Cubic Earnings Cut in Setting Aside Reserve

Hit with “technical problems” that will delay delivery of U.S. Air Force flight training simulator systems, Cubic Corp. on Wednesday said it established a $4-million reserve that cut first-quarter earnings by 69% to $1.1 million.

Sales for the first quarter ended Dec. 31 increased 13.5% to $81 million.

The reserves represent about one-half of the earnings Cubic could make on the $80-million contract, officials said.

Cubic took the reserves this quarter to “recognize potential problems,” according to President Walter J. Zable.

The due date for the simulator systems is confidential, but it is soon approaching, officials said. “We don’t know if we’ll be behind schedule,” a spokesman said.

The reserves will cover the expected cost-overruns that will help Cubic meet its deadline, the spokesman said.

Cubic experienced problems in engineering the simulator, which “hasn’t been built before,” the spokesman said. “We don’t (now) have enough learning experience to be proficient, it seems,” he said.

New order bookings for the quarter reached $100 million, up nearly 30%, while backlog totaled $247 million, up 12%.