Note 13 — Segment Information

We define our operating segments and reportable segments based on the way our chief executive officer, who we have concluded is our chief operating decision maker, manages our operations for purposes of allocating resources and assessing performance and we continually reassess our operating segment and reportable segment designation based upon these criteria. Through September 30, 2017, our company was aligned in our CGD Systems and CTS operating segments, which were also our reportable segments. In 2016, we formalized the structure of our CMS business unit within our CGD Systems operating segment. CMS combines and integrates our C4ISR and secure communications operations. Through September 30, 2017, we concluded that CMS was not a separate operating segment based upon factors including the nature of information presented to our chief executive officer and Board of Directors and the consequential level at which certain resource allocations and performance assessments were made. In the first quarter of fiscal 2018, we began providing additional financial information to our chief executive officer and Board of Directors at the CMS level, which allowed greater resource allocation decisions and performance assessments to be made at that level. As such, we concluded that CMS became a separate operating segment beginning on October 1, 2017. Applicable prior period amounts have been adjusted retrospectively to reflect the reportable segment change.

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


	Nine Months Ended				Three Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Sales:
Cubic Transportation Systems	$	478.1	$	407.9	$	164.6	$	136.4
Cubic Global Defense Systems		233.2		247.4		88.9		89.1
Cubic Mission Solutions		111.9		103.3		42.7		40.7
Total sales	$	823.2	$	758.6	$	296.2	$	266.2

Operating income (loss):
Cubic Transportation Systems	$	42.7	$	16.5	$	18.6	$	(0.9)
Cubic Global Defense Systems		13.6		18.4		6.9		10.4
Cubic Mission Solutions		(17.2)		(14.5)		(0.5)		(1.5)
Unallocated corporate expenses		(42.4)		(39.0)		(14.7)		(14.8)
Total operating income (loss)	$	(3.3)	$	(18.6)	$	10.3	$	(6.8)

Depreciation and amortization:
Cubic Transportation Systems	$	9.1	$	6.9	$	2.8	$	2.4
Cubic Global Defense Systems		6.1		7.3		2.0		3.5
Cubic Mission Solutions		15.8		18.1		4.7		5.4
Corporate		3.1		3.5		1.1		0.5
Total depreciation and amortization	$	34.1	$	35.8	$	10.6	$	11.8

Unallocated corporate costs in the third quarter of 2018 include costs of strategic and IT system resource planning as part of our One Cubic Initiatives, which totaled $5.0 million compared to $8.9 million in the third quarter of last year. Unallocated corporate costs included $18.8 million of costs incurred in the first nine months of 2018 for strategic and IT system resource planning compared to $23.6 million in the first nine months of last year. As described in Note 2, the operating results of CGD Services have been classified as discontinued operations in the Condensed Consolidated Statements of Income (Loss) for all periods presented. In the application of the accounting requirements for discontinued operations, corporate overhead is not allocated to discontinued operations. Therefore, certain corporate overhead costs that had previously been allocated to the CGD Services segment have been included in the unallocated corporate expenses amounts above. Such amounts totaled $1.3 million and $1.9 million in the third quarter of fiscal 2018 and fiscal 2017, respectively, and totaled $5.3 million and $5.9 million for the first nine months of fiscal 2018 and fiscal 2017, respectively.

Changes in estimates on contracts for which revenue is recognized using the cost-to-cost-percentage-of-completion method increased our operating income by $2.2 million and decreased our operating loss by $0.1 million for the three and nine months ended June 30, 2018, respectively, and decreased our operating loss by $6.2 million and $2.4 million for the three and nine months ended June 30, 2017, respectively. These adjustments increased our net income from continuing operations attributable to Cubic by $1.7 million ($0.06 per share) and decreased our net loss from continuing operations attributable to Cubic by $0.1 million ($0.00 per share) for the three and nine months ended June 30, 2018, respectively, and decreased our net loss from continuing operations attributable to Cubic by $3.2 million ($0.12 per share) and $1.2 million ($0.05 per share) for the three and nine months ended June 30, 2017, respectively.

CMS Investment in Shield Aviation

As of June 30, 2018 our CMS segment had total secured loans outstanding of $4.5 million from Shield Aviation, a private start-up company in the U.S. that is developing autonomous aircraft systems for intelligence, surveillance and reconnaissance (ISR) services. CMS also obtained warrants in the investee in connection with this debt financing, with a carrying value of $0.7 million at June 30, 2018. The note receivable is classified within other current assets and the warrants are classified within non-current other assets on our Condensed Consolidated Balance Sheets. The note receivable is held at amortized cost and the warrants are held at their historical cost.

In July 2018, we purchased all of the assets of Shield Aviation in exchange for cancellation of the loans receivable and the warrants, plus cash consideration of $1.6 million. In addition, we have agreed to pay the sellers a percentage of the cumulative revenues earned for the sales of Shield Aviation products and services for seven years from the date of the purchase, up to a total possible payment to the sellers of $10.0 million.