**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q**

 

**QUARTERLYREPORT**

 

**Pursuantto Section 13 or 15(d) of the Securities Exchange Act of 1934**

 

**For theQuarter Ended June 30, 2009**

 

**1-8931**

**CommissionFile Number**

 

**CUBIC CORPORATION**

Exact Name ofRegistrant as Specified in its Charter

 

| **Delaware**            | ** ** | **95-1678055**                   |
|-------------------------|------------|----------------------------------|
| State of  Incorporation |       | IRS Employer  Identification No. |

 

**9333Balboa Avenue**

**SanDiego, California 92123**

**Telephone(858) 277-6780**

 

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

 

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

 

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

 

| Large accelerated filer o |   | Accelerated filer x       |
|---------------------------|--------|---------------------------|
|                      |   |                      |
| Non-accelerated filer o   |   | Small Reporting Company o |

 

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

 

As of July 21, 2009,registrant had only one class of common stock of which there were 26,731,987shares outstanding (after deducting 8,945,120 shares held as treasury stock).

 

 

 

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**PART I- FINANCIAL INFORMATION**

ITEM 1 - FINANCIALSTATEMENTS

 

### **CUBIC CORPORATION**

CONDENSEDCONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(amounts inthousands, except per share data)

 
| ** **                                     | ** ** | **Nine  Months Ended** | ** **    | **Three  Months Ended** | ** ** |
|------------------------------------------------|------------|------------------------|---------------|-------------------------|------------|
| ** **                                     | ** ** | **June 30,**      | ** **    | **June 30,**       | ** ** |
| ** **                                     | ** ** | **2009**               | ** **    | **2008**                | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                           |       |                   |          |                    |       |   |   |   |   |
| Net  sales:                                    |       |                   |          |                    |       |   |   |   |   |
| Products                                       |       | $                      |  382,065 |                    | $          |  360,362 |   | $ |  135,338 |   | $ |  130,266 |   |
| Services                                       |       | 353,836                |          | 285,532                 |       | 112,839 |   | 102,626 |   |
|                                           |       | 735,901                |          | 645,894                 |       | 248,177 |   | 232,892 |   |
|                                           |       |                   |          |                    |       |   |   |   |   |
| Costs  and expenses:                           |       |                   |          |                    |       |   |   |   |   |
| Products                                       |       | 280,481                |          | 280,258                 |       | 98,766 |   | 104,661 |   |
| Services                                       |       | 299,017                |          | 240,695                 |       | 95,524 |   | 86,922 |   |
| Selling,  general and administrative           |       | 85,958                 |          | 75,740                  |       | 29,895 |   | 26,865 |   |
| Research  and development                      |       | 5,857                  |          | 6,752                   |       | 2,343 |   | 2,969 |   |
|                                           |       | 671,313                |          | 603,445                 |       | 226,528 |   | 221,417 |   |
|                                           |       |                   |          |                    |       |   |   |   |   |
| Operating  income                              |       | 64,588                 |          | 42,449                  |       | 21,649 |   | 11,475 |   |
|                                           |       |                   |          |                    |       |   |   |   |   |
| Other  income (expense):                       |       |                   |          |                    |       |   |   |   |   |
| Interest  and dividends                        |       | 1,256                  |          | 5,047                   |       | 398 |   | 2,254 |   |
| Interest  expense                              |       | (1,622                 | )             | (2,227                  | )          | (595 | ) | (836 | ) |
| Other  income                                  |       | 1,536                  |          | 334                     |       | 1,006 |   | 6 |   |
| Minority  interest in income of subsidiary     |       | —                 |          | (103                    | )          | — |   | (221 | ) |
|                                           |       |                   |          |                    |       |   |   |   |   |
| Income  before income taxes                    |       | 65,758                 |          | 45,500                  |       | 22,458 |   | 12,678 |   |
|                                           |       |                   |          |                    |       |   |   |   |   |
| Income  taxes                                  |       | 22,450                 |          | 16,700                  |       | 7,550 |   | 4,200 |   |
|                                           |       |                   |          |                    |       |   |   |   |   |
| Net  income                                    |       | $                      |  43,308  |                    | $          |  28,800 |   | $ |  14,908 |   | $ |  8,478 |   |
|                                           |       |                   |          |                    |       |   |   |   |   |
| Basic  and diluted net income per common share |       | $                      |  1.62    |                    | $          |  1.08 |   | $ |  0.56 |   | $ |  0.32 |   |
|                                           |       |                   |          |                    |       |   |   |   |   |
| Dividends  per common share                    |       | $                      |  0.09    |                    | $          |  0.09 |   | $ |  — |   | $ |  — |   |
|                                           |       |                   |          |                    |       |   |   |   |   |
| Average  number of common shares outstanding   |       | 26,730                 |          | 26,725                  |       | 26,732 |   | 26,724 |   |

 

*Seeaccompanying notes.*

 

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CUBIC CORPORATION

CONDENSEDCONSOLIDATED BALANCE SHEETS

(in thousands)

 
| ** **                                      | ** ** | **June 30,** | ** **    | **September 30,** | ** ** |
|-------------------------------------------------|------------|-------------------|---------------|------------------------|------------|
| ** **                                      | ** ** | **2009**          | ** **    | **2008**               | ** ** |
| ** **                                      | ** ** | **(Unaudited)**   | ** **    | **(See  note below)**  | ** ** |
| **ASSETS**                                      |       |              |          |                   |       |
| Current  assets:                                |       |              |          |                   |       |
| Cash  and cash equivalents                      |       | $                 |  227,630 |                   | $          |  112,696 |   |
| Accounts  receivable - net                      |       | 226,433           |          | 268,884                |       |
| Inventories  - net                              |       | 56,782            |          | 45,118                 |       |
| Deferred  income taxes and other current assets |       | 42,660            |          | 48,630                 |       |
| Total  current assets                           |       | 553,505           |          | 475,328                |       |
|                                            |       |              |          |                   |       |
| Long-term  contract receivables                 |       | 10,580            |          | 19,930                 |       |
| Property,  plant and equipment - net            |       | 49,399            |          | 53,887                 |       |
| Goodwill                                        |       | 59,267            |          | 61,032                 |       |
| Purchased  intangibles                          |       | 16,525            |          | 19,060                 |       |
| Other  assets                                   |       | 12,179            |          | 12,015                 |       |
|                                            |       | $                 |  701,455 |                   | $          |  641,252 |   |
|                                            |       |              |          |                   |       |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**   |       |              |          |                   |       |
| Current  liabilities:                           |       |              |          |                   |       |
| Trade  accounts payable                         |       | $                 |  29,344  |                   | $          |  23,288 |   |
| Customer  advances                              |       | 118,713           |          | 74,963                 |       |
| Other  current liabilities                      |       | 70,763            |          | 85,832                 |       |
| Income  taxes payable                           |       | 7,988             |          | 6,017                  |       |
| Current  portion of long-term debt              |       | 4,571             |          | 6,045                  |       |
| Total  current liabilities                      |       | 231,379           |          | 196,145                |       |
|                                            |       |              |          |                   |       |
| Long-term  debt                                 |       | 20,849            |          | 25,700                 |       |
| Other  long-term liabilities                    |       | 23,565            |          | 30,555                 |       |
|                                            |       |              |          |                   |       |
| Shareholders’  equity:                     |       |              |          |                   |       |
| Common  stock                                   |       | 12,530            |          | 12,485                 |       |
| Retained  earnings                              |       | 445,770           |          | 404,868                |       |
| Accumulated  other comprehensive income         |       | 3,433             |          | 7,570                  |       |
| Treasury  stock at cost                         |       | (36,071           | )             | (36,071                | )          |
|                                            |       | 425,662           |          | 388,852                |       |
|                                            |       | $                 |  701,455 |                   | $          |  641,252 |   |

