10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________________________ to __________________________________          

Commission File Number: 001-08931

CUBIC CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	95-1678055
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

9333 Balboa Avenue	92123
San Diego, California	(Zip Code)
(Address of principal executive offices)

(858) 277-6780

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, no par value	CUB	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 21, 2020, there were 31,329,008 shares of the registrant’s common stock, no par value, issued and outstanding (after deducting 8,945,300 shares held as treasury stock).

CUBIC CORPORATION

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended June 30, 2020

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Changes in Shareholders’ Equity	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 4.	Controls and Procedures	57
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 6.	Exhibits	58

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(amounts in thousands, except per share data)

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Net sales:
Products	$	221,039	$	255,900	$	609,137	$	660,897
Services		129,400		126,779		391,623		364,380
		350,439		382,679		1,000,760		1,025,277
Costs and expenses:
Products		151,553		190,434		471,398		491,856
Services		79,943		77,224		251,011		243,851
Selling, general and administrative expenses		62,272		82,167		206,481		211,348
Research and development		12,254		12,470		32,036		38,236
Amortization of purchased intangibles		16,358		9,717		42,940		32,677
Gain on sale of property, plant and equipment		(40)		(32,563)		(170)		(32,563)
Restructuring costs		3,393		8,505		8,775		12,254
		325,733		347,954		1,012,471		997,659
Operating income (loss)		24,706		34,725		(11,711)		27,618
Other income (expenses):
Interest and dividend income		1,997		1,696		5,908		4,343
Interest expense		(7,366)		(6,132)		(20,948)		(14,695)
Loss on extinguishment of debt		—		—		(16,090)		—
Other income (expense), net		(6,773)		(8,714)		(26,564)		(17,069)
Income (loss) from continuing operations before income taxes		12,564		21,575		(69,405)		197
Income tax provision (benefit)		4,602		1,029		(8,936)		(305)
Income (loss) from continuing operations		7,962		20,546		(60,469)		502
Net income (loss) from discontinued operations		252		(202)		(203)		(1,541)
Net income (loss)		8,214		20,344		(60,672)		(1,039)
Less noncontrolling interest in net income (loss) of VIE		9,369		(3,566)		181		(8,970)
Net income (loss) attributable to Cubic	$	(1,155)	$	23,910	$	(60,853)	$	7,931
Amounts attributable to Cubic:
Net income (loss) from continuing operations	$	(1,407)	$	24,112	$	(60,650)	$	9,472
Net income (loss) from discontinued operations		252		(202)		(203)		(1,541)
Net income (loss) attributable to Cubic	$	(1,155)	$	23,910	$	(60,853)	$	7,931
Net income (loss) per share:
Basic
Continuing operations attributable to Cubic	$	(0.04)	$	0.77	$	(1.94)	$	0.31
Discontinued operations	$	0.01	$	(0.01)	$	(0.01)	$	(0.05)
Basic earnings per share attributable to Cubic	$	(0.04)	$	0.77	$	(1.94)	$	0.26
Diluted
Continuing operations attributable to Cubic	$	(0.04)	$	0.77	$	(1.94)	$	0.31
Discontinued operations	$	0.01	$	(0.01)	$	(0.01)	$	(0.05)
Diluted earnings per share attributable to Cubic	$	(0.04)	$	0.77	$	(1.94)	$	0.26
Dividends per common share	$	—	$	—	$	0.14	$	0.14
Weighted average shares used in per share calculations:
Basic		31,299		31,160		31,289		30,267
Diluted		31,299		31,249		31,289		30,332

See Notes to Condensed Consolidated Financial Statements.

3

CUBIC CORPORATION

CONDENSED CONSOLIDATED

STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(amounts in thousands)

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Net income (loss)	$	8,214	$	20,344	$	(60,672)	$	(1,039)
Other comprehensive income (loss):
Foreign currency translation		8,115		(1,900)		690		(2,256)
Change in unrealized gains/losses from cash flow hedges:
Change in fair value of cash flow hedges, net of tax		(13,741)		(483)		(13,868)		98
Adjustment for net gains/losses realized and included in net income, net of tax		(1,572)		69		(2,486)		331
Total change in unrealized gains/losses realized from cash flow hedges, net of tax		(15,313)		(414)		(16,354)		429
Total other comprehensive loss		(7,198)		(2,314)		(15,664)		(1,827)
Total comprehensive income (loss)		1,016		18,030		(76,336)		(2,866)
Noncontrolling interest in comprehensive income (loss) of consolidated VIE, net of tax		9,369		(3,566)		181		(8,970)
Comprehensive income (loss) attributable to Cubic, net of tax	$	(8,353)	$	21,596	$	(76,517)	$	6,104

See Notes to Condensed Consolidated Financial Statements.

4

CUBIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(amounts in thousands)

	June 30,		September 30,
	2020		2019
ASSETS
Current assets:
Cash and cash equivalents	$	109,050	$	65,800
Cash of consolidated VIE		743		347
Restricted cash		22,279		19,507
Restricted cash of consolidated VIE		1,669		9,967
Accounts receivable:
Billed		145,599		127,406
Allowance for doubtful accounts		(1,141)		(1,392)
		144,458		126,014
Contract assets		253,900		349,559
Recoverable income taxes		16,495		7,754
Inventories		151,613		106,794
Other current assets		35,570		38,534
Other current assets of consolidated VIE		99		33
Total current assets		735,876		724,309
Long-term contracts financing receivables		53,739		36,285
Long-term contracts financing receivables of consolidated VIE		191,042		115,508
Property, plant and equipment, net		160,547		144,969
Operating lease right-of-use asset		82,141		—
Deferred income taxes		8,932		4,098
Goodwill		783,368		578,097
Purchased intangibles, net		226,552		165,613
Other assets		19,615		76,872
Other assets of consolidated VIE		—		1,419
Total assets	$	2,261,812	$	1,847,170
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	277,000	$	195,500
Trade accounts payable		121,253		180,773
Trade accounts payable of consolidated VIE		175		25
Contract liabilities		71,269		46,170
Accrued compensation and current liabilities		117,332		95,013
Other current liabilities of consolidated VIE		150		191
Income taxes payable		814		773
Current portion of long-term debt		11,250		10,714
Total current liabilities		599,243		529,159
Long-term debt		433,653		189,110
Long-term debt of consolidated VIE		155,493		61,994
Operating lease liability		75,468		—
Other noncurrent liabilities		78,528		64,734
Other noncurrent liabilities of consolidated VIE		5,572		21,605
Shareholders’ equity:
Common stock		287,252		274,472
Retained earnings		797,046		862,948
Accumulated other comprehensive loss		(155,357)		(139,693)
Treasury stock at cost		(36,078)		(36,078)
Shareholders’ equity related to Cubic		892,863		961,649
Noncontrolling interest in VIE		20,992		18,919
Total shareholders’ equity		913,855		980,568
Total liabilities and shareholders’ equity	$	2,261,812	$	1,847,170

See Notes to Condensed Consolidated Financial Statements.

5

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in thousands)

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Operating Activities:
Net income (loss)	$	8,214	$	20,344	$	(60,672)	$	(1,039)
Net income (loss) from discontinued operations		(252)		202		203		1,541
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		23,394		15,351		63,758		48,949
Share-based compensation expense		5,412		4,402		15,271		10,760
Change in fair value of contingent consideration		(74)		1,163		(4,552)		1,833
Change in fair value of interest rate swap of consolidated VIE		6,888		—		18,370		—
Gain on sale of property, plant and equipment		—		(32,563)		(170)		(32,563)
Deferred income taxes		(2,622)		(948)		(14,457)		(6,773)
Loss on extinguishment of debt		—		—		16,090		—
Other items		(5,020)		—		(712)		—
Changes in operating assets and liabilities, net of effects from acquisitions		(65,170)		(6,897)		(136,478)		(105,364)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES FROM CONTINUING OPERATIONS		(29,230)		1,054		(103,349)		(82,656)
NET CASH PROVIDED BY OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS		2,693		—		2,778		—
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(26,537)		1,054		(100,571)		(82,656)
Investing Activities:
Acquisition of businesses, net of cash acquired		—		—		(234,788)		(395,854)
Proceeds from sale of property, plant and equipment		—		44,891		—		44,891
Purchases of property, plant and equipment		(10,741)		(13,114)		(35,802)		(35,291)
Purchase of non-marketable debt and equity securities		—		(52,997)		—		(52,997)
Receipt of withheld proceeds from sale of trade receivables		—		—		5,521		—
NET CASH USED IN INVESTING ACTIVITIES		(10,741)		(21,220)		(265,069)		(439,251)
Financing Activities:
Proceeds from short-term borrowings		110,000		168,000		994,500		782,500
Principal payments on short-term borrowings		(170,000)		(146,000)		(913,000)		(551,500)
Proceeds from long-term borrowings		—		—		450,000		—
Principal payments on long-term debt		(3,088)		—		(202,921)		—
Proceeds from long-term borrowings of consolidated VIE		174,938		19,841		198,160		35,816
Principal payments on long-term borrowings of consolidated VIE		(92,575)		—		(92,575)		—
Debt extinguishment make whole payment		—		—		(15,856)		—
Deferred financing fees		—		(1,854)		(2,517)		(1,854)
Deferred financing fees of consolidated VIE		(8,638)		(213)		(8,638)		(690)
Proceeds from stock issued under employee stock purchase plan		—		—		1,169		783
Purchase of common stock		—		—		(3,660)		(3,419)
Dividends paid		—		—		(4,225)		(4,205)
Contingent consideration payments related to acquisitions of businesses		—		—		—		(820)
Equity contribution from Boston VIE partner		1,892		—		1,892		—
Proceeds from equity offering, net		—		—		—		215,832
NET CASH PROVIDED BY FINANCING ACTIVITIES		12,529		39,774		402,329		472,443
Effect of exchange rates on cash		8,634		(1,574)		1,431		(234)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(16,115)		18,034		38,120		(49,698)
Cash, cash equivalents and restricted cash at the beginning of the period		149,856		71,876		95,621		139,608
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT THE END OF THE PERIOD	$	133,741	$	89,910	$	133,741	$	89,910
Supplemental disclosure of non-cash investing and financing activities:
Contingent consideration liability incurred with the acquisition of Delerrok		—		—		1,600		—
Receivable recognized in connection with the acquisition of Trafficware, net		—		—		—		1,588
Receivable recognized in connection with the acquisition of GRIDSMART, net		—		—		—		442
Liability incurred to acquire Nuvotronics, net		—		—		—		5,300

See Notes to Condensed Consolidated Financial Statements.

6

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

(amounts in thousands, except per share data)

	For the Three Months Ended June 30, 2020
					Accumulated
					Other				Noncontrolling		Number
	Common		Retained		Comprehensive		Treasury		Interest in		of Shares
	Stock		Earnings		Loss		Stock		VIE		Outstanding
April 1, 2020	$	281,840	$	798,201	$	(148,159)	$	(36,078)	$	9,731	31,296
Net income (loss)		—		(1,155)		—		—		9,369	—
Other comprehensive loss, net of tax		—		—		(7,198)		—		—	—
Stock issued under equity incentive plans		—		—		—		—		—	3
Share-based compensation		5,412		—		—		—		—	—
Equity contribution from Boston VIE partner		—		—		—		—		1,892	—
June 30, 2020	$	287,252	$	797,046	$	(155,357)	$	(36,078)	$	20,992	31,299
	For the Nine Months Ended June 30, 2020
					Accumulated
					Other				Noncontrolling		Number
	Common		Retained		Comprehensive		Treasury		Interest in		of Shares
	Stock		Earnings		Loss		Stock		VIE		Outstanding
October 1, 2019	$	274,472	$	862,948	$	(139,693)	$	(36,078)	$	18,919	31,178
Net income (loss)		—		(60,853)		—		—		181	—
Other comprehensive loss, net of tax		—		—		(15,664)		—		—	—
Stock issued under equity incentive plans		—		—		—		—		—	156
Stock issued under employee stock purchase plan		1,169		—		—		—		—	19
Purchase of common stock		(3,660)		—		—		—		—	(54)
Share-based compensation		15,271		—		—		—		—	—
Cumulative effect of accounting standard adoption		—		(824)		—		—		—	—
Equity contribution from Boston VIE partner		—		—		—		—		1,892	—
Cash dividends paid - $0.14 per share of common stock		—		(4,225)		—		—		—	—
June 30, 2020	$	287,252	$	797,046	$	(155,357)	$	(36,078)	$	20,992	31,299

7

	For the Three Months Ended June 30, 2019
					Accumulated
					Other				Noncontrolling		Number
	Common		Retained		Comprehensive		Treasury		Interest in		of Shares
	Stock		Earnings		Loss		Stock		VIE		Outstanding
April 1, 2019	$	264,612	$	801,486	$	(110,156)	$	(36,078)	$	23,325	31,150
Net income (loss)		—		23,910		—		—		(3,566)	—
Other comprehensive income, net of tax		—		—		(2,314)		—		—	—
Stock issued under equity incentive plans		—		—		—		—		—	12
Purchase of common stock		—		—		—		—		—	(2)
Share-based compensation		4,402		—		—		—		—	—
Other		(49)		—		—		—		10	—
June 30, 2019	$	268,965	$	825,396	$	(112,470)	$	(36,078)	$	19,769	31,160
	For the Nine Months Ended June 30, 2019
					Accumulated
					Other				Noncontrolling		Number
	Common		Retained		Comprehensive		Treasury		Interest in		of Shares
	Stock		Earnings		Loss		Stock		VIE		Outstanding
October 1, 2018	$	45,008	$	801,834	$	(110,643)	$	(36,078)	$	24,075	27,255
Net income (loss)		—		7,931		—		—		(8,970)	—
Other comprehensive income, net of tax		—		—		(1,827)		—		—	—
Stock issued under equity incentive plans		—		—		—		—		—	144
Stock issued under employee stock purchase plan		783		—		—		—		—	15
Purchase of common stock		(3,419)		—		—		—		—	(49)
Share-based compensation		10,760		—		—		—		—	—
Cumulative effect of accounting standard adoption		—		19,834		—		—		4,655	—
Stock issued under equity offering		215,832		—		—		—		—	3,795
Cash dividends paid - $0.14 per share of common stock		—		(4,205)		—		—		—	—
Other		1		2		—		—		9	—
June 30, 2019	$	268,965	$	825,396	$	(112,470)	$	(36,078)	$	19,769	31,160

See Notes to Condensed Consolidated Financial Statements.

8

CUBIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

June 30, 2020

Note 1 — Basis for Presentation

Cubic Corporation (“we,” “us,” the “Company” 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 GAAP for complete financial statements.

In our opinion, the accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results for the interim periods presented. Operating results for the three- and nine-month periods ended June 30, 2020 are not necessarily indicative of the results that may be expected for our fiscal year ending September 30, 2020 (“fiscal 2020”). For further information, refer to the audited consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019 (“fiscal 2019”).

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.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (commonly known as Accounting Standards Codification (“ASC”) Topic 842) (“ASC 842”). Under the guidance, lessees are required to recognize the following for all leases (with the exception of short-term leases): (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. We adopted ASC 842 on October 1, 2019 using the optional transition method and, as a result, did not recast prior period unaudited condensed comparative financial statements. All prior period amounts and disclosures are presented under ASC 840, Leases, the legacy lease accounting guidance. We elected the practical expedients which provide that entities need not reassess whether existing contracts contain a lease, lease classification of existing leases, or the treatment of initial direct costs on existing leases. On October 1, 2019, we recorded a right-of-use asset of $80.0 million and a lease liability of $88.0 million in our consolidated balance sheets. We also recorded a $0.8 million decrease in retained earnings related to the adoption of ASC 842. The adoption of the standard did not have a material impact on our consolidated statements of operations or consolidated statements of cash flows.

Recent Accounting Pronouncements – Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which requires companies to record an allowance for expected credit losses over the contractual term of financial assets, including short-term trade receivables and contract assets, and expands disclosure requirements for credit quality of financial assets. The amendments in this ASU are effective for us in our annual period beginning October 1, 2020. We do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). 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 amount 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. The adoption of ASU 2017-04 will have no immediate impact on our consolidated financial statements and will only have the potential to impact the amount of any goodwill impairment recorded after the adoption thereof.

9

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance modifies the disclosure requirements on fair value measurements. The amendments in this ASU are effective for us in our annual period beginning October 1, 2020 and interim periods within that annual period. We do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Defined Benefit Plans - Disclosure Framework (Topic 715), which modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement benefit plans. The guidance removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant. The amendments in this ASU are effective for us in our annual period beginning October 1, 2020. We do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that Is a Service Contract (Subtopic 350-24), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments in this ASU are effective for us in our annual period beginning October 1, 2020. We do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) (“Topic 740”), which removes certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU are effective for us in our annual period beginning October 1, 2021 and interim periods within that annual period. We are currently evaluating the impact of this standard on our consolidated financial statements.

Note 2 — COVID-19 Update

In March 2020, the novel coronavirus disease (“COVID-19”) was declared a pandemic by the World Health Organization. The outbreak has resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures, and other measures. In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of COVID-19.

Cubic’s businesses have been deemed essential in the locations in which we operate around the world. As such, our priorities are to continue providing our essential products and services to customers while focusing on protecting the health and well-being of our employees.

Our condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that while our operating results in the second and third quarter of fiscal 2020 were impacted by the pandemic, no asset impairments have been recognized.

In light of the risks presented by the current environment, we have taken a number of steps to strengthen liquidity and manage cash flow. These steps include our long-term debt restructuring that closed in the second quarter of fiscal 2020 and which included an increase in limits under our revolving credit facility, as further described in Note 9. We have also been negotiating more favorable payment terms with our customers, suppliers and subcontractors and utilized governmental stimulus benefits, including those related to tax. In addition, we have modified executive and other employee compensation and have planned reductions in capital expenditures and other discretionary expenditures.

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Note 3 — Acquisitions and Divestitures

Sale of CGD Services

In May 2018, we sold our Cubic Global Defense Services (“CGD Services”) business to Nova Global Supply & Services, LLC (Purchaser), an entity affiliated with GC Valiant, LP. The sale closed on May 31, 2018. In accordance with the terms of the stock purchase agreement executed in connection with the transaction, the Purchaser agreed to pay us $135.0 million in cash upon the closing of the transaction, adjusted for the estimated working capital of CGD Services at the date of the sale compared to a working capital target established by the parties. In the third quarter of fiscal 2018, we received $133.8 million in connection with the sale and we recorded a receivable from the Purchaser for the estimated amount due related to the working capital settlement. Since the sale we have worked with the Purchaser and revised certain estimates related to the working capital settlement. In connection with the revision of these estimates, we reduced the receivable from the Purchaser by $0.6 million and recognized a corresponding loss on the sale of CGD Services in the first quarter of fiscal 2020. In the third quarter of fiscal 2020, we settled the working capital receivable with the purchaser and received cash of $2.7 million and recognized a $0.1 million reduction in the previously estimated loss on the sale of CGD Services.

Business Acquisitions

Each of the following acquisitions have 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.

Cubic Mission Solutions (“CMS”)

PIXIA Corp.

On June 27, 2019, we paid cash of $50.0 million to purchase 20% of the outstanding shares of PIXIA Corp. (“Pixia”), a provider of high performance advanced data indexing, warehousing, processing and dissemination software solutions for large volumes of imagery data within traditional or cloud-based architectures. The purchase agreement with Pixia included an option to purchase the remaining 80% of its shares of capital stock for $200.0 million, subject to certain post-closing adjustment provisions, which we exercised in November 2019. On January 3, 2020, we completed the purchase of the remaining 80% of Pixia’s issued and outstanding shares of capital stock for aggregate consideration consisting of $197.8 million in net cash, resulting in our ownership of all of Pixia’s issued and outstanding shares of capital stock. The acquisition was financed primarily with proceeds from draws on our line of credit.

From June 27, 2019 through January 3, 2020, we accounted for our 20% ownership of Pixia using the equity method of accounting. Upon completion of the acquisition of the remaining 80% ownership interest, we now consolidate Pixia into our financial statements. The acquisition-date fair value of consideration transferred is $245.2 million and is comprised of total cash paid of $247.8 million, less a $2.0 million dividend received from Pixia and less a $0.6 million loss recognized during the period that we accounted for our 20% ownership of Pixia using the equity method of accounting.

The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the acquisition date (in millions):

Backlog	$	42.5
Customer relationships		25.5
Developed technology		14.1
Trade name		5.7
Accounts receivable, prepaids and other assets		4.0
Deferred taxes		(18.3)
Other net assets acquired (liabilities assumed)		(1.8)
Net identifiable assets acquired		71.7
Goodwill		173.5
Net assets acquired	$	245.2

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The estimated fair values of assets acquired and liabilities assumed, including purchased intangibles, are preliminary estimates pending the finalization of our detailed valuation analyses and necessary calculations. The 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 trade name valuation used the relief from royalty method, the customer relationships and non-compete agreements valuations used the lost profits valuation method and the technology and backlog valuations used the excess earnings method.

The intangible assets are being amortized using straight-line methods based on the expected period of undiscounted cash flows that will be generated by the assets, over a weighted average useful life of approximately four years from the date of acquisition.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of Pixia with our existing CMS business, and strengthening our capability of developing and integrating products in our CMS 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 CMS segment and is not expected to be deductible for tax purposes.

Nuvotronics, Inc.

In March 2019, we acquired all of the outstanding shares of capital stock of Nuvotronics, Inc. (“Nuvotronics”), a provider of microfabricated radio frequency products. Based in Durham, North Carolina, Nuvotronics’ patented PolyStrata technology enables the design and production of uniquely packaged RF devices, such as antennas, filters and combiners, all of which are also components in Cubic’s advanced technology product offerings. Nuvotronics is expected to provide synergies from combining its capabilities with our existing CMS business.

The acquisition-date fair value of consideration is $66.8 million, which is comprised of net cash paid of $61.9 million, plus the estimated fair value of contingent consideration of $4.9 million. The acquisition was financed primarily with proceeds from draws on our line of credit. Under the purchase agreement executed in connection with the acquisition, we will pay the sellers up to $8.0 million of contingent consideration if Nuvotronics meets certain gross profit goals for the 12-month period ending on each of December 31, 2020 and December 31, 2021. The contingent consideration liability will be re-measured to fair value at each reporting date until the contingencies are resolved and any subsequent changes in fair value are recognized in earnings.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

Technology	$	22.7
Trade name		1.5
Backlog		1.4
Non-compete agreements		0.5
Customer relationships		0.6
Accounts receivable and contract assets		2.6
Fixed assets		2.7
Accounts payable and accrued expenses		(1.8)
Deferred taxes		(3.2)
Other net assets acquired (liabilities assumed)		(0.6)
Net identifiable assets acquired		26.4
Goodwill		40.4
Net assets acquired	$	66.8

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 trade name valuation used the relief from royalty method, the customer relationships valuation used the with-and-without valuation method and the technology and backlog valuations used the excess earnings method.

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The intangible assets are being amortized using straight-line methods based on the expected period of undiscounted cash flows that will be generated by the assets, over an 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 Nuvotronics with our existing CMS business, and strengthening our capability of developing and integrating products in our CMS 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 CMS segment and is not expected to be deductible for tax purposes.

Operating Results

Pixia’s and Nuvotronics’ sales and results of operations included in our operating results were as follows (in millions):

	Three Months Ended
	June 30, 2020				June 30, 2019
	Pixia		Nuvotronics		Pixia		Nuvotronics
Sales	$	4.2	$	3.8	$	—	$	3.6
Operating loss		(5.9)		(2.9)		—		(3.2)
Net loss after taxes		(5.9)		(2.9)		—		(3.2)
	Nine Months Ended
	June 30, 2020				June 30, 2019
	Pixia		Nuvotronics		Pixia		Nuvotronics
Sales	$	5.3	$	9.8	$	—	$	4.3
Operating loss		(15.9)		(7.8)		—		(4.9)
Net loss after taxes		(15.9)		(7.8)		—		(4.9)

Pixia’s and Nuvotronics’ operating results above included the following amounts (in millions):

	Three Months Ended
	June 30, 2020				June 30, 2019
	Pixia		Nuvotronics		Pixia		Nuvotronics
Amortization	$	7.2	$	0.9	$	—	$	0.6
Acquisition-related expenses		1.3		0.3		—		1.1
	Nine Months Ended
	June 30, 2020				June 30, 2019
	Pixia		Nuvotronics		Pixia		Nuvotronics
Amortization	$	14.3	$	3.1	$	—	$	0.7
Acquisition-related expenses		3.3		1.6		—		2.9
Gain for changes in fair value of contingent consideration		—		(4.2)		—		—

The estimated amortization expense related to the intangible assets recorded in connection with our acquisitions of Pixia and Nuvotronics is as follows (in millions):

Year Ending
September 30,	Pixia		Nuvotronics
2020	$	21.5	$	4.0
2021		28.7		3.0
2022		12.7		3.0
2023		7.3		2.9
2024		7.3		2.7
Thereafter		10.5		10.1

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Cubic Transportation Systems (“CTS”)

Delerrok Inc.

Since fiscal 2018, we invested a total of $8.3 million to purchase 17.5% of the outstanding shares of common stock of Delerrok Inc. (“Delerrok”), a private technology company based in Vista, California, that specializes in electronic fare collection systems for the mid-market. Our purchase agreement included an option to purchase the remaining 82.5% of Delerrok’s outstanding shares of common stock, which we exercised in November 2019. On January 3, 2020, we completed the purchase of the remaining 82.5% of Delerrok’s outstanding shares of common stock for aggregate consideration consisting of $37.0 million in net cash, resulting in our ownership of all of Delerrok’s shares of common stock. We will also pay the sellers up to an additional $2.0 million if Delerrok’s sales exceed certain levels from the date of acquisition through December 31, 2020.

Prior to the acquisition of all of Delerrok’s outstanding shares of common stock, we accounted for our investment in Delerrok using the cost method of accounting. Upon completion of the acquisition of all of Delerrok’s outstanding shares of common stock, we now consolidate Delerrok into our financial statements. The estimated acquisition-date fair value of consideration is $45.1 million. The acquisition was financed primarily with proceeds from draws on our line of credit and is comprised of total cash paid of $43.5 million and the estimated fair value of contingent consideration of $1.6 million.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

Technology	$	14.9
Trade name		0.9
Accounts receivable		0.9
Other net assets acquired (liabilities assumed)		(0.2)
Deferred tax liability		(2.0)
Net identifiable assets acquired		14.5
Goodwill		30.6
Net assets acquired	$	45.1

The estimated fair values of assets acquired and liabilities assumed, including purchased intangibles, are preliminary estimates pending the finalization of our detailed valuation analyses and necessary calculations. The 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 trade name valuation used the relief from royalty method, the customer relationships valuation used the with-and-without valuation method and the technology valuations used the excess earnings method.

The intangible assets are being amortized using straight-line methods based on the expected period of undiscounted cash flows that will be generated by the assets, over an average useful life of approximately eight years from the date of acquisition.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of Delerrok with our existing CTS business, and strengthening our capability of developing and integrating products in our CTS 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 CTS segment and is not expected to be deductible for tax purposes.

GRIDSMART Technologies, Inc.

In January 2019, we acquired all of the outstanding shares of capital stock of GRIDSMART Technologies, Inc. (“GRIDSMART”), a provider of differentiated video tracking solutions to the Intelligent Traffic Systems market. Based in Knoxville, Tennessee, GRIDSMART specializes in video detection at the intersection utilizing advanced image processing, computer vision modeling and machine learning along with a single camera solution providing best-in-class data for optimizing the flow of people and traffic through intersections.

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The acquisition-date fair value of consideration is $86.8 million. The acquisition was financed primarily with proceeds from draws on our line of credit.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

Technology	$	25.7
Customer relationships		3.6
Trade name		2.4
Inventory		4.3
Accounts receivable		1.7
Accounts payable and accrued expenses		(1.9)
Deferred taxes		(3.3)
Other net assets acquired		0.5
Net identifiable assets acquired		33.0
Goodwill		53.8
Net assets acquired	$	86.8

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 trade name valuation used the relief from royalty method, the customer relationships valuation used the with-and-without valuation method and the technology valuations used the excess earnings method.

The intangible assets are being amortized using straight-line methods based on the expected period of undiscounted cash flows that will be generated by the assets, over an average useful life of approximately eight years from the date of acquisition.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of GRIDSMART with our existing CTS business, and strengthening our capability of developing and integrating products in our CTS 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 CTS segment and is not expected to be deductible for tax purposes.

Advanced Traffic Solutions Inc.

In October 2018, we acquired all of the outstanding shares of capital stock of Advanced Traffic Solutions Inc. (“Trafficware”), a provider of intelligent traffic solutions for the transportation industry based in Sugar Land, Texas. Trafficware provides a fully integrated suite of software, Internet of Things devices, and hardware solutions that optimize the flow of motorist and pedestrian traffic.

The acquisition-date fair value of consideration is $237.2 million. The acquisition was financed primarily with proceeds from draws on our line of credit.

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The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

Technology	$	43.3
Customer relationships		21.9
Backlog		4.8
Trade name		4.6
Accounts receivable		10.4
Inventory		9.9
Accounts payable and accrued expenses		(9.5)
Other net assets acquired (liabilities assumed)		(2.0)
Net identifiable assets acquired		83.4
Goodwill		153.8
Net assets acquired	$	237.2

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 trade name valuation used the relief from royalty method, the customer relationships valuation used the with-and-without valuation method, and the technology and backlog valuations used the excess earnings method.

The intangible assets are being amortized using straight-line methods based on the expected period of undiscounted cash flows that will be generated by the assets, over an 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 Trafficware with our existing CTS business, and strengthening our capability of developing and integrating products in our CTS 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 CTS segment and is not expected to be deductible for tax purposes.

Operating Results

The sales and results of operations from Delerrok, GRIDSMART and Trafficware included in our operating results were as follows (in millions):

	Three Months Ended
	June 30, 2020						June 30, 2019
	Delerrok		GRIDSMART		Trafficware		Delerrok		GRIDSMART		Trafficware
Sales	$	0.4	$	8.2	$	14.4	$	—	$	7.7	$	15.8
Operating income (loss)		(0.2)		1.5		(1.3)		—		0.7		(1.0)
Net income (loss) after taxes		(0.2)		1.5		(1.3)		—		0.7		(1.0)
	Nine Months Ended
	June 30, 2020						June 30, 2019
	Delerrok		GRIDSMART		Trafficware		Delerrok		GRIDSMART		Trafficware
Sales	$	1.1	$	20.1	$	37.4	$	—	$	14.0	$	38.0
Operating income (loss)		(1.2)		0.7		(4.5)		—		(1.3)		(9.5)
Net income (loss) after taxes		(1.2)		0.7		(4.5)		—		(1.3)		(9.5)

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The operating results above included the following amounts (in millions):

	Three Months Ended
	June 30, 2020						June 30, 2019
	Delerrok		GRIDSMART		Trafficware		Delerrok		GRIDSMART		Trafficware
Amortization	$	0.4	$	1.3	$	2.8	$	—	$	1.3	$	2.8
Acquisition-related expenses		0.5		0.2		0.4		—		0.6		0.9
(Gain) loss for changes in fair value of contingent consideration		(1.1)		—		—		—		—		—
	Nine Months Ended
	June 30, 2020						June 30, 2019
	Delerrok		GRIDSMART		Trafficware		Delerrok		GRIDSMART		Trafficware
Amortization	$	0.9	$	4.0	$	8.5	$	—	$	2.7	$	12.4
Acquisition-related expenses		1.2		0.6		1.3		—		2.4		4.4
(Gain) loss for changes in fair value of contingent consideration		(1.1)		—		—		—		—		—

The estimated amortization expense related to the intangible assets recorded in connection with our acquisitions are as follows (in millions):

Year Ending
September 30,	Delerrok		GRIDSMART		Trafficware
2020	$	1.3	$	5.3	$	11.4
2021		1.7		3.9		11.4
2022		1.6		3.5		11.4
2023		1.6		3.5		6.4
2024		1.6		3.5		5.9
Thereafter		8.0		8.1		12.9

Pro Forma Information

The following unaudited pro forma information presents our consolidated results of operations as if Pixia, Nuvotronics, Delerrok, GRIDSMART and Trafficware had been included in our consolidated results since October 1, 2018 (in millions):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Net sales	$	350.4	$	384.4	$	1,005.0	$	1,050.2
Net income (loss)		(1.4)		14.4		(69.5)		(18.8)

The pro forma information includes adjustments to give effect to events that are directly attributable to the acquisitions and have a continuing impact on our 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 items 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, 2018, and it does not purport to project our future operating results.

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Goodwill

Changes in goodwill for the nine months ended June 30, 2020 were as follows for each of our reporting units (in thousands):

	Cubic Transportation		Cubic Mission		Cubic Global
	Systems		Solutions		Defense Systems		Total
Net balances at September 30, 2019	$	254,592	$	181,424	$	142,081	$	578,097
Acquisitions		30,621		173,531		—		204,152
Adjustments		603		—		—		603
Foreign currency exchange rate changes		329		85		102		516
Net balances at June 30, 2020	$	286,145	$	355,040	$	142,183	$	783,368

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 at a reporting unit level on an annual basis and when circumstances indicate that an impairment is more-likely-than-not. Circumstances that might indicate an impairment is more-likely-than-not 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 amount, including recorded goodwill. If the carrying amount 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 amount. Any resulting impairment determined would be recorded in the current period.

Our most recent annual goodwill impairment test was our 2019 annual impairment test completed as of July 1, 2019. . Subsequent to the effective dates of the tests for each of our reporting units, we do not believe that circumstances have occurred that indicate that an impairment for any of our reporting units is more-likely-than-not. As such, no subsequent interim impairment tests have been performed.

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 CMS 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 prior 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. Although we believe our underlying assumptions supporting these assessments are reasonable, if our forecasted sales and margin growth rates, timing of growth, or the discount rate vary from our forecasts, we could be exposed to material impairment charges in the future.

Note 4 – Variable Interest Entities

In accordance with ASC 810, Consolidation (“ASC 810”), we assess our partnerships and joint ventures at inception, and when there are changes in relevant factors, to determine if any meet the qualifications of a variable interest entity (a “VIE”). We consider a partnership or joint venture to be a VIE if it has any of the following characteristics: (a) the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity) or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity or their rights to receive the expected residual returns of the entity, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights.

We perform a qualitative assessment of each VIE to determine if we are its primary beneficiary. We conclude that we are the primary beneficiary and consolidate the VIE if we have both (a) the power to direct the activities that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive

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benefits from the VIE that could potentially be significant to the VIE. We consider the VIE design, the contractual agreements that define the ownership structure, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board or similar governance representation of the respective parties in determining if we are the primary beneficiary. We also consider all parties that have direct or implicit variable interests when determining whether we are the primary beneficiary. As required by ASC 810, our primary beneficiary assessment is continuously performed.

In March 2018, Cubic and John Laing, an unaffiliated company that specializes in contracting under public-private partnerships, jointly formed Boston AFC 2.0 HoldCo. LLC (“Boston HoldCo”). Also in March 2018, Boston HoldCo’s wholly owned subsidiary, Boston AFC 2.0 OpCo. LLC (“Boston OpCo”), entered into a contract with the Massachusetts Bay Transit Authority (“MBTA”) for the financing, development and operation of a next-generation fare payment system in Boston, Massachusetts (the “Original MBTA Contract”). Boston HoldCo is 90% owned by John Laing and 10% owned by Cubic. Collectively, Boston HoldCo and Boston OpCo are referred to as the “P3 Venture”. Based on our assessment under ASC 810, we concluded that Boston OpCo and Boston HoldCo are VIEs and that we are the primary beneficiary of Boston OpCo. Consequently, we have consolidated the financial statements of Boston OpCo within our consolidated financial statements. We have concluded that we are not the primary beneficiary of Boston HoldCo, and as a result, we have not consolidated the financial statements of Boston HoldCo within our consolidated financial statements. In June 2020, MBTA and Boston OpCo executed an amended agreement (the “Amended MBTA Contract”), which modified a number of the provisions of the Original MBTA Contract.

Under the Original MBTA Contract, MBTA was scheduled to make fixed payments to Boston OpCo in the aggregate amount of $558.5 million, adjusted for incremental transaction-based fees, inflation and performance penalties over a ten-year operate and maintain phase. All of Boston OpCo’s contractual responsibilities under the Original MBTA Contract regarding the design and development and the operation and maintenance of the fare system were subcontracted to Cubic by Boston OpCo. Under its subcontract with Boston OpCo, Cubic was scheduled to receive fixed payments in the aggregate amount of $427.6 million, adjusted for incremental transaction-based fees inflation, and performance penalties.

The Amended MBTA Contract modified certain aspects of the Original MBTA Contract, such as extending the design and build phase to 2024, adding new functionality to the next-generation fare payment system, and increasing the scope and duration of the operate and maintain phase. In accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), the Amended MBTA Contract was treated as a modification to the Original MBTA Contract, and as such Boston OpCo’s contract value was increased by additional fixed payments to be made by MBTA of $278.9 million plus the estimated value of future variable payments to be made by MBTA for incremental transaction-based fees and inflation indexed payments.

The Amended MBTA Contract consists of a design and build phase of approximately four years and an operate and maintain phase of approximately twelve years. The design and build phase is planned to be completed in 2024 and the initial operate and maintain phase is expected to commence in 2021, with full service commencement spanning from 2024 through 2033. Under the Amended MBTA Contract, MBTA will make payments to Boston OpCo consisting of fixed payments of $43.5 million during the design and build phase, fixed payments of $175.8 million upon full service commencement, fixed payments of $618.0 million during the full service period commencement of the operate and maintain phase, variable payments for incremental transaction-based fees and inflation indexed payments during the operate and maintain phase, and payment adjustments for any performance penalties incurred by Boston OpCo during the project.

Boston OpCo subcontracted all of its contractual responsibilities regarding the design and build and the operation and maintenance of the fare system to Cubic. Under its subcontract with Boston OpCo, Cubic will receive fixed payments in the aggregate amount of $596.4 million, adjusted for incremental transaction-based fees, inflation indexed payments, less any performance penalties incurred.

Upon creation of the P3 Venture and upon execution of the Amended MBTA Contract, John Laing made loans to Boston HoldCo of $24.3 million and $1.9 million, respectively, in the form of bridge loans that are intended to be converted to equity in the future in accordance with its equity funding responsibilities under the terms of the P3 Venture. Concurrently, Boston HoldCo made corresponding equity contributions to Boston OpCo in the same amounts which are included within equity of noncontrolling interest in the VIE in our consolidated financial statements. Also, we issued a letter of credit for $2.9 million to Boston HoldCo in accordance with our equity funding responsibilities under the terms

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of the P3 Venture. Boston HoldCo is able to draw on the letter of credit in certain liquidity instances, but no amounts have been drawn on such letter of credit as of June 30, 2020.

Upon creation of the P3 Venture, Boston OpCo entered into a credit agreement with a group of financial institutions (the “Boston OpCo Credit Agreement”), which included a long-term credit facility of up to $212.4 million and a revolving credit facility. The long-term credit facility bore interest at variable rates of London Interbank Offer Rate (“LIBOR”) plus 1.3%. In connection with the execution of the Amended MBTA Contract in June 2020, Boston OpCo entered into an amended credit agreement with a group of financial institutions (the “Boston OpCo Amended Credit Agreement”), which includes two long-term debt facilities and a revolving credit facility to replace the facilities in the Boston OpCo Credit Agreement. At closing of the Boston OpCo Amended Credit Agreement, Boston OpCo retired and paid the outstanding principal balance of $92.6 million plus accrued interest of $7.4 million due under the Boston OpCo Credit Agreement.

Under the Boston OpCo Amended Credit Agreement, the long-term debt facilities allow for draws up to an aggregate of $421.6 million and such draws may only be made during the design and build phase of the Amended MBTA Contract. The long-term debt facilities, including all interest and fees incurred, is required to be repaid on a fixed monthly schedule starting once the design and build phase is completed in 2024. The long-term debt facilities bear interest at variable rates of LIBOR plus a margin of 1.75% to 2.0% over the design and build phase and LIBOR plus a margin of 2.0% to 2.5% over the operate and maintain phase. Boston OpCo incurred debt issuance and modification costs of $8.6 million in connection with the Boston OpCo Amended Credit Agreement and these fees are being amortized as interest expense using the effective interest method over the term of the long-term debt facilities. At June 30, 2020, the outstanding balance on the long-term debt facilities was $172.8 million, which is presented net of total unamortized deferred financing costs of $17.3 million. The revolving credit facility allows for draws up to a maximum aggregate amount of $15.8 million during the operate and maintain phase of the Amended MBTA Contract. Boston OpCo’s debt is nonrecourse with respect to Cubic and our subsidiaries. The fair value of the long-term debt facility approximates its carrying amount.

The Boston OpCo Amended Credit Agreement contains a number of covenants which require that Boston OpCo and Cubic maintain progress on the delivery of the MBTA Amended Agreement within a specified timeline and budget and provide regular reporting on such progress. The Boston OpCo Amended Credit Agreement also contains customary events of default including the delivery of a customized fare collection system to MBTA by a pre-determined date. Failure to meet such delivery date will result in Boston OpCo, and Cubic via our subcontract with Boston OpCo, to incur penalties due to the lenders thereunder.

