**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q**

 

**QUARTERLY REPORT**

 

**Pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**

 

**For theQuarter Ended March 31, 2005**

 

**1-8931**

Commission File Number

 

##### **CUBICCORPORATION**

Exact Name of Registrant asSpecified in its Charter

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

 

**9333Balboa Avenue**

**San Diego,California 92123**

**Telephone(858) 277-6780**

 

Indicateby check mark whether the Registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months, and (2) has been subject to suchfiling requirements for the past 90 days.

 

Yes ý   No o

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Rule 12b-2 of the Exchange Act).

 

Yes ý   No o

 

As of April 25, 2005, Registrant had only one class of commonstock of which there were 26,719,845 shares outstanding (after deducting8,944,884 shares held as treasury stock).

 

 

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**PART I- FINANCIAL INFORMATION**

ITEM 1 - FINANCIAL STATEMENTS

 

### **CUBICCORPORATION**

CONDENSED CONSOLIDATEDSTATEMENTS OF INCOME (UNAUDITED)

(amounts in thousands, exceptper share data)

 
| ** **                                    | ** ** | **Six Months Ended  March 31,** | ** ** | **Three Months Ended  March 31,** | ** ** |
|-----------------------------------------------|------------|--------------------------------------|------------|----------------------------------------|------------|
| ** **                                    | ** ** | **2005**                             | ** ** | **2004**                               | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                          |       |                                 |       |                                   |       |   |   |   |   |
| Sales                                         |       | $                                    | 371,993    |                                   | $          | 346,216 |   | $ | 182,053 |   | $ | 175,184 |   |
|                                          |       |                                 |       |                                   |       |   |   |   |   |
| Costs and expenses:                           |       |                                 |       |                                   |       |   |   |   |   |
| Cost of sales                                 |       | 301,011                              |       | 269,912                                |       | 148,506 |   | 134,865 |   |
| Selling, general and administrative  expenses |       | 58,509                               |       | 49,611                                 |       | 30,294 |   | 26,080 |   |
| Research and development                      |       | 3,378                                |       | 1,908                                  |       | 1,731 |   | 1,048 |   |
|                                          |       |                                 |       |                                   |       |   |   |   |   |
|                                          |       | 362,898                              |       | 321,431                                |       | 180,531 |   | 161,993 |   |
| Operating income                              |       | 9,095                                |       | 24,785                                 |       | 1,522 |   | 13,191 |   |
|                                          |       |                                 |       |                                   |       |   |   |   |   |
| Other income (expenses)                       |       |                                 |       |                                   |       |   |   |   |   |
| Interest expense                              |       | (2,640                               | )          | (2,232                                 | )          | (1,311 | ) | (1,179 | ) |
| Other income                                  |       | 2,112                                |       | 1,333                                  |       | 603 |   | 508 |   |
| Minority interest                             |       | 140                                  |       | —                                 |       | 140 |   | — |   |
| Income before income taxes                    |       | 8,707                                |       | 23,886                                 |       | 954 |   | 12,520 |   |
|                                          |       |                                 |       |                                   |       |   |   |   |   |
| Income taxes                                  |       | 2,900                                |       | 8,100                                  |       | 400 |   | 4,200 |   |
|                                          |       |                                 |       |                                   |       |   |   |   |   |
| Net income                                    |       | $                                    | 5,807      |                                   | $          | 15,786 |   | $ | 554 |   | $ | 8,320 |   |
|                                          |       |                                 |       |                                   |       |   |   |   |   |
| Net income per share                          |       | $                                    | 0.22       |                                   | $          | 0.59 |   | $ | 0.02 |   | $ | 0.31 |   |
|                                          |       |                                 |       |                                   |       |   |   |   |   |
| Dividends per common share                    |       | $                                    | 0.09       |                                   | $          | 0.07 |   | $ | 0.09 |   | $ | 0.07 |   |
|                                          |       |                                 |       |                                   |       |   |   |   |   |
| Average shares of common stock outstanding    |       | 26,720                               |       | 26,720                                 |       | 26,720 |   | 26,720 |   |

 

*Seeaccompanying notes.*

 

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## **CUBIC CORPORATION**

CONDENSED CONSOLIDATED BALANCESHEETS

(in thousands)