 

*Note: The balance sheet at September 30,2008 has been derived from the audited financial statements at that date.*

 

# *See accompanying notes.*

 

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**CUBICCORPORATION**

CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 
| ** **                                                                         | ** ** | **Nine  Months Ended** | ** **    | **Three  Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------|---------------|-------------------------|------------|
| ** **                                                                         | ** ** | **June 30,**      | ** **    | **June 30,**       | ** ** |
| ** **                                                                         | ** ** | **2009**               | ** **    | **2008**                | ** ** | **2009** | ** ** | **2008** | ** ** |
| Operating  Activities:                                                             |       |                   |          |                    |       |   |   |   |   |
| Net  income                                                                        |       | $                      |  43,308  |                    | $          |  28,800 |   | $ |  14,908 |   | $ |  8,478 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |       |                   |          |                    |       |   |   |   |   |
| Depreciation  and amortization                                                     |       | 10,719                 |          | 6,139                   |       | 3,871 |   | 2,035 |   |
| Changes  in operating assets and liabilities                                       |       | 80,579                 |          | 26,647                  |       | 30,764 |   | 26,019 |   |
| NET  CASH PROVIDED BY OPERATING ACTIVITIES                                         |       | 134,606                |          | 61,586                  |       | 49,543 |   | 36,532 |   |
|                                                                               |       |                   |          |                    |       |   |   |   |   |
| Investing  Activities:                                                             |       |                   |          |                    |       |   |   |   |   |
| Acquisitions,  net of cash acquired                                                |       | (7,886                 | )             | —                  |       | — |   | — |   |
| Net  additions to property, plant and equipment                                    |       | (3,894                 | )             | (6,799                  | )          | (1,284 | ) | (1,935 | ) |
| Proceeds  from sales of marketable securities                                      |       | —                 |          | 66,300                  |       | — |   | 10,000 |   |
| Purchases  of marketable securities                                                |       | —                 |          | (39,100                 | )          | — |   | (10,000 | ) |
| NET  CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                               |       | (11,780                | )             | 20,401                  |       | (1,284 | ) | (1,935 | ) |
|                                                                               |       |                   |          |                    |       |   |   |   |   |
| Financing  Activities:                                                             |       |                   |          |                    |       |   |   |   |   |
| Principal  payments on long-term borrowings                                        |       | (5,830                 | )             | (5,950                  | )          | (136 | ) | (173 | ) |
| Purchases  of treasury stock                                                       |       | —                 |          | (2                      | )          | — |   | (2 | ) |
| Dividends  paid                                                                    |       | (2,405                 | )             | (2,405                  | )          | (2,405 | ) | (2,405 | ) |
| Other                                                                              |       | 45                     |          | 128                     |       | — |   | — |   |
| NET  CASH USED IN FINANCING ACTIVITIES                                             |       | (8,190                 | )             | (8,229                  | )          | (2,541 | ) | (2,580 | ) |
|                                                                               |       |                   |          |                    |       |   |   |   |   |
| Effect  of exchange rates on cash                                                  |       | 298                    |          | (730                    | )          | 14,771 |   | (683 | ) |
|                                                                               |       |                   |          |                    |       |   |   |   |   |
| NET  INCREASE IN CASH AND CASH EQUIVALENTS                                         |       | 114,934                |          | 73,028                  |       | 60,489 |   | 31,334 |   |
|                                                                               |       |                   |          |                    |       |   |   |   |   |
| Cash  and cash equivalents at the beginning of the period                          |       | 112,696                |          | 73,563                  |       | 167,141 |   | 115,257 |   |
|                                                                               |       |                   |          |                    |       |   |   |   |   |
| CASH  AND CASH EQUIVALENTS AT THE END OF THE PERIOD                                |       | $                      |  227,630 |                    | $          |  146,591 |   | $ |  227,630 |   | $ |  146,591 |   |

 

# *See accompanying notes.*

 

4

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# ***CUBIC CORPORATION***

NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

June 30, 2009

 

**Note 1 — Basis forPresentation**

 

The accompanyingunaudited consolidated condensed financial statements have been prepared inaccordance with generally accepted accounting principles for interim financialinformation and with the instructions to Form 10-Q and Article 10 ofRegulation S-X. Accordingly, they do not include all information and footnotesrequired by accounting principles generally accepted in the United States forcomplete financial statements.

 

In the opinion ofmanagement, all adjustments considered necessary for a fair presentation havebeen included. Operating results for the three and nine month periods ended June 30,2009 are not necessarily indicative of the results that may be expected for theyear ending September 30, 2009. For further information, refer to theconsolidated financial statements and footnotes thereto included in the Company’sannual report on Form 10-K for the year ended September 30, 2008.

 

The preparation of thefinancial statements in conformity with U. S. generally accepted accountingprinciples requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period. Actual resultscould differ from those estimates.

 

### **Note 2 — Balance Sheet Details**

 

Thecomponents of accounts receivable are as follows (in thousands):

 
| ** **                                | ** ** | **June 30,** | ** **    | **September 30,** | ** ** |
|-------------------------------------------|------------|-------------------|---------------|------------------------|------------|
| ** **                                | ** ** | **2009**          | ** **    | **2008**               | ** ** |
| ** **                                | ** ** | **(unaudited)**   | ** **    | ** **             | ** ** |
| Trade  and other receivables              |       | $                 |  10,637  |                   | $          |  9,014 |   |
| Long-term  contracts:                     |       |              |          |                   |       |
| Billed                                    |       | 90,710            |          | 107,225                |       |
| Unbilled                                  |       | 139,980           |          | 177,453                |       |
| Allowance  for doubtful accounts          |       | (4,314            | )             | (4,878                 | )          |
| Total  accounts receivable                |       | 237,013           |          | 288,814                |       |
| Less  estimated amounts not currently due |       | (10,580           | )             | (19,930                | )          |
| Current  accounts receivable              |       | $                 |  226,433 |                   | $          |  268,884 |   |

 

The amount classified asnot currently due is an estimate of the amount of long-term contract accountsreceivable that will not be collected within one year from June 30, 2009under transportation systems contracts in the U.S., Australia and the U.K., anda defense contract in Canada. The non-current balance at September 30,2008 represented non-current amounts due from customers in the same countries.