In connection with the Boston OpCo Credit Agreement, Boston OpCo entered into pay-fixed/receive-variable interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with its long-term debt facility. Upon execution of the Boston OpCo Amended Credit Agreement, Boston OpCo terminated these interest rate swaps and paid termination costs of $34.4 million to the counterparties. The termination payments are included in cash flows used in operating activities in our Condensed Consolidated Statements of Cash Flows. In connection with the Boston OpCo Amended Credit Agreement, Boston OpCo entered into new pay-fixed/receive-variable interest rate swaps to mitigate the variable interest rate associated with its long-term debt facility. The interest rate swaps contain forward starting notional principal amounts which align with Boston OpCo’s expected draws on its long-term debt facility. At June 30, 2020, the outstanding notional principal amounts on open interest rate swaps were $172.8 million. The fair value of Boston OpCo’s interest rate swaps at June 30, 2020 was $5.6 million and is recorded as a liability in other noncurrent liabilities in our condensed consolidated balance sheets. Boston OpCo’s interest rate swaps were not designated as effective hedges at June 30, 2020 and as such unrealized gains (losses) are included in other income (expense), net. As a result of changes in the fair value of its interest rate swaps, Boston OpCo recognized losses of $6.9 million and $18.4 million for the three and nine months ended June 30, 2020, respectively, and losses of $7.0 million and $16.9 million for the three and nine months ended June 30, 2019, respectively. See Note 8 for a description of the measurement of fair value of derivative financial instruments, including Boston OpCo’s interest rate swaps.

Boston OpCo holds a restricted cash balance which is required by the Amended MBTA Contract to allow for the delivery of future change orders directed by MBTA.

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The assets and liabilities of Boston OpCo that are included in our condensed consolidated balance sheets are as follows:

	June 30,		September 30,
	2020		2019
	(in thousands)
Cash	$	743	$	347
Restricted cash		1,669		9,967
Other current assets		99		33
Long-term contracts financing receivable		191,042		115,508
Other noncurrent assets		—		1,419
Total assets	$	193,553	$	127,274
Trade accounts payable	$	175	$	25
Accrued compensation and other current liabilities		150		191
Due to Cubic		11,754		25,143
Other noncurrent liabilities		5,572		21,605
Long-term debt		155,493		61,994
Total liabilities	$	173,144	$	108,958
Total Cubic equity		(583)		(603)
Noncontrolling interests		20,992		18,919
Total liabilities and owners' equity	$	193,553	$	127,274

The assets of Boston OpCo are restricted for its use only and are not available for our general operations. Boston OpCo’s debt is non-recourse to Cubic. Our maximum exposure to loss as a result of our equity interest in the P3 Venture is limited to the $2.7 million outstanding letter of credit, which will be converted to a cash contribution upon completion of the design and build phase of the Amended MBTA Contract.

Boston OpCo’s results of operations included in our Condensed Consolidated Statements of Operations are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Revenue	$	17,585	$	3,233	$	20,632	$	7,519
Operating income		17,344		2,823		19,832		6,521
Other income (expense), net		(6,888)		(7,031)		(19,636)		(16,884)
Interest income		1,663		1,075		4,871		2,335
Interest expense		(1,710)		(829)		(4,864)		(1,939)

Note 5 — Revenue Recognition

We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers.

Contract Estimates: Use of the cost-to-cost or other similar methods of revenue recognition requires us to make reasonably dependable estimates regarding the revenue and cost associated with the design, manufacture and delivery of our products and services. Revisions or adjustments to estimates of the transaction price, estimated costs at completion and estimated profit or loss of a performance obligation are often required as work progresses under a contract, as experience is gained, as facts and circumstances change and as new information is obtained, even though the scope of work required under the contract may not change. Revisions or adjustments may also be required if contract modifications occur. The impact of revisions in profit or loss estimates are recognized on a cumulative catch-up basis in the period in which the revisions are made. The revisions in contract estimates, if significant, can materially affect our results of operations and cash flows, and in some cases result in liabilities to complete contracts in a loss position. The aggregate impact of net changes in contract estimates are presented in the table below (amounts in thousands, except per share numbers):

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	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Operating income (loss)	$	19,297	$	(1,054)	$	5,499	$	(1,040)
Net income (loss) from continuing operations		18,596		(1,185)		5,103		(1,100)
Net income (loss) from continuing operations attributable to Cubic		4,826		(1,185)		(8,667)		(1,100)
Diluted earnings (loss) per share attributable to Cubic		0.15		(0.04)		(0.28)		(0.04)

For the three and nine months ended June 30, 2020, operating income and net income from continuing operations increased by $25.0 million and $27.8 million, respectively, due to changes in estimates recognized by CTS and Boston OpCo related to the Amended MBTA Contract executed in June 2020. Operating income (loss) and net income (loss) from continuing operations reflects 100% of Boston OpCo’s change in contract estimates. However, because we only own 10% of Boston OpCo, net income (loss) attributable to Cubic reflects only 10% of Boston OpCo’s change in contract estimates. See Note 4 for further details.

Backlog: Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has not yet transferred to the customer. It is comprised of both funded backlog (firm orders for which funding is authorized and appropriated) and unfunded backlog. Unexercised contract options and indefinite delivery indefinite quantity (“IDIQ”) contracts are not included in backlog until the time the option or IDIQ task order is exercised or awarded. For our cost-reimbursable and fixed-priced-incentive contracts, the estimated consideration we expect to receive pursuant to the terms of the contract may exceed the contractual award amount. The estimated consideration is determined at the outset of the contract and is continuously reviewed throughout the contract period. In determining the estimated consideration, we consider the risks related to the technical, schedule and cost impacts to complete the contract and an estimate of any variable consideration. Periodically, we review these risks and may increase or decrease backlog accordingly. As of June 30, 2020, our ending backlog was $3.7 billion, compared to $3.4 billion at September 30, 2019. We expect to recognize approximately 30% of our June 30, 2020 backlog over the next 12 months as revenue, and approximately 45% over the next 24 months as revenue, with the remainder recognized thereafter.

Accounts Receivable: Amounts billed include $53.3 million and $60.3 million due on U.S. federal government contracts at June 30, 2020 and September 30, 2019, respectively.

In our normal course of business, we may sell trade receivables to financial institutions as a cash management technique. We do not retain financial or legal obligations for these receivables that would result in material losses. Our ongoing involvement is limited to the remittance of customer payments to the financial institutions with respect to the sold trade receivables; therefore, our sold trade receivables are not included in our Condensed Consolidated Balance Sheet in any period presented. As of September 30, 2019, we sold $31.1 million of outstanding trade receivables to financial institutions. No trade receivables were sold as of June 30, 2020. During the first nine months of fiscal 2020, we received $5.5 million related to withheld proceeds from receivables we sold as of September 30, 2019, which is included in cash provided by investing activities in our Condensed Consolidated Statements of Cash Flows.

Contract Assets and Liabilities: Contract assets include unbilled amounts typically resulting from sales under contracts when the percentage-of-completion method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer per the contractually agreed project milestones. Contract liabilities include advance payments and billings in excess of revenue recognized. Contract assets and contract liabilities were as follows (in thousands):

	June 30,		September 30,
	2020		2019
Contract assets	$	253,900	$	349,559
Contract liabilities	$	71,269	$	46,170

Contract assets decreased $95.7 million during the nine months ended June 30, 2020, due to billings in excess of revenue recognized related to the satisfaction or partial satisfaction of performance obligations. There were no significant impairment losses related to our contract assets during the nine months ended June 30, 2020.

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Contract liabilities increased $25.1 million during the nine months ended June 30, 2020, due to payments received in excess of revenue recognized on these performance obligations. During the three and nine-month periods ended June 30, 2020, we recognized $3.6 million and $19.9 million of our contract liabilities at September 30, 2019 as revenue, respectively. We expect our contract liabilities to be recognized as revenue over the next 12 months.

Note 6 — Net Income (Loss) Per Share

Basic net income (loss) per share (“EPS”) is computed by dividing the net income (loss) attributable to Cubic 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 from continuing operations attributable to Cubic, 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 RSUs. Dilutive RSUs are calculated based on the average underlying 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. For RSUs with performance and market-based vesting, no common equivalent shares are included in the computation of diluted EPS until the performance criteria have been met, and once the criteria are met the dilutive RSUs are calculated using the treasury stock method, modified by the multiplier that is calculated at the end of the accounting period as if the vesting date was at the end of the accounting period. The multiplier on RSUs with performance and market-based vesting is further described in Note 12.

In periods with a net loss from continuing operations attributable to Cubic, common equivalent shares are not included in the computation of diluted EPS because to do so would be anti-dilutive.

The weighted-average number of shares outstanding used to compute net income (loss) per common share were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Weighted average shares - basic		31,299		31,160		31,289		30,267
Effect of dilutive securities		—		89		—		65
Weighted average shares - diluted		31,299		31,249		31,289		30,332
Number of anti-dilutive securities		1,243		—		1,109		—

Note 7 — Balance Sheet Details

Restricted Cash

Cash and cash equivalents excluded $23.9 million and $29.5 million of restricted cash at June 30, 2020 and September 30, 2019, respectively, which for purposes of our consolidated statements of cash flows, is included in cash, cash equivalents and restricted cash.

Inventories

Inventories consist of the following (in thousands):

	June 30,		September 30,
	2020		2019
Finished products	$	16,825	$	10,905
Work in process and inventoried costs under long-term contracts		90,731		46,951
Materials and purchased parts		44,057		48,938
Net inventories	$	151,613	$	106,794

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At June 30, 2020, work in process and inventoried costs under long-term contracts included approximately $7.7 million in costs incurred outside the scope of work or in advance of a contract award compared to $5.8 million at September 30, 2019. We believe it is probable that we will recover the costs inventoried at June 30, 2020, plus a profit margin, under contract change orders or awards within the next year.

Costs we incur for certain U.S. federal government contracts include general and administrative costs as allowed by government cost accounting standards. The amounts remaining in inventory totaled $0.4 million and $0.5 million at June 30, 2020 and September 30, 2019, respectively.

Property, Plant and Equipment

Significant components of property, plant and equipment are as follows (in thousands):

	June 30,		September 30,
	2020		2019
Land and land improvements	$	7,362	$	7,348
Buildings and improvements		48,628		48,191
Machinery and other equipment		125,656		107,297
Software		114,172		108,526
Leasehold improvements		20,346		17,064
Construction and internal-use software development in progress		24,308		16,814
Accumulated depreciation and amortization		(179,925)		(160,271)
	$	160,547	$	144,969

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 noncurrent liabilities in our Condensed Consolidated Balance Sheets and totaled $10.9 million at June 30, 2020 and $11.0 million at September 30, 2019.

In the past we have made contributions to a rabbi trust to provide a source of funds for satisfying a portion of these deferred compensation liabilities. The total carrying value of the assets set aside to fund deferred compensation liabilities totaled $6.4 million at each of June 30, 2020 and September 30, 2019, and were comprised entirely of life insurance contracts. The carrying value of the life insurance contracts is based on the cash surrender value of the policies. 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 Operations.

Note 8 — 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.

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The following table presents assets and liabilities measured and recorded at fair value on our Condensed Consolidated Balance Sheets on a recurring basis (in thousands):

	June 30, 2020								September 30, 2019
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Current derivative assets	$	—	$	1,761	$	—	$	1,761	$	—	$	2,635	$	—	$	2,635
Noncurrent derivative assets		—		624		—		624		—		859		—		859
Total assets measured at fair value	$	—	$	2,385	$	—	$	2,385	$	—	$	3,494	$	—	$	3,494
Liabilities
Current derivative liabilities		—		4,365		—		4,365		—		529		—		529
Noncurrent derivative liabilities		—		13,342		—		13,342		—		228		—		228
Contingent consideration to seller of H4 Global		—		—		564		564		—		—		1,073		1,073
Contingent consideration to seller of Deltenna		—		—		2,806		2,806		—		—		1,787		1,787
Contingent consideration to seller of Shield		—		—		4,052		4,052		—		—		3,814		3,814
Contingent consideration to seller of Nuvotronics		—		—		—		—		—		—		4,200		4,200
Contingent consideration to seller of Delerrok		—		—		500		500		—		—		—		—
Total liabilities measured at fair value	$	—	$	17,707	$	7,922	$	25,629	$	—	$	757	$	10,874	$	11,631

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 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.

At June 30, 2020, we have the following remaining contingent consideration arrangements with the sellers of companies which we acquired:

● H4 Global: Payments of up to $2.7 million of contingent consideration based upon the value of contracts entered into over the five-year period ending September 30, 2020.

● Deltenna: Payments of up to $6.7 million of contingent consideration if Deltenna meets certain sales goals from the date of acquisition through the fiscal year ending September 30, 2022.

● Shield: Payments of up to $10.0 million of contingent consideration if Shield meets certain sales goals from the date of acquisition through July 31, 2025.

● Nuvotronics: Payments of up to $8.0 million of contingent consideration if Nuvotronics meets certain gross profit goals for the 12-month periods ending on each of December 31, 2020 and December 31, 2021.

● Delerrok: Payments of up to $2.0 million of contingent consideration if Delerrok meets certain sales goals for the 12-month period ending December 31, 2020.

The maximum remaining payout to the sellers of H4 Global is $2.7 million at June 30, 2020 and is based on a percentage of the value of contracts entered into from October 1, 2015 through September 30, 2020. The fair value of the contingent consideration was estimated using a probability weighted approach by applying probabilities to different scenarios and summing the present value of any future payments. The selected discount rate was 23.0% as of June 30, 2020 and 23.5% as of September 30, 2019.

Under the terms of the Deltenna purchase agreement, we will pay the sellers of Deltenna up to $6.7 million if Deltenna meets certain sales goals through September 30, 2022. The fair value of the contingent consideration was estimated using a combination of a probability weighted approach and the real option approach. Under the real option approach,

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each payment was modeled using long digital options written on the underlying revenue metric. The strike price for each option is the respective revenue as specified in the related agreement, and the spot price is calibrated to the revenue forecast by calculating the present value of the corresponding projected revenues using a risk-adjusted discount rate. The volatility for the underlying revenue metrics was based upon an analysis of comparable public companies and was 38% as of June 30, 2020 and 36% as of September 30, 2019. The selected discount rate was 10% as of June 30, 2020 and 11% as of September 30, 2019.

Under the terms of the Shield purchase agreement, we will pay the sellers of Shield up to $10.0 million if Shield meets certain sales goals through July 31, 2025. The fair value of the contingent consideration was estimated based on Monte Carlo simulations, which uses a probability distribution of values based on one million simulation trials. Key inputs for the simulation include projected revenues, discount rates, risk adjustment factors and volatility. The volatility and revenue risk adjustment factors were determined based on an analysis of publicly traded comparable companies and as of June 30, 2020 were 31% and 17%, respectively, and as of September 30, 2019 were 18% and 13%, respectively. The selected discount rate was based primarily on an analysis of publicly traded comparable companies and was 6.5% at June 30, 2020 and 3.6% at September 30, 2019.

Under the terms of the Nuvotronics purchase agreement, we will pay the sellers of Nuvotronics up to $8.0 million if Nuvotronics meets certain gross profit goals for the 12 month period ending on each of December 31, 2020 and December 31, 2021. The fair value of the contingent consideration was estimated based on Monte Carlo simulations, which uses a probability distribution of values based on one million simulation trials.  As of June 30, 2020, the fair value of the Nuvotronics contingent consideration was determined to be zero as its forecasted gross profit was below the payout thresholds.

Under the terms of the Delerrok purchase agreement, we will pay the sellers of Delerrok up to $2.0 million if Delerrok meets certain sales goals for the 12-month period ending December 31, 2020. The fair value of the contingent consideration was estimated based on Monte Carlo simulations, which uses a probability distribution of values based on one million simulation trials. Key inputs for the simulation include projected revenues, assumed discount rates for projected revenues and cash flows and volatility. The volatility factor was determined based on an analysis of publicly traded comparable companies and was 19.0% as of June 30, 2020. The discount rate used as of June 30, 2020 was 3.4% and was based on our risk-free rate of return adjusted for our revenue required risk premium.

The inputs to each of the contingent consideration fair value models include significant unobservable inputs and therefore represent Level 3 measurements within the fair value hierarchy. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition dates and each subsequent period. Accordingly, changes in the assumptions described above can materially impact the amount of contingent consideration expense we record in any period.

As of June 30, 2020, the following table summarizes the change in fair value of our Level 3 contingent consideration liabilities (in thousands):

	H4 Global		Deltenna		Shield		Nuvotronics		Delerrok		Total
Balance as of September 30, 2019	$	1,073	$	1,787	$	3,814	$	4,200	$	—	$	10,874
Initial measurement recognized at acquisition		—		—		—		—		1,600		1,600
Total remeasurement (gain) loss recognized in earnings		(509)		1,019		238		(4,200)		(1,100)		(4,552)
Balance as of June 30, 2020	$	564	$	2,806	$	4,052	$	—	$	500	$	7,922

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 our variable rate long-term debt approximates its carrying value at June 30, 2020.

In fiscal 2019, we invested $5.0 million in Franklin Blackhorse, L.P., a limited partnership investment fund that invests in early stage, privately owned companies in the military, commercial and disruptive technology sectors. We account for our investment using the equity method of accounting. Our share of the fund’s operating losses was $0.6 million for the three- and nine-month periods ended June 30, 2020, and are included in other income (expense), net in our Condensed Consolidated Statements of Operations. Our share of the fund’s operating results was not material for the three- and nine-month periods ended June 30, 2019. Our investment balance is included within other assets in our Condensed

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Consolidated Statements of Operations and amounted to $4.9 million and $5.5 million as of June 30, 2020 and September 30, 2019, respectively.

We did not have any significant non-financial assets or liabilities measured at fair value on a non-recurring basis in the first three quarters of fiscal 2020 or fiscal 2019 other than assets and liabilities acquired in business acquisitions described in Note 3 and the RSUs that contain performance and market-based vesting criteria described in Note 12.

Note 9 — Financing Arrangements

At September 30, 2019, we had $200.0 million of outstanding senior unsecured notes bearing interest rates ranging from 3.35% to 3.93% as well as $226.5 million outstanding under an $800.0 million committed revolving credit agreement with a group of financial institutions. On March 27, 2020, we repaid and extinguished the remaining principal balance of $189.3 million of senior unsecured notes then outstanding and recognized a loss on debt extinguishment of $16.1 million, consisting of a $15.9 million make-whole payment to the note holders and a write-off of previously capitalized debt issuance costs of $0.2 million.

On March 27, 2020, we also executed a Fifth Amended and Restated Credit Agreement (the “Credit Facility”) with a group of financial institutions. The Credit Facility provided for a new term loan in the aggregate amount of $450.0 million (the “Term Loan”) and increased our existing revolving line of credit limit (the “Revolving Line of Credit”) from $800.0 million to $850.0 million. The commitments under the Credit Facility will mature on March 27, 2025 and bear interest generally at the LIBOR rate plus a margin that ranges between 1.00% and 2.00%. At June 30, 2020, the weighted average interest rate on outstanding borrowings under the Credit Facility was 2.18%. The Credit Facility is unsecured, but it is required to be guaranteed by certain significant domestic subsidiaries of Cubic.

On April 1, 2020, we entered into pay-fixed/receive-variable interest rate swaps with a group of financial institutions to mitigate the variable interest rate risk associated with the Credit Facility. The interest rate swaps contain forward starting notional principal amounts which align with our fixed repayment schedules under the Credit Facility and have a fixed interest rate of LIBOR plus a margin of approximately 74 basis points. At June 30, 2020, the outstanding notional principal amounts on open interest rate swaps were $550.0 million. See Note 8 for a description of the measurement of fair value of our derivative financial instruments.

Debt issuance and modification costs of $2.5 million were incurred in connection with the execution of the Credit Facility and are recorded as a reduction to the related liability on our Condensed Consolidated Balance Sheets and are being amortized as interest expense using the effective interest method over the stated term of the Credit Facility. At June 30, 2020, our total debt issuance costs had an unamortized balance of $4.9 million.

The available credit under our Revolving Line of Credit is reduced by any letters of credit issued under the Credit Facility. As of June 30, 2020, there were $447.2 million of borrowings under the Term Loan and $277.0 million of borrowings under the Revolving Line of Credit. Letters of credit outstanding under the Credit Facility totaled $94.0 million at June 30, 2020, which reduced our available line of credit to $479.0 million. The $94.0 million of letters of credit includes both financial letters of credit and performance guarantees.

As of June 30, 2020, we had letters of credit and bank guarantees outstanding totaling $101.4 million, which includes the $94.0 million of letters of credit issued under the Revolving Line of Credit and $7.4 million of letters of credit issued under other facilities. The $101.4 million of letters of credit and bank guarantees includes $96.9 million that guarantees either our performance or customer advances under certain contracts and financial letters of credit and $4.5 million that primarily guarantees 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 have entered into a short-term borrowing arrangement in the United Kingdom in the amount of £20.0 million British Pounds (equivalent to approximately $24.8 million at June 30, 2020) to help meet the short-term working capital requirements of our subsidiary located in the United Kingdom. At June 30, 2020, no amounts were outstanding under this borrowing arrangement.

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

27

performance under a fare collection services contract in the United Kingdom. The balance in the account as of June 30, 2020 was $22.3 million and is classified as restricted cash in our Condensed Consolidated Balance Sheets.

The terms of the Credit Facility contain financial covenants setting a maximum total ratio of debt to adjusted earnings before interest, taxes, depreciation and amortization and a minimum interest coverage ratio. In addition, the terms contain covenants that restrict, among other things, our ability to sell assets, incur indebtedness, make investments, grant liens, pay dividends and make other restricted payments. As of June 30, 2020, we were in compliance with all covenants under the Credit Facility.

In December 2018, we completed an underwritten public offering of 3,795,000 shares of our common stock, including the exercise of the underwriters’ option to purchase additional shares. All shares were offered by us at a price to the public of $60.00 per share. Net proceeds were $215.8 million, after deducting underwriting discounts and commissions and offering expenses in the aggregate of $11.9 million. We used the net proceeds from the offering to repay a portion of our outstanding borrowings under our Revolving Line of Credit which was used to finance the acquisition of Trafficware and for general corporate purposes.

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 accrued compensation and current liabilities in our Condensed Consolidated Balance Sheets amounted to $6.8 million at June 30, 2020 and $7.4 million at September 30, 2019.

Note 10 — Leases

We adopted ASC 842 on October 1, 2019. See “Note 1—Recently Adopted Accounting Pronouncements” for the impacts of the adoption of ASC 842. Our primary involvement with leases is as a lessee where we lease properties to support our business. A majority of our leases are operating leases of office space. For these leases, we have elected to account for the lease and non-lease components together as a single lease component. Our operating leases expire at various dates through 2030 without taking into consideration available renewal options, and many such leases require variable lease payments by us for property taxes, insurance premiums, common area maintenance and other costs. Certain of these leases also have extension or termination options, and we assess the likelihood of exercising such options. If it is reasonably certain that we will exercise the options, we include the impact in the measurement of our right-of-use assets and lease liabilities.

Our right-of-use assets for operating leases are included in operating lease right-of-use-assets on our Condensed Consolidated Balance Sheets. Our lease liabilities for operating leases are included in other current liabilities for the current portion and in operating lease liabilities for the long-term portion. We use our incremental borrowing rate in determining the present value of lease payments. Our operating lease expense is included in costs and expenses in our consolidated statements of operations. Total operating lease expense consists of operating lease cost, which is recognized on a straight-line basis over the lease term, and variable lease cost, which is recognized based on actual amounts incurred. We also sublease certain immaterial properties and sublease income is included as a reduction of rental expense.

The following tables present our operating leases, related lease expenses and other information (dollars in millions):

Operating Lease Portfolio

	June 30,
	2020
Right-of-use assets	$	82.1
Lease liabilities		92.0
Weighted average remaining lease term		7.0 years
Weighted average discount rate		3.01%

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Operating Lease Expense

	Three Months Ended		Nine Months Ended
	June 30,		June 30,
	2020		2020
Operating lease expense	$	4.9	$	14.3
Short-term lease expense		0.1		0.2
Variable lease expense		0.7		2.5
Total lease expense	$	5.7	$	17.0

Other Information

	Nine Months Ended
	June 30,
	2020
Cash paid for amounts included in the measurement of lease liabilities	$	13.7
Right-of-use assets obtained in exchange for new operating lease liabilities		18.9

Maturities of Lease Liabilities

Our future minimum lease commitments of our operating leases on an undiscounted basis, reconciled to the lease liability at June 30, 2020 were as follows (in millions):

2020	$	4.7
2021		17.6
2022		15.3
2023		13.4
2024		12.6
Thereafter		39.1
Total lease payments		102.7
Less: imputed interest		(10.7)
Present value of operating lease liabilities	$	92.0

In fiscal 2019, we entered into agreements related to the construction and leasing of two buildings on our existing corporate campus in San Diego, California. Under these agreements, we will act as the construction agent, a financial institution will own the buildings and we will lease the property for a term of five years upon their completion expected in December 2020. The terms of these agreements include provisions that require or limit, among other financial ratios and measurements, the permitted levels of debt, coverage of cash interest expense, and under certain circumstances, payments of dividends or other distributions to shareholders. As of June 30, 2020, we were in compliance with all covenants included in these agreements.

Note 11 — Pension Plans

The components of net periodic pension cost (benefit) are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Service cost	$	160	$	150	$	489	$	449
Interest cost		1,490		1,915		4,528		5,746
Expected return on plan assets		(2,904)		(3,020)		(8,796)		(9,063)
Amortization of actuarial loss		948		530		2,917		1,592
Administrative expenses		84		97		253		291
Net pension benefit	$	(222)	$	(328)	$	(609)	$	(985)

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Note 12 - Shareholders’ Equity

Long-Term Equity Incentive Plan

Under our long-term equity incentive plan, we have provided participants with three general categories of grant awards: (a) RSUs with time-based vesting, (b) RSUs with performance-based vesting, and (c) RSUs with performance and market-based vesting.

Each RSU with time-based vesting or performance-based vesting represents a contingent right to receive one share of our common stock. Each RSU with performance and market-based vesting represents a contingent right to receive up to 1.25 shares of our common stock. Dividend equivalent rights accrue with respect to the RSUs as dividends are paid on shares of our common stock and vest proportionately with the RSUs to which they relate. Vested shares are delivered to the recipient following each vesting date.

Time-based RSUs granted prior to fiscal 2020 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 with the Company through such vesting date. Time-based RSUs granted in fiscal 2020 generally vest in three equal installments on each of the three October 1 dates following the grant date, subject to the recipient’s continued service with the Company through such vesting date.

The performance-based RSUs granted to participants vest over three-year performance periods based on our achievement of certain revenue growth targets, earnings growth targets and return on equity targets established by the Compensation Committee of our Board of Directors (the “Compensation Committee”) over the performance periods, subject to the recipient’s continued service with the Company through the end of the respective performance periods. The level at which we perform against scalable targets over the performance periods will determine the percentage of the RSUs that will ultimately vest.

In fiscal 2019 and fiscal 2020, the Compensation Committee granted RSUs which contained both performance- and market-based vesting criteria. The performance- and market-based RSUs granted to participants vest over three-year performance periods based on our achievement of revenue growth targets and earnings growth targets subject to the recipient’s continued service with the Company through the end of the respective performance periods. For these RSUs, the relative total stock return (“TSR”) for shares of our common stock as compared to the Russell 2000 Index (the “Index”) over the performance period will result in a multiplier for the number of RSUs that will vest. If the TSR performance exceeds the performance of the Index based on a scale established by the Compensation Committee, the multiplier will result in up to an additional 25% of RSUs vesting at the end of the performance period. If the TSR performance is below the performance of the Index based on a scale established by the Compensation Committee, the multiplier would result in a reduction of up to 25% of these RSUs vesting at the end of the performance period. For the performance- and market-based RSUs granted in fiscal 2020, if our absolute TSR is negative for the three-year performance period, the TSR multiplier shall not exceed 100%, regardless of the performance relative to the Index.

During fiscal 2019, the Compensation Committee amended the Company’s long-term equity incentive plan to provide accelerated vesting for retirement age participants. Under the amended plan, participants who are 60 years of age, and have achieved 10 years of continuous service, are eligible for accelerated vesting of their RSUs. Participants who have reached the retirement age criteria must generally provide us with a one-year notice of retirement. For participants who have reached the retirement age criteria, expense is recognized over the adjusted service period.

The grant date fair value of each RSU with time-based vesting or performance-based vesting is the fair market value of one share of our common stock at the grant date.

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The grant date fair value of each RSU with performance- and market-based vesting was calculated using a Monte Carlo simulation valuation method. Under this method, the prices of the Index and shares of our common stock were simulated through the end of the performance period. The correlation matrix between shares of our common stock and the Index as well as the corresponding return volatilities were developed based upon an analysis of historical data. The following tables include the assumptions used for the valuation of the RSUs with performance and market-based vesting that were granted during fiscal 2019 and fiscal 2020:

	RSUs granted during fiscal 2020
Date of grant	November 29, 2019
Grant date fair value per RSU	$52.51
Performance period begins	November 29, 2019
Performance period ends	September 30, 2022
Risk-free interest rate	1.6%
Expected volatility	41%
	RSUs granted during fiscal 2019
Date of grant	November 21, 2018	April 1, 2019
Grant date fair value per RSU	$67.40	$59.29
Performance period begins	November 21, 2018	April 1, 2019
Performance period ends	September 30, 2021	September 30, 2021
Risk-free interest rate	2.8%	2.8%
Expected volatility	34%	34%

At June 30, 2020, 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 511,508 RSUs with time-based vesting, 106,772 RSUs with performance-based vesting, and 194,237 RSUs with performance- and market-based vesting.

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The following table summarizes our RSU activity:

	Unvested RSUs with Time-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2019	422,094	$	58.84
Granted	383,661		57.75
Vested	(162,253)		55.66
Forfeited	(51,331)		60.04
Unvested at June 30, 2020	592,171	$	58.90

	Unvested RSUs with Performance-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2019	315,262	$	55.67
Granted	—		—
Vested	—		—
Forfeited	(177,492)		47.57
Unvested at June 30, 2020	137,770	$	61.40

	Unvested RSUs with Performance- and Market-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2019	227,402	$	66.77
Granted	346,826		52.51
Vested	—		—
Forfeited	(51,088)		59.03
Unvested at June 30, 2020	523,140	$	58.07

We recorded non-cash compensation expense related to stock-based awards as follows (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of sales	$	857	$	498	$	2,139	$	1,236
Selling, general and administrative		4,555		3,904		13,132		9,524
	$	5,412	$	4,402	$	15,271	$	10,760

As of June 30, 2020, there was $50.4 million of unrecognized compensation expense 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 $48.5 million, which is expected to be recognized over a weighted average period of 1.5 years.

We 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 in each of fiscal 2019 and fiscal 2020. To the extent the actual forfeiture rate is different from what we have estimated, compensation expense related to these awards will be different from our expectations.

Note 13 – Income Taxes

The Tax Cuts and Jobs Act, as enacted by the U.S. federal government in December 2017, fundamentally changed the taxation of multinational corporations in the United States. Significant provisions impacting Cubic include global intangible low-taxed income, a new tax on income of foreign corporations and base-erosion and anti-abuse tax (“BEAT”). BEAT provisions impose an alternative tax on applicable taxpayers with base-erosion payments greater than a de minimis threshold. After considering available tax planning opportunities, we made a reasonable forecast of BEAT expense for the third quarter of fiscal 2020.

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On March 27, 2020, the U.S. federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act was intended to assist with the stabilization of the U.S. domestic economy during the COVID-19 crisis and includes relief provisions for the U.S. corporate income tax system, including temporary changes to the prior and future utilization of net operation losses, acceleration of depreciation for certain qualifying improvements and relaxed limitations on the deductibility of interest. At June 30, 2020, we have made reasonable estimates of the impact of the CARES Act on our condensed consolidated statements of operations and our condensed consolidated statements of cash flows.

The quarterly forecast of our annual effective tax rate is impacted by numerous factors including income fluctuations by tax jurisdiction throughout the year, the level of intercompany transactions, applicability of new tax regimes and the impact of acquisitions. For the three-month period ended June 30, 2020, we concluded it is more appropriate to use a blend of the discrete effective tax rate method for U.S. operations and the estimated annual effective tax rate method for foreign operations to determine income tax expense for the period.

The income tax expense recognized on pre-tax loss from continuing operations for the three- and nine-month periods ended June 30, 2020 resulted in effective tax rates of 37% and 13%, respectively, which differ from the effective tax rates of 5% and negative 166% for the three- and nine-month periods ended June 30, 2019, respectively. The variability in effective tax rates primarily relates to the difference in jurisdictional mix of earnings, increased U.S. BEAT cash tax expense, discrete benefits related to the release of a portion of the existing U.S. deferred tax valuation allowance due to deferred tax liabilities acquired in business combinations, as well as cash tax benefits resulting from the net operating loss carryback provisions of the CARES Act.

Note 14 — 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 five 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, both the effective and ineffective portions of a change in the fair value of the derivative are recognized as a component of accumulated other comprehensive income (loss) until the underlying hedged item is recognized in earnings, or the forecasted transaction is no longer probable of occurring. 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 noncurrent assets or liabilities, depending on the realized and unrealized gain or loss position of the hedged contract at the balance sheet date, and the timing of future cash flows. The cash flows from derivatives treated as hedges are classified in the condensed consolidated statements of cash flows in the same category as the item being hedged.

The following table shows the notional principal amounts of our outstanding derivative instruments as of June 30, 2020 and September 30, 2019 (in thousands):

	Notional Principal
	June 30, 2020		September 30, 2019
Instruments designated as accounting hedges:
Foreign currency forwards	$	112,508	$	143,164
Interest rate swaps		645,000		95,000
Instruments not receiving hedge accounting treatment:
Foreign currency forwards	$	2,218	$	24,220

Included in the amounts not receiving hedge accounting treatment at June 30, 2020 and September 30, 2019 were non-designated foreign currency forwards with notional principal amounts of $2.2 million and $14.0 million, respectively,

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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 have approximately offset an equal and opposite amount of gains or losses related to the foreign currency exposure. These foreign currency forward contracts resulted in unrealized gains of $1.1 million and unrealized losses of $0.2 million for the three months ended June 30, 2020 and 2019, respectively, and resulted in unrealized losses of $0.6 million and $0.3 million for the nine months ended June 30, 2020 and 2019, respectively. Unrealized gains or losses are included in other income (expense), net in our condensed consolidated statements of operations.

In conjunction with the agreements related to the construction and leasing of two new buildings on our existing corporate campus, in August 2019, we entered into pay-fixed/receive-variable interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with these future lease obligations. The interest rate swaps contain forward starting notional principal amounts of $95.0 million which align with our expected lease payments. These interest rate swaps were designated as effective cash flow hedges and as such, unrealized gains (losses) are included in accumulated other comprehensive income (loss). Unrealized losses as a result of changes in the fair value of the interest rate swaps were $2.5 million and $4.7 million for the three and nine months ended June 30, 2020, respectively.

On April 1, 2020, in conjunction with the Credit Facility described in Note 9, we entered into pay-fixed/receive-variable interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with the Credit Facility. The interest rate swaps contain forward starting notional principal amounts of $550.0 million and were designated as effective cash flow hedges, and as such, unrealized gains (losses) are included in accumulated other comprehensive income (loss). Unrealized losses as a result of changes in the fair value of the interest rate swaps were $7.8 million for the three and nine months ended June 30, 2020.

The notional principal amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of our exposure to credit or market loss. Credit risk represents our 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. Our exposure to credit loss and market risk will vary over time as a function of interest and currency exchange rates. The amount of credit risk from derivative instruments and hedging activities was not material for the periods ended June 30, 2020 or September 30, 2019. Although the table above reflects the notional principal amounts of our 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 present 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 June 30, 2020 or September 30, 2019.

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 (in thousands):

		Fair Value
	Balance Sheet Location	June 30, 2020		September 30, 2019
Asset derivatives:
Foreign currency forwards	Other current assets	$	1,761	$	2,635
Foreign currency forwards	Other assets		624		619
Forward starting swap	Other assets		—		240
Total		$	2,385	$	3,494
Liability derivatives:
Foreign currency forwards	Accrued compensation and current liabilities	$	4,365	$	529
Foreign currency forwards	Other noncurrent liabilities		1,118		228
Forward starting swap	Other noncurrent liabilities		12,224		—
Total		$	17,707	$	757

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The tables below present gains and losses recognized in other comprehensive income (loss) related to derivative financial instruments designated as cash flow hedges, as well as the amount of gains and losses reclassified into earnings (in thousands):

	Three Months Ended
	June 30, 2020				June 30, 2019
	Gains (losses)		Gains (losses)				Gains (losses)
	recognized in		reclassified into		Gains (losses)		reclassified into
Derivative Type	OCI		earnings		recognized in OCI		earnings
Foreign currency forwards	$	(18,521)	$	2,125	$	661	$	94
	Nine Months Ended
	June 30, 2020				June 30, 2019
	Gains (losses)		Gains (losses)				Gains (losses)
	recognized in		reclassified into		Gains (losses)		reclassified into
Derivative Type	OCI		earnings		recognized in OCI		earnings
Foreign currency forwards	$	(18,696)	$	3,398	$	(134)	$	466

Foreign currency forwards designated as accounting hedges (including both fair value and cash flow hedges) had realized gains of $2.5 million and $5.4 million for the three- and nine-month periods ended June 30, 2020, respectively.

The amount of unrealized gains and losses from derivative instruments and hedging activities classified as not highly effective did not have a material impact on the results of operations for the three- and nine-month periods ended June 30, 2020 or 2019. The amount of estimated unrealized net gains from cash flow hedges which are expected to be reclassified to earnings in the next 12 months is $1.9 million, net of income taxes.

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Note 15 — 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. We evaluate performance and allocate resources based on total segment operating income or loss. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in Note 1. Intersegment sales and transfers are immaterial and are eliminated in consolidation.

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

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Sales:
Cubic Transportation Systems	$	215.5	$	212.7	$	601.8	$	595.2
Cubic Mission Solutions		69.0		95.0		167.2		203.3
Cubic Global Defense Systems		65.9		75.0		231.8		226.8
Total sales	$	350.4	$	382.7	$	1,000.8	$	1,025.3
Operating income (loss):
Cubic Transportation Systems	$	50.9	$	17.2	$	77.8	$	37.0
Cubic Mission Solutions		(21.3)		1.3		(67.6)		(12.1)
Cubic Global Defense Systems		6.1		1.9		18.1		10.0
Unallocated corporate expenses		(11.0)		14.3		(40.0)		(7.3)
Total operating income (loss)	$	24.7	$	34.7	$	(11.7)	$	27.6
Depreciation and amortization:
Cubic Transportation Systems	$	7.1	$	6.9	$	21.6	$	24.1
Cubic Mission Solutions		13.3		6.0		34.3		17.2
Cubic Global Defense Systems		1.9		1.7		5.2		5.4
Corporate		1.1		0.7		2.7		2.2
Total depreciation and amortization	$	23.4	$	15.3	$	63.8	$	48.9

Unallocated corporate expenses include costs of strategic and information technology (“IT”) system resource planning as part of our One Cubic Initiatives, which totaled $0.3 million in the third quarter of fiscal 2020 compared to $2.4 million in the third quarter of fiscal 2019. Unallocated corporate costs included $3.3 million of costs incurred in the first nine months of fiscal 2020 for strategic and IT system resource planning compared to $6.3 million in the first nine months of fiscal 2019.

Disaggregation of Total Net Sales: We disaggregate our sales from contracts with customers by end customer, contract type, deliverable type and revenue recognition method for each of our segments, as we believe these factors can affect the nature, amount, timing and uncertainty of our revenue and cash flows.

Sales by Geographic Region (in millions):

	Three months ended June 30, 2020								Nine months ended June 30, 2020
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
United States	$	134.7	$	67.0	$	32.2	$	233.9	$	342.5	$	161.3	$	78.3	$	582.1
United Kingdom		43.3		0.6		4.7		48.6		140.8		1.3		13.6		155.7
Australia		30.2		0.7		8.1		39.0		96.7		2.4		21.4		120.5
Far East/Middle East		0.3		0.3		12.4		13.0		2.2		0.8		84.0		87.0
Other		7.0		0.4		8.5		15.9		19.6		1.4		34.5		55.5
Total sales	$	215.5	$	69.0	$	65.9	$	350.4	$	601.8	$	167.2	$	231.8	$	1,000.8

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	Three months ended June 30, 2019								Nine months ended June 30, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
United States	$	128.9	$	94.0	$	31.6	$	254.5	$	327.3	$	200.1	$	101.3	$	628.7
United Kingdom		47.5		0.2		7.7		55.4		151.6		1.3		16.3		169.2
Australia		30.9		0.3		8.1		39.3		91.1		0.5		20.7		112.3
Far East/Middle East		0.7		0.1		15.2		16.0		8.5		0.7		45.8		55.0
Other		4.7		0.4		12.4		17.5		16.7		0.7		42.7		60.1
Total sales	$	212.7	$	95.0	$	75.0	$	382.7	$	595.2	$	203.3	$	226.8	$	1,025.3

Sales by End Customer: We are the prime contractor for the vast majority of our sales. The table below presents total net sales disaggregated by end customer (in millions):

	Three months ended June 30, 2020								Nine months ended June 30, 2020
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
U.S. Federal Government and State and Local Municipalities	$	127.8	$	64.9	$	32.4	$	225.1	$	325.4	$	155.1	$	85.4	$	565.9
Other		87.7		4.1		33.5		125.3		276.4		12.1		146.4		434.9
Total sales	$	215.5	$	69.0	$	65.9	$	350.4	$	601.8	$	167.2	$	231.8	$	1,000.8

	Three months ended June 30, 2019								Nine months ended June 30, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
U.S. Federal Government and State and Local Municipalities	$	123.1	$	91.8	$	37.4	$	252.3	$	310.7	$	195.6	$	107.3	$	613.6
Other		89.6		3.2		37.6		130.4		284.5		7.7		119.5		411.7
Total sales	$	212.7	$	95.0	$	75.0	$	382.7	$	595.2	$	203.3	$	226.8	$	1,025.3

Sales by Contract Type: Substantially all of our contracts are fixed-price type contracts. Sales included in “Other” contract types represent cost-plus and time-and-material type contracts.

