Cubic Corporation (NYSE: CUB) today announced its financial
results for the third fiscal quarter ended June 30, 2020.
Third Quarter Fiscal Year 2020 Highlights (all metrics
compared to Third Quarter Fiscal Year 2019 unless otherwise
noted)
- Sales of $350.4 million, down 8%
- Net loss from continuing operations attributable to Cubic of
$1.4 million, or $0.04 per share, compared to net income from
continuing operations attributable to Cubic of $24.1 million, or
$0.77 per share in the third quarter of fiscal 2019; prior year
included $32.6 million gain on sale of fixed assets
- Adjusted earnings per share of $0.74, up 12%
- Adjusted EBITDA of $38.2 million, up 25%
- Backlog increased to $3.7 billion, up 10% from fiscal 2019
year-end
- Cubic and Massachusetts Bay Transportation Authority (“MBTA”)
closed an amended agreement for delivery of next-generation fare
payment system
- Recent, multi-year awards in defense to support future growth:
U.S. Air Force Advanced Battle Management System (multiple award,
$950 million IDIQ) and $38 million contract to deliver High
Capacity Backbone prototype, with significant market opportunity;
U.S. Navy Surface Training Immersive Gaming and Simulations (single
award, $99 million IDIQ)
- The company estimates unfavorable impacts totaling up to $41
million for Sales and up to $14 million for Adjusted EBITDA as a
result of the COVID-19 pandemic
“We are pleased with our performance and strategic progress this
quarter, especially in light of the challenging macro environment
due to the ongoing COVID-19 pandemic. In the third fiscal quarter,
Cubic grew backlog, Adjusted EBITDA and Adjusted EPS and delivered
strong Adjusted Free Cash Flow, supported by the successful
completion of our Boston contract amendment and disciplined cost
management,” said Bradley H. Feldmann, chairman, president and
chief executive officer of Cubic Corporation. “We continue to help
our transportation customers deliver solutions that enhance safety
and provide insights to support COVID-19 recovery. The health and
safety of our team, partners and community remains our top priority
and we are committed to fostering an inclusive workplace where
everyone is respected, supported, empowered and has the opportunity
to drive innovation - Cubic’s lifeblood.”
COVID-19 Business Update
As a provider of essential products and services, Cubic’s
businesses have remained operational during the ongoing COVID-19
pandemic. The company remains focused on keeping its employees and
customers safe through increased sanitation measures as well as
social distancing and additional safety protocols. While Cubic has
not experienced significant disruptions in its supply chain or
manufacturing facilities to date, the pandemic has presented
challenges and impacts on each of its businesses, including delays
of customer orders, slowdown of certain projects and impacts due to
travel restrictions and remote work. The company estimates that
these unfavorable impacts relating to the COVID-19 pandemic totaled
up to $41 million for Sales and up to $14 million for Adjusted
EBITDA in the third quarter of fiscal year 2020. The company’s
proactive efforts to ensure business continuity, coupled with
disciplined cost management, partially mitigated the disruptions
caused by COVID-19 on the company’s operations and financial
performance for the period. Additional information regarding
COVID-19 can be found in Cubic’s most recent Quarterly Report on
Form 10-Q.
