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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

ANNUAL REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended September 30, 2002

1-8931Commission File Number

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CUBIC CORPORATIONExact Name of Registrant as Specified in its Charter

|Delaware                                                                |  | 95-1678055                          
|----------------------------------------------------------------------- |  | ------------------------------------
|State of Incorporation                                                  |  | IRS Employer Identification No.     
|9333 Balboa Avenue
San Diego, California 92123
Telephone (858) 277-6780
|Common Stock                                                            |  | American Stock Exchange, Inc.       
|Title of each class                                                     |  | Name of exchange on which registered

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Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for the past
90 days. Yes ý No o

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K. Yes ý No o

The
aggregate market value of 15,968,304 shares of voting stock held by non-affiliates of the registrant is: $276,252,000 as of November 22, 2002, based on the closing
stock price on that date.

Number
of shares of common stock outstanding as of November 22, 2002 including shares held by affiliates is: 26,719,845 (after deducting 8,944,884 shares held as treasury stock).

Parts
I and III incorporate information by reference from the Registrant's definitive proxy statement which will be filed no later than 120 days after the close of the
Registrant's year-end, and no later than 30 days prior to the Annual Shareholders' Meeting.

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PART I

Item 1.BUSINESS.

(a)General Development of Business.

The
Registrant, CUBIC CORPORATION (the Company), was incorporated in the State of California in 1949 and began operations in 1951. In 1984, the Company moved its corporate domicile to
the State of Delaware.

The
Company, its subsidiaries and divisions design, develop, manufacture and install products which are mainly electronic in nature, such as:



The
Company also performs a variety of services, such as computer simulation training, distributed interactive simulation and development of military training doctrine, as well as field
operations and maintenance services related to products produced by the Company and others. The Company also
manufactures replacement parts for its own such products. In addition, it operates a corrugated paper converting facility through its subsidiary, Consolidated Converting Company.

The
Company achieved the highest level of profits in its history in fiscal 2002 due to significant profit improvements in its defense segment and continued strong operating profits in
the transportation systems segment. Sales were also at an all-time high for the Company as both segments generated increased sales over fiscal 2001.

During
fiscal year 2002, approximately 39 percent of the Company's total business was conducted, either directly or indirectly, with various agencies of the United States
government. The remaining 61 percent of the business is classified as commercial.

The
Company's domestic products and services are sold almost entirely by its employees. Overseas sales are made either directly or through representatives or licensees.

(b)Financial Information Relating to Industry Segments and Classes of Products or
Services.

Information
regarding the amounts of revenue, operating profit and loss and identifiable assets attributable to each of the Company's industry segments, is set forth in Note 12 to
the Consolidated Financial Statements for the year ended September 30, 2002, and follows at Item 15(a)(1) of this filing, on pages 40 through 42.

(c)Narrative Description of Businesses.

DEFENSE

The defense segment's products include customized military range instrumentation, training and applications systems, communications and surveillance systems, HF
and UHF/VHF surveillance receivers, transceivers and avionics systems. Services provided by the segment include computer simulation training, distributed interactive simulation, development of
military training doctrine and field operations and maintenance.

During
fiscal 2002 the defense segment reorganized its businesses to better align the Company's resources with customer requirements and stimulate new opportunities through working more
closely

2

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together instead of operating as separate businesses. The results thus far have been very positive as customers now have a better understanding of the segment's total capabilities. The newly defined
organization has been named Cubic Defense Applications (CDA), reflecting the Company's goal to provide innovative solutions to customer requirements, primarily in the defense sector, and potentially
applying defense technology solutions in the commercial marketplace.

CDA
is best known for its combat training systems for military field exercises. These systems use lasers or computer software to simulate "live fire," plus instrumentation to record the
force-on-force engagement. When the missions are completed, the instructors and personnel involved replay computer data on display screens for review. The U. S. Navy,
Marine Corps, Air Force, Air National Guard and NATO air forces use these air combat training systems. The new generation of air ranges is based on the GPS (Global Positioning System) although fixed
ranges continue to play an important role in air combat training. CDA has now completed the development of two ground combat training centers for the British Ministry of Defence that are the
state-of-the-art in the world today. Instrumented training ranges at the CMTC (Combat Maneuver Training Center) and JRTC (Joint Readiness Training Center) were
developed and installed for the U. S. Army in past years.

CDA
is also producing the Multiple Integrated Laser Engagement System (MILES 2000) for the U.S. Army and Marine Corps, as well as allied forces. MILES is a family of products that uses
lasers to realistically simulate weapons firing and detection systems to register hits or kills without endangering the target in realistic force-on-force combat training
exercises. New orders for these products received in fiscal 2001 and 2002 have enabled this product line to produce a profit for the first time, in fiscal 2002.

New
Zealand-based Oscmar International, Ltd. provides tactical engagement simulation equipment, similar to CDA's MILES 2000, to governments worldwide. Oscmar and CDA often
collaborate to address specific customer requirements for training equipment.

CDA
produces the air/ground data link for the Joint STARS (Surveillance Target Attack Radar System) system built for the Air Force and Army by Northrop Grumman. The Company has invested
in the development of new data link capability, which it believes will provide opportunities to expand this product line. The defense group also builds avionics products, such as the PLS (Personnel
Locator System) for helicopters, and a GCAS (Ground Collision Avoidance System) which provides warnings for flight safety, for the U. S. military, aircraft prime contractors and foreign
governments. CDA's communication products business also designs and produces HF and VHF/UHF surveillance receivers and direction finders for the U. S. and foreign military markets and
transceivers for use in air traffic control. The division has also become a leader in Digital Signal Processor-based transceiver development.

The
battlefield simulation business is a tactical knowledge-based service division that teaches military commanders to make correct decisions in battle situations by using computer
simulation for training. The Company's personnel serve with their clients in their actual environment, supporting field exercises
and leader development through state-of-the-art educational and multimedia technologies. The Worldwide Technical Services division performs product and logistics
support for Cubic products and also has significant business providing operations, maintenance and other technical services for primarily military customers. The segment's service businesses are
active at more than 80 locations worldwide.

Raw Materials:

The principal raw materials used by the defense segment are sheet aluminum and steel, copper electrical wire, and composite products. A significant portion of the
segment's end product is composed of purchased electronic components and subcontracted parts and supplies. These items are primarily

3

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procured from commercial sources. In general, supplies of raw materials and purchased parts are presently adequate to meet the requirements of the segment.

Backlog:

Funded sales backlog of the defense segment at September 30, 2002 was $232 million compared to $241 million at September 30, 2001.
Approximately $83 million of the September 30, 2002 funded backlog is not expected to be completed by September 30, 2003. Total backlog, including un-funded or
unexercised customer orders, was $493 million at September 30, 2002 compared to $471 million at September 30, 2001.

Competition:

The defense segment competes with organizations of varying size, including some of the largest corporations in the world. It is not possible to predict the extent
of competition that present or future activities will encounter, particularly since the defense industry is subject to rapidly changing competitive conditions, customer requirements and technological
developments.

TRANSPORTATION SYSTEMS

The transportation systems segment designs, produces, installs and services electronic revenue collection systems for mass transit projects, including railways
and buses, and is the leader in this industry, worldwide.

The
segment has been awarded large contracts by cities such as New York, Washington, D.C., San Francisco, Chicago, London, Singapore, Los Angeles, San Diego, Shanghai and Guangzhou,
China and Sydney, Australia. These programs provide a solid base of current business and the potential for additional future business as the programs are expanded. In 1998 a joint venture, in which
Cubic has 37.5 percent ownership, was awarded a contract called "PRESTIGE" to privatize the London Transport fare collection system. This contract, now in its fifth year, is estimated to be
worth more than $1.75 billion over a 17 year period, making it the largest automated fare collection contract ever awarded. Cubic's share of the work, including all options exercised to
date, exceeds $585 million over the initial 12 year period of the contract, and if extended for the full 17 year period will exceed $700 million.

There
is worldwide demand for automated revenue management systems in all forms of public mass transit. The Company's transportation systems segment continues to provide the technology
and leadership to deliver quality products and services to the world fare collection market, including new innovations such as contactless smart card technology.

Raw Materials:

Raw materials used in this segment include sheet steel, composite products, copper electrical wire and castings. A significant portion of the segment's end
product is composed of purchased electronic components and subcontracted parts and supplies. All of these items are procured from commercial sources. In general, supplies of raw materials and
purchased parts are presently adequate to meet the requirements of the segment.

Backlog:

Funded sales backlog of the transportation systems segment at September 30, 2002 was $545 million compared to $497 million at
September 30, 2001. Approximately $305 million of the September 30, 2002 funded backlog is not expected to be completed by September 30, 2003. Total

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backlog, including un-funded or unexercised customer orders, was $672 million at September 30, 2002 compared to $624 million at September 30, 2001.

Competition:

The transportation systems segment is the leading supplier of automated fare collection systems for transit systems throughout the world. However, the segment
competes with large international
companies and in many locations encounters significant competition. It is not possible to predict the extent of competition that present or future activities will encounter; particularly since the
transportation industry is subject to rapidly changing competitive conditions, customer requirements, political situations and technological developments.

OTHER OPERATIONS

Consolidated Converting Company converts corrugated paper stock into pizza boxes, high-quality packaging and shipping containers and converts paper
stock into toilet seat covers.

Raw Materials:

Raw materials used by Consolidated Converting Company consist of paper products, which are procured from commercial sources. In general, supplies of raw materials
are presently adequate to meet the requirements of this business. Paper shortages could delay completion of customer orders in the future.

Backlog:

Consolidated Converting Company had little sales backlog at September 30, 2002 and 2001. The business does not track sales backlog due to the
short-term conversion of customer orders into sales and the absence of any significant long-term contracts.

Competition:

This business competes with concerns of varying size, including some very large companies. It is not possible to predict the extent of the competition which
present or future activities will encounter, particularly since the market for this subsidiary's products is subject to rapidly changing competitive conditions.

GENERAL

The Company pursues a policy of seeking patent protection for its products, where deemed advisable, but it does not regard itself as materially dependent on its
patents for the maintenance of its competitive position.

