ITEM 1. BUSINESS. --------
(a) GENERAL DEVELOPMENT OF BUSINESS. -------------------------------
The Registrant, CUBIC CORPORATION, was incorporated in the State of California in 1949 and began operations in 1951.
In 1984, Registrant moved its Corporate domicile to the State of Delaware.
The Registrant, its subsidiaries and divisions, design, develop and manufacture products which are mainly electronic in nature, such as:
Electronic equipment for use in customized military range instrumentation, training and applications systems, communications and surveillance systems, HF and VHF/UHF surveillance receivers, avionics systems, space RF/digital products and cellular call boxes for public use on freeways and in parking lots.
Automatic revenue collection equipment, ticket-vending machines and passenger gates for mass transit systems, airlines, buses, toll roads, and bridges.
The Registrant also performs a variety of services, such as computer simulation training, distributed interactive simulation, development of training doctrine, as well as field operations and maintenance services related to products previously produced and products produced by others. Registrant also manufactures replacement parts for its own such products. In addition, Registrant operates a corrugated paper converting facility through its subsidiary, Consolidated Converting Company.
During 1994, Registrant increased its sales volume through acquisitions, one in the defense segment and the other in the automatic revenue collection systems segment. The acquisition, in April 1994, of the Titan Applications and Titan Services International divisions of the Titan Corporation helped to reverse the downward sales trend in recent years in the defense segment. Automatic revenue collection systems segment sales increased due to the acquisition, in January 1994, of voting control of the Registrant's fifty-percent owned subsidiary, Westinghouse Cubic Ltd. This change in control resulted in the consolidation of the accounts of this subsidiary with the Registrant. Work continues on major revenue collection systems for the New York City Transit Authority, the London Underground, the Washington Metropolitan Transit Authority, the Florida Department of Transportation and the Chicago Transit Authority, as well as other transportation agencies.
During fiscal year 1994, approximately 40 percent of the Registrant's total business was done, either directly or indirectly, with various agencies of the United States Government. The remaining 60 percent of the business is classified by the Registrant as industrial.
The Registrant's products and services are sold almost entirely by Registrant's employees. Overseas sales are made either directly or through representatives or licensees.
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(b) FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS AND CLASSES OF PRODUCTS OR SERVICES. --------------------------------------------
Information regarding the amounts of revenue, operating profit and loss and identifiable assets attributable to each of the Registrant's industry segments, is set forth in Note M to the Consolidated Financial Statements for the year ended September 30, 1994, and follows at Item 14(a)(1) of this filing, on pages 34 through 36.
(c) NARRATIVE DESCRIPTION OF BUSINESS. ---------------------------------
DEFENSE - -------
The defense segment's products include customized military range instrumentation, training and applications systems, communications and surveillance systems, HF and UHF/VHF surveillance receivers, avionics systems and space RF/digital products. Services provided by the segment include computer simulation training, distributed interactive simulation, development of training doctrine and field operations and maintenance.
Cubic Defense Systems, Inc. is best known for its combat training systems for military field exercises. These systems use lasers or computer software to simulate live fire, plus instrumentation to record the force-on-force engagement. When the missions are completed, computer data is replayed on display screens for review by the instructors and personnel involved. The TACTS (Tactical Aircrew Combat Training System) is used by the United States Navy and Marine Corps, and ACMI (Air Combat Maneuvering Instrumentation) by the Air Force. Instrumented training ranges at the CMTC (Combat Maneuver Training Center) and JRTC (Joint Readiness Training Center) are for the U. S. Army.
Cubic Defense Systems, Inc. also produces the SRS (Sonobuoy Reference System) for anti-submarine aircraft for the United States and foreign Navies and a data link for the Joint STARS reconnaissance system being built for the Air Force by Grumman. Avionics products, such as the PLS (Personnel Locator System) for helicopters, and a GCAS (Ground Collision Avoidance System) which provides warnings for flight safety, are built for the U. S. military, aircraft prime contractors and foreign governments.
Cubic Applications Inc., was formed in April 1994 from the acquisition of certain net assets of the Titan Applications and Titan Services International divisions of the Titan Corporation. This subsidiary is a tactical knowledge based service company that teaches commanders to make correct decisions in battle situations by using computer simulation for training.
Cubic Communications Inc. designs and produces HF and VHF/UHF surveillance receivers primarily for the U. S. and foreign military markets.
RAW MATERIALS: - -------------
The principal raw materials used by the defense segment are sheet aluminum and steel, copper electrical wire, and composite products. A significant portion of the segment's end product is composed of purchased components and subcontracted parts and supplies. These items are primarily procured from commercial sources. In general, supplies of raw materials and purchased parts are presently adequate to meet the requirements of the segment.
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BACKLOG: - -------
The defense segment's sales backlog at September 30, 1994 was $102,400,000 compared to $62,700,000 at September 30, 1993. Approximately $13,000,000 is not expected to be completed by September 30, 1995.
COMPETITION: - -----------
The defense segment competes with concerns of varying size, including some of the largest corporations in the country. It is not possible to predict the extent of competition which present or future activities will encounter, particularly since many of the segment's activities are subject to rapidly changing competitive conditions, customer requirements and technological developments. However, it is expected that United States government spending for defense programs will continue at a lower level than in the past decade, resulting in continued heavy competition for this segment.
AUTOMATIC REVENUE COLLECTION SYSTEMS - ------------------------------------
The automatic revenue collection systems segment includes five subsidiaries which work together to design, produce and service three revenue collection product lines: rail systems, toll products and bus systems. These include four wholly-owned subsidiaries, Cubic Automatic Revenue Collection Group, Cubic Toll Systems, Inc., Southern Cubic Pty. Ltd. and New York Revenue Automation, Inc. as well as the Registrant's 50% owned subsidiary in England, Westinghouse Cubic Limited. This group of companies together are the acknowledged leader in a market that serves rapid transit systems, bus, parking and tollway needs the world over.
