Cubic Corporation (NYSE: CUB) today announced its financial
results for the second fiscal quarter ended March 31, 2020.
Second Quarter Fiscal Year 2020 Highlights
- Sales of $321.5 million, down 5% year-over-year
- Net loss from continuing operations attributable to Cubic of
$39.3 million, or $1.25 per share, compared to $8.1 million, or
$0.26 per share in the second quarter of fiscal 2019
- Adjusted EPS of ($0.12), compared to $0.24 in the second
quarter of fiscal 2019
- Adjusted EBITDA of $4.5 million, compared to $19.4 million in
the second quarter of fiscal 2019
- Closed Pixia and Delerrok acquisitions, advancing NextMission™
and NextCity™ strategies
- Strengthened financial flexibility with restructuring of debt
and increased availability under the Company’s revolving credit
facility
- Implemented a cost savings program with expectation to drive
cumulative net savings of $30 million to $35 million through fiscal
2021
- Repurposing capabilities to support COVID-19 relief
efforts
- Suspending previously announced fiscal 2020 guidance due to
uncertainty surrounding the COVID-19 pandemic
“Our number one priority at Cubic is the health and safety of
our team members, customers, partners and communities. I want to
thank our employees for their commitment to serve our customers
during these unprecedented times. We are supporting our customers
and communities impacted by COVID-19 by repurposing our
capabilities to produce protective gear, ventilators and game-based
training solutions,” said Bradley H. Feldmann, chairman, president
and chief executive officer of Cubic Corporation. “While we are
experiencing short-term impacts and challenges, we have taken the
necessary actions to navigate this environment and the long-term
fundamentals of our businesses remain strong. Cubic is
well-positioned to drive growth by solving our customers’ hardest
challenges.”
COVID-19 Response and Business Update
Employee Safety and Well-being
The Company is focused on keeping its employees safe through
increased sanitation measures as well as social distancing and
additional safety protocols. The Company has taken the following
key actions in response to COVID-19:
- Established a COVID-19 working group that meets daily
- Maximized remote work
- Increased frequency of cleaning and sanitation
- Following social distancing and additional safety protocols for
“site-essential” employees
- Monitoring health and well-being of employees
- Restricting non-essential travel
Cost Reduction and Cash Preservation
In response to the uncertainties arising from the COVID-19
pandemic, the Company has undertaken a cost reduction and cash
preservation program, which is expected to result in cumulative net
savings of $30 million to $35 million through fiscal 2021. The
Company has taken the following actions to reduce costs:
- Reduced discretionary expenses
- Optimized overhead costs
- Reduced and deferred select research and development (R&D)
investments while continuing critical investments to support
near-term growth; expect fiscal 2020 investment in innovation to
increase compared to fiscal 2019
- Reduced Board and CEO cash compensation by 15% and CFO by 7.5%
for remainder of fiscal 2020
- Suspended employee salary merit increases through fiscal 2021
and 401(k) match for remainder of fiscal 2020
- Implemented hiring freeze for indirect and overhead
positions
- Utilized stimulus benefits, including the monetization of
certain net operating losses and the deferral of certain tax
payments
Balance Sheet and Liquidity
Cubic expects to have sufficient liquidity to continue business
operations during the evolving economic conditions surrounding the
COVID-19 pandemic. The Company strengthened its financial position
during the quarter by entering into an amended and restated credit
agreement, providing Cubic with a new $450 million unsecured term
loan and upsizing Cubic’s existing unsecured revolving credit
facility from $800 million to $850 million. This transaction
increases Cubic’s capacity by 30% to a total of $1.3 billion and
improves its financial flexibility due to more flexible covenants,
interest savings and an improved maturity profile. The Company
remains focused on lowering its net leverage to its target of below
3.0x in the future.
Relief Efforts
Cubic is repurposing capabilities to support its employees,
customers and communities. The Company has manufactured general
purpose face coverings and made them available to all Cubic
employees and their families. Additionally, Cubic is delivering
face coverings and other protective gear to customers, including
the New York Metropolitan Transportation Authority and the U.S.
Navy. Cubic continues to assess additional opportunities to support
relief efforts, including repurposing the Company’s inflatable
satellite antenna technology to build ventilators and leveraging
its expertise in game-based training to develop immersive,
synthetic solutions to train medical professionals.
Business Update
Cubic’s businesses have been deemed essential services under
applicable law and remain operational during the COVID-19 pandemic.
Cubic has implemented preparedness plans to ensure business
continuity, while focusing on protecting the health and well-being
of its employees and the communities in which the Company does
business. Overall, while the Company is experiencing
customer-driven delays and other impacts, the Company believes that
the long-term strategy and secular trends for all of Cubic’s
businesses remain intact.