 
| ** **                                      | ** ** | **March 31,  2005** | ** ** | **September 30,  2004** | ** ** |
|-------------------------------------------------|------------|--------------------------|------------|------------------------------|------------|
| ** **                                      | ** ** | **(Unaudited)**          | ** ** | **(See note below)**         | ** ** |
| **ASSETS**                                      |       |                     |       |                         |       |
| Current assets:                                 |       |                     |       |                         |       |
| Cash and cash equivalents                       |       | $                        | 19,634     |                         | $          | 10,622 |   |
| Marketable securities, available-for-sale       |       | —                   |       | 6,200                        |       |
| Accounts receivable                             |       | 309,438                  |       | 343,197                      |       |
| Inventories                                     |       | 38,964                   |       | 23,967                       |       |
| Deferred income taxes and other current  assets |       | 26,937                   |       | 29,310                       |       |
| Total current assets                            |       | 394,973                  |       | 413,296                      |       |
|                                            |       |                     |       |                         |       |
| Long-term contract receivables                  |       | 39,600                   |       | 33,000                       |       |
| Property, plant and equipment - net             |       | 52,824                   |       | 52,359                       |       |
| Goodwill                                        |       | 35,495                   |       | 35,173                       |       |
| Other assets                                    |       | 9,621                    |       | 9,096                        |       |
|                                            |       | $                        | 532,513    |                         | $          | 542,924 |   |
|                                            |       |                     |       |                         |       |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**   |       |                     |       |                         |       |
| Current liabilities:                            |       |                     |       |                         |       |
| Short-term borrowings                           |       | $                        | 43,980     |                         | $          | 25,048 |   |
| Trade accounts payable                          |       | 20,044                   |       | 28,317                       |       |
| Customer advances                               |       | 35,280                   |       | 51,182                       |       |
| Other current liabilities                       |       | 50,733                   |       | 53,658                       |       |
| Accrued pension liability                       |       | 9,475                    |       | 8,618                        |       |
| Income taxes payable                            |       | 2,426                    |       | 5,908                        |       |
| Current portion of long-term debt               |       | 6,078                    |       | 6,057                        |       |
| Total current liabilities                       |       | 168,016                  |       | 178,788                      |       |
|                                            |       |                     |       |                         |       |
| Long-term debt                                  |       | 44,548                   |       | 50,037                       |       |
| Accrued pension liability                       |       | 8,030                    |       | 9,009                        |       |
| Deferred compensation                           |       | 7,230                    |       | 6,323                        |       |
| Minority interest                               |       | 360                      |       | —                       |       |
|                                            |       |                     |       |                         |       |
| Shareholders’ equity:                      |       |                     |       |                         |       |
| Common stock                                    |       | 234                      |       | 234                          |       |
| Additional paid-in capital                      |       | 12,123                   |       | 12,123                       |       |
| Retained earnings                               |       | 315,783                  |       | 312,381                      |       |
| Accumulated other comprehensive income  (loss)  |       | 12,255                   |       | 10,095                       |       |
| Treasury stock at cost                          |       | (36,066                  | )          | (36,066                      | )          |
|                                            |       | 304,329                  |       | 298,767                      |       |
|                                            |       | $                        | 532,513    |                         | $          | 542,924 |   |

 

*Note: The balance sheet at September 30,2004 has been derived from the audited financial statements at that date.*

# *See accompanying notes.*

 

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**CUBICCORPORATION**

CONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 
| ** **                                                                                   | ** ** | **Six Months Ended  March 31,** | ** ** | **Three Months Ended  March 31,** | ** ** |
|----------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                                   | ** ** | **2005**                             | ** ** | **2004**                               | ** ** | **2005** | ** ** | **2004** | ** ** |
| Operating Activities:                                                                        |       |                                 |       |                                   |       |   |   |   |   |
| Net income                                                                                   |       | $                                    | 5,807      |                                   | $          | 15,786 |   | $ | 554 |   | $ | 8,320 |   |
| Adjustments to reconcile net income to net  cash provided by (used in) operating activities: |       |                                 |       |                                   |       |   |   |   |   |
| Depreciation and amortization                                                                |       | 4,417                                |       | 4,118                                  |       | 2,332 |   | 2,216 |   |
| Changes in operating assets and liabilities                                                  |       | (12,781                              | )          | (59,995                                | )          | 5,103 |   | (28,197 | ) |
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                          |       | (2,557                               | )          | (40,091                                | )          | 7,989 |   | (17,661 | ) |
|                                                                                         |       |                                 |       |                                   |       |   |   |   |   |
| Investing Activities:                                                                        |       |                                 |       |                                   |       |   |   |   |   |
| Net additions to property, plant and  equipment                                              |       | (4,703                               | )          | (3,349                                 | )          | (2,917 | ) | (1,733 | ) |
| Acquisitions net of cash acquired                                                            |       | —                               |       | (4,934                                 | )          | — |   | — |   |
| Proceeds from sale of marketable securities                                                  |       | 6,200                                |       | 3,021                                  |       | — |   | — |   |
| NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                                          |       | 1,497                                |       | (5,262                                 | )          | (2,917 | ) | (1,733 | ) |
|                                                                                         |       |                                 |       |                                   |       |   |   |   |   |
| Financing Activities:                                                                        |       |                                 |       |                                   |       |   |   |   |   |
| Change in short-term borrowings, net                                                         |       | 18,548                               |       | 34,651                                 |       | 1,413 |   | 22,282 |   |
| Long-term borrowings                                                                         |       | —                               |       | 9,026                                  |       | — |   | 120 |   |
| Principal payment on long-term borrowings                                                    |       | (5,592                               | )          | (1,428                                 | )          | — |   | — |   |
| Dividends paid                                                                               |       | (2,405                               | )          | (1,871                                 | )          | (2,405 | ) | (1,871 | ) |
| NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                          |       | 10,551                               |       | 40,378                                 |       | (992 | ) | 20,531 |   |
|                                                                                         |       |                                 |       |                                   |       |   |   |   |   |
| Effect of exchange rates on cash                                                             |       | (479                                 | )          | 165                                    |       | (810 | ) | (109 | ) |
|                                                                                         |       |                                 |       |                                   |       |   |   |   |   |
| NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS                                        |       | 9,012                                |       | (4,810                                 | )          | 3,270 |   | 1,028 |   |
|                                                                                         |       |                                 |       |                                   |       |   |   |   |   |
| Cash and cash equivalents at the beginning  of the period                                    |       | 10,622                               |       | 22,370                                 |       | 16,364 |   | 16,532 |   |
|                                                                                         |       |                                 |       |                                   |       |   |   |   |   |
| CASH AND CASH EQUIVALENTS AT THE END OF THE  PERIOD                                          |       | $                                    | 19,634     |                                   | $          | 17,560 |   | $ | 19,634 |   | $ | 17,560 |   |

 

# *See accompanying notes.*

 

4

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# ***CUBICCORPORATION***

NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

(UNAUDITED)

 

March 31, 2005

 

**Note 1 – Basis forPresentation**

 

The accompanying unaudited consolidated condensed financial statementshave been prepared in accordance with generally accepted accounting principlesfor interim financial information and with the instructions to Form 10-Qand Article 10 of Regulation S-X. Accordingly, they do not include allinformation and footnotes required by accounting principles generally acceptedin the United States for complete financial statements.