On a fixed-price type contract, we agree to perform the contractual statement of work for a predetermined sales price. Certain of our fixed-price contracts include compensation for bonuses, transactional variable based fees or other similar provisions. On a cost-plus type contract, we are paid our allowable incurred costs plus a profit which can be fixed or variable depending on the applicable contract’s fee arrangement up to funding levels that are predetermined by the customer. On a time-and-material type contract, we are paid on the basis of direct labor hours expended at specified fixed-price hourly rates (that include wages, overhead, allowable general and administrative expenses and profit) and materials at cost. The table below presents total net sales disaggregated by contract type (in millions):

	Three months ended June 30, 2020								Nine months ended June 30, 2020
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Fixed Price	$	213.1	$	61.8	$	57.2	$	332.1	$	592.4	$	144.0	$	207.1	$	943.5
Other		2.4		7.2		8.7		18.3		9.4		23.2		24.7		57.3
Total sales	$	215.5	$	69.0	$	65.9	$	350.4	$	601.8	$	167.2	$	231.8	$	1,000.8

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	Three months ended June 30, 2019								Nine months ended June 30, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Fixed Price	$	210.5	$	93.2	$	69.5	$	373.2	$	586.3	$	199.6	$	209.4	$	995.3
Other		2.2		1.8		5.5		9.5		8.9		3.7		17.4		30.0
Total sales	$	212.7	$	95.0	$	75.0	$	382.7	$	595.2	$	203.3	$	226.8	$	1,025.3

Sales by Deliverable Type: The table below presents total net sales disaggregated by the type of deliverable, which is determined by us at the performance obligation level (in millions):

	Three months ended June 30, 2020								Nine months ended June 30, 2020
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Product	$	124.2	$	59.7	$	37.1	$	221.0	$	317.4	$	141.6	$	150.2	$	609.2
Service		91.3		9.3		28.8		129.4		284.4		25.6		81.6		391.6
Total sales	$	215.5	$	69.0	$	65.9	$	350.4	$	601.8	$	167.2	$	231.8	$	1,000.8

	Three months ended June 30, 2019								Nine months ended June 30, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Product	$	122.8	$	87.3	$	45.8	$	255.9	$	328.7	$	183.9	$	148.3	$	660.9
Service		89.9		7.7		29.2		126.8		266.5		19.4		78.5		364.4
Total sales	$	212.7	$	95.0	$	75.0	$	382.7	$	595.2	$	203.3	$	226.8	$	1,025.3

Revenue Recognition Method: Sales recognized at a point in time are typically for standard goods with a short production cycle and are recognized when the customer obtains control, which is generally upon delivery and acceptance. Sales for services and for products with a long production cycle, which often include significant customization and development, are recognized over time. The table below presents total net sales disaggregated based on the revenue recognition method applied (in millions):

	Three months ended June 30, 2020								Nine months ended June 30, 2020
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Point in Time	$	26.5	$	41.4	$	2.9	$	70.8	$	72.3	$	93.9	$	4.8	$	171.0
Over Time		189.0		27.6		63.0		279.6		529.5		73.3		227.0		829.8
Total sales	$	215.5	$	69.0	$	65.9	$	350.4	$	601.8	$	167.2	$	231.8	$	1,000.8

	Three months ended June 30, 2019								Nine months ended June 30, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Point in Time	$	29.7	$	76.0	$	1.0	$	106.7	$	68.2	$	169.2	$	2.9	$	240.3
Over Time		183.0		19.0		74.0		276.0		527.0		34.1		223.9		785.0
Total sales	$	212.7	$	95.0	$	75.0	$	382.7	$	595.2	$	203.3	$	226.8	$	1,025.3

Note 16 — Restructuring Costs

In fiscal 2019, we initiated projects to restructure and modify our supply chain strategy, functional responsibilities, methods, capabilities, processes and rationalize suppliers with the goal of reducing ongoing costs and increasing the efficiencies of our worldwide procurement organization. The majority of the costs associated with these restructuring

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activities are related to consultants that we have engaged in connection with these efforts, and such costs have been recognized by our corporate entity. The total costs of this restructuring project have been incurred and these efforts have been materially completed as of the third quarter of fiscal 2020.

In the first nine months of fiscal 2019 and 2020, our Corporate segment incurred additional restructuring charges, consisting primarily of employee severance costs related to headcount reductions initiated to optimize our cost positions. The total costs of each of these restructuring plans initiated thus far are not expected to be significantly greater than the charges incurred to date.

Restructuring charges incurred by our business segments were as follows (in millions):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Restructuring costs:
Cubic Transportation Systems	$	0.2		1.4	$	0.7	$	2.2
Cubic Mission Solutions		0.4		—		0.4		—
Cubic Global Defense Systems		0.7		2.6		1.3		2.7
Unallocated corporate expenses		2.1		4.5		6.4		7.4
Total restructuring costs	$	3.4	$	8.5	$	8.8	$	12.3

The following table presents a rollforward of our restructuring liability as of June 30, 2020, which is included within accrued compensation and other current liabilities within our condensed consolidated balance sheets (in millions):

	Restructuring Liability		Restructuring Liability
	Employee Separation and Other		Consulting Costs
Balance as of September 30, 2019	$	2.0	$	0.8
Accrued costs		7.0		1.8
Cash payments		(8.3)		(2.2)
Balance as of June 30, 2020	$	0.7	$	0.4

Certain restructuring costs are based upon estimates. Actual amounts paid may ultimately differ from these estimates. If additional costs are incurred or recognized amounts exceed costs, such changes in estimates will be recognized when incurred.

Note 17 — Legal Matters

We consider all current legal matters to be ordinary proceedings incidental to our business. We believe the outcome of these proceedings will not have a materially adverse effect on our financial position, results of operations or cash flows.

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CUBIC CORPORATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

June 30, 2020

Overview

Cubic Corporation (“we,” “us,” the “Company” and “Cubic”) is a technology-driven, market-leading global provider of innovative, mission-critical solutions that reduce congestion and increase operational readiness and effectiveness through superior situational understanding. Cubic designs, integrates and operates systems, products and services focused in the transportation, command, control, communication, computers, intelligence, surveillance and reconnaissance (“C4ISR”), and training markets. We operate in three reportable business segments: Cubic Transportation Systems (“CTS”), Cubic Mission Solutions (“CMS”), and Cubic Global Defense Systems (“CGD”).

CTS specializes in the design, development, production, installation, maintenance and operation of automated fare payment, traffic management and enforcement solutions, real-time information systems, and revenue management infrastructure and technologies for transportation agencies. As part of our turnkey solutions, CTS also provides these customers with a comprehensive suite of business process outsourcing services and expertise, such as card and payment media management, central systems and application support, retail network management, customer call centers and financial clearing and settlement support. As transportation authorities seek to optimize their operations by outsourcing bundled systems and services, CTS has transformed itself from a provider of automated fare collection systems into a systems integrator and services company focused on the intelligent transportation market.

CMS provides networked C4ISR capabilities for defense, intelligence, security and commercial missions. CMS’s core competencies include protected wide-band communications for space, aircraft, unmanned aerial vehicle (“UAV”), and terrestrial applications. It provides rugged internet of things cloud solutions, interoperability gateways, and artificial intelligence/machine learning based command and control, intelligence, surveillance and reconnaissance applications for video situational understanding. Through its acquisition of PIXIA Corp. (“Pixia”), CMS offers cloud-based platforms designed to manage and share large amounts of imagery data, wide-area motion imagery and geospatial data. CMS is also building UAV systems to provide intelligence, surveillance and reconnaissance as-a-service.

CGD is a leading diversified supplier of live, virtual, constructive and game-based training solutions to the U.S. Department of Defense, other U.S. government agencies and allied nations. We offer a full range of training solutions for military and security forces. Our customized systems and services accelerate combat readiness in the air, on the ground and at sea while meeting the demands of evolving operations globally.

COVID-19 Update

In March 2020, the novel coronavirus disease (“COVID-19”) was declared a pandemic by the World Health Organization.  The pandemic has negatively affected the U.S. and global economy, disrupted global supply chains and financial markets, and resulted in significant travel restrictions, mandated facility closures and shelter-in-place orders in numerous jurisdictions worldwide. Cubic’s businesses have been deemed essential in the locations in which we operate around the world. As such, our priorities are to continue providing our essential products and services to customers while focusing on protecting the health and well-being of our employees.

We have activated our crisis response team that has proactively implemented our business continuity plans and has taken a variety of measures to ensure the ongoing availability of our essential services, while taking health and safety measures, including implementing enhanced cleaning and hygiene protocols in our facilities, implementing remote work policies where possible, eliminating non-essential travel and providing education resources to employees. We have used our manufacturing facility to produce personal protective gear, such as general-purpose face coverings and face shields.

The pandemic has presented challenges and impacts on each of our businesses, including delays of customer orders, slowdown of certain projects and impacts due to travel restrictions and remote work. We have taken proactive measures regarding communications and scheduling in order to mitigate the potential impacts of the pandemic with our vendors and subcontractors. To date we have not experienced significant disruptions in our supply chain, nor have we

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experienced any significant disruptions at our manufacturing facilities. However, if our supply chain and subcontractors are more significantly impacted in the future and we are not able to implement alternatives or other mitigations, deliveries and other milestones on affected programs could be adversely impacted.

The vast majority of revenue from our CTS businesses is earned under fixed-price contracts. However, approximately 2% of our annual revenue is directly tied to the level of transit ridership. While transit ridership levels have improved from the lows of the pandemic, they remain significantly below normal levels with uncertainty surrounding the pace and timing of recovery. As a result, many of our transit agency customers continue to experience a significant decline in their revenues. While we continue to believe that CTS’s backlog is largely insulated from the impacts of COVID-19 due to the critical service of fare collection, there could be potential delays in the award of new business. Our CMS businesses have experienced some delays in timing of orders and shipments which negatively impacted sales and profits in the second and third quarter of fiscal 2020, and we believe the delays are related to the COVID-19 pandemic. However, our CMS businesses continue to actively write proposals as the U.S. National Defense Strategy continues to drive demand in our markets. Our CGD businesses have experienced some slowdowns in onsite defense training work and certain customer orders have been delayed, but generally customer budgets are in place and orders are anticipated later in fiscal 2020.

We believe that the fundamentals of our Company remain strong in the midst of the global pandemic. We expect to have sufficient liquidity on hand to continue business operations during this volatile period and we have taken a number of steps to strengthen liquidity and manage cash flow. These steps include long-term debt restructuring and an increase in limits on our revolving credit facility as further described in the “Liquidity and Capital Resources” section below. We have also been negotiating more favorable payment terms with certain customers, suppliers and subcontractors and utilized governmental stimulus benefits (including those relating to tax). In addition, we have modified compensation to members of our Board of Directors, executives and other employees and have planned reductions in capital expenditures and other discretionary expenditures, which increased our operating income by over $8.0 million in our third quarter of fiscal 2020, offsetting some of the negative impacts from COVID-19.

The extent to which COVID-19 will adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including new information concerning the severity of the outbreak and the effectiveness of actions, domestically and globally, to contain or mitigate its effects. While we expect the pandemic to continue to negatively impact our results of operations, cash flows and financial position, the current level of uncertainty over the economic and operational impacts of COVID-19 means that the related financial impact to us cannot be reasonably estimated at this time.

Non-GAAP Financial Information

In addition to results reported under U.S. generally accepted accounting principles (“GAAP”), this Quarterly Report on Form 10-Q also contains non-GAAP measures as defined under Regulation G. These non-GAAP measures consist of Adjusted EBITDA, Adjusted Net Income and Adjusted EPS. We believe that these non-GAAP measures provide additional insight into our ongoing operations and underlying business trends, facilitate a comparison of our results between current and prior periods, and facilitate the comparison of our operating results with the results of other public companies that provide non-GAAP measures. We use Adjusted EBITDA internally to evaluate the operating performance of our business, for strategic planning purposes and as a factor in determining incentive compensation for certain employees. These non-GAAP measures facilitate company-to-company operating comparisons by excluding items that we believe are not part of our core operating performance. Adjusted Net Income is defined as GAAP net income (loss) from continuing operations attributable to Cubic excluding amortization of purchased intangibles, restructuring costs, loss on extinguishment of debt, acquisition-related expenses, strategic and IT system resource planning expenses, gains or losses on the disposal of fixed assets, other non-operating expense (income), tax impacts related to acquisitions, and the impact of the Tax Cuts and Jobs Act (“U.S. Tax Reform”). Adjusted EPS is defined as Adjusted Net Income on a per share basis using the weighted average diluted shares outstanding. Adjusted EBITDA is defined as GAAP net income (loss) from continuing operations attributable to Cubic before interest expense (income), loss on extinguishment of debt, income taxes, depreciation and amortization, other non-operating expense (income), acquisition-related expenses, strategic and IT system resource planning expenses, restructuring costs, and gains or losses on the disposal of fixed assets. Strategic and IT system resource planning expenses consists of expenses incurred in the development of our enterprise resource planning system and the redesign of our supply chain which include internal labor costs and external costs of materials and services that do not qualify for capitalization. Acquisition-related expenses include business acquisition expenses including retention bonus expenses, due diligence and consulting costs

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incurred in connection with the acquisitions, and expenses recognized related to the change in the fair value of contingent consideration for acquisitions.

These non-GAAP measures are not measurements of financial performance under GAAP and should not be considered as measures of discretionary cash available to the Company or as alternatives to net income as a measure of performance. In addition, other companies may define these non-GAAP measures differently and, as a result, our non-GAAP measures may not be directly comparable to the non-GAAP measures of other companies. Furthermore, non-GAAP financial measures have limitations as an analytical tool and you should not consider these measures in isolation, or as a substitute for analysis of our results as reported under GAAP. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is included under the “Reconciliation of Non-GAAP Financial Information” section below.

Consolidated Financial Results

	Three Months Ended							Nine Months Ended
	June 30,							June 30,
	2020		2019		% Change			2020		2019		% Change
(in millions, except per share data)
Sales	$	350.4	$	382.7		(8)	%	$	1,000.8	$	1,025.3		(2)	%
Operating income (loss)		24.7		34.7		(29)	%		(11.7)		27.6		nm
Net income (loss) from continuing operations attributable to Cubic		(1.4)		24.1		nm			(60.7)		9.5		nm
Diluted earnings (loss) per share from continuing operations attributable to Cubic		(0.04)		0.77		nm			(1.94)		0.31		nm
Adjusted EBITDA		38.2		30.6		25	%		54.1		70.0		(23)	%
Adjusted Net Income		23.0		20.7		11	%		15.4		37.4		(59)	%
Adjusted EPS		0.74		0.66		12	%		0.49		1.23		(60)	%
nm - not meaningful

Sales:

Third Quarter of 2020 vs. Third Quarter of 2019: Sales for the third quarter of fiscal 2020 decreased 8% to $350.4 million from $382.7 million in the third quarter last year. Sales from CTS increased by 1%, while sales from CMS and CGD decreased by 27% and 12%, respectively. Sales in the third quarter of fiscal 2020 were negatively impacted by COVID-19 due to a decrease in sales resulting from lower transit ridership and delayed orders as discussed further below in the analysis of segment sales. In addition, average exchange rates between the prevailing currency in our foreign operations and the U.S. dollar had unfavorable impacts on sales of $3.4 million for the third quarter of fiscal 2020 compared to the third quarter of our fiscal year ended September 30, 2019 (“fiscal 2019”). Sales generated by businesses we acquired during fiscal 2020 and fiscal 2019 totaled $31.0 million for the third quarter of fiscal 2020, compared to $27.1 million in the same period last year.

First Nine Months of 2020 vs. First Nine Months of 2019: Sales for the first nine months of fiscal 2020 decreased 2% to $1,000.8 million compared to $1,025.3 million in the same period last year. For the first nine months of fiscal 2020, sales from CGD and CTS increased by 2% and 1%, respectively, while CMS sales decreased by 18%, as compared to the same period last year primarily due to delayed orders of expeditionary satellite communications products as compared to the timing of orders in fiscal 2019. Sales for the first nine months of fiscal 2020 were negatively impacted by COVID-19 due to a decrease in sales resulting from lower transit ridership and delayed orders as discussed above. in addition, average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar had a net unfavorable impact on sales of $10.2 million for the first nine months of fiscal 2020 compared to the same period last year. Sales generated by businesses we acquired during fiscal 2020 and fiscal 2019 totaled $73.7 million for the first nine months of fiscal 2020, compared to $56.3 million for the same period last year.

See the segment discussions below for further analysis of segment sales.

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Gross Margin:

Third Quarter of 2020 vs. Third Quarter of 2019: Our gross margin percentage on product sales increased to 31% in the third quarter of fiscal 2020, as compared to 26% in the same period last year. The increase was primarily due to a contract amendment signed in the third quarter of fiscal 2020 in our CTS segment and cost saving initiatives, partially offset by lower sales of high margin expeditionary satellite communications products from CMS. Our gross margin percentage on service sales of 38% for the third quarter of fiscal 2020 was relatively flat compared to 39% in the third quarter of last year.

First Nine Months of 2020 vs. First Nine Months of 2019: Our gross margin percentage on products sales decreased to 23% for the first nine months of fiscal 2020, as compared to 26% in the same period last year. The decrease was primarily due to lower sales of high margin expeditionary satellite communications products and other secure communications and secure networks products at CMS, partially offset by the impact of the contract amendment and cost saving initiatives noted above. Our gross margin percentage on service sales increased to 36% for the first nine months of fiscal 2020 compared to 33% for the same period last year. The increase was primarily driven by the impact of productivity initiatives in CTS as well as services sales mix.

Selling, General and Administrative:

Third Quarter of 2020 vs. Third Quarter of 2019: Selling, General and Administrative (“SG&A”) expenses decreased in the third quarter of fiscal 2020 to $62.3 million compared to $82.2 million in the same period last year. As a percentage of sales, SG&A expense were 18% in the third quarter of fiscal 2020, compared to 21% in the same period last year. The decrease in SG&A expense was driven by cost reduction initiatives implemented in the third quarter of fiscal 2020 and lower acquisition-related expenses of $2.7 million as compared to the same period last year.

First Nine Months of 2020 vs. First Nine Months of 2019: SG&A expenses decreased to $206.5 million for the first nine months of fiscal 2020, compared to $211.3 million for the same period last year. As a percentage of sales, SG&A expenses were 21% for both the first nine months of fiscal 2020 and fiscal 2019. The decrease in SG&A expense was driven by cost reduction initiatives implemented in the third quarter of fiscal 2020 as well as a reduction in acquisition-related expenses of $5.3 million through the first nine months of fiscal 2020 as compared to the same period last year.

Restructuring: Restructuring expenses decreased to $3.4 million in the third quarter of fiscal 2020 compared to $8.5 million in the same period last year, and for the first nine months of fiscal 2020, restructuring expenses decreased to $8.8 million compared to $12.3 million for the same period last year. The expenses primarily related to severance costs associated with headcount reductions as well as costs to restructure and modify our supply chain strategy, functional responsibilities, methods, capabilities, processes and rationalize suppliers with the goal of reducing ongoing costs and increasing the efficiencies of our worldwide procurement organization.

Research and Development:

Internally funded company-sponsored research and development (“R&D”) expenses, as reflected in our Condensed Consolidated Statements of Operations (as included in Part I, Item 1 of this Quarterly Report on Form 10-Q) are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Company-Sponsored Research and Development Expense:
Cubic Transportation Systems	$	2,734	$	1,737	$	5,850	$	8,788
Cubic Mission Solutions		8,985		7,319		21,834		19,240
Cubic Global Defense Systems		535		2,555		4,352		9,349
Unallocated corporate expenses		—		859		—		859
Total company-sponsored research and development expense	$	12,254	$	12,470	$	32,036	$	38,236

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Company-sponsored R&D expense was relatively flat in the third quarter of fiscal 2020 compared to the same period last year and decreased $6.2 million for the nine-month period ended June 30, 2020 as compared to the same period last year due to the timing of certain planned R&D projects including CTS and CGD digital initiatives.

In addition to internally funded Company-sponsored R&D, a significant portion of our new product development occurs during the performance of contractual work for our customers. These costs are included in cost of sales in our Condensed Consolidated Statements of Operations (included in Part I, Item 1 of this Quarterly Report on Form 10-Q) as they are directly related to contract performance. The estimated cost of contract R&D activities included in our cost of sales is as follows (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of Contract Research and Development Activities:
Cubic Transportation Systems	$	15,032	$	14,650	$	45,331	$	40,801
Cubic Mission Solutions		10,333		8,212		29,478		20,331
Cubic Global Defense Systems		9,016		8,847		25,729		26,069
Total cost of contract research and development activities	$	34,381	$	31,709	$	100,538	$	87,201

Amortization of Purchased Intangibles: Amortization of purchased intangibles for the third quarter of fiscal 2020 increased to $16.4 million from $9.7 million in the third quarter last year and increased to $42.9 million in the first nine months of fiscal 2020 as compared to $32.7 million in the same period last year. The increase in amortization expense was driven by the completion of our acquisitions of Delerrok Inc. (“Delerrok”) and Pixia in January 2020, partially offset by lower amortization of purchased intangible assets that are amortized based upon accelerated methods.

Operating Income (Loss):

Third Quarter of 2020 vs. Third Quarter of 2019: Our operating income decreased to $24.7 million in the third quarter of fiscal 2020 compared to $34.7 million in the same period last year. CTS operating income increased to $50.9 million for the third quarter of fiscal 2020 compared to $17.2 million last year and CGD operating income increased to $6.1 million in the third quarter compared to $1.9 million in the same period last year. The CMS operating loss for the third quarter of fiscal 2020 was $21.3 million compared to operating income of $1.2 million in the same period last year. Operating income in the third quarter of fiscal 2020 was negatively impacted by COVID-19 due to a decrease in sales resulting from lower transit ridership and delayed orders. Our operating results were significantly impacted by accounting for businesses acquired in fiscal 2020 and fiscal 2019. On a consolidated basis, the businesses that we acquired during fiscal 2020 and fiscal 2019 had operating losses totaling $8.8 million in the third quarter of fiscal 2020, as compared to $3.5 million in the third quarter last year. The operating losses include total acquisition-related expenses, including amortization of intangible assets, of $14.1 million in the third quarter of fiscal 2020, as compared to $7.3 million in the same period last year.

Unallocated corporate and other costs for the third quarter of fiscal 2020 were $11.0 million compared to income of $14.3 million in the third quarter of fiscal 2019. The third quarter of fiscal 2019 included a gain on the sale of land and real estate of $32.6 million. Excluding this gain, unallocated corporate and other costs decreased by $7.5 million in the third quarter of fiscal 2020 as compared to fiscal 2019. The decrease was primarily driven by lower corporate restructuring costs, reduced strategic and IT system resource planning expenses, and cost reduction initiatives implemented in the third quarter of fiscal 2020.

The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar had a net unfavorable impact in the third quarter of fiscal 2020 of $0.6 million as compared to the third quarter of last year.

First Nine Months of 2020 vs. First Nine Months of 2019: Our consolidated operating loss for the first nine months of fiscal 2020 was $11.7 million compared to operating income of $27.6 million for the first nine months of last year. The CMS operating loss for the first nine months of fiscal 2020 increased to $67.6 million compared to $12.1 million last year, while CGD operating income increased 81% to $18.1 million and CTS operating income increased 110% to $77.8

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million for the first nine months of fiscal 2020 compared to the same period last year. Our operating results for the first nine months of fiscal 2020 were negatively impacted by COVID-19 due to a decrease in sales resulting from lower transit ridership and delayed orders. Our operating results were impacted by accounting for businesses acquired in fiscal 2020 and fiscal 2019. On a consolidated basis, the businesses that we acquired during fiscal 2020 and fiscal 2019 had operating losses totaling $28.7 million in the first nine months of fiscal 2020, compared to $15.7 million in the same period last year. The operating losses include acquisition-related expenses, including amortization of intangible assets, of $37.7 million in the first nine months of fiscal 2020, as compared to $25.5 million in the same period last year. Additionally, CTS incurred SG&A expenses for other acquisition-related expenses of $3.9 million for the first nine months of fiscal 2020.

Unallocated corporate and other costs for the first nine months of fiscal 2020 were $40.0 million compared to $7.3 million in the same period last year. The first nine months of fiscal 2019 included a gain on the sale of real estate of $32.6 million. Excluding this gain, unallocated corporate and other costs were relatively flat in the first nine months of fiscal 2020 as compared to the same period last year.

The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar had a net unfavorable impact on our operating results of $1.3 million in the first nine months of fiscal 2020 compared to the same period last year.

See the segment discussions below for further analysis of segment operating income and loss.

Interest and Dividend Income and Interest Expense: Interest and dividend income was $2.0 million in the third quarter of fiscal 2020 compared to $1.7 million in the same period last year, and $5.9 million in the first nine months of fiscal 2020 compared to $4.3 million in the same period last year. The increase was primarily due to the interest income recorded on higher balances of long-term contracts financing receivables in our Condensed Consolidated Balance Sheets (as included in Part I, Item 1 of this Quarterly Report on Form 10-Q). Interest expense for the third quarter of fiscal 2020 was $7.4 million compared to $6.1 million in the third quarter of last year and was $20.9 million for the first nine months of fiscal 2020 compared to $14.7 million for the same period last year. The increase in interest expense was due to higher average debt balances in fiscal 2020 primarily as a result of the completion of our acquisitions of Pixia and Delerrok in January 2020, as well an increase in the average outstanding non-recourse debt balance of our consolidated variable interest entity (“VIE”). The 90% noncontrolling interest in the net income (loss) of the consolidated VIE, which includes the interest income and expense of such VIE, is added back to our net income (loss) to arrive at net income (loss) attributable to Cubic.

Loss on Extinguishment of Debt: Loss on extinguishment of debt was $16.1 million during the first nine months of fiscal 2020 and related to our repayment and extinguishment of our senior unsecured notes in March 2020. See the “Liquidity and Capital Resources” section below for further discussion.

Other Income (Expense): Other income (expense) netted to expense of $6.8 million in the third quarter of fiscal 2020 compared to expense of $8.7 million in the third quarter of fiscal 2019 and netted to expense of $26.6 million in the first nine months of fiscal 2020 compared to expense of $17.1 million in the same period last year. Changes in our non-operating expenses are primarily driven by changes in the fair value of an interest rate swap held by our consolidated VIE. The 90% noncontrolling interest in the net income (loss) of the consolidated VIE, including the VIE’s loss on its interest rate swap, is added back to our net income (loss) to arrive at net income (loss) attributable to Cubic.

Income Tax Provision: The income tax expense recognized on pre-tax loss from continuing operations for the three and nine months ended June 30, 2020 resulted in an effective tax rate of 37% and 13%, respectively, which differs from the effective tax rates of 5% and negative 166% for the three and nine months ended June 30, 2019, respectively. The variability in effective tax rates primarily relates to the difference in jurisdictional mix of earnings, increased U.S. base-erosion and anti-abuse cash tax, discrete benefits related to the release of a portion of the existing U.S. deferred tax valuation allowance due to deferred tax liabilities acquired in business combinations, as well as cash tax benefits resulting from the net operating loss carryback provisions of the Coronavirus Aid, Relief, and Economic Security Act enacted by the U.S. federal government in March 2020.

Our effective tax rate could be affected by, among other factors, the mix of business between U.S. and foreign jurisdictions, the level of intercompany transactions, applicability of new tax regimes, the impact of acquisitions, fluctuations in the need for a valuation allowance against deferred tax assets, our ability to take advantage of available

45

tax attributes and audits of our records by taxing authorities. After considering these impacts, we have determined that a reliable estimate of the annual effective tax rate for fiscal 2020 cannot be made.

Net Loss from Continuing Operations attributable to Cubic: Our net loss from continuing operations attributable to Cubic in the third quarter of fiscal 2020 was $1.4 million compared to net income from continuing operations attributable to Cubic of $24.1 million in the third quarter of fiscal 2019. The increase in net loss from continuing operations attributable to Cubic was primarily due to the lower operating income as described above. For the first nine months of fiscal 2020, our net loss from continuing operations attributable to Cubic was $60.7 million compared to net income from continuing operations attributable to Cubic of $9.5 million last year. The increase in net loss from continuing operations attributable to Cubic was primarily due to the increases in our operating loss, other non-operating expenses, and interest expense as described above, as well as the $16.1 million loss on extinguishment of debt.

Adjusted EBITDA: Adjusted EBITDA increased to $38.2 million in the third quarter of fiscal 2020 compared to $30.6 million in the third quarter of fiscal 2019. The increase in Adjusted EBITDA was due to the same factors described above in operating income (loss), but excludes amortization expense, gain on sale of fixed assets, restructuring costs and acquisition-related expenses.

For the first nine months of fiscal 2020, Adjusted EBITDA decreased to $54.1 million compared to $70.0 million last year. The decrease in Adjusted EBITDA was primarily due to the same factors that drove the increase in operating loss described above, but excludes amortization expense, gain on sale of fixed assets, restructuring costs and acquisition-related expenses.

Adjusted Net Income (Loss): Our Adjusted Net Income increased to $23.0 million in the third quarter of fiscal 2020 compared to $20.7 million in the same period last year. The increase in Adjusted Net Income was primarily due to the same factors described above in net loss from continuing operations attributable to Cubic, but excludes amortization expense, restructuring costs, loss on extinguishment of debt, acquisition-related expenses and non-operating gains and losses.

For the first nine months of fiscal 2020, Adjusted Net Income decreased to $15.4 million compared to $37.4 million for the first nine months last year. The decrease in Adjusted Net Income was primarily due to the same factors that drove the increase in net loss from continuing operations attributable to Cubic described above, but excludes amortization expense, restructuring costs, loss on extinguishment of debt, acquisition-related expenses and non-operating gains and losses.

Adjusted EPS: Adjusted EPS increased to $0.74 in the third quarter of fiscal 2020 compared to $0.66 in the third quarter last year. For the first nine months of fiscal 2020, Adjusted EPS decreased to $0.49 compared to $1.23 last year. The changes in Adjusted EPS was due to the same factors that impacted Adjusted Net Income noted above.

CTS Segment

	Three Months Ended							Nine Months Ended
	June 30,							June 30,
	2020		2019		% Change			2020		2019		% Change
(in millions)
Sales	$	215.5	$	212.7		1	%	$	601.8	$	595.2		1	%
Operating income		50.9		17.2		196	%		77.8		37.0		110	%
Adjusted EBITDA		41.9		24.5		71	%		88.3		64.3		37	%

Sales:

Third Quarter of 2020 vs. Third Quarter of 2019: CTS sales for the third quarter of fiscal 2020 increased 1% to $215.5 million from $212.7 million in the third quarter last year. Sales increased in the U.S. and decreased in the U.K and Australia as compared to the same periods last year. Sales were higher in the U.S. due to increased work on our system development contract in Boston, which was partially offset by lower revenue on the system development contract in New York. The decrease in sales in the U.K. and Australia were primarily caused by a reduction in work on fare system hardware in the U.K. and the strengthening of the U.S. dollar against the British Pound and Australian Dollar. Sales in

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the third quarter of fiscal 2020 were negatively impacted by COVID-19 due to a decrease in sales resulting from lower transit ridership. In addition, average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar resulted in a decrease in sales of $2.6 million for the third quarter of fiscal 2020, compared to the third quarter last year.

First Nine Months of 2020 vs. First Nine Months of 2019: CTS sales for the first nine months of fiscal 2020 increased 1% to $601.8 million from $595.2 million in the same period last year. Sales increased in the U.S. and decreased in the U.K compared to the same periods last year while sales in Australia were relatively flat. Sales were higher in the U.S. primarily due to increased work on system development contracts in Boston and Chicago, which were partially offset by lower revenue on the system development contract in New York. The decrease in sales in the U.K. was primarily caused by a reduction in work on fare system hardware and the strengthening of the U.S. dollar against the British Pound. Sales for the first nine months of fiscal 2020 were negatively impacted by COVID-19 due to a decrease in sales resulting from lower transit ridership. In addition, average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar resulted in a decrease in sales of $8.4 million for the first nine months of fiscal 2020 compared to the same period last year, primarily due to the strengthening of the U.S. dollar against the British Pound and Australian dollar.

Operating Income:

Third Quarter of 2020 vs. Third Quarter of 2019: CTS operating income for the third quarter of fiscal 2020 increased 196% to $50.9 million compared to $17.2 million in the third quarter last year. Operating income was higher in the U.S. due to a contract amendment signed in the third quarter of fiscal 2020 with our Boston customer and cost saving initiatives, which were partially offset by lower work on our New York contract. Additionally, CTS’s consolidated VIE recognized higher operating income due to the contract amendment with our Boston customer. Operating income in the U.K. and Australia was slightly higher as compared to the same period last year due primarily to the impact of cost saving initiatives. The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar resulted in a decrease in operating income of $0.5 million for the third quarter of fiscal 2020 compared to the same period last year.

First Nine Months of 2020 vs. First Nine Months of 2019: CTS operating income for the first nine months of fiscal 2020 increased 110% to $77.8 million compared to $37.0 million in the first nine months of last year. Operating income was higher in the U.S. due to the contract amendment signed in the third quarter of fiscal 2020 with our Boston customer increased system development work on our contracts in Boston and Chicago, cost saving initiatives, which were partially offset by lower revenue on our New York contract. Additionally, CTS’s consolidated VIE recognized higher operating income due to the contract amendment with our Boston customer. Operating income in the U.K. was higher as compared to the same period last year due to productivity measures achieved on service contracts. Operating income in the APAC region slightly decreased in the first nine months of fiscal 2020 due to lower profitability on Australian service contracts. The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar resulted in a decrease in operating income of $1.0 million for the first nine months of fiscal 2020 compared to the same period last year.

Amortization of Purchased Intangibles: Amortization of purchased intangibles included in the CTS results amounted to $4.8 million in the third quarter of fiscal 2020 compared to $4.7 million in the third quarter of fiscal 2019, and $14.1 million in the first nine months of fiscal 2020 compared to $17.5 million in the first nine months of last year. The decrease in amortization expense for the first nine months of fiscal 2020 is related to purchased intangible assets that are amortized based upon accelerated methods, partially offset by increased amortization as a result of the amortization of intangible assets acquired in our purchase of Delerrok in January 2020.

Adjusted EBITDA: CTS Adjusted EBITDA increased 71% to $41.9 million in the third quarter of fiscal 2020 compared to $24.5 million in the third quarter of fiscal 2019, and increased 37% to $88.3 million in the first nine months of fiscal 2020 compared to $64.3 million in the same period last year. The increase in Adjusted EBITDA was primarily driven by the same factors that drove the increase in operating income described above, excluding amortization of purchased intangibles and acquisition-related expenses. In addition, CTS is required to reflect 100% of the sales and operating income of its consolidated VIE in its operating results. However, because CTS only owns 10% of the consolidated VIE, CTS reflects only 10% of the Adjusted EBITDA of the VIE in CTS Adjusted EBITDA.

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CMS Segment

	Three Months Ended							Nine Months Ended
	June 30,							June 30,
	2020		2019		% Change			2020		2019		% Change
(in millions)
Sales	$	69.0	$	95.0		(27)	%	$	167.2	$	203.3		(18)	%
Operating income (loss)		(21.3)		1.3		nm			(67.6)		(12.1)		nm
Adjusted EBITDA		(5.0)		9.3		nm			(30.8)		9.9		nm
nm - not meaningful

Sales:

Third Quarter of 2020 vs. Third Quarter of 2019: CMS sales for the third quarter of fiscal 2020 decreased 27% to $69.0 million from $95.0 million in the third quarter last year. The decrease in sales resulted from decreased product deliveries on delayed orders of expeditionary satellite communications products. Businesses acquired by CMS in fiscal 2020 and fiscal 2019 had sales of $8.0 million for the third quarter of fiscal 2020 compared to $3.6 million in the same period last year.

First Nine Months of 2020 vs. First Nine Months of 2019: CMS sales for the first nine months of fiscal 2020 decreased 18% to $167.2 million from $203.3 million in the same period last year. The decrease in sales resulted from decreased deliveries on delayed orders of expeditionary satellite communications products. Businesses acquired by CMS in fiscal 2020 and fiscal 2019 had sales of $15.1 million for the first nine months of fiscal 2020 compared to $4.3 million for the same period last year.

Operating Income (Loss):

Third Quarter of 2020 vs. Third Quarter of 2019: The CMS operating loss for the third quarter of fiscal 2020 was $21.3 million compared to operating income of $1.3 million in the same period last year. The lower operating income was driven by lower deliveries of expeditionary satellite communications products, incremental investments in technologies being developed for certain secure communications contracts, higher R&D expense from increased investments in innovation and operating losses incurred by newly acquired businesses. Operating losses incurred by businesses acquired by CMS during fiscal 2020 and fiscal 2019 totaled $8.8 million for the third quarter of fiscal 2020, compared to $3.2 million in the third quarter last year. These operating losses were driven by acquisition-related expenses, including amortization of intangible assets, totaling $9.6 million for the third quarter of fiscal 2020, compared to $1.7 million for the same quarter last year.

First Nine Months of 2020 vs. First Nine Months of 2019: The CMS operating loss was $67.6 million in the first nine months of fiscal 2020 compared to $12.1 million in the same period last year. The increase in operating loss was driven by lower deliveries of expeditionary satellite communications products, incremental investments in technologies being developed for certain secure communications contracts, higher R&D expense from increased investments in innovation and operating losses incurred by newly acquired businesses. Operating losses incurred by businesses acquired by CMS during fiscal 2020 and fiscal 2019 totaled $23.7 million for the first nine months of fiscal 2020, compared to $4.9 million of operating losses in the same period last year. These operating losses were driven by acquisition-related expenses, including amortization of intangible assets, totaling $22.3 million for the first nine months of fiscal 2020, compared to $3.6 million in the same period last year.

Amortization of Purchased Intangibles: Amortization of purchased intangibles included in the CMS results amounted to $11.5 million in the third quarter of fiscal 2020 compared to $4.9 million in the third quarter of fiscal 2019, and $28.8 million in the first nine months of fiscal 2020 compared to $14.6 million last year. The increase in amortization was due to the amortization of purchased intangibles related to our acquisition of Pixia in January 2020.

Adjusted EBITDA: CMS Adjusted EBITDA was a loss of $5.0 million in the third quarter of fiscal 2020 compared to income of $9.3 million in the third quarter of fiscal 2019, and was a loss of $30.8 million in the first nine months of fiscal 2020 compared to income of $9.9 million in the same period last year. The change in Adjusted EBITDA was

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primarily driven by the same factors that drove the change in operating income (loss) described above, excluding amortization of purchased intangibles and acquisition-related expenses.

CGD Segment

	Three Months Ended							Nine Months Ended
	June 30,							June 30,
	2020		2019		% Change			2020		2019		% Change
(in millions)
Sales	$	65.9	$	75.0		(12)	%	$	231.8	$	226.8		2	%
Operating income		6.1		1.9		221	%		18.1		10.0		81	%
Adjusted EBITDA		8.6		7.4		16	%		23.9		19.6		22	%

Sales:

Third Quarter of 2020 vs. Third Quarter of 2019: CGD sales for the third quarter of fiscal 2020 decreased 12% to $65.9 million from $75.0 million in the third quarter last year. The decrease in sales was due to decreased work on ground combat training system contracts based on timing of orders, partially offset by an increase in air combat training systems work during the quarter.

First Nine Months of 2020 vs. First Nine Months of 2019: CGD sales for the first nine months of fiscal 2020 increased 2% to $231.8 million from $226.8 million in the same period last year. The increase in sales was primarily due to increased work on air combat training systems, partially offset by decreased work on digital and ground combat training system development.

Operating Income:

Third Quarter of 2020 vs. Third Quarter of 2019: CGD operating income for the third quarter of fiscal 2020 increased 221% to $6.1 million from $1.9 million in the same period last year. Operating income increased primarily due to lower SG&A costs incurred as a result of cost saving initiatives implemented in fiscal 2019 and fiscal 2020, lower restructuring costs incurred, lower acquisition-related expenses and reduced R&D expenditures in the third quarter of fiscal 2020. The increase in operating income was partially offset by lower income from digital and ground combat training system development contracts.

