- Completed acquisitions of TeraLogics,
LLC and H4 Global during the first quarter, and acquisition of GATR
Technologies, Inc. on February 2, 2016
- Sales of $313.8 million for the first
quarter
- EBITDA(1) of $1.0 million and Adjusted
EBITDA(1) of $11.3 million for the quarter
- Net loss of $5.4 million, or $0.20 per
diluted share for the quarter
- Total backlog of $2.920 billion as of
December 31, 2015
Cubic Corporation (NYSE: CUB) today reported its financial
results for the quarter ended December 31, 2015.
“We are very excited about our expansion into the high growth,
higher margin C4ISR markets with the acquisitions of TeraLogics and
GATR. Historically, our first quarter has often been our least
profitable quarter, and this year was further impacted by costs
associated with these acquisitions and the continued implementation
of our OneCubic ERP and supply chain efficiency efforts. We remain
confident that fiscal year 2016 sales and Adjusted EBITDA will be
higher than last year and fiscal year 2017 will be at record
levels,” said Bradley H. Feldmann, president and chief executive
officer of Cubic Corporation.
First Quarter Results
First quarter sales of $313.8 million in 2016 were 1 percent
lower than sales of $318.5 million in the corresponding quarter
last year. The average exchange rates between the prevailing
currency in foreign operations and the U.S. dollar resulted in a
decrease in sales of $9.5 million for the first quarter compared to
the same period last year. Sales grew for the quarter from Cubic
Global Defense Services (CGD Services), but decreased from Cubic
Transportation Systems (CTS) and Cubic Global Defense Systems (CGD
Systems). The increase in CGD Services sales for the first quarter
was primarily due to increased activity at the Joint Readiness
Training Center (JRTC). The decrease in CTS sales for the first
quarter was primarily due to foreign currency rates. The decrease
in CGD Systems sales for the first quarter was mainly caused by
lower sales of air combat training systems.
The operating loss in the first quarter of fiscal 2016 was $8.1
million compared to operating income of $7.2 million in the first
quarter last year. The decrease was due in part to accelerated
expenditures related to strategic and IT system resource planning
as part of our OneCubic initiatives, totaling $6.5 million for the
first quarter of 2016 compared to $1.1 million in the same quarter
last year. In addition, during the first quarter of fiscal 2016,
total expenses incurred for the recent acquisitions of businesses
and diligence on prospective business acquisitions totaled $4.3
million compared to $1.7 million in the first quarter of fiscal
2015. The net loss in the first quarter of 2016 was $5.4 million,
or $0.20 per diluted share, compared to net income of $5.2 million,
or $0.19 per diluted share in the corresponding quarter last
year.
EBITDA(1) decreased to $1.0 million in the first quarter of 2016
from $15.2 million in the first quarter of 2015 primarily due to
increased ERP and acquisition-related expenses, and lower margins
on the London follow-on fare collections contract. Adjusted
EBITDA(1), which excludes acquisition-related expenses, expenses
related to ERP system development and supply chain process
redesign, restructuring costs and other non-operating income and
expenses, decreased to $11.3 million in the first quarter of 2016
from $18.8 million in the corresponding quarter last year.
Total backlog was $2.920 billion at December 31, 2015, compared
to $2.976 billion as of September 30, 2015, a decrease of $56.1
million. TeraLogics, a CGD Systems business acquired in December
2015, had $2.7 million of funded backlog and $34.4 million of total
backlog on the date of the acquisition. Changes in exchange rates
between the prevailing currency in our foreign operations and the
U.S. dollar as of the end of the quarter decreased backlog by $5.4
million compared to September 30, 2015.
(1)
EBITDA and Adjusted EBITDA are Non-GAAP metrics - see
the table included in the section titled “Use of Non-GAAP Financial
Information” for a reconciliation of these GAAP and non-GAAP
financial measures
Reportable Segment Results
Transportation Systems (40 percent of first quarter 2016
consolidated sales)
Three
Months Ended December 31, 2015
2014 (in millions) Transportation Systems Segment Sales $
125.8 $ 131.5 Transportation Systems Segment Operating
Income $ 3.6 $ 12.1
CTS sales decreased 4 percent in the first quarter to $125.8
million compared to $131.5 million last year. Foreign currency
exchange rates had a significant impact on the comparability of CTS
sales between the quarters. The average exchange rates between the
prevailing currency in CTS’ foreign operations and the U.S. dollar
resulted in a decrease in sales of $6.8 million for the first
quarter compared to the same period last year. Decreases in
transportation sales in Australia and the U.K. were partially
offset by higher sales in the U.S.
