10-Q 1 a14-11797_110q.htm 10-Q

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the Quarter Ended March 31, 2014

 

001-08931

Commission File Number

 

CUBIC CORPORATION

Exact Name of Registrant as Specified in its Charter

 

Delaware

 

95-1678055

State of Incorporation

 

IRS Employer Identification No.

 

9333 Balboa Avenue
San Diego, California 92123
Telephone (858) 277-6780

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Small Reporting Company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Exchange Act). Yes o No x

 

As of April 28, 2014, registrant had only one class of common stock of which there were 26,788,525 shares outstanding (after deducting 8,945,300 shares held as treasury stock).

 

 

 



Table of Contents

 

CUBIC CORPORATION

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended March 31, 2014

 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Statements of Income

3

 

Condensed Consolidated Statements of Comprehensive Income

4

 

Condensed Consolidated Balance Sheets

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to the Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

38

Item 4.

Controls and Procedures

38

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

39

Item 1A.

Risk Factors

40

Item 6.

Exhibits

40

 



Table of Contents

 

EXPLANATORY NOTE REGARDING RESTATEMENT

 

This Quarterly Report on Form 10-Q of Cubic Corporation (“Company”, “we”, and “us”) for the three- and six-month periods ended March 31, 2014, includes our restated Condensed Consolidated Balance Sheet as of September 30, 2013 and our restated Condensed Consolidated Statements of Income, Comprehensive Income, and Cash Flows for the three- and six-month periods ended March 31, 2013. The restatement resulted from our identification of certain errors in our recognition of revenue for one of our wholly owned subsidiaries. See Note 2, “Restatement of Condensed Consolidated Financial Statements” of the Notes to Condensed Consolidated Financial Statements in Part I Item 1 for a detailed discussion of the errors and effect of the restatement.

 

The restatement is more fully described in our Annual Report on Form 10-K/A for the year ended September 30, 2013 filed concurrently herewith.

 



Table of Contents

 

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

 

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(amounts in thousands, except per share data)

 

 

 

Six Months Ended

 

Three Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

(As Restated)

 

 

 

(As Restated)

 

Net sales:

 

 

 

 

 

 

 

 

 

Products

 

$

268,770

 

$

301,754

 

$

146,789

 

$

167,036

 

Services

 

392,859

 

381,651

 

207,703

 

201,573

 

 

 

661,629

 

683,405

 

354,492

 

368,609

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Products

 

196,944

 

219,032

 

110,185

 

119,145

 

Services

 

324,180

 

297,391

 

162,693

 

153,320

 

Selling, general and administrative

 

85,019

 

82,263

 

48,265

 

41,320

 

Restructuring costs

 

203

 

6,084

 

203

 

6,084

 

Research and development

 

9,873

 

12,920

 

4,959

 

7,098

 

Amortization of purchased intangibles

 

11,403

 

7,830

 

6,010

 

4,266

 

 

 

627,622

 

625,520

 

332,315

 

331,233

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

34,007

 

57,885

 

22,177

 

37,376

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

363

 

749

 

118

 

312

 

Interest expense

 

(1,613

)

(1,522

)

(752

)

(657

)

Other income (expense) - net

 

40

 

49

 

386

 

(53

)

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

32,797

 

57,161

 

21,929

 

36,978

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

8,248

 

13,145

 

5,809

 

7,276

 

 

 

 

 

 

 

 

 

 

 

Net income

 

24,549

 

44,016

 

16,120

 

29,702

 

 

 

 

 

 

 

 

 

 

 

Less noncontrolling interest in income of VIE

 

69

 

125

 

28

 

52

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Cubic

 

$

24,480

 

$

43,891

 

$

16,092

 

$

29,650

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to Cubic

 

 

 

 

 

 

 

 

 

Basic

 

$

0.91

 

$

1.64

 

$

0.60

 

$

1.11

 

Diluted

 

$

0.91

 

$

1.64

 

$

0.60

 

$

1.11

 

 

 

 

 

 

 

 

 

 

 

Dividends per common share

 

$

0.12

 

$

0.12

 

$

0.12

 

$

0.12

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used in per share calculations:

 

 

 

 

 

 

 

 

 

Basic

 

26,785

 

26,736

 

26,786

 

26,736

 

Diluted

 

26,892

 

26,736

 

26,901

 

26,736

 

 

See accompanying notes.

 

3



Table of Contents

 

CUBIC CORPORATION

CONDENSED CONSOLIDATED

STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

 

 

 

Six Months Ended

 

Three Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

(As Restated)

 

 

 

(As Restated)

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

24,549

 

$

44,016

 

$

16,120

 

$

29,702

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

11,862

 

(13,989

)

3,645

 

(15,338

)

Change in net unrealized gains/losses from cash flow hedges:

 

 

 

 

 

 

 

 

 

Change in fair value of cash flow hedges, net of tax

 

(181

)

(1,337

)

(1,288

)

(732

)

Adjustment for net gains/losses realized and included in net income, net of tax

 

(23

)

1,334

 

(55

)

(13

)

Total change in net unrealized gains/losses from cash flow hedges, net of tax

 

(204

)

(3

)

(1,343

)

(745

)

Total other comprehensive income (loss)

 

11,658

 

(13,992

)

2,302

 

(16,083

)

Total comprehensive income

 

$

36,207

 

$

30,024

 

$

18,422

 

$

13,619

 

 

4



Table of Contents

 

CUBIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

 

 

 

March 31,

 

September 30,

 

 

 

2014

 

2013

 

 

 

