Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jun. 30, 2016 | Jul. 20, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | CUBIC CORP /DE/ | |
Entity Central Index Key | 26,076 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 26,991,636 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Net sales: | ||||
Products | $ 170,566 | $ 133,762 | $ 451,329 | $ 392,884 |
Services | 204,674 | 214,044 | 603,748 | 612,244 |
Total net sales | 375,240 | 347,806 | 1,055,077 | 1,005,128 |
Costs and expenses: | ||||
Products | 108,785 | 94,381 | 328,422 | 288,926 |
Services | 164,053 | 175,334 | 478,647 | 480,671 |
Selling, general and administrative expenses | 68,632 | 55,127 | 206,897 | 155,603 |
Research and development | 8,521 | 5,938 | 18,146 | 12,830 |
Amortization of purchased intangibles | 9,666 | 6,606 | 24,620 | 21,035 |
Restructuring costs | 1,690 | 127 | 1,615 | 5,385 |
Total costs and expenses | 361,347 | 337,513 | 1,058,347 | 964,450 |
Operating income (loss) | 13,893 | 10,293 | (3,270) | 40,678 |
Other income (expense): | ||||
Interest and dividend income | 415 | 434 | 1,152 | 1,337 |
Interest expense | (3,486) | (1,125) | (7,403) | (3,058) |
Other income (expense), net | (1,930) | (257) | (1,532) | (1,157) |
Income (loss) before income taxes | 8,892 | 9,345 | (11,053) | 37,800 |
Income tax expense (benefit) | 4,394 | 559 | (20,281) | 34,863 |
Net income | 4,498 | 8,786 | 9,228 | 2,937 |
Less noncontrolling interest in income of VIE | 6 | 29 | ||
Net income attributable to Cubic | $ 4,498 | $ 8,780 | $ 9,228 | $ 2,908 |
Net income per share attributable to Cubic: | ||||
Basic (in dollars per share) | $ 0.17 | $ 0.33 | $ 0.34 | $ 0.11 |
Diluted (in dollars per share) | $ 0.17 | $ 0.33 | 0.34 | 0.11 |
Dividends per common share (in dollars per share) | $ 0.14 | $ 0.14 | ||
Weighted average shares used in per share calculations: | ||||
Basic (in shares) | 26,977 | 26,883 | 26,971 | 26,868 |
Diluted (in shares) | 27,058 | 26,960 | 27,010 | 26,925 |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | ||||
Net income | $ 4,498 | $ 8,786 | $ 9,228 | $ 2,937 |
Other comprehensive income (loss): | ||||
Foreign currency translation | (21,950) | 18,315 | (39,571) | (14,742) |
Change in net unrealized gains/losses from cash flow hedges: | ||||
Change in fair value of cash flow hedges, net of tax | 620 | (448) | 273 | 519 |
Adjustment for net gains/losses realized and included in net income, net of tax | (294) | 101 | (868) | (767) |
Total change in unrealized gains/losses realized from cash flow hedges, net of tax | 326 | (347) | (595) | (248) |
Total other comprehensive income (loss) | (21,624) | 17,968 | (40,166) | (14,990) |
Total comprehensive income (loss) | $ (17,126) | $ 26,754 | $ (30,938) | $ (12,053) |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands | Jun. 30, 2016 | Sep. 30, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 173,439 | $ 218,476 |
Restricted cash | 73,361 | 69,245 |
Marketable securities | 13,331 | 30,533 |
Accounts receivable - net | 376,047 | 358,925 |
Recoverable income taxes | 14,982 | 753 |
Inventories - net | 64,803 | 63,700 |
Deferred income taxes and other current assets | 38,829 | 33,670 |
Total current assets | 754,792 | 775,302 |
Long-term contract receivables | 21,755 | 36,809 |
Long-term capitalized contract costs | 67,686 | 73,017 |
Property, plant and equipment, net | 95,013 | 74,690 |
Deferred income taxes | 1,619 | 11,443 |
Goodwill | 406,249 | 237,899 |
Purchased intangibles, net | 132,643 | 72,936 |
Other assets | 6,366 | 18,180 |
Total assets | 1,486,123 | 1,300,276 |
Current liabilities: | ||
Short-term borrowings | 230,000 | 60,000 |
Trade accounts payable | 62,165 | 47,170 |
Customer advances | 48,915 | 77,083 |
Accrued compensation and other current liabilities | 145,725 | 143,919 |
Income taxes payable | 2,513 | 4,675 |
Deferred income taxes | 13,404 | |
Current portion of long-term debt | 462 | 525 |
Total current liabilities | 489,780 | 346,776 |
Long-term debt | 200,692 | 126,180 |
Other long-term liabilities | 68,553 | 71,032 |
Shareholders' equity: | ||
Common stock | 31,006 | 25,560 |
Retained earnings | 824,172 | 818,642 |
Accumulated other comprehensive loss | (92,002) | (51,836) |
Treasury stock at cost | (36,078) | (36,078) |
Total shareholders' equity | 727,098 | 756,288 |
Total liabilities and shareholders' equity | $ 1,486,123 | $ 1,300,276 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Operating Activities: | ||||
Net income | $ 4,498 | $ 8,786 | $ 9,228 | $ 2,937 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||
Depreciation and amortization | 12,966 | 8,653 | 31,943 | 28,717 |
Share-based compensation expense | 2,828 | 1,361 | 6,916 | 6,652 |
Changes in operating assets and liabilities net of effects from acquisitions: | 22,842 | (33,406) | (42,648) | 8,186 |
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | 43,134 | (14,606) | 5,439 | 46,492 |
Investing Activities: | ||||
Acquisition of businesses, net of cash acquired | (712) | (243,483) | (90,172) | |
Purchases of property, plant and equipment | (4,508) | (13,163) | (25,883) | (15,743) |
Purchases of marketable securities | (7,116) | (1,611) | (21,802) | (6,201) |
Proceeds from sales or maturities of marketable securities | 7,053 | 36,923 | 1,196 | |
Purchases of other assets | (2,993) | |||
NET CASH USED IN INVESTING ACTIVITIES | (4,571) | (15,486) | (254,245) | (113,913) |
Financing Activities: | ||||
Proceeds from short-term borrowings | 10,000 | 25,000 | 263,300 | 95,000 |
Principal payments on short-term borrowings | (20,000) | (10,000) | (93,300) | (25,000) |
Proceeds from long-term borrowings | 75,000 | |||
Principal payments on long-term borrowings | (124) | (134) | (378) | (403) |
Purchase of common stock | (929) | (1,658) | (2,652) | |
Dividends paid | (3,641) | (3,627) | ||
Net change in restricted cash | (602) | (45) | (4,116) | (146) |
Contingent consideration payments related to acquisitions of businesses | (1,679) | |||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | (10,726) | 13,892 | 233,528 | 63,172 |
Effect of exchange rates on cash | (13,206) | 17,401 | (29,759) | (2,295) |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 14,631 | 1,201 | (45,037) | (6,544) |
Cash and cash equivalents at the beginning of the period | 158,808 | 208,104 | 218,476 | 215,849 |
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 173,439 | 209,305 | 173,439 | 209,305 |
GATR | ||||
Operating Activities: | ||||
Net income | (8,200) | (20,600) | ||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||
Change in fair value of contingent consideration | 600 | 700 | ||
Supplemental disclosure of non-cash investing and financing activities: | ||||
Liability incurred to acquire, net | 7,651 | |||
TeraLogics | ||||
Operating Activities: | ||||
Net income | (200) | (1,400) | ||
Supplemental disclosure of non-cash investing and financing activities: | ||||
Liability incurred to acquire, net | 4,998 | |||
H4 Global | ||||
Operating Activities: | ||||
Net income | 100 | 100 | ||
Supplemental disclosure of non-cash investing and financing activities: | ||||
Liability incurred to acquire, net | 952 | |||
DTECH | ||||
Operating Activities: | ||||
Net income | $ (400) | (200) | $ (4,000) | (2,000) |
Supplemental disclosure of non-cash investing and financing activities: | ||||
Liability incurred to acquire, net | $ 44 | $ 8,898 |
Basis for Presentation
Basis for Presentation | 9 Months Ended |
Jun. 30, 2016 | |
Basis for Presentation | |
Basis for Presentation | Note 1 — Basis for Presentation Cubic Corporation (“we”, “us”, and “Cubic”) has prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In our opinion, the accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results for the interim periods presented. Operating results for the three- and nine-month periods ended June 30, 2016 are not necessarily indicative of the results that may be expected for the year ending September 30, 2016. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended September 30, 2015. The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions 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. Actual results could differ from those estimates. Significant Accounting Policies There have been no material changes to our significant accounting policies as compared with the significant accounting policies described in our Annual Report on Form 10-K for the year ended September 30, 2015. Recent Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance and will require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. ASU 2014-09 will be effective for us starting in the first quarter of fiscal 2019 or the guidance gives us the option of adopting ASU 2014-09 early, in the first quarter of 2018. ASU 2014-09 allows for two methods of adoption: (a) “full retrospective” adoption, meaning the standard is applied to all periods presented, or (b) “modified retrospective” adoption, meaning the cumulative effect of applying ASU 2014-09 is recognized as an adjustment to the opening retained earnings balance in the year of adoption. We do not intend to adopt the standard early and we have not yet determined which method of adoption we will select. As the new standard will supersede substantially all existing revenue guidance affecting us under GAAP, it could impact revenue and cost recognition on a significant number of contracts across our business segments, in addition to our business processes and our information technology systems. As a result, our evaluation of the effect of the new standard will likely extend over several future periods. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern, which requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and provide related footnote disclosures. ASU 2014-15 will be effective for us for the year ended September 30, 2017 and for interim reporting periods thereafter. Early adoption is permitted for financial statements that have not been previously issued, but we have not yet adopted this standard. This adoption is not expected to have a significant impact on our financial statements. In April 2015, the FASB issued ASU 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement . ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU 2015-05 will be effective for the Company beginning on October 1, 2016, with early adoption permitted. We are currently assessing the impact that adopting this new accounting guidance will have on our consolidated financial statements. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs which requires that all costs incurred to issue debt be presented in the balance sheet as a direct reduction from the carrying value of the debt, similar to the presentation of debt discounts. ASU 2015-03 is effective for us on October 1, 2016 with early adoption permitted. We do not expect that the adoption of this new accounting guidance will have a material impact on our consolidated financial statements. In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes which removes the requirement to separate deferred tax liabilities and assets into current and noncurrent amounts and instead requires all such amounts be classified as noncurrent on the balance sheet. We adopted ASU 2015-17 prospectively on October 1, 2015 and reclassified the current portion of our net deferred tax assets and liabilities to net noncurrent deferred tax assets and liabilities. No prior periods were retrospectively adjusted. In January 2016, the FASB issued Accounting Standards Update ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10) which updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 will be effective for us beginning October 1, 2018 and, with the exception of a specific portion of the amendment, early adoption is not permitted. We are currently evaluating the impact this guidance will have on our financial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases . Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The ASU will be effective for us beginning October 1, 2019 with early adoption permitted. We are currently evaluating the impact of the application of this accounting standard update on our consolidated financial statements as well as whether to adopt the new guidance early. In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation . The new guidance simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this standard are effective for our annual year and first fiscal quarter beginning on October 1, 2017 with early adoption is permitted. We are currently evaluating the impact of the application of this accounting standard update on our consolidated financial statements as well as whether to adopt the new guidance early. |
Acquisitions
Acquisitions | 9 Months Ended |
Jun. 30, 2016 | |
Acquisitions | |
Acquisitions | Note 2 — Acquisitions Each of the following acquisitions has been treated as a business combination for accounting purposes. The results of operations of each acquired business has been included in our consolidated financial statements since the respective date of each acquisition. GATR On February 2, 2016, we acquired all of the outstanding capital stock of GATR Technologies, LLC (GATR), a defense systems business based in Huntsville, Alabama which manufactures deployable satellite communication terminal solutions. GATR expands our satellite communications and networking applications technologies for our Cubic Global Defense Systems (CGD Systems) segment and expands our customer base. GATR’s sales totaled $9.3 million for the quarter ended June 30, 2016 and $18.6 million since the acquisition date. GATR’s operating income since the acquisition date was significantly impacted by the GAAP accounting requirements regarding business combinations. Prior to our acquisition of GATR, GATR had a number of share-based payment awards in place to its employees. Due to the structure of certain of these share-based payment awards and the acceleration of vesting of certain of these awards in connection with our acquisition of GATR, we were required to recognize compensation expense, rather than purchase consideration, for the portion of our purchase price that we paid to the seller that was distributed to the recipients of these awards. Consequently, we recognized $18.5 million of compensation expense within general and administrative expenses during the quarter ended March 31, 2016 related to this matter. Of this $18.5 million amount, $15.4 million is not expected to be deductible for tax purposes. In addition during the three and nine months ended June 30, 2016, GATR incurred charges of $3.6 million and $6.0 million, respectively, for the amortization of intangibles and acquisition costs of $0.5 million for the nine months ended June 30, 2016. The GATR operating results for the quarter and nine months ended June 30, 2016 include charges of $ 0.6 million and $0.7 million, respectively for the increase in the fair value of contingent consideration. As a result of the charges above, the GATR net loss after taxes for the three and nine-month periods ended June 30, 2016 totaled $ 8.2 million and $20.6 million, respectively . The estimated fair value of consideration is $221.2 million, which is comprised of cash paid of $231.3 million plus the estimated fair value of contingent consideration of $2.5 million, plus additional held back consideration to be paid in the future estimated at $5.2 million, less $17.7 million of cash paid to the seller related to the $18.5 million recorded as expense described above. Under the purchase agreement, we will pay the sellers up to $7.5 million of contingent consideration if GATR meets certain gross profit goals for the 12 month periods ended February 28, 2017 and 2018. The contingent consideration liability will be re-measured to fair value at each reporting date until the contingencies are resolved and any changes in fair value are recognized in earnings. The acquisition of GATR is being paid for predominantly with the proceeds of the borrowings described below. