Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Mar. 31, 2017 | Apr. 25, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | CUBIC CORP /DE/ | |
Entity Central Index Key | 26,076 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
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 | 27,110,669 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Net sales: | ||||
Products | $ 154,168 | $ 155,794 | $ 298,928 | $ 280,763 |
Services | 189,541 | 210,230 | 379,458 | 399,074 |
Total net sales | 343,709 | 366,024 | 678,386 | 679,837 |
Costs and expenses: | ||||
Products | 109,403 | 120,445 | 214,015 | 219,637 |
Services | 155,582 | 159,938 | 306,724 | 314,594 |
Selling, general and administrative expenses | 59,356 | 79,774 | 123,114 | 138,265 |
Research and development | 12,858 | 6,143 | 21,878 | 9,625 |
Amortization of purchased intangibles | 7,873 | 8,499 | 17,228 | 14,954 |
Restructuring costs | 709 | 311 | 1,600 | (75) |
Total costs and expenses | 345,781 | 375,110 | 684,559 | 697,000 |
Operating loss | (2,072) | (9,086) | (6,173) | (17,163) |
Other income (expense): | ||||
Interest and dividend income | 223 | 339 | 470 | 737 |
Interest expense | (4,305) | (2,579) | (7,845) | (3,917) |
Other income (expense), net | (398) | 223 | (945) | 398 |
Loss before income taxes | (6,552) | (11,103) | (14,493) | (19,945) |
Income tax benefit | (7,013) | (21,247) | (12,086) | (24,675) |
Net income (loss) | $ 461 | $ 10,144 | $ (2,407) | $ 4,730 |
Net income (loss) per share: | ||||
Basic (in dollars per share) | $ 0.02 | $ 0.38 | $ (0.09) | $ 0.18 |
Diluted (in dollars per share) | 0.02 | 0.38 | (0.09) | 0.18 |
Dividends per common share (in dollars per share) | $ 0.14 | $ 0.14 | $ 0.14 | $ 0.14 |
Weighted average shares used in per share calculations: | ||||
Basic (in shares) | 27,103 | 26,973 | 27,095 | 26,968 |
Diluted (in shares) | 27,159 | 26,995 | 27,095 | 26,986 |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | ||||
Net income (loss) | $ 461 | $ 10,144 | $ (2,407) | $ 4,730 |
Other comprehensive income (loss): | ||||
Foreign currency translation | 7,214 | (9,118) | (13,304) | (17,621) |
Change in unrealized gains/losses from cash flow hedges: | ||||
Change in fair value of cash flow hedges, net of tax | (244) | (375) | 222 | (347) |
Adjustment for net gains/losses realized and included in net income, net of tax | (326) | 395 | (1,191) | (574) |
Total change in unrealized gains/losses realized from cash flow hedges, net of tax | (570) | 20 | (969) | (921) |
Total other comprehensive income (loss) | 6,644 | (9,098) | (14,273) | (18,542) |
Total comprehensive income (loss) | $ 7,105 | $ 1,046 | $ (16,680) | $ (13,812) |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2017 | Sep. 30, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 167,817 | $ 197,127 |
Restricted cash | 77,161 | 75,648 |
Marketable securities | 18,844 | 12,996 |
Accounts receivable - net | 344,706 | 382,581 |
Recoverable income taxes | 6,268 | 9,706 |
Inventories - net | 113,864 | 66,362 |
Other current assets | 31,841 | 38,231 |
Total current assets | 760,501 | 782,651 |
Long-term contract receivables | 19,562 | 20,926 |
Long-term capitalized contract costs | 60,872 | 65,382 |
Property, plant and equipment, net | 101,230 | 96,316 |
Deferred income taxes | 17,794 | 2,194 |
Goodwill | 409,091 | 406,946 |
Purchased intangibles, net | 110,648 | 123,403 |
Other assets | 8,204 | 6,590 |
Total assets | 1,487,902 | 1,504,408 |
Current liabilities: | ||
Short-term borrowings | 250,000 | 240,000 |
Trade accounts payable | 68,669 | 81,172 |
Customer advances | 63,404 | 49,481 |
Accrued compensation and other current liabilities | 134,618 | 147,690 |
Income taxes payable | 1,889 | 1,450 |
Current portion of long-term debt | 435 | 450 |
Total current liabilities | 519,015 | 520,243 |
Long-term debt | 200,071 | 200,291 |
Other long term liabilities | 96,844 | 93,978 |
Shareholders' equity: | ||
Common stock | 35,191 | 32,756 |
Retained earnings | 806,949 | 813,035 |
Accumulated other comprehensive loss | (134,090) | (119,817) |
Treasury stock at cost | (36,078) | (36,078) |
Total shareholders' equity | 671,972 | 689,896 |
Total liabilities and shareholders' equity | $ 1,487,902 | $ 1,504,408 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Operating Activities: | ||||
Net income (loss) | $ 461 | $ 10,144 | $ (2,407) | $ 4,730 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||
Depreciation and amortization | 12,292 | 10,029 | 25,736 | 18,977 |
Share-based compensation expense | 1,043 | 1,970 | 3,357 | 4,088 |
Change in fair value of contingent consideration | (880) | (897) | (2,194) | (1,706) |
Changes in operating assets and liabilities net of effects from acquisitions | (9,016) | (9,354) | (13,494) | (63,784) |
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | 3,900 | 11,892 | 10,998 | (37,695) |
Investing Activities: | ||||
Acquisition of businesses, net of cash acquired | (213,765) | (12,924) | (243,483) | |
Purchases of property, plant and equipment | (8,495) | (11,015) | (15,169) | (21,375) |
Purchases of marketable securities | (12,509) | (7,145) | (18,755) | (14,686) |
Proceeds from sales or maturities of marketable securities | 6,257 | 15,694 | 12,503 | 29,870 |
Proceeds from sale of fixed assets | 1,233 | |||
NET CASH USED IN INVESTING ACTIVITIES | (14,747) | (216,231) | (33,112) | (249,674) |
Financing Activities: | ||||
Proceeds from short-term borrowings | 32,480 | 180,700 | 69,280 | 253,300 |
Principal payments on short-term borrowings | (24,280) | (50,700) | (59,280) | (73,300) |
Proceeds from long-term borrowings | 75,000 | 75,000 | ||
Principal payments on long-term debt | (109) | (123) | (216) | (254) |
Purchase of common stock | (2,314) | (1,658) | ||
Dividends paid | (3,659) | (3,641) | (3,679) | (3,641) |
Contingent consideration payments related to acquisitions of businesses | (1,988) | (1,679) | ||
Net change in restricted cash | 2,713 | (1,102) | (1,513) | (3,514) |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 7,145 | 200,134 | 290 | 244,254 |
Effect of exchange rates on cash | 5,180 | (8,350) | (7,486) | (16,553) |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 1,478 | (12,555) | (29,310) | (59,668) |
Cash and cash equivalents at the beginning of the period | 166,339 | 171,363 | 197,127 | 218,476 |
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 167,817 | 158,808 | 167,817 | 158,808 |
Vocality | ||||
Operating Activities: | ||||
Net income (loss) | (600) | (1,500) | ||
Supplemental disclosure of non-cash investing and financing activities: | ||||
Liability incurred to acquire, net | 1,035 | |||
GATR | ||||
Operating Activities: | ||||
Net income (loss) | (2,900) | (18,300) | (3,200) | (18,300) |
Supplemental disclosure of non-cash investing and financing activities: | ||||
Liability incurred to acquire, net | 7,651 | 7,651 | ||
TeraLogics | ||||
Operating Activities: | ||||
Net income (loss) | $ (100) | $ (200) | (100) | (1,200) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||
Change in fair value of contingent consideration | 3,200 | |||
Supplemental disclosure of non-cash investing and financing activities: | ||||
Liability incurred to acquire, net | 4,998 | |||
H4 Global | ||||
Operating Activities: | ||||
Net income (loss) | $ (200) | |||
Supplemental disclosure of non-cash investing and financing activities: | ||||
Liability incurred to acquire, net | $ 952 |
Basis for Presentation
Basis for Presentation | 6 Months Ended |
Mar. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
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 six-month periods ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending September 30, 2017. 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, 2016. 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 policies described in our Annual Report on Form 10-K for the year ended September 30, 2016. Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. The new guidance 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. Adoption of ASU 2014-09 will be required for us beginning in the first quarter of fiscal 2019 and we have determined that we will not adopt ASU 2014-09 earlier than required. 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 have not yet determined which method of adoption we will select. We have assigned a task force within management to lead our implementation efforts and we have engaged outside advisors to assist. We are currently in the process of analyzing the impact of the adoption of the new standard on our various revenue streams. Under ASU 2014-09, revenue is recognized as control transfers to the customer. As such, revenue for our fixed-price development and production contracts will generally be recognized over time as costs are incurred, which is consistent with the revenue recognition model we currently use for the majority of these contracts. For certain of our fixed-price production contracts where we currently recognize revenue as units are delivered, in most cases the accounting for those contracts will change under ASU 2014-09 such that we will recognize revenue as costs are incurred. This change will generally result in an acceleration of revenue as compared with our current revenue recognition method for those contracts. Approximately 13% of our net sales used the units-of-delivery method to recognize revenue in fiscal 2016. We continue to analyze the impact of the new standard on our remaining revenue streams and, as the standard will supersede substantially all existing revenue guidance affecting us under GAAP, we expect that it will impact revenue and cost recognition on a significant number of our 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 continue to extend over several future periods. 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 2016-02, Leases . Under the new guidance, leasees 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. ASU 2016-02 will be adopted on a modified retrospective transition basis for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. 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 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 permitted. We are currently evaluating the impact of the application of this accounting standard update on our consolidated financial statements. We do not intend to adopt the new guidance early. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments , which provides clarifying guidance on how entities should classify certain cash receipts and cash payments on the statement of cash flows. The guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The guidance will be effective for us in our fiscal year beginning October 1, 2018, and 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. In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs . The guidance will be effective for us in our fiscal year beginning October 1, 2018, and 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. In November 2016, the FASB issued ASU 2016-18, Restricted Cash , which requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. The guidance will be effective for us in our fiscal year beginning October 1, 2018, and early adoption is permitted. The adoption of this standard is anticipated to affect our presentation of restricted cash within our statement of cash flows. We are currently evaluating whether to adopt the new guidance early. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business . This ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance will be effective for us in our fiscal year beginning October 1, 2018 and early adoption is allowed for certain transactions. We are currently evaluating the impact of the application of this accounting standard update on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. This standard removes the second step of the goodwill impairment test, where a determination of the fair value of individual assets and liabilities of a reporting unit was needed to measure the goodwill impairment. Under this updated standard, goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance will be effective for us in our fiscal year beginning October 1, 2020 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 2017, the FASB issued ASU 2017-07 , Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost . The update requires employers to present the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost, including interest cost, expected return on plan assets, amortization of prior service cost/credit and actuarial gain/loss, and settlement and curtailment effects, are to be presented outside of any subtotal of operating income. Employers will have to disclose the line(s) used to present the other components of net periodic benefit cost, if the components are not presented separately in the income statement . ASU 2017-07 will be effective for us beginning October 1, 2018, and 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 | 6 Months Ended |