 

 

(As Restated)

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

125,343

 

$

203,892

 

Restricted cash

 

68,984

 

69,381

 

Marketable securities

 

 

4,055

 

Accounts receivable - net

 

439,626

 

379,002

 

Recoverable income taxes

 

14,231

 

7,885

 

Inventories - net

 

64,303

 

59,746

 

Deferred income taxes and other current assets

 

29,743

 

18,638

 

Total current assets

 

742,230

 

742,599

 

 

 

 

 

 

 

Long-term contract receivables

 

17,410

 

19,021

 

Long-term capitalized contract costs

 

79,010

 

68,963

 

Property, plant and equipment - net

 

63,789

 

56,305

 

Deferred income taxes

 

18,181

 

19,322

 

Goodwill

 

186,808

 

136,094

 

Purchased intangibles - net

 

75,389

 

57,542

 

Other assets

 

15,107

 

9,772

 

 

 

$

1,197,924

 

$

1,109,618

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Short-term borrowings

 

$

30,000

 

$

 

Trade accounts payable

 

24,616

 

40,310

 

Customer advances

 

88,830

 

84,307

 

Accrued compensation and other current liabilities

 

143,938

 

109,253

 

Income taxes payable

 

9,842

 

12,731

 

Current portion of long-term debt

 

578

 

557

 

Total current liabilities

 

297,804

 

247,158

 

 

 

 

 

 

 

Long-term debt

 

102,166

 

102,363

 

Other long-term liabilities

 

46,390

 

43,017

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common stock

 

17,322

 

15,825

 

Retained earnings

 

761,262

 

740,002

 

Accumulated other comprehensive income (loss)

 

8,855

 

(2,803

)

Treasury stock at cost

 

(36,078

)

(36,078

)

Shareholders’ equity related to Cubic

 

751,361

 

716,946

 

Noncontrolling interest in variable interest entity

 

203

 

134

 

Total shareholders’ equity

 

751,564

 

717,080

 

 

 

$

1,197,924

 

$

1,109,618

 

 

See accompanying notes.

 

5



Table of Contents

 

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

 

 

Six Months Ended

 

Three Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

(As Restated)

 

 

 

(As Restated)

 

Operating Activities:

 

 

 

 

 

 

 

 

 

Net income

 

$

24,549

 

$

44,016

 

$

16,120

 

$

29,702

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

15,229

 

11,597

 

7,852

 

6,879

 

Share-based compensation expense

 

2,585

 

59

 

1,725

 

59

 

Changes in operating assets and liabilities

 

(71,662

)

(111,643

)

(15,201

)

(66,495

)

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 

(29,299

)

(55,971

)

10,496

 

(29,855

)

 

 

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

 

 

 

Acquisition of businesses, net of cash acquired

 

(79,683

)

(53,272

)

(10,708

)

(20,177

)

Purchases of property, plant and equipment

 

(10,947

)

(3,861

)

(6,025

)

(2,438

)

Proceeds from sales or maturities of marketable securities

 

4,055

 

 

4,055

 

 

NET CASH USED IN INVESTING ACTIVITIES

 

(86,575

)

(57,133

)

(12,678

)

(22,615

)

 

 

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

 

 

 

Proceeds from short-term borrowings

 

30,000

 

70,000

 

10,000

 

45,000

 

Principal payments on short-term borrowings

 

 

(45,000

)

 

(45,000

)

Proceeds from long-term borrowings

 

 

50,000

 

 

50,000

 

Principal payments on long-term debt

 

(284

)

(8,273

)

(144

)

(4,133

)

Proceeds from issuance of common stock

 

113

 

 

113

 

 

Dividends paid

 

(3,215

)

(3,208

)

(3,215

)

(3,208

)

Net change in restricted cash

 

397

 

(84

)

457

 

(313

)

Contingent consideration payments related to acquisitions of businessess

 

(1,117

)

 

(447

)

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

25,894

 

63,435

 

6,764

 

42,346

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rates on cash

 

11,431

 

(13,993

)

(615

)

(15,387

)

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

(78,549

)

(63,662

)

3,967

 

(25,511

)

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the beginning of the period

 

203,892

 

212,267

 

121,376

 

174,116

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD

 

$

125,343

 

$

148,605

 

$

125,343

 

$

148,605

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liability incurred to acquire NEK, net

 

$

 

$

19,552

 

$

 

$

 

Liability incurred to acquire ITMS, net

 

$

3,301

 

$

 

$

 

$

 

Liability incurred to acquire Intific, net

 

$

2,233

 

$

 

$

2,233

 

$

 

Receivable from the seller of NextBus

 

$

 

$

682

 

$

 

$

682

 

 

See accompanying notes.

 

6



Table of Contents

 

CUBIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

March 31, 2014

 

Note 1 — Basis for Presentation

 

Cubic Corporation (“we”, “us”, and “Cubic”) has prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

 

In our opinion, all adjustments necessary for a fair presentation of these financial statements have been included, and are of a normal and recurring nature as well as all adjustments discussed in Note 2, “Restatement of Condensed Consolidated Financial Statements,” considered necessary to fairly state the financial position of Cubic Corporation at March 31, 2014 and September 30, 2013; the results of its operations for the three- and six-month periods ended March 31, 2014 and 2013; and its cash flows for the three- and six-month periods ended March 31, 2014 and 2013. Operating results for the three- and six-month periods ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending September 30, 2014. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K/A for the year ended September 30, 2013 filed concurrently herewith.