Cubic Transportation Systems (CTS)
The substantial majority of revenue from CTS is earned under
fixed-price contracts. However, approximately $25 million of the
Company’s annual revenue, or less than 2% of Cubic’s fiscal 2019
full year sales, is earned based on transit ridership. While
Cubic’s financial exposure to ridership is limited, its
transportation agency customers are experiencing reduced revenue
which could delay future orders. Additionally, while Cubic has not
experienced significant disruptions to its planned delivery
schedules on major projects as a result of COVID-19, the Company
may experience impacts in the future, including short-term
delays.
Cubic Mission Solutions (CMS)
CMS has experienced some order delays as a result of COVID-19;
however, the business continues to actively write proposals as the
U.S. National Defense Strategy continues to drive demand in the
Company’s markets. As COVID-19 continues, Cubic may experience
delays of orders and customer acceptance processes could be
disrupted by government-imposed travel restrictions. To mitigate
these potential impacts, Cubic is partnering with customers on
revised acceptance procedures.
Cubic Global Defense Systems (CGD)
CGD has experienced slowdowns in on-site defense training work
and certain customer orders have been delayed as a result of
COVID-19, but generally customer budgets are in place and orders
are anticipated later in fiscal 2020.
Additional Information
For additional information on Cubic’s response to COVID-19 as
well as observations on notable trends and developments, please
refer to the supplemental earnings presentation on the “Investor
Relations” section of Cubic’s website at
https://www.cubic.com/investor-relations.
Financial Results Summary
Three Months Ended
Six Months Ended
March 31,
March 31,
2020
2019
2020
2019
(in millions, except per share
data)
(in millions, except per share
data)
Sales
$
321.5
$
337.3
$
650.3
$
642.6
Operating loss
(29.9
)
(6.5
)
(36.4
)
(7.1
)
Adjusted EBITDA1
4.5
19.4
15.9
39.4
Adjusted net income (loss)1
(3.9
)
7.6
(7.6
)
16.7
Loss from continuing operations
attributable to Cubic before income taxes
$
(59.0
)
$
(11.8
)
$
(72.8
)
$
(16.0
)
Income tax benefit from continuing
operations attributable to Cubic
(19.7
)
(3.7
)
(13.5
)
(1.3
)
Net loss from continuing operations
attributable to Cubic
$
(39.3
)
$
(8.1
)
$
(59.2
)
$
(14.6
)
Loss per share from continuing operations
attributable to Cubic
$
(1.25
)
$
(0.26
)
$
(1.89
)
$
(0.49
)
Adjusted earnings (loss) per share1
(0.12
)
0.24
(0.24
)
0.56
Acquisition-related expenses, excluding
amortization
6.6
6.1
5.9
8.6
Strategic and IT system resource planning
expenses
1.8
2.3
2.9
3.9
Depreciation and amortization
23.4
17.6
40.4
33.6
Research and development expense
11.4
13.8
19.8
25.8
(1)
A non-GAAP financial measure. See the
section below titled “Use of Non-GAAP Financial Information” for
additional information regarding the Company’s non-GAAP financial
measures and a reconciliation of such non-GAAP financial measures
to the most directly comparable GAAP financial measures.
Consolidated Second Quarter Fiscal Year 2020 Results
Sales for the second quarter of fiscal 2020 decreased 5% as
reported and 4% on an organic basis to $321.5 million, compared to
$337.3 million in the second quarter of fiscal 2019, reflecting
growth in Global Defense Systems, offset by a decline in Mission
Solutions while Transportation Systems organic sales were flat.
Operating loss in the second quarter of fiscal 2020 was $29.9
million, compared to $6.5 million in the second quarter of fiscal
2019. The increase in operating loss was largely driven by Mission
Solutions due to lower sales of high margin products, as further
described in the segment results below. Additionally, unallocated
corporate expenses increased to $16.8 million, compared to $12.0
million in the second quarter of fiscal 2019, partially driven by
higher restructuring charges and an increase in stock-based
compensation expense.
Adjusted EBITDA in the second quarter of fiscal 2020 decreased
to $4.5 million, compared to $19.4 million in the second quarter of
fiscal 2019, primarily due to the same factors that drove a higher
operating loss, except for the increase in restructuring charges as
that is excluded from Adjusted EBITDA.
Net loss from continuing operations attributable to Cubic in the
second quarter of fiscal 2020 was $39.3 million, or $1.25 per
share, compared to $8.1 million in the second quarter of fiscal
2019, or $0.26 per share, primarily reflecting an increase in
operating loss and interest expense as well as a $16.1 million loss
on extinguishment of debt.
Adjusted net loss was $3.9 million, or $0.12 per share, in the
second quarter of fiscal 2020, compared to Adjusted net income of
$7.6 million, or $0.24 per share, in the second quarter of fiscal
2019, reflecting lower Adjusted EBITDA and higher interest and
depreciation expense, partially offset by tax benefits.