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions): Customer relationships $ Backlog Technology Non-compete agreements Trade name Accounts receivable Inventory Income tax receivable Accounts payable and accrued expenses Deferred tax liabilities Other net assets acquired (liabilities assumed) Net identifiable assets acquired Goodwill Net assets acquired $ The estimated fair values of assets acquired and liabilities assumed, including deferred tax assets and liabilities, purchased intangibles and deferred revenue, as well as the estimated fair value of contingent consideration and the amount of expense recognized in connection with the modification of the share-based payment awards described above are preliminary estimates pending the finalization of our valuation analyses. The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. The customer relationships and backlog valuation used the excess earnings approach, the non-compete agreements used the with-and-without approach, and the technology and trade name asset valuations used the relief from royalty approach. The intangible assets are being amortized using a combination of straight-line and accelerated methods based on the expected cash flows from the assets, over a weighted average useful life of nine years from the date of acquisition. The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of GATR with our existing CGD Systems business, including the synergies expected from combining its satellite communications and networking applications technologies with our CGD Systems product portfolio. The goodwill also includes the value of the assembled workforce that became our employees following the close of the acquisition. The amount recorded as goodwill is allocated to our CGD Systems segment and is generally not expected to be deductible for tax purposes. The estimated amortization expense related to the intangible assets recorded in connection with our acquisition of GATR for fiscal years 2016 through 2020 and thereafter is as follows (in millions): Year Ended September 30, 2016 $ 2017 2018 2019 2020 Thereafter TeraLogics On December 21, 2015, we acquired all of the assets of TeraLogics, LLC, an Ashburn, Virginia-based provider of real-time full motion video processing, exploitation and dissemination (PED) for the Department of Defense, the intelligence community and commercial customers. TeraLogics’ ability to develop real-time video analysis and delivery software for full motion video complements the existing tactical communications portfolio of our CGD Systems segment and expands our customer base. For the three months and nine months ended June 30, 2016, TeraLogics had sales of $4.2 million and $8.0 million, respectively. TeraLogics net loss after taxes was $0.2 million, and $1.4 million for three and nine months ended June 30, 2016, respectively, including the impact of charges related to the acquisition. During the three and nine months ended June 30, 2016, TeraLogics incurred charges of $1.0 million and $2.0 million, respectively, for the amortization of intangibles. In addition, during the quarter ended December 31, 2015 we incurred $0.9 million of transaction and acquisition expenses and a $1.3 million charge for compensation expense incurred related to amounts paid to TeraLogics employees upon the close of the acquisition. The estimated fair value of consideration is $33.9 million, which is comprised of cash paid of $28. 9 million plus the estimated acquisition-date fair value of contingent consideration of $5. 0 million. Under the purchase agreement, we will pay the sellers up to $9.0 million of contingent consideration. Of this amount, up to $6.0 million will be paid if TeraLogics meets certain revenue thresholds in fiscal years 2016, 2017 and 2018; and up to $3.0 million will be paid if specific contract extensions are exercised by TeraLogics customers through fiscal 2018. The contingent consideration liability will be re-measured to fair value at each reporting date until the contingencies are resolved and any changes in fair value are recognized in earnings. There has been no significant change in the fair value of contingent consideration since the date of the acquisition. The acquisition of TeraLogics is being paid for with a combination of funds from our existing cash resources and borrowings on our revolving credit facility . The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions): Customer relationships $ Backlog Software Non compete agreements Accounts receivable Accounts payable and accrued expenses Other net assets acquired (liabilities assumed) Net identifiable assets acquired Goodwill Net assets acquired $ The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. The customer relationships and backlog valuation used the excess earnings approach, the non-compete agreements used the with-and-without approach, and the software used the replacement cost new less cost decrements for obsolescence approach. The intangible assets are being amortized using a combination of straight-line and accelerated methods based on the expected cash flows from the assets, over a weighted average useful life of seven years from the date of acquisition. The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of TeraLogics with our existing CGD Systems business, including the synergies expected from combining TeraLogics real-time video capabilities with our existing tactical communications product portfolio. The goodwill also includes the value of the assembled workforce who became our employees following the close of the acquisition. The amount recorded as goodwill is allocated to our CGD Systems segment and is expected to be deductible for tax purposes. The estimated amortization expense amounts related to the intangible assets recorded in connection with our acquisition of TeraLogics for fiscal years 2016 through 2020 and thereafter is as follows (in millions): Year Ended September 30, 2016 $ 2017 2018 2019 2020 Thereafter H4 Global On November 4, 2015, we acquired all of the assets of H4 Global, a U.K.-based provider of simulation-based training solutions which complements our CGD Systems segment portfolio. For the three months ended June 30, 2016, the amounts of H4 Global’s sales and net income after taxes included in our Consolidated Statement of Income were $0.8 million and $0.1 million, respectively. For the nine months ended June 30, 2016, the amount of H4 Global’s sales and net income after taxes were $1.4 million and $0.1 million, respectively. During the quarter ended December 31, 2015, we incurred $0.1 million of transaction costs to acquire H4 Global. The fair value of consideration is $1.9 million, which is comprised of cash paid of $0.9 million plus the fair value of contingent consideration of $1.0 million. Under the purchase agreement, we will pay the sellers up to $4.1 million of contingent consideration, based upon the value of contracts entered over the five -year period beginning on the acquisition date. The contingent consideration liability will be re-measured to fair value at each reporting date until the contingencies are resolved and any changes in fair value will be recognized in earnings. There has been no significant change in the fair value of contingent consideration since the date of the acquisition. The fair value of the net assets acquired and liabilities assumed was not material. Consequently, virtually the entire purchase price of $1.9 million was recorded as goodwill, which is comprised of expected synergies and assembled workforce. The amount recorded as goodwill is allocated to our CGD Systems segment and is not expected to be deductible for tax purposes. DTECH On December 16, 2014, we acquired all of the outstanding capital stock of DTECH LABs, Inc. (DTECH). Based in Sterling, VA, DTECH is a provider of modular networking and baseband communications equipment that adds networking capability to our secure communications business. This acquisition expands the portfolio of product offerings and the customer base of our CGD Systems segment. For the three months ended June 30, 2016, the amounts of DTECH’s sales and net loss after taxes included in our Consolidated Statement of Income were $6.2 million and $0.4 million, respectively, compared to $10.8 million and $0.2 million, respectively for the three months ended June 30, 2015. For the nine months ended June 30, 2016, the amount of DTECH’s sales and net loss after tax were $15.4 million and $4.0 million, respectively, compared to $22.6 million and $2.0 million, respectively for the nine months ended June 30, 2015. The DTECH operating results for the quarter and nine months ended June 30, 2016 include charges of $ 0.4 million and $ 2.3 million, respectively, for the increase in the fair value of contingent consideration and $1.9 million and $6.1 million, respectively, for the amortization of intangibles. There was no significant change in the fair value of contingent consideration in the quarter or nine months ended June 30, 2015. The DTECH operating results for the quarter and nine months ended June 30, 2015 include charges of $2.2 million and $6.9 million, respectively, for the amortization of intangibles. For the nine months ended June 30, 2015, DTECH’s operations also included $0.8 million of transaction and acquisition related costs before related income taxes. The purchase agreement states that the cost of the acquisition is approximately $99.5 million, adjusted by the difference between the net working capital acquired and the targeted working capital amounts and adjusted for other acquisition related payments made upon closing, plus a contingent amount of up to $15.0 million based upon DTECH’s achievement of revenue and gross profit targets in the future. The acquisition date fair value of the consideration was $99.4 million. The total acquisition date fair value of consideration includes the acquisition fair value of holdback consideration and contingent consideration described below. Approximately $4.7 million of cash consideration (Holdback Consideration) will be paid to the seller over time when certain events occur in the future. At June 30, 2016, the fair value of the Holdback Consideration is estimated to approximate $4.4 million using a discounted cash flow model, based upon the expected timing of the payment of the Holdback Consideration. In addition to the Holdback Consideration, we will pay the seller up to $15.0 million of contingent cash consideration based upon DTECH’s achievement of revenue and gross profit targets. The purchase agreement specifies independent revenue and gross profit targets for the period from our acquisition of DTECH through September 30, 2015, and separately for each of fiscal 2016 and fiscal 2017. At the acquisition date, the total fair value of the contingent consideration was estimated at $3.9 million using a real options approach. During the measurement period ended September 30, 2015, DTECH met both the revenue and gross profit targets. As a result, $5.0 million was paid to the seller in December 2015. The remaining contingent consideration liability will be re-measured to fair value at each reporting date until the contingencies are resolved and any changes in fair value are recognized in earnings. At June 30, 2016 the fair value of the contingent consideration was $ 4.7 million. Through June 30, 2016, we have paid $96.3 million to the seller. At June 30, 2016, we have recorded a liability of $ 9.1 million as an estimate of the additional cash consideration that will be due to the seller in the future, including the Holdback Consideration and contingent consideration. The acquisition of DTECH is being paid for with a combination of funds from our existing cash resources and borrowings on our revolving credit facility . The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions): Customer relationships $ Non-compete agreements Backlog Cash Accounts receivable Inventory Warranty obligation Tax liabilities Accounts payable and accrued expenses Other net assets acquired Net identifiable assets acquired Goodwill Net assets acquired $ The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. The customer relationships and backlog valuation used the excess earnings approach and the non-compete agreements used the with-and-without approach. The intangible assets are being amortized using a combination of straight-line and accelerated methods based on the expected cash flows from the assets, over a weighted average useful life of seven years from the date of acquisition and the amortization is expected to be deductible for tax purposes. The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of DTECH with our existing CGD Systems business, including the synergies expected from combining the networking and secure communications technologies of DTECH, and complementary products that will enhance our overall product and service portfolio. The goodwill also consists of the value of the assembled workforce that became our employees following the close of the acquisition. The amount recorded as goodwill is allocated to our CGD Systems segment and is expected to be deductible for tax purposes. The estimated amortization expense amounts related to the intangible assets recorded in connection with our acquisition of DTECH for fiscal years 2016 through 2020 and thereafter is as follows (in millions): Year Ended September 30, 2016 $ 8.0 2017 6.8 2018 5.5 2019 4.1 2020 2.8 Thereafter 1.5 Changes in goodwill for the nine months ended June 30, 2016 were as follows (in millions): Cubic Global Cubic Global Transportation Defense Defense Systems Systems Services Total Balances at September 30, 2015 $ $ $ $ Acquisitions — — Foreign currency exchange rate changes — Balances at June 30, 2016 $ $ $ $ Pro forma information The following unaudited pro forma information presents our consolidated results of operations as if GATR, TeraLogics, H4 Global and DTECH had been included in our consolidated results since October 1, 2014 (in millions): Nine Months Ended Three Months Ended June 30, June 30, 2016 2015 2016 2015 Net sales $ $ $ $ Net income attributable to Cubic $ $ $ $ The pro forma information includes adjustments to give effect to pro forma events that are directly attributable to the acquisitions and have a continuing impact on operations including the amortization of purchased intangibles and the elimination of interest expense for the repayment of debt. No adjustments were made for transaction expenses, other adjustments that do not reflect ongoing operations or for operating efficiencies or synergies. The pro forma financial information is not necessarily indicative of what the consolidated financial results of our operations would have been had the acquisitions been completed on October 1, 2014, and it does not purport to project our future operating results. |
Net Income Per Share