 

In the opinion of management, all adjustments (consisting of normalrecurring accruals) considered necessary for a fair presentation have beenincluded. Operating results for the quarter ended March 31, 2005 are notnecessarily indicative of the results that may be expected for the year ending September 30,2005. For further information, refer to the consolidated financial statementsand footnotes thereto included in the Company’s annual report on Form 10-Kfor the year ended September 30, 2004.

 

The preparation of the financial statements in conformity with U. S.generally accepted accounting principles requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates.

 

### **Note 2– Balance Sheet Details**

 

The components of accounts receivable are asfollows (in thousands):

 
| ** **                               | ** ** | **March 31,  2005** | ** ** | **September 30,  2004** | ** ** |
|------------------------------------------|------------|--------------------------|------------|------------------------------|------------|
| ** **                               | ** ** | **(unaudited)**          | ** ** | ** **                   | ** ** |
| Trade and other receivables              |       | $                        | 11,244     |                         | $          | 29,771 |   |
| Long-term contracts:                     |       |                     |       |                         |       |
| Billed                                   |       | 89,231                   |       | 85,056                       |       |
| Unbilled                                 |       | 253,704                  |       | 262,230                      |       |
| Allowance for doubtful accounts          |       | (5,141                   | )          | (860                         | )          |
| Total accounts receivable                |       | 349,038                  |       | 376,197                      |       |
| Less estimated amounts not currently due |       | (39,600                  | )          | (33,000                      | )          |
| Current accounts receivable              |       | $                        | 309,438    |                         | $          | 343,197 |   |

 

The amount classified as not currently due is an estimate of the amountof long-term contract accounts receivable that will not be collected within oneyear from March 31, 2005. Of this amount, approximately $32 millionrelates to the Prestige contract in the United Kingdom, which is atransportation systems contract. The balance of approximately $8 millionrelates primarily to a defense systems contract with the government ofSingapore that is secured by a letter of credit.

 

5

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During the quarter ended March 31, 2005, the company added $4.2million to the allowance for doubtful accounts as the result of a defaultnotice and subsequent claim filed by a certain transportation segment customer.The Company believes that it substantially completed work under the contractand that the amount is due, however, this allowance was recorded because of theuncertainty of ultimate collection.

 

Inventories consist of the following (in thousands):

 
| ** **                                                       | ** ** | **March 31,  2005** | ** ** | **September 30,  2004** | ** ** |
|------------------------------------------------------------------|------------|--------------------------|------------|------------------------------|------------|
| ** **                                                       | ** ** | **(unaudited)**          | ** ** | ** **                   | ** ** |
| Finished products                                                |       | $                        | 563        |                         | $          | 510 |   |
| Work in process and inventoried costs under  long-term contracts |       | 32,270                   |       | 16,491                       |       |
| Raw material and purchased parts                                 |       | 6,131                    |       | 6,966                        |       |
| Total inventories                                                |       | $                        | 38,964     |                         | $          | 23,967 |   |

 

At March 31, 2005, work in process and inventoried costs underlong-term contracts includes approximately $7 million in costs incurred outsidethe scope of work on several contracts, primarily in the defense segment.Management believes it is probable these costs, plus appropriate profit margin,will be recovered under contract change orders within the next year.

 

**Note 3 –Comprehensive Income**

 

Comprehensive income (loss) is as follows (in thousands):

 
| ** **                                                                                    | ** ** | **Six Months Ended  March 31,** | ** ** | **Three Months Ended  March 31,** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                                    | ** ** | **2005**                             | ** ** | **2004**                               | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                                                                          |       |                                 |       |                                   |       |   |   |   |   |
| Net income                                                                                    |       | $                                    | 5,807      |                                   | $          | 15,786 |   | $ | 554 |   | $ | 8,320 |   |
| Foreign currency translation adjustments                                                      |       | 2,237                                |       | 9,035                                  |       | (2,720 | ) | 2,297 |   |
| Reclassification adjustment for gain on  sale of marketable securities included in net income |       | —                               |       | (160                                   | )          | — |   | — |   |
| Net unrealized gains from cash flow hedges                                                    |       | (77                                  | )          | 98                                     |       | 560 |   | (280 | ) |
| Comprehensive income (loss)                                                                   |       | $                                    | 7,967      |                                   | $          | 24,759 |   | $ | (1,606 | ) | $ | 10,337 |   |

 

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### **Note 4– Segment Information**

 

Business segment financial data is as follows (in millions):

 
| ** **                   | ** ** | **Six Months Ended  March 31,** | ** ** | **Three Months Ended  March 31,** | ** ** |
|------------------------------|------------|--------------------------------------|------------|----------------------------------------|------------|
| ** **                   | ** ** | **2005**                             | ** ** | **2004**                               | ** ** | **2005** | ** ** | **2004** | ** ** |
|                         |       |                                 |       |                                   |       |   |   |   |   |
| **Sales:**                   |       |                                 |       |                                   |       |   |   |   |   |
| Defense                      |       | $                                    | 242.2      |                                   | $          | 212.4 |   | $ | 120.2 |   | $ | 108.4 |   |
| Transportation systems       |       | 122.3                                |       | 126.2                                  |       | 58.4 |   | 63.1 |   |
| Corporate and other          |       | 7.5                                  |       | 7.6                                    |       | 3.4 |   | 3.7 |   |
| Total sales                  |       | $                                    | 372.0      |                                   | $          | 346.2 |   | $ | 182.0 |   | $ | 175.2 |   |
|                         |       |                                 |       |                                   |       |   |   |   |   |
| **Operating income (loss):** |       |                                 |       |                                   |       |   |   |   |   |
| Defense                      |       | $                                    | 14.2       |                                   | $          | 17.3 |   | $ | 7.6 |   | $ | 8.7 |   |
| Transportation systems       |       | (3.7                                 | )          | 9.0                                    |       | (5.6 | ) | 5.0 |   |
| Corporate and other          |       | (1.4                                 | )          | (1.5                                   | )          | (0.5 | ) | (0.5 | ) |
| Total operating income       |       | $                                    | 9.1        |                                   | $          | 24.8 |   | $ | 1.5 |   | $ | 13.2 |   |

