- Sales of $347.8 million for the quarter
and $1.005 billion for the nine-month period
- Adjusted EBITDA1 of $18.9 million for
the quarter and $69.4 million for the nine-month period
- Net income of $8.8 million, or $0.33
per diluted share for the quarter and net income of $2.9 million,
or $0.11 per diluted share for the nine-month period
- Net income includes a non-cash
valuation allowance on deferred tax assets of $0.9 million or $0.03
per diluted share in the third quarter and $30.2 million or $1.12
per diluted share for the nine-month period
- Operating results continue to be
significantly impacted by changes in foreign currency exchange
rates
- Total backlog of $3.005 billion as of
June 30, 2015
- Cash used in operating activities of
$14.6 million for the quarter and cash provided by operating
activities of $46.5 million for the nine-month period
Cubic Corporation (NYSE: CUB) today reported its financial
results for the quarter and nine months ended June 30, 2015.
Third Quarter Results
Sales for the third quarter of fiscal 2015 were $347.8 million
compared to $340.4 million in fiscal 2014, an increase of 2
percent. In the third quarter, sales continued to be significantly
impacted by changes in foreign currency exchange rates. Foreign
currency exchange translation reduced sales by $14.6 million for
the quarter when compared to prior year exchange rates. Sales from
recent acquisitions for the third quarter of fiscal 2015 were $25.5
million compared to $14.7 million last year.
Operating income for the quarter decreased 46 percent to $10.3
million from $19.2 million last year, primarily as a result of
expenditures related to strategic and IT system resource planning
as part of our One Cubic Initiatives totaling $5.3 million for the
quarter. Foreign currency exchange translation further reduced
operating income by $1.6 million.
Adjusted EBITDA1 was $18.9 million or 5.4 percent of sales for
the quarter compared to $26.7 million or 7.9 percent of sales in
the third quarter of fiscal 2014.
Net income attributable to Cubic shareholders was $8.8 million,
or $0.33 per diluted share, compared to $12.2 million, or $0.45 per
diluted share, in the third quarter of fiscal 2014.
Net income includes a non-cash valuation allowance on U.S.
deferred tax assets of $0.9 million, or $0.03 per diluted share,
for the quarter.
First Nine Months Results
Sales for the first nine months of fiscal 2015 were $1.005
billion compared to $1.002 billion in fiscal 2014, an increase of
less than 1 percent. Sales from recent acquisitions for the first
nine months of fiscal 2015 were $66.3 million compared to $32.8
million last year. Foreign currency exchange translation reduced
reported sales by $32.6 million, or 3 percent year-to-date.
Operating income was $40.7 million in the first nine months of
fiscal 2015 compared to $53.2 million in fiscal 2014, a decrease of
23 percent. Operating income was impacted by a restructuring
charge in the second quarter of fiscal 2015 totaling $5.4 million,
costs related to an audit committee investigation totaling $3.0
million and $7.8 million of expenditures related to new strategic
and IT system resource planning efforts. Foreign currency exchange
translation further reduced operating income by $4.6 million.
Adjusted EBITDA1 decreased 9 percent to $69.4 million or 6.9
percent of sales for the first nine months of fiscal 2015 compared
to $76.0 million or 7.6 percent of sales in fiscal 2014.
Net income attributable to Cubic shareholders was $2.9 million,
or $0.11 per diluted share, compared to net income attributable to
Cubic of $36.7 million, or $1.36 per diluted share, in the first
nine months of fiscal 2014.
Net income includes a non-cash valuation allowance on U.S.
deferred tax assets of $30.2 million, or $1.12 per diluted share,
for the nine-month period.
Total backlog was $3.005 billion at the end of the quarter
compared to $3.180 billion at September 30, 2014, a decrease of
$175.5 million. Decreases in backlog for Cubic Transportation
Systems (CTS) and Cubic Global Defense (CGD) Services were
partially offset by an increase in CGD Systems. Changes in currency
exchange rates between September 30, 2014 and June 30, 2015 reduced
backlog by $71.3 million.
“Our third-quarter results were mixed, primarily driven by
slower-than-expected sales growth due to the ongoing negative
impact of foreign currency exchange rates and the continuing
investments in enterprise systems,” said Bradley H. Feldmann,
president and chief executive officer of Cubic Corporation. “We
expect to close out the fiscal year with a strong fourth quarter
led by strong performance in our defense systems business.”