Net Income Per Share | 9 Months Ended |
Jun. 30, 2016 | |
Net Income Per Share | |
Net Income Per Share | Note 3 — Net Income Per Share Basic net income per share (EPS) is computed by dividing the net income for the period by the weighted average number of common shares outstanding during the period, including vested restricted stock units (RSUs). In periods with a net income, diluted EPS is computed by dividing the net income for the period by the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares consist of dilutive restricted stock units. Dilutive restricted stock units are calculated based on the average share price for each fiscal period using the treasury stock method. For RSUs with performance-based vesting, no common equivalent shares are included in the computation of diluted EPS until the related performance criteria have been met. In periods with a net loss, common equivalent shares are not included in the computation of diluted EPS, because to do so would be anti-dilutive. There were no anti-dilutive securities for the three and nine months ended June 30, 2016 and 2015. Basic and diluted EPS are computed as follows (amounts in thousands, except per share data). Nine Months Ended Three Months Ended June 30, June 30, 2016 2015 2016 2015 Net income attributable to Cubic $ $ $ $ Weighted average shares - basic Effect of dilutive securities Weighted average shares - diluted Net income per share attributable to Cubic, basic $ $ $ $ Effect of dilutive securities — — — — Net income per share attributable to Cubic, diluted $ $ $ $ Anti-dilutive employee share-based awards — — — — |
Balance Sheet Details
Balance Sheet Details | 9 Months Ended |
Jun. 30, 2016 | |
Balance Sheet Details | |
Balance Sheet Details | Note 4 — Balance Sheet Details Marketable Securities Marketable securities consist of fixed time deposits with short-term maturities. Marketable securities are classified and accounted for as available-for-sale. These investments are recorded at fair value in the accompanying Condensed Consolidated Balance Sheets and the change in fair value is recorded, net of taxes, as a component of other comprehensive loss. There have been no significant realized or unrealized gains or losses on these marketable securities to date. Marketable securities have been classified as current assets in the accompanying Condensed Consolidated Balance Sheets based upon the nature of the securities and availability for use in current operations. Accounts Receivable The components of accounts receivable are as follows (in thousands): June 30, September 30, 2016 2015 Trade and other receivables $ $ Long-term contracts: Billed Unbilled Allowance for doubtful accounts Total accounts receivable Less estimated amounts not currently due Current accounts receivable $ $ The amount classified as not currently due is an estimate of the amount of long-term contract accounts receivable that will not be collected within one year from June 30, 2016 under transportation systems contracts in the U.S. and Australia, and under a CGD Systems contract in Italy based upon the payment terms in the contracts. The non-current balance at September 30, 2015 represented non-current amounts due from these same customers. Inventories Inventories consist of the following (in thousands): June 30, September 30, 2016 2015 Finished products $ $ Work in process and inventoried costs under long-term contracts Materials and purchased parts Customer advances Net inventories $ $ Pursuant to contract provisions, agencies of the U.S. government and certain other customers have title to, or security interest in, inventories related to such contracts as a result of advances, performance-based payments, and progress payments. Contract advances, performance-based payments and progress payments received are recorded as an offset against the related inventory balances for contracts that are accounted for on a percentage-of-completion basis using units-of-delivery as the basis to measure progress toward completing the contract. This determination is performed on a contract by contract basis. Any amount of payments received in excess of the cumulative amount of accounts receivable and inventoried costs for a contract is classified as customer advances, which is classified as a liability on the balance sheet. At June 30, 2016, work in process and inventoried costs under long-term contracts includes approximately $2.0 million in costs incurred outside the scope of work or in advance of a contract award compared to $1.9 million at September 30, 2015. We believe it is probable that we will recover the costs inventoried at June 30, 2016, plus a profit margin, under contract change orders or awards within the next year. Long-term Capitalized Costs Long-term capitalized contract costs include costs incurred on contracts to develop and manufacture transportation systems for customers for which revenue recognition does not begin until the customers begin operating the systems. These capitalized costs are being recognized in cost of sales based upon the ratio of revenue recorded during a period compared to the revenue expected to be recognized over the term of the contracts. Long-term capitalized costs that were recognized as cost of sales totaled $2.2 million and $6.5 million for the quarter and nine-month periods ended June 30, 2016, respectively, and $2.3 million and $6.0 million for the quarter and nine-month periods ended June 30, 2015, respectively. Capitalized Software We capitalize certain costs associated with the development or purchase of internal-use software. The amounts capitalized are included in property, plant and equipment in our Condensed Consolidated Balance Sheets and are amortized on a straight-line basis over the estimated useful life of the software, which ranges from three to seven years. No amortization expense is recorded until the software is ready for its intended use. As a part of our efforts to upgrade our current information systems, early in fiscal 2015 we purchased new enterprise resource planning (ERP) software and began the process of designing and configuring this software and other software applications to manage our operations. Through March 31, 2016 we had capitalized cumulative software development costs related to these systems totaling $30.7 million, including $14.7 million that were capitalized during the first half of fiscal year 2016. At March 31, 2016, all such costs were classified as construction and internal-use software development in process as the related system components were not yet ready for their intended use. On April 1, 2016 we began using certain components of the ERP system. We reclassified the costs of the ERP components that we began using, totaling $28.4 million, into completed software and we began amortizing these costs over the seven year estimated useful life of these software components.We continue to capitalize costs associated with the development of other ERP components that are not yet ready for their intended use. During the quarter ended June 30, 2016 we capitalized costs totaling $4.3 million related to such ERP components. In addition to software costs that were capitalized in fiscal 2016, during the quarter and nine-month periods ended June 30, 2016 we recognized expense related to the development of our ERP system of $ 5.1 million and $ 17.1 m illion, respectively, compared to $4.7 million and $6.6 million during the quarter and nine-month periods ended June 30, 2015, respectively, for costs that did not meet the requirements for capitalization. Amounts that were expensed in connection with the development of these systems are classified within selling, general and administrative expenses in the Consolidated Statements of Income. Deferred Compensation Plan We have a non-qualified deferred compensation plan offered to a select group of highly compensated employees. The plan provides participants with the opportunity to defer a portion of their compensation in a given plan year. The liabilities associated with the non-qualified deferred compensation plan are included in other long-term liabilities in our Condensed Consolidated Balance Sheets and totaled $10.6 million and $9.9 million at June 30, 2016 and September 30, 2015, respectively. In the first quarter of fiscal 2015, we began making contributions to a rabbi trust to provide a source of funds for satisfying a portion of these deferred compensation liabilities. The total carrying value of the assets set aside to fund deferred compensation liabilities as of June 30, 2016 was $3.0 million, which included life insurance contracts with a carrying value of $2.7 million and marketable securities with a carrying value of $0.3 million. At September 30, 2015, the total carrying value of the assets set aside to fund deferred compensation liabilities was $2.9 million, which included life insurance contracts with a carrying value of $1.9 million and marketable securities with a carrying value of $1.0 million. The carrying value of the life insurance contracts is based on the cash surrender value of the policies. The marketable securities in the rabbi trust are carried at fair value, which is based upon quoted market prices for identical securities. Changes in the carrying value of the deferred compensation liability, and changes in the carrying value of the assets held in the rabbi trust are reflected in our Condensed Consolidated Statements of Income. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 9 Months Ended |
Jun. 30, 2016 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | Note 5 — Fair Value of Financial Instruments The valuation techniques required to determine fair value are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. The two types of inputs create the following fair value hierarchy: · Level 1 - Quoted prices for identical instruments in active markets. · Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. · Level 3 - Significant inputs to the valuation model are unobservable. The fair value of certain of our cash equivalents are based upon quoted prices for identical instruments in active markets. The fair value of our other cash equivalents and our available for sale marketable securities is based upon a discounted cash flow model and approximate cost. The marketable securities in the rabbi trust are carried at fair value, which is based upon quoted market prices for identical securities. Derivative financial instruments are measured at fair value, the material portions of which are based on active or inactive markets for identical or similar instruments or model-derived valuations whose inputs are observable. Where model-derived valuations are appropriate, we use the applicable credit spread as the discount rate. Credit risk related to derivative financial instruments is considered minimal and is managed by requiring high credit standards for counterparties and through periodic settlements of positions. The fair value of our contingent consideration liabilities to the sellers of businesses that we have acquired are revalued to their fair value each period and any increase or decrease is recorded into selling, general and administrative expense. Any changes in the assumed timing and amount of the probability of payment scenarios could impact the fair value. The fair value of contingent consideration liabilities that are based upon revenue targets or gross margin targets are based upon a real option approach. The contingent consideration liabilities that are valued using this real option approach include a portion of the TeraLogics contingent consideration, the DTECH contingent consideration, and the GATR contingent consideration. Under this real option approach, each payment was modeled using a long digital options written on the underlying revenue or gross margin metric. The strike price for each option is the respective revenue or gross margin as specified in the related agreement, and the spot price is calibrated to the revenue or gross margin forecast by calculating the present value of the corresponding projected revenues or gross margins using a risk-adjusted discount rate. The volatility for the underlying revenue metrics was based upon analysis of comparable guideline public companies and the volatility factor used in the June 30, 2016 valuations was 18% for TeraLogics, 22% for DTECH and 18% for GATR. The volatility factor used in the September 30, 2015 valuation for DTECH was 20% . The risk-free rate was selected based on the quoted yields for U.S. Treasury securities with terms matching the earn-out payment period. The fair value of the portion of the TeraLogics contingent consideration that is based on customer execution of contract extensions was estimated using a probability weighted approach. Subject to the terms and conditions of the TeraLogics Purchase Agreement, contingent consideration will be paid over a period commencing on the closing date and ending on December 21, 2018. The fair value of the contingent consideration was determined by applying probabilities of achieving the periodic payment to each period’s potential payment, and summing the present value of any future payments. The fair value of the H4 Global contingent consideration was estimated using a probability weighted approach. Subject to the terms and conditions of the H4 Global Purchase Agreement, contingent consideration will be paid over a five year term that commenced on October 1, 2015 and ends on September 30, 2020. The payments will be calculated based on the award of certain contracts during the specified period. The fair value of the contingent consideration was determined by applying probabilities to different scenarios, and summing the present value of any future payments. The inputs to each of the contingent consideration fair value models include significant unobservable inputs and therefore represent Level 3 measurements within the fair value hierarchy. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition dates and each subsequent period. Accordingly, changes in the assumptions described above can materially impact the amount of contingent consideration expense we record in any period . As of June 30, 2016, the following table summarizes the change in fair value of our Level 3 contingent consideration liability (in thousands): DTECH H4 TeraLogics (Contract Extensions) TeraLogics (Revenue Targets) GATR Total Balance as of September 30, 2015 $ $ — $ — $ — $ — $ Initial measurement recognized at acquisition — — Cash paid to seller — — — — Total remeasurement recognized in earnings — — — — Balance as of December 31, 2015 $ $ $ $ $ — $ Initial measurement recognized at acquisition — — — — Adjustment to the provisional acquisition date valuation — — — Total remeasurement recognized in earnings Balance as of March 31, 2016 $ $ $ $ $ $ Total remeasurement recognized in earnings Balance as of June 30, 2016 $ $ $ $ $ $ The following table presents assets and liabilities measured and recorded at fair value on our balance sheets on a recurring basis (in thousands): June 30, 2016 Level 1 Level 2 Level 3 Total Assets Cash equivalents $ $ $ — $ Marketable securities — — Current derivative assets — — Noncurrent derivative assets — — Marketable securities in rabbi trust — — Total assets measured at fair value $ $ $ — $ Liabilities Current derivative liabilities $ — $ $ — $ Noncurrent derivative liabilities — — Contingent consideration to seller of GATR — — Contingent consideration to seller of TeraLogics - contract extensions — — Contingent consideration to seller of TeraLogics - revenue targets — — Contingent consideration to seller of H4 Global — — Contingent consideration to seller of DTECH — — Total liabilities measured at fair value $ — $ $ $ September 30, 2015 Level 1 Level 2 Level 3 Total Assets Cash equivalents $ $ — $ — $ Marketable securities — — Current derivative assets — — Noncurrent derivative assets — — Marketable securities in rabbi trust — — Total assets measured at fair value $ $ $ — $ Liabilities Current derivative liabilities $ — $ $ — $ Noncurrent derivative liabilities — — Contingent consideration to seller of DTECH — — Total liabilities measured at fair value $ — $ $ $ We carry certain financial instruments, including accounts receivable, short-term borrowings, accounts payable and accrued liabilities at cost, which we believe approximates fair value because of the short-term maturity of these instruments. The fair value of long-term debt is calculated by discounting the value of the note based on market interest rates for similar debt instruments, which is a Level 2 technique . The following table presents the estimated fair value and carrying value of our long-term debt (in millions): June 30, September 30, 2016 2015 Fair value $ $ Carrying value $ $ |