The rail system product line, headquartered in San Diego, designs computerized systems for rapid transit rail systems. The manufacture of these systems is accomplished at the Tullahoma, Tennessee facility. The Registrant and its subsidiaries, Cubic Automatic Revenue Collection Group and Westinghouse Cubic Ltd., have been awarded large contracts by the cities of New York, Chicago, London, and Sydney, Australia, as well as a major system enhancement for the Washington, D.C. Metro. These programs provide a solid base of current business and the potential for additional future business as the programs are expanded.
Cubic Automatic Revenue Collection Group is also a major supplier of bus fareboxes. Public bus systems across the United States are being equipped with computerized fareboxes, which accept all denominations of coins, $1 bills and magnetically encoded passes.
Cubic Toll Systems, Inc. and Cubic Automatic Revenue Collection Group together provide computerized toll collection and ticketing equipment for bridges and tunnels, revenue control systems for parking lots, and advanced equipment to collect fares on toll roads and turnpikes. Equipment is either sold or leased to more than 150 authorities worldwide. The Florida Turnpike Toll System project is the largest contract for this type of equipment to date. The Texas Turnpike Authority, the Harris County Toll Authority and the Virginia Department of Transportation are also significant customers.
There is a worldwide need for improved revenue management in all forms of public transit. The Registrant's automatic revenue collection systems segment will continue to provide the technology and leadership to give the world fare collection market quality products and quality service.
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RAW MATERIALS: - -------------
Raw materials used in this segment include sheet steel, composite products, copper electrical wire and castings. All of these items are procured from commercial sources. In general, supplies of raw materials and purchased parts are presently adequate to meet the requirements of the segment.
BACKLOG: - -------
The automatic revenue collection systems segment sales backlog at September 30, 1994 was $296,600,000, compared to $177,000,000 at September 30, 1993. Approximately $135,000,000 is not expected to be completed by September 30, 1995.
COMPETITION: - -----------
Registrant's automatic revenue collection systems segment is a leading manufacturer of automatic fare collection systems for rail, bus and toll applications. Although competition is intense, Registrant believes that its state-of-the-art systems and equipment, together with continuing research and development, will enable it to maintain its leading position in these areas of the industry for the immediate foreseeable future. As an incident to the sale of its automatic revenue collection systems products, Registrant's subsidiaries are subject to possible liability by reason of warranties against defects in design, material and workmanship.
INDUSTRIAL OPERATIONS - ---------------------
The primary business included in the industrial operations segment is Consolidated Converting Co. which converts corrugated paper stock into high- quality packaging and shipping containers and converts paper stock into seat covers.
The segment also includes call boxes for use on freeways, golf courses and in parking lots produced by the Registrant's subsidiary, Cubic Communications, Inc.
RAW MATERIALS: - -------------
Raw materials used in the industrial operations segment include sheet aluminum and steel, paper and composite products. All of these items are procured from commercial sources. In general, supplies of raw materials and purchased parts are presently adequate to meet the requirements of the segment. Paper shortages could delay completion of the segment's contracts in the future.
BACKLOG: - -------
The industrial operations segment sales backlog at September 30, 1994 was $7,500,000, compared to $6,200,000 at September 30, 1993. Approximately $3,000,000 is not expected to be completed by September 30, 1995.
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COMPETITION: - -----------
In the industrial operations segment, the subsidiaries of the Registrant compete with concerns of varying size, including some of the largest corporations in the country. It is not possible to predict the extent of the competition which present or future activities will encounter, particularly since many of the activities of the Registrant's subsidiaries are subject to rapidly changing competitive conditions.
GENERAL - -------
The Registrant pursues a policy of seeking patent protection for its products, where deemed advisable, but it does not regard itself as materially dependent on its patents for the maintenance of its competitive position.
The Registrant does not engage in any business that is seasonal in nature.
The estimated dollar amounts spent for customer sponsored research activities relating to the development of new products or services, was $35,000,000, $46,000,000 and $51,000,000 in 1994, 1993, and 1992, respectively. The dollar amounts of Registrant and subsidiary sponsored research and development activity was $7,440,000, $3,597,000 and $3,803,000 in 1994, 1993, and 1992, respectively.
Registrant and its subsidiaries must comply with Federal, State and local laws and regulations regarding discharge of materials into the environment and the handling and disposal of materials classed as hazardous and/or toxic. Such compliance has no material effect upon the capital expenditures, earnings or competitive position of Registrant or any of its subsidiaries.
There were approximately 2,650 persons employed by the Registrant and its subsidiaries at the close of the fiscal year ending September 30, 1994.
Typically, Registrant's contracts, through its defense systems segment and for its revenue collection systems installations, provide for progress or advance payments which provide assistance in financing the Registrant's working capital requirements on those contracts.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES ----------------------------------------
Information regarding foreign and domestic operations and export sales is set forth in Note M to the Consolidated Financial Statements for the year ended September 30, 1994, and follows at Item 14(a)(1) of this filing, on pages 34 through 36.
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ITEM 2.
ITEM 2. PROPERTIES. ----------
Registrant's Corporate Headquarters and part of its subsidiary, Cubic Defense Systems, Inc., are located in a 100,000 square-foot facility, situated on a Registrant-owned, 8-1/2 acre parcel in the City of San Diego, California.
The Registrant owns an approximately 100,000 square-foot, two-story facility adjacent to the Corporate Headquarters and located on the westerly portion of the parcel referred to above. The facility is used primarily by the Registrant's subsidiary, Cubic Defense Systems, Inc., for engineering and office space.
Adjacent to the Corporate headquarters is a Registrant owned, 127,000 square- foot office and manufacturing facility on a fourteen-acre parcel which is used almost entirely by Registrant's subsidiary, Cubic Defense Systems, Inc.
A four-acre parcel, located adjacent and south of the above facility, is owned by Registrant and contains a plant facility consisting of approximately 60,000 square feet used by Cubic Communications, Inc.
The Registrant also owns the property in which its Cubic Automatic Revenue Collection Group headquarters is located, consisting of approximately twenty acres and 78,000 square feet of plant and office facilities, of which approximately 20,000 square feet are leased to the former owner.