 

### **Note 5– Financing Arrangements**

 

In March 2005 the Company entered into a five year revolvingcredit agreement with a group of financial institutions in the amount of $150million. The interest rate on this debt facility is a daily rate equal to thegreater of the prime rate or the overnight Federal Funds Rate plus one-half ofone percent, plus a spread up to 0.25%; or for Eurodollar loans the AdjustedLIBOR, plus a spread up to 1.25%. As of March 31, 2005 $40.9 million wasoutstanding under this agreement at a rate of 3.7% and is included in currentliabilities because it is management’s intent to repay the borrowing within oneyear.

 

The credit agreement contains covenants which, among other things,limit the incurrence of additional indebtedness, liens, contingent liabilities,dividends and other distributions to shareholders (but such dividendlimitations are in excess of the Company’s current annual rate of dividends),transactions with affiliates, asset sales, acquisitions of businesses in excessof $20 million without permission of the administrative agent, mergers, andother matters customarily restricted in such agreements.

 

The credit agreement also contains customary events of default,including payment defaults, breach of representations and warranties, covenantdefaults, cross-defaults to certain other indebtedness, certain events ofbankruptcy and insolvency, the occurrence of a change in control and judgmentdefaults.

 

As of March 31, 2005, including the amount above, the Company hada total of $44 million outstanding under its various unsecured short-termborrowing arrangements in the U.S., UK, Canada and New Zealand at an averagerate of 3.6%. The total borrowing availability of these facilities isapproximately $174 million.

 

7

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### **Note 6– Pension Plans**

 

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

 
| ** **                     | ** ** | **Six Months Ended  March 31,** | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------|------------|--------------------------------------|------------|----------------------------------------|------------|
| ** **                     | ** ** | **2005**                             | ** ** | **2004**                               | ** ** | **2005** | ** ** | **2004** | ** ** |
| Service cost                   |       | $                                    | 3,766      |                                   | $          | 3,344 |   | $ | 1,889 |   | $ | 1,646 |   |
| Interest cost                  |       | 4,002                                |       | 3,211                                  |       | 2,005 |   | 1,595 |   |
| Expected return on plan assets |       | (4,129                               | )          | (3,007                                 | )          | (2,068 | ) | (1,493 | ) |
| Amortization of:               |       |                                 |       |                                   |       |   |   |   |   |
| Prior service cost             |       | 15                                   |       | 2                                      |       | 7 |   | 1 |   |
| Actuarial (gain) loss          |       | 827                                  |       | 1,102                                  |       | 414 |   | 547 |   |
| Administrative expenses        |       | 50                                   |       | 33                                     |       | 25 |   | 17 |   |
| Net pension cost               |       | $                                    | 4,531      |                                   | $          | 4,685 |   | $ | 2,272 |   | $ | 2,313 |   |

 

### **Note 7– Variable Interest Entity**

 

InDecember 2004, the Company entered into a 50/50 joint venture arrangementwith the U.S. subsidiary of Rafael Armament Development Authority, Ltd.(Rafael), an Israeli company, to manufacture certain of their products for saleto the U.S. and Israeli defense forces. The agreement requires the Company toinvest up to $15 million in the joint venture over the first three years ofoperation, while Rafael will provide certain of its intellectual property tothe joint venture in a royalty-free arrangement. The Company invested $1million in the joint venture and it commenced operations during the quarterended March 31, 2005, incurring approximately $300,000 in expenses. TheCompany analyzed this joint venture under the provisions of FIN 46 “*Consolidation of Variable Interest Entities,*”andconcluded that it is the primary beneficiary of the arrangement. Therefore, thejoint venture has been consolidated in the Company’s financial statements forthe quarter ended March 31, 2005. Minority interest in the net loss fromthis business is reflected in the condensed consolidated income statement andminority interest in the net assets of the joint venture is included in thecondensed consolidated balance sheet.

 

**Note 8 – Legal Matter**

 

In January 2005, a North American customer of the Company issued acure notice on a contract for the supply of a bus fare collection system and inMarch 2005 issued a notice of default immediately after the Company hadfiled a motion asking a court to prevent the issuance of a default notice. In April 2005,the customer filed a claim for breach of contract, seeking damages ofapproximately $4 million, unspecified reprocurement costs, “consequential andliquidated damages” and attorney’s fees. The contract limits liability to thecontract value of $8.2 million, but the customer appears to be attempting tovoid that limitation.

 

The Company believes that both the default notice and the claim fordamages are unwarranted and plans to vigorously defend against the allegations.In addition, the Company intends to amend its motion to include a complaint forbreach of contract, as well as other applicable causes

 

8

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of action. Management believes the Company has substantially completedthe contract and will seek payment of the remaining contract value ofapproximately $4.2 million, additional costs incurred for directed work outsidethe contract and attorney’s fees. Based on the advice of counsel, managementbelieves it is more likely than not the Company will prevail in this matter,however, due to the uncertainty of collecting the outstanding receivablebalance, an allowance for doubtful accounts reserve of $4.2 million wasestablished in the quarter ended March 31, 2005 and all costs incurred inthe performance of the contract and costs incurred outside the scope of thecontract were expensed.

 

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### **CUBICCORPORATION**

ITEM 2 - MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OFOPERATIONS

 

March 31, 2005

 

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.