 

The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

There have been no material changes to our significant accounting policies as compared with the significant accounting policies described in our Annual Report on Form 10-K/A for the year ended September 30, 2013 filed concurrently herewith.

 

Note 2—Restatement of Condensed Consolidated Financial Statements

 

We have restated our Condensed Consolidated Balance Sheet at September 30, 2013 and our Condensed Consolidated Statements of Income, Comprehensive Income, and Cash Flows for the three- and six-month periods ended March 31, 2013.

 

The cumulative adjustments to correct the errors in the consolidated financial statements for all periods prior to October 1, 2012 are recorded as adjustments to retained earnings and accumulated other comprehensive income (loss) at September 30, 2012. The cumulative effect of those adjustments increased previously reported retained earnings by $6.3 million and reduced previously reported accumulated other comprehensive loss by $0.5 million at September 30, 2012.

 

The following tables present the summary impacts of the restatement adjustments on our previously reported consolidated retained earnings at September 30, 2012 and consolidated net income for the three and six months ended March 31, 2013 (in thousands):

 

Retained earnings at September 30, 2012 - As previously reported

 

$

715,043

 

Adjustments

 

6,290

 

Retained earnings at September 30, 2012 - As restated

 

$

721,333

 

 

 

 

Six Months Ended

 

Three Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2013

 

2013

 

Net Income - As previously reported

 

$

39,604

 

$

27,158

 

Adjustments

 

4,287

 

2,492

 

Net Income - As restated

 

$

43,891

 

$

29,650

 

 

7



Table of Contents

 

Description of Adjustments

 

On February 10, 2014, we announced that we would be restating certain previously issued audited consolidated financial statements and unaudited condensed consolidated financial statements primarily to correct two errors in the recognition of revenue.

 

In 2012, we restated our financial statements for the years ended September 30, 2011, 2010 and 2009, the quarters ended March 31, 2012 and December 31, 2011 and each of the prior quarters of 2011 and 2010. This previous restatement was the result of our determination that we had made errors in the calculation of revenues for a significant number of our contracts due to incorrect application of GAAP. In the course of our financial statement closing process for the quarter ended December 31, 2013, we identified two errors related to revenue recognition for two contracts with the same customer that date back to the previous restatement period. The first error was related to the computation of revenues for a contract that was entered in 2011. The error resulted from a miscalculation in a revenue recognition model that was created during the previous restatement activity. The second error relates to a contract entered into in 2007 and was the result of a failure to appropriately update the contract value in our revenue accounting system as well as a failure to properly account for a 2008 amendment to this contract. Upon modification of this second contract in 2008, the cost-to-cost percentage of completion method should no longer have been used, and revenue should have been recognized using a service-based model.

 

In addition to the errors described above, we also made adjustments related to other individually immaterial errors including certain corrections that had been previously identified but not recorded because they were not material, individually or in the aggregate, to our consolidated financial statements. These corrections included certain accrued liabilities and reserves and miscellaneous reclassification entries; adjustments to various income tax and indirect tax accrual accounts; and adjustments to sales and cost of sales to correct cutoff on immaterial revenue recognition transactions.

 

8



Table of Contents

 

The following tables present the impact of the restatement on the our previously issued Consolidated Balance Sheet as of September 30, 2013, and our Consolidated Statements of Income, Comprehensive Income and Cash Flows for the three and six months ended March 31, 2013:

 

 

 

Condensed Consolidated Balance Sheet 
September 30, 2013

 

 

 

Previously 
Reported

 

Adjustments

 

As 
Restated

 

 

 

(in thousands)

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

203,892

 

$

 

$

203,892

 

Restricted cash

 

69,381

 

 

69,381

 

Marketable securities

 

4,055

 

 

4,055

 

Accounts receivable - net

 

376,143

 

2,859

 

379,002

 

Recoverable income taxes

 

7,885

 

 

7,885

 

Inventories - net

 

54,400

 

5,346

 

59,746

 

Deferred income taxes and other current assets

 

18,638

 

 

18,638

 

Total current assets

 

734,394

 

8,205

 

742,599

 

 

 

 

 

 

 

 

 

Long-term contract receivables

 

19,249

 

(228

)

19,021

 

Long-term capitalized costs

 

75,520

 

(6,557

)

68,963

 

Property, plant and equipment - net

 

56,305

 

 

56,305

 

Deferred income taxes

 

19,322

 

 

19,322

 

Goodwill

 

136,094

 

 

136,094

 

Purchased intangibles - net

 

57,542

 

 

57,542

 

Other assets

 

9,772

 

 

9,772

 

 

 

$

1,108,198

 

$

1,420

 

$

1,109,618

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

Trade accounts payable

 

$

39,016

 

$

1,294

 

$

40,310

 

Customer advances

 

103,187

 

(18,880

)

84,307

 

Accrued compensation and other current liabilities

 

107,330

 

1,923

 

109,253

 

Income taxes payable

 

8,076

 

4,655

 

12,731

 

Current portion of long-term debt

 

557

 

 

557

 

Total current liabilities

 

258,166

 

(11,008

)

247,158

 

 

 

 

 

 

 

 

 

Long-term debt

 

102,363

 

 

102,363

 

Other long-term liabilities

 

42,742

 

275

 

43,017

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

Common stock

 

15,825

 

 

15,825

 

Retained earnings

 

728,424

 

11,578

 

740,002

 

Accumulated other comprehensive loss

 

(3,378

)

575

 

(2,803

)

Treasury stock at cost

 

(36,078

)

 

(36,078

)

Shareholders’ equity related to Cubic

 