The Registrant's 50% owned subsidiary, Westinghouse Cubic Ltd., owns a 60,000 square foot plant and office facility located on a two acre parcel in Merstham Surrey, approximately 30 miles north of London, England.
The Registrant leases approximately 90,000 square feet of manufacturing and office space in Teterboro, New Jersey. These facilities are shared by the Precision Electro-Optical Division of Cubic Defense Systems, Inc. and Cubic Automatic Revenue Collection Group.
In addition, Registrant leases a 56,000 square-foot facility in Hauppauge, New York, which is used for manufacturing, warehouse and office space by Cubic Automatic Revenue Collection Group.
A 100,000 square-foot facility, located on sixteen acres in Tullahoma, Tennessee, is owned by Registrant and used by Cubic Automatic Revenue Collection Group.
The Registrant and its subsidiaries own and lease additional plant and office facilities, individually under 50,000 square feet in size, at various locations around the United States for terms having varied expiration dates, mostly of short-term duration.
Total square footage either owned or under lease comprises approximately 1.3 million square feet. Approximately forty percent of the total square footage of the facilities of the Registrant is utilized for manufacturing and the remainder is utilized for administrative and engineering purposes. All owned and leased properties used by the Registrant are generally well maintained in good operating condition.
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ITEM 3.
ITEM 3. LEGAL PROCEEDINGS. ----------------- In October 1991, the California Environmental Protection Agency notified the Registrant and two of its subsidiaries that they had been identified as three of approximately ninety potentially responsible parties with respect to alleged hazardous substances released into the environment at a used oil and solvent recycling facility in San Diego County. The Registrant and its subsidiaries are not in the business of transporting or disposing of waste materials. The Registrant and the involved subsidiaries sold and/or delivered for recycling certain waste materials generated by them to the owners of the recycling facility. After receipt of the materials by the owners of the recycling facility, the Registrant and the involved subsidiaries were not further involved in the transportation, treatment, or disposal of the materials. It is the Registrant's understanding that alleged hazardous materials from at least ninety other parties were allegedly released at the facility. Under Federal and California law, the Registrant and the involved subsidiaries are "potentially responsible parties" and, therefore, potentially liable for response costs even though they were not involved in the transport or disposal of the materials. The Registrant has been informed that the State of California has already incurred response costs of approximately $7.9 million with respect to the site. Removal and remediation activities have not yet been completed, and the eventual costs of such activities are expected to be substantially in excess of the amount spent to date.
Registrant and its involved subsidiaries have joined a group of other potentially responsible parties to share costs and resources and to undertake a unified course of action in response to their potential liability as potentially responsible parties and have, without admission of liability, entered into a Consent Order with the State to remove the most contaminated ground water and to develop a remedial action plan. A second Consent Order is contemplated to conduct the site remediation in accordance with the plan.
Several of Registrant's insurance carriers have entered into settlements whereby they have agreed to pay approximately three-quarters of the costs of Registrant and its involved subsidiaries, estimated to be necessary for the completion of the work specified in the first Consent Order. Registrant believes that its insurance policies provide coverage for any additional costs it may incur under the contemplated second Consent Order, and will pursue its claims for that coverage in a timely manner. It is management's opinion that any possible liability resulting from this situation will not have a material effect on the Registrant's financial statements.
The government of Iran commenced an arbitration proceeding against the Registrant seeking $12.9 million for reimbursement of payments made for equipment that was to comprise an Air Combat Maneuvering Range pursuant to a contract executed in 1977, and an additional $15 million for unspecified damages. The Registrant believes that Iran defaulted on the agreement and has brought a counterclaim for compensatory damages of $10.4 million, plus interest. A hearing was held by the arbitral panel in June 1994 on issues involving the applicability of the statute of limitations and liability. No decision has been rendered by the panel. The Registrant is vigorously contesting Iran's claim and believes its defenses and counterclaim are strong and that the ultimate outcome of the matter will not have a material effect on the Registrant's financial statements.
In September 1993, the Registrant and its subsidiary, Cubic Defense Systems, Inc., filed a lawsuit against British Aerospace PLC in the United States District Court for the District of Columbia seeking $9.9 million in compensatory damages, plus interest, and unspecified punitive damages for breach of contract and fiduciary duty. The suit also alleges fraudulent misrepresentation in connection with the construction of an Air Combat Maneuvering Range in the North Sea. In 1994, British Aerospace PLC filed a counterclaim for $95 million in damages for misrepresentation and breach of fiduciary duty. Discovery is in progress and trial is set for April 3, 1995. The Registrant believes the counterclaim is without merit and is vigorously pursuing its lawsuit.
Neither the Registrant nor any of its subsidiaries are presently a party to any material pending proceedings other than ordinary litigation incidental to the business, the outcome of which will not, in management's opinion, have a materially adverse effect on the financial position of the Registrant.
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ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. --------------------
None.
PART II -------
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS. -----------------------------------
The principal market on which the Registrant's common stock is being traded is the American Stock Exchange, Inc. The high and low sales prices for the stock, as reported in the consolidated transaction reporting system on the American Stock Exchange, Inc. for the quarterly periods during the past two fiscal years, and dividend information for those periods, are as follows:
On December 13, 1994, the closing price of Registrant's common stock on the American Stock Exchange, Inc. was $17.88.
The terms of the Registrant's note payable to an insurance company includes provisions for maintenance of working capital and tangible net worth and limitations on the level of debt, lease commitments, outstanding letters of credit, loans to subsidiaries and certain investments. At September 30, 1994, the covenant relating to the maintenance of tangible net worth leaves consolidated retained earnings of $11.7 million available for the payment of dividends to shareholders, purchases of the Company's common stock and other charges to shareholders' equity.
There were approximately 2,200 shareholders of record of the Registrant's common stock as of December 13, 1994.
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ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA. -----------------------
FINANCIAL HIGHLIGHTS AND SUMMARY OF CONSOLIDATED OPERATIONS
(Amounts in thousands, except per share data)
This summary should be read in conjunction with the related consolidated financial statements and accompanying notes.