 

5

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### **Note 2 — Balance Sheet Details - Continued**

 

Inventoriesconsist of the following (in thousands):

 
| ** **                                                       | ** ** | **June 30,** | ** **   | **September 30,** | ** ** |
|------------------------------------------------------------------|------------|-------------------|--------------|------------------------|------------|
| ** **                                                       | ** ** | **2009**          | ** **   | **2008**               | ** ** |
| ** **                                                       | ** ** | **(unaudited)**   | ** **   | ** **             | ** ** |
| Finished  products                                               |       | $                 |  92     |                   | $          |  172 |   |
| Work  in process and inventoried costs under long-term contracts |       | 92,139            |         | 64,179                 |       |
| Customer  advances                                               |       | (37,404           | )            | (20,783                | )          |
| Raw  material and purchased parts                                |       | 1,955             |         | 1,550                  |       |
| Net  inventories                                                 |       | $                 |  56,782 |                   | $          |  45,118 |   |

 

At June 30, 2009,work in process and inventoried costs under long-term contracts includesapproximately $2.6 million in costs incurred in advance of contract award oroutside the scope of work on several contracts in the defense segment, comparedto $1.6 million as of September 30, 2008. Management believes it isprobable that these costs, plus appropriate profit margin, will be recoveredunder contract change orders or upon the award of new contracts within the nextyear.

 

###### **Note 3 — Comprehensive Income**

 

Comprehensiveincome is as follows (in thousands): 

 
| ** **                                        | ** ** | **Nine  Months Ended** | ** **   | **Three  Months Ended** | ** ** |
|---------------------------------------------------|------------|------------------------|--------------|-------------------------|------------|
| ** **                                        | ** ** | **June 30,**      | ** **   | **June 30,**       | ** ** |
| ** **                                        | ** ** | **2009**               | ** **   | **2008**                | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                              |       |                   |         |                    |       |   |   |   |   |
| Net  income                                       |       | $                      |  43,308 |                    | $          |  28,800 |   | $ |  14,908 |   | $ |  8,478 |   |
| Foreign  currency translation adjustments         |       | (4,132                 | )            | (928                    | )          | 11,487 |   | (1,286 | ) |
| Net  unrealized gain (loss) from cash flow hedges |       | (5                     | )            | (60                     | )          | 67 |   | 69 |   |
| Comprehensive  income                             |       | $                      |  39,171 |                    | $          |  27,812 |   | $ |  26,462 |   | $ |  7,261 |   |

 

6

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**Note 4 — Segment Information**

 

Businesssegment financial data is as follows (in millions): 

 
| ** **                   | ** ** | **Nine  Months Ended** | ** **  | **Three  Months Ended** | ** ** |
|------------------------------|------------|------------------------|-------------|-------------------------|------------|
| ** **                   | ** ** | **June 30,**      | ** **  | **June 30,**       | ** ** |
| ** **                   | ** ** | **2009**               | ** **  | **2008**                | ** ** | **2009** | ** ** | **2008** | ** ** |
|                         |       |                   |        |                    |       |   |   |   |   |
| **Sales:**                   |       |                   |        |                    |       |   |   |   |   |
| Defense                      |       | $                      |  515.8 |                    | $          |  447.1 |   | $ |  172.3 |   | $ |  162.7 |   |
| Transportation  systems      |       | 217.8                  |        | 198.3                   |       | 74.8 |   | 69.7 |   |
| Corporate  and other         |       | 2.3                    |        | 0.5                     |       | 1.1 |   | 0.5 |   |
| Total  sales                 |       | $                      |  735.9 |                    | $          |  645.9 |   | $ |  248.2 |   | $ |  232.9 |   |
|                         |       |                   |        |                    |       |   |   |   |   |
| **Operating income (loss):** |       |                   |        |                    |       |   |   |   |   |
| Defense                      |       | $                      |  35.3  |                    | $          |  13.5 |   | $ |  11.3 |   | $ |  0.9 |   |
| Transportation  systems      |       | 34.1                   |        | 30.8                    |       | 11.6 |   | 11.6 |   |
| Corporate  and other         |       | (4.8                   | )           | (1.8                    | )          | (1.2 | ) | (1.0 | ) |
| Total  operating income      |       | $                      |  64.6  |                    | $          |  42.5 |   | $ |  21.7 |   | $ |  11.5 |   |

 

**Note 5 — Financing Arrangements**

 

TheCompany has a committed five-year revolving credit agreement with a group offinancial institutions in the amount of $150 million, expiring in March 2010.As of June 30, 2009, there were no borrowings under this agreement;however, there were letters of credit outstanding under the agreement totaling$48.3 million.

 

### **Note 6 — Pension Plans**

 

The components of netperiodic pension benefits costs are as follows (in thousands):

 
| ** **                      | ** ** | **Nine  Months Ended** | ** **  | **Three  Months Ended** | ** ** |
|---------------------------------|------------|------------------------|-------------|-------------------------|------------|
| ** **                      | ** ** | **June 30,**      | ** **  | **June 30,**       | ** ** |
| ** **                      | ** ** | **2009**               | ** **  | **2008**                | ** ** | **2009** | ** ** | **2008** | ** ** |
| Service  cost                   |       | $                      |  1,717 |                    | $          |  2,631 |   | $ |  562 |   | $ |  868 |   |
| Interest  cost                  |       | 7,552                  |        | 7,519                   |       | 2,501 |   | 2,496 |   |
| Expected  return on plan assets |       | (7,273                 | )           | (9,739                  | )          | (2,409 | ) | (3,234 | ) |
| Amortization  of:               |       |                   |        |                    |       |   |   |   |   |
| actuarial  loss (gain)          |       | 315                    |        | (156                    | )          | 105 |   | (51 | ) |
| Administrative  expenses        |       | 132                    |        | 90                      |       | 44 |   | 30 |   |
| Net  pension cost               |       | $                      |  2,443 |                    | $          |  345 |   | $ |  803 |   | $ |  109 |   |

 

7

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### **Note 7 — New Accounting Pronouncements**

 

Duringthe quarter ended December 31, 2008, the Company adopted SFAS No. 157,*Fair Value Measurements*. SFAS 157 defines fair value,establishes a framework and gives guidance regarding the methods used formeasuring fair value, and expands disclosures about fair value measurements. Asof June 30, 2009, the Company had foreign exchange forward contracts thatare valued based on inputs that are observable in the market. These assets andliabilities fall in the Level 2 hierarchy established by SFAS 157, and areimmaterial. Therefore, the adoption of SFAS 157 did not have a material impacton the Company’s results of operations or financial position.

 

Duringthe quarter ended December 31, 2008, the Company adopted SFAS No. 159,*The Fair Value Option for Financial Assets andFinancial Liabilities — Including an Amendment of FASB Statement No. 115*.This statement permits an entity to choose to measure many financialinstruments and certain other items at fair value at specified election dates.Subsequent unrealized gains and losses on items for which the fair value optionhas been elected will be reported in earnings. The adoption of SFAS 159 did nothave a material impact on the Company’s results of operations or financialposition.