Mar. 31, 2017 | |
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. Vocality On November 30, 2016, we acquired all of the outstanding capital stock of Vocality International (Vocality), based in Shackleford, United Kingdom, a provider of embedded technology which unifies communications platforms, enhances voice quality, increases video performance and optimizes data throughput. Vocality contributes to our Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) portfolio of products for our Cubic Global Defense Systems (CGD Systems) segment and expands our defense customer base. Vocality also sells its technology in the broadcast, oil and gas, mining, and maritime markets. Vocality’s sales and results of operations included in our operating results for the quarter and six-months ended March 31, 2017 and 2016 were as follows (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Sales $ 0.8 $ — $ 0.7 $ — Operating income (loss) (1.6) — (0.5) — Net income (loss) after taxes (1.5) — (0.6) — Vocality’s operating results above included the following amounts for the quarter and six month periods (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Amortization $ 0.2 $ — $ 0.2 $ — Acquisition-related expenses 1.2 — 0.4 — P rior to our acquisition of Vocality, Vocality had a number of share-based payment awards in place to its employees. Due to the structure of some of these share-based payment awards and the acceleration of vesting of certain of these awards in connection with our acquisition of Vocality, 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 $0.4 million of compensation expense within general and administrative expenses during the quarter ended December 31, 2016 related to this matter. This compensation is reflected in Vocality’s acquisition-related expenses and results of operations above for the six months ended March 31, 2017. The estimated acquisition date fair value of consideration is $9.6 million, which was comprised of cash paid of $8.9 million plus additional held back consideration to be paid in the future estimated at $1.1 million, less the $0.4 million of cash paid to the seller recorded as compensation expense described above . The acquisition of Vocality was paid for with funds from existing cash resources. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions): Customer relationships $ 2.1 Technology 2.4 Trade name 0.4 Inventory 1.7 Accounts payable and accrued expenses (0.4) Other net assets acquired (liabilities assumed) (0.2) Net identifiable assets acquired 6.0 Goodwill 3.6 Net assets acquired $ 9.6 The preliminary estimated fair values of assets acquired and liabilities assumed, including purchased intangibles, inventory and deferred revenue are preliminary estimates pending the finalization of our valuation analyses. The preliminary estimated 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 valuation used the excess earnings 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 Vocality with our existing CGD Systems business, including the synergies expected from combining its communication unification technologies with our C4ISR products and other products in our CGD Systems 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 Vocality for fiscal years 2017 through 2021 and thereafter is as follows (in millions): Year Ended September 30, 2017 $ 0.6 2018 0.8 2019 0.7 2020 0.6 2021 0.5 Thereafter 1.7 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 CGD Systems segment and expands our customer base. GATR’s sales and results of operations included in our operating results for the quarter and six months ended March 31, 2017 and 2016 were as follows (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Sales $ 27.4 $ 9.3 $ 8.9 $ 9.3 Operating income (loss) (5.3) (20.7) (4.8) (20.7) Net loss after taxes (3.2) (18.3) (2.9) (18.3) GATR’s operating results above included the following amounts for the quarter and six-month periods (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Amortization $ 6.6 $ 2.4 $ 3.0 $ 2.4 Gains (losses) for changes in fair value of contingent consideration 1.7 (0.1) 1.3 (0.1) Acquisition-related expenses 0.8 19.4 — 18.8 GATR’s operating results for the quarter ended March 31, 2016 were 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. This compensation expense is reflected in GATR’s acquisition-related expenses and the results of GATR’s operations above. Of this $18.5 million amount, $15.4 million is not deductible for tax purposes. The estimated acquisition-date fair value of consideration is $220.5 million, which is comprised of cash paid of $236.1 million plus the estimated fair value of contingent consideration of $2.5 million, less $18.1 million of cash paid to the seller that was recognized as expense in fiscal 2016. 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 was paid for predominantly with the proceeds of borrowings on our revolving credit agreement, described below, in the second quarter of fiscal 2016. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions): Customer relationships $ 51.7 Backlog 3.4 Technology 10.7 Non-compete agreements 1.2 Trade name 4.7 Accounts receivable 10.6 Inventory 3.4 Income tax receivable 5.1 Accounts payable and accrued expenses (2.4) Deferred tax liabilities (23.8) Net identifiable assets acquired 64.6 Goodwill 155.9 Net assets acquired $ 220.5 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 C4ISR products and other products in our CGD Systems 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 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 2017 through 2021 and thereafter is as follows (in millions): Year Ended September 30, 2017 $ 12.7 2018 11.1 2019 9.8 2020 8.3 2021 6.9 Thereafter 13.2 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 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. Teralogic ’s sales and results of operations included in our operating results for the quarter and six months ended March 31, 2017 and 2016 were as follows (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Sales $ 11.0 $ 3.8 $ 4.8 $ 3.8 Operating income (loss) (0.2) (2.0) (0.2) (0.3) Net loss after taxes (0.1) (1.2) (0.1) (0.2) Teralogic’s operating results above included the following amounts for the quarter and six-month periods (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Amortization $ 1.8 $ 1.0 $ 0.8 $ 1.0 Gains (losses) for changes in fair value of contingent consideration (0.2) 0.1 (0.3) 0.1 Acquisition-related expenses 0.1 2.2 — 0.5 During the quarter ended December 31, 2015 we incurred a $1.3 million charge for compensation expense incurred related to amounts paid to TeraLogics employees upon the close of the acquisition. This compensation expense is reflected in Teralogic’s acquisition-related expenses and the results of Teralogic’s operations above. The estimated acquisition-date 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. Through March 31, 2017 we have paid $32.4 million to the seller. At March 31, 2017 we have recorded a liability of $3.2 million as an estimate of the additional cash consideration that will be due to the seller in the future. 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 $ 6.7 Backlog 5.6 Software 2.5 Non-compete agreements 0.1 Accounts receivable 1.4 Accounts payable and accrued expenses (0.5) Other net assets acquired (liabilities assumed) (0.1) Net identifiable assets acquired 15.7 Goodwill 18.2 Net assets acquired $ 33.9 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 2017 through 2021 and thereafter is as follows (in millions): Year Ended September 30, 2017 $ 3.5 2018 2.8 2019 2.1 2020 1.4 2021 0.8 Thereafter 1.4 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 training portfolio. H4 Global ’s sales and results of operations included in our operating results for the quarter and six months ended March 31, 2017 and 2016 were as follows (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Sales $ 1.6 $ 0.6 $ 0.9 $ 0.6 Operating income (loss) (0.3) — (0.1) 0.1 Net income (loss) after taxes (0.2) — — — H4 Global’s operating results above included the following amounts for the quarter and six-month periods (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Amortization $ 0.1 $ — $ 0.1 $ — Gains (losses) for changes in fair value of contingent consideration 0.1 0.2 — 0.2 Acquisition-related expenses — 0.1 — — The acquisition-date 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. 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. Pro forma information The following unaudited pro forma information presents our consolidated results of operations as if Vocality, GATR, TeraLogics and H4 Global had been included in our consolidated results since October 1, 2015 (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Net sales $ 678.6 $ 703.2 $ 343.7 $ 369.1 Net income (loss) $ (2.7) $ 3.8 $ 0.5 $ 9.5 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, 2015, and it does not purport to project our future operating results. Goodwill Changes in goodwill for the six months ended March 31, 2017 were as follows (in millions): Cubic Global Cubic Global Transportation Defense Defense Systems Systems Services Total Net balances at September 30, 2016 $ 49,630 $ 262,966 $ 94,350 $ 406,946 Acquisitions — 3,642 — 3,642 Foreign currency exchange rate changes (1,266) (231) — (1,497) Net balances at March 31, 2017 $ 48,364 $ 266,377 $ 94,350 $ 409,091 Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired. Goodwill is not amortized but is subject to an impairment test on an annual basis and when circumstances indicate that an impairment is more-likely-than-not. Such circumstances include a significant adverse change in the business climate for one of our reporting units or a decision to dispose of a reporting unit or a significant portion of a reporting unit. The test for goodwill impairment is a two-step process. The first step of the test is performed by comparing the fair value of each reporting unit to its carrying value, including recorded goodwill. If the carrying value of a reporting unit exceeds its fair value, the second step is performed to measure the amount of the impairment, if any, by comparing the implied fair value of goodwill to its carrying value. Any resulting impairment determined would be recorded in the current period. Our most recent annual goodwill impairment test was our 2016 annual impairment test completed as of July 1, 2016. Subsequent to the effective date of that test, we do not believe that circumstances have occurred that indicate that an impairment is more-likely-than-not. As such, no subsequent interim impairment test has been performed. The results of our 2016 annual impairment test indicated that the estimated fair values for our CGD Services and Transportation Systems reporting units each exceeded their carrying values by over 20%, while the estimated value of our CGD Systems reporting unit exceeded its carrying value by over 15%. Significant management judgment is required in the forecast of future operating results that are used in our impairment analysis. The estimates we used are consistent with the plans and estimates that we use to manage our business. For our CGD Services reporting unit, significant assumptions utilized in our discounted cash flow approach included growth rates for sales and margins at greater levels than we have achieved in the past six years, but at levels that are less than the average annual growth we achieved over the period from fiscal 2000 through fiscal 2010. Although we believe our underlying assumptions supporting this assessment are reasonable, if our forecasted sales and margin growth rates, timing of growth, or the discount rate vary from our forecasts, we may be required to perform an interim analysis in 2017 that could expose us to material impairment charges in the future. Assumptions used in our discounted cash flow approach for our CGD Systems reporting unit also included growth rates for sales and margins at greater levels than we have achieved in recent years due to our expectation that businesses recently acquired by this reporting unit will achieve growth at higher rates than the unit’s legacy operations. While our interim assessment of our reporting units did not indicate that impairment was more-likely-than-not for any reporting unit, we believe that, based on the results achieved by our CGD Services reporting unit in the first half of fiscal 2017, there is a heightened risk that a step two impairment test could be required in the future. Unforeseen negative changes in future business or other market conditions for any of our reporting units including margin compression or loss of business, could cause recorded goodwill to be impaired in the future. Also, changes in estimates and assumptions we make in conducting our goodwill assessment could affect the estimated fair value of our reporting units and could result in a goodwill impairment charge in a future period. |