Financing Arrangements
Financing Arrangements | 9 Months Ended |
Jun. 30, 2016 | |
Financing Arrangements | |
Financing Arrangements | Note 6 — Financing Arrangements In March 2013, we entered into a note purchase and private shelf agreement pursuant to which we issued $100.0 million of senior unsecured notes, bearing interest at a rate of 3.35% and maturing on March 12, 2025. In addition, pursuant to the agreement, on July 17, 2015 we issued senior unsecured notes in an aggregate principal amount of $25.0 million. These additional notes will also mature on March 12, 2025 and bear an interest rate of 3.70% . Interest payments on the notes issued in 2013 and 2015 are due semi-annually and principal payments are due from 2021 through 2025. On February 2, 2016 we revised the note purchase agreement and we issued an additional $75.0 million of unsecured notes bearing interest at 3.93%. Interest payments on these notes are due semi-annually and principal payments are due from 2020 through 2026. At the time of the issuance of the last series of notes, certain terms and conditions for all of the notes were revised in coordination with the revision and expansion of the Revolving Credit Agreement as discussed below in order to increase our leverage capacity. At the beginning of fiscal 2015, we had a committed revolving credit agreement (Revolving Credit Agreement), expiring in May 2017, with a group of financial institutions in the amount of $200.0 million. On February 2, 2016, Cubic and the group of financial institutions increased the revolving line of credit available under the Revolving Credit Agreement to $400.0 million and we borrowed $150.0 million as a source of financing the purchase of GATR. The Revolving Credit Agreement bears a variable rate of interest and terminates on May 8, 2017. In connection with this increase in the facility size, certain debt covenant definitions and limitations were modified to increase our leverage capacity. The available line of credit is reduced by any letters of credit issued under the Revolving Credit Agreement. As of June 30, 2016, there were borrowings totaling $230.0 million under this agreement and there were letters of credit outstanding totaling $21.9 million, which reduced the available line of credit to $148.1 million. Borrowings under the agreement bear a variable rate of interest which is calculated based upon the U.S. dollar LIBOR rate plus a contractually defined credit spread that is based upon the tenor of the specific borrowing. At June 30, 2016, the weighted average interest rate on outstanding borrowings under the Revolving Credit Agreement was 2.78% . We have a secured letter of credit facility agreement with a bank (Secured Letter of Credit Facility) which is cancellable by us at any time upon the completion of certain conditions to the satisfaction of the bank. At June 30, 2016, there were letters of credit outstanding under this agreement of $61.1 million. Restricted cash at June 30, 2016 of $69.4 million was held on deposit in the U.K. as collateral in support of this Secured Letter of Credit 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 $63.1 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 under the Revolving Credit Agreement. We maintain a cash account with a bank that grants a first-ranking fixed charge over the account balance in favor of a customer in the United Kingdom. The account is required to secure the customer’s interest in cash deposited in the account to fund our activities related to our performance under a fare collection services contract. The balance in the account as of June 30, 2016 was $3.9 million and is classified as restricted cash in our Condensed Consolidated Balance Sheet. As of June 30, 2016, we had letters of credit and bank guarantees outstanding totaling $78.8 million, including the letters of credit outstanding under the Revolving Credit Agreement and the Secured Letter of Credit Facility, which guarantee either our performance or customer advances under certain contracts. In addition, we had financial letters of credit outstanding totaling $16.7 million as of June 30, 2016, which primarily guarantee our payment of certain self-insured liabilities. We have never had a drawing on a letter of credit instrument, nor are any anticipated; therefore, we estimate the fair value of these instruments to be zero . We maintain short-term borrowing arrangements in New Zealand and Australia totaling $0.5 million New Zealand dollars (equivalent to approximately $0.4 million) and $3.0 million Australian dollars (equivalent to approximately $2.2 million) to help meet the short-term working capital requirements of our subsidiaries in those countries. At June 30, 2016, no amounts were outstanding under these borrowing arrangements. The terms of certain of our lending and credit agreements include provisions that require and/or limit, among other financial ratios and measurements, the permitted levels of debt, coverage of cash interest expense, and under certain circumstances, payments of dividends or other distributions to shareholders. As of June 30, 2016, these agreements restrict such distributions to shareholders to a maximum of $32.8 million in fiscal year 2016. Our self-insurance arrangements are limited to certain workers’ compensation plans, automobile liability and product liability claims. Under these arrangements, we self-insure only up to the amount of a specified deductible for each claim. Self-insurance liabilities included in other current liabilities on the balance sheet amounted to $8.5 million and $8.8 million as of June 30, 2016 and September 30, 2015, respectively. |
Pension Plans
Pension Plans | 9 Months Ended |
Jun. 30, 2016 | |
Pension Plans | |
Pension Plans | Note 7 — Pension Plans The components of net periodic pension cost (benefit) are as follows (in thousands): Nine Months Ended Three Months Ended June 30, June 30, 2016 2015 2016 2015 Service cost $ $ $ $ Interest cost Expected return on plan assets Amortization of actuarial loss Administrative expenses Net pension benefit $ $ $ $ |
Stockholders_ Equity
Stockholders’ Equity | 9 Months Ended |
Jun. 30, 2016 | |
Stockholders' Equity | |
Stockholders’ Equity | Note 8 - Stockholders’ Equity Long-Term Equity Incentive Plan On March 21, 2013, the Executive Compensation Committee of the Board of Directors (Compensation Committee) approved a long-term equity incentive award program. Through June 30, 2016, the Compensation Committee has granted 736,788 RSU’s with time-based vesting and 785,256 RSU’s with performance-based vesting under this program. Each RSU represents a contingent right to receive one share of our common stock. Dividend equivalent rights accrue with respect to the RSU’s when and as dividends are paid on our common stock and vest proportionately with the RSUs to which they relate. Vested shares are delivered to the recipient following each vesting date. The RSUs granted with time-based vesting generally vest in four equal installments on each of the four October 1 dates following the grant date, subject to the recipient’s continued service through such vesting date. The performance-based RSUs granted to participants vest over three -year performance periods based on Cubic’s achievement of performance goals established by the Compensation Committee over the performance periods, subject to the recipient’s continued service through the end of the respective performance periods. For the performance-based RSUs granted to date, the vesting will be contingent upon Cubic meeting one of three types of vesting criteria over the performance period. These three categories of vesting criteria consist of revenue growth targets, earnings targets, and return on equity targets. The level at which Cubic performs against scalable targets over the performance periods will determine the percentage of the RSUs that will ultimately vest. Through June 30, 2016, Cubic has granted 1,522,044 restricted stock unit’s of which 349,588 have vested. The grant date fair value of each restricted stock unit is the fair market value of one share of our common stock at the grant date. At June 30, 2016, the total number of unvested RSUs that are ultimately expected to vest, after consideration of expected forfeitures and estimated vesting of performance-based RSUs is 477,684 . The following table summarizes our RSU activity: Unvested Restricted Stock Units Weighted-Average Number of Shares Grant-Date Fair Value Unvested at September 30, 2015 $ Granted Vested Forfeited Unvested at June 30, 2016 $ |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Jun. 30, 2016 | |
Stock-Based Compensation | |
Stock-Based Compensation | Note 9 - Stock-Based Compensation We recorded non-cash compensation expense related to stock-based awards for the three- and nine-month periods ended June 30, 2016 and 2015 as follows (in thousands): Nine Months Ended Three Months Ended June 30, June 30, 2016 2015 2016 2015 Cost of sales $ $ $ $ Selling, general and administrative $ $ $ $ As of June 30, 2016, there was $37.4 million of unrecognized compensation cost related to unvested RSUs. Based upon the expected forfeitures and the expected vesting of performance based RSUs, the aggregate fair value of RSUs expected to ultimately vest is $21.6 million. This amount is expected to be recognized over a weighted-average period of 1.6 years. We are required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods on a cumulative basis in the period the estimated forfeiture rate changes for all stock-based awards when significant events occur. We consider our historical experience with employee turnover as the basis to arrive at our estimated forfeiture rate. The forfeiture rate was estimated to be 12.5% per year as of June 30, 2016. To the extent the actual forfeiture rate is different from what we have estimated, stock-based compensation related to these awards will be different from our expectations. |
Income Taxes
Income Taxes | 9 Months Ended |
Jun. 30, 2016 | |
Income Taxes | |
Income Taxes | Note 10 – Income Taxes Our effective tax rate for the three months ended June 30, 2016 was 50% as compared to 68% for the year ended September 30, 2015. The effective tax rate for the three months ended June 30, 2016 was lower than the prior full year effective tax rate primarily as a result of the impact of recording a valuation allowance against U.S. deferred taxes during the prior fiscal year. The amount of net unrecognized tax benefits was $9.2 million as of June 30, 2016 and $7.3 million as of September 30, 2015, exclusive of interest and penalties. The increase in net unrecognized tax benefits was primarily related to the impact of timing differences with respect to tax accounting for long term contracts. At June 30, 2016, the amount of net unrecognized tax benefits from permanent tax adjustments that, if recognized, would favorably impact the effective rate was $4.9 million. During the next 12 months, it is reasonably possible that resolution of reviews by taxing authorities, both domestic and international, could be reached with respect to approximately $5.2 million of the net unrecognized tax benefits depending on the timing of examinations and expiration of statute of limitations, either because our tax positions are sustained or because we agree to their disallowance and pay the related income tax. We are subject to ongoing audits from various taxing authorities in the jurisdictions in which we do business. As of June 30, 2016, the years open under the statute of limitations in significant jurisdictions include fiscal years 2012-2015 in the U.S. We believe we have adequately provided for uncertain tax issues that have not yet been resolved with federal, state and foreign tax authorities. On October 1, 2015, we adopted FASB ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes” on a prospective basis. This ASU requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. Adoption of this ASU resulted in a reclassification of our net deferred tax assets and liabilities to the net non-current deferred tax asset in our Condensed Consolidated Balance Sheet for all periods after adoption. No prior periods were retrospectively adjusted. The Company evaluated its net deferred income taxes, which included an assessment of the cumulative income or loss over the prior-three year period and future periods, to determine if a valuation allowance is required. After considering its recent history of U.S. losses, the Company recorded a valuation allowance during fiscal year 2015 on its net U.S. deferred tax assets, with a corresponding charge to its income tax provision of $35.8 million. As of June 30, 2016, the Company maintained a valuation allowance against its U.S. deferred tax assets as realization of such assets does not meet the more-likely-than-not threshold required under accounting guidelines. The Company will continue to assess the need for a valuation allowance on deferred tax assets by evaluating positive and negative evidence that may exist. Through June 30, 2016, a total valuation allowance of $35.2 million has been established for U.S. net deferred tax assets, certain foreign operating losses and other foreign assets. If sufficient positive evidence arises in the future, such as a sustained return to profitability in the U.S., any existing valuation allowance could be reversed as appropriate, decreasing income tax expense in the period that such conclusion is reached. Until the Company re-establishes a pattern of continuing profitability in the U.S. tax jurisdiction, in accordance with the applicable accounting guidance, U.S. income tax expense or benefit related to the recognition of deferred tax assets in the condensed consolidated statement of operations for future periods will be offset by decreases or increases in the valuation allowance with no net effect on the consolidated condensed statement of operations. |
Derivative Instruments and Hedg
Derivative Instruments and Hedging Activities | 9 Months Ended |
Jun. 30, 2016 | |
Derivative Instruments and Hedging Activities | |