The
Company does not engage in any significant business that is seasonal in nature. Because the Company's revenues are generated primarily from work on contracts performed by its
employees and subcontractors, first quarter revenues tend to be lower than the other three quarters due to the Company's policy of providing many of its employees seven holidays in the first quarter,
compared to one or two in each of the other quarters of the year. This is not necessarily a consistent pattern as it depends upon actual activities in any given year.

The
estimated dollar amounts spent for customer sponsored research activities relating to the development of new products or services was $22 million, $58 million and
$67 million in 2002, 2001 and 2000, respectively. The cost of Company sponsored research and development activities was $8.4 million, $9.8 million and $7.0 million in 2002,
2001, and 2000, respectively.

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The
Company must comply with federal, state and local laws and regulations regarding discharge of materials into the environment and the handling and disposal of materials classed as
hazardous and/or toxic. Such compliance has no material effect upon the capital expenditures, earnings or competitive position of the Company.

There
were approximately 4,500 persons employed by the Company and its subsidiaries at September 30, 2002.

Typically,
the Company's long-term contracts provide for progress or advance payments by its customers, which provide assistance in financing the working capital requirements
on those contracts.

(d)Financial Information about Foreign and Domestic Operations and Export
Sales

Information
regarding foreign and domestic operations and export sales is set forth in Note 12 to the Consolidated Financial Statements for the year ended September 30,
2002, and follows at Item 15(a)(1) of this filing, on page 42.

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Item 2.PROPERTIES.

The Company conducts its operations in approximately 1.2 million square feet in both owned and leased properties located in the United States and foreign
countries. Approximately 50 percent of the square footage is owned by the Company, including 425,000 square feet located in the City of San Diego. All owned and leased properties are considered
in good condition and adequately utilized. The following table identifies significant properties by business segment:

|Location of Property      |  | Owned or Leased
|------------------------- |  | ---------------
|Corporate Headquarters:   |  |                
|San Diego, CA             |  | Owned          
|Defense:                  |  |                
|Alexandria, VA            |  | Leased         
|Arlington, VA             |  | Leased         
|Auckland, New Zealand     |  | Leased         
|Fort Walton Beach, FL     |  | Leased         
|Hampton, VA               |  | Leased         
|Honolulu, HI              |  | Leased         
|Lacey, WA                 |  | Leased         
|Leavenworth, KS           |  | Leased         
|Orlando, FL               |  | Leased         
|San Diego, CA             |  | Owned          
|San Jose, CA              |  | Leased         
|Tijuana, Mexico           |  | Leased         
|Transportation Systems:   |  |                
|Auburn, NSW Australia     |  | Leased         
|Brondby, Denmark          |  | Leased         
|Chantilly, VA             |  | Leased         
|Chicago, IL               |  | Leased         
|Merstham, Surrey, England |  | Owned          
|New York, NY              |  | Leased         
|London, England           |  | Leased         
|Salfords, Surrey, England |  | Owned          
|San Diego, CA             |  | Owned          
|Tullahoma, TN             |  | Owned          
|Other:                    |  |                
|Whittier, CA              |  | Leased         
|Investment properties:    |  |                
|San Diego, CA             |  | Owned          
|Spring Valley, CA         |  | Owned          
|Teterboro, NJ             |  | Leased         

Item 3.LEGAL PROCEEDINGS.

In 1991, the government of Iran commenced an arbitration proceeding against the Company seeking $12.9 million for reimbursement of payments made for
equipment that was to comprise an Air Combat Maneuvering Range pursuant to a sales contract and an installation contract executed in 1977, and an additional $15 million for unspecified damages.
The Company contested the action and brought a counterclaim for compensatory damages of $10.4 million. In May 1997, the arbitral tribunal awarded

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the government of Iran a decision in the amount of $2.8 million, plus simple interest at the rate of 12 percent per annum from September 21, 1991 through May 5, 1997.

In
December 1998, the United States District Court granted a motion by the government of Iran confirming the arbitral award. The Company believes the Court did not follow case law
precedent established by the Ninth Circuit Court in reaching its decision and has appealed on that basis. The Company believes that the ultimate outcome of the matter will not have a material effect
on its financial statements and, to date, no expense has been accrued.

Neither
the Company nor any of its subsidiaries are presently a party to any material pending proceedings other than ordinary litigation incidental to the business, the outcome of which
will not, in management's opinion, have a materially adverse effect on the financial position of the Company.

Item 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Information regarding submission of matters to a vote of security holders is incorporated herein by reference from the Company's definitive Proxy Statement, which
will be filed no later than 30 days prior to the date of the Annual Meeting of Shareholders.

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PART II

Item 5.MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS.

The principal market on which the Company's common stock is being traded is the American Stock Exchange. The closing high and low sales prices for the stock, as
reported in the consolidated transaction reporting system on the American Stock Exchange for the quarterly periods during the past two fiscal years, and dividend information for those periods, are as
follows.

MARKET
AND DIVIDEND INFORMATION

| |              | Sales Price of Common Shares |   | Dividends per Share
| | ------------ | ---------------------------- | - | -------------------
|
|
|
| | December 31  |                              | $ | 17.16              
| | March 31     |                              |   | 22.78              
| | June 30      |                              |   | 32.97              
| | September 30 |                              |   | 23.37              

Per
share amounts have been adjusted retroactively to reflect a 3-for-1 stock split which occurred in April 2002.

On
November 22, 2002, the closing price of the Company's common stock on the American Stock Exchange was $17.30.

There
were approximately 1300 shareholders of record of the Company's common stock as of November 22, 2002.

Item 6.SELECTED FINANCIAL DATA.

FINANCIAL HIGHLIGHTS AND SUMMARY OF CONSOLIDATED OPERATIONS  (amounts in thousands, except per share data)

|                                             |  | Years Ended September 30,
|-------------------------------------------- |  | -------------------------
|
|Results of Operations:                       |  |                          
|Sales                                        |  | $                        
|Cost of sales                                |  |                          
|Selling, general and administrative expenses |  |                          
|Interest expense                             |  |                          
|Income taxes (benefit)                       |  |                          
|Net income                                   |  |                          
|Average number of shares outstanding         |  |                          
|Per Share Data:                              |  |                          
|Net income                                   |  | $                        
|Cash dividends                               |  |                          
|Year-End Data:                               |  |                          
|Shareholders' equity                         |  | $                        
|Equity per share                             |  |                          
|Total assets                                 |  |                          
|Long-term debt                               |  |                          

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This
summary should be read in conjunction with the related consolidated financial statements and accompanying notes.

Per
share amounts have been adjusted retroactively to reflect a 3-for-1 stock split which occurred in April 2002.

Item 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward Looking Statements

In addition to historical matters, this report contains forward-looking statements. They can be identified by sentences that contain words such as anticipate,
hope, estimate, plan, potential, feel, expect, should, andconfident. These forward-looking
statements are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements involve risks and uncertainties
which may affect the Company's business and prospects. These include the effects of politics on negotiations and business dealings with government entities, reductions in defense budgets, economic
conditions in the various countries in which the Company does or hopes to do business, competition and technology changes in the defense and transportation industries, and other competitive and
technological factors.

Fiscal 2002 Compared to Fiscal 2001

The Company's net sales for fiscal 2002 were $560 million, an increase of 12 percent over fiscal 2001, representing the highest sales in the
Company's history. Net income grew 41 percent to $29.4 million, or $1.10 per share, also a record high for the Company. While some of this increase can be attributed to a change in
accounting for goodwill of $1.7 million, after taxes, and a one-time tax benefit of $2.5 million, operating profits increased in both major segments, most significantly in
defense.

DEFENSE SEGMENT

As
depicted in the following chart, defense segment sales increased from $282 million in fiscal 2001 to $314 million in fiscal 2002, an 11 percent increase. This
increase was from growth in the Company's existing defense training and service businesses. The most significant growth came from a 22 percent increase in the service businesses as the Company
won new battlefield simulation and operation and maintenance contracts. Training systems sales increased 13 percent for the year from new MILES contracts and strong sales of both air and ground
combat training systems. Sales of communications systems decreased by 11 percent from last year due to certain products, which may be nearing the end of their life cycle. However, the Company
has developed new or enhanced

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communications products in the past year which it believes will generate growth opportunities for this business in the coming years.

Years ended September 30,2002

2001

2000(in millions)Defense Segment SalesCommunications and electronics

$
59.0

$
66.0

$
46.7Training systems


113.5


100.1


121.0Government services


141.9


116.0


104.0$
314.4

$
282.1

$
271.7Defense Segment Operating ProfitsCommunications and electronics

$
3.7

$
5.6

$
4.0Training systems


5.0


(3.6
)

(32.4
)Government services


9.2


7.4


6.2Goodwill amortization





(1.8
)

(1.4
)$
17.9

$
7.6

$
(23.6
)


As
the foregoing operating profit analysis indicates, operating profits in the defense segment more than doubled from $7.6 million in fiscal 2001 to $17.9 million in fiscal
2002. The biggest improvements came from training systems, with the MILES product line generating a profit for the first time due to new contract awards received in 2001 and 2002 and due to the combat
training range business improving from an operating loss in 2001 to an operating profit in 2002. Growth of the service businesses generated increased operating profits proportionate to the increase in
sales. Operating profits in Communications were down primarily due to lower profit margins in the Company's surveillance receiver product line. Operating profits for the segment were also increased by
the adoption of Financial Accounting Standards Board (FASB) Statement No. 142 this year, which required the discontinuance of goodwill amortization. Had this pronouncement been in effect last
year, operating profits for the segment would have been higher by approximately $1.8 million in fiscal 2001.

TRANSPORTATION SYSTEMS SEGMENT

Transportation
segment sales increased 13 percent from $205 million in fiscal 2001 to $231 million in fiscal 2002. Like the defense business, this increase was the
result of internally generated growth due to new contract awards in recent years. The North American market generated significant new business for the Company, while the European market has remained
strong, especially in the United Kingdom. The Company has turned its attention primarily to these markets as business in the Far East has declined and opportunities there appear to be limited in the
near term.