Net Income (Loss) Per Share
Net Income (Loss) Per Share | 6 Months Ended |
Mar. 31, 2017 | |
Net Income (Loss) Per Share | |
Net Income (Loss) Per Share | Note 3 — Net Income (Loss) Per Share Basic net income (loss) per share (EPS) is computed by dividing the net income (loss) 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. For the six months ended March 31, 2017, the effect of 1.0 million shares of restricted stock were excluded from diluted loss per share that would have been included if we had been in a net income position. There were no anti-dilutive securities for the three months ended March 31, 2017 or for the three and six months ended March 31, 2016. Basic and diluted EPS are computed as follows (amounts in thousands, except per share data). Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Net income (loss) $ (2,407) $ 4,730 $ 461 $ 10,144 Weighted average shares - basic 27,095 26,968 27,103 26,973 Effect of dilutive securities — 18 56 22 Weighted average shares - diluted 27,095 26,986 27,159 26,995 Net income (loss) per share, basic $ (0.09) $ 0.18 $ 0.02 $ 0.38 Effect of dilutive securities — — — — Net income (loss) per share, diluted $ (0.09) $ 0.18 $ 0.02 $ 0.38 |
Balance Sheet Details
Balance Sheet Details | 6 Months Ended |
Mar. 31, 2017 | |
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): March 31, September 30, 2017 2016 Trade and other receivables $ 9,665 $ Long-term contracts: Billed 111,256 Unbilled 243,759 Allowance for doubtful accounts (412) (326) Total accounts receivable 364,268 Less estimated amounts not currently due (19,562) (20,926) Current accounts receivable $ 344,706 $ 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 March 31, 2017 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, 2016 represented non-current amounts due from these same customers. Inventories Inventories consist of the following (in thousands): March 31, September 30, 2017 2016 Finished products $ 9,461 $ 10,018 Work in process and inventoried costs under long-term contracts 101,551 62,570 Materials and purchased parts 9,448 12,102 Customer advances (6,596) (18,328) Net inventories $ 113,864 $ 66,362 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 March 31, 2017, work in process and inventoried costs under long-term contracts includes approximately $1.1 million in costs incurred outside the scope of work or in advance of a contract award compared to $0.7 million at September 30, 2016. We believe it is probable that we will recover the costs inventoried at March 31, 2017, 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 $2.4 million and $4.8 million for the quarter and six-month periods ended March 31, 2017, respectively, and $2.1 million and $4.3 million for the quarter and six-month periods ended March 31, 2016, 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. Certain components of our ERP system became ready for their intended use and were placed into service on April 1, 2016 and on October 1, 2016 at which time the capitalized costs of developing those components were transferred 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. We capitalized costs related to ERP components in development totaling $4.5 million and $6.5 million for the quarter and six-month periods ended March 31, 2017, respectively, and $7.4 million and $14.7 million for the quarter and six-month periods ended March 31, 2016, respectively. In addition to software costs that were capitalized, during the quarter and six-month periods ended March 31, 2017 we recognized expense related to the development and implementation of our ERP system of $3.7 million and $10.0 million, respectively, compared to $6.9 million and $12.2 million during the quarter and six-month periods ended March 31, 2016, respectively, for costs that did not meet the requirements for capitalization. Amounts that were expensed in connection with the development and implementation of these systems are classified within selling, general and administrative expenses in the Condensed Consolidated Statements of Income (Loss). 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 $10.4 million and $10.6 million at March 31, 2017 and September 30, 2016, 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 assets set aside to fund deferred compensation liabilities as of March 31, 2017 was $5.0 million, which included life insurance contracts with a carrying value of $4.9 million and marketable securities with a carrying value of $0.1 million. At September 30, 2016, the total carrying value of assets set aside to fund deferred compensation liabilities was $3.6 million, comprised entirely of life insurance contracts. 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 (Loss). |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 6 Months Ended |
Mar. 31, 2017 | |
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 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 March 31, 2017 valuations was 16% for TeraLogics, 21% for DTECH and 16% for GATR. The volatility factor used in the September 30, 2016 valuation was 17% for TeraLogics, 18% for DTECH and 17% for GATR. 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 March 31, 2017, 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, 2016 $ 2,000 $ 567 $ 1,400 $ 4,100 $ 3,200 $ 11,267 Cash paid to seller — — — (2,500) — (2,500) Total remeasurement (gain) loss recognized in earnings (700) (114) 100 (200) (400) (1,314) Balance as of December 31, 2016 $ 1,300 $ 453 $ 1,500 $ 1,400 $ 2,800 $ 7,453 Total remeasurement (gain) loss recognized in earnings 100 20 100 200 (1,300) (880) Balance as of March 31, 2017 $ 1,400 $ 473 $ 1,600 $ 1,600 $ 1,500 $ 6,573 The following table presents assets and liabilities measured and recorded at fair value on our balance sheets on a recurring basis (in thousands): March 31, 2017 September 30, 2016 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets Cash equivalents $ 81,195 $ — $ — $ 81,195 $ 57,455 $ — $ — $ 57,455 Marketable securities — 18,843 — 18,843 — 12,996 — 12,996 Current derivative assets — 1,952 — 1,952 — 14,770 — 14,770 Noncurrent derivative assets — 821 — 821 — 1,201 — 1,201 Marketable securities in rabbi trust 136 — — 136 4 — — 4 Total assets measured at fair value $ 81,331 $ 21,616 $ — $ 102,947 $ 57,459 $ 28,967 $ — $ 86,426 Liabilities Current derivative liabilities — 2,260 — 2,260 — 13,752 — 13,752 Noncurrent derivative liabilities — 821 — 821 — 1,334 — 1,334 Contingent consideration to seller of GATR — — 1,500 1,500 — — 3,200 3,200 Contingent consideration to seller of TeraLogics - contract extensions — — 1,600 1,600 — — 1,400 1,400 Contingent consideration to seller of TeraLogics - revenue targets — — 1,600 1,600 — — 4,100 4,100 Contingent consideration to seller of H4 Global — — 473 473 — — 567 567 Contingent consideration to seller of DTECH — — 1,400 1,400 — — 2,000 2,000 Total liabilities measured at fair value $ — $ 3,081 $ 6,573 $ 9,654 $ — $ 15,086 $ 11,267 $ 26,353 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): March 31, September 30, 2017 2016 Fair value $ 199.9 $ 210.0 Carrying value $ 200.8 $ 201.0 |
Financing Arrangements
Financing Arrangements | 6 Months Ended |
Mar. 31, 2017 | |
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 an additional $25.0 million of senior unsecured notes bearing interest at a rate of 3.70% and maturing on March 12, 2025. Interest payments on the notes issued in 2013 and 2015 are due semi-annually and principal payments are due from 2021 through 2025. The agreement pertaining to the aforementioned notes also contained a provision that the coupon rate would increase by a further 0.50% should the company’s leverage ratio exceed a certain level. On February 2, 2016, we revised the note purchase agreement and we issued an additional $75.0 million of senior unsecured notes bearing interest at 3.93% and maturing on March 12, 2026. 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 this last series of notes, certain terms and conditions of the note purchase and private shelf agreement were revised in coordination with the revision and expansion of the revolving credit agreement as discussed below in order to increase our leverage capacity. We have a committed revolving credit agreement with a group of financial institutions in the amount of $400.0 million which expires in August 2021 (Revolving Credit Agreement). At March 31, 2017, the weighted average interest rate on outstanding borrowings under the Revolving Credit Agreement was 3.19%. Debt issuance and modification costs of $2.3 million and $1.3 million were incurred in connection with February 2, 2016 and August 11, 2016 amendments to the Revolving Credit Agreement, respectively. Costs incurred in connection with establishment of and amendments to this credit agreement are recorded in prepaid expenses and other current assets on our Condensed Consolidated Balance Sheets, and are being amortized as interest expense using the effective interest method over the stated term of the Revolving Credit Agreement. At March 31, 2017, the Company’s total debt issuance costs have an unamortized balance of $2.8 million. The available line of credit is reduced by any letters of credit issued under the Revolving Credit Agreement. As of March 31, 2017, there were borrowings totaling $250.0 million under this agreement and there were letters of credit outstanding totaling $16.8 million, which reduce the available line of credit to $133.2 million. 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 March 31, 2017, there were letters of credit outstanding under this agreement of $63.3 million. Restricted cash at March 31, 2017 of $69.6 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 $63.3 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. Our revolving credit agreement and note purchase and private shelf agreement each contain a number of customary covenants, including requirements for us to maintain certain interest coverage and leverage ratios and restrictions on our and certain of our subsidiaries’ abilities to, among other things, incur additional debt, create liens, consolidate or merge with any other entity, or transfer or sell substantially all of their assets, in each case subject to certain exceptions and limitations. The occurrence of any event of default under these agreements may result in all of the indebtedness then outstanding becoming immediately due and payable. At March 31, 2017 we did not maintain the required leverage ratio. Therefore in May 2017 certain terms and conditions of the revolving credit agreement and note purchase and private shelf agreement were further revised to allow us to maintain a higher level of leverage as of March 31, 2017 and for the remainder of the 2017 fiscal year. These revision also contains a provision that the coupon rate may increase on all of the term notes discussed above by up to 0.75% should our leverage ratio exceed a certain level that is below the revised level necessary for maintaining covenant compliance. In connection with this revision, we incurred $0.4 million of costs, primarily for amounts charged by our lenders in connection with these modifications. These costs were recorded in May 2017 as a reduction in the carrying value of the related debt liability and which will be amortized into additional interest expense over the life of the related debt. We maintain a cash account with a bank in the United Kingdom for which the funds are restricted as to use. 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 in the United Kingdom. The balance in the account as of March 31, 2017 was $7.6 million and is classified as restricted cash in our Condensed Consolidated Balance Sheets. As of March 31, 2017, we had letters of credit and bank guarantees outstanding totaling $76.3 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 $16.9 million as of March 31, 2017, 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 a short-term borrowing arrangement in New Zealand totaling $0.5 million New Zealand dollars (equivalent to approximately $0.4 million) to help meet the short-term working capital requirements of our subsidiary. At March 31, 2017, no amounts were outstanding under this borrowing arrangement. 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 March 31, 2017, these agreements restrict such distributions to shareholders to a maximum of $49.2 million in fiscal year 2017. 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 $8.0 million and $8.2 million as of March 31, 2017 and September 30, 2016, respectively. |