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ITEM 7:
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. ---------------------------------------------
FISCAL 1994 COMPARED TO FISCAL 1993 - -----------------------------------
In April 1994, the Company acquired certain contracts and net assets of the Titan Applications and Titan Services International divisions of Titan Corporation in a move to enhance the Company's capabilities as a premier contractor to the Department of Defense for computer simulation training, systems instrumentation, training doctrine development and field operations and maintenance. The transaction was accounted for as a purchase as described in Note B to the consolidated financial statements. In January 1994, an amendment to the shareholder agreement for Westinghouse Cubic Limited (WCL), a fifty- percent owned subsidiary in the United Kingdom, was executed which granted voting control to Cubic in recognition of certain contract performance guarantees provided by the Company. Accordingly, the accounts of WCL have been consolidated in the accompanying financial statements from January 1994. The above events contributed $51 million and $3.7 million to consolidated sales and consolidated operating profits, respectively, for the year ended September 30, 1994.
Primarily as a result of the above mentioned events, sales increased by 18% to $261 million while operating profits increased 33% to $11 million from last year.
Along with the addition of the Titan Applications Group to our defense segment's training capabilities, the Company made significant investments in research and development, engineering computing tools and manufacturing equipment for this segment in 1994. Development of new technology for combat training ranges, communications technology and related systems amounted to over $6.5 million, while investments in engineering work stations, other computer-aided engineering tools, and computer-aided manufacturing equipment amounted to $2.8 million. This $9.3 million investment compares to approximately $5.1 million spent for such items in the prior year. Although the acquired company added to the operating profits of this segment, the overall decrease of $2.6 million in operating profits is attributable to the investment in research and development. We believe that the U. S. Government will provide the funding necessary for the Department of Defense to sustain quality training support for our Armed Services. We also believe that Cubic's defense segment, currently a significant DOD contractor in training activities, will be a stronger, more effective competitor and will earn a profitable return on this investment.
In the fourth quarter of fiscal 1994, the New York City Transit Authority (NYCTA) exercised Option Two under a contract with Cubic Automatic Revenue Collection Group (CARCG) to provide additional automated turnstiles and other revenue collection equipment for the balance of the system. In addition, claims for additional costs incurred on Option One were settled. All together, including inter-modal bus fareboxes and other enhancements, the value under contract with NYCTA exceeds $200 million. Progress on the contract, now over 50% complete, is ahead of schedule and projected to be profitable.
As mentioned above, operating profits in this segment include WCL on a consolidated basis from January 1994 and, after elimination of the minority interest in the operating profits of WCL, reflect a 75% improvement over last year.
A decrease in cost of sales as a percent of sales from 81% to 77% resulted from lower costs of contract performance in both major segments. At 20% of sales, selling, general and administrative expenses reflect a modest increase over last year's 19% resulting from increased bid and proposal and other marketing efforts in the defense segment.
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As explained in Note A, the Company adopted, as of October 1, 1993, Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Among other changes, this statement changes the recognition and measurement criteria for certain deferred tax assets, which previously were excluded by Statement No. 96. As a result, net income for 1994 was increased by $1.4 million, or $.23 per share.
FISCAL 1993 COMPARED TO FISCAL 1992 - -----------------------------------
In February 1993, the company sold 100% of the common stock of United States Elevator Corp.(USEC) for $40 million in cash and $20 million in preferred stock, as well as possible additional future consideration for the common stock. This consideration, if triggered by a decision of the purchaser of USEC, would be the greater of $20 million or an amount equal to a multiple of 4.25 times the average pretax earnings of USEC over any three consecutive year period less $20 million. If triggered by a decision of Cubic, the additional consideration would be the greater of the amount determined by the multiple as described above, or zero, through December 1997 (for example, a three year average pretax income of $8.2 million, equal to USEC's actual performance for the years 1988- 90, would result in an additional $15 million of consideration for the common stock). After December 1997, the consideration would be based solely on the amount determined by the multiple and could be negative. The contingent payment provision can run as long as 16 years, after which it is triggered automatically. In any event, the contingent payment provision, when exercised, requires the redemption of the preferred stock. The sale of USEC, which resulted in an initial net gain of $20 million, and the results of operations of USEC, were reported as a discontinued operation in the accompanying financial statements.
In addition, in August 1993, management decided to dispose of its Precision Electro-Optical Systems Division and continues to be in discussion with potential buyers of this business. The results of operations of this division and a provision for disposal costs were also reported as a discontinued operation. In total, 1993 income from discontinued operations amounted to $3.30 per share of common stock.
Sales from continuing operations of $221 million, a 7% decrease from 1992, included a 25% decrease in defense systems and a 17% increase in automatic revenue collection systems. This reflected the emphasis the company made over the past few years toward industry leadership in automatic revenue collection systems. The growth in this segment's sales did not include the significant growth experienced by Westinghouse Cubic Limited, a 50% owned subsidiary operating in the United Kingdom. The decrease in the defense segment followed a trend in recent years which reflected the downsizing of the defense industrial base by the Department of Defense.
The decrease in operating profits from continuing operations was attributed not only to the downsizing mentioned above, but also to generally lower profit margins which resulted from increased competition in the smaller overall defense market. A new management team was put in place to address the business issues in this segment. Defense systems instrumentation and training continue to represent a significant market despite the reduced United States defense budget. The company's strength in this market segment justifies its continued commitment to it.
Although operating profit increased in automatic revenue collection systems during 1993, the level of increase was inhibited by contract changes and customer delays on major programs. Efforts were made to improve profits in this segment by relocating some manufacturing activities to lower cost areas, such as Tennessee.
Cost of sales as a percentage of sales increased from 75% to 81% as a result of the lower operating margins mentioned above. Selling, general and administrative expenses as a percentage of sales returned to 19%, as the unusual litigation and bid and proposal expenses incurred in 1992 were not repeated in 1993. Income taxes reflected a net credit for the year due primarily to foreign source income and tax exempt interest and dividend income.
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FINANCIAL POSITION AND LIQUIDITY
During 1994, operating activities generated $19 million in cash, primarily as a result of improved cash flow on automatic revenue collection contracts. The principal use of cash was for the acquisition of the Titan Applications Group which was financed from cash on hand and the liquidation of $13 million of marketable securities. Investments in capital equipment, including toll equipment under operating leases, of $8 million accounts for the use of the balance of cash generated by operating activities. The net cash position was virtually unchanged from the beginning to the end of the year.
