The Rising Influence of Rising Affluence

[DewDiligence]

Cubic Reports Record FY3Q10 Results

[CUB is sui generis: 2/3 of sales are from high-tech services for the defense industry and 1/3 of sales are from the world’s premiere fare-collection company for urban mass transit. I used to post about CUB on iHub’s Defense/Aerospace board, but I think the posts are more appropriate here because CUB’s mass-transit business, which is driven by population growth and urban congestion, is a clear beneficiary of The Global Demographic Tailwind. In the coming years, I expect to see many more stories like the one in #msg-53481095, and CUB should be able to garner a substantial share of the fare-collection business from these projects.

CUB does not hold quarterly CC’s; please see actual PR for financial tables. ]

http://finance.yahoo.com/news/Cubic-Corp-NYSE-CUB-Reports-iw-87871669.html?x=0&.v=1

›August 5, 2010, 6:00 am EDT

SAN DIEGO, CA--(Marketwire - 08/05/10) - Cubic Corporation (NYSE: CUB) today reported record high sales and earnings for the quarter ended June 30, 2010. Sales for the third fiscal quarter were $331.3 million compared to $248.2 million last year, an increase of 33 percent. Net income increased by 52 percent to $22.7 million or 85 cents per share this year from $14.9 million or 56 cents per share last year. Sales for the third quarter exceeded Cubic's previous quarterly record high of $280.8 million, and net income exceeded the previous record of $18.3 million from the second quarter of 1993 (which included a gain on the sale of a business segment).

Operating income increased in the third quarter by 50 percent to $32.6 million this year from $21.7 million last year. Cash flow from operations was $11.1 million in the quarter.

Nine-Month Results

For the nine months ended June 30, 2010, sales increased to $846.5 million from $735.9 million last year, an increase of 15 percent. Net income increased to $53.8 million for the nine-month period, or $2.01 per share, compared to last year's net income of $43.3 million, or $1.62 per share. Operating income for the first nine months increased to $79.1 million this year from $64.6 million in 2009. Cash flow from operations was $57.3 million in the nine-month period.

Transportation Systems Segment

Cubic Transportation Systems (CTS) sales increased 49 percent from $74.8 million in the third quarter last year to $111.2 million this year. Sales increased from contracts in North America and from the PRESTIGE contract in London. Nearly $14.4 million of the sales increase came from the consolidation of the company's 50 percent owned subsidiary in the United Kingdom, called TranSys, beginning in the second quarter of this year, because Cubic is now the primary beneficiary of the venture.

Operating income from CTS increased in the third quarter from $11.6 million last year to $14.6 million this year. Higher profits resulted from higher sales and margins in North America, offset somewhat by lower profits in the U.K. The consolidation of TranSys had no impact on operating income.

For the first nine months of the year, CTS sales increased 27 percent from $217.8 million last year to $276.7 million this year and operating income improved from $34.1 million to $40.7 million. In addition to the third quarter results described above, a favorable contract modification on a European contract in the second quarter added $1.6 million to operating income for the nine-month period.

Defense Systems Segment

Sales from Cubic Defense Systems (CDS) increased 50 percent to $108.5 million from $72.2 million in last year's third quarter. Sales from the communications business were up 45 percent compared to last year's third quarter, and sales from training systems were 51 percent higher primarily because of delivery of virtual small arms training systems to a U.S. government customer. Operating income from CDS more than doubled at $11.6 million compared to $5.2 million last year. The increase in sales of small arms training systems added significantly to operating income in this year's third quarter, in addition to higher operating income on higher sales of ground combat training and electro-optic training systems.

For the first nine months of the year, CDS sales increased 20 percent from $207.1 million to $247.5 million due to increased sales from both the training systems and the communications businesses. Operating income increased from $15.4 million last year to $23.6 million in the first nine months of this year due to the higher training systems sales mentioned above, and a $1.9 million recovery this year of a $3.1 million bad debt which was expensed in last year's nine-month results.

Mission Support Services Segment

Mission Support Services (MSS) sales increased 11 percent to $111.3 million from $100.1 million in last year's third quarter. Sales were higher from live combat training support and other training support contracts. Operating income from MSS also increased to $7.6 million compared to $6.1 million last year, due primarily to higher sales.

For the first nine months of the year, MSS sales increased 4 percent from $308.7 million to $320.9 million. Operating income decreased from $19.9 million last year to $18.7 million in the first nine months of this year, due primarily to a provision in the first quarter of $2.0 million for a dispute with a customer over contract terms.

Backlog

Total backlog was $2.387 billion at June 30, 2010 compared to $2.183 billion at September 30, 2009. At the end of the quarter, Transportation Systems backlog was $1.1 billion, Mission Support Services backlog was $774 million, and Defense Systems backlog was $514 million.

Financial Condition

The company continues to maintain a strong liquidity position, ending the period with $326.6 million in cash and short-term investments, and total debt of only $20.4 million.

Cubic Corporation is the parent company of three major business segments: Defense Systems, Mission Support Services and Transportation Systems. Cubic Defense Systems is a leading provider of realistic combat training systems, cyber technologies, asset tracking solutions, and defense electronics. Mission Support Services is a leading provider of training, operations, maintenance, technical and other support services. Cubic Transportation Systems is the world's leading provider of automated fare collection systems and services for public transit authorities. For more information about Cubic, see the company's Web site at www.cubic.com.‹