Segment Information

9 Months Ended

Jun. 30, 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 June 30, 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):

	Nine Months Ended				Three Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Sales:
Cubic Transportation Systems	$	407.9	$	430.5	$	136.4	$	156.0
Cubic Global Defense Systems		350.7		331.3		129.8		119.0
Cubic Global Defense Services		281.7		293.3		95.7		100.2
Total sales	$	1,040.3	$	1,055.1	$	361.9	$	375.2
Operating income (loss):
Cubic Transportation Systems	$	16.6	$	43.9	$	(0.9)	$	20.5
Cubic Global Defense Systems		4.0		(23.7)		8.9		0.9
Cubic Global Defense Services		4.8		9.3		3.2		4.8
Unallocated corporate expenses		(33.3)		(32.8)		(12.9)		(12.3)
Total operating income (loss)	$	(7.9)	$	(3.3)	$	(1.7)	$	13.9
Depreciation and amortization:
Cubic Transportation Systems	$	6.8	$	5.4	$	2.4	$	1.2
Cubic Global Defense Systems		24.2		19.7		7.7		8.7
Cubic Global Defense Services		2.4		4.8		0.7		1.8
Corporate		4.8		2.0		1.7		1.3
Total depreciation and amortization	$	38.2	$	31.9	$	12.5	$	13.0

Unallocated corporate costs in the third quarter of 2017 include costs of strategic and IT system resource planning as part of our One Cubic Initiatives, which totaled $8.9 million compared to $8.5 million in the third quarter of last year. Unallocated corporate costs included $23.6 million of costs incurred in the first nine months of 2017 for strategic and IT system resource planning compared to $24.4 million in the first nine months 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 $6.1 million and decreased operating income by $1.2 million for the three and nine months ended June 30, 2017, respectively, and increased operating income by $0.2 million and decreased operating income by $3.1 million for the three and nine months ended June 30, 2016, respectively.

These adjustments decreased our net loss by $3.2 million ($0.12 per share) and increased our net loss by $1.0 million ($0.04 per share) for the three and nine months ended June 30, 2017, respectively, and increased net income by $0.1 million (no impact to diluted shares) and decreased net income by $1.8 million ($0.07 per share) for the three and nine months ended June 30, 2016, respectively.

In June 2017, funding was approved on an $8.0 million equitable contract adjustment for our littoral combat ship virtual training contract with the U.S. Navy. As such, we recognized $8.0 million in sales and operating profit related to such contract adjustment during the quarter ended June 30, 2017 within our CGD Systems segment.