The significant growth in receivables which occurred in fiscal 1993, primarily relating to the Florida Turnpike project, should liquidate in 1995 and generate approximately $20 million more than will be required by new sales. In addition the Company's liquidity position is strengthened by the Cubic Toll Systems, Inc. $30 million credit agreement, $20 million of which is currently available. Further, at year end, the Company had $107 million in working capital which includes $31 million in cash and marketable securities. Management believes that this strong financial position and liquidity provide adequate resources to meet anticipated financing needs at this time. See Note E to the consolidated financial statements for a discussion of the Company's financing arrangements.
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ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA. ------------------------------------------
The following consolidated financial statements of the Registrant and its subsidiaries, for the year ended September 30, 1994, are attached hereto, marked Pages 15 and 20 through 36.
Report of Independent Auditors See Page 15
Consolidated Balance Sheet September 30, 1994 and 1993 See Pages 20 and 21
Consolidated Statement of Income Years ended September 30, 1994, 1993 and 1992 See Page 22
Consolidated Statement of Retained Earnings Years ended September 30, 1994, 1993 and 1992 See Page 23
Consolidated Statement of Cash Flows Years ended September 30, 1994,1993, and 1992 See Page 24
Notes to Consolidated Financial Statements September 30, 1994 See Pages 25 through 36
ITEM 9.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. ------------------------
None.
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Report of Independent Auditors
Board of Directors and Shareholders Cubic Corporation
We have audited the accompanying consolidated balance sheet of Cubic Corporation as of September 30, 1994 and 1993, and the related consolidated statements of income, retained earnings and cash flows for each of the three years in the period ended September 30, 1994. Our audits also included the financial statement schedule listed in the index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cubic Corporation at September 30, 1994 and 1993, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
San Diego, California December 5, 1994
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PART III --------
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. --------------------------------------------------
Information regarding directors and executive officers is incorporated herein by reference from the Company's definitive Proxy Statement, which will be filed no later than 30 days prior to the date of the Annual Meeting of Shareholders.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION. ----------------------
Information regarding executive compensation is incorporated herein by reference from the Company's definitive Proxy Statement, which will be filed no later than 30 days prior to the date of the Annual Meeting of Shareholders.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. --------------------------------
Information regarding security ownership of certain beneficial owners and management is incorporated herein by reference from the Company's definitive Proxy Statement, which will be filed no later than 30 days prior to the date of the Annual Meeting of Shareholders.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. ----------------------------------------------
Information regarding "Certain Relationships and Related Transactions" is included in Note K to the Consolidated Financial Statements for the year ended September 30, 1994, and follows at Item 14(a)(1) of this filing, on page 33.
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PART IV -------
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. ---------------------------------
(a) Documents filed as part of this Report:
(1) The following consolidated financial statements of Cubic Corporation and subsidiaries, as referenced in Item 8:
Consolidated Balance Sheet September 30, 1994 and 1993
Consolidated Statement of Income Years ended September 30, 1994, 1993 and 1992
Consolidated Statement of Retained Earnings Years ended September 30, 1994, 1993 and 1992
Consolidated Statement of Cash Flows Years ended September 30, 1994, 1993 and 1992
Notes to Consolidated Financial Statements September 30, 1994
(2) The following consolidated financial statement schedules of Cubic Corporation and subsidiaries, as referenced in Item 14(d):
Schedule II -- Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other Than Related Parties
All other schedules, for which provision is made in the applicable accounting rules and regulations of the Securities and Exchange Commission, are not required under the related instructions or are not applicable and, therefore, have been omitted.
(b) No reports on Form 8-K were filed during the last quarter of the period covered by this report.
(c) Exhibits:
21. List of Subsidiaries
27. Financial Data Schedule
(d) Financial Statement Schedules
Schedule II -- Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other Than Related Parties
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SIGNATURES ----------
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:
(Registrant) CUBIC CORPORATION
12/21/94 /s/ Walter J. Zable - ------------ ------------------------------------------------------------ Date WALTER J. ZABLE, President - --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
12/21/94 /s/ Walter J. Zable - ------------ ------------------------------------------------------------ Date WALTER J. ZABLE, President, Chief Executive Officer and Chairman of the Board of Directors
12/21/94 /s/ Walter C. Zable - ------------ ------------------------------------------------------------ Date WALTER C. ZABLE, Vice President and Vice Chairman of the Board of Directors
12/21/94 /s/ Jackson D. Arnold - ------------ ------------------------------------------------------------ Date JACKSON D. ARNOLD, Director
12/21/94 /s/ Thomas P. Moran - ------------ ------------------------------------------------------------ Date THOMAS P. MORAN, Director
12/21/94 /s/ Richard G. Duncan - ------------ ------------------------------------------------------------ Date RICHARD G. DUNCAN, Director
12/21/94 /s/ Robert T. Monagan - ------------ ------------------------------------------------------------ Date ROBERT T. MONAGAN, Director
12/21/94 /s/ Raymond E. Peet - ------------ ------------------------------------------------------------ Date RAYMOND E. PEET, Director
12/21/94 /s/ Thomas A. Baz - ------------ ------------------------------------------------------------ Date THOMAS A. BAZ, Vice President and Corporate Controller
12/21/94 /s/ William W. Boyle - ------------ ------------------------------------------------------------ Date WILLIAM W. BOYLE, Vice President of Finance & Chief Financial Officer
Cubic Corporation - SEC Form 10-K Page 19 - --------------------------------------------------------------------------------
ITEM 8, ITEM 14(A)(1) AND (2),(C) AND (D)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
EXHIBITS
FINANCIAL STATEMENT SCHEDULE
Cubic Corporation
Year Ended September 30, 1994
San Diego, California
Cubic Corporation - SEC Form 10-K Page 20 ------------------------------------------------------------------------------
CUBIC CORPORATION
CONSOLIDATED BALANCE SHEET
Cubic Corporation - SEC Form 10-K Page 21 - --------------------------------------------------------------------------------
See accompanying notes
Cubic Corporation - SEC Form 10-K Page 22 - --------------------------------------------------------------------------------
CUBIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
See accompanying notes
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CUBIC CORPORATION
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
See accompanying notes
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CUBIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
See accompanying notes
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CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation: The consolidated financial statements include the accounts of - -------------- Cubic Corporation and all of its subsidiaries (the Company), including Westinghouse Cubic Limited (WCL) subsequent to December 31, 1993. As explained in note B, WCL is fifty-percent owned but is controlled by the Company as of January 1994. WCL is a United Kingdom company engaged in revenue collection equipment design, fabrication, and installation. All significant intercompany transactions are eliminated in consolidation.