Pension Plans
Pension Plans | 6 Months Ended |
Mar. 31, 2017 | |
Pension Plans | |
Pension Plans | Note 7 — Pension Plans The components of net periodic pension cost are as follows (in thousands): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Service cost $ 302 $ 310 $ 151 $ 152 Interest cost 3,518 4,540 1,759 2,279 Expected return on plan assets (6,400) (6,775) (3,201) (3,303) Amortization of actuarial loss 1,822 912 912 499 Administrative expenses 94 86 47 45 Net pension benefit $ (664) $ (927) $ (332) $ (328) |
Stockholders_ Equity
Stockholders’ Equity | 6 Months Ended |
Mar. 31, 2017 | |
Stockholders’ Equity | |
Stockholders’ Equity | Note 8 - Stockholders’ Equity Long-Term Equity Incentive Plan In 2013, the Executive Compensation Committee of our Board of Directors (Compensation Committee) approved a long-term equity incentive award program. Through March 31, 2017, the Compensation Committee has granted 912,162 RSUs with time-based vesting and 993,298 RSUs 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 RSUs 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 growth 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 March 31, 2017, Cubic has granted 1,905,460 RSUs of which 445,242 have vested. The grant date fair value of each RSU is the fair market value of one share of our common stock at the grant date. At March 31, 2017, 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 493,560. The following table summarizes our RSU activity: Unvested Restricted Stock Units Weighted-Average Number of Shares Grant-Date Fair Value Unvested at September 30, 2016 889,129 $ 45.98 Granted 459,923 46.20 Vested (151,983) 46.17 Forfeited (73,456) 48.60 Unvested at March 31, 2017 1,123,613 $ 45.87 |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Mar. 31, 2017 | |
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 six-month periods ended March 31, 2017 and 2016 as follows (in thousands): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Cost of sales $ 283 $ 544 $ 108 $ 226 Selling, general and administrative 3,074 3,544 935 1,744 $ 3,357 $ 4,088 $ 1,043 $ 1,970 As of March 31, 2017, there was $47.5 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 $22.5 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 March 31, 2017. 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 | 6 Months Ended |
Mar. 31, 2017 | |
Income Taxes | |
Income Taxes | Note 10 – Income Taxes Our effective tax rate for the three months ended March 31, 2017 was 109% as compared to 123% for the year ended September 30, 2016. The effective tax rate for the three months ended March 31, 2017 was lower than the prior full year effective tax rate primarily due to benefits recorded in the prior year related to the release of a portion of the existing valuation allowance against U.S. deferred tax assets due to deferred tax liabilities acquired in business combinations, offset by nondeductible acquisition related compensation expenses. In addition, the effective tax rate for the three months ended March 31, 2017 differs from the U.S. statutory tax rate of 35% primarily due to an increase in the valuation allowance on U.S. deferred tax assets. The amount of net unrecognized tax benefits was $11.1 million as of March 31, 2017 and $10.2 million as of September 30, 2016, exclusive of interest and penalties. The increase in net unrecognized tax benefits was primarily related to the reclassification of tax contingencies from contra deferred tax assets to FASB Interpretation No. 48 liabilities, as those deferred tax assets are expected to be utilized. At March 31, 2017, the amount of net unrecognized tax benefits from permanent tax adjustments that, if recognized, would favorably impact the effective rate was $8.3 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 $6.3 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 March 31, 2017, the years open under the statute of limitations in significant jurisdictions include fiscal years 2012-2016 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. In light of our inability as of March 31, 2017 to maintain the required leverage ratio in our revolving credit agreement and note purchase and private shelf agreement using U.S. cash resources, we have decided to access cash resources in our foreign subsidiaries to provide increased assurance of compliance with our loan covenants in the future. As a result, we are no longer able to assert that accumulated or current earnings in our foreign subsidiaries are indefinitely reinvested. Our intent is to repatriate approximately $105.0 million of earnings from the U.K. in fiscal 2017, and we have provided for the associated U.S. taxes in our 2017 current tax provision. In addition, during the quarter ended March 31, 2017, we have provided a deferred tax liability in the amount of $26.7 million for the estimated U.S. taxes that would be due if we were to repatriate the remainder of the accumulated or current earnings in our foreign subsidiaries. We do not have plans to repatriate any additional amounts at this time, however, we may do so if circumstances change or we determine it is in the company’s best interests to do so. As described below, we currently maintain a valuation allowance against our net U.S. deferred tax assets, therefore, the effect of recording this additional deferred liability was to decrease the valuation allowance by an equal and opposite amount, resulting in no net change to tax expense in the quarter ended March 31, 2017. We evaluated our 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 our recent history of U.S. losses, we 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 March 31, 2017, we 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. We will continue to assess the need for a valuation allowance on deferred tax assets by evaluating positive and negative evidence that may exist. Through March 31, 2017, a total valuation allowance of $9.0 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 we re-establish 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 Statements of Income (Loss). |
Derivative Instruments and Hedg
Derivative Instruments and Hedging Activities | 6 Months Ended |
Mar. 31, 2017 | |
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 March 31, 2017 and September 30, 2016 (in thousands): Notional Principal March 31, 2017 September 30, 2016 Instruments designated as accounting hedges: Foreign currency forwards $ 118,412 $ 158,664 Instruments not designated as accounting hedges: Foreign currency forwards $ 122,151 $ 115,070 Included in the amounts not designated as accounting hedges above at March 31, 2017 and September 30, 2016 are foreign currency forwards with notional principal amounts of $100.3 million and $78.4 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. Unrealized gains of $1.8 million and unrealized losses of $4.5 million were recognized in other income (expense), net for the three months ended March 31, 2017 and 2016, respectively, related to foreign currency forwards not designated as accounting hedges. Unrealized losses of $1.9 million and $9.5 million were recognized in other income (expense), net for the six months ended March 31, 2017 and 2016, respectively, related to foreign currency forwards not designated as accounting hedges . 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 March 31, 2017 and September 30, 2016. 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. We generally enter into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. We presents our derivative assets and derivative liabilities at their gross fair values. We did not have any derivative instruments with credit-risk related contingent features that would require us to post collateral as of March 31, 2017 or September 30, 2016. 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 March 31, 2017 and September 30, 2016 (in thousands): Fair Value Balance Sheet Location March 31, 2017 September 30, 2016 Asset derivatives: Foreign currency forwards Other current assets $ 1,961 $ 14,769 Foreign currency forwards Other noncurrent assets 821 1,201 $ 2,782 $ 15,970 Liability derivatives: Foreign currency forwards Other current liabilities $ 2,400 $ 13,752 Foreign currency forwards Other noncurrent liabilities 821 1,333 Total $ 3,221 $ 15,085 The tables below present gains and losses recognized in other comprehensive loss for the three and six months ended March 31, 2017 and 2016 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): Six Months Ended March 31, 2017 March 31, 2016 Gains (losses) Gains (losses) Gains (losses) reclassified into reclassified into recognized in earnings - Gains (losses) earnings - Derivative Type OCI Effective Portion recognized in OCI Effective Portion Foreign currency forwards $ (1,631) $ 1,833 $ (1,417) $ 883 Three Months Ended March 31, 2017 March 31, 2016 Gains (losses) Gains (losses) Gains (losses) reclassified into reclassified into recognized in earnings - Gains (losses) earnings - Derivative Type OCI Effective Portion recognized in OCI Effective Portion Foreign currency forwards $ (1,017) $ 502 $ 30 $ (607) 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 six months ended March 31, 2017 and 2016. The amount of estimated unrealized net losses from cash flow hedges which are expected to be reclassified to earnings in the next twelve months is $0.3 million, net of income taxes. |
Segment Information
Segment Information | 6 Months Ended |
Mar. 31, 2017 | |
Segment Information | |
Segment Information | Note 12 — Segment Information Our company is aligned in three operating segments, which are also our reportable segments: Cubic Transportation Systems (CTS), Cubic Global Defense Systems (CGD Systems), and Cubic Global Defense Services (CGD Services). We define our operating segments and reportable segments based on the way our chief executive officer manages the operations of the Company for purposes of allocating resources and assessing performance and we continually reassess our operating segment and reportable segment designation based upon these criteria. In 2016 we formalized the structure of our Cubic Mission Solutions (CMS) business unit within our CGD Systems operating segment. CMS combines and integrates our command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) and secure communications operations. Following the formalization of the structure of our CMS business, our chief executive officer began receiving reports of our business activities in multiple different formats and began to use the results of the CMS business activities for certain aspects of resource allocation decisions and performance assessments. However, based upon our March 31, 2017 assessment of our operating segments and reportable segments we have concluded based upon factors such as the nature of the business activities and customers, and the nature of information presented to our Board of Directors that CMS is not an operating segment. As our CMS business unit continues to grow and mature, additional aspects of resource allocation and performance assessment may be made at the CMS level and it is possible that CMS could become an operating segment in the future. Business segment financial data is as follows (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Sales: Cubic Transportation Systems $ 271.5 $ 274.5 $ 139.6 $ 148.7 Cubic Global Defense Systems 220.9 212.2 108.4 116.3 Cubic Global Defense Services 186.0 193.1 95.7 101.0 Total sales $ 678.4 $ 679.8 $ 343.7 $ 366.0 Operating income (loss): Cubic Transportation Systems $ 17.5 $ 23.4 $ 7.8 $ 19.8 Cubic Global Defense Systems (4.9) (24.6) (4.4) (21.2) Cubic Global Defense Services 1.6 4.5 2.0 4.3 Unallocated corporate expenses (20.4) (20.5) (7.5) (12.0) Total operating income (loss) $ (6.2) $ (17.2) $ (2.1) $ (9.1) Depreciation and amortization: Cubic Transportation Systems $ 4.4 $ 4.2 $ 2.0 $ 1.7 Cubic Global Defense Systems 16.5 11.0 7.7 6.9 Cubic Global Defense Services 1.7 3.0 0.7 1.0 Corporate 3.1 0.8 1.9 0.4 Total depreciation and amortization $ 25.7 $ 19.0 $ 12.3 $ 10.0 Unallocated corporate costs in the second quarter of 2017 include costs of strategic and IT system resource planning as part of our One Cubic Initiatives, which totaled $6.0 million compared to $9.4 million in the second quarter of last year. Unallocated corporate costs included $14.6 million of costs incurred in the first half of 2017 for strategic and IT system resource planning compared to $15.9 million in the first half of last year. Changes in estimates on contracts for which revenue is recognized using the cost-to-cost-percentage-of-completion method increased operating income by $3.3 million and decreased operating income by $4.6 million for the three and six months ended March 31, 2017, respectively, and decreased operating income by $0.3 million and $2.4 million for the three and six months ended March 31, 2016. These adjustments decreased our net loss by $2.3 million ($0.09 per share) and increased our net loss by $2.5 million ($0.09 per share) for the three and six months ended March 31, 2017, respectively, and decreased net loss by $0.2 million ($0.01 per share) and $1.4 million ($0.05 per share) for the three and six months ended March 31, 2016. |