(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
Cubic Transportation Systems (41 percent of consolidated
sales for the nine-month period of fiscal 2015)
Nine Months Ended Three
Months Ended June 30, June 30, 2015 2014 2015
2014 (in millions) Cubic Transportation
Systems Segment Sales $ 411.5 $ 429.1 $ 133.3 $ 153.0 Cubic
Transportation Systems Segment Operating Income $ 50.8 $ 35.2 $
11.7 $ 15.3
CTS sales decreased 13 percent in the third quarter to $133.3
million compared to $153.0 million last year, and decreased 4
percent for the nine-month period to $411.5 million from $429.1
million last year. Changes in foreign currency exchange rates
reduced sales by $11.3 million for the third quarter and $26.0
million for the nine-month period compared to the same periods last
year. Sales were lower for the quarter and nine-month period on
contracts in Sydney and in the U.K.
CTS operating income decreased 24 percent in the third quarter
to $11.7 million compared to $15.3 million last year. For the
quarter, the decrease in operating income is the result of a $1.1
million impact of foreign currency exchange rates, an increase in
R&D expenditures and lower operating income on work performed
on U.K. development and service contracts. These decreases were
partially offset by decreased losses on a development contract in
Vancouver which experienced less cost growth in 2015 than in
2014.
CTS operating income increased 44 percent for the nine-month
period to $50.8 million from $35.2 million last year. The increase
in operating income was primarily attributable to a decrease in
losses experienced on the Vancouver contract, an increase in gross
margins on a contract in Chicago and a gain recognized on proceeds
from a claim settlement of $3.6 million. These increases in
operating income were partially offset by slightly lower margins on
development and services work in the U.K. and a $3.5 million impact
of changes in foreign currency exchange rates.
Cubic Global Defense Services (30 percent of consolidated
sales for the nine-month period of fiscal 2015)
Nine Months Ended Three
Months Ended June 30, June 30, 2015 2014 2015
2014 (in millions) Cubic Global Defense
Services Segment Sales $ 298.4 $ 291.7 $ 111.9 $ 91.8 Cubic
Global Defense Services Segment Operating Income $ 4.2 $ 6.0 $ 3.1
$ 1.8
CGD Services sales increased 22 percent in the third quarter to
$111.9 million compared to $91.8 million last year, and increased 2
percent for the nine-month period to $298.4 million compared to
$291.7 million last year. Sales for the third quarter were higher
primarily because of increased activity at the Joint Readiness
Training Center in the third quarter, due to a Marine Corps
training contract won earlier in the fiscal year and growth in the
simulator training business. For the first nine months, higher
sales from the Marine Corps contract and simulator training
business were partially offset by lower sales from other contracts
and a general reduction in the number of training exercises and
other support requirements for U.S. government customers.
CGD Services operating income increased 72 percent in the third
quarter to $3.1 million compared to $1.8 million last year, and
decreased 30 percent for the nine-month period to $4.2 million from
$6.0 million last year. The increase in operating income for the
third quarter resulted from a decrease in amortization expense
related to purchased intangible assets and higher sales volume.
However, although sales increased in the quarter over the prior
year, profit margins decreased due to competitive pressures driving
down bid prices. For the nine months, profit margins were lower
than in the comparable period of the prior year due to budget
pressures and new contracting standards by the Department of
Defense, and due to higher compensation costs than normal during
the first quarter of fiscal 2015 as the result of recruiting new
executive management. In addition, we incurred restructuring
charges of $0.3 million in the second quarter of 2015. Lower
operating income for the nine-month period was partially offset by
a decrease in amortization expense related to purchased intangible
assets.
Cubic Global Defense Systems (29 percent of consolidated
sales for the nine-month period of fiscal 2015)
Nine Months Ended Three
Months Ended June 30, June 30, 2015 2014 2015
2014 (in millions) Cubic Global Defense
Systems Segment Sales $ 295.2 $ 281.2 $ 102.6 $ 95.6 Cubic
Global Defense Systems Segment Operating Income $ 2.8 $ 16.1 $ 3.2
$ 3.3
CGD Systems sales increased 7 percent in the third quarter to
$102.6 million compared to $95.6 million last year, and increased 5
percent for the nine-month period ended June 30, 2015 to $295.2
million from $281.2 million last year. Sales were higher from air
combat training systems and due to the acquisition of businesses.