Derivative Instruments and Hedging Activities | Note 11 — Derivative Instruments and Hedging Activities In order to manage our exposure to fluctuations in interest and foreign currency exchange rates we utilize derivative financial instruments such as forward starting swaps and foreign currency forwards for periods typically up to three years. We do not use any derivative financial instruments for trading or other speculative purposes. All derivatives are recorded at fair value, however, the classification of gains and losses resulting from changes in the fair values of derivatives are dependent on the intended use of the derivative and its resulting designation. If a derivative is designated as a fair value hedge, then a change in the fair value of the derivative is offset against the change in the fair value of the underlying hedged item and only the ineffective portion of the hedge, if any, is recognized in earnings. If a derivative is designated as a cash flow hedge, then the effective portion of a change in the fair value of the derivative is recognized as a component of accumulated other comprehensive loss until the underlying hedged item is recognized in earnings, or the forecasted transaction is no longer probable of occurring. If a derivative does not qualify as a highly effective hedge, any change in fair value is immediately recognized in earnings. We formally document all hedging relationships for all derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transactions. We classify the fair value of all derivative contracts as current or non- current assets or liabilities, depending on the realized and unrealized gain or loss position of the hedged contract at the balance sheet date, and the timing of future cash flows. The cash flows from derivatives treated as hedges are classified in the Condensed Consolidated Statements of Cash Flows in the same category as the item being hedged. The following table shows the notional principal amounts of our outstanding derivative instruments as of June 30, 2016 and September 30, 2015 (in thousands): Notional Principal June 30, 2016 September 30, 2015 Instruments designated as accounting hedges: Foreign currency forwards $ $ Instruments not designated as accounting hedges: Foreign currency forwards $ $ Included in the amounts not designated as accounting hedges above at June 30, 2016 and September 30, 2015 are foreign currency forwards with notional principal amounts of $102.6 million and $117.8 million, respectively, that have been designed to manage exposure to foreign currency exchange risks, and for which the gains or losses of the changes in fair value of the forwards has approximately offset an equal and opposite amount of gains or losses related to the foreign currency exposure. The notional principal amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of the Company’s exposure to credit or market loss. Credit risk represents the Company’s gross exposure to potential accounting loss on derivative instruments that are outstanding or unsettled if all counterparties failed to perform according to the terms of the contract, based on then-current interest or currency exchange rates at each respective date. The Company’s exposure to credit loss and market risk will vary over time as a function of interest and currency exchange rates. The amount of credit risk from derivative instruments and hedging activities was not material for the periods ended June 30, 2016 and September 30, 2015. Although the table above reflects the notional principal amounts of the Company’s foreign exchange instruments, it does not reflect the gains or losses associated with the exposures and transactions that the foreign exchange instruments are intended to hedge. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments. The Company generally enters into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. The Company presents its derivative assets and derivative liabilities at their gross fair values. The Company did not have any derivative instruments with credit-risk related contingent features that would require it to post collateral as of June 30, 2016 or September 30, 2015. The table below presents the fair value of our derivative financial instruments that qualify for hedge accounting as well as their classification in the Condensed Consolidated Balance Sheets as of June 30, 2016 and September 30, 2015 (in thousands): Fair Value Balance Sheet Location June 30, 2016 September 30, 2015 Asset derivatives: Foreign currency forwards Other current assets $ $ Foreign currency forwards Other noncurrent assets $ $ Liability derivatives: Foreign currency forwards Other current liabilities $ $ Foreign currency forwards Other noncurrent liabilities Total $ $ The tables below present gains and losses recognized in other comprehensive loss for the three and nine months ended June 30, 2016 and 2015 related to derivative financial instruments designated as cash flow hedges, as well as the amount of gains and losses reclassified into earnings during those periods (in thousands): Nine Months Ended June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 Gains (losses) Gains (losses) Gains (losses) reclassified into reclassified into Gains (losses) recognized - Ineffective recognized in earnings - Gains (losses) earnings - Portion and amount excluded from Derivative Type OCI Effective Portion recognized in OCI Effective Portion Location of gain (loss) effectiveness testing Foreign currency forwards $ $ $ $ Other income (expense), net $ $ — Three Months Ended June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 Gains (losses) Gains (losses) Gains (losses) reclassified into reclassified into Gains (losses) recognized - Ineffective recognized in earnings - Gains (losses) earnings - Portion and amount excluded from Derivative Type OCI Effective Portion recognized in OCI Effective Portion Location of gain (loss) effectiveness testing Foreign currency forwards $ $ $ $ Other income (expense), net $ $ — The amount of gains and losses from derivative instruments and hedging activities classified as not highly effective did not have a material impact on the results of operations for the three and nine months ended June 30, 2016 and 2015. The amount of estimated unrealized net gains from cash flow hedges which are expected to be reclassified to earnings in the next twelve months is $0.7 million, net of income taxes. |
Segment Information
Segment Information | 9 Months Ended |
Jun. 30, 2016 | |
Segment Information | |
Segment Information | Note 12 — Segment Information Business segment financial data is as follows (in millions): Nine Months Ended Three Months Ended June 30, June 30, 2016 2015 2016 2015 Sales: Cubic Transportation Systems $ $ $ $ Cubic Global Defense Systems Cubic Global Defense Services Total sales $ $ $ $ Operating income (loss): Cubic Transportation Systems $ $ $ $ Cubic Global Defense Systems Cubic Global Defense Services Unallocated corporate expenses and other Total operating income (loss) $ $ $ $ Depreciation and amortization: Cubic Transportation Systems $ $ $ $ Cubic Global Defense Systems Cubic Global Defense Services Corporate and other Total depreciation and amortization $ $ $ $ Unallocated corporate expenses include expense related to the development of our ERP system for costs that did not meet the requirements for capitalization of $ 5.1 million and $ 17.1 million for the three and nine months ended June 30, 2016, respectively compared to $ 4.7 million and $ 6.6 million for the three and nine months ended June 30, 2015, respectively. Changes in estimates on contracts for which revenue is recognized using the cost-to-cost-percentage-of-completion method increased operating income by $0.2 million and decreased operating income by $3.1 million for the three and nine months ended June 30, 2016, respectively, and had no impact on operating income for the three months ended June 30, 2015 and decreased operating income by $13.8 million for the nine months ended June 30, 2015. These adjustments increased net income by $0.1 million (no impact to diluted shares) and decreased net income by $1.8 million ($0.07 per share) for the three and nine months ended June 30, 2016, and increased net income by $0.3 million ($0.01 per share) for the three months ended June 30, 2015 and decreased net income by $10.7 million ($0.40 per share) for the nine months ended June 30, 2015, respectively. |
Legal Matters
Legal Matters | 9 Months Ended |
Jun. 30, 2016 | |
Legal Matters | |
Legal Matters | Note 13 — Legal Matters In October 2014, a lawsuit was filed in the United States District Court, Northern District of Illinois against us and one of our transit customers alleging infringement of various patents held by the plaintiff. We are investigating the matter and plan to vigorously defend the lawsuit. We are also undertaking defense of our customer in this matter pursuant to our contractual obligations to that customer. Due to the preliminary nature of this case, we cannot estimate the probability of loss or any range of estimate of possible loss. We are not a party to any other material pending proceedings and we consider all other matters to be ordinary proceedings incidental to the business. We believe the outcome of these other proceedings will not have a materially adverse effect on our financial position, results of operations, or cash flows. |
Restructuring Costs
Restructuring Costs | 9 Months Ended |
Jun. 30, 2016 | |
Restructuring Costs | |
Restructuring Costs | Note 14 — Restructuring Costs In 2015 and 2016 we conducted a number of restructuring initiatives. In February 2015, we incurred restructuring costs of $5.4 million in connection with the combination of our defense services and defense systems businesses into a single business called Cubic Global Defense to better align our defense business organizational structure with customer requirements, increase operational efficiencies and improve collaboration and innovation across the Company. In the third quarter of fiscal 2016 our CGD-Systems and CGD-Services segments incurred cumulative restructuring costs of $0. 9 million in connection with the formalization of Cubic Mission Solutions (CMS), a business division within our CGD Systems segment that includes our C4ISR subsidiaries and product offerings. In addition, during the third quarter of fiscal 2016, our CTS business implemented a restructuring plan to reduce headcount by approximately 20 in order to rebalance our resources with work levels. CTS incurred resulting restructuring charges of $0.8 million in connection with this initiative. The total costs of each of these restructuring plans are not expected to be significantly greater than the charges incurred to date . Restructuring charges (reversals) incurred by business segment were as follows (in millions): Nine Months Ended Three Months Ended June 30, June 30, 2016 2015 2016 2015 Restructuring costs (reversals): Cubic Transportation Systems $ $ $ $ Cubic Global Defense Systems Cubic Global Defense Services Unallocated corporate expenses and other — — Total restructuring costs (reversals) $ $ $ $ The following table presents a rollforward of our restructuring liability as of June 30, 2016, which is included within accrued compensation and other current liabilities within our Condensed Consolidated Balance Sheets (in millions): Employee Separation Liability as of September 30, 2015 $ Accrued costs Cash payments Liability as of June 30, 2016 $ Certain restructuring costs are based upon estimates. Actual amounts paid may ultimately differ from these estimates. If additional costs are incurred or recognized amounts exceed costs, such changes in estimates will be recognized when incurred. |
Basis for Presentation (Policie
Basis for Presentation (Policies) | 9 Months Ended |
Jun. 30, 2016 | |
Basis for Presentation | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance and will require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. ASU 2014-09 will be effective for us starting in the first quarter of fiscal 2019 or the guidance gives us the option of adopting ASU 2014-09 early, in the first quarter of 2018. ASU 2014-09 allows for two methods of adoption: (a) “full retrospective” adoption, meaning the standard is applied to all periods presented, or (b) “modified retrospective” adoption, meaning the cumulative effect of applying ASU 2014-09 is recognized as an adjustment to the opening retained earnings balance in the year of adoption. We do not intend to adopt the standard early and we have not yet determined which method of adoption we will select. As the new standard will supersede substantially all existing revenue guidance affecting us under GAAP, it could impact revenue and cost recognition on a significant number of contracts across our business segments, in addition to our business processes and our information technology systems. As a result, our evaluation of the effect of the new standard will likely extend over several future periods. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern, which requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and provide related footnote disclosures. ASU 2014-15 will be effective for us for the year ended September 30, 2017 and for interim reporting periods thereafter. Early adoption is permitted for financial statements that have not been previously issued, but we have not yet adopted this standard. This adoption is not expected to have a significant impact on our financial statements. In April 2015, the FASB issued ASU 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement . ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. ASU 2015-05 will be effective for the Company beginning on October 1, 2016, with early adoption permitted. We are currently assessing the impact that adopting this new accounting guidance will have on our consolidated financial statements. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs which requires that all costs incurred to issue debt be presented in the balance sheet as a direct reduction from the carrying value of the debt, similar to the presentation of debt discounts. ASU 2015-03 is effective for us on October 1, 2016 with early adoption permitted. We do not expect that the adoption of this new accounting guidance will have a material impact on our consolidated financial statements. In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes which removes the requirement to separate deferred tax liabilities and assets into current and noncurrent amounts and instead requires all such amounts be classified as noncurrent on the balance sheet. We adopted ASU 2015-17 prospectively on October 1, 2015 and reclassified the current portion of our net deferred tax assets and liabilities to net noncurrent deferred tax assets and liabilities. No prior periods were retrospectively adjusted. In January 2016, the FASB issued Accounting Standards Update ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10) which updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 will be effective for us beginning October 1, 2018 and, with the exception of a specific portion of the amendment, early adoption is not permitted. We are currently evaluating the impact this guidance will have on our financial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases . Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The ASU will be effective for us beginning October 1, 2019 with early adoption permitted. We are currently evaluating the impact of the application of this accounting standard update on our consolidated financial statements as well as whether to adopt the new guidance early. In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation . The new guidance simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this standard are effective for our annual year and first fiscal quarter beginning on October 1, 2017 with early adoption is permitted. We are currently evaluating the impact of the application of this accounting standard update on our consolidated financial statements as well as whether to adopt the new guidance early. |