During
the year the Company acquired a new facility south of London, England, in order to gain greater efficiency by bringing administrative and engineering operations in the region
together into one facility. This new building is currently being outfitted and is expected to be occupied by January 2003. In connection with this consolidation of operations, the Company
recorded a provision of $0.9 million in the first quarter of fiscal 2002 for severance costs related to the planned closing of a facility in western England. The facility was closed and the
total amount provided was expended by September 30, 2002.

Operating
profits in the transportation systems segment improved primarily due to the growth in North American revenues and due to the discontinuance of goodwill amortization, as
described above. Had the new accounting rules been in effect last year, operating profits for the segment would have been higher by approximately $0.8 million in fiscal 2001. The growth in
operating profits in fiscal 2002

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was limited somewhat due to the severance costs mentioned above and by legal costs incurred in connection with the Company's dispute of a contract tender in Australia.

The
PRESTIGE contract in London has progressed well during the year and the Company has met all of its major milestones. Nearly all equipment has been installed and the system is
functioning well.
Certain less critical milestones have been moved to fiscal 2003 by mutual agreement with the customer. These changes resulted from failure of a certain subcontractor to perform. Consequently, the
Company was forced to terminate this subcontractor and is completing the subcontractor's work. The Company will incur additional costs to complete this work and is in the process of preparing a claim
against the subcontractor to recover the costs. This situation has resulted in the Company realizing lower profit margins to date than had previously been anticipated, and could limit increases in
future profit margins and cash flows from the contract until the situation is resolved. While the Company believes the factual basis for its claim is very strong, recovery has not been anticipated in
the calculation of operating profits, because the amount of ultimate claim recovery cannot be determined at this point and, in accordance with criteria set forth in AICPA Statement of Position
81-1, cannot be recorded as an asset.

GENERAL

The
growth in net income in fiscal 2002 was partially due to a tax benefit of $2.5 million and a required change in accounting for goodwill, which added another
$1.7 million, after taxes. Partially offsetting these items in fiscal 2002 were charges related to facility closing costs in the United Kingdom of $0.6 million, after taxes. In addition,
fiscal 2001 had included a nonrecurring gain of $0.9 million, after taxes, from the sale of marketable securities. Excluding these non-recurring items in both years, earnings
increased by approximately 27 percent, as follows (amounts are presented after the effects of income taxes):

2002

2001(in millions)Earnings before nonrecurring items

$
27.5

$
21.6Tax benefit


2.5


Facility closing costs


(0.6
)

Goodwill amortization





(1.7
)Gain on sale of securities





0.9Net income

$
29.4

$
20.8


Cost
of sales improved to 76.1 percent of sales in fiscal 2002 from 76.9 percent in fiscal 2001 due to improved margins in the defense segment. Selling, general and
administrative (SG&A) expenses grew by $9.4 million from 2001 to 2002, increasing from 15.2 percent of sales to 15.3 percent of sales. The increase in SG&A spending occurred in
both segments as selling activities in pursuit of new business opportunities increased. The defense segment increase came from an increase in proposal activity for potential new contracts, while the
transportation segment increased its marketing efforts in Europe. In addition, the transportation segment incurred legal costs in connection with the Company's dispute of a contract tender in
Australia and provided for facility closing costs related to the facilities in England.

Income
tax expense for the year ended September 30, 2002 was unusually low, at about 28 percent of pre-tax income, due to a $2.5 million tax benefit
realized from the Company's subsidiary in Denmark. The Company was able to utilize a net operating loss carryforward through the sale of this business to another foreign subsidiary of the Company. In
the fourth quarter of fiscal 2002, the Danish tax authorities approved the transaction and the liquidation of the subsidiary, resulting in the realization of the associated deferred tax asset. Without
this nonrecurring item, income tax expense would have been approximately 34 percent of pre-tax income.

12

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New Accounting Pronouncements

In June 2001, the FASB issued Statements of Financial Accounting Standards No. 141,Business
Combinationsand No. 142,Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill is no longer amortized but is subject to annual impairment tests in accordance with the Statements.

As
allowed by early adoption provisions, the Company began applying the new rules on accounting for goodwill and other intangible assets effective October 1, 2001. If the new
rules had been in effect during the years ended September 30, 2001 and 2000, net income would have been higher in those years by approximately $1.7 million ($.06 per share) and
$1.4 million ($.05 per share) respectively. As of September 30, 2002 and 2001 there was no impairment of the goodwill balance. Fluctuation in the goodwill balance between
September 30, 2001 and 2002 reflects the effects of foreign currency translation on goodwill balances carried on the books of foreign subsidiaries.

In
October 2001, the FASB issued Statement of Financial Accounting Standards No. 144 (FAS 144),Accounting for the Impairment or Disposal of
Long-Lived Assets. FAS 144 establishes a single model to account for impairment of assets to be held or disposed, incorporating guidelines for accounting and
disclosure of discontinued operations. FAS 144 is effective for fiscal years beginning after December 15, 2001 and, generally, its provisions are to be applied prospectively. The Company
adopted this new standard effective October 1, 2002 and there was no impact on the financial statements of the Company at that date.

In
July 2002, the FASB issued Statement of Financial Accounting Standards No. 146 (FAS 146),Accounting for Costs Associated with Exit or
Disposal Activities. The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity. The principal effect of applying FAS 146 will be on the timing of recognition of these costs. Had the statement been
in effect during fiscal 2002, the impact on the Company's financial statements would have been immaterial. The new standard is effective as of December 31, 2002 and will be applied
prospectively to exit or disposal activities initiated after that date.

Fiscal 2001 Compared to Fiscal 2000

In fiscal 2001 the company realized significant profit improvements in both major segments of the business, despite somewhat lower sales than in fiscal 2000.
Transportation segment sales were lower by about 16 percent due to delays in new contract awards, customer requested production delays in San Francisco, and anticipated revenue declines in
London and New York.

In
spite of the decreased transportation sales volume in fiscal 2001, improved profit margins resulted in higher profits from this segment. Management's assessment was that margins in
the segment had improved due to the maturity of its customer base and the substantial completion of several contracts with lower profit margins.

Defense
segment sales grew by nearly 4 percent in fiscal 2001, with the most significant growth coming from its data link product line, which increased sales to the United Kingdom
and U.S. governments during 2001. In addition, acquisitions made in fiscal 2000 contributed to higher sales, as well as continued growth in defense related service activities, including the
computerized battlefield simulation and operations and maintenance businesses. The growth from these products and services more than offset a decrease in revenues from the MILES 2000 contract with the
U.S. government, which was nearing completion. The Company was awarded contracts for additional MILES work during 2001.

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Operating
profits in the defense segment improved significantly from the loss incurred in fiscal 2000. Increased sales volume from data links and the computerized battlefield simulation
business resulted in higher operating profits from those product lines. However, the most significant improvement from 2000 to 2001 was due to the loss provision for the MILES 2000 contract recorded
in the fourth quarter of fiscal 2000 not being repeated in fiscal 2001. Competition for combat training systems contracts continued to be substantial, resulting in low profit margins from this
business area in recent years.

Cost
of sales as a percentage of sales decreased from 84.6 percent in fiscal 2000 to 76.9 percent in fiscal 2001. The high ratio in 2000 was caused by the loss provision
recorded on the MILES contract. The fiscal 2001 ratio also represents improvement from 79.1 percent in fiscal 1999, resulting from higher profit margins in the transportation segment during
fiscal year 2001, as described above.

SG&A
expenses were virtually unchanged from 2000 to 2001, but increased to 15.2 percent of sales in fiscal 2001 from 14.3 percent of sales in fiscal 2000. SG&A expenses
increased in the defense segment in proportion to the increase in sales. Although the transportation segment reduced SG&A spending slightly, the reductions were not as significant as the decrease in
sales volume, primarily due to increased selling and proposal spending in pursuit of transportation systems opportunities.

Financial Position and Liquidity

Cash flows from operations were positive for the fourth consecutive year as positive cash flows from the defense segment offset somewhat negative cash flows in
the transportation segment. One particular transportation systems contract generated negative cash flows of nearly $25 million during the year, due to unfavorable contractual payment terms
provided to the customer in a competitive situation. This caused growth in the unbilled long-term contract accounts receivable balance during the year; however, management expects that all
of the equipment will be accepted by the customer in fiscal 2003 and that all outstanding amounts from this customer will be collected prior to September 30, 2003. Cash was used to invest in
the new building in the United Kingdom, as described above, for normal replacement of capital equipment, and to pay dividends to shareholders.

The
Company's net deferred tax asset was $24.1 million at September 30, 2002 compared to $21.6 million at September 30, 2001. Of these amounts,
$6.0 million and $1.2 million at September 30, 2002 and 2001 respectively, resulted from the tax effect of recording the additional minimum pension liability, as described below.
It is expected that the Company will generate sufficient taxable income in the future such that the net deferred tax asset will be realized.

The
Company recorded a charge to Accumulated Other Comprehensive Income (Loss) of $8.9 million and $2.3 million, net of applicable income taxes of $4.8 million and
$1.2 million, in the years ended September 30, 2002 and 2001, respectively, due to growth in the accumulated benefit obligation and the decline in market value of assets in its defined
benefit pension plans. Pension accounting rules require that a minimum liability be recorded for the excess of the accumulated benefit obligation over the net assets of the plan, resulting in this
charge to Accumulated Other Comprehensive Income (Loss). The increase in accumulated benefit obligation can be attributed primarily to a drop in interest rates, which the Company expects will be a
short-term situation. In addition, the Company believes that the decline in the value of pension plan assets is also temporary, as it resulted from the steep decline in the stock market
during the past two years. Over the long term the Company's pension assets have performed at or above the level of the assumed rate of return used for the calculation of pension expense and the
Company expects that this will continue in the future. The current under funded situation will result in an increase to the minimum funding requirement for fiscal 2003 and, therefore, an increase in
Company contributions to the plans of $3-5 million for the year.

14

---

At
September 30, 2002 the Company had working capital of $190 million and a current ratio of 2.8 to 1. The Company expects that cash on hand and its unused debt capacity
will be adequate to meet its short and long-term financing needs.

Funded
backlog at September 30, 2002 was $777,000,000 compared to $738,000,000 at September 30, 2001. Total backlog, including un-funded or
un-exercised customer orders, was $1,165,000,000 at September 30, 2002 compared to $1,095,000,000 at September 30, 2001.

