BUSINESS SEGMENT INFORMATION

12 Months Ended

Sep. 30, 2015

BUSINESS SEGMENT INFORMATION

BUSINESS SEGMENT INFORMATION

NOTE 16—BUSINESS SEGMENT INFORMATION

We have three primary business segments: Cubic Transportation Systems (CTS), Cubic Global Defense Services (CGD Services) and Cubic Global Defense Systems (CGD Systems). CTS designs, produces, installs and services electronic revenue collection systems for mass transit projects, including railways and buses. CGD Services provides training, operations, intelligence, maintenance, technical and other services to the U.S. government and allied nations. CGD Systems performs work under U.S. and foreign government contracts relating to electronic defense systems and equipment. CGD Systems products include customized military range instrumentation, laser based training systems, virtual simulation systems, communications products including datalinks, power amplifiers, avionics systems, modular networking and baseband communications equipment and cross domain hardware solutions to address multi-level security requirements.

We evaluate performance and allocate resources based on total segment operating profit or loss. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Intersegment sales and transfers are immaterial and are eliminated in consolidation.

Our reportable segments are business units that offer different products and services. Operating results for each segment are reported separately to senior corporate management to make decisions as to the allocation of corporate resources and to assess performance.

Business segment financial data is as follows (in millions):

Years ended September 30,	2015			2014			2013
Sales:
Cubic Transportation Systems	$	566.8		$	599.7		$	529.5
Cubic Global Defense Services	402.1			398.1			468.7
Cubic Global Defense Systems	462.1			400.6			363.0
Other	—			—			0.2
Total sales	$	1,431.0		$	1,398.4		$	1,361.4
Operating income (loss):
Cubic Transportation Systems	$	75.9		$	65.9		$	66.8
Cubic Global Defense Services	6.6			7.8			(36.1		)
Cubic Global Defense Systems	18.4			26.8			14.2
Unallocated corporate expenses and other	(25.5		)	(8.0		)	(4.2		)
Total operating income	$	75.4		$	92.5		$	40.7
Assets:
Cubic Transportation Systems	$	410.0		$	422.2		$	369.8
Cubic Global Defense Services	200.7			195.8			205.2
Cubic Global Defense Systems	341.2			252.4			228.9
Corporate and other	348.4			324.2			304.5
Total assets	$	1,300.3		$	1,194.6		$	1,108.4
Depreciation and amortization:
Cubic Transportation Systems	$	10.8		$	11.5		$	5.0
Cubic Global Defense Services	8.5			10.7			13.0
Cubic Global Defense Systems	17.1			7.4			6.1
Corporate and other	1.3			0.8			1.3
Total depreciation and amortization	$	37.7		$	30.4		$	25.4
Capital expenditures:
Cubic Transportation Systems	$	2.0		$	1.8		$	2.8
Cubic Global Defense Services	—			—			0.3
Cubic Global Defense Systems	0.6			13.2			4.6
Corporate and other	19.6			1.6			1.4
Total expenditures for long-lived assets	$	22.2		$	16.6		$	9.1

Years ended September 30,	2015		2014		2013
Geographic Information:
Sales (a):
United States	$	765.0	$	749.9	$	741.7
United Kingdom	282.4		294.4		267.4
Canada	17.6		9.0		30.4
Australia	164.6		161.9		148.5
Middle East	67.7		42.0		35.4
Far East	55.3		76.6		78.2
Other	78.4		64.6		59.8
Total sales	$	1,431.0	$	1,398.4	$	1,361.4

(a) Sales are attributed to countries or regions based on the location of customers.

Long-lived assets, net:
United States	$	65.8	$	49.8	$	43.9
United Kingdom	8.6		9.3		9.2
Other foreign countries	4.3		6.3		6.6
Total long-lived assets, net	$	78.7	$	65.4	$	59.7

CGD Services and CGD Systems segment sales include $670.0 million, $651.5 million and $691.8 million in 2015, 2014 and 2013, respectively, of sales to U.S. government agencies. CTS segment sales include $183.2 million, $213.2 million and $193.4 million in 2015, 2014 and 2013, respectively, of sales under various contracts with our customer, Transport for London (TfL). No other customer accounts for 10% or more of our revenues for any periods presented.

Changes in estimates on contracts for which revenue is recognized using the cost-to-cost percentage-of-completion method decreased operating income by approximately $14.5 million in 2015, increased operating income by approximately $1.3 million in 2014 and decreased operating income by approximately $1.7 million in 2013. These adjustments decreased net income by approximately $8.0 million ($0.30 per share) in 2015, increased net income by approximately $3.5 million ($0.13 per share) in 2014 and decreased net income by approximately $0.3 million ($0.01 per share) in 2013.

Certain of our transportation systems service contracts contain service level or system usage incentives, for which we recognize revenues when the incentive award is fixed or determinable. These contract incentives are generally based upon monthly service levels or monthly performance and become fixed or determinable on a monthly basis. However, one of our transportation systems service contracts contains annual system usage incentives which are based upon system usage compared to annual baseline amounts. For this contract the annual system usage incentives are not considered fixed or determinable until the end of the contract year for which the incentives are measured, which falls within the second quarter of our fiscal year. During the second quarter of fiscal years ended September 30, 2015, 2014, and 2013, we recognized sales of $9.3 million, $12.2 million, and $13.2 million, respectively related to annual system usage incentives on this transportation systems contract. In August 2015 we completed this contract and recognized an additional $3.1 million related to the final amount of system usage incentives. The recognition of these system usage incentives resulted in additional operating income of the same amounts in these respective periods. Upon completion of this contract we entered into a new service contract with this customer that is structured differently than the contract that completed in August 2015; the new contract does not have any significant system usage incentives.

In 2015 we incurred a total of $6.3 million of charges related to restructuring. In February 2015, we implemented a plan to restructure our defense services and defense systems businesses into a single organization to better align our defense business organizational structure with customer requirements, increase operational efficiencies and improve collaboration and innovation across the company. CGD Systems and CGD Services incurred restructuring charges of $4.6 million and $0.6 million, respectively, in connection with these restructuring activities. In addition, CTS incurred $0.6 million of restructuring costs and we incurred $0.5 million of unallocated corporate expenses related to various restructuring activities.

In 2014 we incurred restructuring charges of $1.1 million primarily by our CTS business in September 2014 as a result of a planned reduction of employee headcount in the U.S. by approximately 20. This restructuring was predominantly driven by the reduction in work on certain contracts that were in the process of moving from the design and build phase to the services phase.

In 2013, we incurred restructuring charges of $8.1 million by our CGD Systems segment to reduce global employee headcount by approximately 230 in order to rebalance our resources with work levels that declined due to delays in contract awards and contract funding.

A summary of the activity relating to the restructuring liability and employee separation expenses, which is included within accrued compensation and other current liabilities within our Consolidated Balance Sheet, is as follows (in thousands):

Liability as of October 1, 2013	$	2,220
Accrued costs	1,094
Cash payments	(2,538		)
Liability as of September 30, 2014	$	776
Accrued costs	6,272
Cash payments	(5,155		)
Liability as of September 30, 2015	$	1,893