Acquisitions (Tables)
Acquisitions (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Acquisitions | |
Schedule of changes in the carrying amount of goodwill | Changes in goodwill for the nine months ended June 30, 2016 were as follows (in millions): Cubic Global Cubic Global Transportation Defense Defense Systems Systems Services Total Balances at September 30, 2015 $ $ $ $ Acquisitions — — Foreign currency exchange rate changes — Balances at June 30, 2016 $ $ $ $ |
Schedule of unaudited pro forma information | The following unaudited pro forma information presents our consolidated results of operations as if GATR, TeraLogics, H4 Global and DTECH had been included in our consolidated results since October 1, 2014 (in millions): Nine Months Ended Three Months Ended June 30, June 30, 2016 2015 2016 2015 Net sales $ $ $ $ Net income attributable to Cubic $ $ $ $ |
GATR | |
Acquisitions | |
Schedule of estimated fair values of the assets acquired and liabilities assumed at the acquisition date | The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions): Customer relationships $ Backlog Technology Non-compete agreements Trade name Accounts receivable Inventory Income tax receivable Accounts payable and accrued expenses Deferred tax liabilities Other net assets acquired (liabilities assumed) Net identifiable assets acquired Goodwill Net assets acquired $ |
Schedule of estimated amortization expense related to acquisition | The estimated amortization expense related to the intangible assets recorded in connection with our acquisition of GATR for fiscal years 2016 through 2020 and thereafter is as follows (in millions): Year Ended September 30, 2016 $ 2017 2018 2019 2020 Thereafter |
TeraLogics | |
Acquisitions | |
Schedule of estimated fair values of the assets acquired and liabilities assumed at the acquisition date | The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions): Customer relationships $ Backlog Software Non compete agreements Accounts receivable Accounts payable and accrued expenses Other net assets acquired (liabilities assumed) Net identifiable assets acquired Goodwill Net assets acquired $ |
Schedule of estimated amortization expense related to acquisition | The estimated amortization expense amounts related to the intangible assets recorded in connection with our acquisition of TeraLogics for fiscal years 2016 through 2020 and thereafter is as follows (in millions): Year Ended September 30, 2016 $ 2017 2018 2019 2020 Thereafter |
DTECH | |
Acquisitions | |
Schedule of estimated fair values of the assets acquired and liabilities assumed at the acquisition date | The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions): Customer relationships $ Non-compete agreements Backlog Cash Accounts receivable Inventory Warranty obligation Tax liabilities Accounts payable and accrued expenses Other net assets acquired Net identifiable assets acquired Goodwill Net assets acquired $ |
Schedule of estimated amortization expense related to acquisition | The estimated amortization expense amounts related to the intangible assets recorded in connection with our acquisition of DTECH for fiscal years 2016 through 2020 and thereafter is as follows (in millions): Year Ended September 30, 2016 $ 8.0 2017 6.8 2018 5.5 2019 4.1 2020 2.8 Thereafter 1.5 |
Net Income Per Share (Tables)
Net Income Per Share (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Net Income Per Share | |
Schedule of computation of basic and diluted EPS | Basic and diluted EPS are computed as follows (amounts in thousands, except per share data). Nine Months Ended Three Months Ended June 30, June 30, 2016 2015 2016 2015 Net income attributable to Cubic $ $ $ $ Weighted average shares - basic Effect of dilutive securities Weighted average shares - diluted Net income per share attributable to Cubic, basic $ $ $ $ Effect of dilutive securities — — — — Net income per share attributable to Cubic, diluted $ $ $ $ Anti-dilutive employee share-based awards — — — — |
Balance Sheet Details (Tables)
Balance Sheet Details (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Balance Sheet Details | |
Schedule of components of accounts receivable | The components of accounts receivable are as follows (in thousands): June 30, September 30, 2016 2015 Trade and other receivables $ $ Long-term contracts: Billed Unbilled Allowance for doubtful accounts Total accounts receivable Less estimated amounts not currently due Current accounts receivable $ $ |
Components of inventories | Inventories consist of the following (in thousands): June 30, September 30, 2016 2015 Finished products $ $ Work in process and inventoried costs under long-term contracts Materials and purchased parts Customer advances Net inventories $ $ |
Fair Value of Financial Instr24
Fair Value of Financial Instruments (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Fair Value of Financial Instruments | |
Summary of change in fair value of liability | As of June 30, 2016, the following table summarizes the change in fair value of our Level 3 contingent consideration liability (in thousands): DTECH H4 TeraLogics (Contract Extensions) TeraLogics (Revenue Targets) GATR Total Balance as of September 30, 2015 $ $ — $ — $ — $ — $ Initial measurement recognized at acquisition — — Cash paid to seller — — — — Total remeasurement recognized in earnings — — — — Balance as of December 31, 2015 $ $ $ $ $ — $ Initial measurement recognized at acquisition — — — — Adjustment to the provisional acquisition date valuation — — — Total remeasurement recognized in earnings Balance as of March 31, 2016 $ $ $ $ $ $ Total remeasurement recognized in earnings Balance as of June 30, 2016 $ $ $ $ $ $ |
Summary of assets and liabilities measured and recorded at fair value on Balance Sheet on a recurring basis | The following table presents assets and liabilities measured and recorded at fair value on our balance sheets on a recurring basis (in thousands): June 30, 2016 Level 1 Level 2 Level 3 Total Assets Cash equivalents $ $ $ — $ Marketable securities — — Current derivative assets — — Noncurrent derivative assets — — Marketable securities in rabbi trust — — Total assets measured at fair value $ $ $ — $ Liabilities Current derivative liabilities $ — $ $ — $ Noncurrent derivative liabilities — — Contingent consideration to seller of GATR — — Contingent consideration to seller of TeraLogics - contract extensions — — Contingent consideration to seller of TeraLogics - revenue targets — — Contingent consideration to seller of H4 Global — — Contingent consideration to seller of DTECH — — Total liabilities measured at fair value $ — $ $ $ September 30, 2015 Level 1 Level 2 Level 3 Total Assets Cash equivalents $ $ — $ — $ Marketable securities — — Current derivative assets — — Noncurrent derivative assets — — Marketable securities in rabbi trust — — Total assets measured at fair value $ $ $ — $ Liabilities Current derivative liabilities $ — $ $ — $ Noncurrent derivative liabilities — — Contingent consideration to seller of DTECH — — Total liabilities measured at fair value $ — $ $ $ |
Schedule of estimated fair value and carrying value of our long-term debt | The following table presents the estimated fair value and carrying value of our long-term debt (in millions): June 30, September 30, 2016 2015 Fair value $ $ Carrying value $ $ |
Pension Plans (Tables)
Pension Plans (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Pension Plans | |
Components of net periodic pension cost (benefit) | The components of net periodic pension cost (benefit) are as follows (in thousands): Nine Months Ended Three Months Ended June 30, June 30, 2016 2015 2016 2015 Service cost $ $ $ $ Interest cost Expected return on plan assets Amortization of actuarial loss Administrative expenses Net pension benefit $ $ $ $ |
Stockholders_ Equity (Tables)
Stockholders’ Equity (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Stockholders' Equity | |
Summary of RSU activity | The following table summarizes our RSU activity: Unvested Restricted Stock Units Weighted-Average Number of Shares Grant-Date Fair Value Unvested at September 30, 2015 $ Granted Vested Forfeited Unvested at June 30, 2016 $ |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Stock-Based Compensation | |
Schedule of stock-based compensation expense related to stock-based awards | We recorded non-cash compensation expense related to stock-based awards for the three- and nine-month periods ended June 30, 2016 and 2015 as follows (in thousands): Nine Months Ended Three Months Ended June 30, June 30, 2016 2015 2016 2015 Cost of sales $ $ $ $ Selling, general and administrative $ $ $ $ |
Derivative Instruments and He28
Derivative Instruments and Hedging Activities (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Derivative Instruments and Hedging Activities | |
Schedule of notional principal amounts of the outstanding derivative instruments | The following table shows the notional principal amounts of our outstanding derivative instruments as of June 30, 2016 and September 30, 2015 (in thousands): Notional Principal June 30, 2016 September 30, 2015 Instruments designated as accounting hedges: Foreign currency forwards $ $ Instruments not designated as accounting hedges: Foreign currency forwards $ $ |
Schedule of fair value of derivative financial instruments | The table below presents the fair value of our derivative financial instruments that qualify for hedge accounting as well as their classification in the Condensed Consolidated Balance Sheets as of June 30, 2016 and September 30, 2015 (in thousands): Fair Value Balance Sheet Location June 30, 2016 September 30, 2015 Asset derivatives: Foreign currency forwards Other current assets $ $ Foreign currency forwards Other noncurrent assets $ $ Liability derivatives: Foreign currency forwards Other current liabilities $ $ Foreign currency forwards Other noncurrent liabilities Total $ $ |
Schedule of gains and losses recognized in other comprehensive loss on derivative financial instruments designated as cash flow hedges | The tables below present gains and losses recognized in other comprehensive loss for the three and nine months ended June 30, 2016 and 2015 related to derivative financial instruments designated as cash flow hedges, as well as the amount of gains and losses reclassified into earnings during those periods (in thousands): Nine Months Ended June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 Gains (losses) Gains (losses) Gains (losses) reclassified into reclassified into Gains (losses) recognized - Ineffective recognized in earnings - Gains (losses) earnings - Portion and amount excluded from Derivative Type OCI Effective Portion recognized in OCI Effective Portion Location of gain (loss) effectiveness testing Foreign currency forwards $ $ $ $ Other income (expense), net $ $ — Three Months Ended June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015 Gains (losses) Gains (losses) Gains (losses) reclassified into reclassified into Gains (losses) recognized - Ineffective recognized in earnings - Gains (losses) earnings - Portion and amount excluded from Derivative Type OCI Effective Portion recognized in OCI Effective Portion Location of gain (loss) effectiveness testing Foreign currency forwards $ $ $ $ Other income (expense), net $ $ — |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Segment Information | |
Schedule of business segment financial data | Business segment financial data is as follows (in millions): Nine Months Ended Three Months Ended June 30, June 30, 2016 2015 2016 2015 Sales: Cubic Transportation Systems $ $ $ $ Cubic Global Defense Systems Cubic Global Defense Services Total sales $ $ $ $ Operating income (loss): Cubic Transportation Systems $ $ $ $ Cubic Global Defense Systems Cubic Global Defense Services Unallocated corporate expenses and other Total operating income (loss) $ $ $ $ Depreciation and amortization: Cubic Transportation Systems $ $ $ $ Cubic Global Defense Systems Cubic Global Defense Services Corporate and other Total depreciation and amortization $ $ $ $ |
Restructuring Costs (Tables)
Restructuring Costs (Tables) | 9 Months Ended |
Jun. 30, 2016 | |
Restructuring Costs | |
Schedule Of Restructuring Charges | Restructuring charges (reversals) incurred by business segment were as follows (in millions): Nine Months Ended Three Months Ended June 30, June 30, 2016 2015 2016 2015 Restructuring costs (reversals): Cubic Transportation Systems $ $ $ $ Cubic Global Defense Systems Cubic Global Defense Services Unallocated corporate expenses and other — — Total restructuring costs (reversals) $ $ $ $ |
Summary of the activity relating to the restructuring liability and employee separation expenses | The following table presents a rollforward of our restructuring liability as of June 30, 2016, which is included within accrued compensation and other current liabilities within our Condensed Consolidated Balance Sheets (in millions): Employee Separation Liability as of September 30, 2015 $ Accrued costs Cash payments Liability as of June 30, 2016 $ |
Acquisitions (Details)
Acquisitions (Details) - USD ($) $ in Thousands | Feb. 02, 2016 | Dec. 21, 2015 | Nov. 04, 2015 | Dec. 16, 2014 | Dec. 31, 2015 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2016 | Jun. 30, 2015 | Sep. 30, 2015 |
Acquisitions | |||||||||||||
Net sales | $ 375,240 | $ 347,806 | $ 1,055,077 | $ 1,005,128 | |||||||||
Net income | 4,498 | 8,786 | 9,228 | 2,937 | |||||||||
Amortization of purchased intangibles | 9,666 | 6,606 | 24,620 | 21,035 | |||||||||
Purchase price allocation | |||||||||||||
Goodwill | 406,249 | $ 406,249 | 406,249 | $ 237,899 | |||||||||
GATR | |||||||||||||
Acquisitions | |||||||||||||
Net sales | 9,300 | 18,600 | |||||||||||
Net income | (8,200) | (20,600) | |||||||||||
Compensation expense paid | $ 18,500 | ||||||||||||
Compensation expense not expected to be deductible for tax purposes | $ 15,400 | ||||||||||||
Amortization of purchased intangibles | 3,600 | 6,000 | |||||||||||
Transaction and acquisition related costs | 500 | ||||||||||||
Change in fair value of contingent consideration | 600 | 700 | |||||||||||
Cash consideration paid | $ 231,300 | ||||||||||||
Contingent Amount | 2,500 | ||||||||||||
Additional cash consideration accelerated if certain event occurs | 5,200 | ||||||||||||
Cash paid related to compensation expenses | $ 17,700 | ||||||||||||
Contingent consideration paid based upon contracts entered period | 12 months | ||||||||||||
Purchase price allocation | |||||||||||||
Accounts receivable | $ 10,600 | ||||||||||||
Inventory | 3,400 | ||||||||||||
Income tax receivable | 5,500 | ||||||||||||
Deferred tax liabilities | (22,200) | ||||||||||||
Accounts payable and accrued expenses | (2,400) | ||||||||||||