Legal Matters
Legal Matters | 6 Months Ended |
Mar. 31, 2017 | |
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, seeking judgment that we have infringed on plaintiff’s patents; regular and treble damages; requiring an accounting of sales, profits, royalties and damages owed plaintiffs; pre and post judgment interest; an award of costs, fees and expenses, an injunction prohibiting the continuing infringement of the patents; and any other relief the court deems just and equitable. We are vigorously defending the lawsuit. We are also undertaking defense of our customer in this matter pursuant to our contractual obligations to that customer. The court made several rulings in our favor concerning the validity of the plaintiff’s patents at issue. Plaintiff has appealed those rulings and they are now on appeal. We await the appellate court’s ruling on those issues. Due to the uncertain status 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 our 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. |
Basis for Presentation (Policie
Basis for Presentation (Policies) | 6 Months Ended |
Mar. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. The new guidance 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. Adoption of ASU 2014-09 will be required for us beginning in the first quarter of fiscal 2019 and we have determined that we will not adopt ASU 2014-09 earlier than required. 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 have not yet determined which method of adoption we will select. We have assigned a task force within management to lead our implementation efforts and we have engaged outside advisors to assist. We are currently in the process of analyzing the impact of the adoption of the new standard on our various revenue streams. Under ASU 2014-09, revenue is recognized as control transfers to the customer. As such, revenue for our fixed-price development and production contracts will generally be recognized over time as costs are incurred, which is consistent with the revenue recognition model we currently use for the majority of these contracts. For certain of our fixed-price production contracts where we currently recognize revenue as units are delivered, in most cases the accounting for those contracts will change under ASU 2014-09 such that we will recognize revenue as costs are incurred. This change will generally result in an acceleration of revenue as compared with our current revenue recognition method for those contracts. Approximately 13% of our net sales used the units-of-delivery method to recognize revenue in fiscal 2016. We continue to analyze the impact of the new standard on our remaining revenue streams and, as the standard will supersede substantially all existing revenue guidance affecting us under GAAP, we expect that it will impact revenue and cost recognition on a significant number of our 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 continue to extend over several future periods. 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 2016-02, Leases . Under the new guidance, leasees 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. ASU 2016-02 will be adopted on a modified retrospective transition basis for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. 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 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 permitted. We are currently evaluating the impact of the application of this accounting standard update on our consolidated financial statements. We do not intend to adopt the new guidance early. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments , which provides clarifying guidance on how entities should classify certain cash receipts and cash payments on the statement of cash flows. The guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The guidance will be effective for us in our fiscal year beginning October 1, 2018, and 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. In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs . The guidance will be effective for us in our fiscal year beginning October 1, 2018, and 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. In November 2016, the FASB issued ASU 2016-18, Restricted Cash , which requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. The guidance will be effective for us in our fiscal year beginning October 1, 2018, and early adoption is permitted. The adoption of this standard is anticipated to affect our presentation of restricted cash within our statement of cash flows. We are currently evaluating whether to adopt the new guidance early. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business . This ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance will be effective for us in our fiscal year beginning October 1, 2018 and early adoption is allowed for certain transactions. We are currently evaluating the impact of the application of this accounting standard update on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. This standard removes the second step of the goodwill impairment test, where a determination of the fair value of individual assets and liabilities of a reporting unit was needed to measure the goodwill impairment. Under this updated standard, goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance will be effective for us in our fiscal year beginning October 1, 2020 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 2017, the FASB issued ASU 2017-07 , Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost . The update requires employers to present the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost, including interest cost, expected return on plan assets, amortization of prior service cost/credit and actuarial gain/loss, and settlement and curtailment effects, are to be presented outside of any subtotal of operating income. Employers will have to disclose the line(s) used to present the other components of net periodic benefit cost, if the components are not presented separately in the income statement . ASU 2017-07 will be effective for us beginning October 1, 2018, and 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) | 6 Months Ended |
Mar. 31, 2017 | |
Acquisitions | |
Schedule of unaudited pro forma information | The following unaudited pro forma information presents our consolidated results of operations as if Vocality, GATR, TeraLogics and H4 Global had been included in our consolidated results since October 1, 2015 (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Net sales $ 678.6 $ 703.2 $ 343.7 $ 369.1 Net income (loss) $ (2.7) $ 3.8 $ 0.5 $ 9.5 |
Schedule of changes in the carrying amount of goodwill | Changes in goodwill for the six months ended March 31, 2017 were as follows (in millions): Cubic Global Cubic Global Transportation Defense Defense Systems Systems Services Total Net balances at September 30, 2016 $ 49,630 $ 262,966 $ 94,350 $ 406,946 Acquisitions — 3,642 — 3,642 Foreign currency exchange rate changes (1,266) (231) — (1,497) Net balances at March 31, 2017 $ 48,364 $ 266,377 $ 94,350 $ 409,091 |
Vocality | |
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 $ 2.1 Technology 2.4 Trade name 0.4 Inventory 1.7 Accounts payable and accrued expenses (0.4) Other net assets acquired (liabilities assumed) (0.2) Net identifiable assets acquired 6.0 Goodwill 3.6 Net assets acquired $ 9.6 |
Schedule of estimated amortization expense related to acquisition | The estimated amortization expense related to the intangible assets recorded in connection with our acquisition of Vocality for fiscal years 2017 through 2021 and thereafter is as follows (in millions): Year Ended September 30, 2017 $ 0.6 2018 0.8 2019 0.7 2020 0.6 2021 0.5 Thereafter 1.7 |
Schedule of Business Combination Operating Results | Vocality’s sales and results of operations included in our operating results for the quarter and six-months ended March 31, 2017 and 2016 were as follows (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Sales $ 0.8 $ — $ 0.7 $ — Operating income (loss) (1.6) — (0.5) — Net income (loss) after taxes (1.5) — (0.6) — |
Components of Business Combination Operating Results | Vocality’s operating results above included the following amounts for the quarter and six month periods (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Amortization $ 0.2 $ — $ 0.2 $ — Acquisition-related expenses 1.2 — 0.4 — |
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 $ 51.7 Backlog 3.4 Technology 10.7 Non-compete agreements 1.2 Trade name 4.7 Accounts receivable 10.6 Inventory 3.4 Income tax receivable 5.1 Accounts payable and accrued expenses (2.4) Deferred tax liabilities (23.8) Net identifiable assets acquired 64.6 Goodwill 155.9 Net assets acquired $ 220.5 |
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 2017 through 2021 and thereafter is as follows (in millions): Year Ended September 30, 2017 $ 12.7 2018 11.1 2019 9.8 2020 8.3 2021 6.9 Thereafter 13.2 |
Schedule of Business Combination Operating Results | GATR’s sales and results of operations included in our operating results for the quarter and six months ended March 31, 2017 and 2016 were as follows (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Sales $ 27.4 $ 9.3 $ 8.9 $ 9.3 Operating income (loss) (5.3) (20.7) (4.8) (20.7) Net loss after taxes (3.2) (18.3) (2.9) (18.3) |
Components of Business Combination Operating Results | GATR’s operating results above included the following amounts for the quarter and six-month periods (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Amortization $ 6.6 $ 2.4 $ 3.0 $ 2.4 Gains (losses) for changes in fair value of contingent consideration 1.7 (0.1) 1.3 (0.1) Acquisition-related expenses 0.8 19.4 — 18.8 |
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 $ 6.7 Backlog 5.6 Software 2.5 Non-compete agreements 0.1 Accounts receivable 1.4 Accounts payable and accrued expenses (0.5) Other net assets acquired (liabilities assumed) (0.1) Net identifiable assets acquired 15.7 Goodwill 18.2 Net assets acquired $ 33.9 |
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 2017 through 2021 and thereafter is as follows (in millions): Year Ended September 30, 2017 $ 3.5 2018 2.8 2019 2.1 2020 1.4 2021 0.8 Thereafter 1.4 |
Schedule of Business Combination Operating Results | Teralogic ’s sales and results of operations included in our operating results for the quarter and six months ended March 31, 2017 and 2016 were as follows (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Sales $ 11.0 $ 3.8 $ 4.8 $ 3.8 Operating income (loss) (0.2) (2.0) (0.2) (0.3) Net loss after taxes (0.1) (1.2) (0.1) (0.2) |
Components of Business Combination Operating Results | Teralogic’s operating results above included the following amounts for the quarter and six-month periods (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Amortization $ 1.8 $ 1.0 $ 0.8 $ 1.0 Gains (losses) for changes in fair value of contingent consideration (0.2) 0.1 (0.3) 0.1 Acquisition-related expenses 0.1 2.2 — 0.5 |
H4 Global | |
Acquisitions | |
Schedule of Business Combination Operating Results | H4 Global ’s sales and results of operations included in our operating results for the quarter and six months ended March 31, 2017 and 2016 were as follows (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Sales $ 1.6 $ 0.6 $ 0.9 $ 0.6 Operating income (loss) (0.3) — (0.1) 0.1 Net income (loss) after taxes (0.2) — — — |
