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CUBIC CORP /DE/ - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
(Edgar Glimpses Via Acquire Media NewsEdge) CONDITION AND RESULTS OF OPERATIONS
December 31, 2012
We are a leading international provider of cost-effective systems and solutions
that address the mass transit and global defense markets' most pressing and
demanding requirements. We are engaged in the design, development, manufacture,
integration, and sustainment of advanced technology systems and products. We
also provide a broad range of engineering, training, technical, logistic, and
information technology services. We serve the needs of various federal and
regional government agencies in the U.S. and other allied nations around the
world with products and services that have both defense and civil applications.
Our main areas of focus are in mass transit fare collection, defense,
intelligence, homeland security, and information technology, including cyber
security.
We operate in three reportable business segments: Cubic Transportation Systems
(CTS), Mission Support Services (MSS) and Cubic Defense Systems (CDS). We
organize our business segments based on the nature of the products and services
offered.
CTS develops and delivers innovative fare collection systems and services for
public transit authorities worldwide. We provide fare collection devices,
software and multiagency, multimodal transportation integration technologies, as
well as a full scope of operational services that allow the agencies to
efficiently collect fares, manage their operations, reduce fare evasion and make
using public transit a more convenient and attractive option for commuters. We
provide a wide range of services for transit authorities in 20 regions
worldwide, including computer hosting services, call center and web services,
payment media issuance and distribution services, retail point of sale network
management, payment processing, financial clearing and settlement, software
application support and outsourced asset operations and maintenance.
MSS is a leading provider of highly specialized support services to the U.S.
government and allied nations. Services provided include live, virtual and
constructive training, real-world mission rehearsal exercises, professional
military education, intelligence support, information technology, information
assurance and related cyber support, development of military doctrine,
consequence management, infrastructure protection and force protection, as well
as support to field operations, force deployment and redeployment and logistics.
CDS is focused on two primary lines of business: Training Systems and Secure
Communications. CDS is a diversified supplier of live and virtual military
training systems, and secure communication systems and products to the U. S.
Department of Defense, other U.S. government agencies and allied nations. As a
prime contractor on more than 75% of our contracts, we design and manufacture
instrumented range systems for fighter aircraft, armored vehicles and infantry
force-on-force live training weapons effects simulations, laser-based tactical
and communication systems, and precision gunnery solutions. Our secure
communications products are aimed at intelligence, surveillance, search and
rescue, multi-band communication tracking devices, and cross domain hardware
solutions to address multi-level security requirements.
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Consolidated Overview
Sales for the quarter ended December 31, 2012 were $313.4 million compared to
$316.8 million in the quarter ended December 31, 2011, a decrease of 1%. CTS
sales decreased 6% and CDS sales decreased 3% compared to the first quarter of
last year while MSS sales increased 5%. The sales generated by the operations of
NEK Special Programs Group LLC (NEK), which was acquired on December 14, 2012,
were not significant for the quarter. See the segment discussions following for
further analysis of segment sales.
Operating income was $18.2 million in the first quarter of fiscal 2013 compared
to $27.8 million in the first quarter of fiscal 2012, a decrease of 34%. CTS
operating income decreased 26%, MSS operating income decreased 7% and CDS
operating income decreased 80% compared to the first quarter of last year. NEK's
operating loss for the first quarter of 2013 was $0.5 million, which included
transaction costs of $0.4 million. Corporate and other costs for the first
quarter of 2013 were $0.4 million compared to $0.6 million in 2012.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
(Adjusted EBITDA) for the first quarter of fiscal 2013 was $23.0 million,
compared to $33.6 million in the first quarter of fiscal 2012. The decrease was
due to lower operating income in all three segments, partially offset by a $1.1
million decrease in depreciation and amortization, primarily in MSS. See below
for a reconciliation of this non-GAAP metric to net income and an explanation of
why we believe it to be an important measure of performance.
Net income attributable to Cubic for the first quarter of fiscal 2013 was $12.4
million, or 47 cents per share, compared to $20.7 million, or 77 cents per share
in 2012. Net income decreased for the quarter due to a decrease in operating
income, a decrease in other income and an increase in interest expense. These
decreases were partially offset by lower income tax expense due to the decrease
in income before income taxes, although the effective tax rate in the first
quarter was slightly higher this year, as described below. Included in other
income was a net foreign currency exchange gain of $0.1 million in the first
quarter of fiscal 2013 compared to a gain of $1.2 million in the first quarter
of fiscal 2012. In the first quarter of fiscal 2013, we recorded $0.6 million of
interest expense related to a judgment against us, which requires us to pay such
amount of interest to the court on behalf of a party that had filed claims
against us.
