC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (LOSS) (UNAUDITED) (amounts in thousands, except per share
data)
Three Months Ended December 31,
2016 2015 Net sales: Products $ 144,760
$ 124,969 Services 189,917 188,844
334,677 313,813 Costs and expenses: Products 104,612 99,192
Services 151,142 154,656 Selling, general and administrative
expenses 63,758 58,491 Research and development 9,020 3,482
Amortization of purchased intangibles 9,355 6,455 Restructuring
costs 891 (386 ) 338,778
321,890 Operating loss (4,101 ) (8,077 ) Other
income (expenses): Interest and dividend income 247 398 Interest
expense (3,540 ) (1,338 ) Other income (expense), net (547 )
175 Loss before income taxes (7,941 ) (8,842 )
Income tax benefit (5,073 ) (3,428 )
Net loss $ (2,868 ) $ (5,414 ) Net loss per share: Basic $
(0.11 ) $ (0.20 ) Diluted $ (0.11 ) $ (0.20 ) Weighted
average shares used in per share calculations: Basic 27,086 26,964
Diluted 27,086 26,964
CUBIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands)
December 31, September 30, 2016
2016 ASSETS Current assets: Cash and cash equivalents
$ 166,339 $ 197,127 Restricted cash 79,874 75,648 Marketable
securities 12,353 12,996 Accounts receivable - net 342,606 382,581
Recoverable income taxes 4,613 9,706 Inventories - net 98,710
66,362 Other current assets 26,093 38,231
Total current assets 730,588 782,651
Long-term contract receivables 21,130 20,926
Long-term capitalized contract costs 63,492 65,382 Property, plant
and equipment, net 96,550 96,316 Deferred income taxes 9,966 2,194
Goodwill 408,372 406,946 Purchased intangibles, net 118,012 123,403
Other assets 7,187 6,590 $ 1,455,297
$ 1,504,408 LIABILITIES AND SHAREHOLDERS’
EQUITY Current liabilities: Short-term borrowings $ 241,800 $
240,000 Trade accounts payable 63,441 81,172 Customer advances
57,682 49,481 Accrued compensation and other current liabilities
122,451 147,690 Income taxes payable 2,280 1,450 Current portion of
long-term debt 428 450 Total current
liabilities 488,082 520,243
Long-term debt 200,165 200,291 Other long-term liabilities 100,959
93,978 Shareholders’ equity: Common stock 32,756 32,756
Retained earnings 810,147 813,035 Accumulated other comprehensive
loss (140,734 ) (119,817 ) Treasury stock at cost (36,078 )
(36,078 ) Total shareholders’ equity 666,091
689,896 $ 1,455,297 $ 1,504,408
CUBIC CORPORATION CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)
Three
Months Ended December 31, 2016 2015
Operating Activities: Net loss $ (2,868 ) $ (5,414 ) Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities: Depreciation and amortization 13,444 8,948 Share-based
compensation expense 2,314 2,118 Change in fair value of contingent
consideration (1,314 ) 809 Changes in operating assets and
liabilities, net of effects from acquisitions (4,478 )
(56,048 ) NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 7,098 (49,587 ) Investing
Activities: Acquisition of businesses, net of cash acquired (12,924
) (29,718 ) Purchases of property, plant and equipment (6,674 )
(10,360 ) Purchases of marketable securities (6,246 ) (7,541 )
Proceeds from sales or maturities of marketable securities 6,246
14,176
Proceeds from sale of fixed assets
1,233 — NET CASH USED IN INVESTING
ACTIVITIES (18,365 ) (33,443 ) Financing
Activities: Proceeds from short-term borrowings 36,800 72,600
Principal payments on short-term borrowings (35,000 ) (22,600 )
Principal payments on long-term debt (107 ) (131 ) Purchase of
common stock (2,314 ) (1,658 ) Dividends paid (20 ) — Contingent
consideration payments related to acquisitions of businesses (1,988
) (1,679 ) Net change in restricted cash (4,226 )
(2,412 ) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
(6,855 ) 44,120 Effect of exchange rates on
cash (12,666 ) (8,203 ) NET DECREASE IN CASH
AND CASH EQUIVALENTS (30,788 ) (47,113 ) Cash and cash
equivalents at the beginning of the period 197,127
218,476 CASH AND CASH EQUIVALENTS AT THE END
OF THE PERIOD $ 166,339 $ 171,363 Supplemental
disclosure of non-cash investing and financing activities:
Liability incurred to acquire Vocality, net $ 1,093 $ — Liability
incurred to acquire TeraLogics, net $ — $ 5,098 Liability incurred
to acquire H4 Global, net $ — $ 1,568
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170209006312/en/
Cubic CorporationDiane DyerInvestor RelationsPH: +1
858-505-2907orJohn D. ThomasMediaPH: +1 858-505-2989
Cubic (NYSE:CUB)
Historical Stock Chart
From Mar 2024 to Apr 2024
Cubic (NYSE:CUB)
Historical Stock Chart
From Apr 2023 to Apr 2024