Net cash used in continuing operations was $26.6 million in the
second quarter of fiscal 2020, compared to $22.5 million in the
second quarter of fiscal 2019. Adjusted Free Cash Flow was negative
$37.0 million in the second quarter of fiscal 2020, compared to
negative $23.0 million in the second quarter of fiscal 2019.
Reportable Segment Results
Three Months Ended
Six Months Ended
March 31,
March 31,
2020
2019
2020
2019
Sales:
(in millions)
(in millions)
Cubic Transportation Systems
$
197.6
$
200.7
$
386.2
$
382.5
Cubic Mission Solutions
39.5
61.9
98.2
108.3
Cubic Global Defense Systems
84.4
74.7
165.9
151.8
Total sales
$
321.5
$
337.3
$
650.3
$
642.6
Operating income (loss):
Cubic Transportation Systems
$
12.6
$
8.8
$
26.9
$
19.8
Cubic Mission Solutions
(31.4
)
(8.5
)
(46.3
)
(13.4
)
Cubic Global Defense Systems
5.7
5.2
12.0
8.1
Unallocated corporate expenses
(16.8
)
(12.0
)
(29.0
)
(21.6
)
Total operating income (loss)
$
(29.9
)
$
(6.5
)
$
(36.4
)
$
(7.1
)
Adjusted EBITDA:
Cubic Transportation Systems
$
24.2
$
20.4
$
46.4
$
39.8
Cubic Mission Solutions
(16.5
)
(0.1
)
(25.8
)
0.6
Cubic Global Defense Systems
7.8
6.5
15.3
12.2
Unallocated corporate expenses
(11.0
)
(7.4
)
(20.0
)
(13.2
)
Total Adjusted EBITDA
$
4.5
$
19.4
$
15.9
$
39.4
Cubic Transportation Systems
CTS sales decreased 2% to $197.6 million in the second quarter
of fiscal 2020, compared to $200.7 million in the second quarter of
fiscal 2019. Organic sales were flat, primarily reflecting the
timing of project delivery.
CTS Adjusted EBITDA increased 19% to $24.2 million in the second
quarter of fiscal 2020, compared to $20.4 million in the second
quarter of fiscal 2019, reflecting higher gross margins on service
sales as well as benefits from cost management.
Cubic Mission Solutions
CMS sales decreased 36% to $39.5 million in the second quarter
of fiscal 2020, compared to $61.9 million in the second quarter of
fiscal 2019. Organic sales declined 42% reflecting lower orders and
deliveries of expeditionary satellite communications products
(GATR) and the timing of orders and deliveries of secure networks
products (DTECH). The prior year results were favorably impacted by
strong orders for GATR in support of Urgent Operational Needs.
CMS Adjusted EBITDA decreased to negative $16.5 million in the
second quarter of fiscal 2020, compared to negative $0.1 million in
the second quarter of fiscal 2019. Adjusted EBITDA reflects lower
sales of high margin orders, as described above, as well as
increased R&D and bid and proposal expenses.
Cubic Global Defense Systems
CGD sales increased 13% to $84.4 million in the second quarter
of fiscal 2020, compared to $74.7 million in the second quarter of
fiscal 2019. Organic sales growth of 14% was primarily related to
increased work on air combat training systems.
CGD Adjusted EBITDA increased 20% to $7.8 million in the second
quarter of fiscal 2020, compared to $6.5 million in the second
quarter of fiscal 2019, reflecting strong project execution and
cost management.
Backlog
Backlog increased by $177.8 million from September 30, 2019 to
March 31, 2020. Foreign currency had an unfavorable impact of $37.5
million during the period.
March 31,
September 30,
2020
2019
(in millions)
Total backlog
Cubic Transportation Systems
$
3,040.2
$
2,953.3
Cubic Mission Solutions
171.8
103.7
Cubic Global Defense Systems
366.8
344.0
Total
$
3,578.8
$
3,401.0
Full Year Fiscal 2020 Guidance
Due to the uncertainty surrounding the COVID-19 pandemic, which
is being experienced by both the Company and its customers, Cubic
is unable to confidently forecast the impact of COVID-19 and its
related effects on its operational and financial results, which
could be material. As a result, the Company is suspending its
previously announced full year guidance for fiscal 2020.
Conference Call and Webcast Information
Date:
May 6, 2020
Time:
5:00 p.m. ET
Hosts:
Bradley H. Feldmann, Chairman, President
and Chief Executive Officer
Anshooman Aga, Executive Vice President
and Chief Financial Officer
Dial in:
844-603-5091
825-312-2261 (international)
Conference ID 5467698
Webcast:
https://event.on24.com/wcc/r/2157476/197B36755B67A2C57F7771466F8C38DF
An archive of the webcast will be made available on the Investor
Relations section of the company’s website:
https://www.cubic.com/investor-relations/earnings.