 

Duringthe quarter ended March 31, 2009, the Company adopted SFAS No. 161, *Disclosures about Derivative Instruments and Hedging Activities, anamendment of FASB Statement No. 133*. This statement requires enhanced disclosures about an entity’sfinancial position, financial performance, and cash flows. The statementrequires that objectives for using derivative instruments be disclosed in termsof underlying risks and accounting designation. Refer to Note 10 for additionaldiscussion.

 

Duringthe quarter ended June 30, 2009, the Company adopted SFAS No. 165, *Subsequent Events*.  This statement establishesgeneral standards of accounting for and disclosures of events that occur afterthe balance sheet date but before financial statements are issued or areavailable to be issued.  The adoption of SFAS 165 did not have amaterial impact on the Company’s results of operations or financialposition.  Refer to Note 11for additional information.

 

InDecember 2007, the FASB issued SFAS No. 141(R), *BusinessCombinations (revised 2007)*, which is effective for fiscal yearsbeginning after December 15, 2008,which for the Company is the fiscal year beginning October 1, 2009. Thisstatement applies to all transactions or other events in which an entityobtains control of one or more businesses. This statement applies to allbusiness entities, including mutual entities that previously used thepooling-of-interests method of accounting for some business combinations. Followingadoption, the resolution of existing balances related to uncertain taxpositions from prior acquisitions that differ from recorded amounts will beadjusted through earnings, rather than goodwill.  Management does notexpect that the adoption of SFAS 141(R) will have a material impact on theCompany’s results of operations or financial position.  Adoptionof this statement is, however, expected to have a significant effect on howacquisition transactions subsequent to October 1, 2009, are reflected inthe financial statements.

 

InDecember 2007, the FASB also issued SFAS No. 160, *Noncontrolling Interests in Consolidated Financial Statements*,which is effective for fiscal years beginning after December 15, 2008, which for the Company is the fiscal yearbeginning October 1, 2009. This statement requires all entities toreport noncontrolling (minority) interests in subsidiaries as equity in theconsolidated financial statements. Management does not expect that the adoptionof SFAS 160 will have a material impact on the Company’s consolidated resultsof operations or financial position.

 

8

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InDecember 2008, the FASB issued FSP No. FAS 132(R)-1, *Employers’ Disclosures about Postretirement Benefit Plan Assets*,which expands the disclosure requirements about plan assets for defined benefitpension plans and postretirement plans.  FSP FAS 132(R)-1 iseffective for financial statements issued for fiscal years ending after December 15,2009, which for the Company is the fiscal year beginning October 1, 2009.

 

InJune 2009, the FASB issued SFAS No. 167, *Amendmentsto FASB Interpretation No. 46(R).*   SFAS 167 amendsFASB Interpretation No. 46(R), *Consolidation of VariableInterest Entities* regarding certain guidance for determining whetheran entity is a variable interest entity and modifies the methods allowed fordetermining the primary beneficiary of a variable interestentity.  In addition, SFAS 167 requires ongoing reassessments ofwhether an enterprise is the primary beneficiary of a variable interest entityand enhanced disclosures related to an enterprise’s involvement in a variableinterest entity.  Management does not anticipate the adoption of SFAS 167will have a material impact on the Company’s results of operations or financialposition.  SFAS 167 is effective for the first annual reportingperiod that begins after November 15, 2009, which for the Company is thefiscal year beginning October 1, 2010.

 

InJune 2009, the FASB issued SFAS No. 168, *The FASBAccounting Standards Codification**TM** and the Hierarchy of Generally AcceptedAccounting Principles — a replacement of FASB Statement No. 162*.  This statement provides for theFASB Accounting Standards CodificationTM (the “Codification”) to become the singleofficial source of authoritative, nongovernmental U.S. generally acceptedaccounting principles (GAAP).  The Codification did not change GAAPbut reorganizes the literature.  SFAS 168 is effective for interimand annual periods ending after September 15, 2009, which for the Companyis the year ending September 30, 2009.

 

### **Note 8 — Income Taxes**

 

The amount of unrecognized tax benefits determined in accordance withFinancial Interpretation No. 48, “Accounting for Uncertainty in IncomeTaxes — an interpretation of FASB Statement No. 109” (“FIN 48”), was $4.5million at June 30, 2009 and $5.8 million at September 30, 2008,exclusive of interest. The total amount of unrecognized tax benefits that, ifrecognized, would favorably impact the effective tax rate is $2.7 million at June 30,2009.

 

Asof June 30, 2009, the Company’s open tax years in significantjurisdictions include 2006-2008 in both the U.S. and the U.K. The Companybelieves appropriate provisions for all outstanding issues have been made forall jurisdictions and all open years.

 

TheCompany reports income tax-related interest income or expense and penalties inincome tax expense in the Condensed Consolidated Statement of Income. Theamount of net interest and penalties recognized as a component of income taxexpense during the three- and nine-month periods ended June 30, 2009 wasnot material.  Interest and penaltiesaccrued at June 30, 2009 amounted to $0.4 million.

 

InOctober 2008, the Tax Extenders and Alternative Minimum Tax Relief Act of2008 reinstated the U.S. federal Research and Experimentation (R&E) taxcredit, retroactive to January 1, 2008. As a result, the tax provision forthe first nine months of fiscal 2009 reflected a $0.8 million tax benefitrelated to fiscal 2008 R&E expenditures.

 

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**Note 9 — Legal Matter**

 

In December 2008,the Company was named in a purported class-action suit in the U.S. DistrictCourt, Southern District, CA, seeking reclassification of certain employeesworking on a U.S. Government subcontract from salaried to hourly, overtime pay,back pay and damages under a variety of theories for violation of Californiaand Federal labor and employment laws. The complaint alleges the value of theseclaims could exceed $5 million. The matter is in the very early stages of thelitigation process and almost no discovery has been conducted to date. Amediation hearing is scheduled for August 2009. Management is vigorouslydefending the Company against these claims. Management has made anindemnification demand on the prime contractor for damages that may arise fromthis action and believes there is a reasonable basis for insurance coverage. Atthis early stage of the proceeding, management believes it is possible, but notprobable that a significant loss will be incurred and no liability for thisclaim has been recorded as of June 30, 2009.

 

**Note 10 — Derivative Instrumentsand Hedging Activities**

 

InMarch 2008, the FASB issued SFAS No. 161, “*Disclosuresabout Derivative Instruments and Hedging Activities, an amendment of FASBStatement No. 133*” (“SFAS No. 161”). SFAS No. 161requires entities to provide greater transparency in interim and annualfinancial statements about how and why the entity uses derivative instruments,how the instruments and related hedged items are accounted for under SFAS No. 133,“*Accounting for Derivative Instruments and HedgingActivities*” (“SFAS No. 133”), and how the instruments andrelated hedged items affect the financial position, results of operations, andcash flows of the entity. The Company adopted SFAS No. 161 effective January 1,2009.