Other net liabilities assumed | (100) | ||||||||||||
Net identifiable assets acquired | 66,500 | ||||||||||||
Goodwill | 154,700 | ||||||||||||
Net assets acquired | $ 221,200 | ||||||||||||
Weighted average useful life of intangible assets | 9 years | ||||||||||||
Estimated amortization expense related to the intangible assets | |||||||||||||
2,016 | 9,700 | 9,700 | 9,700 | ||||||||||
2,017 | 12,700 | 12,700 | 12,700 | ||||||||||
2,018 | 11,100 | 11,100 | 11,100 | ||||||||||
2,019 | 9,800 | 9,800 | 9,800 | ||||||||||
2,020 | 8,300 | 8,300 | 8,300 | ||||||||||
Thereafter | 20,100 | 20,100 | 20,100 | ||||||||||
GATR | Maximum | |||||||||||||
Acquisitions | |||||||||||||
Contingent consideration paid based upon the value of contracts entered | $ 7,500 | ||||||||||||
GATR | Customer relationships | |||||||||||||
Purchase price allocation | |||||||||||||
Amortizable intangible assets | 51,700 | ||||||||||||
GATR | Backlog | |||||||||||||
Purchase price allocation | |||||||||||||
Amortizable intangible assets | 3,400 | ||||||||||||
GATR | Technology | |||||||||||||
Purchase price allocation | |||||||||||||
Amortizable intangible assets | 10,700 | ||||||||||||
GATR | Non-compete agreements | |||||||||||||
Purchase price allocation | |||||||||||||
Amortizable intangible assets | 1,200 | ||||||||||||
GATR | Trade names | |||||||||||||
Purchase price allocation | |||||||||||||
Amortizable intangible assets | $ 4,700 | ||||||||||||
TeraLogics | |||||||||||||
Acquisitions | |||||||||||||
Net sales | 4,200 | 8,000 | |||||||||||
Net income | (200) | (1,400) | |||||||||||
Compensation expense paid | $ 1,300 | ||||||||||||
Amortization of purchased intangibles | 1,000 | 2,000 | |||||||||||
Transaction and acquisition related costs | 900 | 900 | |||||||||||
Cash consideration paid | $ 28,900 | ||||||||||||
Contingent Amount | 5,000 | ||||||||||||
Fair value of consideration transferred | 9,000 | ||||||||||||
Purchase price allocation | |||||||||||||
Accounts receivable | 1,400 | ||||||||||||
Accounts payable and accrued expenses | (500) | ||||||||||||
Other net liabilities assumed | (100) | ||||||||||||
Net identifiable assets acquired | 15,700 | ||||||||||||
Goodwill | 18,200 | ||||||||||||
Net assets acquired | $ 33,900 | ||||||||||||
Weighted average useful life of intangible assets | 7 years | ||||||||||||
Estimated amortization expense related to the intangible assets | |||||||||||||
2,016 | 3,000 | 3,000 | 3,000 | ||||||||||
2,017 | 3,500 | 3,500 | 3,500 | ||||||||||
2,018 | 2,800 | 2,800 | 2,800 | ||||||||||
2,019 | 2,100 | 2,100 | 2,100 | ||||||||||
2,020 | 1,400 | 1,400 | 1,400 | ||||||||||
Thereafter | 2,100 | 2,100 | 2,100 | ||||||||||
TeraLogics | Maximum | |||||||||||||
Acquisitions | |||||||||||||
Additional cash consideration accelerated if certain event occurs | $ 6,000 | ||||||||||||
Fair value of the potential customer | 3,000 | ||||||||||||
TeraLogics | Customer relationships | |||||||||||||
Purchase price allocation | |||||||||||||
Amortizable intangible assets | 6,700 | ||||||||||||
TeraLogics | Backlog | |||||||||||||
Purchase price allocation | |||||||||||||
Amortizable intangible assets | 5,600 | ||||||||||||
TeraLogics | Software | |||||||||||||
Purchase price allocation | |||||||||||||
Amortizable intangible assets | 2,500 | ||||||||||||
TeraLogics | Non-compete agreements | |||||||||||||
Purchase price allocation | |||||||||||||
Amortizable intangible assets | $ 100 | ||||||||||||
H4 Global | |||||||||||||
Acquisitions | |||||||||||||
Net sales | 800 | 1,400 | |||||||||||
Net income | 100 | 100 | |||||||||||
Transaction and acquisition related costs | $ 100 | ||||||||||||
Cash consideration paid | $ 900 | ||||||||||||
Contingent Amount | 1,000 | ||||||||||||
Fair value of consideration transferred | $ 1,900 | ||||||||||||
Contingent consideration paid based upon contracts entered period | 5 years | ||||||||||||
Purchase price allocation | |||||||||||||
Goodwill | $ 1,900 | ||||||||||||
H4 Global | Maximum | |||||||||||||
Acquisitions | |||||||||||||
Contingent consideration paid based upon the value of contracts entered | $ 4,100 | ||||||||||||
DTECH | |||||||||||||
Acquisitions | |||||||||||||
Net sales | 6,200 | 10,800 | 15,400 | 22,600 | |||||||||
Net income | (400) | (200) | (4,000) | (2,000) | |||||||||
Amortization of purchased intangibles | 1,900 | $ 2,200 | 6,100 | 6,900 | |||||||||
Transaction and acquisition related costs | $ 800 | ||||||||||||
Cash consideration paid | 96,300 | ||||||||||||
Fair value of consideration transferred | $ 99,400 | ||||||||||||
Additional cash consideration accelerated if certain event occurs | 4,700 | ||||||||||||
Fair value of the potential customer | 4,400 | 4,400 | 4,400 | ||||||||||
Fair value of contingent consideration | 400 | 2,300 | |||||||||||
Cost of acquisition net | 99,500 | ||||||||||||
Contingent consideration paid based upon the value of contracts entered | $ 5,000 | ||||||||||||
Estimated fair value of the liability for contingent consideration | 3,900 | 4,700 | 4,700 | 4,700 | |||||||||
Fair value of additional cash consideration due to the seller, including the Holdback Consideration and contingent consideration | 9,100 | 9,100 | 9,100 | ||||||||||
Purchase price allocation | |||||||||||||
Cash | 900 | ||||||||||||
Accounts receivable | 5,400 | ||||||||||||
Inventory | 4,200 | ||||||||||||
Warranty obligation | (400) | ||||||||||||
Deferred tax liabilities | (3,300) | ||||||||||||
Accounts payable and accrued expenses | (3,400) | ||||||||||||
Other net assets acquired | 200 | ||||||||||||
Net identifiable assets acquired | 41,500 | ||||||||||||
Goodwill | 57,900 | ||||||||||||
Net assets acquired | $ 99,400 | ||||||||||||
Weighted average useful life of intangible assets | 7 years | ||||||||||||
Estimated amortization expense related to the intangible assets | |||||||||||||
2,016 | 8,000 | 8,000 | 8,000 | ||||||||||
2,017 | 6,800 | 6,800 | 6,800 | ||||||||||
2,018 | 5,500 | 5,500 | 5,500 | ||||||||||
2,019 | 4,100 | 4,100 | 4,100 | ||||||||||
2,020 | 2,800 | 2,800 | 2,800 | ||||||||||
Thereafter | $ 1,500 | $ 1,500 | $ 1,500 | ||||||||||
DTECH | Maximum | |||||||||||||
Acquisitions | |||||||||||||
Contingent Amount | $ 15,000 | ||||||||||||
DTECH | Customer relationships | |||||||||||||
Purchase price allocation | |||||||||||||
Amortizable intangible assets | 35,100 | ||||||||||||
DTECH | Backlog | |||||||||||||
Purchase price allocation | |||||||||||||
Amortizable intangible assets | 2,100 | ||||||||||||
DTECH | Non-compete agreements | |||||||||||||
Purchase price allocation | |||||||||||||
Amortizable intangible assets | $ 700 |
Acquisitions - Goodwill and Pro
Acquisitions - Goodwill and Pro forma information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Changes in the carrying amount of goodwill | ||||
Balance at the beginning of the period | $ 237,899 | |||
Acquisitions | 173,600 | |||
Foreign currency exchange rate changes | (5,300) | |||
Balance at the end of the period | $ 406,249 | 406,249 | ||
Unaudited pro forma information | ||||
Net sales | 375,200 | $ 367,000 | 1,075,100 | $ 1,061,700 |
Net income attributable to Cubic | 4,500 | 8,800 | 8,300 | 2,500 |
Adjustments made for transaction expenses | 0 | $ 0 | 0 | $ 0 |
Cubic Transportation Systems | ||||
Changes in the carrying amount of goodwill | ||||
Balance at the beginning of the period | 56,000 | |||
Foreign currency exchange rate changes | (5,400) | |||
Balance at the end of the period | 50,600 | 50,600 | ||
Cubic Global Defense Systems | ||||
Changes in the carrying amount of goodwill | ||||
Balance at the beginning of the period | 87,500 | |||
Acquisitions | 173,600 | |||
Foreign currency exchange rate changes | 100 | |||
Balance at the end of the period | 261,200 | 261,200 | ||
Cubic Global Defense Services | ||||
Changes in the carrying amount of goodwill | ||||
Balance at the beginning of the period | 94,400 | |||
Balance at the end of the period | $ 94,400 | $ 94,400 |
Net Income Per Share (Details)
Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Net Income Per Share | ||||
Net income attributable to Cubic | $ 4,498 | $ 8,780 | $ 9,228 | $ 2,908 |
Weighted average shares - basic | 26,977 | 26,883 | 26,971 | 26,868 |
Effect of dilutive securities (in shares) | 81 | 77 | 39 | 57 |
Weighted average shares - diluted | 27,058 | 26,960 | 27,010 | 26,925 |
Net income per share, basic (in dollars per share) | $ 0.17 | $ 0.33 | $ 0.34 | $ 0.11 |
Net income per share attributable to Cubic, diluted (in dollars per share) | $ 0.17 | $ 0.33 | $ 0.34 | $ 0.11 |
Anti-dilutive employee share-based awards | 0 | 0 | 0 | 0 |
Balance Sheet Details (Details)
Balance Sheet Details (Details) - USD ($) $ in Thousands | Apr. 01, 2016 | Jun. 30, 2016 | Jun. 30, 2015 | Mar. 31, 2016 | Jun. 30, 2016 | Jun. 30, 2015 | Sep. 30, 2015 |
Marketable Securities | |||||||
Realized or unrealized gains or losses on marketable securities | $ 0 | ||||||
Accounts Receivable | |||||||
Trade and other receivables | $ 12,286 | 12,286 | $ 12,812 | ||||
Long-term contracts: | |||||||
Billed | 139,932 | 139,932 | 127,462 | ||||
Unbilled | 245,763 | 245,763 | 255,639 | ||||
Allowance for doubtful accounts | (179) | (179) | (179) | ||||
Total accounts receivable | 397,802 | 397,802 | 395,734 | ||||
Less estimated amounts not currently due | (21,755) | (21,755) | (36,809) | ||||
Current accounts receivable | 376,047 | $ 376,047 | 358,925 | ||||
Period that receivables will not be collected within to be classified as not currently due | 1 year | ||||||
Inventories | |||||||
Finished products | 2,228 | $ 2,228 | 644 | ||||
Work in process and inventoried costs under long-term contracts | 75,886 | 75,886 | 66,293 | ||||
Materials and purchased parts | 2,962 | 2,962 | 2,733 | ||||
Customer advances | (16,273) | (16,273) | (5,970) | ||||
Net inventories | 64,803 | 64,803 | 63,700 | ||||
Costs incurred outside the scope of work or in advance of a contract award | 2,000 | 2,000 | 1,900 | ||||
Long-term Capitalized Costs | |||||||
Long-term capitalized costs being recognized as cost of sales | 2,200 | $ 2,300 | 6,500 | $ 6,000 | |||
Deferred Compensation Plan | |||||||
Deferred compensation | 10,600 | 10,600 | 9,900 | ||||
Carrying value of Rabbi trust to fund deferred compensation liabilities | 3,000 | 3,000 | 2,900 | ||||
Carrying value of insurance contracts | 2,700 | 2,700 | 1,900 | ||||
Carrying value of marketable securities | 300 | 300 | $ 1,000 | ||||
Software | |||||||
Capitalized Software | |||||||
Capitalized software, net | 30,700 | $ 30,700 | |||||
Addition to capitalized software expenses | $ 14,700 | ||||||
Software | Maximum | |||||||
Capitalized Software | |||||||
Estimated useful life | P7Y | ||||||
Software | Minimum | |||||||
Capitalized Software | |||||||
Estimated useful life | P3Y | ||||||
ERP | |||||||
Capitalized Software | |||||||
Estimated useful life | P7Y | ||||||
Capitalized software, net | $ 28,400 | ||||||
Addition to capitalized software expenses | 4,300 | ||||||
Software development expense | $ 5,100 | $ 4,700 | $ 17,100 | $ 6,600 |
Fair Value of Financial Instr35
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Feb. 02, 2016 | Dec. 21, 2015 | Nov. 04, 2015 | Dec. 16, 2014 | Dec. 31, 2015 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Jun. 30, 2016 | Sep. 30, 2015 |
Assets and liabilities measured at fair value on a recurring basis | ||||||||||
Contingent consideration payments related to acquisitions of businesses | $ (1,679) | |||||||||
DTECH | ||||||||||
Assets and liabilities measured at fair value on a recurring basis | ||||||||||
Volatility earning metrics | 22.00% | 20.00% | ||||||||
Initial measurement recognized at acquisition | $ 99,400 | |||||||||
Cash paid to seller | $ (5,000) | |||||||||
H4 Global | ||||||||||
Assets and liabilities measured at fair value on a recurring basis | ||||||||||
Contingent consideration paid based upon contracts entered period | 5 years | |||||||||
Initial measurement recognized at acquisition | $ 1,900 | |||||||||
TeraLogics | ||||||||||
Assets and liabilities measured at fair value on a recurring basis | ||||||||||
Volatility earning metrics | 18.00% | |||||||||
Initial measurement recognized at acquisition | $ 9,000 | |||||||||
GATR | ||||||||||
Assets and liabilities measured at fair value on a recurring basis | ||||||||||
Volatility earning metrics | 18.00% | |||||||||
Contingent consideration paid based upon contracts entered period | 12 months | |||||||||
Change in fair value of contingent consideration | $ 600 | $ 700 | ||||||||
Level 2 | ||||||||||
Debt instruments | ||||||||||
Fair Value | 208,200 | 208,200 | $ 125,800 | |||||||
Carrying value | 201,200 | 201,200 | 126,700 | |||||||
Level 3 | ||||||||||
Assets and liabilities measured at fair value on a recurring basis | ||||||||||
Balance at the Beginning period | 12,699 | $ 10,018 | $ 7,507 | 7,507 | ||||||
Initial measurement recognized at acquisition | 2,500 | 6,702 | ||||||||
Cash paid to seller | (5,000) | |||||||||
Adjustment to the provisional acquisition date valuation | (716) | |||||||||
Total remeasurement recognized in earnings | 1,050 | 897 | 809 | |||||||
Balance at the ending period | 10,018 | 13,749 | 12,699 | 10,018 | 13,749 | 7,507 | ||||
Level 3 | DTECH | ||||||||||
Assets and liabilities measured at fair value on a recurring basis | ||||||||||
Balance at the Beginning period | 4,400 | 3,316 | 7,507 | 7,507 | ||||||
Cash paid to seller | (5,000) | |||||||||
Total remeasurement recognized in earnings | 300 | 1,084 | 809 | |||||||
Balance at the ending period | 3,316 | 4,700 | 4,400 | 3,316 | 4,700 | 7,507 | ||||
Level 3 | H4 Global | ||||||||||
Assets and liabilities measured at fair value on a recurring basis | ||||||||||
Balance at the Beginning period | 799 | 1,602 | ||||||||
Initial measurement recognized at acquisition | 1,602 | |||||||||
Adjustment to the provisional acquisition date valuation | (616) | |||||||||
Total remeasurement recognized in earnings | (50) | (187) | ||||||||
Balance at the ending period | 1,602 | 749 | 799 | 1,602 | 749 | |||||
Level 3 | GATR | ||||||||||
Assets and liabilities measured at fair value on a recurring basis | ||||||||||
Balance at the Beginning period | 2,600 | |||||||||
Initial measurement recognized at acquisition | 2,500 | |||||||||
Total remeasurement recognized in earnings | 600 | 100 | ||||||||
Balance at the ending period | 3,200 | 2,600 | 3,200 | |||||||
Level 3 | Contract Extensions | TeraLogics | ||||||||||
Assets and liabilities measured at fair value on a recurring basis | ||||||||||
Balance at the Beginning period | 2,000 | 2,000 | ||||||||
Initial measurement recognized at acquisition | 2,000 | |||||||||
Adjustment to the provisional acquisition date valuation | (100) | |||||||||
Total remeasurement recognized in earnings | 100 | 100 | ||||||||
Balance at the ending period | 2,000 | 2,100 | 2,000 | 2,000 | 2,100 | |||||
Level 3 | Revenue Targets | TeraLogics | ||||||||||
Assets and liabilities measured at fair value on a recurring basis | ||||||||||
Balance at the Beginning period | 2,900 | 3,100 | ||||||||
Initial measurement recognized at acquisition | 3,100 | |||||||||
Total remeasurement recognized in earnings | 100 | (200) | ||||||||
Balance at the ending period | $ 3,100 | 3,000 | $ 2,900 | $ 3,100 | 3,000 | |||||
Assets and liabilities measured at fair value | ||||||||||
Assets | ||||||||||
Cash equivalents | 63,161 | 63,161 | 68,194 | |||||||
Marketable securities | 13,331 | 13,331 | 30,533 | |||||||