About Cubic Corporation
Cubic is a technology-driven,
market-leading provider of integrated solutions that increase
situational understanding for transportation, defense C4ISR and
training customers worldwide to decrease urban congestion and
improve the militaries’ effectiveness and operational readiness.
Our teams innovate to make a positive difference in people’s lives.
We simplify their daily journeys. We promote mission success and
safety for those who serve their nation. For more information about
Cubic, please visit 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
(the “Act”) that are subject to the safe harbor created by the Act.
Forward-looking statements include, among others, statements about
our expectations regarding future events or our future financial
and operating performance and delivering on our strategic growth
plan. 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:
the impact of the COVID-19 outbreak or future epidemics or
pandemics on our business, financial condition and operating
results; 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 assumptions covering behavior by public
transit authorities; our ability to successfully integrate new
companies, including Trafficware, GRIDSMART, Nuvotronics, Delerrok
and Pixia into our business and to properly assess the effects of
such integration on our financial condition and operating results;
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;
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; unforeseen problems with the
implementation and maintenance of our information systems,
including our ERP system; business disruptions due to cyber
security threats, physical threats, terrorist acts, acts of nature
and public health crises (including COVID-19); 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 filings
with the Securities and Exchange Commission (the “SEC”) available
at www.sec.gov, including our most recent Annual Report on Form
10-K for our fiscal year ended September 30, 2019 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 of this press release, and, except as
required by law, we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after
the date of this press release.
Use of Non-GAAP Financial
Information
In addition to results reported under U.S. generally accepted
accounting principles (“GAAP”), we provide certain financial
measures that are not prepared in accordance with GAAP. These
non-GAAP measures consist of organic sales growth, Adjusted net
income, Adjusted earnings per share (“Adjusted EPS”), Adjusted
EBITDA and Adjusted Free Cash Flow. We believe that these non-GAAP
measures provide additional insight into our ongoing operations and
underlying business trends, facilitate a comparison of our results
between current and prior periods, and facilitate the comparison of
our operating results with the results of other public companies
that provide non-GAAP measures. We use Adjusted EBITDA internally
to evaluate the operating performance of our business, for
strategic planning purposes, and as a factor in determining
incentive compensation for certain employees. These non-GAAP
measures facilitate company-to-company operating comparisons by
excluding items that we believe are not part of our core operating
performance. Organic sales growth is defined as the year-over-year
percentage change in reported sales relative to the prior
comparable period, excluding the impact of acquisitions and
divestitures over the prior 12 months and the impact of foreign
currency translation. Adjusted EBITDA is defined as GAAP net income
from continuing operations attributable to Cubic before interest
expense, loss on extinguishment of debt, income taxes, depreciation
and amortization, other non-operating expense, acquisition-related
expenses, strategic and information technology (“IT”) system
resource planning expenses, restructuring costs, and gains or
losses on the disposal of fixed assets. Adjusted net income is
defined as GAAP net income from continuing operations attributable
to Cubic excluding amortization of purchased intangibles,
restructuring costs, loss on extinguishment of debt, acquisition
related expenses, strategic and IT system resource planning
expenses, gains or losses on the disposal of fixed assets, other
non-operating expense (income), tax impacts related to
acquisitions, and the impact of the Tax Cuts and Jobs Act (“U.S.
Tax Reform”). Adjusted EPS is defined as Adjusted net income on a
per share basis using the weighted average diluted shares
outstanding. Strategic and IT system resource planning expenses
consists of expenses incurred in the development of our ERP system
and the redesign of our supply chain which include internal labor
costs and external costs of materials and services that do not
qualify for capitalization. Acquisition-related expenses include
business acquisition expenses including retention bonus expenses,
due diligence and consulting costs incurred in connection with the
acquisitions, and expenses recognized related to the change in the
fair value of contingent consideration for acquisitions.
Adjusted Free Cash Flow is defined as Net cash provided by
continuing operations, excluding operating cash flow associated
with the Boston Special Purpose Vehicle (the “Boston SPV”) in which
Cubic has a 10% equity stake, less capital expenditures plus
proceeds from the sale of fixed assets and the receipt of withheld
proceeds from the sale of trade receivables. The Boston SPV has
contracted with Cubic for the design-build and operations and
maintenance phases of the next-generation fare collection system
for the Massachusetts Bay Transit Authority and pays Cubic progress
payments during the design-build phase of the project. These
payments are primarily funded by non-recourse debt issued by the
Boston SPV. Additional information regarding the Boston SPV can be
found in our Annual Report on Form 10-K for the fiscal year ended
September 30, 2019 and our most recent Quarterly Reports on Form
10-Q. Management believes that Adjusted Free Cash Flow is
meaningful to investors because management reviews cash flows
generated from operations after taking into consideration capital
expenditures, which are necessary to maintain and expand Cubic’s
business, in addition to the other adjustments noted above.