First Nine Months of 2020 vs. First Nine Months of 2019: CGD operating income for the first nine months of fiscal 2020 increased 81% to $18.1 million from $10.0 million in the same period last year. Operating income increased primarily due to higher system development work on air combat training systems, a reduction of R&D activities, lower acquisition-related expenses and lower SG&A costs as a result of productivity and cost saving initiatives. The increase in operating income was partially offset by lower income from digital and ground combat training system development contracts.

Amortization of Purchased Intangibles: CGD had no significant amortization expense in the third quarter and first nine months of fiscal 2020 compared to $0.1 million in the third quarter of last year and $0.6 million in the first nine months of last year.

Adjusted EBITDA: CGD Adjusted EBITDA increased 16% to $8.6 million in the third quarter of fiscal 2020 compared to $7.4 million in the same period last year and increased 22% to $23.9 million in the first nine months of fiscal 2020 compared to $19.6 million in the first nine months of last year. The increase in Adjusted EBITDA was primarily driven by the same factors that drove the increase in operating income described above other than the reductions in restructuring charges, amortization expenses and acquisition-related expenses as these items are not included in Adjusted EBITDA.

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Backlog

	June 30,		September 30,
	2020		2019
	(in millions)
Total backlog
Cubic Transportation Systems	$	3,194.8	$	2,953.3
Cubic Mission Solutions		181.0		103.7
Cubic Global Defense Systems		356.6		344.0
Total	$	3,732.4	$	3,401.0

Total backlog increased by $331.4 million from September 30, 2019 to June 30, 2020 primarily due to an award for an upgrade and extension to the transportation fare collection system for our Chicago customer and a contract amendment with our Boston customer. Changes in exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar as of June 30, 2020 increased backlog by a net $16.5 million as compared to September 30, 2019.

Reconciliation of Non-GAAP Financial Information

We reconcile Adjusted EBITDA and Adjusted Net Income to GAAP net income, which we consider to be the most directly comparable GAAP financial measure. We reconcile Adjusted EPS to GAAP EPS, which we consider to be the most directly comparable GAAP financial measure. The following tables reconcile these non-GAAP measures to their most directly comparable GAAP financial measure:

Adjusted Net Income and Adjusted EPS Reconciliation

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
(in millions, except per share data)
GAAP EPS	$	(0.04)	$	0.77	$	(1.94)	$	0.31
GAAP Net income (loss) from continuing operations attributable to Cubic	$	(1.4)	$	24.1	$	(60.7)	$	9.5
Noncontrolling interest in net income (loss) of VIE		9.4		(3.6)		0.2		(9.0)
Amortization of purchased intangibles		16.4		9.7		42.9		32.7
Gain on sale of fixed assets		(0.1)		(32.6)		(0.2)		(32.6)
Restructuring costs		3.4		8.6		8.8		12.3
Loss on extinguishment of debt		—		—		16.1		—
Acquisition-related expenses, excluding amortization		2.0		4.7		7.9		13.3
Strategic and IT system resource planning expenses		0.4		2.4		3.3		6.3
Other non-operating expense (income), net		6.8		8.8		26.6		17.1
Noncontrolling interest in Adjusted Net Income of VIE		(15.6)		(2.7)		(17.8)		(6.2)
Tax impact related to acquisitions1		0.6		0.1		(12.9)		(7.4)
Impact of U.S. Tax Reform		0.1		—		0.7		—
Tax impact related to non-GAAP adjustments2		1.1		1.3		0.5		1.4
Adjusted Net Income	$	23.0	$	20.7	$	15.4	$	37.4
Adjusted EPS	$	0.74	$	0.66	$	0.49	$	1.23
Weighted Average Diluted Shares Outstanding (in thousands)		31,299		31,249		31,289		30,332

¹ Represents the tax accounting impact of significant discrete items recorded at the time of acquisition.

² The tax effect of the non-GAAP adjustments is generally based on the statutory tax rate of the jurisdiction of the event.

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Adjusted EBITDA Reconciliation

	Three Months Ended				Nine Months Ended
(in millions)	June 30,				June 30,
Cubic Transportation Systems	2020		2019		2020		2019
Sales	$	215.5	$	212.7	$	601.8	$	595.2
Operating income	$	50.9	$	17.2	$	77.8	$	37.0
Depreciation and amortization		7.1		6.9		21.6		24.1
Noncontrolling interest in income of VIE		(15.6)		(2.5)		(17.8)		(5.8)
Acquisition-related expenses (gains), excluding amortization		(0.7)		1.4		6.0		6.8
Restructuring costs		0.2		1.5		0.7		2.2
Adjusted EBITDA	$	41.9	$	24.5	$	88.3	$	64.3
Adjusted EBITDA margin		19.4%		11.5%		14.7%		10.8%
	Three Months Ended				Nine Months Ended
(in millions)	June 30,				June 30,
Cubic Mission Solutions	2020		2019		2020		2019
Sales	$	69.0	$	95.0	$	167.2	$	203.3
Operating income (loss)	$	(21.3)	$	1.3	$	(67.6)	$	(12.1)
Depreciation and amortization		13.3		6.0		34.3		17.2
Acquisition-related expenses, excluding amortization		2.6		2.0		2.1		4.8
Restructuring costs		0.4		-		0.4		-
Adjusted EBITDA	$	(5.0)	$	9.3	$	(30.8)	$	9.9
Adjusted EBITDA margin		(7.2%)		9.8%		(18.4%)		4.9%
	Three Months Ended				Nine Months Ended
(in millions)	June 30,				June 30,
Cubic Global Defense Systems	2020		2019		2020		2019
Sales	$	65.9	$	75.0	$	231.8	$	226.8
Operating income	$	6.1	$	1.9	$	18.1	$	10.0
Depreciation and amortization		1.9		1.7		5.2		5.4
Acquisition-related expenses (gains), excluding amortization		-		0.9		(0.5)		1.2
(Gain) loss on sale of fixed assets		(0.1)		0.3		(0.2)		0.3
Restructuring costs		0.7		2.6		1.3		2.7
Adjusted EBITDA	$	8.6	$	7.4	$	23.9	$	19.6
Adjusted EBITDA margin		13.1%		9.9%		10.3%		8.6%
	Three Months Ended				Nine Months Ended
(in millions)	June 30,				June 30,
Cubic Consolidated	2020		2019		2020		2019
Sales	$	350.4	$	382.7	$	1,000.8	$	1,025.3
Net income (loss) from continuing operations attributable to Cubic	$	(1.4)	$	24.1	$	(60.7)	$	9.5
Noncontrolling interest in net income (loss) of VIE		9.4		(3.6)		0.2		(9.0)
Income tax provision (benefit)		4.6		1.0		(8.9)		(0.3)
Interest expense, net		5.4		4.5		15.0		10.4
Loss on extinguishment of debt		-		-		16.1		-
Other non-operating expense (income), net		6.8		8.8		26.6		17.1
Operating income (loss)	$	24.7	$	34.7	$	(11.7)	$	27.6
Depreciation and amortization		23.4		15.3		63.8		48.9
Noncontrolling interest in EBITDA of VIE		(15.6)		(2.5)		(17.8)		(5.8)
Acquisition-related expenses, excluding amortization		2.0		4.7		7.9		13.3
Strategic and IT system resource planning expenses		0.4		2.4		3.3		6.3
Gain on sale of fixed assets		(0.1)		(32.6)		(0.2)		(32.6)
Restructuring costs		3.4		8.6		8.8		12.3
Adjusted EBITDA	$	38.2	$	30.6	$	54.1	$	70.0
Adjusted EBITDA margin		10.9%		8.0%		5.4%		6.8%

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Liquidity and Capital Resources

Operating activities used cash of $100.6 million for the first nine months of fiscal 2020 primarily due to inventory builds for upcoming scheduled deliveries, as well as payments to vendors and contractors for goods and services received related to our significant work on customer contracts in the fourth quarter of fiscal 2019. Our use of cash from operating activities includes cash outflows of $106.7 million from our consolidated VIE. As further described below, our consolidated operating cash flows exclude $63.0 million of cash received by Cubic from our consolidated VIE in the first nine months of fiscal 2020.

Investing activities used cash of $265.1 million for the first nine months of fiscal 2020 and included $197.8 million of cash paid related to the acquisition of Pixia in our CMS segment, and $37.0 million of cash paid related to the acquisition of Delerrok in our CTS segment. In addition, investing activities during the period included capital expenditures of $35.8 million as well as $5.5 million of proceeds received related to the sale of trade receivables to banks which are required to be classified as investing activities.

Financing activities provided cash of $402.3 million for the first nine months of fiscal 2020 and included net short-term borrowings of $81.5 million, net proceeds from long-term borrowings of $247.1 million, a $15.9 million make-whole payment related to the early extinguishment of our senior unsecured notes in March 2020 and $2.5 million of payments for deferred financing fees related to our amended credit facility, as further described below. We used the net proceeds from the short-term and long-term borrowings to finance the acquisitions of Pixia and Delerrok in January 2020 and for general corporate purposes. Net long-term borrowings undertaken by our consolidated VIE amounted to $105.6 million for the first nine months of fiscal 2020. See discussion of our consolidated VIE in the section below.

Consolidated Variable Interest Entity

In March 2018, Cubic and John Laing, an unaffiliated company that specializes in contracting under public-private partnerships, jointly formed Boston AFC 2.0 HoldCo. LLC (“Boston HoldCo”). Also in March 2018, Boston HoldCo’s wholly owned entity, Boston AFC 2.0 OpCo. LLC (“Boston OpCo”), entered into a contract with the Massachusetts Bay Transit Authority (“MBTA”) for the financing, development and operation of a next-generation fare payment system in Boston (the “Original MBTA Contract”). In June 2020, MBTA and Boston OpCo executed an amended agreement (the “Amended MBTA Contract”) to reset the project and modify certain aspects of the Original MBTA Contract. Collectively, Boston HoldCo and Boston OpCo are referred to as the “P3 Venture”.

We have consolidated Boston OpCo into our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Also, because we consolidate Boston OpCo into Cubic’s financial statements, any payments from Boston OpCo to Cubic are excluded from our cash flows provided by operating activities in our Condensed Consolidated Statements of Cash Flows, and the cash received by Boston OpCo in connection with its draws on its non-recourse debt are reflected as cash provided by financing activities in our Condensed Consolidated Statements of Cash Flows. Boston OpCo’s draws on its non-recourse debt amounted to $105.6 million in the first nine months of fiscal 2020. Payments we received from Boston OpCo that were not included in cash provided by operating activities totaled $63.0 million in the first nine months of fiscal 2020 and have totaled a cumulative $132.0 million since the inception of our contract with Boston OpCo in March 2018.

Upon creation of the P3 Venture, Boston OpCo entered into a credit agreement with a group of financial institutions (the “Boston OpCo Credit Agreement”) which included a long-term credit facility of up to $212.4 million and a revolving credit facility. The long-term credit facility bore interest at variable rates of London Interbank Offer Rate (“LIBOR”) plus 1.3%. In connection with the execution of the Amended MBTA Contract, Boston OpCo entered into an amended credit agreement with a group of financial institutions (the “Boston OpCo Amended Credit Agreement”), which includes two long-term debt facilities and a revolving credit facility to replace the facilities in the Boston OpCo Credit Agreement. At closing of the Boston OpCo Amended Credit Agreement, Boston OpCo retired and paid off the outstanding principal balances of $92.6 million and accrued interest of $7.4 million due under the Boston OpCo Credit Agreement.

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Under the Boston OpCo Amended Credit Agreement, the long-term debt facilities allow for draws up to an aggregate of $421.6 million and such draws may only be made during the design and build phase of the Amended MBTA Contract. The long-term debt facilities, including all interest and fees incurred, is required to be repaid on a fixed monthly schedule starting once the design and build phase is completed in 2024. The long-term debt facilities bear interest at variable rates of LIBOR plus a margin of 1.75% to 2.0% over the design and build phase and LIBOR plus a margin of 2.0% to 2.5% over the operate and maintain phases. Boston OpCo incurred debt issuance and modification costs of $8.6 million in connection with the Boston OpCo Amended Credit Agreement which are being amortized as interest expense using the effective interest method over the term of the long-term debt facilities. At June 30, 2020, the outstanding balance on the long-term debt facilities was $172.8 million, which is presented net of unamortized deferred financing costs of $17.3 million. The revolving credit facility allows for draws up to a maximum aggregate amount of $15.8 million during the operate and maintain phase of the Amended MBTA Contract. Boston OpCo’s debt is nonrecourse with respect to Cubic and our subsidiaries. The fair value of the long-term debt facility approximates its carrying amount. Upon closing of the Boston OpCo Amended Credit Agreement, John Laing made a loan to Boston HoldCo of $1.9 million in the form of a bridge loan that is intended to be converted to equity in the future in accordance with its equity funding responsibilities under the terms of the P3 Venture. Concurrently, Boston HoldCo made a corresponding equity contribution to Boston OpCo in the same amounts which is included within equity of noncontrolling interest in VIE in our consolidated financial statements.

The Boston OpCo Amended Credit Agreement contains covenants that require Boston OpCo and Cubic to maintain progress on the delivery of the Amended MBTA Contract within a specified timeline and budget and provide regular reporting on such progress. The Boston OpCo Amended Credit Agreement also contains events of default, including the delivery of a customized fare collection system to the MBTA by a pre-determined date as well as other customary events of default. Failure to meet such delivery date will result in Boston OpCo, and Cubic via our subcontract with Boston OpCo, incurring penalties due to the lenders thereunder.

In connection with the Boston OpCo Credit Agreement, Boston OpCo entered into pay-fixed/receive-variable interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with its long-term debt. Upon execution of the Boston OpCo Amended Credit Agreement, Boston OpCo terminated these interest rate swaps and paid termination costs of $34.4 million to the counterparties. The termination payments are included in cash flows used in operating activities in our Condensed Consolidated Statements of Cash Flows. In connection with the Boston OpCo Amended Credit Agreement, Boston OpCo entered into new pay-fixed/receive-variable interest rate swaps to mitigate variable interest rate associated with its long-term debt. The interest rate swaps contain forward starting notional principal amounts which align with Boston OpCo’s expected draws on its long-term debt facility. At June 30, 2020, the outstanding notional principal amounts on Boston OpCo’s open interest rate swaps were $172.8 million.

Financing Arrangements

At September 30, 2019, we had $200.0 million of outstanding senior unsecured notes bearing interest rates ranging from 3.35% to 3.95% as well as $226.5 million outstanding under an $800.0 million committed revolving credit agreement with a group of financial institutions. On March 27, 2020, we repaid and extinguished the remaining principal balance of $189.3 million of senior unsecured notes then outstanding and recognized a loss on debt extinguishment of $16.1 million, consisting of a $15.9 million make-whole payment to the note holders and a write-off of previously capitalized debt issuance costs of $0.2 million.

On March 27, 2020, we also executed a Fifth Amended and Restated Credit Agreement (the “Credit Facility”) with a group of financial institutions. The Credit Facility provided for a new term loan in the aggregate amount of $450.0 million (the “Term Loan”) and increased our existing revolving line of credit limit (the “Revolving Line of Credit”) from $800.0 million to $850.0 million. The commitments under the Credit Facility will mature on March 27, 2025 and bear interest generally at the LIBOR rate plus a margin that ranges between 1.00% and 2.00%. At June 30, 2020, the weighted average interest rate on outstanding borrowings under the Credit Facility was 2.18%. The Credit Facility is unsecured, but it is required to be guaranteed by certain significant domestic subsidiaries of Cubic.

On April 1, 2020, we entered into pay-fixed/receive-variable interest rate swaps with a group of financial institutions to mitigate the variable interest rate risk associated with the Credit Facility. The interest rate swaps contain forward starting notional principal amounts which align with our fixed repayment schedules under the Credit Facility and have a fixed interest rate of LIBOR plus a margin of approximately 74 basis points. At June 30, 2020, the outstanding notional principal amounts on open interest rate swaps were $550.0 million.

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Debt issuance and modification costs of $2.5 million were incurred in connection with the Credit Facility and are recorded as a reduction to the related liability on our condensed consolidated balance sheets and are being amortized as interest expense using the effective interest method over the stated term of the Credit Facility. At June 30, 2020, our total debt issuance costs had an unamortized balance of $4.9 million. The available credit under our Revolving Line of Credit is reduced by any letters of credit issued under the Credit Facility. As of June 30, 2020, there were $447.2 million of borrowings under the Term Loan and $277.0 million of borrowings under the Revolving Line of Credit. Letters of credit outstanding under the Credit Facility totaled $94.0 million at June 30, 2020, which reduced our available line of credit to $479.0 million. The $94.0 million of letters of credit includes both financial letters of credit and performance guarantees.

As of June 30, 2020, we had letters of credit and bank guarantees outstanding totaling $101.4 million, which includes the $94.0 million of letters of credit issued under the Revolving Line of Credit and $7.4 million of letters of credit issued under other facilities. The $101.4 million of letters of credit and bank guarantees includes $96.9 million that guarantees either our performance or customer advances under certain contracts and financial letters of credit and $4.5 million that primarily guarantees 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 have entered into a short-term borrowing arrangement in the United Kingdom in the amount of £20.0 million British Pounds (equivalent to approximately $24.8 million at June 30, 2020) to help meet the short-term working capital requirements of our subsidiary located in the United Kingdom. At June 30, 2020, no amounts were outstanding under this borrowing arrangement.

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 activities related to our performance under a fare collection services contract in the United Kingdom. The balance in the account as of June 30, 2020 was $22.3 million and is classified as restricted cash in our Condensed Consolidated Balance Sheets.

The terms of the Credit Facility contain financial covenants setting a maximum total ratio of debt to adjusted earnings before interest, taxes, depreciation and amortization and a minimum interest coverage ratio. In addition, the terms contain covenants that restrict, among other things, our ability to sell assets, incur indebtedness, make investments, grant liens, pay dividends and make other restricted payments. As of June 30, 2020, we were in compliance with all covenants under the Credit Facility.

In the normal course of our business, we may sell trade receivables to financial institutions as a cash management technique. We do not retain financial or legal obligations for these receivables that would result in material losses. Our ongoing involvement is limited to the remittance of customer payments to the financial institutions with respect to the sold trade receivables; therefore, our sold trade receivables are not included in our Condensed Consolidated Balance Sheet in any period presented. As of September 30, 2019, we sold $31.1 million of outstanding trade receivables to financial institutions. No trade receivables were sold as of June 30, 2020. The cash received for the sale of trade receivables is included in cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows. During the first nine months of fiscal 2020, we received $5.5 million related to withheld proceeds from receivables we sold as of September 30, 2019, which is included in cash provided by investing activities in our Condensed Consolidated Statements of Cash Flows.

Our financial condition remains strong with working capital of $136.2 million and a current ratio of 1.2 to 1 at June 30, 2020. We expect that for our current operations, cash on hand, cash flows from operations and our unused lines of credit will be adequate to meet our liquidity requirements for the foreseeable future. Our cash is invested primarily in highly liquid bank deposits and government instruments in the U.S., the U.K., New Zealand and Australia.

Future repatriations of foreign earnings will generally be exempt from U.S. tax. We will continue to monitor our intentions to repatriate foreign earnings and provide applicable deferred taxes and withholding taxes that would be due upon repatriation of the undistributed foreign earnings.

Recent Accounting Pronouncements

See “Recent Accounting Pronouncements” in Note 1 of the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

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Critical Accounting Policies, Estimates and Judgments

Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments 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. We continually evaluate our estimates and judgments, the most critical of which are those related to revenue recognition, income taxes, valuation of goodwill, purchased intangibles, accounting for business combinations and pension costs. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known.

Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.

There have been no significant changes to the critical accounting policies disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for fiscal 2019.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact should be considered forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements about our expectations, beliefs, plans, objectives, assumptions, future events or our future financial or operating performance, including those concerning new programs and growth in the markets in which we do business, increases in demand for our products and for fully integrated systems, retention of existing contracts and receipt of new contracts, the development of new products, systems and services, expansion of our automated payment and fare collection systems and services, maintenance of long-term relationships with our existing customers, expansion of our service offerings and customer base for services, maintenance of a diversified business mix, expansion of our international footprint, strategic acquisitions, the uncertainty regarding the scope, duration and impact of COVID-19, U.S. and foreign government funding, supplies of raw materials and purchased parts, cash needs, financial condition, liquidity, prospects, and the trends that may affect us or the industries in which we operate, are not historical and may be forward-looking.

These statements are often, but not always, made through the use of words or phrases such as “may,” “will,” “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “predict,” “potential,” “opportunity” and similar words or phrases or the negatives of these words or phrases. These forward-looking statements involve risks, estimates, assumptions and uncertainties, including those discussed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for fiscal 2019 and in Part II, Item 1A of this Quarterly Report on Form 10-Q, that could cause actual results to differ materially from those expressed in these statements.

Such risks, estimates, assumptions and uncertainties include, among others:

● the impact of the COVID-19 outbreak or future epidemics on our business, including the potential for facility closures or work stoppages; supply chain disruptions; program delays; our ability to recover our costs under contracts; changing government funding and acquisition priorities and payment policies and regulations; and potential impacts to the fair value of our assets;

● our dependence on U.S. and foreign government contracts;

● delays in approving U.S. and foreign government budgets and cuts in U.S. and foreign government defense expenditures;

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● the ability of certain government agencies to unilaterally terminate or modify our contracts with them;

● the effects of potential sequestration on our contracts;

● our assumptions covering behavior by public transit authorities;

● our ability to successfully integrate new companies into our business and to properly assess the effects of such integration on our financial condition;

● the U.S. government’s increased emphasis on awarding contracts to small businesses, and our ability to retain existing contracts or win new contracts under competitive bidding processes;

● negative audits by the U.S. government;

● the effects of politics and economic conditions on negotiations and business dealings in the various countries in which we do business or intend to do business;

● competition and technology changes in the defense and transportation industries;

● changes in the way transit agencies pay for transit systems;

● our ability to accurately estimate the time and resources necessary to satisfy obligations under our contracts;

● the effect of adverse regulatory changes on our ability to sell products and services;

● our ability to identify, attract and retain qualified employees;

● our failure to properly implement our enterprise resource planning system;

● unforeseen problems with the implementation and maintenance of our information systems;

● business disruptions due to cyber security threats, physical threats, terrorist acts, acts of nature and public health crises;

● our involvement in litigation, including litigation related to patents, proprietary rights and employee misconduct;

● our reliance on subcontractors and on a limited number of third parties to manufacture and supply our products;

● our ability to comply with our development contracts and to successfully develop, introduce and sell new products, systems and services in current and future markets;

● defects in, or a lack of adequate coverage by insurance or indemnity for, our products and systems;

● changes in U.S. and foreign tax laws, exchange rates or our economic assumptions regarding our pension plans; and

● other factors discussed elsewhere in this Quarterly Report on Form 10-Q.

Because the risks, estimates, assumptions and uncertainties referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. In addition, past financial or operating performance is not necessarily a reliable indicator of future performance and you should not use our historical performance to anticipate results or future period trends. Further, any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New

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factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risks at June 30, 2020 have not materially changed from those described under “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for fiscal 2019.

ITEM 4. CONTROLS AND PROCEDURES

We performed an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2020. The evaluation was performed with the participation of senior management of each business segment and key corporate functions, and under the supervision of our Chief Executive Officer and our Chief Financial Officer. Based on our evaluation, we concluded that our disclosure controls and procedures were operating and effective as of that date.

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) are designed to provide reasonable assurance that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

There have not been any significant changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We consider all current legal matters to be ordinary proceedings incidental to our business. We believe the outcome of these proceedings will not have a materially adverse effect on our financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for fiscal 2019, and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020.

ITEM 6. EXHIBITS

Exhibit Index

Exhibit No.	Description
3.1	Amended and Restated Certificate of Incorporation. Incorporated by reference to Current Report on Form 8-K filed February 19, 2019, file No. 001-08931, Exhibit 3.1.
3.2	Amended and Restated Bylaws. Incorporated by reference to Current Report on Form 8-K filed November 14, 2018, file No. 001-08931, Exhibit 3.1.
10.1	First Amendment to Fifth Amended and Restated Credit Agreement, dated as of July 2, 2020, by and among Cubic Corporation, JPMorgan Chase Bank, N.A. (as administrative agent) and the other lenders party thereto.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101	Financial statements from the Cubic Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline eXtensible Business Reporting Language (Inline iXBRL): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.
104	Cover Page Interactive Data File, formatted as Inline XBRL and contained in Exhibit 101.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CUBIC CORPORATION
Date:	August 5, 2020	/s/ Anshooman Aga
		Anshooman Aga
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)
Date:	August 5, 2020	/s/ Mark A. Harrison
		Mark A. Harrison
		Senior Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

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EX-10.1

Exhibit 10.1

FIRST AMENDMENT

TO

FIFTH AMENDED AND RESTATED CREDIT AGREEMENT

Dated as of July 2, 2020

This FIRST AMENDMENT TO FIFTH AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is among CUBIC CORPORATION, a Delaware corporation (the “Company”), CUBIC TRANSPORTATION SYSTEMS, INC., a California corporation (“CTS”), CUBIC DEFENSE APPLICATIONS, INC., a California corporation (“CDA”, and together with CTS and the Company, collectively, the “Borrowers”), the Lenders party hereto and JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders (the “Administrative Agent”).

PRELIMINARY STATEMENTS:

(1)          The Borrowers, the Lenders and the Administrative Agent have entered into that certain Fifth Amended and Restated Credit Agreement dated as of March 27, 2020 (as amended from time to time, the “Credit Agreement”; capitalized terms used and not otherwise defined herein have the meanings assigned to such terms in the Credit Agreement).

(2)          The Borrowers have requested that the Administrative Agent and the Lenders amend the Credit Agreement as set forth in this Amendment.

(3)          The Administrative Agent and the Lenders party hereto are, on the terms and conditions stated below, willing to grant the request of the Borrowers.

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1.       Amendment. Effective as of the First Amendment Effective Date (as defined below) and subject to the satisfaction of the conditions precedent set forth in Section 2 of this Amendment, the parties hereto agree that the Credit Agreement is hereby amended to delete the stricken text (indicated textually in the same manner as the following example: stricken text) and to add the double-underlined text (indicated textually in the same manner as the following example: double-underlined text) as set forth in the pages of the Credit Agreement attached as Exhibit B hereto.

SECTION 2.       Conditions to Effectiveness. The amendments in Section 1 of this Amendment shall be effective as of the date (the “First Amendment Effective Date”) the following conditions are satisfied:

(a)         the Administrative Agent’s receipt of counterparts of this Amendment duly executed by the Borrowers, the Administrative Agent and Lenders constituting Required Lenders;

(b)         the Administrative Agent’s receipt of a reaffirmation (the “Reaffirmation”) of the Guarantee by the Guarantors, in the form of Exhibit A, duly executed by each Guarantor party thereto; and

(c)         the Administrative Agent’s (and its affiliates’) receipt of all fees and expenses then due and owing under the Credit Agreement, the other Financing Documents or under any other applicable letter agreement, including, to the extent invoiced, reimbursement or payment of all out-of-

pocket expenses required to be reimbursed or paid by the Company under the Credit Agreement or other applicable document.

The Administrative Agent shall notify the Borrowers and the Lenders of the First Amendment Effective Date, and such notice shall be conclusive and binding.

SECTION 3.       Representations and Warranties. Each Borrower represents and warrants as follows:

(a)         Authority; Enforceability. Each Borrower has the requisite corporate power and authority to execute, deliver and perform this Amendment, and to perform its obligations under the Credit Agreement as modified hereby and the other Financing Documents to which it is a party.  Each Guarantor has the requisite corporate or limited liability company, as applicable, power and authority to execute, deliver and perform the Reaffirmation, and to perform its obligations under the Reaffirmation and the other Financing Documents to which it is a party. The execution, delivery and performance by each Borrower of this Amendment and by each Guarantor of the Reaffirmation have been duly approved by the board of directors or other governing body, as applicable, of each such Person, and no other corporate proceedings on the part of any Borrower or any Guarantor are necessary to consummate such transactions.  This Amendment has been duly executed and delivered by each Borrower and the Reaffirmation has been duly executed and delivered by each Guarantor.  Each of this Amendment and the Credit Agreement as amended hereby constitutes the legal, valid and binding obligation of each Borrower, enforceable against such Borrower in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization or moratorium or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.  Each of the Guarantee by the Guarantors and the Reaffirmation constitutes the legal, valid and bind obligation of each Guarantor, enforceable against such Guarantor in accordance with its terms except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization or moratorium or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.

(b)         Financing Document Representations and Warranties. The representations and warranties contained in each Financing Document are true and correct in all material respects (except that any representation and warranty that is qualified by materiality shall be true and correct in all respects) on and as of the date hereof, before and after giving effect to this Amendment, as though made on and as of such date (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects (except that any representation and warranty that is qualified by materiality shall be true and correct in all respects) as of such earlier date).

(c)         Absence of Default. Except as expressly waived hereby, no event or circumstance has occurred and is continuing, or would result from the effectiveness of this Amendment, that constitutes a Default or an Event of Default.

SECTION 4.       Reference to and Effect on the Financing Documents. (a)  Upon and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof’ or words of like import referring to the Credit Agreement, and each reference in the other Financing Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby.

(b)         The Credit Agreement and all other Financing Documents are and shall continue to be in full force and effect and are hereby ratified and confirmed in all respects.

2

(c)         The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under any of the Financing Documents, nor constitute a waiver of any provision of any of the Financing Documents.

(d)         This Amendment is a Financing Document under (and as defined in) the Credit Agreement.

SECTION 5.       Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Amendment and/or any document to be signed in connection with this Amendment and the transactions contemplated hereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be.

SECTION 6.       Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT THE ADMINISTRATIVE AGENT, THE LENDERS AND THE BORROWERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

SECTION 7.       Severability. Whenever possible, each provision of this Amendment shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision of this Amendment shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Amendment.

SECTION 8.       Captions and Headings. The captions or section headings at various places in this Amendment are intended for convenience only and do not constitute and shall not be interpreted as part of this Amendment.

[Signature Pages Follow]

3

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.

CUBIC CORPORATION, as the Company
By:	/s/ Anshooman Aga
Name:	Anshooman Aga
Title:	Executive Vice President and
	Chief Financial Officer

By:	/s/ Rhys Williams
Name:	Rhys V. Williams
Title:	Vice President, Treasurer

CUBIC TRANSPORTATION SYSTEMS, INC., as a Borrower
By:	/s/ Rhys Williams
Name:	Rhys V. Williams
Title:	Vice President and Treasurer

CUBIC DEFENSE APPLICATIONS, INC., as a Borrower
By:	/s/ Rhys Williams
Name:	Rhys V. Williams
Title:	Treasurer and Assistant Secretary

Signature Page to First Amendment to Fifth Amended and Restated Credit Agreement

Cubic Corporation

JPMORGAN CHASE BANK, N.A., individually as a
Lender and as Administrative Agent
By:	/s/ Anna C. Araya
Name:	Anna C. Araya
Title:	Executive Director

Signature Page to First Amendment to Fifth Amended and Restated Credit Agreement

Cubic Corporation

BANK OF THE WEST, as a Lender
By:	/s/ James Wade
Name:	James Wade
Title:	Director

Signature Page to First Amendment to Fifth Amended and Restated Credit Agreement

Cubic Corporation

CITIBANK, N.A., as a Lender
By:	/s/ Hans Lin
Name:	Hans Lin
Title:	Director

Signature Page to First Amendment to Fifth Amended and Restated Credit Agreement

Cubic Corporation

MUFG UNION BANK, N.A., as a Lender
By:	/s/ Edmund Ozorio
Name:	Edmund Ozorio
Title:	Vice President

Signature Page to First Amendment to Fifth Amended and Restated Credit Agreement

Cubic Corporation

U.S. BANK NATIONAL ASSOCIATION, as a Lender
By:	/s/ Glenn Leyrer
Name:	Glenn Leyrer
Title:	Vice President

Signature Page to First Amendment to Fifth Amended and Restated Credit Agreement

Cubic Corporation

BANK OF AMERICA, N.A., as a Lender
By:	/s/ Aaron Marks
Name:	Aaron Marks
Title:	Senior Vice President

Signature Page to First Amendment to Fifth Amended and Restated Credit Agreement

Cubic Corporation

WELLS FARGO BANK, NATIONAL
ASSOCIATION, as a Lender
By:	/s/ Evan Huckaby
Name:	Evan Huckaby
Title:	Senior Vice President

Signature Page to First Amendment to Fifth Amended and Restated Credit Agreement

Cubic Corporation

CITY NATIONAL BANK, N.A., as a Lender
By:	/s/ Laura Dodd
Name:	Laura Dodd
Title:	Vice President

Signature Page to First Amendment to Fifth Amended and Restated Credit Agreement

Cubic Corporation

FIFTH THIRD BANK, as a Lender
By:	/s/ Peter Samboul
Name:	Peter Samboul
Title:	Director

Signature Page to First Amendment to Fifth Amended and Restated Credit Agreement

Cubic Corporation

RAYMOND JAMES BANK, NATIONAL
ASSOCIATION, as a Lender
By:	/s/ Kathy Bennett
Name:	Kathy Bennett
Title:	SVP

Signature Page to First Amendment to Fifth Amended and Restated Credit Agreement

Cubic Corporation

TRUIST BANK, as a Lender
By:	/s/ Anika Kirs
Name:	Ankia Kirs
Title:	Vice President

Signature Page to First Amendment to Fifth Amended and Restated Credit Agreement

Cubic Corporation

UMPQUA BANK, as a Lender
By:	/s/ Kevin Foley
Name:	Kevin Foley
Title:	SVP

Signature Page to First Amendment to Fifth Amended and Restated Credit Agreement

Cubic Corporation

EXHIBIT A

REAFFIRMATION BY THE GUARANTORS

Each of the undersigned (a) acknowledges that (i) it has reviewed that certain First Amendment to Fifth Amended and Restated Credit Agreement (the “Amendment”; capitalized terms used and not otherwise defined herein have the meanings assigned to such terms in the Amendment), dated as of July 2, 2020, to that certain Fifth Amended and Restated Credit Agreement dated as of March 27, 2020 (the “Credit Agreement”), among Cubic Corporation, as the Company, the Subsidiary Borrowers party thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A., as the Administrative Agent, (ii) that certain Fifth Amended and Restated Guarantee, dated as of March 27, 2020 (the “Guarantee”), to which it is a party and the other Financing Documents to which it is a party remains in full force and effect, and (iii) under the terms of the Guarantee, it guarantees the Guaranteed Obligations (as defined in the Guarantee) and the other obligations set forth in the Guarantee, and (b) agrees that each Financing Document to which it is a party is hereby reaffirmed, ratified, approved and confirmed in each and every respect, except that, upon the effectiveness of, and on and after the date of, the Amendment, each reference in the Guarantee to the Credit Agreement, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended by the Amendment.

CUBIC TRANSPORTATION SYSTEMS, INC., a
California corporation, as a Guarantor
By:	/s/ Rhys Williams
Name:	Rhys V. Williams
Title:	Vice President and Treasurer

CUBIC DEFENSE APPLICATIONS, INC., a
California corporation, as a Guarantor
By:	/s/ Rhys Williams
Name:	Rhys V. Williams
Title:	Treasurer and Assistant Secretary

Signature Page to Reaffirmation

Cubic Corporation

CUBIC ITS, INC., a Texas corporation, as a Guarantor
By:	/s/ Rhys Williams
Name:	Rhys V. Williams
Title:	Treasurer

DELERROK INC., a California corporation, as a
Guarantor
By:	/s/ Rhys Williams
Name:	Rhys V. Williams
Title:	Treasurer

GATR TECHNOLOGIES, INC., an Alabama
corporation, as a Guarantor
By:	/s/ Rhys Williams
Name:	Rhys V. Williams
Title:	Treasurer

ISR SYSTEMS, INC., a Delaware corporation, as a
Guarantor
By:	/s/ Rhys Williams
Name:	Rhys V. Williams
Title:	Treasurer

NUVOTRONICS, INC., a Delaware corporation, as a
Guarantor
By:	/s/ Rhys Williams
Name:	Rhys V. Williams
Title:	Treasurer

PIXIA CORP.., a Delaware corporation, as a
Guarantor
By:	/s/ Rhys Williams
Name:	Rhys V. Williams
Title:	Treasurer

Signature Page to Reaffirmation

Cubic Corporation

EXHIBIT B

[Intentionally Omitted]

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bradley H. Feldmann, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Cubic Corporation;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Bradley H. Feldmann

Bradley H. Feldmann

Chairman, President and Chief Executive Officer

Date: August 5, 2020

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Anshooman Aga, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Cubic Corporation;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

a

/s/ Anshooman Aga

Anshooman Aga

Executive Vice President and Chief Financial Officer

Date: August 5, 2020

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350

The undersigned, in his capacity as an officer of Cubic Corporation (the “Registrant”) hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:

(1) The quarterly report of the Registrant on Form 10-Q for the period ended June 30, 2020, (the “Report”), which accompanies this certification, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ Bradley H. Feldmann

Bradley H. Feldmann

Chairman, President and Chief Executive Officer

Date: August 5, 2020

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350

The undersigned, in his capacity as an officer of Cubic Corporation (the “Registrant”) hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:

(1) The quarterly report of the Registrant on Form 10-Q for the period ended June 30, 2020, (the “Report”), which accompanies this certification, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ Anshooman Aga

Anshooman Aga

Executive Vice President and Chief Financial Officer

Date: August 5, 2020

XML

Document and Entity Information - shares	9 Months Ended
	Jun. 30, 2020	Jul. 21, 2020
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2020
Entity File Number	001-08931
Entity Registrant Name	CUBIC CORP /DE/
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	95-1678055
Entity Address, Address Line One	9333 Balboa Avenue
Entity Address, City or Town	San Diego
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92123
City Area Code	858
Local Phone Number	277-6780
Title of 12(b) Security	Common stock, no par value
Trading Symbol	CUB
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		31,329,008
Current Fiscal Year End Date	--09-30
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Entity Central Index Key	0000026076
Amendment Flag	false

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Net sales:
Net sales	$ 350,439	$ 382,679	$ 1,000,760	$ 1,025,277
Costs and expenses:
Selling, general and administrative expenses	62,272	82,167	206,481	211,348
Research and development	12,254	12,470	32,036	38,236
Amortization of purchased intangibles	16,358	9,717	42,940	32,677
Gain on sale of property, plant and equipment	(40)	(32,563)	(170)	(32,563)
Restructuring costs	3,393	8,505	8,775	12,254
Total costs and expenses	325,733	347,954	1,012,471	997,659
Operating income (loss)	24,706	34,725	(11,711)	27,618
Other income (expenses):
Interest and dividend income	1,997	1,696	5,908	4,343
Interest expense	(7,366)	(6,132)	(20,948)	(14,695)
Loss on extinguishment of debt			(16,090)	0
Other income (expense), net	(6,773)	(8,714)	(26,564)	(17,069)
Income (loss) from continuing operations before income taxes	12,564	21,575	(69,405)	197
Income tax provision (benefit)	4,602	1,029	(8,936)	(305)
Income (loss) from continuing operations	7,962	20,546	(60,469)	502
Net income (loss) from discontinued operations	252	(202)	(203)	(1,541)
Net (income) loss	8,214	20,344	(60,672)	(1,039)
Less noncontrolling interest in net income (loss) of VIE	9,369	(3,566)	181	(8,970)
Net income (loss) attributable to Cubic	(1,155)	23,910	(60,853)	7,931
Amounts attributable to Cubic:
Net income (loss) from continuing operations	(1,407)	24,112	(60,650)	9,472
Net income (loss) from discontinued operations	252	(202)	(203)	(1,541)
Net income (loss) attributable to Cubic	$ (1,155)	$ 23,910	$ (60,853)	$ 7,931
Basic
Continuing operations attributable to Cubic (in dollars per share)	$ (0.04)	$ 0.77	$ (1.94)	$ 0.31
Discontinued operations (in dollars per share)	0.01	(0.01)	(0.01)	(0.05)
Basic earnings per share attributable to Cubic (in dollars per share)	(0.04)	0.77	(1.94)	0.26
Diluted
Continuing operations attributable to Cubic (in dollars per share)	(0.04)	0.77	(1.94)	0.31
Discontinued operations (in dollars per share)	0.01	(0.01)	(0.01)	(0.05)
Diluted earnings per share attributable to Cubic (in dollars per share)	$ (0.04)	$ 0.77	(1.94)	0.26
Dividends per common share (in dollars per share)			$ 0.14	$ 0.14
Weighted average shares used in per share calculations:
Basic (in shares)	31,299	31,160	31,289	30,267
Diluted (in shares)	31,299	31,249	31,289	30,332
Products
Net sales:
Net sales	$ 221,039	$ 255,900	$ 609,137	$ 660,897
Costs and expenses:
Costs	151,553	190,434	471,398	491,856
Services
Net sales:
Net sales	129,400	126,779	391,623	364,380
Costs and expenses:
Costs	$ 79,943	$ 77,224	$ 251,011	$ 243,851