 

The Company utilizes derivative and nonderivative financialinstruments, such as foreign currency forwards, foreign currency debtobligations and foreign currency cash balances, to manage its exposure tofluctuations in foreign currency exchange rates. The Company does not use anyderivative financial instruments for trading or other speculative purposes. At June 30,2009, the Company had foreign exchange contracts with a notional value of$164.7 million outstanding.

 

Allderivatives are recorded at fair value, however, the classification of gains and losses resulting from changes in thefair values of derivatives are dependent on the intended use of the derivativeand its resulting designation. Ifa derivative is designated as a fair value hedge, then a change in the fairvalue of the derivative is offset against the change in the fair value of theunderlying hedged item and only the ineffective portionof the hedge, if any, is recognized in earnings. If a derivative is designated as a cash flow hedge, then the effectiveportion of a change in the fair value of the derivative is recognized as acomponent of Accumulated Other Comprehensive Income until the underlying hedgeditem is recognized in earnings, or the forecasted transaction is no longerprobable of occurring. If a derivative does not qualify as a highly effective hedge, achange in fair value is immediately recognized in earnings. The Company formallydocuments all hedging relationships for all derivative hedges and theunderlying hedged items, as well as the risk management objectives andstrategies for undertaking the hedge transactions.

 

TheCompany classifies the fair value of all derivative contracts as either currentassets or liabilities, depending on the realized and unrealized gain or lossposition of the hedged contract at the balance sheet date. The cash flows fromderivatives treated as hedges are classified in the Consolidated Statements ofCash Flows in the same category as the item being hedged.

 

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SFASNo. 161 requires tabular disclosures of the impact that derivativeinstruments and hedging activities have on the Company’s financial statements.The Company has not provided these disclosures because the amounts as of andfor the three months ended June 30, 2009 are not significant. The amountof gains and losses from hedges classified as not highly effective was notsignificant. In addition, a foreign currency forward has been excluded from theassessment of hedge effectiveness as it is marked to market on a quarterlybasis. There are no significant credit risks related to contingent features inour derivative agreements. Finally, the amount of estimated unrealized netgains or losses from cash flow hedges which are expected to be reclassified toearnings in the next twelve months is not significant.

 

**Note 11 — Subsequent Events**

 

TheCompany has completed an evaluation of all subsequent events through August 5,2009, which is the issuance date of these consolidated financial statements andconcluded no subsequent events have occurred that require recognition ordisclosure.

 

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**CUBICCORPORATION**

ITEM 2 -MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION ANDRESULTS OF OPERATIONS

 

June 30, 2009

 

Our two primary businesses are in the defense and transportation industries. These are high technology businesses that design, manufacture and integrate complex systems and provide essential services to meet the needs of various federal and regional government agencies in the U.S. and other nations around the world.

 

Our defense segment is a diversified supplier ofconstructive, live and virtual military training systems, services andcommunication systems and products to the U.S. Department of Defense, othergovernment agencies and allied nations. We design instrumented range systemsfor fighter aircraft, armored vehicles and infantry force-on-force livetraining; weapons effects simulations; laser-based tactical engagement andvirtual simulation systems; and precision gunnery solutions. Our services arefocused on training, mission support, computer simulation training, distributedinteractive simulation, development of military training doctrine, forcemodernization services for NATO entrants and field operations and maintenance.Our communications products are aimed at intelligence, surveillance, and searchand rescue markets.

 

Our transportation systems segment develops anddelivers innovative fare collection systems for public transit authoritiesworldwide.  We provide hardware, softwareand multi-agency, multimodal transportation integration technologies andservices that allow the agencies to efficiently collect fares, manage theiroperations, reduce shrinkage and make using public transit a more convenientand attractive option for commuters.

 

**Consolidated Overview**

 

Salesfor the quarter ended June 30, 2009 increased to $248.2 million comparedto $232.9 million last year, an increase of 7%. Transportation systems salesincreased 7% compared to the third quarter of last year, and defense salesincreased by 6%. Of the increase in total sales for the quarter, $12.9 million,came from the company we acquired in late fiscal 2008, Omega Training Group(Omega), and is included in the defense segment results.

 

Salesincreased to $735.9 million for the first nine months of the fiscal yearcompared to $645.9 million for the first nine months of 2008, an increase of14%. Defense sales increased 15% and transportation systems sales increased 10%for the period. Of the increase in total sales, Omega contributed $42.6 millionfor the nine month period. See the segment discussions following for further analysisof segment sales.

 

Operatingincome increased 89% to $21.7 million in the quarter compared to $11.5 millionin the third quarter of last year. Defense operating income increasedsignificantly from the low level in last year’s third quarter while transportationsystems operating income was the same as last year. Corporate and other costsfor the quarter were $1.2 million this year, compared to $1.0 million in thethird quarter of last year.

 

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Operatingincome for the first nine months of the fiscal year increased 52% from $42.5million in 2008 to $64.6 million this year. Defense segment operating incomewas more than double the level of 2008 and transportation systems segmentoperating income increased 11% compared to the first nine months of 2008.Corporate and other costs were $4.8 million for the first three quarters of2009 compared to $1.8 million in the same period last year. These costsincluded $2.4 million for the development and marketing of new security relatedtechnologies. See the segment discussions following for further analysis ofsegment operating income.

 

Netincome for the third quarter of fiscal 2009 increased to $14.9 million, or 56cents per share, compared to $8.5 million, or 32 cents per share last year. Forthe first nine months of the year, net income increased to $43.3 million, or$1.62 per share, from $28.8 million, or $1.08 per share last year. Net income increased for the quarter andfirst nine months of this fiscal year as a result of the increase in operatingincome and the tax benefits described below, partially offset by a decrease ininvestment income resulting from lower interest rates, despite higher cashbalances available for investment in the current year.

 

Selling, general andadministrative (SG&A) expenses increased in the third quarter this year to$30.0 million compared to $26.9 million last year. For the first nine months ofthe year SG&A expenses increased from $75.7 million in 2008 to $86.0 million this year. As apercentage of sales, SG&A expenses were 11.7% for the first nine months ofboth years. About half of the increase in SG&A expenses for the nine-monthperiod came from Omega, including amortization of purchased intangibles of $4.2million. In addition, the defense segment made a provision of $3.1 million inthe second quarter for a receivable that is doubtful of collection, asdescribed in the defense segment section below. Company funded research anddevelopment expenditures were lower for the third quarter and first nine monthscompared to last year and the focus shifted to transportation and securityrelated projects with less invested this year in defense related technologies.

 

Our projected effectivetax rate for fiscal 2009 is 37.0% and is reflected in the tax provision for thefirst nine months. The tax expense provided in the third quarter benefited fromthe expiration of statutes in the U.S. and U.K. that allowed the reversal oftax reserves amounting to $0.4 million in the quarter. The provision for thefirst nine months also benefited from a credit of approximately $0.8 millionrecorded in the first quarter that resulted from the retroactive reinstatementby the U.S. Congress of the R&E credit to January 1, 2008. Theeffective rate for fiscal 2009 could be affected by, among other factors, themix of business between the U.S. and foreign jurisdictions, our ability to takeadvantage of available tax credits and audits of our records by taxingauthorities.