704,793

 

12,153

 

716,946

 

Noncontrolling interest in variable interest entity

 

134

 

 

134

 

Total shareholders’ equity

 

704,927

 

12,153

 

717,080

 

 

 

$

1,108,198

 

$

1,420

 

$

1,109,618

 

 

9



Table of Contents

 

 

 

Condensed Consolidated Statement of Income
Six Months Ended March 31, 2013

 

Condensed Consolidated Statement of Income
Three Months Ended March 31, 2013

 

 

 

Previously

 

 

 

As

 

Previously

 

 

 

As

 

 

 

Reported

 

Adjustments

 

Restated

 

Reported

 

Adjustments

 

Restated

 

 

 

(amounts in thousands, except per share data)

 

(amounts in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

300,669

 

$

1,085

 

$

301,754

 

$

164,968

 

$

2,068

 

$

167,036

 

Services

 

377,007

 

4,644

 

381,651

 

199,337

 

2,236

 

201,573

 

 

 

677,676

 

5,729

 

683,405

 

364,305

 

4,304

 

368,609

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

218,018

 

1,014

 

219,032

 

117,123

 

2,022

 

119,145

 

Services

 

297,617

 

(226

)

297,391

 

153,766

 

(446

)

153,320

 

Selling, general and administrative

 

82,317

 

(54

)

82,263

 

41,320

 

 

41,320

 

Restructuring costs

 

6,084

 

 

6,084

 

6,084

 

 

6,084

 

Research and development

 

12,920

 

 

12,920

 

7,098

 

 

7,098

 

Amortization of purchased intangibles

 

7,830

 

 

7,830

 

4,266

 

 

4,266

 

 

 

624,786

 

734

 

625,520

 

329,657

 

1,576

 

331,233

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

52,890

 

4,995

 

57,885

 

34,648

 

2,728

 

37,376

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

749

 

 

749

 

312

 

 

312

 

Interest expense

 

(1,516

)

(6

)

(1,522

)

(654

)

(3

)

(657

)

Other income (expense) - net

 

49

 

 

49

 

(53

)

 

(53

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

52,172

 

4,989

 

57,161

 

34,253

 

2,725

 

36,978

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

12,443

 

702

 

13,145

 

7,043

 

233

 

7,276

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

39,729

 

4,287

 

44,016

 

27,210

 

2,492

 

29,702

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less noncontrolling interest in income of VIE

 

125

 

 

125

 

52

 

 

52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Cubic

 

$

39,604

 

$

4,287

 

$

43,891

 

$

27,158

 

$

2,492

 

$

29,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to Cubic:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.48

 

$

0.16

 

$

1.64

 

$

1.02

 

$

0.09

 

$

1.11

 

Diluted

 

$

1.48

 

$

0.16

 

$

1.64

 

$

1.02

 

$

0.09

 

$

1.11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used in per share calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

26,736

 

 

26,736

 

26,736

 

 

26,736

 

Diluted

 

26,736

 

 

26,736

 

26,736

 

 

26,736

 

 

 

 

Condensed Consolidated Statement of Comprehensive Income
Six Months Ended March 31, 2013

 

Condensed Consolidated Statement of Comprehensive Income
Three Months Ended March 31, 2013

 

 

 

Previously

 

 

 

As

 

Previously

 

 

 

As

 

 

 

Reported

 

Adjustments

 

Restated

 

Reported

 

Adjustments

 

Restated

 

 

 

 

 

(in thousands)

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

Net income

 

$

39,729

 

$

4,287

 

$

44,016

 

$

27,210

 

$

2,492

 

$

29,702

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

(13,313

)

(676

)

(13,989

)

(14,608

)

(730

)

(15,338

)

Change in net unrealized gains/losses from cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of cash flow hedges, net of tax

 

(1,337

)

 

(1,337

)

(732

)

 

(732

)

Adjustment for net losses realized and included in net income, net of tax

 

1,334

 

 

1,334

 

(13

)

 

(13

)

Net unrealized gains/losses from cash flow hedges, net of tax

 

(3

)

 

(3

)

(745

)

 

(745

)

Total other comprehensive loss

 

(13,316

)

(676

)

(13,992

)

(15,353

)

(730

)

(16,083

)

Total comprehensive income

 

26,413

 

3,611

 

30,024

 

11,857

 

1,762

 

13,619

 

 

10



Table of Contents

 

 

 

Condensed Consolidated Statement of Cash Flows
Six Months Ended March 31, 2013

 

Condensed Consolidated Statement of Cash Flows
Three Months Ended March 31
, 2013

 

 

 

Previously

 

 

 

As

 

Previously

 

 

 

As

 

 

 

Reported

 

Adjustments

 

Restated

 

Reported

 

Adjustments

 

Restated

 

 

 

 

 

(in thousands)

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

39,729

 

$

4,287

 

$

44,016

 

$

27,210

 

$

2,492

 

$

29,702

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

11,597

 

 

11,597

 

6,879

 

 

6,879

 

Share-based compensation expense

 

59

 

 

59

 

59

 

 

59

 

Changes in operating assets and liabilities net of effects from acquisitions:

 

(107,356

)

(4,287

)

(111,643

)

(64,003

)

(2,492

)

(66,495

)

NET CASH USED IN OPERATING ACTIVITIES

 

(55,971

)

 

(55,971

)

(29,855

)

 

(29,855

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of businesses, net of cash acquired

 

(53,272

)

 

(53,272

)

(20,177

)

 

(20,177

)