Critical Accounting Policies, Estimates and Judgments

The Company's financial statements are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of
these financial statements requires management 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. Management continually evaluates its estimates and judgments, the most critical of which
are those related to revenue recognition, costs to complete contracts, pension costs, valuation of goodwill and income taxes. Management bases its estimates and judgments on historical experience and
other factors that are believed to be reasonable under the circumstances. Eventual results may differ from these estimates.

Item 7a.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Interest Rate Risk

The Company invests in money market instruments and short-term marketable debt and equity securities that are tied to floating interest rates being
offered at the time the investment is made. The Company maintains a short-term borrowing arrangement in the United Kingdom (U.K.), which is also tied to a floating interest rate (the U.K.
base rate). The Company also has senior unsecured notes payable to insurance companies that are due in annual installments. These notes have fixed coupon interest rates. See Note 5 to the
Consolidated Financial Statements for more information.

Interest
income earned on the Company's short-term investments is affected by changes in the general level of U.S. and U.K. interest rates. These income streams are generally
not hedged. Interest expense incurred under the short-term borrowing arrangement is affected by changes in the general level of interest rates in the U.K. The expense related to these cost
streams is usually not hedged since it is either revolving, payable within three months and/or immediately callable by the lender at any time. Interest expense incurred under the long-term
notes payable is not affected by changes in any interest rate because it is fixed. However, the Company has in the past, and may in the future, use an interest rate swap to essentially convert this
fixed rate into a floating rate for some or all of the long-term debt outstanding. The purpose of a swap is to tie the interest expense risk related to these borrowings to the interest
income risk on the Company's short-term investments, thereby mitigating the Company's net interest rate risk. The Company believes that it is not significantly exposed to interest rate
risk at this point in time. There was no interest rate swap outstanding at September 30, 2002.

Foreign Currency Exchange Risk

In the ordinary course of business, the Company enters into firm sale and purchase commitments denominated in many foreign currencies. The Company has a policy to
hedge those commitments greater than $20,000 by using foreign currency exchange forward and option contracts that are denominated in currencies other than the functional currency of the subsidiary
responsible for the commitment, typically the British Pound, Euro, Singapore Dollar and Australian Dollar. These contracts are designed to be effective hedges regardless of the direction or magnitude
of any foreign currency exchange rate change because they result in an equal and opposite income or cost stream that offsets the change in the value of the underlying commitment. See Note 1 to
the Consolidated

15

---

Financial Statements for more information on the Company's foreign currency translation and transaction accounting policies. The Company also uses balance sheet hedges to mitigate foreign exchange
risk. This strategy involves incurring British Pound denominated debt (See Interest Rate Risk above), and having the option of paying off the debt using U.S. Dollar or British Pound funds. The Company
believes that it is not significantly exposed to foreign currency exchange rate risk at this point in time.

The
Company's investments in its foreign subsidiaries in the U.K., Australia, New Zealand and Singapore are not hedged because they are considered to be invested indefinitely. In
addition, the Company generally has control over the timing and amount of earnings repatriation and expects to use this control to mitigate foreign currency exchange risk.

Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.

The following consolidated financial statements of the Company and its subsidiaries, for the year ended September 30, 2002, are attached hereto, marked
Pages 17 and 23 through 43.



Item 9.DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

16

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Report of Ernst & Young LLP, Independent Auditors

Board
of Directors and Shareholders
Cubic Corporation

We
have audited the accompanying consolidated balance sheets of Cubic Corporation as of September 30, 2002 and 2001, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period ended September 30, 2002. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cubic Corporation at September 30, 2002
and 2001, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 2002, in conformity with accounting principles
generally accepted in the United States.

As
discussed in Notes 1 and 2 to the consolidated financial statements, effective October 1, 2001, the Company adopted Financial Accounting Standards Board Statement
No. 142,Goodwill and Other Intangible Assets.

| |  |  |  |  |  | Ernst & Young LLP
| |  |  |  |  |  | -----------------

San
Diego, California
November 22, 2002

17

---



PART III

Item 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Certain information regarding directors and executive officers is incorporated herein by reference from the Company's definitive Proxy Statement, which will be
filed no later than 30 days prior to the date of the Annual Meeting of Shareholders.

Item 11.EXECUTIVE COMPENSATION.

Information regarding executive compensation is incorporated herein by reference from the Company's definitive Proxy Statement, which will be filed no later than
30 days prior to the date of the Annual Meeting of Shareholders.

Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Information regarding security ownership of certain beneficial owners and management is incorporated herein by reference from the Company's definitive Proxy
Statement, which will be filed no later than 30 days prior to the date of the Annual Meeting of Shareholders.

Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information regarding "Certain Relationships and Related Transactions" is included in Note 9 to the Consolidated Financial Statements for the year ended
September 30, 2002, and follows at Item 14(a)(1) of this filing, on page 39.

Item 14.STATEMENT ON DISCLOSURE CONTROLS AND PROCEDURES.

As of September 30, 2002, an evaluation was performed under the supervision and with the participation of the Company's management, including the CEO and
CFO, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's management, including the CEO and CFO, concluded that
the Company's disclosure controls and procedures were effective as of September 30, 2002. There have been no significant changes in the Company's internal controls or in other factors that
could significantly affect internal controls subsequent to September 30, 2002.

18

---



PART IV

Item 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.









19

---





SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized:

|(Registrant) |  | CUBIC CORPORATION                           |  | 
|------------ |  | ------------------------------------------- |  | 
|12/10/02Date |  | /s/WALTER J. ZABLEWALTER J. ZABLE,President |  | 

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on
the dates indicated:

|12/10/02Date |  | /s/WALTER J. ZABLEWALTER J. ZABLE,President, Chief Executive Officer and
Chairman of the Board of Directors |  | 
|------------ |  | ----------------------------------------------------------------------------------------------------------- |  | 
|12/10/02Date |  | /s/WALTER C. ZABLEWALTER C. ZABLE,Vice President and Vice Chairman of the Board of
Directors                |  | 
|Date         |  | RICHARD C. ATKINSON,Director                                                                                |  | 
|12/10/02Date |  | /s/RAYMOND L. DEKOZANRAYMOND deKOZAN,Director                                                               |  | 
|12/10/02Date |  | /s/ROBERT T. MONAGANROBERT T. MONAGAN,Director                                                              |  | 
|12/10/02Date |  | /s/RAYMOND E. PEETRAYMOND E. PEET,Director                                                                  |  | 
|12/10/02Date |  | /s/WILLIAM W. BOYLEWILLIAM W. BOYLE,Director, Vice President and Chief Financial Officer                    |  | 
|12/10/02Date |  | /s/THOMAS A. BAZTHOMAS A. BAZ,Vice President and Corporate Controller (Principal Accounting
Officer)        |  | 

20

---



CERTIFICATIONS

I,
Walter J. Zable, certify that:

December
11, 2002

|/s/ Walter J. ZableWalter J. Zable President and Chief Executive Officer |  |  | 
|------------------------------------------------------------------------ |  |  | 

21

---

I,
William W. Boyle, certify that:

December
11, 2002

|/s/ William W. BoyleWilliam W. Boyle Chief Financial Officer |  |  | 
|------------------------------------------------------------ |  |  | 

22

---



ITEM 8, ITEM 15(a)(1) and (2),(c) and (d)        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA        EXHIBITS

Cubic Corporation

Year
Ended September 30, 2002

San
Diego, California

23

---



CUBIC CORPORATION        CONSOLIDATED BALANCE SHEETS

|                              |                                           | September 30,                   |        
|----------------------------- | ----------------------------------------- | ------------------------------- | -------
|
|
|ASSETS                        |                                           |                                 |        
|CURRENT ASSETS                |                                           |                                 |        
|                              | Cash and cash equivalents                 |                                 | $      
|                              | Marketable securities, available-for-sale |                                 |        
|                              | Accounts receivable:                      |                                 |        
|                              |                                           | Trade and other receivables     |        
|                              |                                           | Long-term contracts             |        
|                              |                                           | Allowance for doubtful accounts |        
|                              |                                           |                                 |        
|                              |                                           |                                 | 163,283
|                              | Inventories                               |                                 |        
|                              | Deferred income taxes                     |                                 |        
|                              | Prepaid expenses and other current assets |                                 |        
|                              |                                           |                                 |        
|TOTAL CURRENT ASSETS          |                                           |                                 | 296,807
|                              |                                           |                                 |        
|PROPERTY, PLANT AND EQUIPMENT |                                           |                                 |        
|                              | Land and land improvements                |                                 |        
|                              | Buildings and improvements                |                                 |        
|                              | Construction in progress                  |                                 |        
|                              | Machinery and other equipment             |                                 |        
|                              | Leasehold improvements                    |                                 |        
|                              | Accumulated depreciation and amortization |                                 |        
|                              |                                           |                                 |        
|                              |                                           |                                 | 42,419 
|                              |                                           |                                 |        
|OTHER ASSETS                  |                                           |                                 |        
|                              | Deferred income taxes                     |                                 |        
|                              | Goodwill, less amortization               |                                 |        
|                              | Miscellaneous other assets                |                                 |        
|                              |                                           |                                 |        
|                              |                                           |                                 | 35,233 
|                              |                                           |                                 |        
|TOTAL ASSETS                  |                                           | $                               | 374,459
|                              |                                           |                                 |        

See
accompanying notes.