Adjusted Free Cash Flow does not represent the residual cash flow
available for discretionary expenditures since other
non-discretionary expenditures are not deducted from the
measure.
These non-GAAP measures are not measurements of financial
performance under GAAP and should not be considered as measures of
discretionary cash available to the Company or as alternatives to
net income as a measure of performance. In addition, other
companies may define these non-GAAP measures differently and, as a
result, our non-GAAP measures may not be directly comparable to the
non-GAAP measures of other companies. Furthermore, non-GAAP
financial measures have limitations as an analytical tool and you
should not consider these measures in isolation, or as a substitute
for analysis of our results as reported under GAAP. Investors are
advised to carefully review our GAAP financial results that are
disclosed in our filings with the SEC, including our Annual Report
on Form 10-K for the fiscal year ended September 30, 2019 and our
most recent Quarterly Reports on Form 10-Q.
We reconcile organic sales growth to sales growth as reported,
which we consider to be the most directly comparable GAAP financial
measure. We reconcile Adjusted EBITDA and Adjusted net income to
GAAP net income, which we consider to be the most directly
comparable GAAP financial measure. We reconcile Adjusted EPS to
GAAP EPS, which we consider to be the most directly comparable GAAP
financial measure. We reconcile Adjusted Free Cash Flow to Net cash
provided by continuing operations, which we consider to be the most
directly comparable GAAP financial measure. The following tables
reconcile these non-GAAP measures to their most directly comparable
GAAP financial measure:
ORGANIC SALES GROWTH RATE RECONCILIATION (UNAUDITED)
Three Months Ended March 31,
2020
Six Months Ended March 31,
2020
Cubic
CTS
CMS
CGD
Cubic
CTS
CMS
CGD
Sales growth as reported
(4.7
%)
(1.6
%)
(36.2
%)
13.0
%
1.2
%
1.0
%
(9.3
%)
9.3
%
Contribution from acquisitions
(1.3
%)
(0.3
%)
(5.8
%)
—
(1.7
%)
(1.3
%)
(5.9
%)
—
Foreign currency translation
1.5
%
2.1
%
—
1.1
%
1.1
%
1.5
%
—
0.7
%
Organic sales growth
(4.5
%)
0.2
%
(42.0
%)
14.1
%
0.5
%
1.2
%
(15.2
%)
10.0
%
Note: Percentages may not sum due to
rounding.
GAAP NET INCOME TO ADJUSTED EARNINGS BEFORE INTEREST, TAXES,
DEPRECIATION AND AMORTIZATION (EBITDA) RECONCILIATION
(UNAUDITED)
Three Months Ended
Six Months Ended
($ In Millions)
March 31,
March 31,
Cubic Transportation Systems
2020
2019
2020
2019
Sales
$
197.6
$
200.7
$
386.2
$
382.5
Operating income
$
12.6
$
8.8
$
26.9
$
19.8
Depreciation and amortization
7.4
9.5
14.5
17.2
Noncontrolling interest in income of
VIE
(1.3
)
(1.8
)
(2.2
)
(3.3
)
Acquisition-related expenses, excluding
amortization
5.4
3.6
6.7
5.4
Restructuring costs
0.1
0.3
0.5
0.7
Adjusted EBITDA
$
24.2
$
20.4
$
46.4
$
39.8
Adjusted EBITDA margin
12.2
%
10.2
%
12.0
%
10.4
%
Three Months Ended
Six Months Ended
($ In Millions)
March 31,
March 31,
Cubic Mission Solutions
2020
2019
2020
2019
Sales
$
39.5
$
61.9
$
98.2
$
108.3
Operating loss
$
(31.4
)
$
(8.5
)
$
(46.3
)
$
(13.4
)
Depreciation and amortization
13.5
5.8
21.0
11.2
Acquisition-related expenses (gains),
excluding amortization