 

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**DefenseSegment**

 
| ** **                           | ** ** | **Nine Months Ended** | ** ** | **Three Months Ended** | ** ** |
|--------------------------------------|------------|-----------------------|------------|------------------------|------------|
| ** **                           | ** ** | **June 30,**          | ** ** | **June 30,**           | ** ** |
| ** **                           | ** ** | **2009**              | ** ** | **2008**               | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                           | ** ** | **(in millions)**     | ** ** |
| **Defense Segment Sales**            |       |                  |       |                   |       |   |   |   |   |
| Mission  support services            |       | $                     | 308.7      |                   | $          | 234.5 |   | $ | 100.1 |   | $ | 86.5 |   |
| Training  systems                    |       | 173.7                 |       | 174.8                  |       | 59.1 |   | 61.4 |   |
| Communications                       |       | 31.9                  |       | 28.1                   |       | 12.6 |   | 10.5 |   |
| Tactical  systems and other          |       | 1.5                   |       | 9.7                    |       | 0.5 |   | 4.3 |   |
|                                 |       | $                     | 515.8      |                   | $          | 447.1 |   | $ | 172.3 |   | $ | 162.7 |   |
|                                 |       |                  |       |                   |       |   |   |   |   |
| **Defense Segment Operating Income** |       |                  |       |                   |       |   |   |   |   |
| Mission  support services            |       | $                     | 19.9       |                   | $          | 17.3 |   | $ | 6.1 |   | $ | 6.6 |   |
| Training  systems                    |       | 13.2                  |       | 7.7                    |       | 3.3 |   | 1.7 |   |
| Communications                       |       | 3.4                   |       | (10.9                  | )          | 1.8 |   | (7.8 | ) |
| Tactical  systems and other          |       | (1.2                  | )          | (0.6                   | )          | 0.1 |   | 0.4 |   |
|                                 |       | $                     | 35.3       |                   | $          | 13.5 |   | $ | 11.3 |   | $ | 0.9 |   |

 

**MissionSupport Services**

 

Salesfrom Mission Support Services increased 16% to $100.1 million in the thirdquarter of this year, from $86.5 million last year. For the first nine monthsof the year, sales increased from $234.5 million last year to $308.7 millionthis year, a 32% increase. Of these increases in the third quarter and first ninemonths of the year, $12.9 million and $42.6 million, respectively, came fromOmega, the company acquired late last fiscal year. Higher sales in thenine-month period also came from an increase in activity at the Joint ReadinessTraining Center (JRTC) in Fort Polk, LA. and from a contract at the U.S. Army’sQuartermaster Center and School.

 

MissionSupport Services operating income decreased 8% to $6.1 million in the thirdquarter of this year from $6.6 million last year. The decrease came from anoperating loss in the newly acquired Omega division of $0.5 million for thequarter resulting from amortization of purchased intangible assets of $1.4million and an accrual for other acquisition-related costs of $0.1 million.

 

Forthe first nine months of the year, Mission Support Services operating incomeincreased from $17.3 million last year to $19.9 million this year, an increaseof 15%. Omega contributed $0.4 million of this increase, net of amortization ofpurchased intangible assets of $4.2 million and an accrual for otheracquisition-related costs of $0.2 million for the period. Higher sales from theJRTC and the U.S. Army’s Quartermaster Center and School contracts and higherprofit margins from operations and maintenance contracts also contributed to theincrease. A contract modification received in the first quarter that reimbursedus for out-of-scope costs expensed last year, also added $1.2 million tooperating income for the nine-month period.

 

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**TrainingSystems**

 

Trainingsystems sales decreased 4% from $61.4 million in the third quarter of last yearto $59.1 million this year. Air combat training sales were higher in the thirdquarter this year, but this was more than offset by lower sales from groundcombat training and small arms training systems. The increase in air combattraining sales came from the U.S. government P5 contract and the Joint StrikeFighter contract. Sales were lower from ground combat training systems in theU.K. and Canada and electro-optics (laser-based tactical engagement systems)contracts during the quarter. For the first nine months, trainingsystems sales were 1% lower than last year at $173.7 million compared to $174.8million. Higher sales of air combat training systems and small arms training systems were offset bylower sales of ground combat training systems and related electro-optictraining systems.

 

Training systemsoperating income increased to $3.3 million in the third quarter this year from$1.7 million last year. Improved profit margins from electro-optic training systems andfrom air combat training systems in the Far East contributed to the profitimprovement. The electro-optic contract that experienced cost growth and aresulting loss in the development phase last year has now transitioned toproduction, resulting in a profit margin from product delivered during thequarter. Lower sales of small arms training systems resulted in an operatingloss from this product line for the quarter, partially offsetting theseimprovements.

 

Training systemsoperating income increased from $7.7 million in the first nine months of lastyear to $13.2 million this year. Higher sales of air combat training systemsand small arms training systems and higher profit margins on air combattraining systems in the Far East contributed to the improvement. In addition,as mentioned above, last year’s results included cost growth for thedevelopment of an electro-optic training system, which totaled $7.7 million forthe first nine months, compared to $3.0 million this year. The productshipments on this contract, as mentioned above, also contributed to theimproved results for the nine-month period. Partially offsetting these profitimprovements was a $3.1 million allowance for doubtful accounts establishedduring the second fiscal quarter. A company through which we sold trainingsystems products to the U.S. government in previous periods failed to pass onto us cash they collected from the government on our behalf. We were able tocollect a portion of the money they owed us and have now negotiated a paymentplan with them; however, the company appears to be in financial trouble andcollection of the remainder continues to be doubtful. We will reverse thereserve only upon the collection of cash from them.

 

**Communications**

 

Communicationssales increased 20% to $12.6 million in the third quarter of 2009, from $10.5million in the same quarter last year. Sales were higher for the quarter fromdata links and personnel locator systems but were lower from power amplifiers.For the first three quarters of the year, communications sales were $31.9million this year compared to $28.1 million last year, a 14% increase. Asettlement agreement reached in the first quarter with the U.S. Navy on a datalink development contract added $3.3 million to sales and facilitated progresstoward completion of the contract, further increasing sales for the nine monthperiod. Lower sales of power amplifiers partially offset the growth in datalink sales for the first nine months of the year.

 

Communications operatingincome for the third quarter was $1.8 million, compared to an operating loss of$7.8 million in the third quarter of last year. Sales of personnel locatorsystems and data link spare parts contributed to the operating income thisyear, in addition to a contract in the U.K. to develop data link technology for unmanned aerialvehicles. This contract was restructured early this fiscal year afterhaving incurred cost growth of $6.5 million in the third quarter last year.Another data link contract had also experienced cost growth of $1.8 million inthe third quarter last year, contributing further to the operating loss in thatperiod.