CTS operating income decreased 70 percent in the first quarter
to $3.6 million compared to $12.1 million last year. For the
quarter, the decrease in operating income is primarily the result
of the transition to our follow-on fare collections contract in
London that has lower margins than the legacy contract. In the
first quarter of fiscal 2016, margins on the follow-on contract
were further impacted by transition costs. These decreases were
partially offset by increased operating profits in the U.S.
primarily due to reductions in losses on contracts in Vancouver and
Chicago.
CGD Systems (31 percent of first quarter 2016 consolidated
sales)
Three
Months Ended December 31, 2015
2014 (in millions) Cubic Global Defense Systems Segment
Sales $ 95.9 $ 98.0 Cubic Global Defense Systems Segment
Operating Loss $ (3.4 ) $ (2.7 )
CGD Systems sales decreased 2 percent in the first quarter to
$95.9 million compared to $98.0 million last year. Sales were lower
from air combat training systems in the Middle East and Australia
ground combat training system sales in the Far East, as well as
from data link sales. These lower sales were partially offset by
increased sales of Multiple Integrated Laser Engagement System
(MILES) equipment and ground combat training systems. In addition,
DTECH Labs, Inc., a secure communications business acquired by CGD
Systems in December 2014 contributed sales of $7.8 million in
the first quarter of fiscal 2016 compared to $1.0 million for the
first quarter last year.
The CGD Systems operating loss increased 26 percent in the first
quarter of fiscal 2016 to $3.4 million compared to $2.7 million
last year. The operating losses recognized by Cubic for businesses
acquired since fiscal 2014, including TeraLogics, H4 Global,
Intific and DTECH, as well as costs of diligence on the acquisition
of GATR, which closed on February 2, 2016, totaled $4.4 million in
the quarter ended December 31, 2015 compared to $1.5 million during
the quarter ended December 31, 2014.
The operating loss in the first quarter of 2015 was primarily
caused by an increase in estimated development costs on a contract
for a training system, cost growth on a simulator contract in the
Middle East and losses on recently acquired companies, as noted
above. The increase in operating loss between the first quarter of
fiscal 2016 and the corresponding quarter last year was also caused
by lower profits from decreased sales of air combat training
systems, ground combat training systems in the Far East and data
link products.
CGD Services (29 percent of first quarter 2016 consolidated
sales)
Three
Months Ended December 31, 2015
2014 (in millions) Cubic Global Defense Services Segment
Sales $ 92.1 $ 89.0 Cubic Global Defense Services Segment
Operating Income $ 0.2 $ -
CGD Services sales increased 3 percent in the first quarter to
$92.1 million compared to $89.0 million last year. Sales for the
first quarter were higher primarily because of increased activity
at the JRTC, higher sales from a Marine Corps training contract
that was awarded in fiscal 2015 and increased activity supporting
Special Operations Forces training.
CGD Services operating income increased in the first quarter to
$0.2 million compared to breakeven last year. In the first quarter
of fiscal 2016 operating margins increased from sales of Special
Operations Forces training. Margins also increased due to a
decrease in amortization expense related to purchased intangible
assets. Increases in operating income were partially offset by
operating losses realized on the Marine Corps training contract
that was bid in an extremely competitive environment.
Cash Flows
Operating activities used cash of $49.6 million in the first
quarter of 2016 compared to cash provided by operating activities
of $8.3 million in the corresponding quarter in 2015. In 2016, CGD
Systems and CTS used cash, partially offset by CGD Services
positive cash flows.
Conference Call
Cubic management will host a conference call to discuss the
company’s first quarter 2016 results today, Thursday, February 4,
2016 at 1:00 p.m. EST/10:00 a.m. PST, which will be simultaneously
broadcast over the Internet. Bradley H. Feldmann, president and
chief executive officer, and John “Jay” D. Thomas, executive vice
president and chief financial officer, will host the call.