Net additions to property, plant and equipment

 

(3,861

)

 

(3,861

)

(2,438

)

 

(2,438

)

NET CASH USED IN INVESTING ACTIVITIES

 

(57,133

)

 

(57,133

)

(22,615

)

 

(22,615

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from short-term borrowings

 

70,000

 

 

70,000

 

45,000

 

 

45,000

 

Principal payments on short-term borrowings

 

(45,000

)

 

(45,000

)

(45,000

)

 

(45,000

)

Proceeds from long-term borrowings

 

50,000

 

 

50,000

 

50,000

 

 

50,000

 

Principal payments on long-term debt

 

(8,273

)

 

(8,273

)

(4,133

)

 

(4,133

)

Dividends paid to shareholders

 

(3,208

)

 

(3,208

)

(3,208

)

 

(3,208

)

Change in restricted cash

 

(84

)

 

(84

)

(313

)

 

(313

)

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

63,435

 

 

63,435

 

42,346

 

 

42,346

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rates on cash

 

(13,993

)

 

(13,993

)

(15,387

)

 

(15,387

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

(63,662

)

 

(63,662

)

(25,511

)

 

(25,511

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the beginning of the period

 

212,267

 

 

212,267

 

174,116

 

 

174,116

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD

 

$

148,605

 

$

 

$

148,605

 

$

148,605

 

$

 

$

148,605

 

 

Financial information in the accompanying footnotes to the condensed consolidated financial statements reflects the effects of the preceding discussions and tables.

 

Note 3 — Acquisitions

 

Each of the following acquisitions has been treated as a business combination for accounting purposes. The results of operations of each acquired business has been included in our consolidated financial statements since the respective date of each acquisition.

 

Intific

 

On February 28, 2014 we acquired all of the outstanding capital stock of Intific Inc. (Intific), an Austin, Texas based advanced technology company focused on software and game-based solutions in modeling and simulation, training and education, cyber warfare, and neuroscience. The acquisition of Intific expands the portfolio of services and customer base of our Cubic Defense Systems (CDS) segment.

 

For the three months ended March 31, 2014, the amount of Intific’s sales and net loss after taxes included in our Consolidated Statement of Income were $0.8 million and $2.1 million, respectively. Included in Intific’s operating results for the three months ended March 31, 2014 are $0.2 million of transaction and acquisition related costs and $3.1 million of compensation expense which was paid to Intific employees upon the close of the acquisition.

 

The purchase agreement states that the cost of the acquisition is approximately $12.6 million, adjusted by the difference between the net working capital acquired and the targeted working capital amounts. The acquisition date fair value of the consideration transferred is estimated to be $12.9 million. In February 2014, we paid cash of approximately $10.7 million and have recorded a liability of approximately $2.2 million as an estimate of the cash that will be paid to the seller in connection with the working capital settlement and cash that will be owed to the seller due to the passage of time.

 

11



Table of Contents

 

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

 

Customer relationships

 

$

2.0

 

Technology

 

0.7

 

Backlog

 

0.7

 

Other intangible assets

 

0.2

 

Accounts receivable

 

1.5

 

Deferred tax liabilities, net

 

(0.5

)

Accounts payable and accrued expenses

 

(0.6

)

Other net assets acquired

 

0.6

 

Net identifiable assets acquired

 

4.6

 

Goodwill

 

8.3

 

Net assets acquired

 

$

12.9

 

 

The estimated fair values of the assets acquired and liabilities assumed, including the fair value of purchased intangibles and net deferred tax liabilities are preliminary estimates pending the finalization of our valuation analyses. The net deferred tax liabilities were primarily recorded to reflect the tax impact of amortization related to identified intangible assets that is not expected to be deductible for tax purposes, net of acquisition consideration that is a tax deductible expense. The estimated fair value of the accounts receivable and accounts payable and accrued expenses will be finalized as further information is received from the seller regarding these items.

 

The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. The customer relationships and backlog valuation used the excess earnings approach and the technology valuation used the replacement cost approach.

 

The intangible assets will be amortized using a combination of straight-line and accelerated methods based on the expected cash flows from the assets, over a weighted average useful life of two years from the date of acquisition. .

 

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of Intific with our existing CDS business and the acquired assembled workforce. The anticipated synergies include the ability to expand services offerings and cost reductions. The amount recorded as goodwill is allocated to our CDS segment and is not expected to be deductible for tax purposes.

 

Based upon the preliminary estimate of the fair value of identifiable intangible assets, the estimated amortization expense related to the intangible assets recorded in connection with our acquisition of Intific for fiscal years 2014 through 2018 is as follows (in millions):

 

Year Ended
September 30,

 

 

 

2014

 

$

0.6

 

2015

 

0.9

 

2016

 

0.7

 

2017

 

0.6

 

2018

 

0.5

 

 

ITMS

 

On November 26, 2013 we acquired all of the outstanding capital stock of Intelligent Transport Management Solutions Limited (ITMS) from Serco Limited. ITMS is a provider of traffic management systems technology, traffic and road enforcement and maintenance of traffic signals, emergency equipment and other critical road and tunnel infrastructure. The acquisition of ITMS expands the portfolio of services and customer base of our Cubic Transportation Systems (CTS) segment.

 

12



Table of Contents

 

For the three months ended March 31, 2014, the amount of ITMS’ sales and net loss after taxes included in our Consolidated Statement of Income were $12.6 million and $0.2 million, respectively. For the six months ended March 31, 2014, the amount of ITMS’ sales and net loss after taxes included in our Consolidated Statement of Income were $17.3 million and $0.7 million, respectively. Included in the ITMS operating results are $0.1 million and $0.5 million of transaction costs incurred during the three and six months ended March 31, 2014, respectively.