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$ 8,214	$ 20,344	$ (60,672)	$ (1,039)
Other comprehensive income (loss):
Foreign currency translation	8,115	(1,900)	690	(2,256)
Change in unrealized gains/losses from cash flow hedges:
Change in fair value of cash flow hedges, net of tax	(13,741)	(483)	(13,868)	98
Adjustment for net gains/losses realized and included in net income, net of tax	(1,572)	69	(2,486)	331
Total change in unrealized gains/losses realized from cash flow hedges, net of tax	(15,313)	(414)	(16,354)	429
Total other comprehensive loss	(7,198)	(2,314)	(15,664)	(1,827)
Total comprehensive income (loss)	1,016	18,030	(76,336)	(2,866)
Noncontrolling interest in comprehensive income (loss) of consolidated VIE, net of tax	9,369	(3,566)	181	(8,970)
Comprehensive income (loss) attributable to Cubic, net of tax	$ (8,353)	$ 21,596	$ (76,517)	$ 6,104

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2020	Sep. 30, 2019
Accounts receivable:
Billed	$ 145,599	$ 127,406
Allowance for doubtful accounts	(1,141)	(1,392)
Accounts receivable - net	144,458	126,014
Contract assets	253,900	349,559
Recoverable income taxes	16,495	7,754
Inventories	151,613	106,794
Total current assets	735,876	724,309
Property, plant and equipment, net	160,547	144,969
Operating lease right-of-use asset	82,141
Deferred income taxes	8,932	4,098
Goodwill	783,368	578,097
Purchased intangibles, net	226,552	165,613
Total assets	2,261,812	1,847,170
Current liabilities:
Short-term borrowings	277,000	195,500
Contract liabilities	71,269	46,170
Accrued compensation and current liabilities	117,332	95,013
Income taxes payable	814	773
Current portion of long-term debt	11,250	10,714
Total current liabilities	599,243	529,159
Operating lease liability	75,468
Shareholders' equity:
Common stock	287,252	274,472
Retained earnings	797,046	862,948
Accumulated other comprehensive loss	(155,357)	(139,693)
Treasury stock at cost	(36,078)	(36,078)
Shareholders' equity related to Cubic	892,863	961,649
Noncontrolling interest in VIE	20,992	18,919
Total shareholders' equity	913,855	980,568
Total liabilities and shareholders' equity	2,261,812	1,847,170
Cubic Corporation Excluding VIE
Current assets:
Cash and cash equivalents	109,050	65,800
Restricted cash	22,279	19,507
Accounts receivable:
Other current assets	35,570	38,534
Long-term contracts financing receivables	53,739	36,285
Other assets	19,615	76,872
Current liabilities:
Trade accounts payable	121,253	180,773
Long-term debt	433,653	189,110
Other noncurrent liabilities	78,528	64,734
VIE
Current assets:
Cash and cash equivalents	743	347
Restricted cash	1,669	9,967
Accounts receivable:
Other current assets	99	33
Long-term contracts financing receivables	191,042	115,508
Other assets		1,419
Total assets	193,553	127,274
Current liabilities:
Trade accounts payable	175	25
Other current liabilities in consolidated VIE	150	191
Long-term debt	155,493	61,994
Other noncurrent liabilities	5,572	21,605
Shareholders' equity:
Shareholders' equity related to Cubic	(583)	(603)
Noncontrolling interest in VIE	20,992	18,919
Total liabilities and shareholders' equity	$ 193,553	$ 127,274

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Operating Activities:
Net income (loss)	$ 8,214	$ 20,344	$ (60,672)	$ (1,039)
Net income (loss) from discontinued operations	(252)	202	203	1,541
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	23,394	15,351	63,758	48,949
Share-based compensation expense	5,412	4,402	15,271	10,760
Change in fair value of contingent consideration	(74)	1,163	(4,552)	1,833
Gain on sale of property, plant and equipment	(40)	(32,563)	(170)	(32,563)
Deferred income taxes	(2,622)	(948)	(14,457)	(6,773)
Loss on extinguishment of debt			16,090	0
Other items	(5,020)		(712)
Changes in operating assets and liabilities, net of effects from acquisitions:	(65,170)	(6,897)	(136,478)	(105,364)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES FROM CONTINUING OPERATIONS	(29,230)	1,054	(103,349)	(82,656)
NET CASH PROVIDED BY OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS	2,693		2,778
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	(26,537)	1,054	(100,571)	(82,656)
Investing Activities:
Acquisition of businesses, net of cash acquired			(234,788)	(395,854)
Proceeds from sale of property, plant and equipment		44,891		44,891
Purchases of property, plant and equipment	(10,741)	(13,114)	(35,802)	(35,291)
Purchase of non-marketable debt and equity securities		(52,997)		(52,997)
Receipt of withheld proceeds from sale of trade receivables			5,521
NET CASH USED IN INVESTING ACTIVITIES	(10,741)	(21,220)	(265,069)	(439,251)
Financing Activities:
Proceeds from short-term borrowings	110,000	168,000	994,500	782,500
Principal payments on short-term borrowings	(170,000)	(146,000)	(913,000)	(551,500)
Debt extinguishment make whole payment			(15,856)
Proceeds from stock issued under employee stock purchase plan			1,169	783
Purchase of common stock			(3,660)	(3,419)
Dividends paid			(4,225)	(4,205)
Contingent consideration payments related to acquisitions of businesses				(820)
Proceeds from equity offering, net				215,832
NET CASH PROVIDED BY FINANCING ACTIVITIES	12,529	39,774	402,329	472,443
Effect of exchange rates on cash	8,634	(1,574)	1,431	(234)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(16,115)	18,034	38,120	(49,698)
Cash, cash equivalents and restricted cash at the beginning of the period	149,856	71,876	95,621	139,608
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT THE END OF THE PERIOD	133,741	89,910	133,741	89,910
Delerrok Inc.
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Change in fair value of contingent consideration	(1,100)		(1,100)
Supplemental disclosure of non-cash investing and financing activities:
Contingent consideration liability incurred with the acquisition			1,600
Trafficware
Supplemental disclosure of non-cash investing and financing activities:
Receivable recognized in connection with the acquisition of net				1,588
GRIDSMART
Supplemental disclosure of non-cash investing and financing activities:
Receivable recognized in connection with the acquisition of net				442
Nuvotronics
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Change in fair value of contingent consideration			(4,200)
Supplemental disclosure of non-cash investing and financing activities:
Contingent consideration liability incurred with the acquisition				5,300
Cubic Corporation Excluding VIE
Financing Activities:
Proceeds from long-term borrowings			450,000
Principal payments on long-term debt	(3,088)		(202,921)
Deferred financing fees		(1,854)	(2,517)	(1,854)
VIE
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Change in fair value of interest rate swap in VIE	6,888		18,370
Financing Activities:
Proceeds from long-term borrowings	174,938	19,841	198,160	35,816
Principal payments on long-term debt	(92,575)		(92,575)
Deferred financing fees	(8,638)	$ (213)	(8,638)	$ (690)
Equity contribution from Boston VIE partner	$ 1,892		$ 1,892

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Common Stock	Retained Earnings	Accumulated Other Comprehensive Loss	Treasury Stock	Noncontrolling Interest in VIE	Total
Balance at Sep. 30, 2018	$ 45,008	$ 801,834	$ (110,643)	$ (36,078)	$ 24,075
Balance (in shares) at Sep. 30, 2018						27,255
Increase (Decrease) in Stockholders' Equity
Net income (loss)		7,931			(8,970)	$ 7,931
Other comprehensive income (loss), net of tax			(1,827)			$ (1,827)
Stock issued under equity incentive plans (in shares)						144
Stock issued under employee stock purchase plans, value	783
Stock issued under employee stock purchase plans (in shares)						15
Purchase of common stock, value	(3,419)
Purchase of common stock (in shares)						(49)
Share - based compensation	10,760
Cumulative effect of accounting standard adoption		19,834			4,655
Stock issued under equity offering, net, value	215,832
Stock issued under equity offering, net (in shares)						3,795
Cash dividends paid		(4,205)
Other	1	2			9
Balance at Jun. 30, 2019	268,965	825,396	(112,470)	(36,078)	19,769
Balance (in shares) at Jun. 30, 2019						31,160
Balance at Mar. 31, 2019	264,612	801,486	(110,156)	(36,078)	23,325
Balance (in shares) at Mar. 31, 2019						31,150
Increase (Decrease) in Stockholders' Equity
Net income (loss)		23,910			(3,566)	$ 23,910
Other comprehensive income (loss), net of tax			(2,314)			$ (2,314)
Stock issued under equity incentive plans (in shares)						12
Purchase of common stock (in shares)						(2)
Share - based compensation	4,402
Other	(49)				10
Balance at Jun. 30, 2019	268,965	825,396	(112,470)	(36,078)	19,769
Balance (in shares) at Jun. 30, 2019						31,160
Balance at Sep. 30, 2019	274,472	862,948	(139,693)	(36,078)	18,919	$ 980,568
Balance (in shares) at Sep. 30, 2019						31,178
Increase (Decrease) in Stockholders' Equity
Net income (loss)		(60,853)			181	$ (60,853)
Other comprehensive income (loss), net of tax			(15,664)			$ (15,664)
Stock issued under equity incentive plans (in shares)						156
Stock issued under employee stock purchase plans, value	1,169
Stock issued under employee stock purchase plans (in shares)						19
Purchase of common stock, value	(3,660)
Purchase of common stock (in shares)						(54)
Share - based compensation	15,271
Equity contribution of noncontrolling interest					1,892
Cumulative effect of accounting standard adoption		(824)
Cash dividends paid		(4,225)
Balance at Jun. 30, 2020	287,252	797,046	(155,357)	(36,078)	20,992	$ 913,855
Balance (in shares) at Jun. 30, 2020						31,299
Balance at Mar. 31, 2020	281,840	798,201	(148,159)	(36,078)	9,731
Balance (in shares) at Mar. 31, 2020						31,296
Increase (Decrease) in Stockholders' Equity
Net income (loss)		(1,155)			9,369	$ (1,155)
Other comprehensive income (loss), net of tax			(7,198)			$ (7,198)
Stock issued under equity incentive plans (in shares)						3
Share - based compensation	5,412
Equity contribution of noncontrolling interest					1,892
Balance at Jun. 30, 2020	$ 287,252	$ 797,046	$ (155,357)	$ (36,078)	$ 20,992	$ 913,855
Balance (in shares) at Jun. 30, 2020						31,299

XML

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares	9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Cash dividends paid, per share of common stock	$ 0.14	$ 0.14

XML

Basis for Presentation

9 Months Ended

Jun. 30, 2020

Basis for Presentation

Basis for Presentation

Note 1 — Basis for Presentation

Cubic Corporation (“we,” “us,” the “Company” 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 GAAP for complete financial statements.

In our opinion, the accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results for the interim periods presented. Operating results for the three- and nine-month periods ended June 30, 2020 are not necessarily indicative of the results that may be expected for our fiscal year ending September 30, 2020 (“fiscal 2020”). For further information, refer to the audited consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019 (“fiscal 2019”).

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.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (commonly known as Accounting Standards Codification (“ASC”) Topic 842) (“ASC 842”). Under the guidance, lessees are required to recognize the following for all leases (with the exception of short-term leases): (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. We adopted ASC 842 on October 1, 2019 using the optional transition method and, as a result, did not recast prior period unaudited condensed comparative financial statements. All prior period amounts and disclosures are presented under ASC 840, Leases, the legacy lease accounting guidance. We elected the practical expedients which provide that entities need not reassess whether existing contracts contain a lease, lease classification of existing leases, or the treatment of initial direct costs on existing leases. On October 1, 2019, we recorded a right-of-use asset of $80.0 million and a lease liability of $88.0 million in our consolidated balance sheets. We also recorded a $0.8 million decrease in retained earnings related to the adoption of ASC 842. The adoption of the standard did not have a material impact on our consolidated statements of operations or consolidated statements of cash flows.

Recent Accounting Pronouncements – Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which requires companies to record an allowance for expected credit losses over the contractual term of financial assets, including short-term trade receivables and contract assets, and expands disclosure requirements for credit quality of financial assets. The amendments in this ASU are effective for us in our annual period beginning October 1, 2020. We do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). 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 amount 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. The adoption of ASU 2017-04 will have no immediate impact on our consolidated financial statements and will only have the potential to impact the amount of any goodwill impairment recorded after the adoption thereof.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance modifies the disclosure requirements on fair value measurements. The amendments in this ASU are effective for us in our annual period beginning October 1, 2020 and interim periods within that annual period. We do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Defined Benefit Plans - Disclosure Framework (Topic 715), which modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement benefit plans. The guidance removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant. The amendments in this ASU are effective for us in our annual period beginning October 1, 2020. We do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that Is a Service Contract (Subtopic 350-24), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments in this ASU are effective for us in our annual period beginning October 1, 2020. We do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) (“Topic 740”), which removes certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU are effective for us in our annual period beginning October 1, 2021 and interim periods within that annual period. We are currently evaluating the impact of this standard on our consolidated financial statements.

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COVID-19 Update

9 Months Ended

Jun. 30, 2020

COVID-19 Update

COVID-19 Update

Note 2 — COVID-19 Update

In March 2020, the novel coronavirus disease (“COVID-19”) was declared a pandemic by the World Health Organization. The outbreak has resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures, and other measures. In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of COVID-19.

Cubic’s businesses have been deemed essential in the locations in which we operate around the world. As such, our priorities are to continue providing our essential products and services to customers while focusing on protecting the health and well-being of our employees.

Our condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that while our operating results in the second and third quarter of fiscal 2020 were impacted by the pandemic, no asset impairments have been recognized.

In light of the risks presented by the current environment, we have taken a number of steps to strengthen liquidity and manage cash flow. These steps include our long-term debt restructuring that closed in the second quarter of fiscal 2020 and which included an increase in limits under our revolving credit facility, as further described in Note 9. We have also been negotiating more favorable payment terms with our customers, suppliers and subcontractors and utilized governmental stimulus benefits, including those related to tax. In addition, we have modified executive and other employee compensation and have planned reductions in capital expenditures and other discretionary expenditures.

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Acquisitions and Divestitures

9 Months Ended

Jun. 30, 2020

Acquisitions and Divestitures

Acquisitions and Divestitures

Note 3 — Acquisitions and Divestitures

Sale of CGD Services

In May 2018, we sold our Cubic Global Defense Services (“CGD Services”) business to Nova Global Supply & Services, LLC (Purchaser), an entity affiliated with GC Valiant, LP. The sale closed on May 31, 2018. In accordance with the terms of the stock purchase agreement executed in connection with the transaction, the Purchaser agreed to pay us $135.0 million in cash upon the closing of the transaction, adjusted for the estimated working capital of CGD Services at the date of the sale compared to a working capital target established by the parties. In the third quarter of fiscal 2018, we received $133.8 million in connection with the sale and we recorded a receivable from the Purchaser for the estimated amount due related to the working capital settlement. Since the sale we have worked with the Purchaser and revised certain estimates related to the working capital settlement. In connection with the revision of these estimates, we reduced the receivable from the Purchaser by $0.6 million and recognized a corresponding loss on the sale of CGD Services in the first quarter of fiscal 2020. In the third quarter of fiscal 2020, we settled the working capital receivable with the purchaser and received cash of $2.7 million and recognized a $0.1 million reduction in the previously estimated loss on the sale of CGD Services.

Business Acquisitions

Each of the following acquisitions have 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.

Cubic Mission Solutions (“CMS”)

PIXIA Corp.

On June 27, 2019, we paid cash of $50.0 million to purchase 20% of the outstanding shares of PIXIA Corp. (“Pixia”), a provider of high performance advanced data indexing, warehousing, processing and dissemination software solutions for large volumes of imagery data within traditional or cloud-based architectures. The purchase agreement with Pixia included an option to purchase the remaining 80% of its shares of capital stock for $200.0 million, subject to certain post-closing adjustment provisions, which we exercised in November 2019. On January 3, 2020, we completed the purchase of the remaining 80% of Pixia’s issued and outstanding shares of capital stock for aggregate consideration consisting of $197.8 million in net cash, resulting in our ownership of all of Pixia’s issued and outstanding shares of capital stock. The acquisition was financed primarily with proceeds from draws on our line of credit.

From June 27, 2019 through January 3, 2020, we accounted for our 20% ownership of Pixia using the equity method of accounting. Upon completion of the acquisition of the remaining 80% ownership interest, we now consolidate Pixia into our financial statements. The acquisition-date fair value of consideration transferred is $245.2 million and is comprised of total cash paid of $247.8 million, less a $2.0 million dividend received from Pixia and less a $0.6 million loss recognized during the period that we accounted for our 20% ownership of Pixia using the equity method of accounting.

The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the acquisition date (in millions):

Backlog	$	42.5
Customer relationships		25.5
Developed technology		14.1
Trade name		5.7
Accounts receivable, prepaids and other assets		4.0
Deferred taxes		(18.3)
Other net assets acquired (liabilities assumed)		(1.8)
Net identifiable assets acquired		71.7
Goodwill		173.5
Net assets acquired	$	245.2

The estimated fair values of assets acquired and liabilities assumed, including purchased intangibles, are preliminary estimates pending the finalization of our detailed valuation analyses and necessary calculations. The 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 trade name valuation used the relief from royalty method, the customer relationships and non-compete agreements valuations used the lost profits valuation method and the technology and backlog valuations used the excess earnings method.

The intangible assets are being amortized using straight-line methods based on the expected period of undiscounted cash flows that will be generated by the assets, over a weighted average useful life of approximately four years from the date of acquisition.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of Pixia with our existing CMS business, and strengthening our capability of developing and integrating products in our CMS 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 CMS segment and is not expected to be deductible for tax purposes.

Nuvotronics, Inc.

In March 2019, we acquired all of the outstanding shares of capital stock of Nuvotronics, Inc. (“Nuvotronics”), a provider of microfabricated radio frequency products. Based in Durham, North Carolina, Nuvotronics’ patented PolyStrata technology enables the design and production of uniquely packaged RF devices, such as antennas, filters and combiners, all of which are also components in Cubic’s advanced technology product offerings. Nuvotronics is expected to provide synergies from combining its capabilities with our existing CMS business.

The acquisition-date fair value of consideration is $66.8 million, which is comprised of net cash paid of $61.9 million, plus the estimated fair value of contingent consideration of $4.9 million. The acquisition was financed primarily with proceeds from draws on our line of credit. Under the purchase agreement executed in connection with the acquisition, we will pay the sellers up to $8.0 million of contingent consideration if Nuvotronics meets certain gross profit goals for the 12-month period ending on each of December 31, 2020 and December 31, 2021. The contingent consideration liability will be re-measured to fair value at each reporting date until the contingencies are resolved and any subsequent changes in fair value are recognized in earnings.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

Technology	$	22.7
Trade name		1.5
Backlog		1.4
Non-compete agreements		0.5
Customer relationships		0.6
Accounts receivable and contract assets		2.6
Fixed assets		2.7
Accounts payable and accrued expenses		(1.8)
Deferred taxes		(3.2)
Other net assets acquired (liabilities assumed)		(0.6)
Net identifiable assets acquired		26.4
Goodwill		40.4
Net assets acquired	$	66.8

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 trade name valuation used the relief from royalty method, the customer relationships valuation used the with-and-without valuation method and the technology and backlog valuations used the excess earnings method.

The intangible assets are being amortized using straight-line methods based on the expected period of undiscounted cash flows that will be generated by the assets, over an 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 Nuvotronics with our existing CMS business, and strengthening our capability of developing and integrating products in our CMS 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 CMS segment and is not expected to be deductible for tax purposes.

Operating Results

Pixia’s and Nuvotronics’ sales and results of operations included in our operating results were as follows (in millions):

	Three Months Ended
	June 30, 2020				June 30, 2019
	Pixia		Nuvotronics		Pixia		Nuvotronics
Sales	$	4.2	$	3.8	$	—	$	3.6
Operating loss		(5.9)		(2.9)		—		(3.2)
Net loss after taxes		(5.9)		(2.9)		—		(3.2)
	Nine Months Ended
	June 30, 2020				June 30, 2019
	Pixia		Nuvotronics		Pixia		Nuvotronics
Sales	$	5.3	$	9.8	$	—	$	4.3
Operating loss		(15.9)		(7.8)		—		(4.9)
Net loss after taxes		(15.9)		(7.8)		—		(4.9)

Pixia’s and Nuvotronics’ operating results above included the following amounts (in millions):

	Three Months Ended
	June 30, 2020				June 30, 2019
	Pixia		Nuvotronics		Pixia		Nuvotronics
Amortization	$	7.2	$	0.9	$	—	$	0.6
Acquisition-related expenses		1.3		0.3		—		1.1
	Nine Months Ended
	June 30, 2020				June 30, 2019
	Pixia		Nuvotronics		Pixia		Nuvotronics
Amortization	$	14.3	$	3.1	$	—	$	0.7
Acquisition-related expenses		3.3		1.6		—		2.9
Gain for changes in fair value of contingent consideration		—		(4.2)		—		—

The estimated amortization expense related to the intangible assets recorded in connection with our acquisitions of Pixia and Nuvotronics is as follows (in millions):

Year Ending
September 30,	Pixia		Nuvotronics
2020	$	21.5	$	4.0
2021		28.7		3.0
2022		12.7		3.0
2023		7.3		2.9
2024		7.3		2.7
Thereafter		10.5		10.1

Cubic Transportation Systems (“CTS”)

Delerrok Inc.

Since fiscal 2018, we invested a total of $8.3 million to purchase 17.5% of the outstanding shares of common stock of Delerrok Inc. (“Delerrok”), a private technology company based in Vista, California, that specializes in electronic fare collection systems for the mid-market. Our purchase agreement included an option to purchase the remaining 82.5% of Delerrok’s outstanding shares of common stock, which we exercised in November 2019. On January 3, 2020, we completed the purchase of the remaining 82.5% of Delerrok’s outstanding shares of common stock for aggregate consideration consisting of $37.0 million in net cash, resulting in our ownership of all of Delerrok’s shares of common stock. We will also pay the sellers up to an additional $2.0 million if Delerrok’s sales exceed certain levels from the date of acquisition through December 31, 2020.

Prior to the acquisition of all of Delerrok’s outstanding shares of common stock, we accounted for our investment in Delerrok using the cost method of accounting. Upon completion of the acquisition of all of Delerrok’s outstanding shares of common stock, we now consolidate Delerrok into our financial statements. The estimated acquisition-date fair value of consideration is $45.1 million. The acquisition was financed primarily with proceeds from draws on our line of credit and is comprised of total cash paid of $43.5 million and the estimated fair value of contingent consideration of $1.6 million.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

Technology	$	14.9
Trade name		0.9
Accounts receivable		0.9
Other net assets acquired (liabilities assumed)		(0.2)
Deferred tax liability		(2.0)
Net identifiable assets acquired		14.5
Goodwill		30.6
Net assets acquired	$	45.1

The estimated fair values of assets acquired and liabilities assumed, including purchased intangibles, are preliminary estimates pending the finalization of our detailed valuation analyses and necessary calculations. The 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 trade name valuation used the relief from royalty method, the customer relationships valuation used the with-and-without valuation method and the technology valuations used the excess earnings method.

The intangible assets are being amortized using straight-line methods based on the expected period of undiscounted cash flows that will be generated by the assets, over an average useful life of approximately eight years from the date of acquisition.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of Delerrok with our existing CTS business, and strengthening our capability of developing and integrating products in our CTS 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 CTS segment and is not expected to be deductible for tax purposes.

GRIDSMART Technologies, Inc.

In January 2019, we acquired all of the outstanding shares of capital stock of GRIDSMART Technologies, Inc. (“GRIDSMART”), a provider of differentiated video tracking solutions to the Intelligent Traffic Systems market. Based in Knoxville, Tennessee, GRIDSMART specializes in video detection at the intersection utilizing advanced image processing, computer vision modeling and machine learning along with a single camera solution providing best-in-class data for optimizing the flow of people and traffic through intersections.

The acquisition-date fair value of consideration is $86.8 million. The acquisition was financed primarily with proceeds from draws on our line of credit.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

Technology	$	25.7
Customer relationships		3.6
Trade name		2.4
Inventory		4.3
Accounts receivable		1.7
Accounts payable and accrued expenses		(1.9)
Deferred taxes		(3.3)
Other net assets acquired		0.5
Net identifiable assets acquired		33.0
Goodwill		53.8
Net assets acquired	$	86.8

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 trade name valuation used the relief from royalty method, the customer relationships valuation used the with-and-without valuation method and the technology valuations used the excess earnings method.

The intangible assets are being amortized using straight-line methods based on the expected period of undiscounted cash flows that will be generated by the assets, over an average useful life of approximately eight years from the date of acquisition.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of GRIDSMART with our existing CTS business, and strengthening our capability of developing and integrating products in our CTS 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 CTS segment and is not expected to be deductible for tax purposes.

Advanced Traffic Solutions Inc.

In October 2018, we acquired all of the outstanding shares of capital stock of Advanced Traffic Solutions Inc. (“Trafficware”), a provider of intelligent traffic solutions for the transportation industry based in Sugar Land, Texas. Trafficware provides a fully integrated suite of software, Internet of Things devices, and hardware solutions that optimize the flow of motorist and pedestrian traffic.

The acquisition-date fair value of consideration is $237.2 million. The acquisition was financed primarily with proceeds from draws on our line of credit.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

Technology	$	43.3
Customer relationships		21.9
Backlog		4.8
Trade name		4.6
Accounts receivable		10.4
Inventory		9.9
Accounts payable and accrued expenses		(9.5)
Other net assets acquired (liabilities assumed)		(2.0)
Net identifiable assets acquired		83.4
Goodwill		153.8
Net assets acquired	$	237.2

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 trade name valuation used the relief from royalty method, the customer relationships valuation used the with-and-without valuation method, and the technology and backlog valuations used the excess earnings method.

The intangible assets are being amortized using straight-line methods based on the expected period of undiscounted cash flows that will be generated by the assets, over an 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 Trafficware with our existing CTS business, and strengthening our capability of developing and integrating products in our CTS 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 CTS segment and is not expected to be deductible for tax purposes.

Operating Results

The sales and results of operations from Delerrok, GRIDSMART and Trafficware included in our operating results were as follows (in millions):

	Three Months Ended
	June 30, 2020						June 30, 2019
	Delerrok		GRIDSMART		Trafficware		Delerrok		GRIDSMART		Trafficware
Sales	$	0.4	$	8.2	$	14.4	$	—	$	7.7	$	15.8
Operating income (loss)		(0.2)		1.5		(1.3)		—		0.7		(1.0)
Net income (loss) after taxes		(0.2)		1.5		(1.3)		—		0.7		(1.0)
	Nine Months Ended
	June 30, 2020						June 30, 2019
	Delerrok		GRIDSMART		Trafficware		Delerrok		GRIDSMART		Trafficware
Sales	$	1.1	$	20.1	$	37.4	$	—	$	14.0	$	38.0
Operating income (loss)		(1.2)		0.7		(4.5)		—		(1.3)		(9.5)
Net income (loss) after taxes		(1.2)		0.7		(4.5)		—		(1.3)		(9.5)

The operating results above included the following amounts (in millions):

	Three Months Ended
	June 30, 2020						June 30, 2019
	Delerrok		GRIDSMART		Trafficware		Delerrok		GRIDSMART		Trafficware
Amortization	$	0.4	$	1.3	$	2.8	$	—	$	1.3	$	2.8
Acquisition-related expenses		0.5		0.2		0.4		—		0.6		0.9
(Gain) loss for changes in fair value of contingent consideration		(1.1)		—		—		—		—		—
	Nine Months Ended
	June 30, 2020						June 30, 2019
	Delerrok		GRIDSMART		Trafficware		Delerrok		GRIDSMART		Trafficware
Amortization	$	0.9	$	4.0	$	8.5	$	—	$	2.7	$	12.4
Acquisition-related expenses		1.2		0.6		1.3		—		2.4		4.4
(Gain) loss for changes in fair value of contingent consideration		(1.1)		—		—		—		—		—

The estimated amortization expense related to the intangible assets recorded in connection with our acquisitions are as follows (in millions):

Year Ending
September 30,	Delerrok		GRIDSMART		Trafficware
2020	$	1.3	$	5.3	$	11.4
2021		1.7		3.9		11.4
2022		1.6		3.5		11.4
2023		1.6		3.5		6.4
2024		1.6		3.5		5.9
Thereafter		8.0		8.1		12.9

Pro Forma Information

The following unaudited pro forma information presents our consolidated results of operations as if Pixia, Nuvotronics, Delerrok, GRIDSMART and Trafficware had been included in our consolidated results since October 1, 2018 (in millions):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Net sales	$	350.4	$	384.4	$	1,005.0	$	1,050.2
Net income (loss)		(1.4)		14.4		(69.5)		(18.8)

The pro forma information includes adjustments to give effect to events that are directly attributable to the acquisitions and have a continuing impact on our 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 items 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, 2018, and it does not purport to project our future operating results.

Goodwill

Changes in goodwill for the nine months ended June 30, 2020 were as follows for each of our reporting units (in thousands):

	Cubic Transportation		Cubic Mission		Cubic Global
	Systems		Solutions		Defense Systems		Total
Net balances at September 30, 2019	$	254,592	$	181,424	$	142,081	$	578,097
Acquisitions		30,621		173,531		—		204,152
Adjustments		603		—		—		603
Foreign currency exchange rate changes		329		85		102		516
Net balances at June 30, 2020	$	286,145	$	355,040	$	142,183	$	783,368

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 at a reporting unit level on an annual basis and when circumstances indicate that an impairment is more-likely-than-not. Circumstances that might indicate an impairment is more-likely-than-not 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 amount, including recorded goodwill. If the carrying amount 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 amount. Any resulting impairment determined would be recorded in the current period.

Our most recent annual goodwill impairment test was our 2019 annual impairment test completed as of July 1, 2019. . Subsequent to the effective dates of the tests for each of our reporting units, we do not believe that circumstances have occurred that indicate that an impairment for any of our reporting units is more-likely-than-not. As such, no subsequent interim impairment tests have been performed.

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 CMS 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 prior 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. Although we believe our underlying assumptions supporting these assessments are reasonable, if our forecasted sales and margin growth rates, timing of growth, or the discount rate vary from our forecasts, we could be exposed to material impairment charges in the future.

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Variable Interest Entities

9 Months Ended

Jun. 30, 2020

Variable Interest Entities

Variable Interest Entities

Note 4 – Variable Interest Entities

In accordance with ASC 810, Consolidation (“ASC 810”), we assess our partnerships and joint ventures at inception, and when there are changes in relevant factors, to determine if any meet the qualifications of a variable interest entity (a “VIE”). We consider a partnership or joint venture to be a VIE if it has any of the following characteristics: (a) the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity) or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity or their rights to receive the expected residual returns of the entity, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights.

We perform a qualitative assessment of each VIE to determine if we are its primary beneficiary. We conclude that we are the primary beneficiary and consolidate the VIE if we have both (a) the power to direct the activities that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive

benefits from the VIE that could potentially be significant to the VIE. We consider the VIE design, the contractual agreements that define the ownership structure, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board or similar governance representation of the respective parties in determining if we are the primary beneficiary. We also consider all parties that have direct or implicit variable interests when determining whether we are the primary beneficiary. As required by ASC 810, our primary beneficiary assessment is continuously performed.

In March 2018, Cubic and John Laing, an unaffiliated company that specializes in contracting under public-private partnerships, jointly formed Boston AFC 2.0 HoldCo. LLC (“Boston HoldCo”). Also in March 2018, Boston HoldCo’s wholly owned subsidiary, Boston AFC 2.0 OpCo. LLC (“Boston OpCo”), entered into a contract with the Massachusetts Bay Transit Authority (“MBTA”) for the financing, development and operation of a next-generation fare payment system in Boston, Massachusetts (the “Original MBTA Contract”). Boston HoldCo is 90% owned by John Laing and 10% owned by Cubic. Collectively, Boston HoldCo and Boston OpCo are referred to as the “P3 Venture”. Based on our assessment under ASC 810, we concluded that Boston OpCo and Boston HoldCo are VIEs and that we are the primary beneficiary of Boston OpCo. Consequently, we have consolidated the financial statements of Boston OpCo within our consolidated financial statements. We have concluded that we are not the primary beneficiary of Boston HoldCo, and as a result, we have not consolidated the financial statements of Boston HoldCo within our consolidated financial statements. In June 2020, MBTA and Boston OpCo executed an amended agreement (the “Amended MBTA Contract”), which modified a number of the provisions of the Original MBTA Contract.

Under the Original MBTA Contract, MBTA was scheduled to make fixed payments to Boston OpCo in the aggregate amount of $558.5 million, adjusted for incremental transaction-based fees, inflation and performance penalties over a ten-year operate and maintain phase. All of Boston OpCo’s contractual responsibilities under the Original MBTA Contract regarding the design and development and the operation and maintenance of the fare system were subcontracted to Cubic by Boston OpCo. Under its subcontract with Boston OpCo, Cubic was scheduled to receive fixed payments in the aggregate amount of $427.6 million, adjusted for incremental transaction-based fees inflation, and performance penalties.

The Amended MBTA Contract modified certain aspects of the Original MBTA Contract, such as extending the design and build phase to 2024, adding new functionality to the next-generation fare payment system, and increasing the scope and duration of the operate and maintain phase. In accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), the Amended MBTA Contract was treated as a modification to the Original MBTA Contract, and as such Boston OpCo’s contract value was increased by additional fixed payments to be made by MBTA of $278.9 million plus the estimated value of future variable payments to be made by MBTA for incremental transaction-based fees and inflation indexed payments.

The Amended MBTA Contract consists of a design and build phase of approximately four years and an operate and maintain phase of approximately twelve years. The design and build phase is planned to be completed in 2024 and the initial operate and maintain phase is expected to commence in 2021, with full service commencement spanning from 2024 through 2033. Under the Amended MBTA Contract, MBTA will make payments to Boston OpCo consisting of fixed payments of $43.5 million during the design and build phase, fixed payments of $175.8 million upon full service commencement, fixed payments of $618.0 million during the full service period commencement of the operate and maintain phase, variable payments for incremental transaction-based fees and inflation indexed payments during the operate and maintain phase, and payment adjustments for any performance penalties incurred by Boston OpCo during the project.

Boston OpCo subcontracted all of its contractual responsibilities regarding the design and build and the operation and maintenance of the fare system to Cubic. Under its subcontract with Boston OpCo, Cubic will receive fixed payments in the aggregate amount of $596.4 million, adjusted for incremental transaction-based fees, inflation indexed payments, less any performance penalties incurred.

Upon creation of the P3 Venture and upon execution of the Amended MBTA Contract, John Laing made loans to Boston HoldCo of $24.3 million and $1.9 million, respectively, in the form of bridge loans that are intended to be converted to equity in the future in accordance with its equity funding responsibilities under the terms of the P3 Venture. Concurrently, Boston HoldCo made corresponding equity contributions to Boston OpCo in the same amounts which are included within equity of noncontrolling interest in the VIE in our consolidated financial statements. Also, we issued a letter of credit for $2.9 million to Boston HoldCo in accordance with our equity funding responsibilities under the terms

of the P3 Venture. Boston HoldCo is able to draw on the letter of credit in certain liquidity instances, but no amounts have been drawn on such letter of credit as of June 30, 2020.

Upon creation of the P3 Venture, Boston OpCo entered into a credit agreement with a group of financial institutions (the “Boston OpCo Credit Agreement”), which included a long-term credit facility of up to $212.4 million and a revolving credit facility. The long-term credit facility bore interest at variable rates of London Interbank Offer Rate (“LIBOR”) plus 1.3%. In connection with the execution of the Amended MBTA Contract in June 2020, Boston OpCo entered into an amended credit agreement with a group of financial institutions (the “Boston OpCo Amended Credit Agreement”), which includes two long-term debt facilities and a revolving credit facility to replace the facilities in the Boston OpCo Credit Agreement. At closing of the Boston OpCo Amended Credit Agreement, Boston OpCo retired and paid the outstanding principal balance of $92.6 million plus accrued interest of $7.4 million due under the Boston OpCo Credit Agreement.

Under the Boston OpCo Amended Credit Agreement, the long-term debt facilities allow for draws up to an aggregate of $421.6 million and such draws may only be made during the design and build phase of the Amended MBTA Contract. The long-term debt facilities, including all interest and fees incurred, is required to be repaid on a fixed monthly schedule starting once the design and build phase is completed in 2024. The long-term debt facilities bear interest at variable rates of LIBOR plus a margin of 1.75% to 2.0% over the design and build phase and LIBOR plus a margin of 2.0% to 2.5% over the operate and maintain phase. Boston OpCo incurred debt issuance and modification costs of $8.6 million in connection with the Boston OpCo Amended Credit Agreement and these fees are being amortized as interest expense using the effective interest method over the term of the long-term debt facilities. At June 30, 2020, the outstanding balance on the long-term debt facilities was $172.8 million, which is presented net of total unamortized deferred financing costs of $17.3 million. The revolving credit facility allows for draws up to a maximum aggregate amount of $15.8 million during the operate and maintain phase of the Amended MBTA Contract. Boston OpCo’s debt is nonrecourse with respect to Cubic and our subsidiaries. The fair value of the long-term debt facility approximates its carrying amount.

The Boston OpCo Amended Credit Agreement contains a number of covenants which require that Boston OpCo and Cubic maintain progress on the delivery of the MBTA Amended Agreement within a specified timeline and budget and provide regular reporting on such progress. The Boston OpCo Amended Credit Agreement also contains customary events of default including the delivery of a customized fare collection system to MBTA by a pre-determined date. Failure to meet such delivery date will result in Boston OpCo, and Cubic via our subcontract with Boston OpCo, to incur penalties due to the lenders thereunder.

In connection with the Boston OpCo Credit Agreement, Boston OpCo entered into pay-fixed/receive-variable interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with its long-term debt facility. Upon execution of the Boston OpCo Amended Credit Agreement, Boston OpCo terminated these interest rate swaps and paid termination costs of $34.4 million to the counterparties. The termination payments are included in cash flows used in operating activities in our Condensed Consolidated Statements of Cash Flows. In connection with the Boston OpCo Amended Credit Agreement, Boston OpCo entered into new pay-fixed/receive-variable interest rate swaps to mitigate the variable interest rate associated with its long-term debt facility. The interest rate swaps contain forward starting notional principal amounts which align with Boston OpCo’s expected draws on its long-term debt facility. At June 30, 2020, the outstanding notional principal amounts on open interest rate swaps were $172.8 million. The fair value of Boston OpCo’s interest rate swaps at June 30, 2020 was $5.6 million and is recorded as a liability in other noncurrent liabilities in our condensed consolidated balance sheets. Boston OpCo’s interest rate swaps were not designated as effective hedges at June 30, 2020 and as such unrealized gains (losses) are included in other income (expense), net. As a result of changes in the fair value of its interest rate swaps, Boston OpCo recognized losses of $6.9 million and $18.4 million for the three and nine months ended June 30, 2020, respectively, and losses of $7.0 million and $16.9 million for the three and nine months ended June 30, 2019, respectively. See Note 8 for a description of the measurement of fair value of derivative financial instruments, including Boston OpCo’s interest rate swaps.

Boston OpCo holds a restricted cash balance which is required by the Amended MBTA Contract to allow for the delivery of future change orders directed by MBTA.

The assets and liabilities of Boston OpCo that are included in our condensed consolidated balance sheets are as follows:

	June 30,		September 30,
	2020		2019
	(in thousands)
Cash	$	743	$	347
Restricted cash		1,669		9,967
Other current assets		99		33
Long-term contracts financing receivable		191,042		115,508
Other noncurrent assets		—		1,419
Total assets	$	193,553	$	127,274
Trade accounts payable	$	175	$	25
Accrued compensation and other current liabilities		150		191
Due to Cubic		11,754		25,143
Other noncurrent liabilities		5,572		21,605
Long-term debt		155,493		61,994
Total liabilities	$	173,144	$	108,958
Total Cubic equity		(583)		(603)
Noncontrolling interests		20,992		18,919
Total liabilities and owners' equity	$	193,553	$	127,274

The assets of Boston OpCo are restricted for its use only and are not available for our general operations. Boston OpCo’s debt is non-recourse to Cubic. Our maximum exposure to loss as a result of our equity interest in the P3 Venture is limited to the $2.7 million outstanding letter of credit, which will be converted to a cash contribution upon completion of the design and build phase of the Amended MBTA Contract.

Boston OpCo’s results of operations included in our Condensed Consolidated Statements of Operations are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Revenue	$	17,585	$	3,233	$	20,632	$	7,519
Operating income		17,344		2,823		19,832		6,521
Other income (expense), net		(6,888)		(7,031)		(19,636)		(16,884)
Interest income		1,663		1,075		4,871		2,335
Interest expense		(1,710)		(829)		(4,864)		(1,939)

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Revenue Recognition

9 Months Ended

Jun. 30, 2020

Revenue Recognition

Revenue Recognition

Note 5 — Revenue Recognition

We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers.