Components of Business Combination Operating Results | H4 Global’s operating results above included the following amounts for the quarter and six-month periods (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Amortization $ 0.1 $ — $ 0.1 $ — Gains (losses) for changes in fair value of contingent consideration 0.1 0.2 — 0.2 Acquisition-related expenses — 0.1 — — |
Net Income (Loss) Per Share (Ta
Net Income (Loss) Per Share (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Net Income (Loss) 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). Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Net income (loss) $ (2,407) $ 4,730 $ 461 $ 10,144 Weighted average shares - basic 27,095 26,968 27,103 26,973 Effect of dilutive securities — 18 56 22 Weighted average shares - diluted 27,095 26,986 27,159 26,995 Net income (loss) per share, basic $ (0.09) $ 0.18 $ 0.02 $ 0.38 Effect of dilutive securities — — — — Net income (loss) per share, diluted $ (0.09) $ 0.18 $ 0.02 $ 0.38 |
Balance Sheet Details (Tables)
Balance Sheet Details (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Balance Sheet Details | |
Schedule of components of accounts receivable | The components of accounts receivable are as follows (in thousands): March 31, September 30, 2017 2016 Trade and other receivables $ 9,665 $ Long-term contracts: Billed 111,256 Unbilled 243,759 Allowance for doubtful accounts (412) (326) Total accounts receivable 364,268 Less estimated amounts not currently due (19,562) (20,926) Current accounts receivable $ 344,706 $ |
Components of inventories | Inventories consist of the following (in thousands): March 31, September 30, 2017 2016 Finished products $ 9,461 $ 10,018 Work in process and inventoried costs under long-term contracts 101,551 62,570 Materials and purchased parts 9,448 12,102 Customer advances (6,596) (18,328) Net inventories $ 113,864 $ 66,362 |
Fair Value of Financial Instr23
Fair Value of Financial Instruments (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Fair Value of Financial Instruments | |
Summary of change in fair value of liability | 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, 2016 $ 2,000 $ 567 $ 1,400 $ 4,100 $ 3,200 $ 11,267 Cash paid to seller — — — (2,500) — (2,500) Total remeasurement (gain) loss recognized in earnings (700) (114) 100 (200) (400) (1,314) Balance as of December 31, 2016 $ 1,300 $ 453 $ 1,500 $ 1,400 $ 2,800 $ 7,453 Total remeasurement (gain) loss recognized in earnings 100 20 100 200 (1,300) (880) Balance as of March 31, 2017 $ 1,400 $ 473 $ 1,600 $ 1,600 $ 1,500 $ 6,573 |
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): March 31, 2017 September 30, 2016 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets Cash equivalents $ 81,195 $ — $ — $ 81,195 $ 57,455 $ — $ — $ 57,455 Marketable securities — 18,843 — 18,843 — 12,996 — 12,996 Current derivative assets — 1,952 — 1,952 — 14,770 — 14,770 Noncurrent derivative assets — 821 — 821 — 1,201 — 1,201 Marketable securities in rabbi trust 136 — — 136 4 — — 4 Total assets measured at fair value $ 81,331 $ 21,616 $ — $ 102,947 $ 57,459 $ 28,967 $ — $ 86,426 Liabilities Current derivative liabilities — 2,260 — 2,260 — 13,752 — 13,752 Noncurrent derivative liabilities — 821 — 821 — 1,334 — 1,334 Contingent consideration to seller of GATR — — 1,500 1,500 — — 3,200 3,200 Contingent consideration to seller of TeraLogics - contract extensions — — 1,600 1,600 — — 1,400 1,400 Contingent consideration to seller of TeraLogics - revenue targets — — 1,600 1,600 — — 4,100 4,100 Contingent consideration to seller of H4 Global — — 473 473 — — 567 567 Contingent consideration to seller of DTECH — — 1,400 1,400 — — 2,000 2,000 Total liabilities measured at fair value $ — $ 3,081 $ 6,573 $ 9,654 $ — $ 15,086 $ 11,267 $ 26,353 |
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): March 31, September 30, 2017 2016 Fair value $ 199.9 $ 210.0 Carrying value $ 200.8 $ 201.0 |
Pension Plans (Tables)
Pension Plans (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Pension Plans | |
Components of net periodic pension cost (benefit) | The components of net periodic pension cost are as follows (in thousands): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Service cost $ 302 $ 310 $ 151 $ 152 Interest cost 3,518 4,540 1,759 2,279 Expected return on plan assets (6,400) (6,775) (3,201) (3,303) Amortization of actuarial loss 1,822 912 912 499 Administrative expenses 94 86 47 45 Net pension benefit $ (664) $ (927) $ (332) $ (328) |
Stockholders_ Equity (Tables)
Stockholders’ Equity (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Stockholders’ Equity | |
Summary of RSU activity | Unvested Restricted Stock Units Weighted-Average Number of Shares Grant-Date Fair Value Unvested at September 30, 2016 889,129 $ 45.98 Granted 459,923 46.20 Vested (151,983) 46.17 Forfeited (73,456) 48.60 Unvested at March 31, 2017 1,123,613 $ 45.87 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
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 six-month periods ended March 31, 2017 and 2016 as follows (in thousands): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Cost of sales $ 283 $ 544 $ 108 $ 226 Selling, general and administrative 3,074 3,544 935 1,744 $ 3,357 $ 4,088 $ 1,043 $ 1,970 |
Derivative Instruments and He27
Derivative Instruments and Hedging Activities (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
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 March 31, 2017 and September 30, 2016 (in thousands): Notional Principal March 31, 2017 September 30, 2016 Instruments designated as accounting hedges: Foreign currency forwards $ 118,412 $ 158,664 Instruments not designated as accounting hedges: Foreign currency forwards $ 122,151 $ 115,070 |
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 March 31, 2017 and September 30, 2016 (in thousands): Fair Value Balance Sheet Location March 31, 2017 September 30, 2016 Asset derivatives: Foreign currency forwards Other current assets $ 1,961 $ 14,769 Foreign currency forwards Other noncurrent assets 821 1,201 $ 2,782 $ 15,970 Liability derivatives: Foreign currency forwards Other current liabilities $ 2,400 $ 13,752 Foreign currency forwards Other noncurrent liabilities 821 1,333 Total $ 3,221 $ 15,085 |
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 six months ended March 31, 2017 and 2016 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): Six Months Ended March 31, 2017 March 31, 2016 Gains (losses) Gains (losses) Gains (losses) reclassified into reclassified into recognized in earnings - Gains (losses) earnings - Derivative Type OCI Effective Portion recognized in OCI Effective Portion Foreign currency forwards $ (1,631) $ 1,833 $ (1,417) $ 883 Three Months Ended March 31, 2017 March 31, 2016 Gains (losses) Gains (losses) Gains (losses) reclassified into reclassified into recognized in earnings - Gains (losses) earnings - Derivative Type OCI Effective Portion recognized in OCI Effective Portion Foreign currency forwards $ (1,017) $ 502 $ 30 $ (607) |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Segment Information | |
Schedule of business segment financial data | Business segment financial data is as follows (in millions): Six Months Ended Three Months Ended March 31, March 31, 2017 2016 2017 2016 Sales: Cubic Transportation Systems $ 271.5 $ 274.5 $ 139.6 $ 148.7 Cubic Global Defense Systems 220.9 212.2 108.4 116.3 Cubic Global Defense Services 186.0 193.1 95.7 101.0 Total sales $ 678.4 $ 679.8 $ 343.7 $ 366.0 Operating income (loss): Cubic Transportation Systems $ 17.5 $ 23.4 $ 7.8 $ 19.8 Cubic Global Defense Systems (4.9) (24.6) (4.4) (21.2) Cubic Global Defense Services 1.6 4.5 2.0 4.3 Unallocated corporate expenses (20.4) (20.5) (7.5) (12.0) Total operating income (loss) $ (6.2) $ (17.2) $ (2.1) $ (9.1) Depreciation and amortization: Cubic Transportation Systems $ 4.4 $ 4.2 $ 2.0 $ 1.7 Cubic Global Defense Systems 16.5 11.0 7.7 6.9 Cubic Global Defense Services 1.7 3.0 0.7 1.0 Corporate 3.1 0.8 1.9 0.4 Total depreciation and amortization $ 25.7 $ 19.0 $ 12.3 $ 10.0 |
Basis for Presentation (Details
Basis for Presentation (Details) | 6 Months Ended |
Mar. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Net Sales, Recognized under Units-of-Delivery Method | 13.00% |
Acquisitions (Details)
Acquisitions (Details) - USD ($) $ in Thousands | Nov. 30, 2016 | Feb. 02, 2016 | Dec. 21, 2015 | Nov. 04, 2015 | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Sep. 30, 2015 | Sep. 30, 2016 |
Acquisitions | ||||||||||||
Net sales | $ 343,709 | $ 366,024 | $ 678,386 | $ 679,837 | ||||||||
Operating income (Loss) | (2,072) | (9,086) | (6,173) | (17,163) | ||||||||
Net income (loss) | 461 | 10,144 | (2,407) | 4,730 | ||||||||
Compensation expense | 1,043 | 1,970 | 3,357 | 4,088 | ||||||||
Change in fair value of contingent consideration | (880) | (897) | (2,194) | (1,706) | ||||||||
Amortization of purchased intangibles | 7,873 | 8,499 | 17,228 | 14,954 | ||||||||
Contingent consideration paid | 1,988 | 1,679 | ||||||||||
Purchase price allocation | ||||||||||||
Goodwill | 409,091 | 409,091 | $ 406,946 | |||||||||
Selling, general and administrative | ||||||||||||
Acquisitions | ||||||||||||
Compensation expense | 935 | 1,744 | 3,074 | 3,544 | ||||||||
Vocality | ||||||||||||
Acquisitions | ||||||||||||
Net sales | 700 | 800 | ||||||||||
Operating income (Loss) | (500) | (1,600) | ||||||||||
Net income (loss) | (600) | (1,500) | ||||||||||
Amortization | 200 | 200 | ||||||||||
Acquisition-related expenses | 400 | 1,200 | ||||||||||
Transaction and acquisition related costs | 400 | 1,200 | ||||||||||
Fair value of consideration transferred | $ 9,600 | |||||||||||
Cash consideration paid | 8,900 | |||||||||||
Contingent consideration | 1,100 | |||||||||||
Cash paid related to compensation expenses | 400 | |||||||||||
Purchase price allocation | ||||||||||||
Inventory | 1,700 | |||||||||||
Accounts payable and accrued expenses | (400) | |||||||||||
Other net liabilities assumed | (200) | |||||||||||
Net identifiable assets acquired | 6,000 | |||||||||||
Goodwill | 3,600 | |||||||||||
Net assets acquired | $ 9,600 | |||||||||||
Weighted average useful life of intangible assets | 9 years | |||||||||||
Estimated amortization expense related to the intangible assets | ||||||||||||
2,017 | 600 | |||||||||||
2,018 | 800 | |||||||||||
2,019 | 700 | |||||||||||
2,020 | 600 | |||||||||||
2,021 | 500 | |||||||||||
Thereafter | 1,700 | |||||||||||
Vocality | Selling, general and administrative | ||||||||||||
Acquisitions | ||||||||||||
Compensation expense | $ 400 | |||||||||||
Vocality | Customer relationships | ||||||||||||
Purchase price allocation | ||||||||||||
Amortizable intangible assets | $ 2,100 | |||||||||||
Vocality | Technology | ||||||||||||
Purchase price allocation | ||||||||||||
Amortizable intangible assets | 2,400 | |||||||||||
Vocality | Corporate trade names | ||||||||||||
Purchase price allocation | ||||||||||||
Amortizable intangible assets | $ 400 | |||||||||||
GATR | ||||||||||||
Acquisitions | ||||||||||||
Net sales | 8,900 | 9,300 | 27,400 | 9,300 | ||||||||
Operating income (Loss) | (4,800) | (20,700) | (5,300) | (20,700) | ||||||||
Net income (loss) | (2,900) | (18,300) | (3,200) | (18,300) | ||||||||
Amortization | 3,000 | 2,400 | 6,600 | 2,400 | ||||||||
Gains (losses) for changes in fair value of contingent consideration | 1,300 | (100) | 1,700 | (100) | ||||||||
Acquisition-related expenses | 18,800 | 800 | 19,400 | |||||||||
Transaction and acquisition related costs | 18,800 | 800 | 19,400 | |||||||||
Fair value of consideration transferred | $ 220,500 | |||||||||||
Cash consideration paid | 236,100 | |||||||||||
Contingent consideration | 2,500 | |||||||||||
Cash paid related to compensation expenses | $ 18,100 | 15,400 | ||||||||||
Period for contingent consideration contracts | 12 months | |||||||||||
Purchase price allocation | ||||||||||||
Accounts receivable | $ 10,600 | |||||||||||
Inventory | 3,400 | |||||||||||
Income tax receivable | 5,100 | |||||||||||
Accounts payable and accrued expenses | (2,400) | |||||||||||
Tax liabilities | (23,800) | |||||||||||
Net identifiable assets acquired | 64,600 | |||||||||||
Goodwill | 155,900 | |||||||||||
Net assets acquired | $ 220,500 | |||||||||||
Weighted average useful life of intangible assets | 9 years | |||||||||||
Estimated amortization expense related to the intangible assets | ||||||||||||
2,017 | 12,700 | |||||||||||
2,018 | 11,100 | |||||||||||
2,019 | 9,800 | |||||||||||