Conference Call Dial-In Information
Financial analysts and institutional investors interested in
participating in the call are invited to dial:
- (877) 407-8293 for domestic
callers
- (201) 689-8349 for international
callers
Please dial-in approximately 10 minutes prior to the start of
the call.
Webcast
A live webcast of the conference call and presentation slides
will be accessible on our website under the “Investor Relations”
tab at www.cubic.com.
Please visit the website at least 15 minutes prior to the call
to register, download and install any streaming media software
needed to listen to the webcast. A replay of the broadcast
will be available on the Investor Relations tab of Cubic's
website.
About Cubic
Cubic Corporation designs, integrates and operates systems,
products and services focused in the transportation, defense
training and secure communications markets. As the parent company
of two major business units, Cubic’s mission is to increase
situational awareness and understanding for customers worldwide.
Cubic Transportation Systems is a leading integrator of payment and
information technology and services to create intelligent travel
solutions for transportation authorities and operators. Cubic
Global Defense is a leading provider of realistic combat training
systems, secure communications and networking and highly
specialized support services for military and security forces of
the U.S. and allied nations. For more information about Cubic,
please visit the company's website at www.cubic.com or on Twitter
@CubicCorp.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
that are subject to the safe harbor created by such Act.
Forward-looking statements include, among others, statements about
our expectations regarding future events or our future financial
and/or operating performance; making investments in our company to
drive increased productivity and efficiency in the future;
anticipated lower sales, operating income and gross margin
percentage in the future under our new contract with TfL; and the
potential recovery of certain costs related to a contract for the
development of a virtual training system. These statements are
often, but not always, made through the use of words or phrases
such as “may,” “will,” “anticipate,” “estimate,” “plan,” “project,”
“continuing,” “ongoing,” “expect,” “believe,” “intend,” “predict,”
“potential,” “opportunity” and similar words or phrases or the
negatives of these words or phrases. These statements involve
risks, estimates, assumptions and uncertainties that could cause
actual results to differ materially from those expressed in these
statements, including, among others: our dependence on U.S. and
foreign government contracts; delays in approving U.S. and foreign
government budgets and cuts in U.S. and foreign government defense
expenditures; the ability of certain government agencies to
unilaterally terminate or modify our contracts with them; our
ability to successfully integrate new companies into our business
and to properly assess the effects of such integration on our
financial condition; the U.S. government’s increased emphasis on
awarding contracts to small businesses, and our ability to retain
existing contracts or win new contracts under competitive bidding
processes; the effects of politics and economic conditions on
negotiations and business dealings in the various countries in
which we do business or intend to do business; risks associated
with the restatement of our prior consolidated financial
statements, including our identification of material weaknesses in
our internal control over financial reporting; competition and
technology changes in the defense and transportation industries;
our ability to accurately estimate the time and resources necessary
to satisfy obligations under our contracts; the effect of adverse
regulatory changes on our ability to sell products and services;
our ability to identify, attract and retain qualified employees;
unforeseen problems with the implementation and maintenance of our
information systems; business disruptions due to cyber security
threats, physical threats, terrorist acts, acts of nature and
public health crises; our involvement in litigation, including
litigation related to patents, proprietary rights and employee
misconduct; our reliance on subcontractors and on a limited number
of third parties to manufacture and supply our products; our
ability to comply with our development contracts and to
successfully develop, introduce and sell new products, systems and
services in current and future markets; defects in, or a lack of
adequate coverage by insurance or indemnity for, our products and
systems; and changes in U.S. and foreign tax laws, exchange rates
or our economic assumptions regarding our pension plans. In
addition, please refer to the risk factors contained in our SEC
filings available at www.sec.gov, including our most recent Annual
Report on Form 10-K and Quarterly Reports on Form 10-Q. Because the
risks, estimates, assumptions and uncertainties referred to above
could cause actual results or outcomes to differ materially from
those expressed in any forward-looking statements, you should not
place undue reliance on any forward-looking statements. Any
forward-looking statement speaks only as of the date hereof, and,
except as required by law, we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after
the date hereof.