Our gross margin percentages on products and services did not change
significantly between the first quarter of 2012 and 2013. However, product sales
decreased $17.6 million, or 11.5%, while services sales increased by $14.2
million, or 8.7%. The lower gross margin percentage on services sales
contributed to gross profits that were $3.3 million lower in the first quarter
this year compared to the first quarter of fiscal 2012.
Selling, general and administrative (SG&A) expenses increased in the first
quarter of 2013 to $41.0 million compared to $35.2 million in 2012. As a
percentage of sales, SG&A expenses were 13% for the first quarter of 2013
compared to 11% in 2012. SG&A expenses increased in all business segments
primarily due to higher selling and marketing costs, and increased information
technology costs. In addition, during the first quarter of 2013 we incurred $1.1
million of professional services costs in connection with the restatement of our
consolidated financial statements for the year ended September 30, 2012 and
previous periods. Also, in the first quarter of 2013 SG&A expenses were reduced
by $1.4 million related to proceeds from an insurance claim for losses that we
incurred over the period from fiscal 2010 to fiscal 2012. In addition, SG&A
expenses for NEK were $0.5 million for the first quarter of 2013.
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Company funded research and development expenditures, which mainly relate to new
defense technologies we are developing, increased to $5.8 million for the first
quarter of 2013 compared to $4.9 million in 2012. Amortization of purchased
intangibles decreased in the first quarter of 2013 to $3.6 million compared to
$4.0 million in the first quarter of 2012, primarily due to the decrease in the
amortization of certain intangible assets related to our acquisition of Abraxas
Corporation (Abraxas) in December 2010 that are being amortized using
accelerated amortization methods. The decrease in amortization expense was
partially offset by the amortization of intangible assets recorded in connection
with our acquisition of NEK in December 2012, which totaled $0.2 million in the
first quarter of fiscal 2013.
Based on the tax law that was in effect at the end of the first quarter of
fiscal 2013, we estimated our annual effective tax rate to be approximately 30%,
which is reflected in the tax provision for the first quarter.
The American Taxpayer Relief Act of 2012, which reinstated the U.S. federal
research and development tax credit retroactively from January 1, 2012 through
December 31, 2013, was not enacted into law until the second quarter of fiscal
2013. Therefore, the expected tax benefit resulting from such reinstatement for
fiscal 2013 will not be reflected in our estimated annual effective tax rate for
fiscal 2013 until the second fiscal quarter. Additionally, we expect to record a
discrete tax benefit of approximately $1.7 million in the second quarter of
fiscal 2013 related to the reinstatement of the federal research and development
tax credit for fiscal 2012. After consideration of both of these items, we
estimate our annual effective income tax rate for fiscal 2013 will be
approximately 26%. The effective rate for fiscal 2013 could be affected by,
among other factors, the mix of business between the U.S. and foreign
jurisdictions, our ability to take advantage of available tax credits and audits
of our records by taxing authorities.
Transportation Systems Segment (CTS)
Three Months Ended
December 31,
2012 2011
(in millions)
Transportation Systems Segment Sales $ 118.6 $ 125.8
Transportation Systems Segment Operating Income $ 13.2 $ 17.9
CTS sales decreased 6% to $118.6 million compared to $125.8 million last year.
The primary reason for the decrease in sales was due to reduced work on a
contract to design and build a system in Vancouver. In last year's first
quarter revenues were higher on the project as we were producing a significant
amount of the hardware for the system, while this year we are in the latter
stages of the system delivery. This decrease was partially offset by higher
sales from a contract to design and build a system in Sydney, Australia. The
average exchange rates between the prevailing currency in our foreign operations
and the U.S. Dollar resulted in an increase in sales of $2.6 million when
compared to the first quarter of 2012 exchange rates.