24

---

CUBIC CORPORATION        CONSOLIDATED BALANCE SHEETScontinued

|                                           |                                               | September 30,                |        
|------------------------------------------ | --------------------------------------------- | ---------------------------- | -------
|
|
|LIABILITIES AND SHAREHOLDERS' EQUITY       |                                               |                              |        
|CURRENT LIABILITIES                        |                                               |                              |        
|                                           | Trade accounts payable                        |                              | $      
|                                           | Customer advances                             |                              |        
|                                           | Accrued compensation                          |                              |        
|                                           | Accrued pension liability                     |                              |        
|                                           | Other current liabilities                     |                              |        
|                                           | Income taxes payable                          |                              |        
|                                           | Current maturities of long-term debt          |                              |        
|                                           |                                               |                              |        
|TOTAL CURRENT LIABILITIES                  |                                               |                              | 106,328
|                                           |                                               |                              |        
|LONG-TERM DEBT                             |                                               |                              | 48,571 
|OTHER LIABILITIES                          |                                               |                              |        
|                                           | Deferred compensation                         |                              |        
|COMMITMENTS AND CONTINGENCIES              |                                               |                              |        
|SHAREHOLDERS' EQUITY                       |                                               |                              |        
|                                           | Common stock, no par value:                   |                              |        
|                                           |                                               | Authorized60,000,000 shares |        
|                                           |                                               | Issued35,664,729 shares     |        
|                                           | Additional paid-in capital                    |                              |        
|                                           | Retained earnings                             |                              |        
|                                           | Accumulated other comprehensive loss          |                              |        
|                                           | Treasury stock at cost: 20028,944,884 shares |                              |        
|                                           | 20018,944,
737 shares                        |                              |        
|                                           |                                               |                              |        
|                                           |                                               |                              | 213,163
|                                           |                                               |                              |        
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |                                               | $                            | 374,459
|                                           |                                               |                              |        

See
accompanying notes.

25

---



CUBIC CORPORATION    CONSOLIDATED STATEMENTS OF INCOME

|                                              |                                              | Years Ended September 30, |        
|--------------------------------------------- | -------------------------------------------- | ------------------------- | -------
|
|
|Revenues:                                     |                                              |                           |        
|                                              | Net sales                                    |                           | $      
|                                              | Interest and dividends                       |                           |        
|                                              | Other income                                 |                           |        
|                                              |                                              |                           |        
|                                              |                                              |                           | 564,311
|Costs and expenses:                           |                                              |                           |        
|                                              | Cost of sales                                |                           |        
|                                              | Selling, general and administrative expenses |                           |        
|                                              | Research and development                     |                           |        
|                                              | Goodwill amortization                        |                           |        
|                                              | Interest                                     |                           |        
|                                              |                                              |                           |        
|                                              |                                              |                           | 523,390
|                                              |                                              |                           |        
|Income before income taxes                    |                                              |                           | 40,921 
|Income taxes (benefit)                        |                                              |                           | 11,484 
|                                              |                                              |                           |        
|Net income                                    |                                              | $                         | 29,437 
|                                              |                                              |                           |        
|Basic and diluted net income per common share |                                              | $                         | 1.10   
|                                              |                                              |                           |        
|Average number of common shares outstanding   |                                              |                           | 26,720 
|                                              |                                              |                           |        

See
accompanying notes.

26

---

CUBIC CORPORATION    CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

|                                                    |                                                                                                                                     | Comprehensive
Income (Loss) |   | Treasury
Stock |   | Accumulated
Other
Comprehensive
Income (Loss) |   | Retained
Earnings |         | Additional
Paid-in
Capital |   | Common
Stock
|--------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | - | -------------- | - | --------------------------------------------- | - | ----------------- | ------- | -------------------------- | - | ------------
|
|October 1, 1999                                     |                                                                                                                                     |                             |   |                | $ | (36,056                                       | ) | $                 | 317     |                            | $ | 206,347     
|Comprehensive income (loss):                        |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   |             
|                                                    | Net income                                                                                                                          |                             | $ | 674            |   |                                               |   |                   |         |                            |   |             
|                                                    | Unrealized holding gains on marketable securitiesnet of applicable income taxes of $390                                            |                             |   | 575            |   |                                               |   |                   |         | 575                        |   |             
|                                                    | Foreign currency translation adjustment                                                                                             |                             |   | (4,800         | ) |                                               |   |                   |         | (4,800                     | ) |             
|                                                    |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   |             
|                                                    | Comprehensive income (loss)                                                                                                         |                             | $ | (3,551         | ) |                                               |   |                   |         |                            |   |             
|                                                    |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   |             
|Cash dividends paid$.127 per share of common stock |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   | (3,384      
|Treasury stock purchases                            |                                                                                                                                     |                             |   |                |   | (7                                            | ) |                   |         |                            |   |             
|                                                    |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   |             
|September 30, 2000                                  |                                                                                                                                     |                             |   |                |   | (36,063                                       | ) |                   | (3,908  | )                          |   | 203,637     
|Comprehensive income:                               |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   |             
|                                                    | Net income                                                                                                                          |                             | $ | 20,842         |   |                                               |   |                   |         |                            |   |             
|                                                    | Unrealized holding gains on marketable securitiesnet of applicable income taxes of $117                                            |                             |   | 495            |   |                                               |   |                   |         | 495                        |   |             
|                                                    | Reclassification adjustment for gain on sale of marketable securities included in net incomenet of applicable income taxes of $515 |                             |   | (789           | ) |                                               |   |                   |         | (789                       | ) |             
|                                                    | Additional minimum pension liabilitynet of applicable income tax benefit of $1,222                                                 |                             |   | (2,270         | ) |                                               |   |                   |         | (2,270                     | ) |             
|                                                    | Foreign currency translation adjustment                                                                                             |                             |   | (22            | ) |                                               |   |                   |         | (22                        | ) |             
|                                                    |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   |             
|                                                    | Comprehensive income                                                                                                                |                             | $ | 18,256         |   |                                               |   |                   |         |                            |   |             
|                                                    |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   |             
|Cash dividends paid$.127 per share of common stock |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   | (3,384      
|                                                    |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   |             
|September 30, 2001                                  |                                                                                                                                     |                             |   |                |   | (36,063                                       | ) |                   | (6,494  | )                          |   | 221,095     
|Comprehensive income:                               |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   |             
|                                                    | Net income                                                                                                                          |                             | $ | 29,437         |   |                                               |   |                   |         |                            |   |             
|                                                    | Unrealized holding losses on marketable securitiesnet of applicable income taxes of $62                                            |                             |   | (115           | ) |                                               |   |                   |         | (115                       | ) |             
|                                                    | Additional minimum pension liabilitynet of applicable income tax benefit of $4,803                                                 |                             |   | (8,921         | ) |                                               |   |                   |         | (8,921                     | ) |             
|                                                    | Foreign currency translation adjustment                                                                                             |                             |   | 5,434          |   |                                               |   |                   |         | 5,434                      |   |             
|                                                    |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   |             
|                                                    | Comprehensive income                                                                                                                |                             | $ | 25,835         |   |                                               |   |                   |         |                            |   |             
|                                                    |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   |             
|Cash dividends paid$.133 per share of common stock |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   | (3,564      
|Treasury stock purchases                            |                                                                                                                                     |                             |   |                |   | (3                                            | ) |                   |         |                            |   |             
|                                                    |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   |             
|September 30, 2002                                  |                                                                                                                                     |                             |   |                | $ | (36,066                                       | ) | $                 | (10,096 | )                          | $ | 246,968     
|                                                    |                                                                                                                                     |                             |   |                |   |                                               |   |                   |         |                            |   |             

See accompanying notes.

27

---



CUBIC CORPORATION        CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                       |                                                 | Years Ended September 30,                                                         |                                                                               
|------------------------------------------------------ | ----------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------
|
|
|Operating Activities:                                  |                                                 |                                                                                   |                                                                               
|                                                       | Net income                                      |                                                                                   | $                                                                             
|                                                       |                                                 | Adjustments to reconcile net income to net cash provided by operating activities: |                                                                               
|                                                       |                                                 |                                                                                   | Depreciation and amortization                                                 
|                                                       |                                                 |                                                                                   | Deferred income taxes                                                         
|                                                       |                                                 |                                                                                   | Changes in operating assets and liabilities, net of effects from acquisitions:
|                                                       |                                                 |                                                                                   |                                                                               
|                                                       |                                                 |                                                                                   |                                                                               
|                                                       |                                                 |                                                                                   |                                                                               
|                                                       |                                                 |                                                                                   |                                                                               
|                                                       |                                                 |                                                                                   |                                                                               
|                                                       |                                                 |                                                                                   |                                                                               
|                                                       |                                                 |                                                                                   |                                                                               
|                                                       |                                                 |                                                                                   |                                                                               
|NET CASH PROVIDED BY OPERATING ACTIVITIES              |                                                 |                                                                                   | 17,478                                                                        
|                                                       |                                                 |                                                                                   |                                                                               
|Investing Activities:                                  |                                                 |                                                                                   |                                                                               
|                                                       | Acquisition of businesses, net of cash acquired |                                                                                   |                                                                               
|                                                       | Sale of marketable securities                   |                                                                                   |                                                                               
|                                                       | Purchases of property, plant and equipment      |                                                                                   |                                                                               
|                                                       | Other itemsnet                                 |                                                                                   |                                                                               
|                                                       |                                                 |                                                                                   |                                                                               
|NET CASH USED IN INVESTING ACTIVITIES                  |                                                 |                                                                                   | (13,004                                                                       
|                                                       |                                                 |                                                                                   |                                                                               
|Financing Activities:                                  |                                                 |                                                                                   |                                                                               
|                                                       | Change in short-term borrowings                 |                                                                                   |                                                                               
|                                                       | Principal payments on long-term debt            |                                                                                   |                                                                               
|                                                       | Purchases of treasury stock                     |                                                                                   |                                                                               
|                                                       | Dividends paid to shareholders                  |                                                                                   |                                                                               
|                                                       |                                                 |                                                                                   |                                                                               
|NET CASH USED IN FINANCING ACTIVITIES                  |                                                 |                                                                                   | (3,567                                                                        
|                                                       |                                                 |                                                                                   |                                                                               
|Effect of exchange rates on cash                       |                                                 |                                                                                   | 912                                                                           
|                                                       |                                                 |                                                                                   |                                                                               
|NET INCREASE IN CASH AND CASH EQUIVALENTS              |                                                 |                                                                                   | 1,819                                                                         
|Cash and cash equivalents at the beginning of the year |                                                 |                                                                                   | 76,837                                                                        
|                                                       |                                                 |                                                                                   |                                                                               
|CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR       |                                                 | $                                                                                 | 78,656                                                                        
|                                                       |                                                 |                                                                                   |                                                                               

See
accompanying notes.