Use of Non-GAAP Financial Information
We believe that the presentation of Earnings before interest,
taxes, depreciation, and amortization (EBITDA) and Adjusted EBITDA
included in this report provides useful information to investors
with which to analyze our operating trends and performance and
ability to service and incur debt. Also, we believe EBITDA
facilitates company-to-company operating performance comparisons by
backing out potential differences caused by variations in capital
structures (affecting net interest expense), taxation, variations
in organic vs. inorganic growth (affecting amortization expense)
and the age and book depreciation of property, plant and equipment
(affecting relative depreciation expense). We believe Adjusted
EBITDA further facilitates company-to-company operating comparisons
by backing out items that we believe are not part of our core
operating performance. Items backed out of Adjusted EBITDA are
comprised of expenses incurred in the development of our ERP system
and the redesign of our supply chain, business acquisition expenses
including retention bonus expenses, due diligence and consulting
costs incurred in connection with the acquisitions, expenses
recognized related to the change in the fair value of contingent
consideration for acquisitions, restructuring costs, and income and
expenses classified as other non-operating income and expenses
which may vary for different companies for reasons unrelated to
operating performance.
In addition, EBITDA and Adjusted EBITDA are key drivers of the
company’s core operating performance and major factors in
management’s bonus compensation each year. Management has excluded
the effects of these items in these measures to assist investors in
analyzing and assessing our past and future core operating
performance.
In addition, we believe that EBITDA and Adjusted EBITDA are
frequently used by securities analysts, investors and other
interested parties in their evaluation of companies, many of which
present EBITDA, Adjusted EBITDA and/or other adjusted measures when
reporting their results.
EBITDA and Adjusted EBITDA are not measurements of financial
performance under GAAP and should not be considered as alternatives
to net income as a measure of performance. In addition, other
companies may define EBITDA and Adjusted EBITDA differently and, as
a result, our measures of EBITDA and Adjusted EBITDA may not be
directly comparable to EBITDA and Adjusted EBITDA of other
companies. Furthermore, EBITDA and Adjusted EBITDA have limitations
as analytical tools, and you should not consider either of them in
isolation, or as a substitute for analysis of our results as
reported under GAAP.
Because of these limitations, EBITDA and Adjusted EBITDA should
not be considered as measures of discretionary cash available to us
to invest in the growth of our business. We compensate for these
limitations by relying primarily on our GAAP results and using
EBITDA and Adjusted EBITDA only supplementally. You are cautioned
not to place undue reliance on EBITDA or Adjusted EBITDA.
The following table reconciles EBITDA and Adjusted EBITDA to net
income attributable to Cubic, which we consider to be the most
directly comparable GAAP financial measure to EBITDA and Adjusted
EBITDA.
Three Months Ended December 31, 2015
2014 (in
thousands) Net income (loss) attributable to Cubic $ (5,414
) $ 5,152 Add: Interest expense, net 940 406 Income taxes
(3,428 ) 695 Depreciation and amortization 8,948 8,947
Noncontrolling interest in income of VIE - 10
EBITDA 1,046 15,210
Adjustments to EBITDA:
Acquisition-related expenses, excluding
amortization
4,297 1,685 ERP system development and supply chain process
redesign expense 6,506 1,139 Restructuring costs (386 ) (148 )
Other non-operating expense (income), net (175 ) 916
Adjusted EBITDA $ 11,288 $ 18,802
Financial Statements
CUBIC CORPORATION CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (LOSS) (UNAUDITED) (amounts in thousands,
except per share data) Three Months Ended December 31, 2015
2014 Net sales: Products $ 124,969 $ 128,612 Services
188,844 189,876 313,813 318,488 Costs
and expenses: Products 99,192 104,424 Services 154,656 149,292