 

Cubic DefenseApplications is a diversified supplier of constructive, live and virtualmilitary training systems, services and communication products to the U.S.Department of Defense, other government agencies and allied nations. We designinstrumented range systems for fighter aircraft, armored vehicle and infantryforce-on-force live training; weapons effects simulations; laser-based tacticalengagement and virtual simulation systems; and precision gunnery solutions. Ourservices are focused on training mission support, computer simulation training,distributed interactive simulation, development of military training doctrine,force modernization services for NATO entrants and field operations andmaintenance. Our communications products are aimed at intelligence,surveillance, and tactical system markets.

 

CubicTransportation Systems develops and delivers innovative fare collection systemsfor public transit authorities worldwide. We provide hardware, software and multi-agency, multimodal transportationintegration technologies and services that allow the agencies to efficientlycollect fares, manage their operations, reduce shrinkage and make using publictransit a more convenient and attractive option for commuters.

 

**ConsolidatedOverview**

 

Sales increased during the quarter ended March 31, 2005 to $182million, from $175 million in the second quarter last year, an increase of 4%.Sales growth compared to last year came from the defense segment, whiletransportation systems segment sales were down from last year. Defense sales inthe second quarter were up to $120 million from $108 million, an increase of11% over the same quarter last year. Transportation systems sales were $58million for the quarter, an 8% decrease compared to $63 million in the secondquarter last year.

 

Sales for the first six months of fiscal 2005 were $372 millioncompared to $346 million for the same period last year, an increase of 8%.Defense segment sales were $242 million for the six-month period, representingan increase of 14% over last year’s sales of $212 million in the first sixmonths. Transportation systems sales were down from last year for the first sixmonths to $122 million from $126 million, a decrease of 3%. (See the segmentdiscussions following for further analysis of segment sales.)

 

Operating income decreased from $13.2 million in last year’s secondquarter to $1.5 million this year primarily due to the transportation segmentexperiencing an operating loss of $5.6 million this year compared to operatingincome of $5.0 million in last year’s second quarter. The Defense segment alsosuffered a decline from $8.7 million in the second quarter of last year to $7.6million this year.

 

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For the first six months of fiscal 2005 transportation systems incurredan operating loss of $3.7 million compared to operating income of $9.0 millionfor the same period last year. Defense segment operating income decreased to$14.2 million, from $17.3 million last year. (See the segment discussionsfollowing for further analysis of operating income by segment.)

 

Net income decreased in the second quarter to $554,000 this year, ortwo cents per share, from $8.3 million last year, or 31 cents per share, dueprimarily to the operating loss in the transportation segment. Interest expensewas slightly higher for the quarter than last year due to an increase inshort-term borrowings. Other income included a gain of approximately $200,000from foreign currency translation, before applicable income taxes. For thefirst six months of the fiscal year, net income decreased from $15.8 million,or 59 cents per share, to $5.8 million, or 22 cents per share, due primarily tothe operating loss from the transportation segment. Foreign currency gainstotaling $1.2 million (about $700,000 after applicable income taxes) added tonet income for the first six months and represented 3 cents per share.

 

Selling, general and administrative (SG&A) expenses grew by $8.9million compared to the first half of last year and increased from 14.3% to15.7% of sales, with the increase coming from both segments. In the defensesegment, the increase was due primarily to increased selling expenses incurredduring the first quarter this year in pursuit of new contracts which we wereawarded in the second quarter, such as the U.S. Army’s next-generation MILESIndividual Weapon System (IWS) for live force-on-force training and the Initial- Homestation Instrumentation Training Systems (I-HITS) for U.S. Army, ArmyReserve and National Guard sites. SG&A was higher in the second quarterthis year primarily because the transportation segment recorded a bad debtprovision of $4.2 million for an amount receivable from a customer that isdoubtful of collection. (See the transportation segment section below andNote 8 to the condensed consolidated financial statements for furtherdiscussion of this situation.)

 

Research and development activities increased to $1.7 million in thesecond quarter of 2005 compared to $1.0 million the second quarter of 2004 dueto spending for several projects in the defense segment related tocommunications and training systems.

 

Our projected effective tax rate for fiscal 2005 is 33% of pretaxincome, which is reflected in the provision recorded for the six-month period.The projected rate is less than last year’s rate of 34% because a greaterproportion of our 2005 operating income is expected to come from the UK, whererates are lower than in the U.S. This effective rate could be affected by,among other factors, the mix of business between the U.S. and foreignjurisdictions, our ability to take advantage of available tax credits andaudits of our records by taxing authorities.

 

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**Defense Segment**

 
| ** **                           | ** ** | **Six Months Ended  March 31,** | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------------|------------|--------------------------------------|------------|----------------------------------------|------------|
| ** **                           | ** ** | **2005**                             | ** ** | **2004**                               | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                           | ** ** | **(millions)**                       | ** ** |
| **Defense Segment Sales**            |       |                                 |       |                                   |       |   |   |   |   |
| Communications and electronics       |       | $                                    | 24.6       |                                   | $          | 32.5 |   | $ | 11.3 |   | $ | 17.0 |   |
| Training systems                     |       | 98.3                                 |       | 78.4                                   |       | 51.0 |   | 31.9 |   |
| Government services                  |       | 119.3                                |       | 101.5                                  |       | 57.9 |   | 59.5 |   |
|                                 |       | $                                    | 242.2      |                                   | $          | 212.4 |   | $ | 120.2 |   | $ | 108.4 |   |
|                                 |       |                                 |       |                                   |       |   |   |   |   |
| **Defense Segment Operating Income** |       |                                 |       |                                   |       |   |   |   |   |
| Communications and electronics       |       | $                                    | 0.2        |                                   | $          | 4.7 |   | $ | 0.1 |   | $ | 2.5 |   |
| Training systems                     |       | 6.9                                  |       | 7.7                                    |       | 3.6 |   | 2.5 |   |
| Government services                  |       | 7.4                                  |       | 4.9                                    |       | 4.2 |   | 3.7 |   |
| Tactical systems                     |       | (0.3                                 | )          | —                                 |       | (0.3 | ) | — |   |
|                                 |       | $                                    | 14.2       |                                   | $          | 17.3 |   | $ | 7.6 |   | $ | 8.7 |   |