Financial Results Summary
Three Months Ended
Nine Months Ended
June 30,
June 30,
2020
2019
2020
2019
(in millions, except per share
data)
Sales
$
350.4
$
382.7
$
1,000.8
$
1,025.3
Operating income (loss)
24.7
34.7
(11.7
)
27.6
Adjusted EBITDA1
38.2
30.6
54.1
70.0
Adjusted net income1
23.0
20.7
15.4
37.4
Income (loss) from continuing operations
attributable to Cubic before income taxes
$
3.2
$
25.1
$
(69.6
)
$
9.2
Income tax provision (benefit) from
continuing operations attributable to Cubic
4.6
1.0
(8.9
)
(0.3
)
Net income (loss) from continuing
operations attributable to Cubic
$
(1.4
)
$
24.1
$
(60.7
)
$
9.5
Income (loss) per share from continuing
operations attributable to Cubic
$
(0.04
)
$
0.77
$
(1.94
)
$
0.31
Adjusted earnings per share1
0.74
0.66
0.49
1.23
Acquisition-related expenses, excluding
amortization
2.0
4.7
7.9
13.3
Strategic and IT system resource planning
expenses
0.4
2.4
3.3
6.3
Depreciation and amortization
23.4
15.3
63.8
48.9
Research and development expense
12.3
12.5
32.0
38.2
(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 Third Quarter Fiscal Year 2020 Results
(all metrics compared to Third
Quarter Fiscal Year 2019 unless otherwise noted)
Sales for the third quarter of fiscal 2020 decreased 8% as
reported and 9% on an organic basis to $350.4 million, compared to
$382.7 million in the prior year period, reflecting declines in
Mission Solutions and Global Defense, and partially offset by
growth in Transportation Systems. Sales were negatively impacted by
COVID-19 due to delayed orders, delays and disruptions to current
projects as well as lower transit ridership.
Operating income in the third quarter of fiscal 2020 was $24.7
million, compared to $34.7 million in the prior year period.
Operating income was favorably impacted in the prior year due to a
$32.6 million gain on the sale of real estate assets. Excluding
this impact, the change in operating income in the third quarter
primarily reflects an increase in operating income in
Transportation Systems, including the Boston MBTA contract
amendment and company-wide cost reduction initiatives, offset by an
operating loss in Mission Solutions. Amortization of purchased
intangibles for the third quarter of fiscal 2020 increased to $16.4
million from $9.7 million in the third quarter fiscal 2019.
Additionally, Cubic’s consolidated variable interest entity (“VIE”)
recognized higher operating income due to the contract amendment
with the Boston MBTA. Operating margin decreased approximately 210
basis points to 7.0%, compared to 9.1% in the prior year
period.
Adjusted EBITDA increased 25% to $38.2 million, compared to
$30.6 million in the prior year period, driven by growth in
Transportation Systems, which benefited from the Boston MBTA
contract amendment and company-wide cost reduction initiatives,
which partially mitigated the impacts related to COVID-19. Adjusted
EBITDA margin increased approximately 290 basis points to 10.9%,
compared to 8.0% in the prior year period.
Net loss from continuing operations attributable to Cubic was
$1.4 million, or $0.04 per share, compared to net income from
continuing operations attributable to Cubic of $24.1 million in the
prior year period, or $0.77 per share, primarily reflecting lower
operating income and higher taxes.
Adjusted net income was $23.0 million, or $0.74 per share,
compared to Adjusted net income of $20.7 million, or $0.66 per
share, in the prior year period, reflecting higher Adjusted EBITDA,
partially offset by higher taxes and depreciation expense.
Net cash used in continuing operations was $29.2 million,
including the impact of consolidating the Boston VIE, compared to
net cash provided by continuing operations of $1.1 million in the
prior year period. Adjusted Free Cash Flow was $43.8 million,
compared to $52.5 million in the prior year period, reflecting a
cash receipt from the Boston contract and a milestone payment
received from the New York contract. Adjusted Free Cash Flow in the
prior year period was favorably impacted by net proceeds from the
sale of real estate of $44.9 million.