Selling, general and administrative 58,491 47,554 Research and
development 3,482 4,252 Amortization of purchased intangibles 6,455
5,935 Restructuring costs (386 ) (148 )
321,890 311,309 Operating income (loss)
(8,077 ) 7,179 Other income (expense): Interest and dividend
income 398 465 Interest expense (1,338 ) (871 ) Other income
(expense) - net 175 (916 ) Income
(loss) before income taxes (8,842 ) 5,857 Income taxes
(3,428 ) 695 Net income (loss) (5,414 )
5,162 Less noncontrolling interest in income of VIE -
10 Net income (loss) attributable to
Cubic $ (5,414 ) $ 5,152 Net income (loss) per share
attributable to Cubic Basic $ (0.20 ) $ 0.19 Diluted $ (0.20 ) $
0.19 Weighted average shares used in per share calculations:
Basic 26,964 26,860 Diluted 26,964 26,885
CUBIC CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) (in thousands)
December 31, September
30, 2015 2015
ASSETS Current assets: Cash and cash
equivalents $ 171,363 $ 218,476 Restricted cash 71,657 69,245
Marketable securities 23,611 30,533 Accounts receivable - net
352,601 358,925 Recoverable income taxes 8,063 753 Inventories -
net 74,134 63,700 Deferred income taxes and other current assets
39,405 33,670 Total current assets
740,834 775,302 Long-term
contract receivables 42,080 36,809 Long-term capitalized contract
costs 71,689 73,017 Property, plant and equipment - net 82,727
74,690 Deferred income taxes 1,533 11,443 Goodwill 257,255 237,899
Purchased intangibles - net 81,262 72,936 Other assets 7,703
18,180 $ 1,285,083 $ 1,300,276
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Short-term borrowings $ 110,000 $ 60,000 Trade
accounts payable 23,245 47,170 Customer advances 80,418 77,083
Accrued compensation and other current liabilities 137,748 143,919
Income taxes payable 3,019 4,675 Deferred income taxes - 13,404
Current portion of long-term debt 511 525
Total current liabilities 354,941
346,776 Long-term debt 126,021 126,180 Other
long-term liabilities 62,287 71,032 Shareholders' equity:
Common stock 26,020 25,560 Retained earnings 813,172 818,642
Accumulated other comprehensive loss (61,280 ) (51,836 ) Treasury
stock at cost (36,078 ) (36,078 ) Total shareholders'
equity 741,834 756,288 $ 1,285,083
$ 1,300,276
CUBIC
CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (in thousands) Three Months Ended December 31,
2015 2014 Operating Activities: Net income (loss) $ (5,414 ) $
5,162
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 8,948 8,947 Share-based compensation
expense 2,118 1,053
Changes in operating assets and
liabilities, net of effects from acquisitions
(55,239 ) (6,881 )
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
(49,587 ) 8,281 Investing Activities:
Acquisition of businesses, net of cash acquired (29,718 ) (83,423 )
Purchases of property, plant and equipment (10,360 ) (876 )
Purchases of marketable securities (7,541 ) -
Proceeds from sales or maturities of
marketable securities
14,176 - Purchases of other assets - (2,352 )
NET CASH USED IN INVESTING ACTIVITIES (33,443 )
(86,651 ) Financing Activities: Proceeds from short-term
borrowings 72,600 60,000 Principal payments on short-term
borrowings (22,600 ) - Principal payments on long-term debt (131 )
(138 ) Purchase of common stock (1,658 ) (1,582 ) Net change in
restricted cash (2,412 ) (59 )
Contingent consideration payments related
to acquisitions of businesses
(1,679 ) -
NET CASH PROVIDED BY FINANCING
ACTIVITIES
44,120 58,221 Effect of exchange
rates on cash (8,203 ) (8,437 )
NET DECREASE IN CASH AND CASH
EQUIVALENTS
(47,113 ) (28,586 )
Cash and cash equivalents at the beginning
of the period
218,476 215,849
CASH AND CASH EQUIVALENTS AT THE END OF
THE PERIOD
$ 171,363 $ 187,263 Supplemental
disclosure of non-cash investing and financing activities:
Liability incurred to acquire TeraLogics, net $ 5,098 $ - Liability
incurred to acquire H4 Global, net $ 1,568 $ - Liability incurred
to acquire DTECH, net $ - $ 14,891
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160204005817/en/
Cubic CorporationDiane DyerInvestor Relations858-505-2907orJohn
D. ThomasMedia858-505-2989
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