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Operating income from CTS decreased 26% in the first quarter this year to $13.2
million, compared to $17.9 million in the first quarter of last year. We are
currently incurring costs related to our contract in Sydney, Australia to
transition portions of the system into full operations, for which revenues are
not sufficient to cover our costs of servicing the system. This situation should
improve as the systems complete the transition phase and move into full
operations. In addition, we realized lower margins on certain projects in the
U.K. during the first quarter of this year than we had earned on similar
projects in the first quarter last year. These decreases in operating income
were partially offset by sales of certain higher margin fare system products in
North America. The average exchange rates between the prevailing currency in our
foreign operations and the U.S. Dollar resulted in an increase in operating
income of $0.3 million when compared to the first quarter of 2012 exchange
rates.
Mission Support Services Segment (MSS)
Three Months Ended
December 31,
2012 2011
(in millions)
Mission Support Services Segment Sales $ 113.4 $ 107.5
Mission Support Services Segment Operating Income $ 4.2 $ 4.5
Sales from MSS increased 5% to $113.4 million in the first quarter this year,
from $107.5 million in the first quarter of last year. Sales growth was driven
by an increase in activity during the first quarter at the Joint Readiness
Training Center (JRTC) in Fort Polk, Louisiana and by higher Abraxas sales.
These increases were partially offset by lower sales due the loss of a contract
in 2012 for flight simulator training work, because of a lower bid by a
competitor. The sales generated by the operations of the newly acquired NEK
business were not significant for the quarter.
MSS operating income decreased 7% to $4.2 million in the first quarter this year
from $4.5 million in the first quarter of last year. The loss of the training
work for flight simulators described above had a negative impact on operating
income for the first quarter of this year, and cost growth on a training
contract in Europe also contributed to the decrease in margins. In addition, NEK
had an operating loss of $0.5 million in the first quarter of fiscal 2013
primarily due to the incurrence of $0.4 million of acquisition-related costs.
These decreases in operating profits were partially offset by increased margins
on increased Abraxas sales. The amortization expense for MSS intangible assets
decreased from $3.3 million in the first quarter of fiscal 2012 to $2.9 million
in the first quarter of fiscal 2013.
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Defense Systems Segment (CDS)
Three Months Ended
December 31,
2012 2011
(in millions)
Defense Systems Segment Sales
Training systems $ 65.6 $ 64.7
Secure communications 11.6 15.0
Other 4.0 3.6
$ 81.2 $ 83.3
Defense Systems Segment Operating Income
Training systems $ 2.5 $ 4.8
Secure communications 0.3 3.2
Other (1.6 ) (2.0 )
$ 1.2 $ 6.0
Training Systems
Training systems sales increased 1% in the first quarter this year to $65.6
million compared to $64.7 million in the first quarter of last year. Operating
income decreased 48% for the quarter from $4.8 million last year to $2.5 million
this year. Increased sales of air combat training systems in the first quarter
of fiscal 2013 were nearly offset by decreased sales of small arms training
systems in the Middle East and to the U.S. government. The decreases in
operating income were the result of decreased sales of the relatively high
margin small arms training systems. Also, although total sales of air combat
training systems increased in the first quarter of fiscal 2013, sales of higher
margin air combat training systems to a customer in the Far East decreased,
which decreased overall margins from air combat training systems.
Secure Communications
Secure communications sales decreased 23% in the first quarter this year to
$11.6 million compared to $15.0 million in the first quarter of last year.
Operating income decreased to $0.3 million in the first quarter this year from
$3.2 million in the first quarter of last year. Decreased profitability on
lower data link sales, including the impact of $1.2 million cost increase on a
U.S. government contract, contributed to the decrease in operating income. Sales
and operating profits were also lower from power amplifiers and personnel
locater systems.
Other
Higher margins on increased sales of cross domain and global asset tracking
products slightly decreased the operating losses that resulted from our
continued investment in the development and marketing of these products.