Reportable Segment Results (all metrics compared to Third
Quarter Fiscal Year 2019 unless otherwise noted)
Three Months Ended
Nine Months Ended
June 30,
June 30,
2020
2019
2020
2019
Sales:
(in millions)
(in millions)
Cubic Transportation Systems
$
215.5
$
212.7
$
601.8
$
595.2
Cubic Mission Solutions
69.0
95.0
167.2
203.3
Cubic Global Defense Systems
65.9
75.0
231.8
226.8
Total sales
$
350.4
$
382.7
$
1,000.8
$
1,025.3
Operating income (loss):
Cubic Transportation Systems
$
50.9
$
17.2
$
77.8
$
37.0
Cubic Mission Solutions
(21.3
)
1.3
(67.6
)
(12.1
)
Cubic Global Defense Systems
6.1
1.9
18.1
10.0
Unallocated corporate expenses
(11.0
)
14.3
(40.0
)
(7.3
)
Total operating income (loss)
$
24.7
$
34.7
$
(11.7
)
$
27.6
Adjusted EBITDA:
Cubic Transportation Systems
$
41.9
$
24.5
$
88.3
$
64.3
Cubic Mission Solutions
(5.0
)
9.3
(30.8
)
9.9
Cubic Global Defense Systems
8.6
7.4
23.9
19.6
Unallocated corporate expenses
(7.3
)
(10.6
)
(27.3
)
(23.8
)
Total Adjusted EBITDA
$
38.2
$
30.6
$
54.1
$
70.0
Cubic Transportation Systems (“CTS”)
CTS sales increased 1% to $215.5 million, compared to $212.7
million in prior year period. Organic sales were up 2%, primarily
reflecting growth from next-generation fare payment systems
contracts in Boston and the San Francisco Bay Area. CTS was
impacted by headwinds related to COVID-19, including delays of new
awards, slowdowns of projects and transit ridership decline.
CTS Adjusted EBITDA increased 71% to $41.9 million, compared to
$24.5 million in the prior year period, reflecting the Boston
contract amendment as well as benefits from the company’s cost
savings program, which offset unfavorable impacts related to
COVID-19.
Cubic Mission Solutions (“CMS”)
CMS sales decreased 27% to $69.0 million, compared to $95.0
million in the prior year period. Organic sales declined 32%
reflecting lower orders and deliveries of expeditionary satellite
communications products (“GATR”) due to the timing of
shipments.
CMS Adjusted EBITDA decreased to negative $5.0 million, compared
to $9.3 million in the prior year period. Adjusted EBITDA reflects
lower sales of high-margin GATR products and continued investments
in franchise programs.
Cubic Global Defense Systems (“CGD”)
CGD sales decreased 12% to $65.9 million, compared to $75.0
million in the prior year period. Organic sales decline of 11%
reflects lower sales in ground combat training systems, partially
offset by an increase in air combat training systems work. CGD
sales in the third quarter also reflect the delay of international
bookings and other expected program awards, including disruptions
related to COVID-19.
CGD Adjusted EBITDA increased 16% to $8.6 million, compared to
$7.4 million in the prior year period, reflecting continued
operational and cost management.
Backlog
Backlog increased by $331.4 million from September 30, 2019 to
June 30, 2020. Foreign currency had a favorable impact of $16.5
million during the period.
June 30,
September 30,
2020
2019
(in millions)
Total backlog
Cubic Transportation Systems
$
3,194.8
$
2,953.3
Cubic Mission Solutions
181.0
103.7
Cubic Global Defense Systems
356.6
344.0
Total
$
3,732.4
$
3,401.0
Balance Sheet and Liquidity
Cubic expects to have sufficient liquidity during the evolving
economic conditions surrounding the COVID-19 pandemic. The company
has taken a number of recent steps to strengthen liquidity and
manage cash flow, including its long-term debt restructuring
announced in March 2020 as well as a cost savings program, which is
on track for anticipated cumulative net savings of $30 million to
$35 million through Cubic’s fiscal year ending September 30,
2021.
Cubic continues to prioritize reducing leverage and, in
connection therewith, reduced net debt by $54 million in the third
quarter of fiscal 2020. Cubic’s bank net leverage ratio, as defined
in its credit agreement, was 3.7x at quarter end, and the credit
agreement allows the company to have a net leverage ratio of up to
4.75x through December 2020. Cubic remains focused on cash
preservation and lowering its net leverage ratio to its target of
below 3.0x in future periods.