 

The purchase agreement states that the cost of the acquisition was approximately $69.0 million, adjusted by the difference between the net working capital acquired and the targeted working capital amounts. The acquisition date fair value of the consideration transferred is estimated to be $72.3 million. In November 2013, we paid cash of approximately $69.0 million and have recorded a liability of approximately $3.3 million as an estimate of the cash that will be paid to the seller in connection with the working capital settlement.

 

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

 

Customer relationships

 

$

15.7

 

Intellectual property

 

1.6

 

Backlog

 

5.7

 

Supplier relationships

 

0.6

 

Agreements with Seller

 

1.3

 

Accounts receivable - billed

 

4.4

 

Accounts receivable - unbilled

 

6.9

 

Deferred tax liabilities, net

 

(0.2

)

Deferred revenue

 

(2.4

)

Accounts payable and accrued expenses

 

(4.6

)

Other net assets acquired

 

2.6

 

Net identifiable assets acquired

 

31.6

 

Goodwill

 

40.7

 

Net assets acquired

 

$

72.3

 

 

The estimated fair values of the assets acquired and liabilities assumed, including the fair value of purchased intangibles and net deferred tax liabilities are preliminary estimates pending the finalization of our valuation analyses. The net deferred tax liabilities were primarily recorded to reflect the tax impact of the identified intangible assets that will not generate tax deductible amortization expense. The estimated fair value of the accounts receivable, deferred revenue, and accounts payable and accrued expenses will be finalized as further information is received from the seller regarding these items.

 

The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. The customer relationships and backlog valuation used the excess earnings approach and the non-compete agreement and seller agreements valuations used the with and without approach. The supplier relationship and intellectual property valuations used the replacement cost approach.

 

The intangible assets will be amortized using a combination of straight-line and accelerated methods based on the expected cash flows from the assets, over a weighted average useful life of two years from the date of acquisition and is not expected to be deductible for tax purposes.

 

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of ITMS with our existing CTS business and the acquired assembled workforce. The anticipated synergies include the ability to expand services offerings and cost reductions. The amount recorded as goodwill is allocated to our CTS segment and is not expected to be deductible for tax purposes.

 

13



Table of Contents

 

Based upon the preliminary estimate of the fair value of identifiable intangible assets, the estimated amortization expense related to the intangible assets recorded in connection with our acquisition of ITMS for fiscal years 2014 through 2018 is as follows (in millions):

 

Year Ended
September 30,

 

 

 

2014

 

$

7.4

 

2015

 

6.8

 

2016

 

5.4

 

2017

 

3.9

 

2018

 

1.9

 

 

NEK

 

On December 14, 2012, we acquired from NEK Advanced Securities Group, Inc. (Seller) the customer contracts and operating assets of NEK Special Programs Group LLC (NEK), which consists of the Seller’s Special Operation Forces training business based in Fayetteville, North Carolina and Colorado Springs, Colorado.

 

For the three months ended March 31, 2014, the amounts of NEK’s sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $8.9 million and $0.3 million, respectively. For the three months ended March 31, 2013, the amounts of NEK’s sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $9.1 million and $0.3 million, respectively.

 

For the six months ended March 31, 2014, the amounts of NEK’s sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $19.6 million and $0.4 million, respectively. For the six months ended March 31, 2013, the amounts of NEK’s sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $9.6 million and $0.3 million, respectively.

 

Included in the NEK operating results are $0.4 million in transaction related costs incurred during the first quarter of fiscal 2013.

 

The acquisition agreement states that the cost of the acquisition will total $52.0 million, adjusted by the difference between the net working capital acquired and targeted working capital amounts, less amounts that will not be due if certain future events fail to occur. The acquisition-date fair value of consideration transferred is estimated to be $52.6 million. Through March 31, 2014 we have paid the Seller cash consideration of $49.6 million from our existing cash resources and we have recorded a current liability of approximately $3.0 million at March 31, 2014 as an estimate of additional cash consideration that is due to the Seller. The timing of the payment of $0.6 million of the additional cash consideration will be accelerated if the Seller causes certain events to occur, but will ultimately be paid over the passage of time regardless of whether these events occur. Approximately $2.4 million of the additional cash consideration is contingent upon future events, including the novation of certain of the Seller’s contracts to NEK. We have estimated the fair value of the contingent consideration using a probability-weighted discounted cash flow model. We have estimated that the probability of our payment to the Seller of any amounts less than the maximum possible additional cash consideration of $2.4 million is remote. As such, we have estimated that the fair value of the additional cash consideration at March 31, 2014 approximates the maximum possible contingent payments to the Seller of $2.4 million. There has been no significant change in the estimated fair value of the total estimated contingent payments to be made to the Seller since the date of the acquisition.

 

14



Table of Contents

 

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

 

Customer relationships

 

$

13.3

 

Corporate trade names

 

4.9

 

Non-compete agreements

 

0.2

 

Accounts receivable -billed

 

3.1

 

Accounts receivable -unbilled

 

7.7

 

Accounts payable

 

(3.0

)

Other net liabilities assumed

 

(0.4

)

Net identifiable assets acquired

 

25.8

 

Goodwill

 

26.8

 

Net assets acquired

 

$

52.6

 

 

The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. Each of the valuation methodologies used were various methods under the income approach. The trade names valuation used the relief from royalty approach. The customer relationships valuation used the excess earnings approach and the non-compete agreements valuation used the with and without approach. The intangible assets are being amortized using a combination of straight-line and accelerated methods based on the expected cash flows from the assets, over a weighted average useful life of four years from the date of acquisition.