 

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For the first nine monthsof the year communications operating income improved to $3.4 million from anoperating loss of $10.9 million last year. Cost growth on three data linkdevelopment contracts had resulted in last year’s operating loss. This year twoof the three contracts generated operating income due to contractrestructurings and change orders received. Despite lower sales of poweramplifiers this year, improved profit margins resulted in only a small decreasein profitability from the product line compared to last year.

 

**Transportation Systems Segment**

 
| ** **                               | ** ** | **Nine Months Ended** | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------|------------|-----------------------|------------|------------------------|------------|
| ** **                               | ** ** | **June 30,**          | ** ** | **June 30,**           | ** ** |
| ** **                               | ** ** | **2009**              | ** ** | **2008**               | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                               | ** ** | **(in millions)**     | ** ** |
|                                     |       |                  |       |                   |       |   |   |   |   |
| Transportation  Segment Sales            |       | $                     | 217.8      |                   | $          | 198.3 |   | $ | 74.8 |   | $ | 69.7 |   |
|                                     |       |                  |       |                   |       |   |   |   |   |
| Transportation  Segment Operating Income |       | $                     | 34.1       |                   | $          | 30.8 |   | $ | 11.6 |   | $ | 11.6 |   |

 

Transportationsystems sales increased from $69.7 million in the third quarter of last year to$74.8 million this year, an increase of 7%. For the nine-month period, salesincreased 10%, from $198.3 million to $217.8 million. Sales increased in NorthAmerica from a fare collection development contract awarded last year and fromthe sale of spare parts. In the U.K., higher sales came primarily fromcontracts with Transport for London and U.K. train operating companies. A loweraverage exchange rate between the British Pound and the U.S. Dollar in 2009resulted in a decrease in the dollar value of U.K. sales during the thirdquarter of $10.2 million compared to the rate in effect in 2008. For thenine-month period, the exchange rate difference impacted sales by $32.1million.

 

Operatingincome from transportation systems in the third quarter was the same as lastyear at $11.6 million. This year we incurred increased selling costs related toa large new contract proposal; however, last year’s third quarter had includedan investment in new technology of $1.8 million related to a new contract inNorth America, which more than offset the effect of these increased expenses inthe current year. Higher sales of spare parts in North America helped toincrease operating income; however, operating income was also impacted in thecurrent year by a lower exchange rate between the British Pound and the U.S.Dollar, which decreased the dollar value of U.K. operating income by $2.3million when compared to 2008 exchange rates.

 

Forthe first three quarters of the year, transportation systems operating incomeimproved from $30.8 million in 2008 to $34.1 million this year, an 11%increase. Higher sales of spare parts added to operating income for the firstnine months and contract restructuring agreements reached during the firstquarter added a net $1.6 million to operating income. As a result of one of thecontract restructurings, we wrote off accounts receivable of $4.1 million againstthe associated allowance for doubtful accounts, resulting in no impact onoperating income. The lower British Pound vs. U.S. Dollar exchange rateimpacted operating income for the first three quarters of 2009 by $7.9 million,when comparing 2009 average exchange rates to 2008 rates.

 

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**Backlog**

 
| ** **                      | ** ** | **June 30,**      | ** ** | **September 30,** | ** ** |
|---------------------------------|------------|-------------------|------------|-------------------|------------|
| ** **                      | ** ** | **2009**          | ** ** | **2008**          | ** ** |
| ** **                      | ** ** | **(in millions)** | ** ** |
| **Total backlog**               |       |              |       |              |       |
| Transportation  systems         |       | $                 | 679.5      |              | $          | 480.6 |   |
| Defense:                        |       |              |       |              |       |
| Mission  support services       |       | 940.2             |       | 880.0             |       |
| Training  systems               |       | 447.1             |       | 363.6             |       |
| Communications  and electronics |       | 46.0              |       | 45.9              |       |
| Tactical  systems and other     |       | 3.6               |       | 2.4               |       |
| Total  defense                  |       | 1,436.9           |       | 1,291.9           |       |
| Total                           |       | $                 | 2,116.4    |              | $          | 1,772.5 |   |
|                            |       |              |       |              |       |
| **Funded backlog**              |       |              |       |              |       |
| Transportation  systems         |       | $                 | 679.5      |              | $          | 480.6 |   |
| Defense:                        |       |              |       |              |       |
| Mission  support services       |       | 200.2             |       | 180.6             |       |
| Training  systems               |       | 447.1             |       | 363.6             |       |
| Communications  and electronics |       | 46.0              |       | 45.9              |       |
| Tactical  systems and other     |       | 3.6               |       | 2.4               |       |
| Total  defense                  |       | 696.9             |       | 592.5             |       |
| Total                           |       | $                 | 1,376.4    |              | $          | 1,073.1 |   |

 

As reflected in the tableabove, total backlog increased $343.9 million at June 30, 2009 compared toSeptember 30, 2008. Transportation systems backlog increased $198.9million and defense backlog increased $145.0 million during the first ninemonths of the fiscal year.A new contract awarded by Transport for London added approximately $280 million(£170 million) to transportation systems backlog during the period, however, alower exchange rate between the British Pound and the U.S. Dollar as of June 30,2009 decreased backlog by approximately $21 million compared to September 30,2008. Funded backlog increased $303.3 million during the period, withtransportation systems increasing $198.9 million and defense funded backlogincreasing by $104.4 million.

 

In defense, thedifference between total backlog and funded backlog represents options under multi-yearservice contracts. Funding for these contracts comes from annual operatingbudgets of the U.S. government and the options are normally exercised annually.Options for the purchase of additional systems or equipment are not included inbacklog until exercised nor are indefinite delivery, indefinite quantitycontracts until an order is received.

 

###### **Liquidity and Capital Resources**

 

Operatingactivities provided cash of $49.5 million for the third quarter and $134.6million for the first nine months of the fiscal year. In addition to net incomefor the period, customer advances and reductions in accounts receivablecontributed to the positive cash flows. Positive operating cash flows came fromboth the transportation systems and defense segments, with the greater portioncoming from the defense segment.

 

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Investingactivities for the nine-month period consisted of capital expenditures of $3.9million, acquisition of a small transportation business in Australia for $1.8million, and the final payment related to our fiscal year 2008 acquisition ofOmega, amounting to $6.1 million. Financing activities for the nine-month period consisted of scheduledpayments on our long-term debt of $5.8 million, and dividends paid to ourshareholders of $2.4 million.

 

Arebound in the exchange rate between several foreign currencies, especially theBritish Pound, and the U.S. Dollar resulted in an increase of $14.8 million toour cash balance as of June 30, 2009 compared to March 31, 2009.Accumulated Other Comprehensive Income also improved in the quarter by $11.5million due to foreign exchange changes.

 

Whileour pension plans in the U.S. and U.K. have ample funds to meet benefitpayments, current market conditions have negatively impacted asset values,which decreased about 12% from September 30, 2008 to June 30, 2009.Future funding requirements will depend upon the funded status of the plans asof the next actuarial valuation date and for the U.S. plan will be partiallymitigated by temporary funding relief provided by the Worker, Retiree andEmployer Recovery Act of 2008, enacted into law in December 2008. We arenot legally required to make any contributions to our U.S. plan and nosignificant additional contributions to our U.K. plan during fiscal 2009.However, we did make an additional voluntary contribution of $6.5 million toour U.S. plan in the third quarter in order to improve the funded status of theplan, and may make additional voluntary contributions to the U.S. or U.K. plansin the fourth quarter. Based on current conditions, it is likely that ourpension expense for fiscal 2010 will increase over the current level.