Contract Estimates: Use of the cost-to-cost or other similar methods of revenue recognition requires us to make reasonably dependable estimates regarding the revenue and cost associated with the design, manufacture and delivery of our products and services. Revisions or adjustments to estimates of the transaction price, estimated costs at completion and estimated profit or loss of a performance obligation are often required as work progresses under a contract, as experience is gained, as facts and circumstances change and as new information is obtained, even though the scope of work required under the contract may not change. Revisions or adjustments may also be required if contract modifications occur. The impact of revisions in profit or loss estimates are recognized on a cumulative catch-up basis in the period in which the revisions are made. The revisions in contract estimates, if significant, can materially affect our results of operations and cash flows, and in some cases result in liabilities to complete contracts in a loss position. The aggregate impact of net changes in contract estimates are presented in the table below (amounts in thousands, except per share numbers):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Operating income (loss)	$	19,297	$	(1,054)	$	5,499	$	(1,040)
Net income (loss) from continuing operations		18,596		(1,185)		5,103		(1,100)
Net income (loss) from continuing operations attributable to Cubic		4,826		(1,185)		(8,667)		(1,100)
Diluted earnings (loss) per share attributable to Cubic		0.15		(0.04)		(0.28)		(0.04)

For the three and nine months ended June 30, 2020, operating income and net income from continuing operations increased by $25.0 million and $27.8 million, respectively, due to changes in estimates recognized by CTS and Boston OpCo related to the Amended MBTA Contract executed in June 2020. Operating income (loss) and net income (loss) from continuing operations reflects 100% of Boston OpCo’s change in contract estimates. However, because we only own 10% of Boston OpCo, net income (loss) attributable to Cubic reflects only 10% of Boston OpCo’s change in contract estimates. See Note 4 for further details.

Backlog: Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has not yet transferred to the customer. It is comprised of both funded backlog (firm orders for which funding is authorized and appropriated) and unfunded backlog. Unexercised contract options and indefinite delivery indefinite quantity (“IDIQ”) contracts are not included in backlog until the time the option or IDIQ task order is exercised or awarded. For our cost-reimbursable and fixed-priced-incentive contracts, the estimated consideration we expect to receive pursuant to the terms of the contract may exceed the contractual award amount. The estimated consideration is determined at the outset of the contract and is continuously reviewed throughout the contract period. In determining the estimated consideration, we consider the risks related to the technical, schedule and cost impacts to complete the contract and an estimate of any variable consideration. Periodically, we review these risks and may increase or decrease backlog accordingly. As of June 30, 2020, our ending backlog was $3.7 billion, compared to $3.4 billion at September 30, 2019. We expect to recognize approximately 30% of our June 30, 2020 backlog over the next 12 months as revenue, and approximately 45% over the next 24 months as revenue, with the remainder recognized thereafter.

Accounts Receivable: Amounts billed include $53.3 million and $60.3 million due on U.S. federal government contracts at June 30, 2020 and September 30, 2019, respectively.

In our normal course of business, we may sell trade receivables to financial institutions as a cash management technique. We do not retain financial or legal obligations for these receivables that would result in material losses. Our ongoing involvement is limited to the remittance of customer payments to the financial institutions with respect to the sold trade receivables; therefore, our sold trade receivables are not included in our Condensed Consolidated Balance Sheet in any period presented. As of September 30, 2019, we sold $31.1 million of outstanding trade receivables to financial institutions. No trade receivables were sold as of June 30, 2020. During the first nine months of fiscal 2020, we received $5.5 million related to withheld proceeds from receivables we sold as of September 30, 2019, which is included in cash provided by investing activities in our Condensed Consolidated Statements of Cash Flows.

Contract Assets and Liabilities: Contract assets include unbilled amounts typically resulting from sales under contracts when the percentage-of-completion method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer per the contractually agreed project milestones. Contract liabilities include advance payments and billings in excess of revenue recognized. Contract assets and contract liabilities were as follows (in thousands):

	June 30,		September 30,
	2020		2019
Contract assets	$	253,900	$	349,559
Contract liabilities	$	71,269	$	46,170

Contract assets decreased $95.7 million during the nine months ended June 30, 2020, due to billings in excess of revenue recognized related to the satisfaction or partial satisfaction of performance obligations. There were no significant impairment losses related to our contract assets during the nine months ended June 30, 2020.

Contract liabilities increased $25.1 million during the nine months ended June 30, 2020, due to payments received in excess of revenue recognized on these performance obligations. During the three and nine-month periods ended June 30, 2020, we recognized $3.6 million and $19.9 million of our contract liabilities at September 30, 2019 as revenue, respectively. We expect our contract liabilities to be recognized as revenue over the next 12 months.

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Net Income (Loss) Per Share

9 Months Ended

Jun. 30, 2020

Net Income (Loss) Per Share

Net Income (Loss) Per Share

Note 6 — Net Income (Loss) Per Share

Basic net income (loss) per share (“EPS”) is computed by dividing the net income (loss) attributable to Cubic 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 from continuing operations attributable to Cubic, 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 RSUs. Dilutive RSUs are calculated based on the average underlying 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. For RSUs with performance and market-based vesting, no common equivalent shares are included in the computation of diluted EPS until the performance criteria have been met, and once the criteria are met the dilutive RSUs are calculated using the treasury stock method, modified by the multiplier that is calculated at the end of the accounting period as if the vesting date was at the end of the accounting period. The multiplier on RSUs with performance and market-based vesting is further described in Note 12.

In periods with a net loss from continuing operations attributable to Cubic, common equivalent shares are not included in the computation of diluted EPS because to do so would be anti-dilutive.

The weighted-average number of shares outstanding used to compute net income (loss) per common share were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Weighted average shares - basic		31,299		31,160		31,289		30,267
Effect of dilutive securities		—		89		—		65
Weighted average shares - diluted		31,299		31,249		31,289		30,332
Number of anti-dilutive securities		1,243		—		1,109		—

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Balance Sheet Details

9 Months Ended

Jun. 30, 2020

Balance Sheet Details

Balance Sheet Details

Note 7 — Balance Sheet Details

Restricted Cash

Cash and cash equivalents excluded $23.9 million and $29.5 million of restricted cash at June 30, 2020 and September 30, 2019, respectively, which for purposes of our consolidated statements of cash flows, is included in cash, cash equivalents and restricted cash.

Inventories

Inventories consist of the following (in thousands):

	June 30,		September 30,
	2020		2019
Finished products	$	16,825	$	10,905
Work in process and inventoried costs under long-term contracts		90,731		46,951
Materials and purchased parts		44,057		48,938
Net inventories	$	151,613	$	106,794

At June 30, 2020, work in process and inventoried costs under long-term contracts included approximately $7.7 million in costs incurred outside the scope of work or in advance of a contract award compared to $5.8 million at September 30, 2019. We believe it is probable that we will recover the costs inventoried at June 30, 2020, plus a profit margin, under contract change orders or awards within the next year.

Costs we incur for certain U.S. federal government contracts include general and administrative costs as allowed by government cost accounting standards. The amounts remaining in inventory totaled $0.4 million and $0.5 million at June 30, 2020 and September 30, 2019, respectively.

Property, Plant and Equipment

Significant components of property, plant and equipment are as follows (in thousands):

	June 30,		September 30,
	2020		2019
Land and land improvements	$	7,362	$	7,348
Buildings and improvements		48,628		48,191
Machinery and other equipment		125,656		107,297
Software		114,172		108,526
Leasehold improvements		20,346		17,064
Construction and internal-use software development in progress		24,308		16,814
Accumulated depreciation and amortization		(179,925)		(160,271)
	$	160,547	$	144,969

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 noncurrent liabilities in our Condensed Consolidated Balance Sheets and totaled $10.9 million at June 30, 2020 and $11.0 million at September 30, 2019.

In the past we have made contributions to a rabbi trust to provide a source of funds for satisfying a portion of these deferred compensation liabilities. The total carrying value of the assets set aside to fund deferred compensation liabilities totaled $6.4 million at each of June 30, 2020 and September 30, 2019, and were comprised entirely of life insurance contracts. The carrying value of the life insurance contracts is based on the cash surrender value of the policies. 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 Operations.

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Fair Value of Financial Instruments

9 Months Ended

Jun. 30, 2020

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Note 8 — 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 following table presents assets and liabilities measured and recorded at fair value on our Condensed Consolidated Balance Sheets on a recurring basis (in thousands):

	June 30, 2020								September 30, 2019
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Current derivative assets	$	—	$	1,761	$	—	$	1,761	$	—	$	2,635	$	—	$	2,635
Noncurrent derivative assets		—		624		—		624		—		859		—		859
Total assets measured at fair value	$	—	$	2,385	$	—	$	2,385	$	—	$	3,494	$	—	$	3,494
Liabilities
Current derivative liabilities		—		4,365		—		4,365		—		529		—		529
Noncurrent derivative liabilities		—		13,342		—		13,342		—		228		—		228
Contingent consideration to seller of H4 Global		—		—		564		564		—		—		1,073		1,073
Contingent consideration to seller of Deltenna		—		—		2,806		2,806		—		—		1,787		1,787
Contingent consideration to seller of Shield		—		—		4,052		4,052		—		—		3,814		3,814
Contingent consideration to seller of Nuvotronics		—		—		—		—		—		—		4,200		4,200
Contingent consideration to seller of Delerrok		—		—		500		500		—		—		—		—
Total liabilities measured at fair value	$	—	$	17,707	$	7,922	$	25,629	$	—	$	757	$	10,874	$	11,631

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 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.

At June 30, 2020, we have the following remaining contingent consideration arrangements with the sellers of companies which we acquired:

● H4 Global: Payments of up to $2.7 million of contingent consideration based upon the value of contracts entered into over the five-year period ending September 30, 2020.

● Deltenna: Payments of up to $6.7 million of contingent consideration if Deltenna meets certain sales goals from the date of acquisition through the fiscal year ending September 30, 2022.

● Shield: Payments of up to $10.0 million of contingent consideration if Shield meets certain sales goals from the date of acquisition through July 31, 2025.

● Nuvotronics: Payments of up to $8.0 million of contingent consideration if Nuvotronics meets certain gross profit goals for the 12-month periods ending on each of December 31, 2020 and December 31, 2021.

● Delerrok: Payments of up to $2.0 million of contingent consideration if Delerrok meets certain sales goals for the 12-month period ending December 31, 2020.

The maximum remaining payout to the sellers of H4 Global is $2.7 million at June 30, 2020 and is based on a percentage of the value of contracts entered into from October 1, 2015 through September 30, 2020. The fair value of the contingent consideration was estimated using a probability weighted approach by applying probabilities to different scenarios and summing the present value of any future payments. The selected discount rate was 23.0% as of June 30, 2020 and 23.5% as of September 30, 2019.

Under the terms of the Deltenna purchase agreement, we will pay the sellers of Deltenna up to $6.7 million if Deltenna meets certain sales goals through September 30, 2022. The fair value of the contingent consideration was estimated using a combination of a probability weighted approach and the real option approach. Under the real option approach,

each payment was modeled using long digital options written on the underlying revenue metric. The strike price for each option is the respective revenue as specified in the related agreement, and the spot price is calibrated to the revenue forecast by calculating the present value of the corresponding projected revenues using a risk-adjusted discount rate. The volatility for the underlying revenue metrics was based upon an analysis of comparable public companies and was 38% as of June 30, 2020 and 36% as of September 30, 2019. The selected discount rate was 10% as of June 30, 2020 and 11% as of September 30, 2019.

Under the terms of the Shield purchase agreement, we will pay the sellers of Shield up to $10.0 million if Shield meets certain sales goals through July 31, 2025. The fair value of the contingent consideration was estimated based on Monte Carlo simulations, which uses a probability distribution of values based on one million simulation trials. Key inputs for the simulation include projected revenues, discount rates, risk adjustment factors and volatility. The volatility and revenue risk adjustment factors were determined based on an analysis of publicly traded comparable companies and as of June 30, 2020 were 31% and 17%, respectively, and as of September 30, 2019 were 18% and 13%, respectively. The selected discount rate was based primarily on an analysis of publicly traded comparable companies and was 6.5% at June 30, 2020 and 3.6% at September 30, 2019.

Under the terms of the Nuvotronics purchase agreement, we will pay the sellers of Nuvotronics up to $8.0 million if Nuvotronics meets certain gross profit goals for the 12 month period ending on each of December 31, 2020 and December 31, 2021. The fair value of the contingent consideration was estimated based on Monte Carlo simulations, which uses a probability distribution of values based on one million simulation trials.  As of June 30, 2020, the fair value of the Nuvotronics contingent consideration was determined to be zero as its forecasted gross profit was below the payout thresholds.

Under the terms of the Delerrok purchase agreement, we will pay the sellers of Delerrok up to $2.0 million if Delerrok meets certain sales goals for the 12-month period ending December 31, 2020. The fair value of the contingent consideration was estimated based on Monte Carlo simulations, which uses a probability distribution of values based on one million simulation trials. Key inputs for the simulation include projected revenues, assumed discount rates for projected revenues and cash flows and volatility. The volatility factor was determined based on an analysis of publicly traded comparable companies and was 19.0% as of June 30, 2020. The discount rate used as of June 30, 2020 was 3.4% and was based on our risk-free rate of return adjusted for our revenue required risk premium.

The inputs to each of the contingent consideration fair value models include significant unobservable inputs and therefore represent Level 3 measurements within the fair value hierarchy. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition dates and each subsequent period. Accordingly, changes in the assumptions described above can materially impact the amount of contingent consideration expense we record in any period.

As of June 30, 2020, the following table summarizes the change in fair value of our Level 3 contingent consideration liabilities (in thousands):

	H4 Global		Deltenna		Shield		Nuvotronics		Delerrok		Total
Balance as of September 30, 2019	$	1,073	$	1,787	$	3,814	$	4,200	$	—	$	10,874
Initial measurement recognized at acquisition		—		—		—		—		1,600		1,600
Total remeasurement (gain) loss recognized in earnings		(509)		1,019		238		(4,200)		(1,100)		(4,552)
Balance as of June 30, 2020	$	564	$	2,806	$	4,052	$	—	$	500	$	7,922

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 our variable rate long-term debt approximates its carrying value at June 30, 2020.

In fiscal 2019, we invested $5.0 million in Franklin Blackhorse, L.P., a limited partnership investment fund that invests in early stage, privately owned companies in the military, commercial and disruptive technology sectors. We account for our investment using the equity method of accounting. Our share of the fund’s operating losses was $0.6 million for the three- and nine-month periods ended June 30, 2020, and are included in other income (expense), net in our Condensed Consolidated Statements of Operations. Our share of the fund’s operating results was not material for the three- and nine-month periods ended June 30, 2019. Our investment balance is included within other assets in our Condensed

Consolidated Statements of Operations and amounted to $4.9 million and $5.5 million as of June 30, 2020 and September 30, 2019, respectively.

We did not have any significant non-financial assets or liabilities measured at fair value on a non-recurring basis in the first three quarters of fiscal 2020 or fiscal 2019 other than assets and liabilities acquired in business acquisitions described in Note 3 and the RSUs that contain performance and market-based vesting criteria described in Note 12.

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Financing Arrangements

9 Months Ended

Jun. 30, 2020

Financing Arrangements

Financing Arrangements

Note 9 — Financing Arrangements

At September 30, 2019, we had $200.0 million of outstanding senior unsecured notes bearing interest rates ranging from 3.35% to 3.93% as well as $226.5 million outstanding under an $800.0 million committed revolving credit agreement with a group of financial institutions. On March 27, 2020, we repaid and extinguished the remaining principal balance of $189.3 million of senior unsecured notes then outstanding and recognized a loss on debt extinguishment of $16.1 million, consisting of a $15.9 million make-whole payment to the note holders and a write-off of previously capitalized debt issuance costs of $0.2 million.

On March 27, 2020, we also executed a Fifth Amended and Restated Credit Agreement (the “Credit Facility”) with a group of financial institutions. The Credit Facility provided for a new term loan in the aggregate amount of $450.0 million (the “Term Loan”) and increased our existing revolving line of credit limit (the “Revolving Line of Credit”) from $800.0 million to $850.0 million. The commitments under the Credit Facility will mature on March 27, 2025 and bear interest generally at the LIBOR rate plus a margin that ranges between 1.00% and 2.00%. At June 30, 2020, the weighted average interest rate on outstanding borrowings under the Credit Facility was 2.18%. The Credit Facility is unsecured, but it is required to be guaranteed by certain significant domestic subsidiaries of Cubic.

On April 1, 2020, we entered into pay-fixed/receive-variable interest rate swaps with a group of financial institutions to mitigate the variable interest rate risk associated with the Credit Facility. The interest rate swaps contain forward starting notional principal amounts which align with our fixed repayment schedules under the Credit Facility and have a fixed interest rate of LIBOR plus a margin of approximately 74 basis points. At June 30, 2020, the outstanding notional principal amounts on open interest rate swaps were $550.0 million. See Note 8 for a description of the measurement of fair value of our derivative financial instruments.

Debt issuance and modification costs of $2.5 million were incurred in connection with the execution of the Credit Facility and are recorded as a reduction to the related liability on our Condensed Consolidated Balance Sheets and are being amortized as interest expense using the effective interest method over the stated term of the Credit Facility. At June 30, 2020, our total debt issuance costs had an unamortized balance of $4.9 million.

The available credit under our Revolving Line of Credit is reduced by any letters of credit issued under the Credit Facility. As of June 30, 2020, there were $447.2 million of borrowings under the Term Loan and $277.0 million of borrowings under the Revolving Line of Credit. Letters of credit outstanding under the Credit Facility totaled $94.0 million at June 30, 2020, which reduced our available line of credit to $479.0 million. The $94.0 million of letters of credit includes both financial letters of credit and performance guarantees.

As of June 30, 2020, we had letters of credit and bank guarantees outstanding totaling $101.4 million, which includes the $94.0 million of letters of credit issued under the Revolving Line of Credit and $7.4 million of letters of credit issued under other facilities. The $101.4 million of letters of credit and bank guarantees includes $96.9 million that guarantees either our performance or customer advances under certain contracts and financial letters of credit and $4.5 million that primarily guarantees 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 have entered into a short-term borrowing arrangement in the United Kingdom in the amount of £20.0 million British Pounds (equivalent to approximately $24.8 million at June 30, 2020) to help meet the short-term working capital requirements of our subsidiary located in the United Kingdom. At June 30, 2020, no amounts were outstanding under this borrowing arrangement.

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 June 30, 2020 was $22.3 million and is classified as restricted cash in our Condensed Consolidated Balance Sheets.

The terms of the Credit Facility contain financial covenants setting a maximum total ratio of debt to adjusted earnings before interest, taxes, depreciation and amortization and a minimum interest coverage ratio. In addition, the terms contain covenants that restrict, among other things, our ability to sell assets, incur indebtedness, make investments, grant liens, pay dividends and make other restricted payments. As of June 30, 2020, we were in compliance with all covenants under the Credit Facility.

In December 2018, we completed an underwritten public offering of 3,795,000 shares of our common stock, including the exercise of the underwriters’ option to purchase additional shares. All shares were offered by us at a price to the public of $60.00 per share. Net proceeds were $215.8 million, after deducting underwriting discounts and commissions and offering expenses in the aggregate of $11.9 million. We used the net proceeds from the offering to repay a portion of our outstanding borrowings under our Revolving Line of Credit which was used to finance the acquisition of Trafficware and for general corporate purposes.

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 accrued compensation and current liabilities in our Condensed Consolidated Balance Sheets amounted to $6.8 million at June 30, 2020 and $7.4 million at September 30, 2019.

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Leases

9 Months Ended

Jun. 30, 2020

Leases

Leases

Note 10 — Leases

We adopted ASC 842 on October 1, 2019. See “Note 1—Recently Adopted Accounting Pronouncements” for the impacts of the adoption of ASC 842. Our primary involvement with leases is as a lessee where we lease properties to support our business. A majority of our leases are operating leases of office space. For these leases, we have elected to account for the lease and non-lease components together as a single lease component. Our operating leases expire at various dates through 2030 without taking into consideration available renewal options, and many such leases require variable lease payments by us for property taxes, insurance premiums, common area maintenance and other costs. Certain of these leases also have extension or termination options, and we assess the likelihood of exercising such options. If it is reasonably certain that we will exercise the options, we include the impact in the measurement of our right-of-use assets and lease liabilities.

Our right-of-use assets for operating leases are included in operating lease right-of-use-assets on our Condensed Consolidated Balance Sheets. Our lease liabilities for operating leases are included in other current liabilities for the current portion and in operating lease liabilities for the long-term portion. We use our incremental borrowing rate in determining the present value of lease payments. Our operating lease expense is included in costs and expenses in our consolidated statements of operations. Total operating lease expense consists of operating lease cost, which is recognized on a straight-line basis over the lease term, and variable lease cost, which is recognized based on actual amounts incurred. We also sublease certain immaterial properties and sublease income is included as a reduction of rental expense.

The following tables present our operating leases, related lease expenses and other information (dollars in millions):

Operating Lease Portfolio

	June 30,
	2020
Right-of-use assets	$	82.1
Lease liabilities		92.0
Weighted average remaining lease term		7.0 years
Weighted average discount rate		3.01%

Operating Lease Expense

	Three Months Ended		Nine Months Ended
	June 30,		June 30,
	2020		2020
Operating lease expense	$	4.9	$	14.3
Short-term lease expense		0.1		0.2
Variable lease expense		0.7		2.5
Total lease expense	$	5.7	$	17.0

Other Information

	Nine Months Ended
	June 30,
	2020
Cash paid for amounts included in the measurement of lease liabilities	$	13.7
Right-of-use assets obtained in exchange for new operating lease liabilities		18.9

Maturities of Lease Liabilities

Our future minimum lease commitments of our operating leases on an undiscounted basis, reconciled to the lease liability at June 30, 2020 were as follows (in millions):

2020	$	4.7
2021		17.6
2022		15.3
2023		13.4
2024		12.6
Thereafter		39.1
Total lease payments		102.7
Less: imputed interest		(10.7)
Present value of operating lease liabilities	$	92.0

In fiscal 2019, we entered into agreements related to the construction and leasing of two buildings on our existing corporate campus in San Diego, California. Under these agreements, we will act as the construction agent, a financial institution will own the buildings and we will lease the property for a term of five years upon their completion expected in December 2020. The terms of these agreements include provisions that require or limit, among other financial ratios and measurements, the permitted levels of debt, coverage of cash interest expense, and under certain circumstances, payments of dividends or other distributions to shareholders. As of June 30, 2020, we were in compliance with all covenants included in these agreements.

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Pension Plans

9 Months Ended

Jun. 30, 2020

Pension Plans

Pension Plans

Note 11 — Pension Plans

The components of net periodic pension cost (benefit) are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Service cost	$	160	$	150	$	489	$	449
Interest cost		1,490		1,915		4,528		5,746
Expected return on plan assets		(2,904)		(3,020)		(8,796)		(9,063)
Amortization of actuarial loss		948		530		2,917		1,592
Administrative expenses		84		97		253		291
Net pension benefit	$	(222)	$	(328)	$	(609)	$	(985)

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Stockholders' Equity

9 Months Ended

Jun. 30, 2020

Stockholders' Equity

Stockholders' Equity

Note 12 - Shareholders’ Equity

Long-Term Equity Incentive Plan

Under our long-term equity incentive plan, we have provided participants with three general categories of grant awards: (a) RSUs with time-based vesting, (b) RSUs with performance-based vesting, and (c) RSUs with performance and market-based vesting.

Each RSU with time-based vesting or performance-based vesting represents a contingent right to receive one share of our common stock. Each RSU with performance and market-based vesting represents a contingent right to receive up to 1.25 shares of our common stock. Dividend equivalent rights accrue with respect to the RSUs as dividends are paid on shares of our common stock and vest proportionately with the RSUs to which they relate. Vested shares are delivered to the recipient following each vesting date.

Time-based RSUs granted prior to fiscal 2020 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 with the Company through such vesting date. Time-based RSUs granted in fiscal 2020 generally vest in three equal installments on each of the three October 1 dates following the grant date, subject to the recipient’s continued service with the Company through such vesting date.

The performance-based RSUs granted to participants vest over three-year performance periods based on our achievement of certain revenue growth targets, earnings growth targets and return on equity targets established by the Compensation Committee of our Board of Directors (the “Compensation Committee”) over the performance periods, subject to the recipient’s continued service with the Company through the end of the respective performance periods. The level at which we perform against scalable targets over the performance periods will determine the percentage of the RSUs that will ultimately vest.

In fiscal 2019 and fiscal 2020, the Compensation Committee granted RSUs which contained both performance- and market-based vesting criteria. The performance- and market-based RSUs granted to participants vest over three-year performance periods based on our achievement of revenue growth targets and earnings growth targets subject to the recipient’s continued service with the Company through the end of the respective performance periods. For these RSUs, the relative total stock return (“TSR”) for shares of our common stock as compared to the Russell 2000 Index (the “Index”) over the performance period will result in a multiplier for the number of RSUs that will vest. If the TSR performance exceeds the performance of the Index based on a scale established by the Compensation Committee, the multiplier will result in up to an additional 25% of RSUs vesting at the end of the performance period. If the TSR performance is below the performance of the Index based on a scale established by the Compensation Committee, the multiplier would result in a reduction of up to 25% of these RSUs vesting at the end of the performance period. For the performance- and market-based RSUs granted in fiscal 2020, if our absolute TSR is negative for the three-year performance period, the TSR multiplier shall not exceed 100%, regardless of the performance relative to the Index.

During fiscal 2019, the Compensation Committee amended the Company’s long-term equity incentive plan to provide accelerated vesting for retirement age participants. Under the amended plan, participants who are 60 years of age, and have achieved 10 years of continuous service, are eligible for accelerated vesting of their RSUs. Participants who have reached the retirement age criteria must generally provide us with a one-year notice of retirement. For participants who have reached the retirement age criteria, expense is recognized over the adjusted service period.

The grant date fair value of each RSU with time-based vesting or performance-based vesting is the fair market value of one share of our common stock at the grant date.

The grant date fair value of each RSU with performance- and market-based vesting was calculated using a Monte Carlo simulation valuation method. Under this method, the prices of the Index and shares of our common stock were simulated through the end of the performance period. The correlation matrix between shares of our common stock and the Index as well as the corresponding return volatilities were developed based upon an analysis of historical data. The following tables include the assumptions used for the valuation of the RSUs with performance and market-based vesting that were granted during fiscal 2019 and fiscal 2020:

	RSUs granted during fiscal 2020
Date of grant	November 29, 2019
Grant date fair value per RSU	$52.51
Performance period begins	November 29, 2019
Performance period ends	September 30, 2022
Risk-free interest rate	1.6%
Expected volatility	41%
	RSUs granted during fiscal 2019
Date of grant	November 21, 2018	April 1, 2019
Grant date fair value per RSU	$67.40	$59.29
Performance period begins	November 21, 2018	April 1, 2019
Performance period ends	September 30, 2021	September 30, 2021
Risk-free interest rate	2.8%	2.8%
Expected volatility	34%	34%

At June 30, 2020, 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 511,508 RSUs with time-based vesting, 106,772 RSUs with performance-based vesting, and 194,237 RSUs with performance- and market-based vesting.

The following table summarizes our RSU activity:

	Unvested RSUs with Time-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2019	422,094	$	58.84
Granted	383,661		57.75
Vested	(162,253)		55.66
Forfeited	(51,331)		60.04
Unvested at June 30, 2020	592,171	$	58.90

	Unvested RSUs with Performance-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2019	315,262	$	55.67
Granted	—		—
Vested	—		—
Forfeited	(177,492)		47.57
Unvested at June 30, 2020	137,770	$	61.40

	Unvested RSUs with Performance- and Market-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2019	227,402	$	66.77
Granted	346,826		52.51
Vested	—		—
Forfeited	(51,088)		59.03
Unvested at June 30, 2020	523,140	$	58.07

We recorded non-cash compensation expense related to stock-based awards as follows (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of sales	$	857	$	498	$	2,139	$	1,236
Selling, general and administrative		4,555		3,904		13,132		9,524
	$	5,412	$	4,402	$	15,271	$	10,760

As of June 30, 2020, there was $50.4 million of unrecognized compensation expense 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 $48.5 million, which is expected to be recognized over a weighted average period of 1.5 years.

We 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 in each of fiscal 2019 and fiscal 2020. To the extent the actual forfeiture rate is different from what we have estimated, compensation expense related to these awards will be different from our expectations.

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Income Taxes

9 Months Ended

Jun. 30, 2020

Income Taxes

Income Taxes

Note 13 – Income Taxes

The Tax Cuts and Jobs Act, as enacted by the U.S. federal government in December 2017, fundamentally changed the taxation of multinational corporations in the United States. Significant provisions impacting Cubic include global intangible low-taxed income, a new tax on income of foreign corporations and base-erosion and anti-abuse tax (“BEAT”). BEAT provisions impose an alternative tax on applicable taxpayers with base-erosion payments greater than a de minimis threshold. After considering available tax planning opportunities, we made a reasonable forecast of BEAT expense for the third quarter of fiscal 2020.

On March 27, 2020, the U.S. federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act was intended to assist with the stabilization of the U.S. domestic economy during the COVID-19 crisis and includes relief provisions for the U.S. corporate income tax system, including temporary changes to the prior and future utilization of net operation losses, acceleration of depreciation for certain qualifying improvements and relaxed limitations on the deductibility of interest. At June 30, 2020, we have made reasonable estimates of the impact of the CARES Act on our condensed consolidated statements of operations and our condensed consolidated statements of cash flows.

The quarterly forecast of our annual effective tax rate is impacted by numerous factors including income fluctuations by tax jurisdiction throughout the year, the level of intercompany transactions, applicability of new tax regimes and the impact of acquisitions. For the three-month period ended June 30, 2020, we concluded it is more appropriate to use a blend of the discrete effective tax rate method for U.S. operations and the estimated annual effective tax rate method for foreign operations to determine income tax expense for the period.

The income tax expense recognized on pre-tax loss from continuing operations for the three- and nine-month periods ended June 30, 2020 resulted in effective tax rates of 37% and 13%, respectively, which differ from the effective tax rates of 5% and negative 166% for the three- and nine-month periods ended June 30, 2019, respectively. The variability in effective tax rates primarily relates to the difference in jurisdictional mix of earnings, increased U.S. BEAT cash tax expense, discrete benefits related to the release of a portion of the existing U.S. deferred tax valuation allowance due to deferred tax liabilities acquired in business combinations, as well as cash tax benefits resulting from the net operating loss carryback provisions of the CARES Act.

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Derivative Instruments and Hedging Activities

9 Months Ended

Jun. 30, 2020

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

Note 14 — 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 five 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, both the effective and ineffective portions of a change in the fair value of the derivative are recognized as a component of accumulated other comprehensive income (loss) until the underlying hedged item is recognized in earnings, or the forecasted transaction is no longer probable of occurring. 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 noncurrent assets or liabilities, depending on the realized and unrealized gain or loss position of the hedged contract at the balance sheet date, and the timing of future cash flows. The cash flows from derivatives treated as hedges are classified in the condensed consolidated statements of cash flows in the same category as the item being hedged.

The following table shows the notional principal amounts of our outstanding derivative instruments as of June 30, 2020 and September 30, 2019 (in thousands):

	Notional Principal
	June 30, 2020		September 30, 2019
Instruments designated as accounting hedges:
Foreign currency forwards	$	112,508	$	143,164
Interest rate swaps		645,000		95,000
Instruments not receiving hedge accounting treatment:
Foreign currency forwards	$	2,218	$	24,220

Included in the amounts not receiving hedge accounting treatment at June 30, 2020 and September 30, 2019 were non-designated foreign currency forwards with notional principal amounts of $2.2 million and $14.0 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 have approximately offset an equal and opposite amount of gains or losses related to the foreign currency exposure. These foreign currency forward contracts resulted in unrealized gains of $1.1 million and unrealized losses of $0.2 million for the three months ended June 30, 2020 and 2019, respectively, and resulted in unrealized losses of $0.6 million and $0.3 million for the nine months ended June 30, 2020 and 2019, respectively. Unrealized gains or losses are included in other income (expense), net in our condensed consolidated statements of operations.

In conjunction with the agreements related to the construction and leasing of two new buildings on our existing corporate campus, in August 2019, we entered into pay-fixed/receive-variable interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with these future lease obligations. The interest rate swaps contain forward starting notional principal amounts of $95.0 million which align with our expected lease payments. These interest rate swaps were designated as effective cash flow hedges and as such, unrealized gains (losses) are included in accumulated other comprehensive income (loss). Unrealized losses as a result of changes in the fair value of the interest rate swaps were $2.5 million and $4.7 million for the three and nine months ended June 30, 2020, respectively.

On April 1, 2020, in conjunction with the Credit Facility described in Note 9, we entered into pay-fixed/receive-variable interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with the Credit Facility. The interest rate swaps contain forward starting notional principal amounts of $550.0 million and were designated as effective cash flow hedges, and as such, unrealized gains (losses) are included in accumulated other comprehensive income (loss). Unrealized losses as a result of changes in the fair value of the interest rate swaps were $7.8 million for the three and nine months ended June 30, 2020.

The notional principal amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of our exposure to credit or market loss. Credit risk represents our 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. Our exposure to credit loss and market risk will vary over time as a function of interest and currency exchange rates. The amount of credit risk from derivative instruments and hedging activities was not material for the periods ended June 30, 2020 or September 30, 2019. Although the table above reflects the notional principal amounts of our 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 present 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 June 30, 2020 or September 30, 2019.

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 (in thousands):

		Fair Value
	Balance Sheet Location	June 30, 2020		September 30, 2019
Asset derivatives:
Foreign currency forwards	Other current assets	$	1,761	$	2,635
Foreign currency forwards	Other assets		624		619
Forward starting swap	Other assets		—		240
Total		$	2,385	$	3,494
Liability derivatives:
Foreign currency forwards	Accrued compensation and current liabilities	$	4,365	$	529
Foreign currency forwards	Other noncurrent liabilities		1,118		228
Forward starting swap	Other noncurrent liabilities		12,224		—
Total		$	17,707	$	757

The tables below present gains and losses recognized in other comprehensive income (loss) related to derivative financial instruments designated as cash flow hedges, as well as the amount of gains and losses reclassified into earnings (in thousands):

	Three Months Ended
	June 30, 2020				June 30, 2019
	Gains (losses)		Gains (losses)				Gains (losses)
	recognized in		reclassified into		Gains (losses)		reclassified into
Derivative Type	OCI		earnings		recognized in OCI		earnings
Foreign currency forwards	$	(18,521)	$	2,125	$	661	$	94
	Nine Months Ended
	June 30, 2020				June 30, 2019
	Gains (losses)		Gains (losses)				Gains (losses)
	recognized in		reclassified into		Gains (losses)		reclassified into
Derivative Type	OCI		earnings		recognized in OCI		earnings
Foreign currency forwards	$	(18,696)	$	3,398	$	(134)	$	466

Foreign currency forwards designated as accounting hedges (including both fair value and cash flow hedges) had realized gains of $2.5 million and $5.4 million for the three- and nine-month periods ended June 30, 2020, respectively.

The amount of unrealized gains and losses from derivative instruments and hedging activities classified as not highly effective did not have a material impact on the results of operations for the three- and nine-month periods ended June 30, 2020 or 2019. The amount of estimated unrealized net gains from cash flow hedges which are expected to be reclassified to earnings in the next 12 months is $1.9 million, net of income taxes.

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Segment Information

9 Months Ended

Jun. 30, 2020

Segment Information

Segment Information

Note 15 — 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. We evaluate performance and allocate resources based on total segment operating income or loss. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in Note 1. Intersegment sales and transfers are immaterial and are eliminated in consolidation.

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

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Sales:
Cubic Transportation Systems	$	215.5	$	212.7	$	601.8	$	595.2
Cubic Mission Solutions		69.0		95.0		167.2		203.3
Cubic Global Defense Systems		65.9		75.0		231.8		226.8
Total sales	$	350.4	$	382.7	$	1,000.8	$	1,025.3
Operating income (loss):
Cubic Transportation Systems	$	50.9	$	17.2	$	77.8	$	37.0
Cubic Mission Solutions		(21.3)		1.3		(67.6)		(12.1)
Cubic Global Defense Systems		6.1		1.9		18.1		10.0
Unallocated corporate expenses		(11.0)		14.3		(40.0)		(7.3)
Total operating income (loss)	$	24.7	$	34.7	$	(11.7)	$	27.6
Depreciation and amortization:
Cubic Transportation Systems	$	7.1	$	6.9	$	21.6	$	24.1
Cubic Mission Solutions		13.3		6.0		34.3		17.2
Cubic Global Defense Systems		1.9		1.7		5.2		5.4
Corporate		1.1		0.7		2.7		2.2
Total depreciation and amortization	$	23.4	$	15.3	$	63.8	$	48.9

Unallocated corporate expenses include costs of strategic and information technology (“IT”) system resource planning as part of our One Cubic Initiatives, which totaled $0.3 million in the third quarter of fiscal 2020 compared to $2.4 million in the third quarter of fiscal 2019. Unallocated corporate costs included $3.3 million of costs incurred in the first nine months of fiscal 2020 for strategic and IT system resource planning compared to $6.3 million in the first nine months of fiscal 2019.

Disaggregation of Total Net Sales: We disaggregate our sales from contracts with customers by end customer, contract type, deliverable type and revenue recognition method for each of our segments, as we believe these factors can affect the nature, amount, timing and uncertainty of our revenue and cash flows.

Sales by Geographic Region (in millions):

	Three months ended June 30, 2020								Nine months ended June 30, 2020
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
United States	$	134.7	$	67.0	$	32.2	$	233.9	$	342.5	$	161.3	$	78.3	$	582.1
United Kingdom		43.3		0.6		4.7		48.6		140.8		1.3		13.6		155.7
Australia		30.2		0.7		8.1		39.0		96.7		2.4		21.4		120.5
Far East/Middle East		0.3		0.3		12.4		13.0		2.2		0.8		84.0		87.0
Other		7.0		0.4		8.5		15.9		19.6		1.4		34.5		55.5
Total sales	$	215.5	$	69.0	$	65.9	$	350.4	$	601.8	$	167.2	$	231.8	$	1,000.8

	Three months ended June 30, 2019								Nine months ended June 30, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
United States	$	128.9	$	94.0	$	31.6	$	254.5	$	327.3	$	200.1	$	101.3	$	628.7
United Kingdom		47.5		0.2		7.7		55.4		151.6		1.3		16.3		169.2
Australia		30.9		0.3		8.1		39.3		91.1		0.5		20.7		112.3
Far East/Middle East		0.7		0.1		15.2		16.0		8.5		0.7		45.8		55.0
Other		4.7		0.4		12.4		17.5		16.7		0.7		42.7		60.1
Total sales	$	212.7	$	95.0	$	75.0	$	382.7	$	595.2	$	203.3	$	226.8	$	1,025.3

Sales by End Customer: We are the prime contractor for the vast majority of our sales. The table below presents total net sales disaggregated by end customer (in millions):

	Three months ended June 30, 2020								Nine months ended June 30, 2020
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
U.S. Federal Government and State and Local Municipalities	$	127.8	$	64.9	$	32.4	$	225.1	$	325.4	$	155.1	$	85.4	$	565.9
Other		87.7		4.1		33.5		125.3		276.4		12.1		146.4		434.9
Total sales	$	215.5	$	69.0	$	65.9	$	350.4	$	601.8	$	167.2	$	231.8	$	1,000.8

	Three months ended June 30, 2019								Nine months ended June 30, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
U.S. Federal Government and State and Local Municipalities	$	123.1	$	91.8	$	37.4	$	252.3	$	310.7	$	195.6	$	107.3	$	613.6
Other		89.6		3.2		37.6		130.4		284.5		7.7		119.5		411.7
Total sales	$	212.7	$	95.0	$	75.0	$	382.7	$	595.2	$	203.3	$	226.8	$	1,025.3

Sales by Contract Type: Substantially all of our contracts are fixed-price type contracts. Sales included in “Other” contract types represent cost-plus and time-and-material type contracts.