 

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of NEK and our Mission Support Services (MSS) business and the acquired assembled workforce. The anticipated synergies include the ability to expand services offerings and cost reductions. The amount recorded as goodwill is allocated to our MSS segment and is expected to be deductible for tax purposes.

 

Based upon the fair value of identifiable intangible assets, the amortization expense related to the intangible assets recorded in connection with our acquisition of NEK for fiscal years 2014 through 2018 is as follows (in millions):

 

Year Ended
September 30,

 

 

 

2014

 

$

3.4

 

2015

 

2.9

 

2016

 

2.4

 

2017

 

1.9

 

2018

 

1.4

 

 

NextBus

 

On January 24, 2013, we acquired all of the outstanding capital stock of NextBus, Inc. (NextBus) from Webtech Wireless, Inc. NextBus provides products and services to transit agencies which provide real-time passenger information to transit passengers, expanding the portfolio of services and customer base of our CTS segment. For the three months ended March 31, 2014 the amount of NextBus’ sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $2.5 million and $0.1 million, respectively. For the six months ended March 31, 2014, the amounts of NextBus sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $4.7 million and $0.5 million, respectively.

 

15



Table of Contents

 

We paid the seller cash of $20.2 million for NextBus from our existing cash resources. The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

 

Customer relationships

 

$

8.8

 

Accounts receivable, net

 

2.2

 

Backlog

 

1.7

 

Acquired technology

 

1.3

 

Corporate trade names

 

1.0

 

Accounts payable and accrued expenses

 

(1.1

)

Deferred tax liabilities, net

 

(3.3

)

Other net liabilities assumed

 

(1.2

)

Net identifiable assets acquired

 

9.4

 

Goodwill

 

10.8

 

Net assets acquired

 

$

20.2

 

 

The net deferred tax liabilities were primarily recorded to reflect the tax impact of the identified intangible assets that will not generate tax deductible amortization expense. The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. Each of the valuation methodologies used were various methods under the income approach. The customer relationships and backlog valuations used the excess earnings approach. The trade names and technology valuations used the relief from royalty approach.

 

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of NextBus and our CTS business and the acquired assembled workforce. The anticipated synergies include the ability to expand services offerings and cost reductions. The amount recorded as goodwill is allocated to our CTS segment and is not expected to be deductible for tax purposes.

 

The intangible assets are being amortized using a combination of accelerated and straight-line based on the expected cash flows from the assets, over a weighted average useful life of 5 years from the date of acquisition. Based upon the estimate of the fair value of identifiable intangible assets, the estimated amortization expense related to the intangible assets recorded in connection with our acquisition of NextBus for fiscal years 2014 through 2018 is as follows (in millions):

 

Year Ended
September 30,

 

 

 

2014

 

$

1.6

 

2015

 

1.5

 

2016

 

1.4

 

2017

 

1.3

 

2018

 

1.2

 

 

AIS

 

On July 1, 2013 we acquired certain assets of Advanced Interactive Systems (AIS) and all of the capital stock of its foreign subsidiaries through a bankruptcy auction. AIS is a supplier of live fire specialized range facilities, virtual simulation products, engineering design and project management services for counter-terrorism, law enforcement and military forces worldwide. For the three months ended March 31, 2014 the amount of AIS’ sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $1.8 million and $0.1 million, respectively. For the six months ended March 31, 2014, the amounts of AIS’ sales and net loss after taxes included in our Condensed Consolidated Statement of Income were $3.1 million and $0.4 million, respectively.

 

We paid cash of $2.0 million from our existing cash resources, net of cash acquired, for the assets of AIS. At September 30, 2013, the estimated fair value of liabilities for potential claims from customers were preliminary estimates pending the finalization of our valuation analyses. The finalization of the estimation of these values was completed in the quarter ended December 31, 2013 as further information was received from the customers as to the facts and circumstances that existed as of the July 1, 2013 acquisition date. As a result of this additional information, we have estimated that the fair value of the potential customer claims was $1.3 million. As a result, the carrying amount of the potential customer claims liabilities was retrospectively increased by $1.3 million on July 1, 2013, due to this new information, with a corresponding increase to goodwill.

 

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The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions) including the retrospective adjustments described above:

 

Customer relationships

 

$

1.4

 

Technology

 

0.9

 

Backlog

 

0.6

 

Other net liabilities assumed

 

(2.8

)

Net identifiable assets acquired

 

0.1

 

Goodwill

 

1.9

 

Net assets acquired

 

$

2.0

 

 

The amount recorded as goodwill is allocated to our CDS segment and is not expected to be deductible for tax purposes.

 

PSMC

 

On July 1, 2013 we acquired certain assets of PS Management Consultants Pty Ltd. (PSMC). PSMC is a specialist project management and engineering enterprise, based in Canberra, Australia. For the three months ended March 31, 2014 the amount of PSMC’s sales and net income after taxes included in our Condensed Consolidated Statement of Income were $0.5 million and $0.1 million, respectively. For the six months ended March 31, 2014, the amounts of PSMC’s sales and net income after taxes included in our Condensed Consolidated Statement of Income were $1.2 million and $0.3 million, respectively.