28

---



CUBIC CORPORATION        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        September 30, 2002

NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of the Business:Cubic Corporation (the Company) designs, develops and manufactures products which
are mainly electronic in nature, provides government services and services related to products previously produced by Cubic and others. The Company's principal lines of business are defense
electronics and transportation fare collection systems. Principal customers for defense products and services are the United States and foreign governments. Transportation fare collection systems are
sold primarily to large local government agencies in the United States and worldwide.

Principles of Consolidation:The consolidated financial statements include the accounts of Cubic Corporation and its
majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidation of foreign subsidiaries requires translation of their
assets and liabilities into U.S. dollars at year-end exchange rates. Statements of income and cash flows are translated at the average exchange rates for each year.

Cash Equivalents:The Company considers highly liquid investments with maturity of three months or less when purchased to be
cash equivalents.

Concentration of Credit Risk:The Company has established guidelines pursuant to which its cash and cash equivalents are
diversified among various money market instruments and investment funds. These guidelines emphasize the preservation of capital by requiring minimum credit ratings assigned by established credit
organizations. Diversification is achieved by specifying maximum investments in each fund type and issuer. The majority of these investments are not on deposit in federally insured accounts.

Fair Value of Financial Instruments:Financial instruments, including cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities, are carried at cost, which management believes approximates the fair value because of the short-term maturity of these instruments. Receivables
consist primarily of amounts due from U. S. and foreign governments for defense products and local government agencies for transportation systems. Due to the nature of its customers, the Company
generally does not require collateral.

Marketable Securities, Available-for-Sale:Marketable securities are classified as
available-for-sale and are stated at fair market value. The excess of fair market value over cost at September 30, 2002 and 2001 is included in Accumulated Other
Comprehensive Income (Loss) on the Consolidated Balance Sheets and amounted to $103,000 and $218,000 at September 30, 2002 and 2001, respectively, net of applicable income taxes.

Inventories:Inventories are stated at the lower of cost or market. Cost is determined using primarily the
first-in, first-out (FIFO) method, which approximates current replacement cost. Work in process is stated at the actual production and engineering costs incurred to date,
including applicable overhead, and is reduced by charging any amounts in excess of estimated realizable value to cost of sales. Although costs incurred for certain government contracts include general
and administrative costs as allowed by government cost accounting standards, the amounts remaining in inventory at September 30, 2002 and 2001 were immaterial.

Property, Plant and Equipment:Property, plant and equipment are carried at cost. Depreciation is provided in amounts
sufficient to amortize the cost of the depreciable assets over their estimated useful

29

---

lives. Straight-line and accelerated methods are each used for approximately one-half of the depreciable plant and equipment. Provisions for depreciation of plant and
equipment amounted to $6,542,000, $10,157,000, and $9,045,000 in 2002, 2001 and 2000, respectively.

Goodwill:Until the adoption, on October 1, 2001, of Financial Accounting Standards Board (FASB) Statement
No. 142,Goodwill and Other Intangible Assets, goodwill was amortized on a straight-line basis over periods ranging from 3 to
15 years. Accumulated amortization at September 30, 2002 and 2001 was $14.0 million and $13.7 million, respectively. The change in the value of goodwill and accumulated
amortization from September 30, 2001 to September 30, 2002 represents the effects of foreign currency translation on goodwill amounts carried on the books of foreign subsidiaries. Under
the provisions of
Statement No. 142, goodwill is now evaluated for potential impairment annually by comparing the fair value of a reporting unit to its carrying value, including recorded goodwill. If the
carrying value exceeds the fair value, impairment is measured by comparing the derived fair value of goodwill to its carrying value, and any impairment determined would be recorded in the current
period. To date there has been no impairment of the Company's recorded goodwill.

Impairment of Long-Lived Assets:The carrying values of long-lived assets other than goodwill are
generally evaluated for impairment only if events or changes in the facts and circumstances indicate that carrying values may not be recoverable. Any impairment determined would be recorded in the
current period and would be measured by comparing the fair value of the related asset to its carrying value. Fair value is generally determined by identifying estimated undiscounted cash flows to be
generated by those assets.

Revenue Recognition:Sales and profits under the Company's long-term fixed-price contracts, which generally
require a significant amount of development effort in relation to total contract value, are recognized using the cost-to-cost method of accounting. Sales and profits are
recorded based on the ratio of costs incurred to estimated total costs at completion. In the early stages of contract performance, profit is not recognized until progress is demonstrated or contract
milestones are reached.

Sales
under cost-reimbursement type contracts are recorded as costs are incurred. Applicable estimated profits are included in earnings based on the ratio of costs incurred
to the estimated total costs at completion. Sales of products and services provided under essentially commercial terms and conditions are recorded upon shipment of the product or completion of
specified tasks.

Amounts
representing contract change orders, claims or other items are included in the contract value only when they can be reliably estimated and realization is considered more likely
than not. Incentives or penalties and awards applicable to performance on contracts are considered in estimating sales and profits, and are recorded when there is sufficient information to assess
anticipated contract performance. Incentive provisions that increase or decrease earnings based solely on a single significant event are not recognized until the event occurs.

Provisions
are made on a current basis to fully recognize any anticipated losses on contracts. Cash received prior to revenue recognition is classified as customer advances on the
balance sheet.

Earnings Per Share:Per share amounts are based upon the weighted average number of shares of common stock outstanding, after
retroactive adjustments to reflect a 3-for-1 stock split which occurred in April 2002.

30

---

Derivative Financial Instruments:The Company's use of derivative financial instruments is limited to foreign exchange
forward and option contracts used to hedge significant contract sales and purchase commitments that are denominated in currencies other than the functional currency of the subsidiary responsible for
the commitment. At September 30, 2002, the Company had foreign exchange contracts with a notional value of $12.8 million outstanding. The net amount of deferred gains and losses at that
date was immaterial.

Use of Estimates:The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates include the estimated
total costs at completion of the Company's long-term contracts and the estimated rates of return and discount rates related to the Company's defined benefit pension plans. Actual results
could differ from those estimates.

Risks and Uncertainties:The Company is subject to the normal risks and uncertainties of performing large,
multi-year, often fixed-price contracts. In addition the Company is subject to audit of incurred costs related to many of its U.S. Government contracts. These audits could produce
different results than the Company has estimated; however, the Company's experience has been that its costs are acceptable to the government.

Note 2CHANGE IN ACCOUNTING

In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141,Business
Combinationsand No. 142,Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements.

As
allowed by early adoption provisions, the Company began applying the new rules on accounting for goodwill and other intangible assets effective October 1, 2001. The following
table presents a reconciliation of net income and per share data to what would have been reported had the new rules been in effect during the year ended September 30, 2001 (in thousands, except
per share data):

Year Ended
September 30,2002

2001Reported net income

$
29,437

$
20,842Add back goodwill amortization, net of tax





1,715Adjusted net income

$
29,437

$
22,557Basic and diluted net income per common share:Reported net income

$
1.10

$
0.78Goodwill amortization, net of tax





0.06Adjusted net income

$
1.10

$
0.84


31

---

NOTE 3INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

The Company owns 37.5 percent of the common stock of Transys, an unconsolidated joint venture company in the United Kingdom. This joint venture was formed
to bid on a contract called "PRESTIGE" (Procurement of Revenue Services, Ticketing, Information, Gates and Electronics), the purpose of which is to outsource most of the functions of the London
Transport fare collection system. In August 1998, Transys was awarded the contract and began operations. Through September 30, 2002, over $585 million of the work to be performed
by Transys has been subcontracted to the Company as a part of the joint venture arrangement. The long-term debt of Transys is non-recourse to Cubic. Summarized financial
information for this unconsolidated joint venture is as follows:

September 30,2002

2001(in millions)Balance Sheets:Current assets

$
51.6

$
39.2Non-current unbilled contract accounts receivable


264.0


198.2Total Assets

$
315.6

$
237.4Current liabilities

$
15.7

$
16.8Long-term debt


299.9


220.6Equity





Total Liabilities and Equity

$
315.6

$
237.4


Years ended September 30,2002

2001

2000(in millions)Statement of Operations:Sales

$
130.0

$
118.8

$
146.0Operating profit

$


$


$
Net income

$


$


$



The
terms of Transys' subcontracts with the Company and other parties to the joint venture provide for the pass-through of virtually all revenues from London Transport. As a
result, Transys has operated on a break-even basis and is expected to continue to do so.

32

---

NOTE 4ACCOUNTS RECEIVABLE

The
components of accounts receivable under long-term contracts are as follows:

September 30,2002

2001(in thousands)U.S. Government Contracts:Amounts billed

$
21,546

$
23,380Recoverable costs and accrued profits on progress completednot billed


27,803


23,17349,349


46,553Commercial Customers:Amounts billed


20,739


25,597Recoverable costs and accrued profits on progress completednot billed


84,750


56,914105,489


82,511$
154,838

$
129,064


A
portion of recoverable costs and accrued profits on progress completed is billable under progress payment provisions of the related contracts. The remainder of these amounts is
billable upon delivery of products or furnishing of services, with an immaterial amount subject to retainage provisions of the contracts. It is anticipated that substantially all of the unbilled
portion of receivables will be billed and collected under progress billing provisions of the contracts or upon completion of performance tests and/or acceptance by the customers during fiscal 2003.

NOTE 5INVENTORIES

Inventories are classified as follows:

September 30,2002

2001(in thousands)Finished products

$
1,219

$
1,528Work in process


14,746


19,020Materials and purchased parts


13,235


9,838$
29,200

$
30,386


33

---

NOTE 6FINANCING ARRANGEMENTS

Long-term debt consists of the following:

September 30,2002

2001(in thousands)Unsecured notes payable to a group of insurance companies, with annual principal payments of $4,000,000 commencing November 2004. Interest at 6.31% is payable semi-annually in November and May.

$
40,000

$
40,000Unsecured note payable to an insurance company, with annual principal payments of $1,429,000 commencing November 2002. Interest at 6.11% is payable semi-annually in November and May.