Conference Call and Webcast Information
Date:
August 5, 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:
833-968-2299
778-560-2777 (international)
Conference ID 5998881
Webcast:
https://event.on24.com/wcc/r/2403361/D0EC3B567D3B92AEA53FA3C06E741AF0
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
Cubic’s expectations regarding future events or its future
financial and operating performance and delivering on its 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 Cubic’s business, financial
condition and operating results; Cubic’s 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 Cubic’s contracts with them;
Cubic’s assumptions covering behavior by public transit
authorities; Cubic’s ability to successfully integrate recently
acquired companies, including Trafficware, GRIDSMART, Nuvotronics,
Delerrok and PIXIA into its business and to properly assess the
effects of such integration on its financial condition and
operating results; the U.S. government’s increased emphasis on
awarding contracts to small businesses, and Cubic’s 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 Cubic does
business or intends to do business; competition and technology
changes in the defense and transportation industries; the change in
the way transit agencies pay for transit systems; Cubic’s ability
to accurately estimate the time and resources necessary to satisfy
obligations under its contracts; the effect of adverse regulatory
changes on Cubic’s ability to sell products and services; Cubic’s
ability to identify, attract and retain qualified employees;
unforeseen problems with the implementation and maintenance of
Cubic’s information systems, including Cubic’s enterprise resource
planning (“ERP”) system; business disruptions due to cyber security
threats, physical threats, terrorist acts, acts of nature and
public health crises (including COVID-19); Cubic’s involvement in
litigation, including litigation related to patents, proprietary
rights and employee misconduct; Cubic’s reliance on subcontractors
and on a limited number of third parties to manufacture and supply
its products; Cubic’s ability to comply with its 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, Cubic’s products and systems; and changes in U.S.
and foreign tax laws, exchange rates or Cubic’s economic
assumptions regarding its pension plans. In addition, please refer
to the risk factors contained in Cubic’s filings with the
Securities and Exchange Commission (the “SEC”) available at
www.sec.gov, including Cubic’s most recent Annual Report on Form
10-K for its 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, Cubic undertakes 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”), Cubic provides 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. Cubic believes that these
non-GAAP measures provide additional insight into its ongoing
operations and underlying business trends, facilitate a comparison
of its results between current and prior periods, and facilitate
the comparison of its operating results with the results of other
public companies that provide non-GAAP measures. Cubic uses
Adjusted EBITDA internally to evaluate the operating performance of
its 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 Cubic believes are not part of
its 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 Cubic’s ERP
system and the redesign of its 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 Cubic’s Annual Report on Form 10-K for the fiscal year
ended September 30, 2019 and its 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, Cubic’s 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 Cubic’s results as reported under GAAP. Investors
are advised to carefully review Cubic’s GAAP financial results that
are disclosed in its filings with the SEC, including its Annual
Report on Form 10-K for the fiscal year ended September 30, 2019
and its most recent Quarterly Reports on Form 10-Q.