On a fixed-price type contract, we agree to perform the contractual statement of work for a predetermined sales price. Certain of our fixed-price contracts include compensation for bonuses, transactional variable based fees or other similar provisions. On a cost-plus type contract, we are paid our allowable incurred costs plus a profit which can be fixed or variable depending on the applicable contract’s fee arrangement up to funding levels that are predetermined by the customer. On a time-and-material type contract, we are paid on the basis of direct labor hours expended at specified fixed-price hourly rates (that include wages, overhead, allowable general and administrative expenses and profit) and materials at cost. The table below presents total net sales disaggregated by contract type (in millions):

	Three months ended June 30, 2020								Nine months ended June 30, 2020
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Fixed Price	$	213.1	$	61.8	$	57.2	$	332.1	$	592.4	$	144.0	$	207.1	$	943.5
Other		2.4		7.2		8.7		18.3		9.4		23.2		24.7		57.3
Total sales	$	215.5	$	69.0	$	65.9	$	350.4	$	601.8	$	167.2	$	231.8	$	1,000.8

	Three months ended June 30, 2019								Nine months ended June 30, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Fixed Price	$	210.5	$	93.2	$	69.5	$	373.2	$	586.3	$	199.6	$	209.4	$	995.3
Other		2.2		1.8		5.5		9.5		8.9		3.7		17.4		30.0
Total sales	$	212.7	$	95.0	$	75.0	$	382.7	$	595.2	$	203.3	$	226.8	$	1,025.3

Sales by Deliverable Type: The table below presents total net sales disaggregated by the type of deliverable, which is determined by us at the performance obligation level (in millions):

	Three months ended June 30, 2020								Nine months ended June 30, 2020
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Product	$	124.2	$	59.7	$	37.1	$	221.0	$	317.4	$	141.6	$	150.2	$	609.2
Service		91.3		9.3		28.8		129.4		284.4		25.6		81.6		391.6
Total sales	$	215.5	$	69.0	$	65.9	$	350.4	$	601.8	$	167.2	$	231.8	$	1,000.8

	Three months ended June 30, 2019								Nine months ended June 30, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Product	$	122.8	$	87.3	$	45.8	$	255.9	$	328.7	$	183.9	$	148.3	$	660.9
Service		89.9		7.7		29.2		126.8		266.5		19.4		78.5		364.4
Total sales	$	212.7	$	95.0	$	75.0	$	382.7	$	595.2	$	203.3	$	226.8	$	1,025.3

Revenue Recognition Method: Sales recognized at a point in time are typically for standard goods with a short production cycle and are recognized when the customer obtains control, which is generally upon delivery and acceptance. Sales for services and for products with a long production cycle, which often include significant customization and development, are recognized over time. The table below presents total net sales disaggregated based on the revenue recognition method applied (in millions):

	Three months ended June 30, 2020								Nine months ended June 30, 2020
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Point in Time	$	26.5	$	41.4	$	2.9	$	70.8	$	72.3	$	93.9	$	4.8	$	171.0
Over Time		189.0		27.6		63.0		279.6		529.5		73.3		227.0		829.8
Total sales	$	215.5	$	69.0	$	65.9	$	350.4	$	601.8	$	167.2	$	231.8	$	1,000.8

	Three months ended June 30, 2019								Nine months ended June 30, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Point in Time	$	29.7	$	76.0	$	1.0	$	106.7	$	68.2	$	169.2	$	2.9	$	240.3
Over Time		183.0		19.0		74.0		276.0		527.0		34.1		223.9		785.0
Total sales	$	212.7	$	95.0	$	75.0	$	382.7	$	595.2	$	203.3	$	226.8	$	1,025.3

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Restructuring Costs

9 Months Ended

Jun. 30, 2020

Restructuring Costs

Restructuring Costs

Note 16 — Restructuring Costs

In fiscal 2019, we initiated projects to restructure and modify our supply chain strategy, functional responsibilities, methods, capabilities, processes and rationalize suppliers with the goal of reducing ongoing costs and increasing the efficiencies of our worldwide procurement organization. The majority of the costs associated with these restructuring

activities are related to consultants that we have engaged in connection with these efforts, and such costs have been recognized by our corporate entity. The total costs of this restructuring project have been incurred and these efforts have been materially completed as of the third quarter of fiscal 2020.

In the first nine months of fiscal 2019 and 2020, our Corporate segment incurred additional restructuring charges, consisting primarily of employee severance costs related to headcount reductions initiated to optimize our cost positions. The total costs of each of these restructuring plans initiated thus far are not expected to be significantly greater than the charges incurred to date.

Restructuring charges incurred by our business segments were as follows (in millions):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Restructuring costs:
Cubic Transportation Systems	$	0.2		1.4	$	0.7	$	2.2
Cubic Mission Solutions		0.4		—		0.4		—
Cubic Global Defense Systems		0.7		2.6		1.3		2.7
Unallocated corporate expenses		2.1		4.5		6.4		7.4
Total restructuring costs	$	3.4	$	8.5	$	8.8	$	12.3

The following table presents a rollforward of our restructuring liability as of June 30, 2020, which is included within accrued compensation and other current liabilities within our condensed consolidated balance sheets (in millions):

	Restructuring Liability		Restructuring Liability
	Employee Separation and Other		Consulting Costs
Balance as of September 30, 2019	$	2.0	$	0.8
Accrued costs		7.0		1.8
Cash payments		(8.3)		(2.2)
Balance as of June 30, 2020	$	0.7	$	0.4

Certain restructuring costs are based upon estimates. Actual amounts paid may ultimately differ from these estimates. If additional costs are incurred or recognized amounts exceed costs, such changes in estimates will be recognized when incurred.

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Legal Matters

9 Months Ended

Jun. 30, 2020

Legal Matters

Legal Matters

Note 17 — Legal Matters

We consider all current legal matters to be ordinary proceedings incidental to our business. We believe the outcome of these proceedings will not have a materially adverse effect on our financial position, results of operations or cash flows.

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Basis for Presentation (Policies)

9 Months Ended

Jun. 30, 2020

Basis for Presentation

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (commonly known as Accounting Standards Codification (“ASC”) Topic 842) (“ASC 842”). Under the guidance, lessees are required to recognize the following for all leases (with the exception of short-term leases): (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. We adopted ASC 842 on October 1, 2019 using the optional transition method and, as a result, did not recast prior period unaudited condensed comparative financial statements. All prior period amounts and disclosures are presented under ASC 840, Leases, the legacy lease accounting guidance. We elected the practical expedients which provide that entities need not reassess whether existing contracts contain a lease, lease classification of existing leases, or the treatment of initial direct costs on existing leases. On October 1, 2019, we recorded a right-of-use asset of $80.0 million and a lease liability of $88.0 million in our consolidated balance sheets. We also recorded a $0.8 million decrease in retained earnings related to the adoption of ASC 842. The adoption of the standard did not have a material impact on our consolidated statements of operations or consolidated statements of cash flows.

Recent Accounting Pronouncements – Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which requires companies to record an allowance for expected credit losses over the contractual term of financial assets, including short-term trade receivables and contract assets, and expands disclosure requirements for credit quality of financial assets. The amendments in this ASU are effective for us in our annual period beginning October 1, 2020. We do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). 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 amount 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. The adoption of ASU 2017-04 will have no immediate impact on our consolidated financial statements and will only have the potential to impact the amount of any goodwill impairment recorded after the adoption thereof.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance modifies the disclosure requirements on fair value measurements. The amendments in this ASU are effective for us in our annual period beginning October 1, 2020 and interim periods within that annual period. We do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Defined Benefit Plans - Disclosure Framework (Topic 715), which modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement benefit plans. The guidance removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant. The amendments in this ASU are effective for us in our annual period beginning October 1, 2020. We do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that Is a Service Contract (Subtopic 350-24), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments in this ASU are effective for us in our annual period beginning October 1, 2020. We do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) (“Topic 740”), which removes certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU are effective for us in our annual period beginning October 1, 2021 and interim periods within that annual period. We are currently evaluating the impact of this standard on our consolidated financial statements.

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Acquisitions and Divestitures (Tables)

9 Months Ended

Jun. 30, 2020

Acquisitions

Schedule of unaudited pro forma information

The following unaudited pro forma information presents our consolidated results of operations as if Pixia, Nuvotronics, Delerrok, GRIDSMART and Trafficware had been included in our consolidated results since October 1, 2018 (in millions):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Net sales	$	350.4	$	384.4	$	1,005.0	$	1,050.2
Net income (loss)		(1.4)		14.4		(69.5)		(18.8)

Schedule of changes in the carrying amount of goodwill

Changes in goodwill for the nine months ended June 30, 2020 were as follows for each of our reporting units (in thousands):

	Cubic Transportation		Cubic Mission		Cubic Global
	Systems		Solutions		Defense Systems		Total
Net balances at September 30, 2019	$	254,592	$	181,424	$	142,081	$	578,097
Acquisitions		30,621		173,531		—		204,152
Adjustments		603		—		—		603
Foreign currency exchange rate changes		329		85		102		516
Net balances at June 30, 2020	$	286,145	$	355,040	$	142,183	$	783,368

Cubic Mission Solutions

Acquisitions

Schedule of Business Combination Operating Results

Pixia’s and Nuvotronics’ sales and results of operations included in our operating results were as follows (in millions):

	Three Months Ended
	June 30, 2020				June 30, 2019
	Pixia		Nuvotronics		Pixia		Nuvotronics
Sales	$	4.2	$	3.8	$	—	$	3.6
Operating loss		(5.9)		(2.9)		—		(3.2)
Net loss after taxes		(5.9)		(2.9)		—		(3.2)
	Nine Months Ended
	June 30, 2020				June 30, 2019
	Pixia		Nuvotronics		Pixia		Nuvotronics
Sales	$	5.3	$	9.8	$	—	$	4.3
Operating loss		(15.9)		(7.8)		—		(4.9)
Net loss after taxes		(15.9)		(7.8)		—		(4.9)

Schedule of Business Combination components of operating results

Pixia’s and Nuvotronics’ operating results above included the following amounts (in millions):

	Three Months Ended
	June 30, 2020				June 30, 2019
	Pixia		Nuvotronics		Pixia		Nuvotronics
Amortization	$	7.2	$	0.9	$	—	$	0.6
Acquisition-related expenses		1.3		0.3		—		1.1
	Nine Months Ended
	June 30, 2020				June 30, 2019
	Pixia		Nuvotronics		Pixia		Nuvotronics
Amortization	$	14.3	$	3.1	$	—	$	0.7
Acquisition-related expenses		3.3		1.6		—		2.9
Gain for changes in fair value of contingent consideration		—		(4.2)		—		—

Schedule of estimated amortization expense related to acquisition

The estimated amortization expense related to the intangible assets recorded in connection with our acquisitions of Pixia and Nuvotronics is as follows (in millions):

Year Ending
September 30,	Pixia		Nuvotronics
2020	$	21.5	$	4.0
2021		28.7		3.0
2022		12.7		3.0
2023		7.3		2.9
2024		7.3		2.7
Thereafter		10.5		10.1

Cubic Transportation Systems

Acquisitions

Schedule of Business Combination Operating Results

The sales and results of operations from Delerrok, GRIDSMART and Trafficware included in our operating results were as follows (in millions):

	Three Months Ended
	June 30, 2020						June 30, 2019
	Delerrok		GRIDSMART		Trafficware		Delerrok		GRIDSMART		Trafficware
Sales	$	0.4	$	8.2	$	14.4	$	—	$	7.7	$	15.8
Operating income (loss)		(0.2)		1.5		(1.3)		—		0.7		(1.0)
Net income (loss) after taxes		(0.2)		1.5		(1.3)		—		0.7		(1.0)
	Nine Months Ended
	June 30, 2020						June 30, 2019
	Delerrok		GRIDSMART		Trafficware		Delerrok		GRIDSMART		Trafficware
Sales	$	1.1	$	20.1	$	37.4	$	—	$	14.0	$	38.0
Operating income (loss)		(1.2)		0.7		(4.5)		—		(1.3)		(9.5)
Net income (loss) after taxes		(1.2)		0.7		(4.5)		—		(1.3)		(9.5)

Schedule of Business Combination components of operating results

The operating results above included the following amounts (in millions):

	Three Months Ended
	June 30, 2020						June 30, 2019
	Delerrok		GRIDSMART		Trafficware		Delerrok		GRIDSMART		Trafficware
Amortization	$	0.4	$	1.3	$	2.8	$	—	$	1.3	$	2.8
Acquisition-related expenses		0.5		0.2		0.4		—		0.6		0.9
(Gain) loss for changes in fair value of contingent consideration		(1.1)		—		—		—		—		—
	Nine Months Ended
	June 30, 2020						June 30, 2019
	Delerrok		GRIDSMART		Trafficware		Delerrok		GRIDSMART		Trafficware
Amortization	$	0.9	$	4.0	$	8.5	$	—	$	2.7	$	12.4
Acquisition-related expenses		1.2		0.6		1.3		—		2.4		4.4
(Gain) loss for changes in fair value of contingent consideration		(1.1)		—		—		—		—		—

Schedule of estimated amortization expense related to acquisition

The estimated amortization expense related to the intangible assets recorded in connection with our acquisitions are as follows (in millions):

Year Ending
September 30,	Delerrok		GRIDSMART		Trafficware
2020	$	1.3	$	5.3	$	11.4
2021		1.7		3.9		11.4
2022		1.6		3.5		11.4
2023		1.6		3.5		6.4
2024		1.6		3.5		5.9
Thereafter		8.0		8.1		12.9

PIXIA Corp

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 assets acquired and liabilities assumed at the acquisition date (in millions):

Backlog	$	42.5
Customer relationships		25.5
Developed technology		14.1
Trade name		5.7
Accounts receivable, prepaids and other assets		4.0
Deferred taxes		(18.3)
Other net assets acquired (liabilities assumed)		(1.8)
Net identifiable assets acquired		71.7
Goodwill		173.5
Net assets acquired	$	245.2

Nuvotronics

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):

Technology	$	22.7
Trade name		1.5
Backlog		1.4
Non-compete agreements		0.5
Customer relationships		0.6
Accounts receivable and contract assets		2.6
Fixed assets		2.7
Accounts payable and accrued expenses		(1.8)
Deferred taxes		(3.2)
Other net assets acquired (liabilities assumed)		(0.6)
Net identifiable assets acquired		26.4
Goodwill		40.4
Net assets acquired	$	66.8

Delerrok Inc.

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):

Technology	$	14.9
Trade name		0.9
Accounts receivable		0.9
Other net assets acquired (liabilities assumed)		(0.2)
Deferred tax liability		(2.0)
Net identifiable assets acquired		14.5
Goodwill		30.6
Net assets acquired	$	45.1

GRIDSMART

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):

Technology	$	25.7
Customer relationships		3.6
Trade name		2.4
Inventory		4.3
Accounts receivable		1.7
Accounts payable and accrued expenses		(1.9)
Deferred taxes		(3.3)
Other net assets acquired		0.5
Net identifiable assets acquired		33.0
Goodwill		53.8
Net assets acquired	$	86.8

Trafficware

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):

Technology	$	43.3
Customer relationships		21.9
Backlog		4.8
Trade name		4.6
Accounts receivable		10.4
Inventory		9.9
Accounts payable and accrued expenses		(9.5)
Other net assets acquired (liabilities assumed)		(2.0)
Net identifiable assets acquired		83.4
Goodwill		153.8
Net assets acquired	$	237.2

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Variable Interest Entities (Tables)

9 Months Ended

Jun. 30, 2020

Variable Interest Entities

Schedule of summary of the consolidated net assets and liabilities

The assets and liabilities of Boston OpCo that are included in our condensed consolidated balance sheets are as follows:

	June 30,		September 30,
	2020		2019
	(in thousands)
Cash	$	743	$	347
Restricted cash		1,669		9,967
Other current assets		99		33
Long-term contracts financing receivable		191,042		115,508
Other noncurrent assets		—		1,419
Total assets	$	193,553	$	127,274
Trade accounts payable	$	175	$	25
Accrued compensation and other current liabilities		150		191
Due to Cubic		11,754		25,143
Other noncurrent liabilities		5,572		21,605
Long-term debt		155,493		61,994
Total liabilities	$	173,144	$	108,958
Total Cubic equity		(583)		(603)
Noncontrolling interests		20,992		18,919
Total liabilities and owners' equity	$	193,553	$	127,274

Schedule of revenue, operating profit, and other income/(expense), net

Boston OpCo’s results of operations included in our Condensed Consolidated Statements of Operations are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Revenue	$	17,585	$	3,233	$	20,632	$	7,519
Operating income		17,344		2,823		19,832		6,521
Other income (expense), net		(6,888)		(7,031)		(19,636)		(16,884)
Interest income		1,663		1,075		4,871		2,335
Interest expense		(1,710)		(829)		(4,864)		(1,939)

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Revenue Recognition (Tables)

9 Months Ended

Jun. 30, 2020

Schedule of contract assets and liabilities

Contract assets and contract liabilities were as follows (in thousands):

	June 30,		September 30,
	2020		2019
Contract assets	$	253,900	$	349,559
Contract liabilities	$	71,269	$	46,170

ASU 2014-09

Schedule of cumulative effect of changes due to adoption of ASC 606

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Operating income (loss)	$	19,297	$	(1,054)	$	5,499	$	(1,040)
Net income (loss) from continuing operations		18,596		(1,185)		5,103		(1,100)
Net income (loss) from continuing operations attributable to Cubic		4,826		(1,185)		(8,667)		(1,100)
Diluted earnings (loss) per share attributable to Cubic		0.15		(0.04)		(0.28)		(0.04)

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Net Income (Loss) Per Share (Tables)

9 Months Ended

Jun. 30, 2020

Net Income (Loss) Per Share

Schedule of computation of basic and diluted EPS

The weighted-average number of shares outstanding used to compute net income (loss) per common share were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Weighted average shares - basic		31,299		31,160		31,289		30,267
Effect of dilutive securities		—		89		—		65
Weighted average shares - diluted		31,299		31,249		31,289		30,332
Number of anti-dilutive securities		1,243		—		1,109		—

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Balance Sheet Details (Tables)

9 Months Ended

Jun. 30, 2020

Balance Sheet Details

Components of inventories

Inventories consist of the following (in thousands):

	June 30,		September 30,
	2020		2019
Finished products	$	16,825	$	10,905
Work in process and inventoried costs under long-term contracts		90,731		46,951
Materials and purchased parts		44,057		48,938
Net inventories	$	151,613	$	106,794

Components of property, plant and equipment

Significant components of property, plant and equipment are as follows (in thousands):

	June 30,		September 30,
	2020		2019
Land and land improvements	$	7,362	$	7,348
Buildings and improvements		48,628		48,191
Machinery and other equipment		125,656		107,297
Software		114,172		108,526
Leasehold improvements		20,346		17,064
Construction and internal-use software development in progress		24,308		16,814
Accumulated depreciation and amortization		(179,925)		(160,271)
	$	160,547	$	144,969

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Fair Value Of Financial Instruments (Tables)

9 Months Ended

Jun. 30, 2020

Fair Value of Financial Instruments

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 Condensed Consolidated Balance Sheets on a recurring basis (in thousands):

	June 30, 2020								September 30, 2019
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Current derivative assets	$	—	$	1,761	$	—	$	1,761	$	—	$	2,635	$	—	$	2,635
Noncurrent derivative assets		—		624		—		624		—		859		—		859
Total assets measured at fair value	$	—	$	2,385	$	—	$	2,385	$	—	$	3,494	$	—	$	3,494
Liabilities
Current derivative liabilities		—		4,365		—		4,365		—		529		—		529
Noncurrent derivative liabilities		—		13,342		—		13,342		—		228		—		228
Contingent consideration to seller of H4 Global		—		—		564		564		—		—		1,073		1,073
Contingent consideration to seller of Deltenna		—		—		2,806		2,806		—		—		1,787		1,787
Contingent consideration to seller of Shield		—		—		4,052		4,052		—		—		3,814		3,814
Contingent consideration to seller of Nuvotronics		—		—		—		—		—		—		4,200		4,200
Contingent consideration to seller of Delerrok		—		—		500		500		—		—		—		—
Total liabilities measured at fair value	$	—	$	17,707	$	7,922	$	25,629	$	—	$	757	$	10,874	$	11,631

Summary of change in fair value of contingent consideration liability

As of June 30, 2020, the following table summarizes the change in fair value of our Level 3 contingent consideration liabilities (in thousands):

	H4 Global		Deltenna		Shield		Nuvotronics		Delerrok		Total
Balance as of September 30, 2019	$	1,073	$	1,787	$	3,814	$	4,200	$	—	$	10,874
Initial measurement recognized at acquisition		—		—		—		—		1,600		1,600
Total remeasurement (gain) loss recognized in earnings		(509)		1,019		238		(4,200)		(1,100)		(4,552)
Balance as of June 30, 2020	$	564	$	2,806	$	4,052	$	—	$	500	$	7,922

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Leases (Tables)

9 Months Ended

Jun. 30, 2020

Leases

Schedule of Operating Lease Portfolio

Operating Lease Portfolio

	June 30,
	2020
Right-of-use assets	$	82.1
Lease liabilities		92.0
Weighted average remaining lease term		7.0 years
Weighted average discount rate		3.01%

Schedule of operating Expense and Other Information

Operating Lease Expense

	Three Months Ended		Nine Months Ended
	June 30,		June 30,
	2020		2020
Operating lease expense	$	4.9	$	14.3
Short-term lease expense		0.1		0.2
Variable lease expense		0.7		2.5
Total lease expense	$	5.7	$	17.0

Other Information

	Nine Months Ended
	June 30,
	2020
Cash paid for amounts included in the measurement of lease liabilities	$	13.7
Right-of-use assets obtained in exchange for new operating lease liabilities		18.9

Schedule of Maturities of Lease Liabilities

Our future minimum lease commitments of our operating leases on an undiscounted basis, reconciled to the lease liability at June 30, 2020 were as follows (in millions):

2020	$	4.7
2021		17.6
2022		15.3
2023		13.4
2024		12.6
Thereafter		39.1
Total lease payments		102.7
Less: imputed interest		(10.7)
Present value of operating lease liabilities	$	92.0

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Pension Plans (Tables)

9 Months Ended

Jun. 30, 2020

Pension Plans

Components of net periodic pension cost (benefit)

The components of net periodic pension cost (benefit) are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Service cost	$	160	$	150	$	489	$	449
Interest cost		1,490		1,915		4,528		5,746
Expected return on plan assets		(2,904)		(3,020)		(8,796)		(9,063)
Amortization of actuarial loss		948		530		2,917		1,592
Administrative expenses		84		97		253		291
Net pension benefit	$	(222)	$	(328)	$	(609)	$	(985)

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Stockholders' Equity (Tables)

9 Months Ended

Jun. 30, 2020

Stockholders' Equity

Summary of assumptions used for the valuation of the RSUs with performance and market-based vesting that were granted

The following tables include the assumptions used for the valuation of the RSUs with performance and market-based vesting that were granted during fiscal 2019 and fiscal 2020:

	RSUs granted during fiscal 2020
Date of grant	November 29, 2019
Grant date fair value per RSU	$52.51
Performance period begins	November 29, 2019
Performance period ends	September 30, 2022
Risk-free interest rate	1.6%
Expected volatility	41%
	RSUs granted during fiscal 2019
Date of grant	November 21, 2018	April 1, 2019
Grant date fair value per RSU	$67.40	$59.29
Performance period begins	November 21, 2018	April 1, 2019
Performance period ends	September 30, 2021	September 30, 2021
Risk-free interest rate	2.8%	2.8%
Expected volatility	34%	34%

Summary of RSU activity

The following table summarizes our RSU activity:

	Unvested RSUs with Time-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2019	422,094	$	58.84
Granted	383,661		57.75
Vested	(162,253)		55.66
Forfeited	(51,331)		60.04
Unvested at June 30, 2020	592,171	$	58.90

	Unvested RSUs with Performance-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2019	315,262	$	55.67
Granted	—		—
Vested	—		—
Forfeited	(177,492)		47.57
Unvested at June 30, 2020	137,770	$	61.40

	Unvested RSUs with Performance- and Market-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2019	227,402	$	66.77
Granted	346,826		52.51
Vested	—		—
Forfeited	(51,088)		59.03
Unvested at June 30, 2020	523,140	$	58.07

Schedule of stock-based compensation expense related to stock-based awards

We recorded non-cash compensation expense related to stock-based awards as follows (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of sales	$	857	$	498	$	2,139	$	1,236
Selling, general and administrative		4,555		3,904		13,132		9,524
	$	5,412	$	4,402	$	15,271	$	10,760

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Derivative Instruments and Hedging Activities (Tables)

9 Months Ended

Jun. 30, 2020

Derivative Instruments and Hedging Activities

Schedule of notional principal amounts of the outstanding derivative instruments

The following table shows the notional principal amounts of our outstanding derivative instruments as of June 30, 2020 and September 30, 2019 (in thousands):

	Notional Principal
	June 30, 2020		September 30, 2019
Instruments designated as accounting hedges:
Foreign currency forwards	$	112,508	$	143,164
Interest rate swaps		645,000		95,000
Instruments not receiving hedge accounting treatment:
Foreign currency forwards	$	2,218	$	24,220

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 (in thousands):

		Fair Value
	Balance Sheet Location	June 30, 2020		September 30, 2019
Asset derivatives:
Foreign currency forwards	Other current assets	$	1,761	$	2,635
Foreign currency forwards	Other assets		624		619
Forward starting swap	Other assets		—		240
Total		$	2,385	$	3,494
Liability derivatives:
Foreign currency forwards	Accrued compensation and current liabilities	$	4,365	$	529
Foreign currency forwards	Other noncurrent liabilities		1,118		228
Forward starting swap	Other noncurrent liabilities		12,224		—
Total		$	17,707	$	757

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 income (loss) related to derivative financial instruments designated as cash flow hedges, as well as the amount of gains and losses reclassified into earnings (in thousands):

	Three Months Ended
	June 30, 2020				June 30, 2019
	Gains (losses)		Gains (losses)				Gains (losses)
	recognized in		reclassified into		Gains (losses)		reclassified into
Derivative Type	OCI		earnings		recognized in OCI		earnings
Foreign currency forwards	$	(18,521)	$	2,125	$	661	$	94
	Nine Months Ended
	June 30, 2020				June 30, 2019
	Gains (losses)		Gains (losses)				Gains (losses)
	recognized in		reclassified into		Gains (losses)		reclassified into
Derivative Type	OCI		earnings		recognized in OCI		earnings
Foreign currency forwards	$	(18,696)	$	3,398	$	(134)	$	466

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Segment Information (Tables)

9 Months Ended

Jun. 30, 2020

Segment Information

Schedule of business segment financial data

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

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Sales:
Cubic Transportation Systems	$	215.5	$	212.7	$	601.8	$	595.2
Cubic Mission Solutions		69.0		95.0		167.2		203.3
Cubic Global Defense Systems		65.9		75.0		231.8		226.8
Total sales	$	350.4	$	382.7	$	1,000.8	$	1,025.3
Operating income (loss):
Cubic Transportation Systems	$	50.9	$	17.2	$	77.8	$	37.0
Cubic Mission Solutions		(21.3)		1.3		(67.6)		(12.1)
Cubic Global Defense Systems		6.1		1.9		18.1		10.0
Unallocated corporate expenses		(11.0)		14.3		(40.0)		(7.3)
Total operating income (loss)	$	24.7	$	34.7	$	(11.7)	$	27.6
Depreciation and amortization:
Cubic Transportation Systems	$	7.1	$	6.9	$	21.6	$	24.1
Cubic Mission Solutions		13.3		6.0		34.3		17.2
Cubic Global Defense Systems		1.9		1.7		5.2		5.4
Corporate		1.1		0.7		2.7		2.2
Total depreciation and amortization	$	23.4	$	15.3	$	63.8	$	48.9

Schedule of Disaggregation of Total Net Sales

Disaggregation of Total Net Sales: We disaggregate our sales from contracts with customers by end customer, contract type, deliverable type and revenue recognition method for each of our segments, as we believe these factors can affect the nature, amount, timing and uncertainty of our revenue and cash flows.

Sales by Geographic Region (in millions):

	Three months ended June 30, 2020								Nine months ended June 30, 2020
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
United States	$	134.7	$	67.0	$	32.2	$	233.9	$	342.5	$	161.3	$	78.3	$	582.1
United Kingdom		43.3		0.6		4.7		48.6		140.8		1.3		13.6		155.7
Australia		30.2		0.7		8.1		39.0		96.7		2.4		21.4		120.5
Far East/Middle East		0.3		0.3		12.4		13.0		2.2		0.8		84.0		87.0
Other		7.0		0.4		8.5		15.9		19.6		1.4		34.5		55.5
Total sales	$	215.5	$	69.0	$	65.9	$	350.4	$	601.8	$	167.2	$	231.8	$	1,000.8

	Three months ended June 30, 2019								Nine months ended June 30, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
United States	$	128.9	$	94.0	$	31.6	$	254.5	$	327.3	$	200.1	$	101.3	$	628.7
United Kingdom		47.5		0.2		7.7		55.4		151.6		1.3		16.3		169.2
Australia		30.9		0.3		8.1		39.3		91.1		0.5		20.7		112.3
Far East/Middle East		0.7		0.1		15.2		16.0		8.5		0.7		45.8		55.0
Other		4.7		0.4		12.4		17.5		16.7		0.7		42.7		60.1
Total sales	$	212.7	$	95.0	$	75.0	$	382.7	$	595.2	$	203.3	$	226.8	$	1,025.3

Sales by End Customer: We are the prime contractor for the vast majority of our sales. The table below presents total net sales disaggregated by end customer (in millions):

	Three months ended June 30, 2020								Nine months ended June 30, 2020
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
U.S. Federal Government and State and Local Municipalities	$	127.8	$	64.9	$	32.4	$	225.1	$	325.4	$	155.1	$	85.4	$	565.9
Other		87.7		4.1		33.5		125.3		276.4		12.1		146.4		434.9
Total sales	$	215.5	$	69.0	$	65.9	$	350.4	$	601.8	$	167.2	$	231.8	$	1,000.8

	Three months ended June 30, 2019								Nine months ended June 30, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
U.S. Federal Government and State and Local Municipalities	$	123.1	$	91.8	$	37.4	$	252.3	$	310.7	$	195.6	$	107.3	$	613.6
Other		89.6		3.2		37.6		130.4		284.5		7.7		119.5		411.7
Total sales	$	212.7	$	95.0	$	75.0	$	382.7	$	595.2	$	203.3	$	226.8	$	1,025.3

Sales by Contract Type: Substantially all of our contracts are fixed-price type contracts. Sales included in “Other” contract types represent cost-plus and time-and-material type contracts.

On a fixed-price type contract, we agree to perform the contractual statement of work for a predetermined sales price. Certain of our fixed-price contracts include compensation for bonuses, transactional variable based fees or other similar provisions. On a cost-plus type contract, we are paid our allowable incurred costs plus a profit which can be fixed or variable depending on the applicable contract’s fee arrangement up to funding levels that are predetermined by the customer. On a time-and-material type contract, we are paid on the basis of direct labor hours expended at specified fixed-price hourly rates (that include wages, overhead, allowable general and administrative expenses and profit) and materials at cost. The table below presents total net sales disaggregated by contract type (in millions):

	Three months ended June 30, 2020								Nine months ended June 30, 2020
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Fixed Price	$	213.1	$	61.8	$	57.2	$	332.1	$	592.4	$	144.0	$	207.1	$	943.5
Other		2.4		7.2		8.7		18.3		9.4		23.2		24.7		57.3
Total sales	$	215.5	$	69.0	$	65.9	$	350.4	$	601.8	$	167.2	$	231.8	$	1,000.8

	Three months ended June 30, 2019								Nine months ended June 30, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Fixed Price	$	210.5	$	93.2	$	69.5	$	373.2	$	586.3	$	199.6	$	209.4	$	995.3
Other		2.2		1.8		5.5		9.5		8.9		3.7		17.4		30.0
Total sales	$	212.7	$	95.0	$	75.0	$	382.7	$	595.2	$	203.3	$	226.8	$	1,025.3

Sales by Deliverable Type: The table below presents total net sales disaggregated by the type of deliverable, which is determined by us at the performance obligation level (in millions):

	Three months ended June 30, 2020								Nine months ended June 30, 2020
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Product	$	124.2	$	59.7	$	37.1	$	221.0	$	317.4	$	141.6	$	150.2	$	609.2
Service		91.3		9.3		28.8		129.4		284.4		25.6		81.6		391.6
Total sales	$	215.5	$	69.0	$	65.9	$	350.4	$	601.8	$	167.2	$	231.8	$	1,000.8

	Three months ended June 30, 2019								Nine months ended June 30, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Product	$	122.8	$	87.3	$	45.8	$	255.9	$	328.7	$	183.9	$	148.3	$	660.9
Service		89.9		7.7		29.2		126.8		266.5		19.4		78.5		364.4
Total sales	$	212.7	$	95.0	$	75.0	$	382.7	$	595.2	$	203.3	$	226.8	$	1,025.3

Revenue Recognition Method: Sales recognized at a point in time are typically for standard goods with a short production cycle and are recognized when the customer obtains control, which is generally upon delivery and acceptance. Sales for services and for products with a long production cycle, which often include significant customization and development, are recognized over time. The table below presents total net sales disaggregated based on the revenue recognition method applied (in millions):

	Three months ended June 30, 2020								Nine months ended June 30, 2020
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Point in Time	$	26.5	$	41.4	$	2.9	$	70.8	$	72.3	$	93.9	$	4.8	$	171.0
Over Time		189.0		27.6		63.0		279.6		529.5		73.3		227.0		829.8
Total sales	$	215.5	$	69.0	$	65.9	$	350.4	$	601.8	$	167.2	$	231.8	$	1,000.8

	Three months ended June 30, 2019								Nine months ended June 30, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total
Point in Time	$	29.7	$	76.0	$	1.0	$	106.7	$	68.2	$	169.2	$	2.9	$	240.3
Over Time		183.0		19.0		74.0		276.0		527.0		34.1		223.9		785.0
Total sales	$	212.7	$	95.0	$	75.0	$	382.7	$	595.2	$	203.3	$	226.8	$	1,025.3

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Restructuring Costs (Tables)

9 Months Ended

Jun. 30, 2020

Restructuring Costs

Schedule of restructuring charges incurred

Restructuring charges incurred by our business segments were as follows (in millions):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Restructuring costs:
Cubic Transportation Systems	$	0.2		1.4	$	0.7	$	2.2
Cubic Mission Solutions		0.4		—		0.4		—
Cubic Global Defense Systems		0.7		2.6		1.3		2.7
Unallocated corporate expenses		2.1		4.5		6.4		7.4
Total restructuring costs	$	3.4	$	8.5	$	8.8	$	12.3

Schedule of rollforward of restructuring liability

The following table presents a rollforward of our restructuring liability as of June 30, 2020, which is included within accrued compensation and other current liabilities within our condensed consolidated balance sheets (in millions):

	Restructuring Liability		Restructuring Liability
	Employee Separation and Other		Consulting Costs
Balance as of September 30, 2019	$	2.0	$	0.8
Accrued costs		7.0		1.8
Cash payments		(8.3)		(2.2)
Balance as of June 30, 2020	$	0.7	$	0.4

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Basis for Presentation - New Accounting Pronouncements (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Oct. 01, 2019	Sep. 30, 2019
Recent Accounting Pronouncements
Operating lease right-of-use asset	$ 82,141
Lease liabilities	92,000
Retained earnings	$ 797,046		$ 862,948
ASU 2016-02
Recent Accounting Pronouncements
Operating lease right-of-use asset		$ 80,000
Lease liabilities		88,000
Retained earnings		$ (800)

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Acquisitions and Divestitures - CGD Services - Income (loss) from discontinued operations (Details) - Cubic Global Defense Services - Disposed of by sale - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2018	May 31, 2018
Divestitures
Consideration from sale			$ 133.8	$ 135.0
Increase (decrease) in working capital settlement receivable		$ 0.6
Cash received after settlement	$ 2.7
Gain (loss) on sale recognized	$ 0.1

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Acquisitions and Divestitures - Equity Method Investment (Details) - USD ($) $ in Millions		6 Months Ended	15 Months Ended
	Jan. 03, 2020	Jan. 03, 2020	Jan. 03, 2020	Dec. 31, 2019	Nov. 30, 2019	Jun. 27, 2019
PIXIA Corp
Equity method investment
Remaining outstanding shares purchased (as a percent)	80.00%	80.00%	80.00%
Fair value of consideration transferred	$ 245.2
Cash consideration paid	197.8	$ 247.8
Dividend from equity method investment	2.0
Income (loss) from equity method investments	$ (0.6)
Delerrok Inc.
Equity method investment
Remaining outstanding shares purchased (as a percent)	82.50%	82.50%	82.50%
Fair value of consideration transferred	$ 45.1
Cash consideration paid	37.0		$ 43.5
Additional contingent cash consideration to be paid	2.0	$ 2.0	2.0
Contingent consideration	$ 1.6	$ 1.6	$ 1.6
PIXIA Corp
Equity method investment
Purchase price of capital stock						$ 50.0
Ownership percentage						20.00%
Option to purchase remaining percentage of capital stock						80.00%
Cost to purchase remaining capital stock						$ 200.0
Delerrok Inc.
Equity method investment
Purchase price of capital stock				$ 8.3
Ownership percentage				17.50%
Option to purchase remaining percentage of capital stock					82.50%

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Acquisitions and Divestitures - Consolidated Business Acquisitions (Details) - USD ($) $ in Thousands		1 Months Ended			3 Months Ended		6 Months Ended	9 Months Ended		15 Months Ended
	Jan. 03, 2020	Mar. 31, 2019	Jan. 31, 2019	Oct. 31, 2018	Jun. 30, 2020	Jun. 30, 2019	Jan. 03, 2020	Jun. 30, 2020	Jun. 30, 2019	Jan. 03, 2020	Sep. 30, 2019
Purchase price allocation
Goodwill					$ 783,368			$ 783,368			$ 578,097
Sales and results of operations
Sales					350,439	$ 382,679		1,000,760	$ 1,025,277
Operating income (loss)					24,706	34,725		(11,711)	27,618
Net income (loss) after taxes					(1,155)	23,910		(60,853)	7,931
(Gain) loss for changes in fair values of contingent consideration					(74)	1,163		(4,552)	1,833
PIXIA Corp
Estimated acquisition-date fair value of consideration
Fair value of consideration transferred	$ 245,200
Cash consideration paid	197,800						$ 247,800
Purchase price allocation
Accounts receivable, prepaids and other assets	4,000						4,000			$ 4,000
Deferred tax liability	(18,300)						(18,300)			(18,300)
Other net assets acquired (liabilities assumed)	(1,800)						(1,800)			(1,800)
Net identifiable assets acquired	71,700						71,700			71,700
Goodwill	173,500						173,500			173,500
Net assets acquired	$ 245,200						245,200			245,200
Weighted average useful life of intangible assets	4 years
Sales and results of operations
Sales					4,200			5,300
Operating income (loss)					(5,900)			(15,900)
Net income (loss) after taxes					(5,900)			(15,900)
Amortization					7,200			14,300
Acquisition-related expenses					1,300			3,300
Estimated amortization expense related to the intangible assets
2020											21,500
2021											28,700
2022											12,700
2023											7,300
2024											7,300
Thereafter											10,500
PIXIA Corp | Trade names
Purchase price allocation
Indefinite intangible assets	$ 5,700						5,700			5,700
PIXIA Corp | Backlog
Purchase price allocation
Amortizable intangible assets	42,500						42,500			42,500
PIXIA Corp | Customer relationships
Purchase price allocation
Amortizable intangible assets	25,500						25,500			25,500
PIXIA Corp | Technology
Purchase price allocation
Amortizable intangible assets	14,100						14,100			14,100
Nuvotronics
Estimated acquisition-date fair value of consideration
Fair value of consideration transferred		$ 66,800
Cash consideration paid		61,900
Contingent consideration for certain goals		8,000						$ 8,000
Contingent consideration		4,900
Period for contingent consideration contracts								12 months
Purchase price allocation
Accounts receivable and contract assets		2,600
Fixed assets		2,700
Accounts payable and accrued expenses		(1,800)
Deferred tax liability		(3,200)
Other net assets acquired (liabilities assumed)		(600)
Net identifiable assets acquired		26,400
Goodwill		40,400
Net assets acquired		$ 66,800
Weighted average useful life of intangible assets		9 years
Sales and results of operations
Sales					3,800	3,600		$ 9,800	4,300
Operating income (loss)					(2,900)	(3,200)		(7,800)	(4,900)
Net income (loss) after taxes					(2,900)	(3,200)		(7,800)	(4,900)
Amortization					900	600		3,100	700
Acquisition-related expenses					300	1,100		1,600	2,900
(Gain) loss for changes in fair values of contingent consideration								(4,200)
Estimated amortization expense related to the intangible assets
2020											4,000
2021											3,000
2022											3,000
2023											2,900
2024											2,700
Thereafter											10,100
Nuvotronics | Trade names
Purchase price allocation
Indefinite intangible assets		$ 1,500
Nuvotronics | Backlog
Purchase price allocation
Amortizable intangible assets		1,400
Nuvotronics | Customer relationships
Purchase price allocation
Amortizable intangible assets		600
Nuvotronics | Technology
Purchase price allocation
Amortizable intangible assets		22,700
Nuvotronics | Non-compete agreements
Purchase price allocation
Amortizable intangible assets		$ 500
Delerrok Inc.
Estimated acquisition-date fair value of consideration
Fair value of consideration transferred	45,100
Cash consideration paid	37,000									43,500
Contingent consideration for certain goals								2,000
Contingent consideration	1,600						1,600			1,600
Purchase price allocation
Accounts receivable	900						900			900
Deferred tax liability	(2,000)						(2,000)			(2,000)
Other net assets acquired (liabilities assumed)	(200)						(200)			(200)
Net identifiable assets acquired	14,500						14,500			14,500
Goodwill	30,600						30,600			30,600
Net assets acquired	$ 45,100						45,100			45,100
Weighted average useful life of intangible assets	8 years
Sales and results of operations
Sales					400			1,100
Operating income (loss)					(200)			(1,200)
Net income (loss) after taxes					(200)			(1,200)
Amortization					400			900
Acquisition-related expenses					500			1,200
(Gain) loss for changes in fair values of contingent consideration					(1,100)			(1,100)
Estimated amortization expense related to the intangible assets
2020											1,300
2021											1,700
2022											1,600
2023											1,600
2024											1,600
Thereafter											8,000
Delerrok Inc. | Trade names
Purchase price allocation
Indefinite intangible assets	$ 900						900			900
Delerrok Inc. | Technology
Purchase price allocation
Amortizable intangible assets	$ 14,900						$ 14,900			$ 14,900
GRIDSMART
Estimated acquisition-date fair value of consideration
Fair value of consideration transferred			$ 86,800
Purchase price allocation
Accounts receivable			1,700
Inventory			4,300
Accounts payable and accrued expenses			(1,900)
Deferred tax liability			(3,300)
Other net assets acquired (liabilities assumed)			(500)
Net identifiable assets acquired			33,000
Goodwill			53,800
Net assets acquired			$ 86,800
Weighted average useful life of intangible assets			8 years
Sales and results of operations
Sales					8,200	7,700		20,100	14,000
Operating income (loss)					1,500	700		700	(1,300)
Net income (loss) after taxes					1,500	700		700	(1,300)
Amortization					1,300	1,300		4,000	2,700
Acquisition-related expenses					200	600		600	2,400
Estimated amortization expense related to the intangible assets
2020											5,300
2021											3,900
2022											3,500
2023											3,500
2024											3,500
Thereafter											8,100
GRIDSMART | Trade names
Purchase price allocation
Indefinite intangible assets			$ 2,400
GRIDSMART | Customer relationships
Purchase price allocation
Amortizable intangible assets			3,600
GRIDSMART | Technology
Purchase price allocation
Amortizable intangible assets			$ 25,700
Trafficware
Estimated acquisition-date fair value of consideration
Fair value of consideration transferred				$ 237,200
Purchase price allocation
Accounts receivable				10,400
Inventory				9,900
Accounts payable and accrued expenses				(9,500)
Other net assets acquired (liabilities assumed)				(2,000)
Net identifiable assets acquired				83,400
Goodwill				153,800
Net assets acquired				$ 237,200
Weighted average useful life of intangible assets				7 years
Sales and results of operations
Sales					14,400	15,800		37,400	38,000
Operating income (loss)					(1,300)	(1,000)		(4,500)	(9,500)
Net income (loss) after taxes					(1,300)	(1,000)		(4,500)	(9,500)
Amortization					2,800	2,800		8,500	12,400
Acquisition-related expenses					$ 400	$ 900		1,300	$ 4,400
Estimated amortization expense related to the intangible assets
2020											11,400
2021											11,400
2022											11,400
2023											6,400
2024											5,900
Thereafter											$ 12,900
Trafficware | Trade names
Purchase price allocation
Indefinite intangible assets				$ 4,600
Trafficware | Backlog
Purchase price allocation
Amortizable intangible assets				4,800
Trafficware | Customer relationships
Purchase price allocation
Amortizable intangible assets				21,900
Trafficware | Technology
Purchase price allocation
Amortizable intangible assets				$ 43,300
Shield Aviation
Estimated acquisition-date fair value of consideration
Contingent consideration for certain goals								$ 10,000