Cash Equivalents: The Company considers all highly liquid investments with a - ----------------- maturity of three months or less when purchased to be cash equivalents.
Marketable Securities: In May 1993 the Financial Accounting Standards Board - ---------------------- issued Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The Company will apply the new rules starting in the quarter ending December 31, 1994, however, application of the new rules will not have a material effect on shareholders' equity as of October 1, 1994, as there is an immaterial difference between the cost and market value of securities held at that date.
Inventories: Inventories are stated at the lower of cost or market. Cost is - ------------ determined using primarily the first-in, first-out (FIFO) method, which approximates current replacement cost. The last-in, first-out (LIFO) method is used to determine cost for an immaterial amount of inventories.
Work in process is stated at the actual production and engineering costs incurred to date, including applicable overhead, and is reduced by charging any amounts in excess of estimated realizable value to cost of sales. Although certain government contracts include general and administrative costs, the amounts of these costs remaining in inventory are not material.
Property, Plant and Equipment: Property, plant and equipment and toll equipment - ------------------------------ under operating leases are carried at cost. Depreciation and amortization are provided in amounts sufficient to amortize the cost of the depreciable assets over their estimated useful lives. Straight-line and accelerated methods are each used for approximately one-half of the depreciable plant and equipment. Toll equipment under operating leases is depreciated using the straight-line method. Provisions for depreciation and amortization of plant and equipment and toll equipment under operating leases amounted to $9,430,000, $9,637,000, and $9,595,000 in 1994, 1993 and 1992, respectively.
Revenue Recognition: Sales under long-term contracts are recognized as costs - -------------------- are incurred and fees are earned on cost-plus-fee contracts, and as costs are incurred and estimated profits are earned on long-term, fixed price contracts. Such estimated profits are computed by applying the various percentages of completion of the contracts to the estimated ultimate profits. Provisions are made on a current basis to fully recognize any anticipated losses on contracts.
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CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Income Taxes: The Company adopted the provisions of Financial Accounting - ------------- Standards Board Statement No. 109, "Accounting for Income Taxes," as of October 1, 1993. Under Statement 109, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. As permitted by the Statement, prior year financial statements have not been restated. The cumulative effect of adoption, resulting from a change in the recognition of certain deferred tax assets, increased net income by $1,379,000, or $.23 per share. The adoption of the new standard had no material impact on pretax income from operations in 1994.
Reclassification: Certain prior year amounts have been reclassified to conform - ---------------- to current year classifications.
NOTE B--ACQUISITIONS
On April 8, 1994, the Company acquired certain assets and assumed certain liabilities of the Titan Applications and Titan Services International divisions of The Titan Corporation, for a cash price of approximately $23.6 million. The acquisition has been accounted for by the purchase method, and the assets and liabilities have been recorded at their estimated fair values at the date of acquisition. The amount by which the purchase price exceeded the net book value of tangible assets was approximately $18.3 million and will be amortized over a period of 15 years using the straight-line method. The Company has devoted the acquired assets to continuation of the business, which provides training, applications and operations services to the United States Army. The results of operations from the date of acquisition to September 30, 1994 have been included in the accompanying consolidated financial statements as a part of the defense segment.
In January 1994 an amendment to the WCL shareholder agreement was executed which granted voting control of the fifty-percent owned subsidiary to Cubic Corporation in recognition of certain contract performance guarantees provided by the Company's subsidiary, Cubic Automatic Revenue Collection Group. As a result of this acquisition of control, the accounts of WCL are consolidated in these financial statements as of January 1, 1994.
The Company's fifty-percent share of the equity of WCL was $3,484,000 at September 30, 1993 and is included in other assets in the consolidated balance sheet at that date. The Company's equity share of the net income of WCL for the quarter ended December 31, 1993 and for the years ended September 30, 1993 and 1992, was $474,000, $1,699,000 and $935,000, respectively, and is included in other income for each of those periods.
Pro forma results of the Company's operations, assuming the acquisitions had occurred as of October 1, 1993 and 1992, are presented below (in thousands, except per share data). In addition to purchase accounting adjustments, the pro forma amounts include certain adjustments to historical financial data, including elimination of intercompany sales, reduction of nonrecurring general and administrative expenses, reduction of interest income and the income tax effect of these adjustments. The pro forma operating results may not be indicative of the results that actually would have occurred if the acquisitions had taken place on the dates indicated or which may occur in the future.
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CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE B--ACQUISITION--Continued
NOTE C--ACCOUNTS RECEIVABLE
The following tabulation shows the components of accounts receivable for long- term contracts at September 30:
A substantial portion of recoverable costs and accrued profits on progress completed is billable under progress payment provisions of the related contracts. The remainder of these amounts is billable upon delivery of products or furnishing of services. It is anticipated that such receivables from the U.S. Government at September 30, 1994, will be billed during 1995 as units are delivered and those from commercial customers will be billed upon completion of performance tests and/or acceptance by the customers in 1995.
NOTE D--INVENTORIES
Inventories at September 30 are classified as follows:
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CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE E--FINANCING ARRANGEMENTS
Long-term debt at September 30, other than the bank debt of the Company's subsidiary, Cubic Toll Systems, Inc. (CTS), consists of the following:
At September 30, 1994, the Company had outstanding intermediate-term interest rate swap agreements. Under the agreements, the Company receives a fixed rate of 6.11% on $15 million and pays a floating rate based on the London Interbank Offered Rate (LIBOR), as determined in six month intervals. The transaction effectively changes a portion of the Company's interest rate from a fixed rate to a floating rate basis.