Cubic reconciles organic sales growth to sales growth as
reported, which it considers to be the most directly comparable
GAAP financial measure. Cubic reconciles Adjusted EBITDA and
Adjusted net income to GAAP net income, which it considers to be
the most directly comparable GAAP financial measure. Cubic
reconciles Adjusted EPS to GAAP EPS, which it considers to be the
most directly comparable GAAP financial measure. Cubic reconciles
Adjusted Free Cash Flow to Net cash provided by continuing
operations, which it considers 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 June 30,
2020
Nine Months Ended June 30,
2020
Cubic
CTS
CMS
CGD
Cubic
CTS
CMS
CGD
Sales growth as reported
(8.4
%)
1.3
%
(27.3
%)
(12.2
%)
(2.4
%)
1.1
%
(17.7
%)
2.2
%
Contribution from acquisitions
(1.2
%)
(0.2
%)
(4.4
%)
—
(1.5
%)
(0.9
%)
(5.2
%)
—
Foreign currency translation
0.9
%
1.2
%
—
1.0
%
1.0
%
1.4
%
—
0.8
%
Organic sales growth
(8.8
%)
2.4
%
(31.7
%)
(11.1
%)
(2.9
%)
1.6
%
(22.9
%)
3.0
%
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
Nine Months Ended
(in millions)
June 30,
June 30,
Cubic Transportation Systems
2020
2019
2020
2019
Sales
$
215.5
$
212.7
$
601.8
$
595.2
Operating income
$
50.9
$
17.2
$
77.8
$
37.0
Depreciation and amortization
7.1
6.9
21.6
24.1
Noncontrolling interest in income of
VIE
(15.6
)
(2.5
)
(17.8
)
(5.8
)
Acquisition-related expenses (gains),
excluding amortization
(0.7
)
1.4
6.0
6.8
Restructuring costs
0.2
1.5
0.7
2.2
Adjusted EBITDA
$
41.9
$
24.5
$
88.3
$
64.3
Adjusted EBITDA margin
19.4
%
11.5
%
14.7
%
10.8
%
Three Months Ended
Nine Months Ended
(in millions)
June 30,
June 30,
Cubic Mission Solutions
2020
2019
2020
2019
Sales
$
69.0
$
95.0
$
167.2
$
203.3
Operating income (loss)
$
(21.3
)
$
1.3
$
(67.6
)
$
(12.1
)
Depreciation and amortization
13.3
6.0
34.3
17.2
Acquisition-related expenses, excluding
amortization
2.6
2.0
2.1
4.8
Restructuring costs
0.4
-
0.4
-
Adjusted EBITDA
$
(5.0
)
$
9.3
$
(30.8
)
$
9.9
Adjusted EBITDA margin
(7.2
%)
9.8
%
(18.4
%)
4.9
%
Three Months Ended
Nine Months Ended
(in millions)
June 30,
June 30,
Cubic Global Defense Systems
2020
2019
2020
2019
Sales
$
65.9
$
75.0
$
231.8
$
226.8
Operating income
$
6.1
$
1.9
$
18.1
$
10.0
Depreciation and amortization
1.9
1.7
5.2
5.4
Acquisition-related expenses (gains),
excluding amortization
-
0.9
(0.5
)
1.2
(Gain) loss on sale of fixed assets
(0.1
)
0.3
(0.2
)
0.3
Restructuring costs
0.7
2.6
1.3
2.7
Adjusted EBITDA
$
8.6
$
7.4
$
23.9
$
19.6
Adjusted EBITDA margin
13.1
%
9.9
%
10.3
%
8.6
%
Three Months Ended
Nine Months Ended
(in millions)
June 30,
June 30,
Cubic Consolidated
2020
2019
2020
2019
Sales
$
350.4
$
382.7
$
1,000.8
$
1,025.3
Net income (loss) from continuing
operations attributable to Cubic
$
(1.4
)
$
24.1
$
(60.7
)
$
9.5
Noncontrolling interest in net income
(loss) of VIE
9.4
(3.6
)
0.2
(9.0
)
Income tax provision (benefit)
4.6
1.0
(8.9
)
(0.3
)
Interest expense, net
5.4
4.5
15.0
10.4
Loss on extinguishment of debt
-
-
16.1
-
Other non-operating expense (income),
net
6.8
8.8
26.6
17.1
Operating income (loss)
$
24.7
$
34.7
$
(11.7
)
$
27.6
Depreciation and amortization
23.4
15.3
63.8
48.9
Noncontrolling interest in EBITDA of
VIE
(15.6
)
(2.5
)
(17.8
)
(5.8
)
Acquisition-related expenses, excluding
amortization
2.0
4.7
7.9
13.3
Strategic and IT system resource planning
expenses
0.4
2.4
3.3
6.3
Gain on sale of fixed assets
(0.1