10,000


10,00050,000


50,000Less current portion


(1,429
)

$
48,571

$
50,000


The
terms of the notes payable include provisions that require and/or limit, among other financial ratios and measurements, the permitted levels of working capital, debt and tangible net
worth and coverage of fixed charges. The Company has also provided certain performance guarantees to various parties related to the PRESTIGE contract and the Transys joint venture. As consideration
for the performance guarantee, the Company has agreed to certain financial covenants including limits on working capital, debt, tangible net worth and cash flow coverage. At September 30, 2002,
the most restrictive covenant under these agreements leaves consolidated retained earnings of $39.2 million
available for the payment of dividends to shareholders, purchases of the Company's common stock and other charges to shareholders' equity. To date, there have been no covenant violations and the
Company believes it will be able to meet the covenant financial performance obligations described above.

The
Company maintains a short-term borrowing arrangement totaling 10 million British Pounds (equivalent to approximately $15.7 million) with a United Kingdom
financial institution to help meet the short-term working capital requirements of its subsidiary, Cubic Transportation Systems Ltd. Any outstanding balances are guaranteed by Cubic
Corporation and are repayable on demand. At September 30, 2002 and 2001, there was no amount outstanding under this borrowing arrangement.

Maturities
of long-term debt for each of the five years in the period ending September 30, 2007, are as follows: 2003$1,429,000;
2004$1,429,000; 2005$5,429,000; 2006$5,429,000; 2007$5,429,000; thereafter$30,855,000.

Interest
paid amounted to $3,532,000, $3,631,000, and $3,806,000 in 2002, 2001, and 2000, respectively.

34

---

As of September 30, 2002 the Company had letters of credit and bank guarantees outstanding totaling $20.4 million, which guarantee either the Company's performance or
customer advances under certain contracts. In addition, the Company had financial letters of credit outstanding totaling $2.5 million as of September 30, 2002, which guarantee the
Company's payment of certain self-insured liabilities. Management believes self-insurance liabilities recorded on the balance sheet as of September 30, 2002 are adequate
to meet the underlying obligations. The Company has never had a drawing on a letter of credit instrument, nor are any anticipated; therefore, the fair value of these instruments is estimated to be
zero.

NOTE 7COMMITMENTS

The Company leases certain office, manufacturing and warehouse space and miscellaneous computer and other office equipment under non-cancelable
operating leases expiring in various years through 2009. These leases, some of which may be renewed for periods up to 10 years, generally require the lessee to pay all maintenance, insurance
and property taxes. Several leases are subject to periodic adjustment based on price indices or cost increases. Rental expense, net of sublease income, for all operating leases amounted to $3,832,000,
$3,613,000, and $3,777,000 in 2002, 2001, and 2000, respectively.

Future
minimum payments, net of minimum sublease income, under non-cancelable operating leases with initial terms of one year or more consist of the following at
September 30, 2002 (in thousands):

2003

$
3,3852004


2,6192005


1,5002006


1,1312007


699Thereafter


1,373$
10,707


NOTE 8INCOME TAXES

Significant
components of the provision (benefit) for income taxes are as follows:

|                                   |         | Years ended September 30, |       
|---------------------------------- | ------- | ------------------------- | ------
|
|
|Current (credit):                  |         |                           |       
|                                   | Federal |                           | $     
|                                   | State   |                           |       
|                                   | Foreign |                           |       
|                                   |         |                           |       
|Total current                      |         |                           | 9,157 
|                                   |         |                           |       
|Deferred (credit):                 |         |                           |       
|                                   | Federal |                           |       
|                                   | State   |                           |       
|                                   | Foreign |                           |       
|                                   |         |                           |       
|Total deferred                     |         |                           | 2,327 
|                                   |         |                           |       
|Total income tax expense (benefit) |         | $                         | 11,484
|                                   |         |                           |       

35

---

Deferred
tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse. Significant components of the Company's deferred tax assets and liabilities are as follows:

|                          |                                                      | September 30,             |       
|------------------------- | ---------------------------------------------------- | ------------------------- | ------
|
|
|Deferred tax assets:      |                                                      |                           |       
|                          | Accrued employee benefits                            |                           | $     
|                          | Additional minimum pension liability                 |                           |       
|                          | Inventory reserves and long-term contract accounting |                           |       
|                          | Self-insurance and other reserves                    |                           |       
|                          | Deferred compensation                                |                           |       
|                          | Foreign net operating loss carryforwards             |                           |       
|                          | Other                                                |                           |       
|                          |                                                      |                           |       
|                          |                                                      | Total deferred tax assets |       
|                          | Valuation allowance for deferred tax assets          |                           |       
|                          |                                                      |                           |       
|                          |                                                      | Deferred tax assets       |       
|                          |                                                      |                           |       
|Deferred tax liabilities: |                                                      |                           |       
|                          | Tax over book depreciation                           |                           |       
|                          | Amortization of goodwill                             |                           |       
|                          | Leveraged lease accounting                           |                           |       
|                          | Prepaid expenses                                     |                           |       
|                          | State taxes                                          |                           |       
|                          | Other                                                |                           |       
|                          |                                                      |                           |       
|                          |                                                      | Deferred tax liabilities  |       
|                          |                                                      |                           |       
|Net deferred tax asset    |                                                      | $                         | 24,136
|                          |                                                      |                           |       

The
Company was able to utilize a net operating loss carryforward in Denmark of approximately $7.5 million through the sale of its Danish subsidiary to another foreign subsidiary
of the Company. In the fourth quarter of fiscal 2002, the Danish tax authorities approved the transaction and the liquidation of the subsidiary, resulting in the realization of the associated deferred
tax asset of approximately $2.5 million. The valuation allowance that had been established against this deferred tax asset was therefore no longer required and was reversed against tax expense.

36

---

The
reconciliation of income tax computed at the U.S. federal statutory tax rate to income tax expense is as follows:

|                                                    |  | Years ended September 30, |       
|--------------------------------------------------- |  | ------------------------- | ------
|
|
|Tax at federal statutory rate                       |  | $                         | 14,322
|State income taxes, net of federal tax benefit      |  |                           | 1,412 
|Tax exempt interest and dividend income             |  |                           | (91   
|Income exclusion on export sales                    |  |                           | (536  
|Non-deductible expenses                             |  |                           | 282   
|Effect of change in tax rates on deferred tax asset |  |                           |      
|Reversal of deferred tax asset valuation reserve    |  |                           | (2,460
|Tax effect from foreign subsidiaries                |  |                           | (475  
|Tax credits and other                               |  |                           | (970  
|                                                    |  |                           |       
|                                                    |  | $                         | 11,484
|                                                    |  |                           |       

The
Company made income tax payments, net of refunds, totaling $15,574,000, $5,158,000, and $7,782,000 in 2002, 2001, and 2000, respectively.

Income
(loss) before income taxes includes the following components:

|              |  | Years ended September 30, |       
|------------- |  | ------------------------- | ------
|
|
|United States |  | $                         | 24,100
|Foreign       |  |                           | 16,821
|              |  |                           |       
|Total         |  | $                         | 40,921
|              |  |                           |       

Undistributed
earnings of the Company's foreign subsidiaries amounted to approximately $38.9 million at September 30, 2002. Those earnings are considered to be indefinitely
reinvested and, accordingly, no provision for U.S. federal and state income taxes has been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company
would be subject to both U.S. income taxes and withholding taxes payable to the foreign countries but would also be able to offset unrecognized foreign tax credit carryforwards. Determination of the
amount of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with its hypothetical calculation; however, the Company does not believe the amount
would be material.

37

---

NOTE 9PENSION, PROFIT SHARING AND OTHER RETIREMENT PLANS

The Company has profit sharing and other defined contribution retirement plans that provide benefits for most employees in the U.S. An employee is eligible to
participate in these plans after six months to one year of service, and may make additional contributions to the plans from their date of hire. These plans provide for full vesting of benefits over
five years. A substantial portion of Company contributions to these plans is discretionary with the Board of Directors. Company contributions to the plans aggregated $8,665,000, $7,998,000 and
$7,422,000 in 2002, 2001 and 2000, respectively.

Approximately
one-half of the Company's non-union employees in the U.S are covered by a non-contributory defined benefit pension plan. Approximately
one-half of the Company's European employees are covered by a contributory defined benefit pension plan. The Company's funding policy provides that contributions will be at least equal to
the minimum amounts mandated by statutory requirements. The following table sets forth changes in the benefit obligation and plan assets for these plans and the net amount recognized in the
Consolidated Balance Sheets:

|                                                       |                                                        | September 30,                          |       
|------------------------------------------------------ | ------------------------------------------------------ | -------------------------------------- | ------
|
|
|Change in benefit obligations:                         |                                                        |                                        |       
|                                                       | Net benefit obligation at the beginning of the year    |                                        | $     
|                                                       |                                                        | Service cost                           |       
|                                                       |                                                        | Interest cost                          |       
|                                                       |                                                        | Actuarial loss                         |       
|                                                       |                                                        | Participant contributions              |       
|                                                       |                                                        | Gross benefits paid                    |       
|                                                       |                                                        | Foreign currency exchange rate changes |       
|                                                       |                                                        |                                        |       
|                                                       | Net benefit obligation at the end of the year          |                                        |       
|                                                       |                                                        |                                        |       
|Change in plan assets:                                 |                                                        |                                        |       
|                                                       | Fair value of plan assets at the beginning of the year |                                        |       
|                                                       |                                                        | Actual return on plan assets           |       
|                                                       |                                                        | Employer contributions                 |       
|                                                       |                                                        | Participant contributions              |       
|                                                       |                                                        | Gross benefits paid                    |       
|                                                       |                                                        | Administrative expenses                |       
|                                                       |                                                        | Foreign currency exchange rate changes |       
|                                                       |                                                        |                                        |       
|                                                       | Fair value of plan assets at the end of the year       |                                        |       
|                                                       |                                                        |                                        |       
|Net amount recognized:                                 |                                                        |                                        |       
|                                                       | Funded status                                          |                                        |       
|                                                       | Unrecognized net actuarial loss                        |                                        |       
|                                                       | Unrecognized prior service cost                        |                                        |       
|                                                       |                                                        |                                        |       
|Net amount recognized                                  |                                                        | $                                      | (5,095
|                                                       |                                                        |                                        |       
|Amounts recognized in the Consolidated Balance Sheets: |                                                        |                                        |       
|                                                       | Accrued benefit cost                                   |                                        | $     
|                                                       | Additional minimum liability                           |                                        |       
|                                                       | Deferred tax asset                                     |                                        |       
|                                                       | Accumulated other comprehensive loss                   |                                        |       
|                                                       |                                                        |                                        |       
|Net amount recognized                                  |                                                        | $                                      | (5,095
|                                                       |                                                        |                                        |       