1.4
2.6
(0.5
)
2.8
Adjusted EBITDA
$
(16.5
)
$
(0.1
)
$
(25.8
)
$
0.6
Adjusted EBITDA margin
(41.8
%)
(0.2
%)
(26.3
%)
0.6
%
Three Months Ended
Six Months Ended
($ In Millions)
March 31,
March 31,
Cubic Global Defense Systems
2020
2019
2020
2019
Sales
$
84.4
$
74.7
$
165.9
$
151.8
Operating income
$
5.7
$
5.2
$
12.0
$
8.1
Depreciation and amortization
1.6
1.5
3.3
3.7
Acquisition-related expenses (gains),
excluding amortization
(0.2
)
(0.2
)
(0.5
)
0.3
(Gain) loss on sale of fixed assets
0.1
-
(0.1
)
-
Restructuring costs
0.6
-
0.6
0.1
Adjusted EBITDA
$
7.8
$
6.5
$
15.3
$
12.2
Adjusted EBITDA margin
9.2
%
8.7
%
9.2
%
8.0
%
Three Months Ended
Six Months Ended
($ In Millions)
March 31,
March 31,
Cubic Consolidated
2020
2019
2020
2019
Sales
$
321.5
$
337.3
$
650.3
$
642.6
Net loss from continuing operations
attributable to Cubic
$
(39.3
)
$
(8.1
)
$
(59.2
)
$
(14.6
)
Noncontrolling interest in net income
(loss) of VIE
(13.2
)
(1.4
)
(9.2
)
(5.4
)
Income tax benefit
(19.7
)
(3.7
)
(13.5
)
(1.3
)
Interest expense, net
6.6
3.1
9.7
5.9
Loss on extinguishment of debt
16.1
-
16.1
-
Other non-operating expense (income),
net
19.6
3.6
19.8
8.4
Operating loss
$
(29.9
)
$
(6.5
)
$
(36.4
)
$
(7.1
)
Depreciation and amortization
23.4
17.6
40.4
33.6
Noncontrolling interest in EBITDA of
VIE
(1.3
)
(1.8
)
(2.2
)
(3.3
)
Acquisition-related expenses, excluding
amortization
6.6
6.1
5.9
8.6
Strategic and IT system resource planning
expenses
1.8
2.3
2.9
3.9
(Gain) loss on sale of fixed assets
0.1
-
(0.1
)
-
Restructuring costs
3.8
1.7
5.4
3.7
Adjusted EBITDA
$
4.5
$
19.4
$
15.9
$
39.4
Adjusted EBITDA margin
1.4
%
5.8
%
2.4
%
6.1
%
Note: Amounts may not sum due to
rounding
GAAP NET INCOME TO ADJUSTED NET INCOME AND GAAP EPS TO
ADJUSTED EPS RECONCILIATION (UNAUDITED)
Three Months Ended
Six Months Ended
March 31,
March 31,
2020
2019
2020
2019
($ In Millions, Except Per Share
Data)
GAAP EPS
$
(1.25
)
$
(0.26
)
$
(1.89
)
$
(0.49
)
GAAP Net loss from continuing
operations attributable to Cubic
$
(39.3
)
$
(8.1
)
$
(59.2
)
$
(14.6
)
Noncontrolling interest in the loss of the
VIE
(13.2
)
(1.4
)
(9.2
)
(5.4
)
Amortization of purchased intangibles
16.5
12.4
26.6
23.0
(Gain) loss on sale of fixed assets
0.1
—
(0.1
)
—
Restructuring costs
3.8
1.7
5.4
3.7
Loss on extinguishment of debt
16.1
—
16.1
—
Acquisition-related expenses, excluding
amortization
6.6
6.1
5.9
8.6
Strategic and IT system resource planning
expenses
1.8
2.3
2.9
3.9
Other non-operating expense (income),
net
19.6
3.6
19.8
8.4
Noncontrolling interest in Adjusted Net
Income of VIE
(1.3
)
(2.0
)
(2.2
)
(3.5
)
Tax impact related to acquisitions1
(13.5
)
(7.2
)
(13.5
)
(7.5
)
Impact of U.S. Tax Reform
0.5
—
0.5
—
Tax impact related to non-GAAP
adjustments2
(1.6
)
0.1
(0.6
)
0.1
Adjusted net income (loss)
$
(3.9
)
$
7.6
$
(7.6
)
$
16.7
Adjusted EPS
$
(0.12
)
$
0.24
$
(0.24
)
$
0.56
Weighted Average Diluted Shares
Outstanding (in thousands)
31,296
31,150
31,284
29,821
Note: Amounts may not sum due to
rounding
1 Represents the tax accounting impact of
significant discrete items recorded at the time of acquisition. 2
The tax effect of the non-GAAP adjustments is generally based on
the statutory tax rate of the jurisdiction of the event.