)
(32.6
)
(0.2
)
(32.6
)
Restructuring costs
3.4
8.6
8.8
12.3
Adjusted EBITDA
$
38.2
$
30.6
$
54.1
$
70.0
Adjusted EBITDA margin
10.9
%
8.0
%
5.4
%
6.8
%
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
Nine Months Ended
June 30,
June 30,
2020
2019
2020
2019
($ In Millions, Except Per Share
Data)
GAAP EPS
$
(0.04
)
$
0.77
$
(1.94
)
$
0.31
GAAP Net income (loss) from continuing
operations attributable to Cubic
$
(1.4
)
$
24.1
$
(60.7
)
$
9.5
Noncontrolling interest in net income
(loss) of VIE
9.4
(3.6
)
0.2
(9.0
)
Amortization of purchased intangibles
16.4
9.7
42.9
32.7
Gain on sale of fixed assets
(0.1
)
(32.6
)
(0.2
)
(32.6
)
Restructuring costs
3.4
8.6
8.8
12.3
Loss on extinguishment of debt
—
—
16.1
—
Acquisition-related expenses, excluding
amortization
2.0
4.7
7.9
13.3
Strategic and IT system resource planning
expenses
0.4
2.4
3.3
6.3
Other non-operating expense (income),
net
6.8
8.8
26.6
17.1
Noncontrolling interest in Adjusted Net
Income of VIE
(15.6
)
(2.7
)
(17.8
)
(6.2
)
Tax impact related to acquisitions1
0.6
0.1
(12.9
)
(7.4
)
Impact of U.S. Tax Reform
0.1
—
0.7
—
Tax impact related to non-GAAP
adjustments2
1.1
1.3
0.5
1.4
Adjusted net income
$
23.0
$
20.7
$
15.4
$
37.4
Adjusted EPS
$
0.74
$
0.66
$
0.49
$
1.23
Weighted Average Diluted Shares
Outstanding (in thousands)
31,299
31,249
31,289
30,332
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
Nine Months Ended
($ In Millions)
June 30,
June 30,
Cubic Consolidated
2020
2019
2020
2019
Net cash provided by (used in)
continuing operating activities
$
(29.2
)
$
1.1
$
(103.3
)
$
(82.7
)
Capital expenditures
(10.5
)
(13.1
)
(35.8
)
(35.3
)
Proceeds from sale of property, plant and
equipment
—
44.9
—
44.9
Operating cash flow associated with
SPV
83.5
19.6
106.7
35.1
Receipt of withheld proceeds from sale of
trade receivables
—
—
5.5
—
Adjusted Free Cash Flow
$
43.8
$
52.5
$
(26.9
)
$
(37.9
)
.
CUBIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS (UNAUDITED)
(amounts in thousands, except per
share data)
Three Months Ended
Nine Months Ended
June 30,
June 30,
2020
2019
2020
2019
Net sales:
Products
$
221,039
$
255,900
$
609,137
$
660,897
Services
129,400
126,779
391,623
364,380
350,439
382,679
1,000,760
1,025,277
Costs and expenses:
Products
151,553
190,434
471,398
491,856
Services
79,943
77,224
251,011
243,851
Selling, general and administrative
expenses
62,272
82,167
206,481
211,348
Research and development
12,254
12,470
32,036
38,236
Amortization of purchased intangibles
16,358
9,717
42,940
32,677
Gain on sale of property, plant and
equipment
(40
)
(32,563
)
(170
)
(32,563
)
Restructuring costs
3,393
8,505
8,775
12,254
325,733
347,954
1,012,471
997,659
Operating income (loss)
24,706
34,725
(11,711
)
27,618
Other income (expenses):
Interest and dividend income
1,997
1,696
5,908
4,343
Interest expense
(7,366
)
(6,132
)
(20,948
)
(14,695
)
Loss on extinguishment of debt
—
—
(16,090
)
—
Other income (expense), net
(6,773
)
(8,714
)
(26,564
)
(17,069
)
Income (loss) from continuing operations
before income taxes
12,564
21,575
(69,405
)
197
Income tax provision (benefit)
4,602
1,029
(8,936
)
(305
)
Income (loss) from continuing
operations
7,962
20,546
(60,469
)
502
Net income (loss) from discontinued
operations
252
(202
)
(203
)
(1,541
)
Net income (loss)
8,214
20,344
(60,672
)
(1,039
)
Less noncontrolling interest in net income
(loss) of VIE
9,369
(3,566