Current derivative assets | 14,570 | 14,570 | 11,543 | |||||||
Noncurrent derivative assets | 728 | 728 | 13,909 | |||||||
Marketable securities in rabbi trust | 257 | 257 | 992 | |||||||
Total assets measured at fair value | 92,047 | 92,047 | 125,171 | |||||||
Liabilities | ||||||||||
Current derivative liabilities | 13,445 | 13,445 | 9,370 | |||||||
Noncurrent derivative liabilities | 817 | 817 | 13,909 | |||||||
Total liabilities measured at fair value | 28,011 | 28,011 | 30,786 | |||||||
Assets and liabilities measured at fair value | DTECH | ||||||||||
Liabilities | ||||||||||
Noncurrent contingent consideration to seller | 4,700 | 4,700 | 7,507 | |||||||
Assets and liabilities measured at fair value | H4 Global | ||||||||||
Liabilities | ||||||||||
Noncurrent contingent consideration to seller | 749 | 749 | ||||||||
Assets and liabilities measured at fair value | GATR | ||||||||||
Liabilities | ||||||||||
Noncurrent contingent consideration to seller | 3,200 | 3,200 | ||||||||
Assets and liabilities measured at fair value | Contract Extensions | TeraLogics | ||||||||||
Liabilities | ||||||||||
Noncurrent contingent consideration to seller | 2,100 | 2,100 | ||||||||
Assets and liabilities measured at fair value | Revenue Targets | TeraLogics | ||||||||||
Liabilities | ||||||||||
Noncurrent contingent consideration to seller | 3,000 | 3,000 | ||||||||
Assets and liabilities measured at fair value | Level 1 | ||||||||||
Assets | ||||||||||
Cash equivalents | 58,882 | 58,882 | 68,194 | |||||||
Marketable securities in rabbi trust | 257 | 257 | 992 | |||||||
Total assets measured at fair value | 59,139 | 59,139 | 69,186 | |||||||
Assets and liabilities measured at fair value | Level 2 | ||||||||||
Assets | ||||||||||
Cash equivalents | 4,279 | 4,279 | ||||||||
Marketable securities | 13,331 | 13,331 | 30,533 | |||||||
Current derivative assets | 14,570 | 14,570 | 11,543 | |||||||
Noncurrent derivative assets | 728 | 728 | 13,909 | |||||||
Total assets measured at fair value | 32,908 | 32,908 | 55,985 | |||||||
Liabilities | ||||||||||
Current derivative liabilities | 13,445 | 13,445 | 9,370 | |||||||
Noncurrent derivative liabilities | 817 | 817 | 13,909 | |||||||
Total liabilities measured at fair value | 14,262 | 14,262 | 23,279 | |||||||
Assets and liabilities measured at fair value | Level 3 | ||||||||||
Liabilities | ||||||||||
Total liabilities measured at fair value | 13,749 | 13,749 | 7,507 | |||||||
Assets and liabilities measured at fair value | Level 3 | DTECH | ||||||||||
Liabilities | ||||||||||
Noncurrent contingent consideration to seller | 4,700 | 4,700 | $ 7,507 | |||||||
Assets and liabilities measured at fair value | Level 3 | H4 Global | ||||||||||
Liabilities | ||||||||||
Noncurrent contingent consideration to seller | 749 | 749 | ||||||||
Assets and liabilities measured at fair value | Level 3 | GATR | ||||||||||
Liabilities | ||||||||||
Noncurrent contingent consideration to seller | 3,200 | 3,200 | ||||||||
Assets and liabilities measured at fair value | Level 3 | Contract Extensions | TeraLogics | ||||||||||
Liabilities | ||||||||||
Noncurrent contingent consideration to seller | 2,100 | 2,100 | ||||||||
Assets and liabilities measured at fair value | Level 3 | Revenue Targets | TeraLogics | ||||||||||
Liabilities | ||||||||||
Noncurrent contingent consideration to seller | $ 3,000 | $ 3,000 |
Financing Arrangements (Details
Financing Arrangements (Details) $ in Thousands, NZD in Millions, AUD in Millions | Feb. 02, 2016USD ($) | Jul. 17, 2015USD ($) | Mar. 31, 2013USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2016NZD | Jun. 30, 2016AUD | Jun. 30, 2016USD ($) | Feb. 01, 2016USD ($) | Sep. 30, 2015USD ($) |
Financial arrangement | |||||||||
Cash on deposit as collateral | $ 3,900 | ||||||||
Short term borrowings | |||||||||
Restricted cash | 73,361 | $ 69,245 | |||||||
Maximum amount of distributions to shareholders as restricted | $ 32,800 | ||||||||
Self-insurance liabilities | 8,500 | $ 8,800 | |||||||
Letters of credit primarily for self-insured liabilities | |||||||||
Short term borrowings | |||||||||
Letters of Credit and bank guarantees outstanding | 16,700 | ||||||||
Fair value of instruments | 0 | ||||||||
Letters of credit and bank guarantees | |||||||||
Short term borrowings | |||||||||
Letters of Credit and bank guarantees outstanding | 78,800 | ||||||||
New Zealand | |||||||||
Short term borrowings | |||||||||
Maximum borrowing capacity under credit agreement | NZD 0.5 | 400 | |||||||
Borrowings outstanding | 0 | ||||||||
Australia | |||||||||
Short term borrowings | |||||||||
Maximum borrowing capacity under credit agreement | AUD 3 | 2,200 | |||||||
Borrowings outstanding | $ 0 | ||||||||
Senior unsecured notes | |||||||||
Financial arrangement | |||||||||
Interest rate (as a percent) | 3.93% | 3.70% | 3.35% | ||||||
Additional senior notes principal amount agreed to be issued | $ 75,000 | $ 25,000 | $ 100,000 | ||||||
Revolving credit agreement | |||||||||
Financial arrangement | |||||||||
Weighted average interest rate on outstanding borrowings | 2.78% | 2.78% | 2.78% | ||||||
Short term borrowings | |||||||||
Maximum borrowing capacity under credit agreement | 400,000 | $ 200,000 | |||||||
Amount borrowed | $ 150,000 | ||||||||
Borrowings outstanding | $ 230,000 | ||||||||
Letters of credit outstanding | 21,900 | ||||||||
Available amount under line of credit | 148,100 | ||||||||
Secured letter of credit agreement | |||||||||
Short term borrowings | |||||||||
Maximum borrowing capacity under credit agreement | 63,100 | ||||||||
Letters of credit outstanding | 61,100 | ||||||||
Secured letter of credit agreement | United Kingdom | |||||||||
Short term borrowings | |||||||||
Restricted cash | $ 69,400 |
Pension Plans (Details)
Pension Plans (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Components of net periodic pension cost (benefit) | ||||
Service cost | $ 147 | $ 166 | $ 457 | $ 505 |
Interest cost | 2,247 | 2,248 | 6,787 | 6,833 |
Expected return on plan assets | (3,253) | (3,483) | (10,028) | (10,363) |
Amortization of actuarial loss | 489 | 183 | 1,401 | 521 |
Administrative expenses | 45 | 42 | 131 | 121 |
Net pension benefit | $ (325) | $ (844) | $ (1,252) | $ (2,383) |
Stockholders_ Equity (Details)
Stockholders’ Equity (Details) | 9 Months Ended |
Jun. 30, 2016item$ / sharesshares | |
RSUs | |
Stockholders' Equity | |
Number of shares of common stock that each award holder has the contingent right to receive | 1 |
Number of units awarded (in shares) | 1,522,044 |
Vested awards to date | 349,588 |
Expected awards vested (in shares) | 477,684 |
Number of Shares | |
Balance unvested at the beginning of the period (in shares) | 760,285 |
Granted (in shares) | 468,031 |
Vested (in shares) | (119,478) |
Forfeited (in shares) | (211,722) |
Balance unvested at the end of the period (in shares) | 897,116 |
Weighted Average Grant-Date Fair Value | |
Balance unvested at the beginning of the period (in dollars per share) | $ / shares | $ 47.24 |
Granted (in dollars per share) | $ / shares | 43.71 |
Vested (in dollars per share) | $ / shares | 46.83 |
Forfeited (in dollars per share) | $ / shares | 44.86 |
Balance unvested at the end of the period (in dollars per share) | $ / shares | $ 46.01 |
Time-based RSUs | |
Stockholders' Equity | |
Number of units awarded (in shares) | 736,788 |
Number of equal installments for vesting of stock awards | item | 4 |
Performance-based RSUs | |
Stockholders' Equity | |
Number of units awarded (in shares) | 785,256 |
Vesting period | 3 years |
Number of vesting criteria which have to be satisfied out of total vesting criteria | item | 1 |
Number of vesting criteria | item | 3 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Stock-Based Compensation | ||||
Non-cash compensation expense related to stock-based awards | $ 2,828 | $ 1,361 | $ 6,916 | $ 6,652 |
Estimated forfeiture rate (as a percent) | 12.50% | |||
Cost of sales | ||||
Stock-Based Compensation | ||||
Non-cash compensation expense related to stock-based awards | 312 | 117 | $ 856 | 536 |
Selling, general and administrative | ||||
Stock-Based Compensation | ||||
Non-cash compensation expense related to stock-based awards | 2,516 | $ 1,244 | 6,060 | $ 6,116 |
RSUs | ||||
Stock-Based Compensation | ||||
Unrecognized compensation cost related to unvested awards | $ 37,400 | 37,400 | ||
Aggregate fair value of awards | $ 21,600 | |||
Weighted-average period of recognition | 1 year 7 months 6 days |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Jun. 30, 2016 | Sep. 30, 2015 | |
Income Taxes | ||
Effective tax rate (as a percent) | 50.00% | 68.00% |
Unrecognized tax benefits, exclusive of interest and penalties | $ 9.2 | $ 7.3 |
Unrecognized tax benefits from permanent tax adjustments that, if recognized, would affect the effective rate | 4.9 | |
Estimated unrecognized tax benefits resulting from possible resolution of reviews by domestic and international taxing authorities | 5.2 | |
Additional income tax expense (benefit) | $ 35.8 | |
Deferred tax asset valuation allowance | $ 35.2 |
Derivative Instruments and He41
Derivative Instruments and Hedging Activities - Notional principal amounts (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Jun. 30, 2016 | Sep. 30, 2015 | |
Derivative Instruments and Hedging Activities | ||
Term of derivative contract | 3 years | |
Instruments designated as accounting hedges: | Foreign currency forwards | ||
Derivative Instruments and Hedging Activities | ||
Notional principal outstanding derivative instruments | $ 171,629 | $ 217,796 |
Not designated but designed to manage exposure: | Foreign currency forwards | ||
Derivative Instruments and Hedging Activities | ||
Notional principal outstanding derivative instruments | 102,600 | 117,800 |
Instruments not designated as accounting hedges: | Foreign currency forwards | ||
Derivative Instruments and Hedging Activities | ||
Notional principal outstanding derivative instruments | $ 125,372 | $ 142,820 |
Derivative Instruments and He42
Derivative Instruments and Hedging Activities - Fair value of derivative financial instruments (Details) - USD ($) $ in Thousands | Jun. 30, 2016 | Sep. 30, 2015 |
Derivative Instruments and Hedging Activities | ||
Asset derivatives: | $ 15,296 | $ 25,230 |
Liability derivatives: | 13,838 | 23,279 |
Foreign currency forwards | Other current assets | ||
Derivative Instruments and Hedging Activities | ||
Asset derivatives: | 14,568 | 11,321 |
Foreign currency forwards | Other noncurrent assets | ||
Derivative Instruments and Hedging Activities | ||
Asset derivatives: | 728 | 13,909 |
Foreign currency forwards | Other current liabilities | ||
Derivative Instruments and Hedging Activities | ||
Liability derivatives: | 13,445 | 9,370 |
Foreign currency forwards | Other noncurrent liabilities | ||
Derivative Instruments and Hedging Activities | ||
Liability derivatives: | $ 393 | $ 13,909 |
Derivative Instruments and He43
Derivative Instruments and Hedging Activities - Gains and losses recognized (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Derivative instruments and hedging activities | ||||
Estimated unrealized net gains from cash flow hedges which are expected to be reclassified into earnings in the next twelve months | $ 700 | $ 700 | ||
Foreign currency forwards | ||||
Derivative instruments and hedging activities | ||||
Gains (losses) recognized in OCI | 500 | $ (534) | 917 | $ (382) |
Gains (losses) reclassified into earnings - Effective Portion | 453 | $ (156) | 1,336 | $ 1,180 |
Foreign currency forwards | Other income/(expense), net | ||||
Derivative instruments and hedging activities | ||||
Gain (losses) recognized - Ineffective Portion and Amount excluded from effectiveness testing | $ (5) | $ (126) |
Segment Information - Business
Segment Information - Business segment financial data (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Revenue recognition | ||||
Sales | $ 375,240 | $ 347,806 | $ 1,055,077 | $ 1,005,128 |
Operating income (loss) | 13,893 | 10,293 | (3,270) | 40,678 |
Depreciation and amortization | 12,966 | 8,653 | 31,943 | 28,717 |
Cubic Transportation Systems | ||||
Revenue recognition | ||||
Sales | 156,000 | 133,300 | 430,500 | 411,500 |
Operating income (loss) | 20,500 | 11,700 | 43,900 | 50,800 |
Depreciation and amortization | 1,200 | 2,800 | 5,400 | 8,400 |
Cubic Global Defense Systems | ||||
Revenue recognition | ||||
Sales | 119,000 | 102,600 | 331,300 | 295,200 |
Operating income (loss) | 900 | 3,200 | (23,700) | 2,800 |
Depreciation and amortization | 8,700 | 3,900 | 19,700 | 13,300 |
Cubic Global Defense Services | ||||
Revenue recognition | ||||
Sales | 100,200 | 111,900 | 293,300 | 298,400 |
Operating income (loss) | 4,800 | 3,100 | 9,300 | 4,200 |
Depreciation and amortization | 1,800 | 1,900 | 4,800 | 6,200 |
Corporate and other | ||||
Revenue recognition | ||||
Depreciation and amortization | 1,300 | 100 | 2,000 | 800 |
Unallocated corporate expenses and other | ||||
Revenue recognition | ||||
Operating income (loss) | $ (12,300) | $ (7,700) | $ (32,800) | $ (17,100) |
Segment Information - Narrative
Segment Information - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Revenue recognition | ||||
Increase (decrease) in operating income | $ 13,893 | $ 10,293 | $ (3,270) | $ 40,678 |
Increase (decrease) in net income | $ 4,498 | $ 8,786 | $ 9,228 | $ 2,937 |
Increase (decrease) in net income per common share (in dollars per share) | $ 0.17 | $ 0.33 | $ 0.34 | $ 0.11 |
Unallocated corporate expenses and other | ||||
Revenue recognition | ||||
Increase (decrease) in operating income | $ (12,300) | $ (7,700) | $ (32,800) | $ (17,100) |
Expense related to the development of ERP system | 5,100 | 4,700 | 17,100 | 6,600 |
Change in estimated total costs | Adjustment | ||||
Revenue recognition | ||||
Increase (decrease) in operating income | 200 | 0 | (3,100) | (13,800) |
Increase (decrease) in net income | $ 100 | $ 300 | $ (1,800) | $ (10,700) |
Increase (decrease) in net income per common share (in dollars per share) | $ 0.01 | $ (0.07) | $ (0.40) |
Restructuring Costs - Restructu
Restructuring Costs - Restructuring charges (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Feb. 28, 2015USD ($) | Jun. 30, 2016USD ($)item | Jun. 30, 2015USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2015USD ($) | |
Restructuring plan | |||||
Restructuring costs | $ 5,400 | $ 1,690 | $ 127 | $ 1,615 | $ 5,385 |
Unallocated corporate expenses and other | |||||
Restructuring plan | |||||
Restructuring costs | 100 | 600 | |||
Cubic Transportation Systems | |||||
Restructuring plan | |||||
Restructuring costs | $ 800 | 100 | 1,000 | 500 | |
Reduction in employee headcount | item | 20 | ||||
Cubic Global Defense Systems | |||||
Restructuring plan | |||||
Restructuring costs | $ 500 | (200) | 100 | 4,000 | |
Cubic Mission Solutions | |||||
Restructuring plan | |||||
Restructuring costs | 900 | ||||
Cubic Global Defense Services | |||||
Restructuring plan | |||||
Restructuring costs | $ 400 | $ 100 | $ 500 | $ 300 |
Restructuring Costs - Rollforwa
Restructuring Costs - Rollforward of restructuring liability (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Feb. 28, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Restructuring liability | |||||
Liability at the beginning of the period | $ 1,900 | ||||
Accrued costs | $ 5,400 | $ 1,690 | $ 127 | 1,615 | $ 5,385 |
Cash payments | (1,600) | ||||
Liability at the end of the period | $ 1,900 | $ 1,900 |