2,020 | 8,300 | |||||||||||
2,021 | 6,900 | |||||||||||
Thereafter | 13,200 | |||||||||||
GATR | Maximum | ||||||||||||
Acquisitions | ||||||||||||
Contingent consideration | $ 7,500 | |||||||||||
GATR | Selling, general and administrative | ||||||||||||
Acquisitions | ||||||||||||
Compensation expense | 18,500 | 18,500 | ||||||||||
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 | Corporate trade names | ||||||||||||
Purchase price allocation | ||||||||||||
Amortizable intangible assets | $ 4,700 | |||||||||||
TeraLogics | ||||||||||||
Acquisitions | ||||||||||||
Net sales | 4,800 | 3,800 | 11,000 | 3,800 | ||||||||
Operating income (Loss) | (200) | (300) | (200) | (2,000) | ||||||||
Net income (loss) | (100) | (200) | (100) | (1,200) | ||||||||
Amortization | 800 | 1,000 | 1,800 | 1,000 | ||||||||
Gains (losses) for changes in fair value of contingent consideration | (300) | 100 | (200) | 100 | ||||||||
Acquisition-related expenses | 500 | 100 | 2,200 | |||||||||
Transaction and acquisition related costs | 500 | 100 | 2,200 | |||||||||
Compensation expense | $ 1,300 | |||||||||||
Change in fair value of contingent consideration | 3,200 | |||||||||||
Fair value of consideration transferred | $ 33,900 | |||||||||||
Cash consideration paid | 28,900 | |||||||||||
Contingent consideration | 5,000 | |||||||||||
Contingent consideration paid | $ 32,400 | |||||||||||
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 | ||||||||||||
2,017 | 3,500 | |||||||||||
2,018 | 2,800 | |||||||||||
2,019 | 2,100 | |||||||||||
2,020 | 1,400 | |||||||||||
2,021 | 800 | |||||||||||
Thereafter | $ 1,400 | |||||||||||
TeraLogics | Maximum | ||||||||||||
Acquisitions | ||||||||||||
Contingent consideration | $ 9,000 | |||||||||||
TeraLogics | Maximum | Revenue thresholds | ||||||||||||
Acquisitions | ||||||||||||
Contingent consideration | 6,000 | |||||||||||
TeraLogics | Maximum | Contract extensions | ||||||||||||
Acquisitions | ||||||||||||
Contingent consideration | 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 | 900 | 600 | 1,600 | 600 | ||||||||
Operating income (Loss) | (100) | 100 | (300) | |||||||||
Net income (loss) | (200) | |||||||||||
Amortization | $ 100 | 100 | ||||||||||
Gains (losses) for changes in fair value of contingent consideration | $ 200 | $ 100 | 200 | |||||||||
Acquisition-related expenses | 100 | |||||||||||
Transaction and acquisition related costs | $ 100 | |||||||||||
Fair value of consideration transferred | $ 1,900 | |||||||||||
Cash consideration paid | 900 | |||||||||||
Contingent consideration | $ 1,000 | |||||||||||
Period for contingent consideration contracts | 5 years | |||||||||||
Purchase price allocation | ||||||||||||
Goodwill | $ 1,900 | |||||||||||
H4 Global | Maximum | ||||||||||||
Acquisitions | ||||||||||||
Contingent consideration | $ 4,100 |
Acquisitions - Goodwill and Pro
Acquisitions - Goodwill and Pro forma information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2016 | |
Unaudited pro forma information | |||||||
Net sales | $ 343,700 | $ 369,100 | $ 678,600 | $ 703,200 | |||
Net income attributable to Cubic | 500 | $ 9,500 | (2,700) | $ 3,800 | |||
Adjustments made for transaction expenses | $ 0 | $ 0 | |||||
Changes in the carrying amount of goodwill | |||||||
Balance at the beginning of the period | 406,946 | 406,946 | |||||
Acquisitions | 3,642 | ||||||
Foreign currency exchange rate changes | (1,497) | ||||||
Balance at the end of the period | 409,091 | 409,091 | $ 406,946 | ||||
Transportation Systems | |||||||
Changes in the carrying amount of goodwill | |||||||
Balance at the beginning of the period | 49,630 | 49,630 | |||||
Foreign currency exchange rate changes | (1,266) | ||||||
Balance at the end of the period | 48,364 | 48,364 | $ 49,630 | ||||
Transportation Systems | Minimum | |||||||
Components of net goodwill | |||||||
Estimated percentage of excess of fair value over carrying value | 20.00% | ||||||
Defense Systems | |||||||
Changes in the carrying amount of goodwill | |||||||
Balance at the beginning of the period | 262,966 | 262,966 | |||||
Acquisitions | 3,642 | ||||||
Foreign currency exchange rate changes | (231) | ||||||
Balance at the end of the period | 266,377 | 266,377 | $ 262,966 | ||||
Defense Systems | Minimum | |||||||
Components of net goodwill | |||||||
Estimated percentage of excess of fair value over carrying value | 20.00% | ||||||
Cubic Global Defense Services | |||||||
Changes in the carrying amount of goodwill | |||||||
Balance at the beginning of the period | $ 94,350 | 94,350 | |||||
Balance at the end of the period | $ 94,350 | $ 94,350 | $ 94,350 | ||||
Cubic Global Defense Services | Minimum | |||||||
Components of net goodwill | |||||||
Estimated percentage of excess of fair value over carrying value | 15.00% |
Net Income (Loss) Per Share (De
Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Net income (loss) | $ 461 | $ 10,144 | $ (2,407) | $ 4,730 |
Weighted average shares - basic | 27,103 | 26,973 | 27,095 | 26,968 |
Effect of dilutive securities (in shares) | 56 | 22 | 18 | |
Weighted average shares - diluted | 27,159 | 26,995 | 27,095 | 26,986 |
Net income (loss) per share, basic (in dollars per share) | $ 0.02 | $ 0.38 | $ (0.09) | $ 0.18 |
Net income (loss) per share, diluted (in dollars per share) | $ 0.02 | $ 0.38 | $ (0.09) | $ 0.18 |
RSUs | ||||
Anti-dilutive employee share-based awards | 0 | 0 | 1,000 | 0 |
Balance Sheet Details (Details)
Balance Sheet Details (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2016 | |
Marketable Securities | |||||
Realized or unrealized gains or losses on marketable securities | $ 0 | ||||
Accounts Receivable | |||||
Trade and other receivables | $ 9,665 | 9,665 | $ 15,488 | ||
Long-term contracts: | |||||
Billed | 111,256 | 111,256 | 146,619 | ||
Unbilled | 243,759 | 243,759 | 241,726 | ||
Allowance for doubtful accounts | (412) | (412) | (326) | ||
Total accounts receivable | 364,268 | 364,268 | 403,507 | ||
Less estimated amounts not currently due | (19,562) | (19,562) | (20,926) | ||
Current accounts receivable | 344,706 | $ 344,706 | 382,581 | ||
Period that receivables will not be collected within to be classified as not currently due | 1 year | ||||
Inventories | |||||
Finished products | 9,461 | $ 9,461 | 10,018 | ||
Work in process and inventoried costs under long-term contracts | 101,551 | 101,551 | 62,570 | ||
Materials and purchased parts | 9,448 | 9,448 | 12,102 | ||
Customer advances | (6,596) | (6,596) | (18,328) | ||
Net inventories | 113,864 | 113,864 | 66,362 | ||
Costs incurred outside the scope of work or in advance of a contract award | 1,100 | 1,100 | 700 | ||
Long-term Capitalized Costs | |||||
Long-term capitalized costs being recognized as cost of sales | 2,400 | $ 2,100 | 4,800 | $ 4,300 | |
Deferred Compensation Plan | |||||
Deferred compensation | 10,400 | 10,400 | 10,600 | ||
Carrying value of Rabbi trust to fund deferred compensation liabilities | 5,000 | 5,000 | |||
Carrying value of insurance contracts | 4,900 | 4,900 | $ 3,600 | ||
Carrying value of marketable securities | 100 | $ 100 | |||
Software | Maximum | |||||
Capitalized Software | |||||
Estimated useful life | P7Y | ||||
Software | Minimum | |||||
Capitalized Software | |||||
Estimated useful life | P3Y | ||||
ERP | |||||
Capitalized Software | |||||
Estimated useful life | P7Y | ||||
Addition to capitalized software expenses | 4,500 | 7,400 | $ 6,500 | 14,700 | |
Software development expense | $ 3,700 | $ 6,900 | $ 10,000 | $ 12,200 |
Fair Value of Financial Instr34
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Feb. 02, 2016 | Dec. 21, 2015 | Nov. 04, 2015 | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2017 | Sep. 30, 2016 |
DTECH | |||||||
Assets and liabilities measured at fair value on a recurring basis | |||||||
Volatility earning metrics | 21.00% | 18.00% | |||||
H4 Global | |||||||
Assets and liabilities measured at fair value on a recurring basis | |||||||
Period for contingent consideration contracts | 5 years | ||||||
Initial measurement recognized at acquisition | $ 1,900 | ||||||
TeraLogics | |||||||
Assets and liabilities measured at fair value on a recurring basis | |||||||
Volatility earning metrics | 16.00% | 17.00% | |||||
Initial measurement recognized at acquisition | $ 33,900 | ||||||
GATR | |||||||
Assets and liabilities measured at fair value on a recurring basis | |||||||
Volatility earning metrics | 16.00% | 17.00% | |||||
Period for contingent consideration contracts | 12 months | ||||||
Initial measurement recognized at acquisition | $ 220,500 | ||||||
Level 2 | |||||||
Debt instruments | |||||||
Fair Value | $ 199,900 | $ 199,900 | $ 210,000 | ||||
Carrying value | 200,800 | 200,800 | 201,000 | ||||
Level 3 | |||||||
Assets and liabilities measured at fair value on a recurring basis | |||||||
Balance at the Beginning period | 7,453 | $ 11,267 | 11,267 | ||||
Cash paid to seller | (2,500) | ||||||
Total remeasurement (gain) loss recognized in earnings | (880) | (1,314) | |||||
Balance at the ending period | 6,573 | 7,453 | 6,573 | 11,267 | |||
Level 3 | DTECH | |||||||
Assets and liabilities measured at fair value on a recurring basis | |||||||
Balance at the Beginning period | 1,300 | 2,000 | 2,000 | ||||
Total remeasurement (gain) loss recognized in earnings | 100 | (700) | |||||
Balance at the ending period | 1,400 | 1,300 | 1,400 | 2,000 | |||
Level 3 | H4 Global | |||||||
Assets and liabilities measured at fair value on a recurring basis | |||||||
Balance at the Beginning period | 453 | 567 | 567 | ||||
Total remeasurement (gain) loss recognized in earnings | 20 | (114) | |||||
Balance at the ending period | 473 | 453 | 473 | 567 | |||
Level 3 | GATR | |||||||
Assets and liabilities measured at fair value on a recurring basis | |||||||
Balance at the Beginning period | 2,800 | 3,200 | 3,200 | ||||
Total remeasurement (gain) loss recognized in earnings | (1,300) | (400) | |||||
Balance at the ending period | 1,500 | 2,800 | 1,500 | 3,200 | |||
Level 3 | Contract extensions | TeraLogics | |||||||
Assets and liabilities measured at fair value on a recurring basis | |||||||
Balance at the Beginning period | 1,500 | 1,400 | 1,400 | ||||
Total remeasurement (gain) loss recognized in earnings | 100 | 100 | |||||
Balance at the ending period | 1,600 | 1,500 | 1,600 | 1,400 | |||
Level 3 | Revenue Targets | TeraLogics | |||||||
Assets and liabilities measured at fair value on a recurring basis | |||||||
Balance at the Beginning period | 1,400 | 4,100 | 4,100 | ||||
Cash paid to seller | (2,500) | ||||||
Total remeasurement (gain) loss recognized in earnings | 200 | (200) | |||||
Balance at the ending period | 1,600 | $ 1,400 | 1,600 | 4,100 | |||
Assets and liabilities measured at fair value | |||||||
Assets | |||||||
Cash equivalents | 81,195 | 81,195 | 57,455 | ||||
Marketable securities | 18,843 | 18,843 | 12,996 | ||||
Current derivative assets | 1,952 | 1,952 | 14,770 | ||||
Noncurrent derivative assets | 821 | 821 | 1,201 | ||||
Marketable securities in rabbi trust | 136 | 136 | 4 | ||||
Total assets measured at fair value | 102,947 | 102,947 | 86,426 | ||||
Liabilities | |||||||
Current derivative liabilities | 2,260 | 2,260 | 13,752 | ||||
Noncurrent derivative liabilities | 821 | 821 | 1,334 | ||||
Total liabilities measured at fair value | 9,654 | 9,654 | 26,353 | ||||
Assets and liabilities measured at fair value | DTECH | |||||||
Liabilities | |||||||
Noncurrent contingent consideration to seller | 1,400 | 1,400 | 2,000 | ||||
Assets and liabilities measured at fair value | H4 Global | |||||||
Liabilities | |||||||
Noncurrent contingent consideration to seller | 473 | 473 | 567 | ||||
Assets and liabilities measured at fair value | GATR | |||||||
Liabilities | |||||||
Noncurrent contingent consideration to seller | 1,500 | 1,500 | 3,200 | ||||
Assets and liabilities measured at fair value | Contract extensions | TeraLogics | |||||||
Liabilities | |||||||
Noncurrent contingent consideration to seller | 1,600 | 1,600 | 1,400 | ||||
Assets and liabilities measured at fair value | Revenue Targets | TeraLogics | |||||||
Liabilities | |||||||
Noncurrent contingent consideration to seller | 1,600 | 1,600 | 4,100 | ||||
Assets and liabilities measured at fair value | Level 1 | |||||||
Assets | |||||||
Cash equivalents | 81,195 | 81,195 | 57,455 | ||||
Marketable securities in rabbi trust | 136 | 136 | 4 | ||||
Total assets measured at fair value | 81,331 | 81,331 | 57,459 | ||||
Assets and liabilities measured at fair value | Level 2 | |||||||
Assets | |||||||
Marketable securities | 18,843 | 18,843 | 12,996 | ||||