38

---

The
components of net periodic pension cost for these plans are as follows:

|                              |                                | Years ended September 30, |      
|----------------------------- | ------------------------------ | ------------------------- | -----
|
|
|                              | Service cost                   |                           | $    
|                              | Interest cost                  |                           |      
|                              | Expected return on plan assets |                           |      
|                              | Amortization of:               |                           |      
|                              |                                | Prior service cost        |      
|                              |                                | Actuarial (gain) loss     |      
|                              | Administrative expenses        |                           |      
|                              |                                |                           |      
|Net pension cost              |                                | $                         | 6,006
|                              |                                |                           |      
|Weighted-average assumptions: |                                |                           |      
|                              | Discount rate                  |                           |      
|                              | Expected return on plan assets |                           |      
|                              | Rate of compensation increase  |                           |      

NOTE 10RELATED PARTY TRANSACTION

The Company is party to an agreement with a trust established by Walter J. Zable, CEO of the Company, and Mrs. Zable, whereby the Company has agreed to
make advances of premiums payable on a split-dollar life insurance policy purchased by the trust on the life of Mrs. Zable. The agreement is so designed that if the assumptions made as to
mortality experience, policy dividends and other factors are realized, at the death of Mrs. Zable the Company will recover all of its insurance premium payments as well as other costs
associated with the policy. The advances are secured by a collateral assignment of the policy to the Company. The agreement is intended to prevent the possibility of a large block of the Company's
common shares being put on the market, to the detriment of the share price, in order for the beneficiaries to pay estate taxes. The Company may cause the agreement to be terminated and the policy to
be surrendered at any time. The difference between policy premiums and other payments, and the increase in the cash surrender value of the policy has been expensed or added to income in the year
incurred. The amount added to income in 2002, 2001 and 2000 was $308,000, $482,000 and $45,000, respectively. As of September 30, 2002, the cash surrender value of the policy exceeded the total
of all premium payments made by the Company through that date.

NOTE 11LEGAL MATTER

In 1991, the government of Iran commenced an arbitration proceeding against the Company seeking $12.9 million for reimbursement of payments made for
equipment that was to comprise an Air Combat
Maneuvering Range pursuant to a sales contract and an installation contract executed in 1977, and an additional $15 million for unspecified damages. The Company contested the action and brought
a counterclaim for compensatory damages of $10.4 million. In May 1997, the arbitral tribunal awarded the government of Iran a decision in the amount of $2.8 million, plus simple
interest at the rate of 12 percent per annum from September 21, 1991 through May 5, 1997.

In
December 1998, the United States District Court granted a motion by the government of Iran confirming the arbitral award. The Company believes the Court did not follow case law
precedent established by the Ninth Circuit Court in reaching its decision and has appealed on that basis. The Company believes that the ultimate outcome of the matter will not have a material effect
on its financial statements and, to date, no expense has been accrued.

39

---

NOTE 12BUSINESS SEGMENT INFORMATION

Description of the types of products and services from which each reportable segment derives its revenues:

The
Company has two primary business segments: transportation systems and defense. The transportation systems segment designs, produces, installs and services electronic revenue
collection systems for mass transit projects, including railways and buses. The defense segment performs work under U.S. and foreign government contracts relating to electronic defense systems and
equipment, computer simulation training, development of training doctrine and field operations and maintenance. Products include customized range instrumentation and training systems, communications
and surveillance systems, avionics systems, transceivers and receivers.

Measurement of segment profit or loss and segment assets:

The
Company evaluates performance and allocates resources based on total segment operating profit or loss. The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies. Intersegment sales and transfers are immaterial.

Factors management used to identify the Company's reportable segments:

The
Company's reportable segments are business units that offer different products and services. The reportable segments are each managed separately because they develop and manufacture
distinct products with different customer bases.

Reclassification:

Certain
prior year costs related to the development of smart card technology have been reclassified from other profit to the transportation systems segment to conform to current year
classification. The effect of this change was to decrease transportation systems operating profit and to increase other profit by approximately $1.7 million and $0.7 million in the years
ended September 30, 2001 and 2000 respectively.

40

---

Business
segment financial data is as follows:

|                                      |                        | Years ended September 30, |      
|------------------------------------- | ---------------------- | ------------------------- | -----
|
|
|Revenues:                             |                        |                           |      
|                                      | Transportation systems |                           | $    
|                                      | Defense                |                           |      
|                                      | Other                  |                           |      
|                                      |                        |                           |      
|Total segment revenues                |                        |                           | 559.6
|                                      | Other                  |                           |      
|                                      |                        |                           |      
|Total consolidated revenues           |                        | $                         | 564.3
|                                      |                        |                           |      
|Operating profit (loss):              |                        |                           |      
|                                      | Transportation systems |                           | $    
|                                      | Defense                |                           |      
|                                      | Other                  |                           |      
|                                      |                        |                           |      
|Total segment operating profit (loss) |                        |                           | 41.4 
|                                      | Other                  |                           |      
|                                      | Interest expense       |                           |      
|                                      |                        |                           |      
|Income before income taxes            |                        | $                         | 40.9 
|                                      |                        |                           |      
|Assets:                               |                        |                           |      
|                                      | Transportation systems |                           | $    
|                                      | Defense                |                           |      
|                                      | Other                  |                           |      
|                                      |                        |                           |      
|Total segment assets                  |                        |                           | 265.9
|                                      | Other                  |                           |      
|                                      |                        |                           |      
|Total consolidated assets             |                        | $                         | 374.5
|                                      |                        |                           |      

41

---

|Depreciation and amortization:                        |                         |   |       |       |   |       |       |   |       |      
|----------------------------------------------------- | ----------------------- | - | ----- | ----- | - | ----- | ----- | - | ----- | -----
|                                                      | Transportation systems  |   | $     | 2.4   |   | $     | 4.6   |   | $     | 5.4  
|                                                      | Defense                 |   |       | 3.5   |   |       | 7.5   |   |       | 5.3  
|                                                      | Other                   |   |       | 0.1   |   |       | 0.1   |   |       | 0.1  
|                                                      |                         |   |       |       |   |       |      
|Total segment depreciation and amortization           |                         |   | 6.0   |       |   | 12.2  |       |   | 10.8  |      
|                                                      | Other                   |   |       | 0.5   |   |       | 0.6   |   |       | 0.6  
|                                                      |                         |   |       |       |   |       |      
|Total consolidated depreciation and amortization      |                         | $ | 6.5   |       | $ | 12.8  |       | $ | 11.4  |      
|                                                      |                         |   |       |       |   |       |      
|Expenditures for long-lived assets:                   |                         |   |       |       |   |       |       |   |       |      
|                                                      | Transportation systems  |   | $     | 10.9  |   | $     | 1.5   |   | $     | 2.4  
|                                                      | Defense                 |   |       | 1.8   |   |       | 2.2   |   |       | 1.6  
|                                                      | Other                   |   |       | 0.1   |   |       | 0.1   |   |       | 0.3  
|                                                      |                         |   |       |       |   |       |      
|Total segment expenditures                            |                         |   | 12.8  |       |   | 3.8   |       |   | 4.3   |      
|                                                      | Other                   |   |       | 0.2   |   |       | 0.6   |   |       | 0.2  
|                                                      |                         |   |       |       |   |       |      
|Total consolidated expenditures for long-lived assets |                         | $ | 13.0  |       | $ | 4.4   |       | $ | 4.5   |      
|                                                      |                         |   |       |       |   |       |      
|Geographic Information:                               |                         |   |       |       |   |       |       |   |       |      
|Revenues(a):                                          |                         |   |       |       |   |       |       |   |       |      
|                                                      | United States           |   | $     | 330.3 |   | $     | 279.3 |   | $     | 289.2
|                                                      | United Kingdom          |   |       | 162.1 |   |       | 149.8 |   |       | 166.7
|                                                      | Far East                |   |       | 16.2  |   |       | 32.5  |   |       | 36.4 
|                                                      | Other foreign countries |   |       | 55.7  |   |       | 47.1  |   |       | 46.9 
|                                                      |                         |   |       |       |   |       |      
|Total consolidated revenues                           |                         | $ | 564.3 |       | $ | 508.7 |       | $ | 539.2 |      
|                                                      |                         |   |       |       |   |       |      

---

|Long-lived assets, net:                   |                         |   |      |      |   |      |      |   |     
|----------------------------------------- | ----------------------- | - | ---- | ---- | - | ---- | ---- | - | ----
|                                          | United States           |   | $    | 51.2 |   | $    | 50.4 |   | $   
|                                          | United Kingdom          |   |      | 19.7 |   |      | 10.6 |   |     
|                                          | Other foreign countries |   |      | 3.2  |   |      | 2.9  |   |     
|                                          |                         |   |      |      |   |     
|Total consolidated long-lived assets, net |                         | $ | 74.1 |      | $ | 63.9 |      | $ | 72.0
|                                          |                         |   |      |      |   |     

Defense
segment revenues include $216.6 million, $183.5 million and $197.2 million in 2002, 2001 and 2000, respectively, of sales to United States Government
agencies. Transportation systems revenues include $86.1 million, $76.3 million, and $91.3 million of sales to Transys in 2002, 2001 and 2000, respectively. No other single
customer accounts for 10 percent or more of the Company's revenue.

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NOTE 13SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly results of operations for the years ended September 30, 2002 and 2001:

|                     |  | Quarter Ended
|-------------------- |  | -------------
|
|
|Fiscal 2002          |  |              
|Net sales            |  | $            
|Gross profit         |  |              
|Net income           |  |              
|Net income per share |  |              
|Fiscal 2001          |  |              
|Net sales            |  | $            
|Gross profit         |  |              
|Net income           |  |              
|Net income per share |  |              

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