14 Dec 12. Cubic Corporation (NYSE : CUB) reported higher sales and earnings for the fiscal year ended September 30, 2012. Sales in fiscal year 2012 were $1.381bn, an increase of 7 percent over sales of $1.296bn in the restated prior year. Net income attributable to Cubic shareholders increased to $91.9 m, or $3.44 per share, from $83.6m, or $3.13 per share, last year, as restated. Sales and net income were both record highs. The company filed with the Securities and Exchange Commission (SEC) its financial statements for the quarter ended June 30, 2012 and the fiscal year ended September 30, 2012. In addition, Cubic filed its restated financial statements for the fiscal years ended September 30, 2011, 2010 and 2009, the quarters ended March 31, 2012 and December 31, 2011, and each of the prior quarters of 2011 and 2010. The restatement resulted in a cumulative increase in equity of $26.9 m through March 31, 2012.
Fiscal Year 2012 Financial Review
Sales increased 7 percent to $1.381bn in fiscal 2012 from $1.296bn in the restated prior year. The increase was primarily due to growth of 20 percent in Cubic Transportation Systems (CTS), and in particular from our contracts in Sydney, Australia and Vancouver, B.C. Growth in 2012 sales from Mission Support Services (MSS) was nearly offset by a decrease in Cubic Defense Systems (CDS) sales. Operating income increased 13 percent to $128.0m in 2012 compared to $113.5m in the restated prior year. CTS and CDS each contributed to the growth in operating income in 2012, while MSS operating income was down in 2012 from 2011. Growth in CTS sales was the primary reason for the increase in operating income. CDS operating income grew primarily due to a decrease in our investment in cross domain and global asset tracking products in 2012 compared to 2011. Operating results for MSS include an operating loss from Abraxas of $1.3m in 2012, including amortization of intangible assets of $9.3m, compared to a loss of $3.5m in 2011, which included amortization of intangible assets of $8.2m and acquisition costs of $0.7m. Selling, general and administrative (SG&A) expenses increased to $163.7m or 12 percent of sales in 2012, compared to $159.8m or 12 percent of sales in the restated prior year. The increase in SG&A expenses in 2012 reflects the overall growth of the business. Company-sponsored research and development (R&D) spending totaled $28.7m in 2012 compared to $25.3 m in the restated prior year. The increase in R&D expenditures in 2012 came from the transportation systems business, which increased R&D spending from $4.0m in 2011 to $8.3m in 2012. Our effective tax rate for 2012 was 29 percent of pretax income compared to 28 percent in 2011, as restated, primarily because of the expiration of the U.S. R&D credit on December 31, 2011. Net income attributable to Cubic increased to $91.9m, or $3.44 per share, in 2012 from $83.6m, or $3.13 per share, in the restated prior year. Higher net income year-over-year resulted primarily from the improvements in operating income. While CDS and CTS both generated negative operating cash flows in 2012, MSS contributed positive operating cash flows. Operating activities used cash of $54.7m in 2012, compared to providing cash of $129.1m in the prior year. In 2012, cash generated by earnings was offset by increases in accounts receivable of $118.2m and inventories of $13.6m, and a net decrease in customer advances of $38.0m. In addition, the company incurred $26.9m in costs to build a new open payment fare collection system for Chicago. The growth in accounts receivable and reduction of customer advances related to several large transportation systems and defense systems contracts the company worked on in 2012. Negative cash flows on these contracts at this stage of their completion are in accordance with contract terms. The company expects cash flows from these contracts to improve as deliveries are made and milestones are reached on these contracts. Total backlo