 

We paid cash of $1.3 million from our existing cash resources to acquire PSMC. The following table summarizes the estimated fair values of the assets acquired at the acquisition date (in millions):

 

Customer relationships

 

$

0.6

 

Backlog

 

0.1

 

Net identifiable assets acquired

 

0.7

 

Goodwill

 

0.6

 

Net assets acquired

 

$

1.3

 

 

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of PSMC and our CDS business and the acquired assembled workforce. The anticipated synergies include the ability to expand services offerings and cost reductions. The amount recorded as goodwill is allocated to our CDS segment and is not expected to be deductible for tax purposes.

 

Changes in goodwill for the six months ended March 31, 2014 were as follows (in millions):

 

 

 

 

 

Mission

 

 

 

 

 

 

 

Transportation

 

Support

 

Defense

 

 

 

 

 

Systems

 

Services

 

Systems

 

Total

 

 

 

 

 

 

 

 

 

 

 

Balances at September 30, 2013

 

$

18.3

 

$

94.4

 

$

23.4

 

$

136.1

 

Acquisitions

 

40.7

 

 

8.3

 

49.0

 

Foreign currency exchange rate changes

 

1.4

 

 

0.4

 

1.8

 

Balances at March 31, 2014

 

$

60.4

 

$

94.4

 

$

32.1

 

$

186.9

 

 

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Pro forma information

 

The following unaudited pro forma information presents our consolidated results of operations as if Intific, ITMS, NEK, NextBus, AIS and PSMC had been included in our consolidated results since October 1, 2012 (in millions):

 

 

 

Six Months Ended
March 31,

 

Three Months Ended
March 31,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

(As Restated)

 

 

 

(As Restated)

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

674.3

 

$

744.6

 

$

356.8

 

$

393.0

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Cubic

 

$

24.1

 

$

48.0

 

$

15.6

 

$

29.5

 

 

The pro forma information includes adjustments to give effect to pro forma events that are directly attributable to the acquisitions and have a continuing impact on operations including the amortization of purchased intangibles and the elimination of interest expense for the repayment of debt. No adjustments were made for transaction expenses, other adjustments that do not reflect ongoing operations or for operating efficiencies or synergies. The pro forma financial information is not necessarily indicative of what the consolidated financial results of our operations would have been had the acquisitions been completed on October 1, 2012, and it does not purport to project our future operating results.

 

Note 4 — Net Income Per Share

 

Basic net income per share (EPS) is computed by dividing the net income for the period by the weighted average number of common shares outstanding during the period, including vested restricted stock units (RSUs).

 

Diluted EPS is computed by dividing the net income for the period by the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares consist of dilutive restricted stock units. Dilutive restricted stock units are calculated based on the average share price for each fiscal period using the treasury stock method. For RSUs with performance-based vesting, no common equivalent shares are included in the computation of diluted EPS until the related performance criteria have been met.

 

Basic and diluted EPS are computed as follows (amounts in thousands, except per share data).

 

 

 

Six Months Ended
March 31,

 

Three Months Ended
March 31,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

(As Restated)

 

 

 

(As Restated)

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Cubic

 

$

24,480

 

$

43,891

 

$

16,092

 

$

29,650

 

Weighted average shares - basic

 

26,785

 

26,736

 

26,786

 

26,736

 

Effect of dilutive securities

 

107

 

 

115

 

 

Weighted average shares - diluted

 

26,892

 

26,736

 

26,901

 

26,736

 

Net income per share attributable to Cubic, basic

 

$

0.91

 

$

1.64

 

$

0.60

 

$

1.11

 

Effect of dilutive securities

 

 

 

 

 

Net income per share attributable to Cubic, diluted

 

$

0.91

 

$

1.64

 

$

0.60

 

$

1.11

 

 

 

 

 

 

 

 

 

 

 

Anti-dilutive employee share-based awards

 

15

 

 

 

 

 

Note 5 — Balance Sheet Details

 

Marketable Securities

 

Marketable securities consist of exchange traded funds whose underlying assets consist of highly liquid debt instruments with short- term maturities. Marketable securities are classified and accounted for as available-for-sale.  These investments are recorded at fair

 

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value in the accompanying Condensed Consolidated Balance Sheets and the change in fair value is recorded, net of taxes, as a component of other comprehensive income. There have been no significant realized or unrealized gains or losses on these marketable securities to date. Marketable securities have been classified as current assets in the accompanying Condensed Consolidated Balance Sheets based upon the nature of the securities and availability for use in current operations.

 

Accounts Receivable

 

The components of accounts receivable are as follows (in thousands):

 

 

 

March 31,

 

September 30,

 

 

 

2014

 

2013

 

 

 

 

 

(As Restated)

 

 

 

 

 

 

 

Trade and other receivables

 

$

28,277

 

$

17,352

 

Long-term contracts:

 

 

 

 

 

Billed

 

138,095

 

98,983

 

Unbilled

 

291,147

 

282,346

 

Allowance for doubtful accounts

 

(483

)

(658

)

Total accounts receivable

 

457,036

 

398,023

 

Less estimated amounts not currently due

 

(17,410

)

(19,021

)

Current accounts receivable

 

$

439,626

 

$

379,002

 

 

The amount classified as not currently due is an estimate of the amount of long-term contract accounts receivable that will not be collected within one year from March 31, 2014 under transportation systems contracts in the U.S. and Australia based upon the payment terms in the contracts. The non-current balance at September 30, 2013 represented non-current amounts due from customers under transportation systems contracts in the same locations.

 

Inventories

 

Inventories consist of the following (in thousands):

 

 

 

March 31,

 

September 30,