OPERATING CASH FLOW TO ADJUSTED FREE CASH FLOW
RECONCILIATION
Three Months Ended
Six Months Ended
($ In Millions)
March 31,
March 31,
Cubic Consolidated
2020
2019
2020
2019
Net cash used in continuing operating
activities
$
(26.5
)
$
(22.5
)
$
(74.1
)
$
(83.7
)
Capital expenditures
(13.5
)
(10.2
)
(25.3
)
(22.2
)
Operating cash flow associated with
SPV
3.0
9.7
23.2
15.5
Receipt of withheld proceeds from sale of
trade receivables
—
—
5.5
—
Adjusted Free Cash Flow
$
(37.0
)
$
(23.0
)
$
(70.7
)
$
(90.4
)
CUBIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS (UNAUDITED)
(amounts in thousands, except per
share data)
Three Months Ended
Six Months Ended
March 31,
March 31,
2020
2019
2020
2019
Net sales:
Products
$
187,494
$
222,744
$
388,098
$
404,997
Services
133,988
114,595
262,223
237,601
321,482
337,339
650,321
642,598
Costs and expenses:
Products
153,002
167,567
319,845
293,052
Services
88,420
82,212
171,068
174,997
Selling, general and administrative
expenses
78,294
66,195
144,209
129,181
Research and development
11,360
13,754
19,782
25,766
Amortization of purchased intangibles
16,493
12,395
26,582
22,960
Loss (gain) on sale of property, plant and
equipment
40
—
(130
)
—
Restructuring costs
3,807
1,757
5,382
3,749
351,416
343,880
686,738
649,705
Operating loss
(29,934
)
(6,541
)
(36,417
)
(7,107
)
Other income (expenses):
Interest and dividend income
1,693
1,413
3,911
2,647
Interest expense
(8,219
)
(4,531
)
(13,582
)
(8,563
)
Loss on extinguishment of debt
(16,090
)
—
(16,090
)
—
Other income (expense), net
(19,664
)
(3,602
)
(19,791
)
(8,355
)
Loss from continuing operations before
income taxes
(72,214
)
(13,261
)
(81,969
)
(21,378
)
Income tax benefit
(19,784
)
(3,831
)
(13,538
)
(1,334
)
Loss from continuing operations
(52,430
)
(9,430
)
(68,431
)
(20,044
)
Net income (loss) from discontinued
operations
129
(1,339
)
(455
)
(1,339
)
Net loss
(52,301
)
(10,769
)
(68,886
)
(21,383
)
Less noncontrolling interest in net loss
of VIE
(13,178
)
(1,377
)
(9,188
)
(5,404
)
Net loss attributable to Cubic
$
(39,123
)
$
(9,392
)
$
(59,698
)
$
(15,979
)
Amounts attributable to Cubic:
Net loss from continuing operations
$
(39,252
)
$
(8,053
)
$
(59,243
)
$
(14,640
)
Net income (loss) from discontinued
operations
129
(1,339
)
(455
)
(1,339
)
Net loss attributable to Cubic
$
(39,123
)
$
(9,392
)
$
(59,698
)
$
(15,979
)
Net loss per share:
Basic
Continuing operations attributable to
Cubic
$
(1.25
)
$
(0.26
)
$
(1.89
)
$
(0.49
)
Discontinued operations
$
—
$
(0.04
)
$
(0.01
)
$
(0.04
)
Basic earnings per share attributable to
Cubic
$
(1.25
)
$
(0.30
)
$
(1.91
)
$
(0.54
)
Diluted
Continuing operations attributable to
Cubic
$
(1.25
)
$
(0.26
)
$
(1.89
)
$
(0.49
)
Discontinued operations
$
—
$
(0.04
)
$
(0.01
)
$
(0.04
)
Diluted earnings per share attributable to
Cubic
$
(1.25
)
$
(0.30
)
$
(1.91
)
$
(0.54
)
Weighted average shares used in per share
calculations:
Basic
31,296
31,150
31,284
29,821
Diluted
31,296
31,150
31,284
29,821
CUBIC CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
(amounts in thousands)
March 31,
September 30,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
$
117,748
$
65,800
Cash in consolidated VIE
457
347
Restricted cash
21,684
19,507
Restricted cash in consolidated VIE
9,967
9,967
Accounts receivable:
Billed
152,653
127,406
Allowance for doubtful accounts
(1,151
)
(1,392
)
151,502
126,014
Contract assets
270,153
349,559
Recoverable income taxes
23,947
7,754
Inventories
139,652
106,794
Other current assets
59,736
38,534
Other current assets in consolidated
VIE
112
33
Total current assets
794,958
724,309
Long-term contracts financing
receivables
48,526
36,285
Long-term contracts financing receivables
in consolidated VIE
137,870
115,508
Property, plant and equipment, net
156,445
144,969
Operating lease right-of-use asset
85,737
—
Deferred income taxes
3,533
4,098
Goodwill
781,683
578,097
Purchased intangibles, net
242,901
165,613
Other assets
22,037
76,872
Other assets in consolidated VIE
—
1,419
Total assets
$
2,273,690
$
1,847,170
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings
$
337,000
$
195,500
Trade accounts payable
140,561
180,773
Trade accounts payable in consolidated
VIE
—
25
Contract liabilities
69,222
46,170
Accrued compensation and current
liabilities
105,702
95,013
Other current liabilities in consolidated
VIE
181
191
Income taxes payable
481
773