 

Defense segment sales increased to $120 million in the second fiscalquarter this year from $108 million in the second quarter of fiscal 2004, an11% increase. Training systems sales increased by almost $20 million comparedto last year’s second quarter as a result of new contracts we were awarded lastyear. These included a contract for virtual simulation trainers and severalcontracts for ground combat training systems and laser engagement systems. Theincrease in training systems sales was partially offset by a decrease incommunications and electronics sales for the quarter. This included lower salesof both data links and personnel locator systems. Government services saleswere slightly lower for the quarter as a result of reduced support required fortraining activities related to the conflict in Iraq, while growth in sales fromother government services contracts partially offset this decrease.

 

For the six-month period, defense segment sales increased by 14%, from$212 million in 2004 to $242 million this year. Training systems sales grew byabout $20 million, while government services sales increased by nearly $18million and communications and electronics sales decreased by $8 million.Training systems sales increased for the reasons mentioned above. Growth ingovernment service sales for the six-month period came from several differentcontracts including the support of training activities related to the conflictin Iraq in the early part of the year, modeling the effects of weapons of massdestruction and other mission support activities. Decreased sales of datalinks, personnel locator systems and other communications products contributedto the decline in communications and electronics sales.

 

Operatingincome in the defense segment decreased in the second fiscal quarter from $8.7million last year to $7.6 million this year. Training systems operating incomewas up in the second quarter this year due primarily to the increase in salesvolume, with the biggest increase in operating income coming from ground combattraining systems. Despite sales volume dropping slightly in governmentservices, operating income increased due to better performance on severalcontracts, especially in the operations and maintenance business. Operatingincome in the communications and electronics business declined by $2.4 milliondue to lower sales volume this year from data links and personnel locatorsystems and an increase of approximately $600,000 in estimated costs for aprogram involving a new intelligence application of our data link and receivertechnology.  In addition, we havesubstantially completed the profitable data link

 

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contractswe were working on last year, while the most significant data link contract weare working on this year was bid at a loss two years ago in a strategic move toexpand our data link business over the long term. We are continuing to evaluatethe communications and electronics business to determine the best course ofaction to improve the performance of this business unit.

 

Forthe first six months of the fiscal year, defense segment operating income wasdown from $17.3 million last year to $14.2 million this year. This was causedby the decrease in communications and electronics operating profits for thereasons identified above. Training systems operating profits were down onlyslightly from last year for the six-month period. This was caused by a decreasein air combat training operating profits on lower sales. We have received anumber of delivery orders on the large aircombat training contract won in 2003; however, overall work under this contractis still in the early stages of completion and has incurred a small loss on thework performed to date. We expect the profit margins from this contract toimprove going forward as we receive additional orders under this contract.Government services operating income improved over last year as the result ofhigher sales volume and the performance improvement mentioned above.

 

Asmentioned in the overview section above, we were awarded two important newcontracts during the second quarter. Thesewins have far reaching strategic implications for Cubic. The IWS win has thepotential of generating several hundred million in sales over the next 5 to 10years and reinforces our leading position in the engagement simulationmarketplace. Similarly, the I-HITS win establishes Cubic asthe U.S. Army’s leading supplier for the rapidly growing home-station anddeployable instrumented training market. Further, winning these contractsstrengthens our position in the international marketplace where the demand forsuch systems continues to grow.

 

Weannounced earlier this year that we had entered into a 50/50 joint venturearrangement with the U.S. subsidiary of Rafael Armament Development Authority,Ltd. (Rafael), an Israeli company. The joint venture will manufacture certainRafael products for sale to the U.S. and Israeli defense forces. This newcompany began operations during the second quarter this year and incurredapproximately $300,000 of expenses which are reflected in the table above as aline item called “Tactical Systems”. Although we could receive significantorders in the near term, we do not expect to generate operating income from theventure for the first two to three years. During this time modest operatinglosses are anticipated to get the business started. We completed our analysisof this arrangement and have concluded that Cubic is the primary beneficiary ofthe venture, as defined in FIN 46 “*Consolidation of Variable Interest Entities.*” Therefore, we consolidated this joint venturein our financial statements for the quarter ended March 31, 2005. Minorityinterest in the net loss from this business is reflected on the incomestatement and minority interest in the net assets is included on the balancesheet.

 

**Transportation Systems Segment**

 

Transportation segment sales decreased 8% from $63 million in thesecond quarter last year to $58 million in the second quarter this year. Forthe six-month period, sales decreased 3% from $126 million last year to $122million this year. Sales from contracts in North America were lower this yearcompared to both the second quarter and six-month periods last year, asprogress toward completion was slowed due to difficulties with softwaredevelopment and integration on several programs. Higher sales on Europeancontracts partially offset this decrease in North American sales.

 

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Transportation systems incurred an operating loss of $5.6 million forthe second quarter this year compared to operating income of $5.0 million inthe second quarter last year. Profit margins on several contracts in NorthAmerica and Australia were unfavorably affected by additional costs that arenow projected to grow by $9.5 million more than we had anticipated lastquarter, related to the development of new software technologies for commonfare collection solutions, resulting in the recording of a loss of that amounton these contracts for the quarter. Although we made progress during thequarter toward resolving these software issues, the software development andintegration effort is ongoing and we have again made our best estimates of themost likely costs to complete the projects.