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Backlog
December 31, September 30,
2012 2012
(in millions)
Total backlog
Transportation Systems $ 1,665.3 $ 1,663.7
Mission Support Services 746.6 737.0
Defense Systems:
Training systems 341.4 362.0
Secure communications 39.3 42.1
Other 23.8 26.8
Total Defense Systems 404.5 430.9
Total $ 2,816.4 $ 2,831.6
Funded backlog
Transportation Systems $ 1,665.3 $ 1,663.7
Mission Support Services 257.3 248.1
Defense Systems:
Training systems 341.4 362.0
Secure communications 39.3 42.1
Other 23.8 26.8
Total Defense Systems 404.5 430.9
Total $ 2,327.1 $ 2,342.7
Total backlog decreased $15.2 million from September 30, 2012 to December 31,
2012. Decreases in backlog for CDS were partially offset by increases in backlog
at CTS and MSS. The increase in MSS backlog was primarily due to the addition of
$19.5 million of backlog from the acquisition of NEK, partially offset by
decreases in backlog on other contracts. In the past, many of the contracts we
were awarded in MSS were long-term in nature, spanning periods of five to ten
years. The U.S. Department of Defense now awards shorter-term contracts for the
services we provide and increasingly relies upon Indefinite Delivery/Indefinite
Quantity (ID/IQ) contracts, which results in a lower backlog due to the
shorter-term nature of these ID/IQ awards. CDS backlog has been negatively
impacted by recent delays in contract awards and extensions, which are due in
part to the budgetary uncertainties experienced by our U.S. governmental agency
customers. Changes in exchange rates between the prevailing currency in our
foreign operations and the U.S. Dollar as of the end of the quarter added $2.4
million to backlog compared to September 30, 2012.
The difference between total backlog and funded backlog represents options under
multiyear service contracts. Funding for these contracts comes from annual
operating budgets of the U.S. government and the options are normally exercised
annually. Funded backlog includes unfilled firm orders for our products and
services for which funding has been both authorized and appropriated by the
customer (Congress, in the case of U.S. government agencies). Options for the
purchase of additional systems or equipment are not included in backlog until
exercised. In addition to the amounts identified above, we have been selected as
a participant in or, in some cases, the sole contractor for several substantial
indefinite delivery/ indefinite quantity (IDIQ) contracts. IDIQ contracts are
not included in backlog until an order is received. We also have several service
contracts in our transportation business that include contingent revenue
provisions tied to meeting certain performance criteria. These variable revenues
are also not included in the amounts identified above.
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Adjusted EBITDA
Adjusted EBITDA represents net income attributable to Cubic before interest,
taxes, non-operating income, depreciation and amortization. We believe that the
presentation of Adjusted EBITDA included in this report provides useful
information to investors with which to analyze our operating trends and
performance and ability to service and incur debt. Also, Adjusted EBITDA is a
factor we use in measuring our performance and compensating certain of our
executives. Further, we believe Adjusted EBITDA facilitates company-to-company
operating performance comparisons by backing out potential differences caused by
variations in capital structures (affecting net interest expense), taxation and
the age and book depreciation of property, plant and equipment (affecting
relative depreciation expense), and non-operating expenses which may vary for
different companies for reasons unrelated to operating performance. In addition,
we believe that Adjusted EBITDA is frequently used by securities analysts,
investors and other interested parties in their evaluation of companies, many of
which present an Adjusted EBITDA measure when reporting their results. Adjusted
EBITDA is not a measurement of financial performance under GAAP and should not
be considered as an alternative to net income as a measure of performance. In
addition, other companies may define Adjusted EBITDA differently and, as a
result, our measure of Adjusted EBITDA may not be directly comparable to
Adjusted EBITDA of other companies. Furthermore, Adjusted EBITDA has limitations
as an analytical tool, and you should not consider it in isolation, or as a
substitute for analysis of our results as reported under GAAP. Some of these
limitations are:
† Adjusted EBITDA does not reflect our cash expenditures, or future
requirements, for capital expenditures or contractual commitments;
† Adjusted EBITDA does not reflect changes in, or cash requirements
for, our working capital needs;
† Adjusted EBITDA does not reflect the interest expense, or the cash
requirements necessary to service interest or principal payments, on our debt;
† Adjusted EBITDA does not reflect our provision for income taxes,
which may vary significantly from period to period; and
† although depreciation and amortization are non-cash charges, the
assets being depreciated and amortized will often have to be replaced in the
future, and Adjusted EBITDA does not reflect any cash requirements for such
replacements.
Because of these limitations, Adjusted EBITDA should not be considered as a
measure of discretionary cash available to us to invest in the growth of our
business. We compensate for these limitations by relying primarily on our GAAP
results and using Adjusted EBITDA only supplementally. You are cautioned not to
place undue reliance on Adjusted EBITDA.