 

Our financial conditionremains strong with working capital of $322.1 million and a current ratio of2.4 to 1 at June 30, 2009. We expect that cash on hand and our unusedlines of credit will be adequate to meet our liquidity requirements for theforeseeable future.

 

**Critical Accounting Policies, Estimates and Judgments**

 

Our financial statements are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, the most critical of which are those related to revenue recognition, income taxes, valuation of goodwill and pension costs. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known.

 

Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.

 

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For further information,refer to the consolidated financial statements and notes thereto included inthe Company’s annual report on Form 10-K for the year ended September 30,2008.

 

**CAUTIONARY STATEMENT ABOUTFORWARD-LOOKING INFORMATION**

 

This report,including the documents that we incorporate by reference, containsforward-looking statements within the meaning of Section 21E of theSecurities Exchange Act of 1934, as amended, that are subject to the “safeharbor” created by those sections. Any statements about our expectations,beliefs, plans, objectives, assumptions or future events or our futurefinancial and/or operating performance are not historical and may beforward-looking. These statements are often, but not always, made through theuse 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 orphrases.  These statements involveestimates, assumptions and uncertainties, including those discussed in “RiskFactors” in the Company’s annual report on Form 10-K for the year ended September 30,2008, and throughout this filing that could cause actual results to differmaterially from those expressed in these statements.

 

Because the riskfactors referred to above could cause actual results or outcomes to differmaterially from those expressed in any forward-looking statements made by us oron our behalf, you should not place undue reliance on any forward-lookingstatements.  In addition, past financialand/or operating performance is not necessarily a reliable indicator of futureperformance and you should not use our historical performance to anticipateresults or future period trends. Further, any forward-looking statement speaks only as of the date onwhich it is made, and we undertake no obligation to update any forward-lookingstatement to reflect events or circumstances after the date on which thestatement is made or to reflect the occurrence of unanticipated events. Newfactors emerge from time to time, and it is not possible for us to predictwhich factors will arise. In addition, we cannot assess the impact of eachfactor on our business or the extent to which any factor, or combination offactors, may cause actual results to differ materially from those contained inany forward-looking statements.

 

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ITEM 4 - STATEMENTON DISCLOSURE CONTROLS AND PROCEDURES.

 

Wemaintain disclosure controls and procedures, including internal control overfinancial reporting, which are designed to ensure that information required tobe disclosed in our periodic filings with the SEC is reported within the timeperiods specified in the SEC’s rules and forms, and to provide reasonableassurance that assets are safeguarded and transactions are properly executedand recorded. Our disclosure controls and procedures are also designed toensure that information is accumulated and communicated to our management,including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO),as appropriate, to allow timely decisions regarding required disclosure. Indesigning and evaluating such controls and procedures, we recognize that anycontrols and procedures, no matter how well designed and operated, can provideonly reasonable assurance of achieving the desired control objectives, andmanagement necessarily is required to use its judgment in evaluating the cost-benefitrelationship of possible controls and procedures.

 

Weroutinely review our system of internal control over financial reporting andmake changes to our processes and systems to improve controls and increaseefficiency, while ensuring that we maintain an effective internal controlenvironment. Changes may include such activities as implementing new, moreefficient systems and migrating certain processes from our operating units toour corporate shared service center. In addition, if we acquire new businesses,we will review the controls and procedures of the acquired business as part ofour integration activities.

 

Weperformed an evaluation of the effectiveness of our disclosure controls andprocedures as of June 30, 2009. The evaluation was performed with theparticipation of senior management of each business segment and key corporatefunctions, and under the supervision of the CEO and CFO. Based on ourevaluation, we concluded that our disclosure controls and procedures wereeffective as of June 30, 2009.

 

TheCompany has made changes to its internal control over financial reporting inconnection with a transition to a new accounting software system in its MissionSupport Services business. During fiscal 2009, the Company establishedadditional temporary compensating controls to support the Company’s internalcontrol over financial reporting while the transition to the new accountingsoftware system is in process. The Company expects to maintain certain of theseadditional temporary compensating controls until implementation of the newsystem is complete. There were no changes in the Company’s internal controlover financial reporting during the quarter ended June 30, 2009 that havematerially affected, or are reasonably likely to materially affect, itsinternal control over financial reporting.

 

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**PART II- OTHER INFORMATION**

 

ITEM 6 - EXHIBITS

 

(a) The followingexhibits are included herein:

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                      |
|----------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                  |       | Amended and Restated Certificate of Incorporation.  Incorporated by reference to Form 10-Q filed for the quarter ended June,  30, 2006, file No. 1-8931, Exhibit 3.1. |
| 3.2                  |       | Bylaws. Incorporated by reference to  Form 10-K filed for the fiscal year ended September 30, 2004, file  No. 1-8931, Exhibit 3.                                 |
| 10.1                 |       | 2005 Equity Incentive Plan. Incorporated by  reference to Form 10-K filed for the fiscal year ended  September 30, 2005, file No. 1-8931, Exhibit 10.1.          |
| 10.2                 |       | Amended Transition Protection Plan. Incorporated  by reference to Form 10-K filed for the fiscal year ended  September 30, 2007, file No. 1-8931, Exhibit 10.2.  |
| 10.3                 |       | Credit Agreement dated March 10, 2005.  Incorporated by reference to Form 10-Q for the quarter ended  March 31, 2005, file No. 1-8931, Exhibit 10.          |
| 10.4                 |       | Revised Deferred Compensation Plan. Incorporated  by reference to Form 10-Q for the quarter ended March 31, 2008,  file No. 1-8931, Exhibit 10.4                 |
| 10.5                 |       | Compensatory Arrangements of Certain Officers.  Incorporated by reference to Form 8-K filed February 5, 2009, file  No. 1-8931                                        |
| 15    |       | Report of Independent Registered Public Accounting  Firm                                                                                                                             |
| 31.1                 |       | Certification of CEO                                                                                                                                                                 |
| 31.2                 |       | Certification of CFO                                                                                                                                                                 |
| 32.1                 |       | CEO Certification                                                                                                                                                                    |
| 32.2                 |       | CFO Certification                                                                                                                                                                    |

 

 

SIGNATURES

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|   | CUBIC CORPORATION                       |
|--------|-----------------------------------------|
|   |                                    |
|   |                                    |
| Date   | August 5, 2009                     |   | /s/ William W. Boyle |
|   | William W. Boyle                        |
|   | Senior Vice President and CFO           |
|   |                                    |
| Date   | August 5, 2009                     |   | /s/ Mark A. Harrison |
|   | Mark A. Harrison                        |
|   | Vice President and Corporate Controller |

 

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