The terms of the note payable to an insurance company include provisions for maintenance of working capital and tangible net worth, and limitations on the level of debt, lease commitments, outstanding letters of credit, loans to subsidiaries and certain investments. At September 30, 1994, the covenant relating to the maintenance of tangible net worth leaves consolidated retained earnings of $11.7 million available for the payment of dividends to shareholders, purchases of the Company's common stock and other charges to shareholders' equity.
CTS has a $30 million revolving credit agreement with a bank which expires in December 1997. Borrowings under this agreement bear interest at rates indexed to either the prime rate, the certificate of deposit rate, or LIBOR, selected at CTS' option. The terms of the credit arrangement provide for commitment fees of 1/4 of 1% per annum of the available unutilized balance. Borrowings under the agreement cannot exceed the present value of future revenues to be received under certain toll equipment leases. At September 30, 1994, the present value of these future revenues exceeded the credit facility maximum. The debt is without recourse to Cubic Corporation and is secured by all of the leases, leased equipment, and capital stock of CTS. As of September 30, 1994, CTS had borrowed $10,000,000 under this revolving credit agreement with interest at 5.53% per annum.
Maturities of long-term debt, including debt of CTS, for each of the five years in the period ending September 30, 1999, are as follows: 1995--$5,000,000; 1996- - -$5,000,000; 1997--$5,000,000; 1998--$15,000,000; 1999--$5,000,000; thereafter-- $5,000,000.
Interest paid amounted to $2,377,000, $2,107,000 and $4,298,000 in 1994, 1993 and 1992, respectively.
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CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F--COMMITMENTS
The Company leases certain office, manufacturing and warehouse space and miscellaneous office machines and other equipment under noncancelable operating leases expiring in various years through 1999. These leases, some of which may be renewed for periods up to 10 years, generally require the lessee to pay all maintenance, insurance and property taxes. Several leases are subject to periodic adjustment based on price indices or cost increases. Rental expense for all operating leases amounted to $2,591,000, $2,699,000, and $3,103,000 in 1994, 1993 and 1992, respectively.
Future minimum payments under noncancelable operating leases with initial terms of one year or more consist of the following at September 30, 1994 (in thousands):
NOTE G--TOLL EQUIPMENT UNDER OPERATING LEASES
CTS is the lessor of toll equipment primarily to governmental agencies or public authorities under leases with terms of five to ten years. Most leases require that CTS provide maintenance support for the leased equipment. The leases may also provide for lessor penalties for equipment downtime, or for lessee penalties for early removal of partial configurations. The cost of equipment under operating leases at September 30, 1994 and 1993 totaled $51,157,000 and $49,408,000, respectively, including costs incurred to date for equipment in production totalling $3,937,000 and $3,342,000, respectively, while accumulated depreciation at the same dates amounted to $35,167,000 and $29,456,000.
Future minimum lease payments receivable under operating leases, including leases for toll equipment in production, which are noncancelable or for which the exercise of a cancellation clause would cause a significant economic detriment to the lessee are as follows at September 30, 1994 (in thousands):
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CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE H--INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of September 30, 1994 are as follows (in thousands):
Significant components of the provision for income taxes attributable to continuing operations are as follows:
Income (loss) from continuing operations before income taxes, minority interest and cumulative effect of accounting change include the following components:
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CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE H--INCOME TAXES--Continued
The components of the provision for deferred income taxes for the years ended September 30, 1993 and 1992 are as follows:
The reconciliation of income tax attributable to continuing operations computed at the U.S. federal statutory tax rate to income tax expense is as follows:
The Company made income tax payments, net of refunds, totalling $3,246,000, $1,259,000, and $2,547,000, in 1994, 1993 and 1992, respectively.
NOTE I--PENSION AND OTHER RETIREMENT PLANS
The Company maintains a defined benefit pension plan covering substantially all non-union U.S. employees in certain of its subsidiaries. Benefits under this plan are based on the employee's earnings during the period of employment. The Company's policy is to fund this plan based on legal requirements and tax considerations.
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CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE I--PENSION AND OTHER RETIREMENT PLANS--Continued
Net pension cost for this plan included the following components:
The following table sets forth the funded status and amounts recognized in the Consolidated Balance Sheet as of September 30, 1994 and 1993, for the Company's defined benefit pension plan:
Plan assets include equities, short and long-term debt instruments and real estate investments. The weighted average discount rate and the rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligations were 8.5% and 5.5%, respectively, in 1994, and 7.5% and 4.5% in 1993. The long-term rate of return used to determine the expected return on plan assets included in the net pension cost was 8.5% in each of the three years presented.
The Company and certain of its subsidiaries also have other retirement plans which provide benefits for participating employees. An employee is eligible to participate in the plans after six months to one year of service, and may make additional contributions to the plans. These plans provide for full vesting of benefits over five to seven years. A substantial portion of Company contributions to the plans are discretionary with the Board of Directors. Company contributions to the plans aggregated $5,015,000, $4,906,000, and $5,408,000, in 1994, 1993 and 1992 respectively.
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CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE J--DISCONTINUED OPERATIONS
In 1993, the Company sold all of the outstanding common stock of its subsidiary, United States Elevator Corp. (USEC), to Thyssen Holding Corporation (Thyssen). Proceeds of the sale were $40 million in cash and $20 million of USEC 6% cumulative, nonvoting, redeemable preferred stock which is required to be repurchased by Thyssen at the option of the Company. The gain on the sale was $20 million, net of applicable income taxes of $5 million. The agreement for the sale of USEC also provides for possible additional consideration based on a formula relating to the post-sale earnings of USEC. This contingent payment provision, which would also require redemption of the preferred stock, could be triggered by either party after December 31, 1995, or run as long as 16 years if not triggered sooner.