)
181
(8,970
)
Net income (loss) attributable to
Cubic
$
(1,155
)
$
23,910
$
(60,853
)
$
7,931
Amounts attributable to Cubic:
Net income (loss) from continuing
operations
$
(1,407
)
$
24,112
$
(60,650
)
$
9,472
Net income (loss) from discontinued
operations
252
(202
)
(203
)
(1,541
)
Net income (loss) attributable to
Cubic
$
(1,155
)
$
23,910
$
(60,853
)
$
7,931
Net income (loss) per share:
Basic
Continuing operations attributable to
Cubic
$
(0.04
)
$
0.77
$
(1.94
)
$
0.31
Discontinued operations
$
0.01
$
(0.01
)
$
(0.01
)
$
(0.05
)
Basic earnings per share attributable to
Cubic
$
(0.04
)
$
0.77
$
(1.94
)
$
0.26
Diluted
Continuing operations attributable to
Cubic
$
(0.04
)
$
0.77
$
(1.94
)
$
0.31
Discontinued operations
$
0.01
$
(0.01
)
$
(0.01
)
$
(0.05
)
Diluted earnings per share attributable to
Cubic
$
(0.04
)
$
0.77
$
(1.94
)
$
0.26
Dividends per common share
$
—
$
—
$
0.14
$
0.14
Weighted average shares used in per share
calculations:
Basic
31,299
31,160
31,289
30,267
Diluted
31,299
31,249
31,289
30,332
CUBIC CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
(amounts in thousands)
June 30,
September 30,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
$
109,050
$
65,800
Cash of consolidated VIE
743
347
Restricted cash
22,279
19,507
Restricted cash of consolidated VIE
1,669
9,967
Accounts receivable:
Billed
145,599
127,406
Allowance for doubtful accounts
(1,141
)
(1,392
)
144,458
126,014
Contract assets
253,900
349,559
Recoverable income taxes
16,495
7,754
Inventories
151,613
106,794
Other current assets
35,570
38,534
Other current assets of consolidated
VIE
99
33
Total current assets
735,876
724,309
Long-term contracts financing
receivables
53,739
36,285
Long-term contracts financing receivables
of consolidated VIE
191,042
115,508
Property, plant and equipment, net
160,547
144,969
Operating lease right-of-use asset
82,141
—
Deferred income taxes
8,932
4,098
Goodwill
783,368
578,097
Purchased intangibles, net
226,552
165,613
Other assets
19,615
76,872
Other assets of consolidated VIE
—
1,419
Total assets
$
2,261,812
$
1,847,170
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings
$
277,000
$
195,500
Trade accounts payable
121,253
180,773
Trade accounts payable of consolidated
VIE
175
25
Contract liabilities
71,269
46,170
Accrued compensation and current
liabilities
117,332
95,013
Other current liabilities of consolidated
VIE
150
191
Income taxes payable
814
773
Current portion of long-term debt
11,250
10,714
Total current liabilities
599,243
529,159
Long-term debt
433,653
189,110
Long-term debt of consolidated VIE
155,493
61,994
Operating lease liability
75,468
—
Other noncurrent liabilities
78,528
64,734
Other noncurrent liabilities of
consolidated VIE
5,572
21,605
Shareholders’ equity:
Common stock
287,252
274,472
Retained earnings
797,046
862,948
Accumulated other comprehensive loss
(155,357
)
(139,693
)
Treasury stock at cost
(36,078
)
(36,078
)
Shareholders’ equity related to Cubic
892,863
961,649
Noncontrolling interest in VIE
20,992
18,919
Total shareholders’ equity
913,855
980,568
Total liabilities and shareholders’
equity
$
2,261,812
$
1,847,170
CUBIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (UNAUDITED)
(amounts in thousands)
Three Months Ended
Nine Months Ended
June 30,
June 30,
2020
2019
2020
2019
Operating Activities:
Net income (loss)
$
8,214
$
20,344
$
(60,672
)
$
(1,039
)