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The following table reconciles Adjusted EBITDA to net income attributable to
Cubic, which we consider to be the most directly comparable GAAP financial
measure to Adjusted EBITDA:
Three Months Ended
December 31,
2012 2011
(in thousands)
Reconciliation:
Net income attributable to Cubic $ 12,446 $ 20,694
Add:
Provision for income taxes 5,400 8,353
Interest expense (income), net 425 (415 )
Other income, net (102 ) (923 )
Noncontrolling interest in income of VIE 73 45
Depreciation and amortization 4,718 5,832
ADJUSTED EBITDA $ 22,960 $ 33,586
Liquidity and Capital Resources
Operating activities used cash of $26.1 million for the first quarter of the
fiscal year. Increases in accounts receivable and long-term capitalized contract
costs and decreases in accounts payable and other current liabilities
contributed to the use of cash. All three segments contributed to the use of
cash from operating activities.
Investing activities for the three-month period included $33.1 million of cash
paid related to the acquisition of NEK and capital expenditures of $1.4 million.
Financing activities for the three-month period consisted of scheduled payments
on our long-term debt of $4.1 million and $25.0 million of proceeds from
short-term borrowings on our revolving line of credit.
We have a committed revolving credit agreement with a group of financial
institutions in the amount of $200.0 million that expires in May 2017 (Revolving
Credit Agreement). The available line of credit on the Revolving Credit
Agreement is reduced by any letters of credit issued under the agreement. As of
December 31, 2012, there were borrowings of $25.0 million under this agreement,
of which $5.0 million was repaid in February 2013. Our borrowings under the
Revolving Credit Agreement bear interest at a variable rate (1.6% at
December 31, 2012). In addition, there were letters of credit outstanding under
the Revolving Credit Agreement totaling $42.4 million, which reduce the
available line of credit to $132.6 million.
We have a secured letter of credit facility agreement with a bank (Secured
Letter of Credit Facility) which expires in February 2013. We are currently
negotiating an extension of the term of the agreement for approximately one
year. At December 31, 2012 there were letters of credit outstanding under this
agreement of $63.4 million. In support of the Secured Letter of Credit Facility,
we placed $68.8 million of our cash on deposit in the U.K. as collateral in a
restricted account with the bank providing the facility. We are required to
leave the cash in the restricted account so long as the bank continues to
maintain associated letters of credit under the facility. The maximum amount of
letters of credit currently allowed by the facility is $66.8 million, and any
increase above this amount would require bank approval and additional restricted
funds to be placed on deposit. We may choose at any time to terminate the
facility and move the associated letters of credit to another credit facility.
Letters of credit outstanding under the Secured Letter of Credit Facility do not
reduce the available line of credit available under the Revolving Credit
Agreement.
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As of December 31, 2012, $165.1 million of the $174.1 million of our cash, cash
equivalents, and short-term investments was held by our foreign subsidiaries. If
these funds are needed for our operations in the U.S., we would be required to
accrue and pay U.S. taxes to repatriate these funds. However, our intent is to
permanently reinvest these funds outside of the U.S. and our current plans do
not demonstrate a need to repatriate them to fund our U.S. operations.
Our financial condition remains strong with working capital of $386.9 million
and a current ratio of 2.3 to 1 at December 31, 2012. We expect that cash on
hand, cash flows from operations, and our unused lines of credit will be
adequate to meet our liquidity requirements for the foreseeable future.
Critical Accounting Policies, Estimates and Judgments
Our financial statements are prepared in accordance with accounting principles
that are generally accepted in the United States. The preparation of these
financial statements requires us to make estimates and judgments that affect the
reported amounts of assets and liabilities, and disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. We continually
evaluate our estimates and judgments, the most critical of which are those
related to revenue recognition, income taxes, valuation of goodwill, purchased
intangibles and pension costs. We base our estimates and judgments on historical
experience and other factors that we believe to be reasonable under the
circumstances. Materially different results can occur as circumstances change
and additional information becomes known.
Besides the estimates identified above that are considered critical, we make
many other accounting estimates in preparing our financial statements and
related disclosures. All estimates, whether or not deemed critical affect
reported amounts of assets, liabilities, revenues and expenses, as well as
disclosures of contingent assets and liabilities. These estimates and judgments
are also based on historical experience and other factors that are believed to
be reasonable under the circumstances. Materially different results can occur as
circumstances change and additional information becomes known, even for
estimates and judgments that are not deemed critical.