 

In addition to these provisions for cost growth, we provided anallowance of $4.2 million for a doubtful accounts receivable balance with acustomer that is attempting to terminate its contract with us. This provisionis included in SG&A expenses on the condensed consolidated statement ofincome. We believe that we have substantially performed the requirements of thecontract such that this payment is due to us and we believe the terminationeffort by this customer is unwarranted. See Note 8 to the condensedconsolidated financial statements for further details of this situation. Wealso recorded a $1.3 million operating loss during the quarter due tounfavorable pricing on two contracts from the parking business we acquired lastyear. The losses from these projects in North America and Australia describedabove were partially offset by higher profits from European contracts.

 

For the first six months of the fiscal year, transportation systemsincurred an operating loss of $3.7 million this year, compared to operatingincome of $9.0 million for the same period last year. This decline in operatingperformance was caused by cost growth provisions in the first and secondquarters and the allowance for doubtful accounts provision in the secondquarter, described above. The European business continued to perform well forthe first six months, partially offsetting the operating losses incurred inNorth America and Australia.

 

Transportation systems is expected to return to profitability in thethird quarter as the losses incurred in the second quarter in North America arenot expected to continue, while the European business and the overall servicebusiness should continue to be solid.

 

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**Backlog**

 
| ** **                     | ** ** | **March 31,  2005** | ** ** | **September 30,  2004** | ** ** |
|--------------------------------|------------|--------------------------|------------|------------------------------|------------|
| ** **                     | ** ** | **(in millions)**        | ** ** |
| **Total backlog**              |       |                     |       |                         |       |
| Transportation systems         |       | $                        | 789.6      |                         | $          | 733.9 |   |
| Defense:                       |       |                     |       |                         |       |
| Communications and electronics |       | 61.5                     |       | 61.5                         |       |
| Training systems               |       | 303.4                    |       | 317.6                        |       |
| Government services            |       | 391.6                    |       | 377.0                        |       |
| Total defense                  |       | 756.5                    |       | 756.1                        |       |
| Total                          |       | $                        | 1,546.1    |                         | $          | 1,490.0 |   |
|                           |       |                     |       |                         |       |
| **Funded backlog**             |       |                     |       |                         |       |
| Transportation systems         |       | $                        | 789.6      |                         | $          | 733.9 |   |
| Defense:                       |       |                     |       |                         |       |
| Communications and electronics |       | 61.5                     |       | 61.5                         |       |
| Training systems               |       | 303.4                    |       | 317.6                        |       |
| Government services            |       | 106.4                    |       | 72.7                         |       |
| Total defense                  |       | 471.3                    |       | 451.8                        |       |
| Total                          |       | $                        | 1,260.9    |                         | $          | 1,185.7 |   |

 

As reflected in the table above, total backlog increased by about $56million at March 31, 2005 compared to the beginning of the fiscal year,while funded backlog increased by about $75 million. The increase in totalbacklog came from the transportation segment and the increase in funded backlogcame from both the defense and transportation systems segments. Although thisrepresents a decrease in defense segment backlog from December 31, 2004,the two contracts mentioned in the defense segment section have importantlong-term potential for Cubic that is not reflected in the relatively smallinitial awards from these contracts in the second quarter.

 

In defense, the difference between total backlog and funded backlogrepresents options under multiyear service contracts. Funding for thesecontracts comes from annual operating budgets of the U.S. government and theoptions are normally exercised annually. Options for the purchase of additionalsystems or equipment are not included in backlog until exercised nor areindefinite delivery, indefinite quantity (IDIQ) contracts until an order isreceived.

 

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

 

Cash flows from operations turned positive in the second quarter byapproximately $8 million.   Theimprovement in cash flows during the quarter came from the defense segment dueprimarily to a reduction in accounts receivable of $16 million. Growth ininventories and a reduction of customer advances partially offset loweraccounts receivable in the defense segment. Accounts receivable in thetransportation segment also decreased during the quarter, primarily because ofthe allowance for doubtful accounts provision mentioned above, which did notprovide cash. A decrease in customer advances resulted in negative cash flowsfor the quarter from this segment.

 

Net accounts receivable were $349 million at March 31, 2005compared to $373 million at

 

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December 31, 2004, representing a $24 million reduction for thequarter. Accounts receivable decreased by $17 million from operations. Inaddition, the bad debt reserve of $4 million mentioned above and foreigncurrency translation adjustments totaling $3 million caused reductions inaccount receivable at March 31, 2005 that did not provide cash.

 

Overall, inventories grew by more than $8 million during the quarter,primarily in the defense segment. About $7 million of this growth representsinventoried costs on long-term contracts where the customers directed us toperform work outside the scope of the contract. We expect to recover thesecosts from the customers through contract change orders, which will add torevenues when received.

 

Investing activities for the six-month period included almost $5million used for normal capital expenditures and $6 million generated by thesale of marketable securities at no significant gain.

 

During the first six months of the fiscal year, we made scheduledpayments on long-term debt of $5.6 million, paid dividends to our shareholdersof $2.4 million and borrowed $18.5 million on a short-term basis.

 

Accumulated Other ComprehensiveIncome declined by $2 million in the second quarter primarily because the U.S.Dollar strengthened against the British Pound, generating a foreign currencytranslation adjustment. This reduced the balance of Accumulated OtherComprehensive Income to $12 million as of March 31, 2005.

 

Our financial condition remains strong with working capital of $227million and a current ratio of 2.4 to 1 at March 31, 2005. We expect thatcash on hand and our lines of credit will be adequate to meet our working capitalrequirements for the foreseeable future.