Current derivative assets | 1,952 | 1,952 | 14,770 | ||||
Noncurrent derivative assets | 821 | 821 | 1,201 | ||||
Total assets measured at fair value | 21,616 | 21,616 | 28,967 | ||||
Liabilities | |||||||
Current derivative liabilities | 2,260 | 2,260 | 13,752 | ||||
Noncurrent derivative liabilities | 821 | 821 | 1,334 | ||||
Total liabilities measured at fair value | 3,081 | 3,081 | 15,086 | ||||
Assets and liabilities measured at fair value | Level 3 | |||||||
Liabilities | |||||||
Total liabilities measured at fair value | 6,573 | 6,573 | 11,267 | ||||
Assets and liabilities measured at fair value | Level 3 | DTECH | |||||||
Liabilities | |||||||
Noncurrent contingent consideration to seller | 1,400 | 1,400 | 2,000 | ||||
Assets and liabilities measured at fair value | Level 3 | H4 Global | |||||||
Liabilities | |||||||
Noncurrent contingent consideration to seller | 473 | 473 | 567 | ||||
Assets and liabilities measured at fair value | Level 3 | GATR | |||||||
Liabilities | |||||||
Noncurrent contingent consideration to seller | 1,500 | 1,500 | 3,200 | ||||
Assets and liabilities measured at fair value | Level 3 | Contract extensions | TeraLogics | |||||||
Liabilities | |||||||
Noncurrent contingent consideration to seller | 1,600 | 1,600 | 1,400 | ||||
Assets and liabilities measured at fair value | Level 3 | Revenue Targets | TeraLogics | |||||||
Liabilities | |||||||
Noncurrent contingent consideration to seller | $ 1,600 | $ 1,600 | $ 4,100 |
Financing Arrangements (Details
Financing Arrangements (Details) $ in Thousands, NZD in Millions | Aug. 11, 2016USD ($) | Feb. 02, 2016USD ($) | Jul. 17, 2015USD ($) | Mar. 31, 2017USD ($) | Mar. 31, 2017NZD | Mar. 31, 2017USD ($) | Sep. 30, 2016USD ($) | Feb. 01, 2016USD ($) | Mar. 31, 2013USD ($) |
Financial arrangement | |||||||||
Restricted cash | $ 77,161 | $ 75,648 | |||||||
Maximum amount of distributions to shareholders as restricted | $ 49,200 | ||||||||
Self-insurance liabilities | 8,000 | $ 8,200 | |||||||
prepaid expenses | |||||||||
Financial arrangement | |||||||||
Debt issuance costs | 400 | ||||||||
Letters of credit primarily for self-insured liabilities | |||||||||
Financial arrangement | |||||||||
Letters of Credit and bank guarantees outstanding | 16,900 | ||||||||
Fair value of instruments | 0 | ||||||||
Letters of credit and bank guarantees | |||||||||
Financial arrangement | |||||||||
Letters of Credit and bank guarantees outstanding | 76,300 | ||||||||
United Kingdom | |||||||||
Financial arrangement | |||||||||
Cash on deposit as collateral | 7,600 | ||||||||
New Zealand | |||||||||
Financial arrangement | |||||||||
Maximum borrowing capacity under credit agreement | NZD 0.5 | 400 | |||||||
Borrowings outstanding | 0 | ||||||||
Australia | |||||||||
Financial arrangement | |||||||||
Borrowings outstanding | $ 0 | ||||||||
Senior unsecured notes | |||||||||
Financial arrangement | |||||||||
Principal amount of debt instrument | $ 75,000 | $ 25,000 | $ 100,000 | ||||||
Interest rate (as a percent) | 3.93% | 3.70% | 3.35% | ||||||
Coupon rate increase based on leverage ratio (as a percent) | 0.50% | ||||||||
Revolving credit agreement | |||||||||
Financial arrangement | |||||||||
Coupon rate increase based on leverage ratio (as a percent) | 0.75% | ||||||||
Maximum borrowing capacity under credit agreement | $ 400,000 | ||||||||
Weighted average interest rate on outstanding borrowings | 3.19% | 3.19% | |||||||
Debt issuance costs incurred | $ 1,300 | $ 2,300 | |||||||
Unamortized debt issuance costs | $ 2,800 | ||||||||
Borrowings outstanding | 250,000 | ||||||||
Letters of credit outstanding | 16,800 | ||||||||
Available amount under line of credit | 133,200 | ||||||||
Secured letter of credit agreement | |||||||||
Financial arrangement | |||||||||
Maximum borrowing capacity under credit agreement | 63,300 | ||||||||
Letters of credit outstanding | 63,300 | ||||||||
Secured letter of credit agreement | United Kingdom | |||||||||
Financial arrangement | |||||||||
Restricted cash | $ 69,600 |
Pension Plans (Details)
Pension Plans (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Components of net periodic pension cost (benefit) | ||||
Service cost | $ 151 | $ 152 | $ 302 | $ 310 |
Interest cost | 1,759 | 2,279 | 3,518 | 4,540 |
Expected return on plan assets | (3,201) | (3,303) | (6,400) | (6,775) |
Amortization of actuarial loss | 912 | 499 | 1,822 | 912 |
Administrative expenses | 47 | 45 | 94 | 86 |
Net pension benefit | $ (332) | $ (328) | $ (664) | $ (927) |
Stockholders_ Equity - Narrativ
Stockholders’ Equity - Narrative (Details) | 6 Months Ended |
Mar. 31, 2017itemshares | |
RSUs | |
Stockholders' Equity | |
Number of units awarded (in shares) | 1,905,460 |
Number of shares of common stock that each award holder has the contingent right to receive | 1 |
Vested awards to date | 445,242 |
Expected awards vested (in shares) | 493,560 |
Time-based RSUs | |
Stockholders' Equity | |
Number of units awarded (in shares) | 912,162 |
Number of equal installments for vesting of stock awards | item | 4 |
Performance-based RSUs | |
Stockholders' Equity | |
Number of units awarded (in shares) | 993,298 |
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 |
Stockholders_ Equity - RSU acti
Stockholders’ Equity - RSU activity (Details) - RSUs | 6 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Number of Shares | |
Balance unvested at the beginning of the period (in shares) | shares | 889,129 |
Granted (in shares) | shares | 459,923 |
Vested (in shares) | shares | (151,983) |
Forfeited (in shares) | shares | (73,456) |
Balance unvested at the end of the period (in shares) | shares | 1,123,613 |
Weighted Average Grant-Date Fair Value | |
Balance unvested at the beginning of the period (in dollars per share) | $ / shares | $ 45.98 |
Granted (in dollars per share) | $ / shares | 46.20 |
Vested (in dollars per share) | $ / shares | 46.17 |
Forfeited (in dollars per share) | $ / shares | 48.60 |
Balance unvested at the end of the period (in dollars per share) | $ / shares | $ 45.87 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Stock-Based Compensation | ||||
Non-cash compensation expense related to stock-based awards | $ 1,043 | $ 1,970 | $ 3,357 | $ 4,088 |
Estimated forfeiture rate (as a percent) | 12.50% | |||
Cost of sales | ||||
Stock-Based Compensation | ||||
Non-cash compensation expense related to stock-based awards | 108 | 226 | $ 283 | 544 |
Selling, general and administrative | ||||
Stock-Based Compensation | ||||
Non-cash compensation expense related to stock-based awards | 935 | $ 1,744 | 3,074 | $ 3,544 |
RSUs | ||||
Stock-Based Compensation | ||||
Unrecognized compensation cost related to unvested awards | $ 47,500 | 47,500 | ||
Aggregate fair value of awards | $ 22,500 | |||
Weighted-average period of recognition | 1 year 7 months 6 days |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2015 | |
Effective tax rate (as a percent) | 109.00% | 123.00% | |||
U.S. statutory tax rate (as a percent) | 35.00% | ||||
Unrecognized tax benefits, exclusive of interest and penalties | $ 11.1 | $ 11.1 | $ 10.2 | ||
Unrecognized tax benefits from permanent tax adjustments that, if recognized, would affect the effective rate | 8.3 | 8.3 | |||
Estimated unrecognized tax benefits resulting from possible resolution of reviews by domestic and international taxing authorities | 6.3 | 6.3 | |||
Deferred tax liability from repatriate of earnings | 26.7 | 26.7 | |||
Additional income tax expense (benefit) | $ 35.8 | ||||
Deferred tax asset valuation allowance | $ 9 | $ 9 | |||
Forecast | |||||
Repatriated earnings | $ 105 |
Derivative Instruments and He41
Derivative Instruments and Hedging Activities - Notional principal amounts (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities | |||||
Term of derivative contract | 3 years | ||||
Unrealized gain (loss) on derivative | $ 1,800 | $ (4,500) | $ 1,900 | $ 9,500 | |
Instruments designated as accounting hedges: | Foreign currency forwards | |||||
Derivative Instruments and Hedging Activities | |||||
Notional principal outstanding derivative instruments | 118,412 | 118,412 | $ 158,664 | ||
Instruments not designated as accounting hedges: | Foreign currency forwards | |||||
Derivative Instruments and Hedging Activities | |||||
Notional principal outstanding derivative instruments | 122,151 | 122,151 | 115,070 | ||
Notional principal outstanding derivative instruments designed to manage exposure | $ 100,300 | $ 100,300 | $ 78,400 |
Derivative Instruments and He42
Derivative Instruments and Hedging Activities - Fair value of derivative financial instruments (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Sep. 30, 2016 |
Derivative Instruments and Hedging Activities | ||
Asset derivatives | $ 2,782 | $ 15,970 |
Liability derivatives | 3,221 | 15,085 |
Foreign currency forwards | Other current assets | ||
Derivative Instruments and Hedging Activities | ||
Asset derivatives | 1,961 | 14,769 |
Foreign currency forwards | Other noncurrent assets | ||
Derivative Instruments and Hedging Activities | ||
Asset derivatives | 821 | 1,201 |
Foreign currency forwards | Other current liabilities | ||
Derivative Instruments and Hedging Activities | ||
Liability derivatives | 2,400 | 13,752 |
Foreign currency forwards | Other noncurrent liabilities | ||
Derivative Instruments and Hedging Activities | ||
Liability derivatives | $ 821 | $ 1,333 |
Derivative Instruments and He43
Derivative Instruments and Hedging Activities - Gains and losses recognized (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Derivative instruments and hedging activities | ||||
Estimated unrealized net gains (losses) from cash flow hedges which are expected to be reclassified into earnings in the next twelve months | $ (300) | $ (300) | ||
Foreign currency forwards | ||||
Derivative instruments and hedging activities | ||||
Gains (losses) recognized in OCI | (1,017) | $ 30 | (1,631) | $ (1,417) |
Gains (losses) reclassified into earnings - Effective Portion | $ 502 | $ (607) | $ 1,833 | $ 883 |
Segment Information - Business
Segment Information - Business segment financial data (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017USD ($) | Mar. 31, 2016USD ($) | Mar. 31, 2017USD ($) | Mar. 31, 2016USD ($)item | |
Revenue recognition | ||||
Number of Operating Segments | item | 3 | |||
Sales | $ 343,709 | $ 366,024 | $ 678,386 | $ 679,837 |
Operating income (Loss) | (2,072) | (9,086) | (6,173) | (17,163) |
Depreciation and amortization | 12,292 | 10,029 | 25,736 | 18,977 |
Transportation Systems | ||||
Revenue recognition | ||||
Sales | 139,600 | 148,700 | 271,500 | 274,500 |
Operating income (Loss) | 7,800 | 19,800 | 17,500 | 23,400 |
Depreciation and amortization | 2,000 | 1,700 | 4,400 | 4,200 |
Defense Systems | ||||
Revenue recognition | ||||
Sales | 108,400 | 116,300 | 220,900 | 212,200 |
Operating income (Loss) | (4,400) | (21,200) | (4,900) | (24,600) |
Depreciation and amortization | 7,700 | 6,900 | 16,500 | 11,000 |
Cubic Global Defense Services | ||||
Revenue recognition | ||||
Sales | 95,700 | 101,000 | 186,000 | 193,100 |
Operating income (Loss) | 2,000 | 4,300 | 1,600 | 4,500 |
Depreciation and amortization | 700 | 1,000 | 1,700 | 3,000 |
Corporate and other | ||||
Revenue recognition | ||||
Depreciation and amortization | 1,900 | 400 | 3,100 | 800 |
Unallocated corporate expenses and other | ||||
Revenue recognition | ||||
Operating income (Loss) | $ (7,500) | $ (12,000) | $ (20,400) | $ (20,500) |
Segment Information - Narrative
Segment Information - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Revenue recognition | ||||
Increase (decrease) in operating income | $ (2,072) | $ (9,086) | $ (6,173) | $ (17,163) |
Net income (loss) | $ 461 | $ 10,144 | $ (2,407) | $ 4,730 |
Increase (decrease) in net income per common share (in dollars per share) | $ 0.02 | $ 0.38 | $ (0.09) | $ 0.18 |
Unallocated corporate expenses and other | ||||
Revenue recognition | ||||
Expense related to the development of ERP system | $ 6,000 | $ 9,400 | $ 14,600 | $ 15,900 |
Increase (decrease) in operating income | (7,500) | (12,000) | (20,400) | (20,500) |
Change in estimated total costs | Adjustment | ||||
Revenue recognition | ||||
Increase (decrease) in operating income | 3,300 | (300) | (4,600) | (2,400) |
Net income (loss) | $ 2,300 | $ 200 | $ (2,500) | $ 1,400 |
Increase (decrease) in net income per common share (in dollars per share) | $ 0.09 | $ 0.01 | $ (0.09) | $ 0.05 |
LEGAL MATTERS (Details)
LEGAL MATTERS (Details) | 1 Months Ended |
Oct. 31, 2014item | |
Legal Matters | |
Number of transit customers included as defendants in lawsuit | 1 |