There have been no significant changes to our critical accounting policies and
estimates described under "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations-Critical Accounting Policies,
Estimates and Judgments" in our Annual Report on Form 10-K for the year ended
September 30, 2012, other than the addition of the following:
Recognizing assets acquired and liabilities assumed in business combinations.
Acquired assets and assumed liabilities are recognized in a business combination
on the basis of their fair values at the date of acquisition. We assess fair
value, which is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date, using a variety of methods including an income approach
such as a present value technique or a cost approach such as the estimation of
current selling prices and replacement values. Fair value of the assets acquired
and liabilities assumed, including
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intangible assets, in-process research and development, and contingent payments,
are measured based on the assumptions and estimations with regards to the
variable factors such as the amount and timing of future cash flows for the
asset or liability being measured, appropriate risk-adjusted discount rates,
nonperformance risk, or other factors that market participants would consider.
Upon acquisition, we determine the estimated economic lives of the acquired
intangible assets for amortization purposes, which are based on the underlying
expected cash flows of such assets. Adjustments to inventory are based on the
fair market value of inventory and amortized into income based on the period in
which the underlying inventory is sold. Goodwill is an asset representing the
future economic benefits arising from other assets acquired in a business
combination that are not individually identified and separately recognized.
Actual results may vary from projected results and assumptions used in the fair
value assessments.
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING INFORMATION
This report, including the documents that we incorporate by reference, contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 that are subject to the "safe harbor" created by
those sections. Any statements about our expectations, beliefs, plans,
objectives, assumptions, future events or our future financial and/or operating
performance are not historical and may be forward-looking. These statements are
often, but not always, made through the use of words or phrases such as "may,"
"will," "anticipate," "estimate," "plan," "project," "continuing," "ongoing,"
"expect," "believe," "intend," "predict," "potential," "opportunity" and similar
words or phrases or the negatives of these words or phrases. These statements
involve risks, estimates, assumptions and uncertainties, including those
discussed in "Risk Factors" in our Annual Report on Form 10-K for the year ended
September 30, 2012, and throughout this report that could cause actual results
to differ materially from those expressed in these statements. Such risks,
estimates, assumptions and uncertainties include, among others:
† unanticipated issues related to the restatement of our financial
statements;
† our ability to develop and implement new processes and procedures to
remediate the material weaknesses that exist in our internal control over
financial reporting;
† our dependence on U.S. and foreign government contracts;
† delays in approving U.S. and foreign government budgets and cuts in
U.S. and foreign government defense expenditures;
† the ability of certain government agencies to unilaterally terminate
or modify our contracts with them;
† our ability to successfully integrate new companies into our business
and to properly assess the effects of such integration on our financial
condition;
† the U.S. government's increased emphasis on awarding contracts to
small businesses, and our ability to retain existing contracts or win new
contracts under competitive bidding processes;
† negative audits by the U.S. government;
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† the effects of politics and economic conditions on negotiations and
business dealings in the various countries in which we do business or intend to
do business;
† competition and technology changes in the defense and transportation
industries;
† our ability to accurately estimate the time and resources necessary
to satisfy obligations under our contracts;
† the effect of adverse regulatory changes on our ability to sell
products and services;
† our ability to identify, attract and retain qualified employees;
† business disruptions due to cyber security threats, physical threats,
terrorist acts, acts of nature and public health crises;
† our involvement in litigation, including litigation related to
patents, proprietary rights and employee misconduct;
† our reliance on subcontractors and on a limited number of third
parties to manufacture and supply our products;
† our ability to comply with our development contracts and to
successfully develop, introduce and sell new products, systems and services in
current and future markets;
† defects in, or a lack of adequate coverage by insurance or indemnity
for, our products and systems;
† changes in U.S. and foreign tax laws, exchange rates or our economic
assumptions regarding our pension plans; and
† other factors discussed elsewhere in this report.
Because the risks, estimates, assumptions and uncertainties referred to above
could cause actual results or outcomes to differ materially from those expressed
in any forward-looking statements made by us or on our behalf, you should not
place undue reliance on any forward-looking statements. In addition, past
financial and/or operating performance is not necessarily a reliable indicator
of future performance and you should not use our historical performance to
anticipate results or future period trends. Further, any forward-looking
statement speaks only as of the date on which it is made, and, except as
required by law, we undertake no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which the
statement is made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time, and it is not possible for us to predict which
factors will arise. In addition, we cannot assess the impact of each factor on
our business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in any
forward-looking statements.
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