Also in 1993, the Company's management made a decision to dispose of its Precision Electro-Optical Systems Division. Provisions of $153,000 and $600,000, net of applicable income taxes of $100,000 and $400,000, respectively, were made in 1994 and 1993, respectively, for the expected costs of disposal of this business and are included in the net gain (loss) on disposal of discontinued operations on the income statement. The Company is continuing its efforts to dispose of or liquidate the business. The remaining net assets, which consist primarily of inventory, were immaterial as of September 30, 1994.
NOTE K--RELATED PARTY TRANSACTIONS
In the first quarter of fiscal 1994, the Company loaned $1.6 million to Mr. Walter J. Zable, its Chairman and principal shareholder. The loan accrued interest at a rate higher than the Company earned on its short-term investments during the time the loan was outstanding. Subsequent to September 30, 1994, the loan was repaid.
The Company leases certain manufacturing facilities in the County of San Diego from co-owners Walter C. Zable, an officer and director of the Company, and his sister, who are the children of Walter J. Zable. The facilities, which are leased through July 1997, under a triple net lease at the rate of $168,000 per year, have been used as manufacturing facilities for subsidiaries of the Company and continue to be available as such.
In October 1992, a trust established by Mr. and Mrs. Walter J. Zable, entered into an agreement with the Company whereby the Company agreed to make advances of premiums payable on a split-dollar life insurance policy purchased by the trust on the life of Mrs. Zable. The agreement is so designed that if the assumptions made as to mortality experience, policy dividends and other factors are realized, at the death of Mrs. Zable the Company will recover all of its insurance premium payments as well as other costs associated with the policy. The advances are secured by a collateral assignment of the policy to the Company. The agreement is intended to prevent the possibility of a large block of the Company's common shares being put on the market, to the detriment of the share price, in order for the beneficiaries to pay estate taxes. The Company may cause the agreement to be terminated and the policy to be surrendered at any time. The Company expensed a net $503,000 and $467,000 in 1994 and 1993, respectively, related to the policy. This amount represents the difference between policy premiums and other payments, and the increase in the cash surrender value of the policy. The Company's accounting policy related to this transaction is to expense this difference in the year incurred. However, should the policy be held to maturity, all payments advanced to carry this policy will be returned. Further, should the policy be held for nine years, it is presumed that the cash surrender value will exceed all payments made, and amounts previously expensed in the early years of the policy will have been reversed.
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CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE L--LEGAL MATTERS
The government of Iran commenced an arbitration proceeding against the Company seeking $12.9 million for reimbursement of payments made for equipment that was to comprise an Air Combat Maneuvering Range pursuant to a contract executed in 1977, and an additional $15 million for unspecified damages. The Company believes that Iran defaulted on the agreement and has brought a counterclaim for compensatory damages of $10.4 million, plus interest. A hearing was held by the arbitral panel in June 1994 on issues involving the applicability of the statute of limitations and liability. No decision has been rendered by the panel. The Company is vigorously contesting Iran's claim and believes its defenses and counterclaim are strong and that the ultimate outcome of the matter will not have a material effect on the Company's financial statements.
In September 1993, the Company and its subsidiary, Cubic Defense Systems, Inc., filed a lawsuit against British Aerospace PLC in the United States District Court for the District of Columbia seeking $9.9 million in compensatory damages, plus interest, and unspecified punitive damages for breach of contract and fiduciary duty. The suit also alleges fraudulent misrepresentation in connection with the construction of an Air Combat Maneuvering Range in the North Sea. In 1994, British Aerospace PLC filed a counterclaim for $95 million in damages for misrepresentation and breach of fiduciary duty. Discovery is in progress and trial is set for April 3, 1995. The Company believes the counterclaim is without merit and is vigorously pursuing its lawsuit.
NOTE M--BUSINESS SEGMENT INFORMATION
The Company's operations are best grouped into three main product segments: defense, automatic revenue collection systems, and industrial operations. A description of each segment's primary activities follows:
Defense--work under U.S. and foreign government contracts relating to electronic - ------- defense systems and equipment, computer simulation training, distributed interactive simulation, development of training doctrine and field operations and maintenance. Products include customized range instrumentation and training systems, communications and surveillance systems, HF and UHF/VHF surveillance receivers, avionics systems and space RF/digital products.
Automatic revenue collection systems--the design, production, leasing and - ------------------------------------ servicing of electronic and mechanical revenue collection systems.
Industrial operations--includes the manufacture of freeway call boxes and paper - --------------------- products.
Business segment financial data for the three years ended September 30, 1994, is presented below.
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CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE M--BUSINESS SEGMENT INFORMATION--Continued
Intersegment sales are immaterial. Sales of $101.9 million, $76.8 million and $100.4 million in 1994, 1993 and 1992, respectively, were made to United States Government agencies by the defense segment. Automatic revenue collection systems sales include $24.3 million, $42.3 million and $21.7 million in 1994, 1993 and 1992, respectively, to the New York City Transit Authority and $27.9 million in 1994 to the London Underground (LUL). No other single customer accounts for 10% or more of the Company's revenue.
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CUBIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE M--BUSINESS SEGMENT INFORMATION--Continued
Domestic revenue includes $30.1 million, $32.2 million, and $47.6 million in 1994, 1993 and 1992, respectively, for export. The Company's foreign assets represent less than 10% of total assets. Foreign revenue consists primarily of $27.9 million in sales made by the Company's subsidiary, WCL, in 1994 (foreign revenue was less than 10% of consolidated revenue in 1993 and 1992). Consolidated operating profit includes $4.5 million in operating profit from WCL in 1994.
NOTE N--SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the years ended September 30, 1994 and 1993:
The quarters ended March 31 and June 30, 1994, have been restated from those previously reported to reflect the acquisition of control of WCL as of January 1, 1994. This restatement resulted in changes to sales and gross profit but had no impact on any of the other amounts presented above.
Cubic Corporation - SEC Form 10-K - --------------------------------------------------------------------------------
Cubic Corporation
September 30, 1994
SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, - ----------- PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
Walter J. Zable - $1,600,000 - $1,600,000
Note: The loan was paid in full in October 1994 and accrued interest at a rate of 4% per annum.