These increases were partially offset by lower sales on ground
combat training systems and simulation systems for the quarter and
nine-month periods.
CGD Systems operating income decreased 3 percent in the third
quarter to $3.2 million compared to $3.3 million last year, and
decreased 83 percent for the nine-month period to $2.8 million from
$16.1 million last year. Operating income decreased for the quarter
and nine-month period driven by losses on a training system
contract due to cost growth, reduced operating income on lower
sales of ground combat and simulation systems and the impact of
changes in foreign currency exchange rates. For the nine-month
period, operating income also decreased due to restructuring
charges of $4.0 million incurred in the second quarter of 2015.
These decreases were partially offset by increased operating income
on increased sales of air combat training systems for the quarter
and nine-month period.
Cash Flows
Operating activities provided cash of $46.5 million for the nine
months ended June 30, 2015. The operating activities of CTS and CGD
Services provided positive cash flows, while CGD Systems used cash.
We invested $90.2 million to acquire DTECH LABs in the first nine
months of 2015. A portion of this purchase was funded by draws on
our U.S. revolving credit facility. At June 30, 2015, we had $70
million outstanding under this facility at a variable interest rate
of 1.71 percent. We had capital expenditures of $15.7 million in
the first nine months of fiscal 2015, including the acquisition of
software licenses for the ERP system, which is currently under
development.
Conference Call
Cubic management will host a conference call to discuss the
company’s third quarter and nine-month results today, Thursday,
August 6 at 4:30 p.m. ET (1:30 p.m. 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 designs, integrates and operates systems,
products and services focused in the transportation, defense
training and secure communications markets. Cubic’s mission is to
increase situational awareness and understanding for customers
worldwide. Cubic Transportation Systems is a leading integrator of
payment and information technology and services to create
intelligent travel solutions for public transit authorities and
operators. Cubic Global Defense Services is a leading provider of
highly specialized support services for military and security
forces of the U.S. and allied nations. Cubic Global Defense Systems
is a leading provider of realistic combat training systems, as well
as secure communications and networking.
For more information about Cubic, see the company’s website 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.
Nine Months Ended Three
Months Ended June 30, June 30, 2015 2014 2015
2014 (in thousands)
Reconciliation: Net
income attributable to Cubic $ 2,908 $ 36,686 $ 8,780 $ 12,206 Add:
Provision for income taxes 34,863 13,240 559 4,992 Interest
expense, net 1,721 2,159 691 909 Other expense, net 1,157 1,058 257
1,098 Noncontrolling interest in income of VIE 29 79 6 10
Depreciation and amortization 28,717 22,740 8,653 7,511
ADJUSTED
EBITDA $ 69,395 $ 75,962 $ 18,946 $ 26,726
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, 2015 2014 2015 2014 Net sales: Products $ 392,884 $
405,419 $ 133,762 $ 136,649 Services 612,244
596,567 214,044 203,708
1,005,128 1,001,986 347,806 340,357 Costs and expenses:
Products 288,926 305,245 94,381 108,301 Services 480,671 480,906
175,334 156,726 Selling, general and administrative 155,603 131,508
55,127 46,489 Research and development 12,830 13,822 5,938 3,949
Amortization of purchased intangibles 21,035 17,056 6,606 5,653
Restructuring costs 5,385 227
127 24 964,450 948,764
337,513 321,142 Operating
income 40,678 53,222 10,293 19,215 Other income (expense):
Interest and dividend income 1,337 958 434 595 Interest expense
(3,058 ) (3,117 ) (1,125 ) (1,504 ) Other income (expense) - net
(1,157 ) (1,058 ) (257 ) (1,098 )
Income before income taxes 37,800 50,005 9,345 17,208
Income taxes 34,863 13,240 559
4,992 Net income 2,937 36,765 8,786
12,216 Less noncontrolling interest in income of VIE
29 79 6 10
Net income attributable to Cubic $ 2,908 $ 36,686 $