Net income (loss) from discontinued
operations
(252
)
202
203
1,541
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization
23,394
15,351
63,758
48,949
Share-based compensation expense
5,412
4,402
15,271
10,760
Change in fair value of contingent
consideration
(74
)
1,163
(4,552
)
1,833
Change in fair value of interest rate swap
of consolidated VIE
6,888
—
18,370
—
Gain on sale of property, plant and
equipment
—
(32,563
)
(170
)
(32,563
)
Deferred income taxes
(2,622
)
(948
)
(14,457
)
(6,773
)
Loss on extinguishment of debt
—
—
16,090
—
Other items
(5,020
)
—
(712
)
—
Changes in operating assets and
liabilities, net of effects from acquisitions
(65,170
)
(6,897
)
(136,478
)
(105,364
)
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES FROM CONTINUING OPERATIONS
(29,230
)
1,054
(103,349
)
(82,656
)
NET CASH PROVIDED BY OPERATING ACTIVITIES
FROM DISCONTINUED OPERATIONS
2,693
—
2,778
—
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
(26,537
)
1,054
(100,571
)
(82,656
)
Investing Activities:
Acquisition of businesses, net of cash
acquired
—
—
(234,788
)
(395,854
)
Proceeds from sale of property, plant and
equipment
—
44,891
—
44,891
Purchases of property, plant and
equipment
(10,741
)
(13,114
)
(35,802
)
(35,291
)
Purchase of non-marketable debt and equity
securities
—
(52,997
)
—
(52,997
)
Receipt of withheld proceeds from sale of
trade receivables
—
—
5,521
—
NET CASH USED IN INVESTING ACTIVITIES
(10,741
)
(21,220
)
(265,069
)
(439,251
)
Financing Activities:
Proceeds from short-term borrowings
110,000
168,000
994,500
782,500
Principal payments on short-term
borrowings
(170,000
)
(146,000
)
(913,000
)
(551,500
)
Proceeds from long-term borrowings
—
—
450,000
—
Principal payments on long-term debt
(3,088
)
—
(202,921
)
—
Proceeds from long-term borrowings of
consolidated VIE
174,938
19,841
198,160
35,816
Principal payments on long-term borrowings
of consolidated VIE
(92,575
)
—
(92,575
)
—
Debt extinguishment make whole payment
—
—
(15,856
)
—
Deferred financing fees
—
(1,854
)
(2,517
)
(1,854
)
Deferred financing fees of consolidated
VIE
(8,638
)
(213
)
(8,638
)
(690
)
Proceeds from stock issued under employee
stock purchase plan
—
—
1,169
783
Purchase of common stock
—
—
(3,660
)
(3,419
)
Dividends paid
—
—
(4,225
)
(4,205
)
Contingent consideration payments related
to acquisitions of businesses
—
—
—
(820
)
Equity contribution from Boston VIE
partner
1,892
—
1,892
—
Proceeds from equity offering, net
—
—
—
215,832
NET CASH PROVIDED BY FINANCING
ACTIVITIES
12,529
39,774
402,329
472,443
Effect of exchange rates on cash
8,634
(1,574
)
1,431
(234
)
NET INCREASE (DECREASE) IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH
(16,115
)
18,034
38,120
(49,698
)
Cash, cash equivalents and restricted cash
at the beginning of the period
149,856
71,876
95,621
139,608
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
AT THE END OF THE PERIOD
$
133,741
$
89,910
$
133,741
$
89,910
Supplemental disclosure of non-cash
investing and financing activities:
Contingent consideration liability
incurred with the acquisition of Delerrok
—
—
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
Liability incurred to acquire Nuvotronics,
net
—
—
—
5,300
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200805005957/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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