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Zable Heirs’ Plans to Sell Some Cubic Stock Seen as Tax Move

The heirs of the late Cubic Corp. founder Walter J. Zable plan to sell about $125 million in Cubic stock to satisfy the tax liability caused by the transfer of Zable’s assets, the company said.

In a recent securities filing, the company said Zable’s two children, Walter C. Zable and Karen Zable Cox, will sell an undetermined number of shares, up to a maximum of $125 million in stock, with all the proceeds going to their use, and not to the company.

Given the timing, and the amount of money that will be derived from the stock sale, it’s seems probable the children need to cash out part of their holdings to pay the estate taxes due, according to Bill Super, a Carlsbad certified public accountant and president of the North County Estate Planning Council-San Diego.

Taxes Due

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“This is coming nine months after the date of Mr. Zable’s death and that is when the taxes are due,” Super said.

The securities filing doesn’t spell out the reasons for the sale nor the number of shares to be sold, but states that all proceeds will go to the stock sellers. The stock is held by Zable’s children in several trusts that were established in 1978.

At the time he died in June at age 97, Walter J. Zable owned more than 10 million shares of Cubic stock for about 38 percent stake in the company. That stake was worth about $490 million at the time of his death.

Super said given the amount of money the two heirs intend to raise and knowing the federal estate tax is 35 percent, Zable’s minimum taxable estate is valued at $357 million.

“If they are selling $125 million to pay the estate taxes then the taxable estate has got to be at least $357 million,” he said.

Businessmen to the End

The fact that Zable died last year saved his heirs 5 percent because the top estate tax rate was increased this year. But the real beneficiaries of the ever-changing tax laws were heirs of those who died in 2010. Because of a revision to the code stemming from tax cuts put into effect by the Bush administration, the estate taxes in that year were zero, Super said. “George Steinbrenner died in the right year — when there was no estate tax,” he said.

Zable founded Cubic in 1951 with about $5,000 and $20 in electronic testing equipment. The business was initially a consulting practice that did distance measuring and aerial photo mapping, among other jobs. In the 1970s, it developed air combat training systems, which it continues to provide to this nation’s military as well as 35 allied nations. It also has a division that develops and makes automated fare collection systems for major mass transit entities, and another that provides mission support services.

For its most recent fiscal year ended Sept. 30, Cubic reported revenue of $1.4 billion, and net income of $92 million. It has 8,200 full-time employees including some 1,200 workers in San Diego at two main sites.

Although the number of shares to be sold by the heirs wasn’t specified, they would probably need to sell about 3 million shares to obtain $125 million, given that Cubic’s recent stock price was $41.65.

The probable remaining stock held by the heirs would still be more than 5 million shares which would result in holdings valued at $208 million.

Since his father’s death, Walter C. Zable, 66, was named executive chairman of the board. He has held a board seat since 1976.

Earlier this month, Cubic named William W. Boyle as its new chief executive officer. Boyle, 78, was formerly Cubic’s executive vice president and chief financial officer. He joined the company as its CFO in 1983.

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