 

We renewed our committed credit facility with a group of banks in theU.S. during March 2005.  The newagreement has a five year term and provides credit up to $150 million at adaily rate equal to the greater of the prime rate or the overnight FederalFunds Rate plus one-half of one percent, plus a spread up to 0.25%; or forEurodollar loans the Adjusted LIBOR, plus a spread up to 1.25%. The CreditAgreement contains covenants which, among other things, limit the incurrence ofadditional indebtedness, liens, contingent liabilities, dividends and otherdistributions to shareholders (but such dividend limitations are in excess ofour current annual rate of dividends), transactions with affiliates, asset sales,acquisitions of businesses in excess of $20 million without permission of theAdministrative Agent, mergers, and other matters customarily restricted in suchagreements. The agreement also contains customary events of default, includingpayment defaults, breach of representations and warranties, covenant defaults,cross-defaults to certain other indebtedness, certain events of bankruptcy andinsolvency, the occurrence of a change in control and judgment defaults.

 

**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,

 

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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.

 

For further information, refer to the consolidated financial statementsand notes thereto included in the Company’s annual report on Form 10-K forthe year ended September 30, 2004.

 

**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 30,2004, 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.

 

ITEM 4 - STATEMENT ONDISCLOSURE CONTROLS AND PROCEDURES.

 

Withinthe 90 days prior to the date of filing this Quarterly Report on Form 10-Q,the Company

 

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carriedout an evaluation, under the supervision and with the participation of theCompany’s management, including the Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of the design and operation of the Company’sdisclosure controls and procedures pursuant to the Securities and Exchange Actof 1934 Rules 13a-15 and 15d-15. Based upon that evaluation, the ChiefExecutive Officer and Chief Financial Officer concluded that, as of the end ofthe three month period ended March 31, 2005, the Company’s disclosurecontrols and procedures are effective in timely alerting them to material informationrelating to the Company (including its consolidated subsidiaries) required tobe included in the Company’s periodic SEC filings.

 

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**CUBIC CORPORATION**

 

**PART II- OTHER INFORMATION**

 

ITEM 1 – LEGAL PROCEEDINGS

 

In January 2005, a North American customer of the Company issued acure notice on a contract for the supply of a bus fare collection system and inMarch 2005 issued a notice of default, immediately after we had filed amotion asking a court to prevent the issuance of a default notice. In April 2005,the customer filed a claim for breach of contract, seeking damages ofapproximately $4 million, unspecified reprocurement costs, “consequential andliquidated damages” and attorney’s fees. The contract limits liability to thecontract value of $8.2 million, but the customer appears to be attempting tovoid that limitation.

 

We believe that both the default notice and the claim for damages areunwarranted and plan to vigorously defend against the allegations. In addition,we intend to amend our motion to include a complaint for breach of contract, aswell as other applicable causes of action. We believe we have substantiallycompleted the contract and will seek payment of the remaining contract value ofapproximately $4.2 million, additional costs incurred for directed work outsidethe contract and attorney’s fees. Based on the advice of counsel, we believe itis more likely than not we will prevail in this matter, however, due to theuncertainty of collecting the outstanding receivable balance we established anallowance for doubtful accounts reserve of $4.2 million in the quarter ended March 31,2005 and have expensed all costs incurred in the performance of the contractand costs incurred outside the scope of the contract.

 

ITEM 4 – SUBMISSION OF MATTERSTO A VOTE OF SECURITY HOLDERS

 

The Company held its annual meeting of shareholders on February 8,2005.  Matters voted upon were (1) electionof directors, and (2) the ratification of the Board’s selection of Ernst &Young LLP as the Company’s independent auditors for the fiscal year ending September 30,2005.

 

The number of votes cast for, against or withheld, with respect to eachmatter are set out below.

 

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1.  Election of Directors

 
| **Director**                            | ** ** | **For**    | ** ** | **Against** | ** ** | **Withheld** | ** ** |
|-----------------------------------------|------------|------------|------------|-------------|------------|--------------|------------|
| Walter J. Zable                         |       | 24,706,157 |       | —      |       | 1,115,518    |       |
| Walter C. Zable                         |       | 24,765,979 |       | —      |       | 1,055,696    |       |
| Dr. Richard C. Atkinson            |       | 24,689,460 |       | —      |       | 1,132,215    |       |
| Robert T. Monagan                       |       | 24,672,061 |       | —      |       | 1,149,614    |       |
| Raymond E. Peet                         |       | 24,680,139 |       | —      |       | 1,141,536    |       |
| William W. Boyle                        |       | 24,630,371 |       | —      |       | 1,191,304    |       |
| Raymond L. deKozan                      |       | 24,755,863 |       | —      |       | 1,065,812    |       |
| Robert S. Sullivan                      |       | 24,806,217 |       | —      |       | 1,015,458    |       |
| Robert D. Weaver                        |       | 24,807,419 |       | —      |       | 1,014,256    |       |
|                                    |       |       |       |        |       |         |       |
| 2. Ratification of Independent Auditors |       | 25,544,539 |       | 248,351     |       | 28,785       |       |

 

ITEM 6 - EXHIBITS

 

(a) The following exhibits are included herein:

 
| **Exhibit No.** | ** ** | **Description**                                          | ** ** |
|----------------------|------------|----------------------------------------------------------|------------|
| 10 —            |       | Credit Agreement dated March 10, 2005               |
| 15 —            |       | Report of Independent Registered Public  Accounting Firm |
| 31.1 —          |       | Certification of CEO                                     |
| 31.2 —          |       | Certification of CFO                                     |
| 32.1 —          |       | CEO and CFO Certification                                |

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 
|   |              |   | CUBIC  CORPORATION            |
|--------|-------------------|--------|-------------------------------|
|   |              |   |                          |
|   |              |   |                          |
| Date   | May 9,  2005 |   | /s/ W. W. Boyle               |   |
|   |              |   | W. W. Boyle                   |
|   |              |   | Senior Vice President and CFO |
|   |              |   |                          |
|   |              |   |                          |
| Date   | May 9, 2005       |   | /s/ Mark A. Harrison          |   |
|   |              |   | Mark A. Harrison              |
|   |              |   | Vice President and Controller |
|        |                   |        |                               |  |  |

 

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