Current portion of long-term debt
11,250
10,714
Total current liabilities
664,397
529,159
Long-term debt
436,322
189,110
Long-term debt in consolidated VIE
87,814
61,994
Operating lease liability
78,408
—
Other noncurrent liabilities
68,127
64,734
Other noncurrent liabilities in
consolidated VIE
33,087
21,605
Shareholders’ equity:
Common stock
281,840
274,472
Retained earnings
798,201
862,948
Accumulated other comprehensive loss
(148,159
)
(139,693
)
Treasury stock at cost
(36,078
)
(36,078
)
Shareholders’ equity related to Cubic
895,804
961,649
Noncontrolling interest in VIE
9,731
18,919
Total shareholders’ equity
905,535
980,568
Total liabilities and shareholders’
equity
$
2,273,690
$
1,847,170
CUBIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (UNAUDITED)
(amounts in thousands)
Three Months Ended
Six Months Ended
March 31,
March 31,
2020
2019
2020
2019
Operating Activities:
Net loss
$
(52,301
)
$
(10,769
)
$
(68,886
)
$
(21,383
)
Net income (loss) from discontinued
operations
(129
)
1,339
455
1,339
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
23,414
17,587
40,364
33,598
Share-based compensation expense
5,382
3,638
9,859
6,358
Change in fair value of contingent
consideration
(1,473
)
241
(4,478
)
670
Change in fair value of interest rate swap
in VIE
15,819
—
11,482
—
Deferred income taxes
2,909
(5,825
)
2,909
(5,825
)
Loss on extinguishment of debt
16,090
—
16,090
—
Other items
13
—
4,308
—
Changes in operating assets and
liabilities, net of effects from acquisitions
(36,281
)
(28,754
)
(86,222
)
(98,467
)
NET CASH USED IN OPERATING ACTIVITIES FROM
CONTINUING OPERATIONS
(26,557
)
(22,543
)
(74,119
)
(83,710
)
NET CASH PROVIDED BY OPERATING ACTIVITIES
FROM DISCONTINUED OPERATIONS
129
—
85
—
NET CASH USED IN OPERATING ACTIVITIES
(26,428
)
(22,543
)
(74,034
)
(83,710
)
Investing Activities:
Acquisition of businesses, net of cash
acquired
(234,538
)
(148,704
)
(234,538
)
(395,854
)
Purchases of property, plant and
equipment
(13,478
)
(10,132
)
(25,311
)
(22,177
)
Receipt of withheld proceeds from sale of
trade receivables
—
—
5,521
—
NET CASH USED IN INVESTING ACTIVITIES
(248,016
)
(158,836
)
(254,328
)
(418,031
)
Financing Activities:
Proceeds from short-term borrowings
727,000
242,500
884,500
614,500
Principal payments on short-term
borrowings
(616,500
)
(98,000
)
(743,000
)
(405,500
)
Proceeds from long-term borrowings
450,000
—
450,000
—
Principal payments on long-term debt
(199,833
)
—
(199,833
)
—
Proceeds from long-term borrowings in
consolidated VIE
3,036
9,700
23,222
15,498
Debt extinguishment make whole payment
(15,856
)
—
(15,856
)
—
Deferred financing fees
(2,517
)
—
(2,517
)
—
Proceeds from stock issued under employee
stock purchase plan
—
783
1,169
783
Purchase of common stock
(39
)
—
(3,660
)
(3,419
)
Dividends paid
(4,225
)
(4,205
)
(4,225
)
(4,205
)
Contingent consideration payments related
to acquisitions of businesses
—
(385
)
—
(820
)
Proceeds from equity offering, net
—
—
—
215,832
NET CASH PROVIDED BY FINANCING
ACTIVITIES
341,066
150,393
389,800
432,669
Effect of exchange rates on cash
(11,224
)
(622
)
(7,203
)
1,340
NET INCREASE (DECREASE) IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH
55,398
(31,608
)
54,235
(67,732
)
Cash, cash equivalents and restricted cash
at the beginning of the period
94,458
103,484
95,621
139,608
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
AT THE END OF THE PERIOD
$
149,856
$
71,876
$
149,856
$
71,876
Supplemental disclosure of non-cash
investing and financing activities:
Receivable recognized in connection with
the acquisition of Pixia, net
$
1,214
$
—
$
1,214
$
—
Contingent consideration liability
incurred with the acquisition of Delerrok
1,600
—
1,600
—
Receivable recognized in connection with
the acquisition of Trafficware, net
—
—
—
1,588
Receivable recognized in connection with
the acquisition of Gridsmart, net
—
442
—
442
Receivable recognized in connection with
the acquisition of Nuvotronics, net
—
166
—
166
Liability incurred to acquire Nuvotronics,
net
—
4,900
—
4,900
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200506006002/en/
Media Contact Laura Chon Corporate Communications Cubic
Corporation PH: +1 858-505-2181 Laura.Chon@cubic.com Investor
Contact Kirsten Nielsen Investor Relations Cubic Corporation PH
+1 212-331-9760 Kirsten.Nielsen@cubic.com
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