8,780 $ 12,206 Net income per share
attributable to Cubic Basic $ 0.11 $ 1.37 $ 0.33 $ 0.46 Diluted $
0.11 $ 1.36 $ 0.33 $ 0.45 Dividends per common share $ 0.14
$ 0.12 $ - $ - Weighted average shares used in per share
calculations: Basic 26,868 26,786 26,883 26,789 Diluted 26,925
26,901 26,960 26,921
CUBIC
CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands) June 30, September 30, 2015 2014
ASSETS Current assets: Cash and cash equivalents $ 209,305 $
215,849 Restricted cash 69,202 69,056 Marketable securities 5,601
1,196 Accounts receivable - net 389,370 394,179 Recoverable income
taxes 12,290 16,055 Inventories - net 66,259 38,775 Deferred income
taxes and other current assets 37,612 30,277
Total current assets 789,639 765,387
Long-term contract receivables 13,460 15,870
Long-term capitalized contract costs 71,220 76,209 Property, plant
and equipment - net 71,377 64,149 Deferred income taxes 2,707
17,849 Goodwill 239,824 184,141 Purchased intangibles - net 80,466
63,618 Other assets 17,855 7,383 $
1,286,548 $ 1,194,606
LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings
$ 70,000 $ - Trade accounts payable 35,409 31,344 Customer advances
106,448 91,690 Accrued compensation and other current liabilities
133,119 133,367 Income taxes payable 9,979 12,737 Deferred income
taxes 4,517 474 Current portion of long-term debt 545
563 Total current liabilities 360,017
270,175 Long-term debt 101,362 101,827 Other
long-term liabilities 54,461 40,103 Shareholders' equity:
Common stock 24,602 20,669 Retained earnings 802,294 803,059
Accumulated other comprehensive loss (20,362 ) (5,372 ) Treasury
stock at cost (36,078 ) (36,078 ) Shareholders'
equity related to Cubic 770,456 782,278 Noncontrolling interest in
variable interest entity 252 223 Total
shareholders' equity 770,708 782,501 $
1,286,548 $ 1,194,606
CUBIC CORPORATION CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (UNAUDITED) (in thousands) Nine Months Ended
Three Months Ended June 30, June 30, 2015 2014 2015 2014 Operating
Activities: Net income $ 2,937 $ 36,765 $ 8,786 $ 12,216
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 28,717 22,740 8,653 7,511 Share-based
compensation expense 6,652 4,370 1,361 1,785
Changes in operating assets and
liabilities net of effects from acquisitions
8,186 (27,138 ) (33,406 ) 44,524
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
46,492 36,737 (14,606 )
66,036 Investing Activities: Acquisition of
businesses, net of cash acquired (90,172 ) (83,456 ) (712 ) (3,773
) Purchases of property, plant and equipment (15,743 ) (13,536 )
(13,163 ) (2,589 ) Purchases of marketable securities (6,201 ) -
(1,611 ) - Proceeds from sales or maturities of marketable
securities 1,196 4,055 - - Purchases of other assets (2,993
) - - - NET CASH USED IN
INVESTING ACTIVITIES (113,913 ) (92,937 )
(15,486 ) (6,362 ) Financing Activities: Proceeds
from short-term borrowings 95,000 38,000 25,000 8,000 Principal
payments on short-term borrowings (25,000 ) (30,000 ) (10,000 )
(30,000 ) Principal payments on long-term debt (403 ) (431 ) (134 )
(147 ) Proceeds from issuance of common stock - 113 - - Purchases
of common stock (2,652 ) - (929 ) - Dividends paid (3,627 ) (3,215
) - - Net change in restricted cash (146 ) 353 (45 ) (44 )
Contingent consideration payments related
to acquisitions of businesses
- (2,368 ) - (1,251 )
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES
63,172 2,452 13,892
(23,442 ) Effect of exchange rates on cash
(2,295 ) 16,697 17,401 5,266
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
(6,544 ) (37,051 ) 1,201 41,498
Cash and cash equivalents at the beginning
of the period
215,849 203,892 208,104
125,343
CASH AND CASH EQUIVALENTS AT THE END OF
THE PERIOD
$ 209,305 $ 166,841 $ 209,305 $ 166,841
Supplemental disclosure of non-cash investing and
financing activities: Liability incurred to acquire DTECH,
net $ 8,898 $ - $ 44 $ - Liability incurred to acquire Intific, net
$ - $ 1,173 $ - $ -
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150806006582/en/
Cubic CorporationInvestor RelationsDiane Dyer,
858-505-2907orMediaJohn D. Thomas, 858-505-2989
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