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Acquisitions and Divestitures - Goodwill and Pro forma information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Unaudited pro forma information
Net sales	$ 350,400	$ 384,400	$ 1,005,000	$ 1,050,200
Net loss attributable to Cubic	(1,400)	$ 14,400	(69,500)	$ (18,800)
Adjustments made for transaction expenses			0
Changes in the carrying amount of goodwill
Net balances at the beginning of the period			578,097
Acquisitions			204,152
Adjustments			603
Foreign currency exchange rate changes			516
Net balance at the end of the period	783,368		783,368
Cubic Transportation Systems
Changes in the carrying amount of goodwill
Net balances at the beginning of the period			254,592
Acquisitions			30,621
Adjustments			603
Foreign currency exchange rate changes			329
Net balance at the end of the period	286,145		286,145
Cubic Mission Solutions
Changes in the carrying amount of goodwill
Net balances at the beginning of the period			181,424
Acquisitions			173,531
Foreign currency exchange rate changes			85
Net balance at the end of the period	355,040		355,040
Cubic Global Defense Systems
Changes in the carrying amount of goodwill
Net balances at the beginning of the period			142,081
Foreign currency exchange rate changes			102
Net balance at the end of the period	$ 142,183		$ 142,183

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Variable Interest Entities - Narrative (Details) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Mar. 31, 2018 USD ($)	Jun. 30, 2020 USD ($) item	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) item	Jun. 30, 2019 USD ($)	Sep. 30, 2019 USD ($)
Revenue recognition
Termination costs				$ (16,090)	$ 0
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01
Revenue recognition
Contract term		12 months		12 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-01
Revenue recognition
Contract term		24 months		24 months
Revolving Credit Agreement
Revenue recognition
Maximum borrowing capacity under credit agreement						$ 800,000
Borrowings outstanding						226,500
Design and Build Phase | Boston OpCo Amended Credit Agreement | Long-term Debt Facility | LIBOR | Minimum
Revenue recognition
Variable interest rate (as a percent)		1.75%
Design and Build Phase | Boston OpCo Amended Credit Agreement | Long-term Debt Facility | LIBOR | Maximum
Revenue recognition
Variable interest rate (as a percent)		2.00%
Operate and Maintain Phase | Boston OpCo Amended Credit Agreement | Long-term Debt Facility | LIBOR | Minimum
Revenue recognition
Variable interest rate (as a percent)		2.00%
Operate and Maintain Phase | Boston OpCo Amended Credit Agreement | Long-term Debt Facility | LIBOR | Maximum
Revenue recognition
Variable interest rate (as a percent)		2.50%
Amended MBTA Agreement | Design and Build Phase | Boston OpCo Amended Credit Agreement | Long-term Debt Facility
Revenue recognition
Maximum borrowing capacity under credit agreement		$ 421,600		$ 421,600
MBTA | Original MBTA Contract | Operate and Maintain Phase | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-10-01
Revenue recognition
Contract term		10 years		10 years
MBTA | Amended MBTA Agreement | Design and Build Phase | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-10-01
Revenue recognition
Contract term		4 years		4 years
MBTA | Amended MBTA Agreement | Operate and Maintain Phase | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-10-01
Revenue recognition
Contract term		12 years		12 years
Cubic Corporation Excluding VIE
Revenue recognition
Restricted cash		$ 22,279		$ 22,279		19,507
VIE
Revenue recognition
Restricted cash		1,669		1,669		$ 9,967
P3 Joint Venture
Revenue recognition
Maximum exposure to loss		$ 2,700		$ 2,700
OpCo.
Revenue recognition
Ownership percentage		10.00%		10.00%
OpCo. | Interest Rate Swaps | Not Designated as Hedging Instrument
Revenue recognition
Notional principal outstanding derivative instruments		$ 172,800		$ 172,800
Unrealized losses		(6,900)	$ (7,000)	(18,400)	$ (16,900)
OpCo. | Interest Rate Swaps | Not Designated as Hedging Instrument | Other noncurrent liabilities
Revenue recognition
Fair value interest rate swaps		$ 5,600		$ 5,600
OpCo. | Boston OpCo Credit Agreement | Maximum
Revenue recognition
Borrowings outstanding	$ 212,400
OpCo. | Boston OpCo Credit Agreement | Long-term Debt Facility | LIBOR
Revenue recognition
Variable interest rate (as a percent)	1.30%
OpCo. | Boston OpCo Amended Credit Agreement
Revenue recognition
Number of long-term debt facilities | item		2		2
Repayment of outstanding balance		$ 92,600
Repayment of accrued interest		7,400
Debt issuance and modification costs		8,600
OpCo. | Boston OpCo Amended Credit Agreement | Interest Rate Swaps
Revenue recognition
Termination costs		34,400
OpCo. | Boston OpCo Amended Credit Agreement | Long-term Debt Facility
Revenue recognition
Carrying value		172,800		$ 172,800
Unamortized deferred financing costs		17,300		17,300
OpCo. | Amended MBTA Agreement
Revenue recognition
Expected contract revenue		175,800		175,800
OpCo. | Amended MBTA Agreement | Design and Build Phase
Revenue recognition
Expected contract revenue		43,500		43,500
OpCo. | Amended MBTA Agreement | Operate and Maintain Phase
Revenue recognition
Expected contract revenue		618,000		618,000
OpCo. | Amended MBTA Agreement | Operate and Maintain Phase | Boston OpCo Amended Credit Agreement | Revolving Credit Agreement
Revenue recognition
Maximum borrowing capacity under credit agreement		15,800		15,800
OpCo. | MBTA | Original MBTA Contract
Revenue recognition
Expected contract revenue		558,500		$ 558,500
OpCo. | MBTA | Amended MBTA Agreement
Revenue recognition
Incremental forecasted revenue		$ 278,900
Cubic Transportation Systems | HoldCo.
Revenue recognition
Ownership percentage		10.00%		10.00%
Cubic Transportation Systems | HoldCo. | Letter of credit agreement
Revenue recognition
Maximum borrowing capacity under credit agreement	$ 2,900
Borrowings outstanding		$ 0		$ 0
Cubic Transportation Systems | OpCo. | Original MBTA Contract
Revenue recognition
Expected contract revenue		427,600		427,600
Cubic Transportation Systems | OpCo. | Amended MBTA Agreement
Revenue recognition
Expected contract revenue		$ 596,400		$ 596,400
John Laing | HoldCo.
Revenue recognition
Ownership percentage		90.00%		90.00%
John Laing | HoldCo. | Equity Bridge Loan
Revenue recognition
Loan amount	$ 24,300
John Laing | HoldCo. | Amended MBTA Agreement | Equity Bridge Loan
Revenue recognition
Loan amount		$ 1,900		$ 1,900

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Variable Interest Entities - Net assets and liabilities (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Sep. 30, 2019
ASSETS
Total assets	$ 2,261,812		$ 2,261,812		$ 1,847,170
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity related to Cubic	892,863		892,863		961,649
Noncontrolling interest in VIE	20,992		20,992		18,919
Total liabilities and shareholders' equity	2,261,812		2,261,812		1,847,170
Revenue	350,439	$ 382,679	1,000,760	$ 1,025,277
Operating income (loss)	24,706	34,725	(11,711)	27,618
Other income (expense), net	(6,773)	(8,714)	(26,564)	(17,069)
VIE
ASSETS
Cash	743		743		347
Restricted cash	1,669		1,669		9,967
Other current assets	99		99		33
Long-term contracts financing receivables	191,042		191,042		115,508
Other noncurrent assets					1,419
Total assets	193,553		193,553		127,274
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable	175		175		25
Accrued compensation and other current liabilities	150		150		191
Due to Cubic	11,754		11,754		25,143
Other noncurrent liabilities	5,572		5,572		21,605
Long-term debt	155,493		155,493		61,994
Total liabilities	173,144		173,144		108,958
Shareholders' equity related to Cubic	(583)		(583)		(603)
Noncontrolling interest in VIE	20,992		20,992		18,919
Total liabilities and shareholders' equity	193,553		193,553		$ 127,274
Revenue	17,585	3,233	20,632	7,519
Operating income (loss)	17,344	2,823	19,832	6,521
Other income (expense), net	(6,888)	(7,031)	(19,636)	(16,884)
Interest income	1,663	1,075	4,871	2,335
Interest Expense	$ (1,710)	$ (829)	$ (4,864)	$ (1,939)

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Revenue Recognition (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Operating income (loss)	$ 24,706	$ 34,725	$ (11,711)	$ 27,618
Net income (loss) from continuing operations	7,962	20,546	(60,469)	502
Net income (loss) from continuing operations attributable to Cubic	$ (1,407)	$ 24,112	$ (60,650)	$ 9,472
Diluted earnings per share attributable to Cubic (in dollars per share)	$ (0.04)	$ 0.77	$ (1.94)	$ 0.26
Increase in operating income	$ 25,000		$ 25,000
Increase in net income from continuing operations	$ 27,800		$ 27,800
OpCo.
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Ownership percentage	10.00%		10.00%
ASU 2014-09 | Adjustments | ASC 606
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Operating income (loss)	$ 19,297	$ (1,054)	$ 5,499	$ (1,040)
Net income (loss) from continuing operations	18,596	(1,185)	5,103	(1,100)
Net income (loss) from continuing operations attributable to Cubic	$ 4,826	$ (1,185)	$ (8,667)	$ (1,100)
Diluted earnings per share attributable to Cubic (in dollars per share)	$ 0.15	$ (0.04)	$ (0.28)	$ (0.04)

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Revenue Recognition (Backlog) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Jun. 30, 2020	Sep. 30, 2019
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining performance obligation	$ 3,700,000	$ 3,400,000
Trade receivables sold to a financial institution	0	31,100
Receipt of withheld proceeds from sale of trade receivables	5,521
U.S. federal government contracts
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Amounts billed	$ 53,300	$ 60,300
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining performance obligation (in percent)	30.00%
Contract term	12 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining performance obligation (in percent)	45.00%
Contract term	24 months

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Revenue Recognition (Contract Assets and Liabilities) (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Jun. 30, 2020	Jun. 30, 2020	Sep. 30, 2019
Contract Assets and Liabilities
Contract assets	$ 253,900	$ 253,900	$ 349,559
Contract liabilities	71,269	71,269	$ 46,170
Increase (decrease) in contract asset		(95,700)
Impairment losses related to contract assets		0
Increase (decrease) in contract liabilities		25,100
Revenue recognized included in contract liability	$ 3,600	$ 19,900

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Net Income (Loss) Per Share (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Weighted-average number of shares outstanding
Weighted average shares - basic	31,299	31,160	31,289	30,267
Effect of dilutive securities		89		65
Weighted average shares - diluted	31,299	31,249	31,289	30,332
Number of anti-dilutive securities	1,243		1,109

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Balance Sheet Details (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2020	Sep. 30, 2019
Restricted Cash
Restricted cash			$ 23,900	$ 29,500
Inventories
Finished products			16,825	10,905
Work in process and inventoried costs under long-term contracts			90,731	46,951
Materials and purchased parts			44,057	48,938
Net inventories			151,613	106,794
Costs incurred outside the scope of work or in advance of a contract award			7,700	5,800
General and administrative amounts for certain government contracts remaining in inventory			400	500
Property, Plant and Equipment
Accumulated depreciation and amortization			(179,925)	(160,271)
Property, plant and equipment - net			160,547	144,969
Proceeds from sale of property, plant and equipment	$ 44,891	$ 44,891
Deferred Compensation Plan
Deferred compensation			10,900	11,000
Carrying value of Rabbi trust to fund deferred compensation liabilities			6,400	6,400
Land and land improvements
Property, Plant and Equipment
Property, plant and equipment, Gross			7,362	7,348
Buildings and improvements
Property, Plant and Equipment
Property, plant and equipment, Gross			48,628	48,191
Machinery and other equipment
Property, Plant and Equipment
Property, plant and equipment, Gross			125,656	107,297
Software
Property, Plant and Equipment
Property, plant and equipment, Gross			114,172	108,526
Leasehold improvements
Property, Plant and Equipment
Property, plant and equipment, Gross			20,346	17,064
Construction and internal-use software development in progress
Property, Plant and Equipment
Property, plant and equipment, Gross			$ 24,308	$ 16,814

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Fair Value of Financial Instruments - Recurring Basis (Details) - Assets and liabilities measured at fair value - USD ($) $ in Thousands	Jun. 30, 2020	Sep. 30, 2019
Assets
Current derivative assets	$ 1,761	$ 2,635
Noncurrent derivative assets	624	859
Total assets measured at fair value	2,385	3,494
Liabilities
Current derivative liabilities	4,365	529
Noncurrent derivative liabilities	13,342	228
Total liabilities measured at fair value	25,629	11,631
Deltenna
Liabilities
Contingent consideration to seller	2,806	1,787
Shield Aviation
Liabilities
Contingent consideration to seller	4,052	3,814
H4 Global
Liabilities
Contingent consideration to seller	564	1,073
Nuvotronics
Liabilities
Contingent consideration to seller		4,200
Delerrok Inc.
Liabilities
Contingent consideration to seller	500
Level 2
Assets
Current derivative assets	1,761	2,635
Noncurrent derivative assets	624	859
Total assets measured at fair value	2,385	3,494
Liabilities
Current derivative liabilities	4,365	529
Noncurrent derivative liabilities	13,342	228
Total liabilities measured at fair value	17,707	757
Level 3
Liabilities
Total liabilities measured at fair value	7,922	10,874
Level 3 | Deltenna
Liabilities
Contingent consideration to seller	2,806	1,787
Level 3 | Shield Aviation
Liabilities
Contingent consideration to seller	4,052	3,814
Level 3 | H4 Global
Liabilities
Contingent consideration to seller	564	1,073
Level 3 | Nuvotronics
Liabilities
Contingent consideration to seller		$ 4,200
Level 3 | Delerrok Inc.
Liabilities
Contingent consideration to seller	$ 500

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Fair Value of Financial Instruments - Contingent Consideration (Details) $ in Thousands	1 Months Ended	3 Months Ended	9 Months Ended	12 Months Ended
	Mar. 31, 2019 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Jan. 03, 2020 USD ($)
Franklin Blackhorse, L.P | Other Assets
Assets and liabilities measured at fair value on a recurring basis
Investment				$ 5,000
Equity Method Investment balance		$ 4,900	$ 4,900	5,500
Franklin Blackhorse, L.P | Other income (expense)
Assets and liabilities measured at fair value on a recurring basis
Income (Loss) from Equity Method Investments		(600)	(600)
Level 3
Change in fair value of our Level 3 contingent consideration
Balance at the Beginning period			10,874
Initial measurement recognized at acquisition			1,600
Total remeasurement (gain) loss recognized in earnings			(4,552)
Balance at the ending period		7,922	7,922	10,874
H4 Global
Assets and liabilities measured at fair value on a recurring basis
Contingent consideration for certain goals			$ 2,700
Period for contingent consideration contracts			5 years
H4 Global | Level 3
Change in fair value of our Level 3 contingent consideration
Balance at the Beginning period			$ 1,073
Total remeasurement (gain) loss recognized in earnings			(509)
Balance at the ending period		$ 564	$ 564	$ 1,073
H4 Global | Discount Rate
Assets and liabilities measured at fair value on a recurring basis
Measurement inputs for contingent consideration		0.230	0.230	0.235
Deltenna
Assets and liabilities measured at fair value on a recurring basis
Contingent consideration for certain goals			$ 6,700
Deltenna | Level 3
Change in fair value of our Level 3 contingent consideration
Balance at the Beginning period			1,787
Total remeasurement (gain) loss recognized in earnings			1,019
Balance at the ending period		$ 2,806	$ 2,806	$ 1,787
Deltenna | Volatility for underlying revenue metrics
Assets and liabilities measured at fair value on a recurring basis
Measurement inputs for contingent consideration		0.38	0.38	0.36
Deltenna | Discount Rate
Assets and liabilities measured at fair value on a recurring basis
Measurement inputs for contingent consideration		0.10	0.10	0.11
Shield Aviation
Assets and liabilities measured at fair value on a recurring basis
Contingent consideration for certain goals			$ 10,000
Shield Aviation | Level 3
Change in fair value of our Level 3 contingent consideration
Balance at the Beginning period			3,814
Total remeasurement (gain) loss recognized in earnings			238
Balance at the ending period		$ 4,052	$ 4,052	$ 3,814
Shield Aviation | Volatility for underlying revenue metrics
Assets and liabilities measured at fair value on a recurring basis
Measurement inputs for contingent consideration		0.31	0.31	0.18
Revenue risk adjustment used in determination of fair value of contingent consideration			17.00%	13.00%
Shield Aviation | Discount Rate
Assets and liabilities measured at fair value on a recurring basis
Measurement inputs for contingent consideration		0.065	0.065	0.036
Nuvotronics
Assets and liabilities measured at fair value on a recurring basis
Contingent consideration for certain goals	$ 8,000		$ 8,000
Contingent consideration	$ 4,900
Period for contingent consideration contracts			12 months
Nuvotronics | Level 3
Change in fair value of our Level 3 contingent consideration
Balance at the Beginning period			$ 4,200
Total remeasurement (gain) loss recognized in earnings			(4,200)
Balance at the ending period				$ 4,200
Delerrok Inc.
Assets and liabilities measured at fair value on a recurring basis
Contingent consideration for certain goals			2,000
Contingent consideration					$ 1,600
Delerrok Inc. | Level 3
Change in fair value of our Level 3 contingent consideration
Initial measurement recognized at acquisition			1,600
Total remeasurement (gain) loss recognized in earnings			(1,100)
Balance at the ending period		$ 500	$ 500
Delerrok Inc. | Volatility for underlying revenue metrics
Assets and liabilities measured at fair value on a recurring basis
Measurement inputs for contingent consideration		0.190	0.190
Delerrok Inc. | Discount Rate
Assets and liabilities measured at fair value on a recurring basis
Measurement inputs for contingent consideration		0.034	0.034

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Financing Arrangements - Extinguishment of Debt (Details) - USD ($) $ in Thousands		9 Months Ended
	Mar. 27, 2020	Jun. 30, 2020	Jun. 30, 2019	Sep. 30, 2019
Financial arrangement
Loss on extinguishment of debt		$ 16,090	$ 0
Debt extinguishment make whole payment		$ 15,856
Revolving Credit Agreement
Financial arrangement
Borrowings outstanding				$ 226,500
Maximum borrowing capacity under credit agreement				800,000
Senior unsecured notes
Financial arrangement
Principal amount of debt instrument				$ 200,000
Principal payments on long-term borrowings	$ 189,300
Loss on extinguishment of debt	16,100
Debt extinguishment make whole payment	15,900
Deferred financing fees	$ 200
Senior unsecured notes | Minimum
Financial arrangement
Interest rate (as a percent)				3.35%
Senior unsecured notes | Maximum
Financial arrangement
Interest rate (as a percent)				3.93%

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Financing Arrangements - Credit Facility (Details) £ in Millions, $ in Millions	Apr. 01, 2020 USD ($)	Mar. 27, 2020 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2020 GBP (£)	Sep. 30, 2019 USD ($)
Debt Instrument [Line Items]
Letters of Credit and bank guarantees outstanding			$ 101.4
United Kingdom
Debt Instrument [Line Items]
Maximum borrowing capacity under credit agreement			24.8	£ 20.0
Borrowings outstanding			0.0
Performance guarantee | United Kingdom
Debt Instrument [Line Items]
Restricted cash			22.3
Performance guarantee | Letter of credit agreement
Debt Instrument [Line Items]
Letters of credit outstanding			96.9
Letters of credit primarily for self-insured liabilities
Debt Instrument [Line Items]
Letters of Credit and bank guarantees outstanding			4.5
Fair value of instruments			0.0
Revolving Credit Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity under credit agreement					$ 800.0
Borrowings outstanding					$ 226.5
Other Credit Facility
Debt Instrument [Line Items]
Letters of credit outstanding			$ 7.4
Credit Facility
Debt Instrument [Line Items]
Loan amount	$ 550.0
Weighted average interest rate on outstanding borrowings			2.18%	2.18%
Debt issuance costs incurred		$ 2.5
Unamortized debt issuance costs			$ 4.9
Credit Facility | LIBOR
Debt Instrument [Line Items]
Variable interest rate (as a percent)	0.74%
Credit Facility | LIBOR | Minimum
Debt Instrument [Line Items]
Variable interest rate (as a percent)		1.00%
Credit Facility | LIBOR | Maximum
Debt Instrument [Line Items]
Variable interest rate (as a percent)		2.00%
Credit Facility | Term Loan
Debt Instrument [Line Items]
Loan amount		$ 450.0
Borrowings under term loan			447.2
Credit Facility | Revolving Credit Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity under credit agreement		$ 850.0
Borrowings outstanding			277.0
Letters of credit outstanding			94.0
Available amount under line of credit			$ 479.0

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Financing Arrangements - Underwritten Public Offering (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	9 Months Ended
	Dec. 31, 2018	Jun. 30, 2019	Jun. 30, 2020	Sep. 30, 2019
Financing Arrangements
Stock issued under equity offering, net (in shares)	3,795,000	3,795,000
Stock offering price (per share)	$ 60.00
Proceeds from equity offering, net	$ 215,800	$ 215,832
Underwriting discounts and commissions and offering expenses	$ 11,900
Self-insurance liabilities			$ 6,800	$ 7,400

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Leases - Operating Lease Portfolio (Details) $ in Thousands	Jun. 30, 2020 USD ($)
Leases
Right-of-use assets	$ 82,141
Lease liabilities	$ 92,000
Weighted average remaining lease term	7 years
Weighted average discount rate	3.01%

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Leases - Operating Lease Expense (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Jun. 30, 2020	Jun. 30, 2020
Leases
Operating lease expense	$ 4.9	$ 14.3
Short-term lease expense	0.1	0.2
Variable lease expense	0.7	2.5
Total lease expense	$ 5.7	$ 17.0

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Leases - Other Information (Details) $ in Millions	9 Months Ended
	Jun. 30, 2020 USD ($)
Leases
Cash paid for amounts included in the measurement of lease liabilities	$ 13.7
Right-of-use assets obtained in exchange for new operating lease liabilities	$ 18.9

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Leases - Maturities of Lease Liabilities (Details) $ in Millions	Jun. 30, 2020 USD ($)	Sep. 30, 2019 building
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
2020	$ 4.7
2021	17.6
2022	15.3
2023	13.4
2024	12.6
Thereafter	39.1
Total lease payments	102.7
Less: imputed interest	(10.7)
Present value of operating lease liabilities	$ 92.0
Number of Buildings | building		2
Lease term		5 years

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Pension Plans (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Components of net periodic pension cost (benefit)
Service cost	$ 160	$ 150	$ 489	$ 449
Interest cost	1,490	1,915	4,528	5,746
Expected return on plan assets	(2,904)	(3,020)	(8,796)	(9,063)
Amortization of actuarial loss	948	530	2,917	1,592
Administrative expenses	84	97	253	291
Net pension cost (benefit)	$ (222)	$ (328)	$ (609)	$ (985)

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Stockholders' Equity - Narrative (Details)	9 Months Ended	12 Months Ended
	Jun. 30, 2020 item shares	Sep. 30, 2019 item
Stockholders' Equity
Retirement age for participants	60 years
Notice period	1 year
Long term equity incentive program, service period (in years)	10 years
RSUs
Stockholders' Equity
Number of shares of common stock that each award holder has the contingent right to receive	1
Time-based RSUs
Stockholders' Equity
Number of equal installments for vesting of stock awards | item	3	4
Expected awards vested (in shares)	511,508
Performance-based RSUs
Stockholders' Equity
Vesting period	3 years
Expected awards vested (in shares)	106,772
Performance and market-based RSUs
Stockholders' Equity
Number of shares of common stock that each award holder has the contingent right to receive	1.25
Vesting period	3 years
Maximum TSR multiplier rate	100.00%
Expected awards vested (in shares)	194,237
Performance and market-based RSUs | Maximum
Stockholders' Equity
Increase (decrease) in multiplier based on performance	25.00%
Performance and market-based RSUs | Minimum
Stockholders' Equity
Decrease in multiplier based on performance	25.00%

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Stockholders' Equity - Assumption used for RSU activity (Details) - RSUs - $ / shares	Nov. 29, 2019	Apr. 01, 2019	Nov. 21, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value units granted (per share)	$ 52.51	$ 59.29	$ 67.40
Risk-free interest rate(as a percent)	1.60%	2.80%	2.80%
Expected volatility (as a percent)	41.00%	34.00%	34.00%

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Stockholders' Equity - RSU activity (Details)	9 Months Ended
	Jun. 30, 2020 $ / shares shares
Service-Based RSUs
Number of Shares
Balance unvested at the beginning of the period (in shares) | shares	422,094
Granted (in shares) | shares	383,661
Vested (in shares) | shares	(162,253)
Forfeited (in shares) | shares	(51,331)
Balance unvested at the end of the period (in shares) | shares	592,171
Weighted Average Grant-Date Fair Value
Balance unvested at the beginning of the period (in dollars per share) | $ / shares	$ 58.84
Granted (in dollars per share) | $ / shares	57.75
Vested (in dollars per share) | $ / shares	55.66
Forfeited (in dollars per share) | $ / shares	60.04
Balance unvested at the end of the period (in dollars per share) | $ / shares	$ 58.90
Performance-based RSUs
Number of Shares
Balance unvested at the beginning of the period (in shares) | shares	315,262
Forfeited (in shares) | shares	(177,492)
Balance unvested at the end of the period (in shares) | shares	137,770
Weighted Average Grant-Date Fair Value
Balance unvested at the beginning of the period (in dollars per share) | $ / shares	$ 55.67
Forfeited (in dollars per share) | $ / shares	47.57
Balance unvested at the end of the period (in dollars per share) | $ / shares	$ 61.40
Performance and market-based RSUs
Number of Shares
Balance unvested at the beginning of the period (in shares) | shares	227,402
Granted (in shares) | shares	346,826
Forfeited (in shares) | shares	(51,088)
Balance unvested at the end of the period (in shares) | shares	523,140
Weighted Average Grant-Date Fair Value
Balance unvested at the beginning of the period (in dollars per share) | $ / shares	$ 66.77
Granted (in dollars per share) | $ / shares	52.51
Forfeited (in dollars per share) | $ / shares	59.03
Balance unvested at the end of the period (in dollars per share) | $ / shares	$ 58.07

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Stockholders' Equity - Non-cash compensation expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Sep. 30, 2019
Stockholders' Equity
Non-cash compensation expense related to stock-based awards	$ 5,412	$ 4,402	$ 15,271	$ 10,760
Estimated forfeiture rate (as a percent)			12.50%		12.50%
Cost of sales
Stockholders' Equity
Non-cash compensation expense related to stock-based awards	857	498	$ 2,139	1,236
Selling, general and administrative
Stockholders' Equity
Non-cash compensation expense related to stock-based awards	4,555	$ 3,904	13,132	$ 9,524
RSUs
Stockholders' Equity
Unrecognized compensation cost related to unvested awards	$ 50,400		50,400
Aggregate fair value of awards			$ 48,500
Weighted-average period of recognition			1 year 6 months

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Income Taxes (Details)	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Income Taxes
Effective tax rate (as a percent)	37.00%	5.00%	13.00%	(166.00%)

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Derivative Instruments and Hedging Activities - Notional principal amounts (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020 USD ($) building	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) building	Jun. 30, 2019 USD ($)	Apr. 01, 2020 USD ($)	Sep. 30, 2019 USD ($)	Aug. 31, 2019 USD ($)
Two Buildings on Existing Campus
Derivative Instruments and Hedging Activities
Unrealized gain (loss) on derivative	$ 2,500		$ 4,700
Number of building under lease | building	2		2
Maximum
Derivative Instruments and Hedging Activities
Term of derivative contract			5 years
Instruments designated as accounting hedges: | Foreign currency forwards
Derivative Instruments and Hedging Activities
Notional principal outstanding derivative instruments	$ 112,508		$ 112,508			$ 143,164
Instruments designated as accounting hedges: | Interest Rate Swaps
Derivative Instruments and Hedging Activities
Notional principal outstanding derivative instruments	645,000		645,000			95,000
Instruments designated as accounting hedges: | Interest Rate Swaps | Credit Facility
Derivative Instruments and Hedging Activities
Notional principal outstanding derivative instruments					$ 550,000
Unrealized gain (loss) on derivative	(7,800)		(7,800)
Instruments designated as accounting hedges: | Interest Rate Swaps | Two Buildings on Existing Campus
Derivative Instruments and Hedging Activities
Notional principal amount							$ 95,000
Instruments not designated as accounting hedges: | Foreign currency forwards
Derivative Instruments and Hedging Activities
Notional principal outstanding derivative instruments	2,218		2,218			24,220
Notional principal outstanding derivative instruments designed to manage exposure	2,200		2,200			$ 14,000
Unrealized gain (loss) on derivative	$ 1,100	$ (200)	$ (600)	$ (300)

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Derivative Instruments and Hedging Activities - Fair value of derivative financial instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Sep. 30, 2019
Derivative Instruments and Hedging Activities
Asset derivatives	$ 2,385	$ 3,494
Liability derivatives	17,707	757
Foreign currency forwards | Other current assets
Derivative Instruments and Hedging Activities
Asset derivatives	1,761	2,635
Foreign currency forwards | Other assets
Derivative Instruments and Hedging Activities
Asset derivatives	624	619
Foreign currency forwards | Accrued compensation and current liabilities
Derivative Instruments and Hedging Activities
Liability derivatives	4,365	529
Foreign currency forwards | Other noncurrent liabilities
Derivative Instruments and Hedging Activities
Liability derivatives	1,118	228
Forward starting swap | Other assets
Derivative Instruments and Hedging Activities
Asset derivatives		$ 240
Forward starting swap | Other noncurrent liabilities
Derivative Instruments and Hedging Activities
Liability derivatives	$ 12,224

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Derivative Instruments and Hedging Activities - Gains and losses recognized (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
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	$ 1,900		$ 1,900
Foreign currency forwards
Derivative instruments and hedging activities
Gains (losses) recognized in OCI	(18,521)	$ 661	(18,696)	$ (134)
Gains (losses) reclassified into earnings - Effective Portion	2,125	$ 94	3,398	$ 466
Realized gain (loss) on derivative	$ 2,500		$ 5,400

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Segment Information - Business Segment Financial Data (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Segment Information
Sales	$ 350,439	$ 382,679	$ 1,000,760	$ 1,025,277
Operating income (loss)	24,706	34,725	(11,711)	27,618
Depreciation and amortization	23,394	15,351	63,758	48,949
Cubic Transportation Systems
Segment Information
Sales	215,500	212,700	601,800	595,200
Operating income (loss)	50,900	17,200	77,800	37,000
Depreciation and amortization	7,100	6,900	21,600	24,100
Cubic Mission Solutions
Segment Information
Sales	69,000	95,000	167,200	203,300
Operating income (loss)	(21,300)	1,300	(67,600)	(12,100)
Depreciation and amortization	13,300	6,000	34,300	17,200
Cubic Global Defense Systems
Segment Information
Sales	65,900	75,000	231,800	226,800
Operating income (loss)	6,100	1,900	18,100	10,000
Depreciation and amortization	1,900	1,700	5,200	5,400
Corporate
Segment Information
Depreciation and amortization	1,100	700	2,700	2,200
Unallocated corporate expenses
Segment Information
Operating income (loss)	$ (11,000)	$ 14,300	$ (40,000)	$ (7,300)

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Segment Information - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Unallocated corporate expenses
Segment Information
Expense related to strategic and IT system resource planning	$ 0.3	$ 2.4	$ 3.3	$ 6.3

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Segment Information - Sales by Geographical Region (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Disaggregation of Revenue
Sales	$ 350,439	$ 382,679	$ 1,000,760	$ 1,025,277
United States
Disaggregation of Revenue
Sales	233,900	254,500	582,100	628,700
United Kingdom
Disaggregation of Revenue
Sales	48,600	55,400	155,700	169,200
Australia
Disaggregation of Revenue
Sales	39,000	39,300	120,500	112,300
Far East/Middle East
Disaggregation of Revenue
Sales	13,000	16,000	87,000	55,000
Other foreign countries
Disaggregation of Revenue
Sales	15,900	17,500	55,500	60,100
Cubic Transportation Systems
Disaggregation of Revenue
Sales	215,500	212,700	601,800	595,200
Cubic Transportation Systems | United States
Disaggregation of Revenue
Sales	134,700	128,900	342,500	327,300
Cubic Transportation Systems | United Kingdom
Disaggregation of Revenue
Sales	43,300	47,500	140,800	151,600
Cubic Transportation Systems | Australia
Disaggregation of Revenue
Sales	30,200	30,900	96,700	91,100
Cubic Transportation Systems | Far East/Middle East
Disaggregation of Revenue
Sales	300	700	2,200	8,500
Cubic Transportation Systems | Other foreign countries
Disaggregation of Revenue
Sales	7,000	4,700	19,600	16,700
Cubic Mission Solutions
Disaggregation of Revenue
Sales	69,000	95,000	167,200	203,300
Cubic Mission Solutions | United States
Disaggregation of Revenue
Sales	67,000	94,000	161,300	200,100
Cubic Mission Solutions | United Kingdom
Disaggregation of Revenue
Sales	600	200	1,300	1,300
Cubic Mission Solutions | Australia
Disaggregation of Revenue
Sales	700	300	2,400	500
Cubic Mission Solutions | Far East/Middle East
Disaggregation of Revenue
Sales	300	100	800	700
Cubic Mission Solutions | Other foreign countries
Disaggregation of Revenue
Sales	400	400	1,400	700
Cubic Global Defense Systems
Disaggregation of Revenue
Sales	65,900	75,000	231,800	226,800
Cubic Global Defense Systems | United States
Disaggregation of Revenue
Sales	32,200	31,600	78,300	101,300
Cubic Global Defense Systems | United Kingdom
Disaggregation of Revenue
Sales	4,700	7,700	13,600	16,300
Cubic Global Defense Systems | Australia
Disaggregation of Revenue
Sales	8,100	8,100	21,400	20,700
Cubic Global Defense Systems | Far East/Middle East
Disaggregation of Revenue
Sales	12,400	15,200	84,000	45,800
Cubic Global Defense Systems | Other foreign countries
Disaggregation of Revenue
Sales	$ 8,500	$ 12,400	$ 34,500	$ 42,700

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Segment Information - Sales by End Customer (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Disaggregation of Revenue
Sales	$ 350,439	$ 382,679	$ 1,000,760	$ 1,025,277
U.S. Federal Government and State and Local Municipalities
Disaggregation of Revenue
Sales	225,100	252,300	565,900	613,600
Other
Disaggregation of Revenue
Sales	125,300	130,400	434,900	411,700
Cubic Transportation Systems
Disaggregation of Revenue
Sales	215,500	212,700	601,800	595,200
Cubic Transportation Systems | U.S. Federal Government and State and Local Municipalities
Disaggregation of Revenue
Sales	127,800	123,100	325,400	310,700
Cubic Transportation Systems | Other
Disaggregation of Revenue
Sales	87,700	89,600	276,400	284,500
Cubic Mission Solutions
Disaggregation of Revenue
Sales	69,000	95,000	167,200	203,300
Cubic Mission Solutions | U.S. Federal Government and State and Local Municipalities
Disaggregation of Revenue
Sales	64,900	91,800	155,100	195,600
Cubic Mission Solutions | Other
Disaggregation of Revenue
Sales	4,100	3,200	12,100	7,700
Cubic Global Defense Systems
Disaggregation of Revenue
Sales	65,900	75,000	231,800	226,800
Cubic Global Defense Systems | U.S. Federal Government and State and Local Municipalities
Disaggregation of Revenue
Sales	32,400	37,400	85,400	107,300
Cubic Global Defense Systems | Other
Disaggregation of Revenue
Sales	$ 33,500	$ 37,600	$ 146,400	$ 119,500

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Segment Information - Sales by Contract Type (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Disaggregation of Revenue
Sales	$ 350,439	$ 382,679	$ 1,000,760	$ 1,025,277
Fixed Price
Disaggregation of Revenue
Sales	332,100	373,200	943,500	995,300
Other
Disaggregation of Revenue
Sales	18,300	9,500	57,300	30,000
Cubic Transportation Systems
Disaggregation of Revenue
Sales	215,500	212,700	601,800	595,200
Cubic Transportation Systems | Fixed Price
Disaggregation of Revenue
Sales	213,100	210,500	592,400	586,300
Cubic Transportation Systems | Other
Disaggregation of Revenue
Sales	2,400	2,200	9,400	8,900
Cubic Mission Solutions
Disaggregation of Revenue
Sales	69,000	95,000	167,200	203,300
Cubic Mission Solutions | Fixed Price
Disaggregation of Revenue
Sales	61,800	93,200	144,000	199,600
Cubic Mission Solutions | Other
Disaggregation of Revenue
Sales	7,200	1,800	23,200	3,700
Cubic Global Defense Systems
Disaggregation of Revenue
Sales	65,900	75,000	231,800	226,800
Cubic Global Defense Systems | Fixed Price
Disaggregation of Revenue
Sales	57,200	69,500	207,100	209,400
Cubic Global Defense Systems | Other
Disaggregation of Revenue
Sales	$ 8,700	$ 5,500	$ 24,700	$ 17,400

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Segment Information - Sales by Deliverable Type (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Disaggregation of Revenue
Sales	$ 350,439	$ 382,679	$ 1,000,760	$ 1,025,277
Products
Disaggregation of Revenue
Sales	221,039	255,900	609,137	660,897
Services
Disaggregation of Revenue
Sales	129,400	126,779	391,623	364,380
Cubic Transportation Systems
Disaggregation of Revenue
Sales	215,500	212,700	601,800	595,200
Cubic Transportation Systems | Products
Disaggregation of Revenue
Sales	124,200	122,800	317,400	328,700
Cubic Transportation Systems | Services
Disaggregation of Revenue
Sales	91,300	89,900	284,400	266,500
Cubic Mission Solutions
Disaggregation of Revenue
Sales	69,000	95,000	167,200	203,300
Cubic Mission Solutions | Products
Disaggregation of Revenue
Sales	59,700	87,300	141,600	183,900
Cubic Mission Solutions | Services
Disaggregation of Revenue
Sales	9,300	7,700	25,600	19,400
Cubic Global Defense Systems
Disaggregation of Revenue
Sales	65,900	75,000	231,800	226,800
Cubic Global Defense Systems | Products
Disaggregation of Revenue
Sales	37,100	45,800	150,200	148,300
Cubic Global Defense Systems | Services
Disaggregation of Revenue
Sales	$ 28,800	$ 29,200	$ 81,600	$ 78,500

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Segment Information - Revenue Recognition Method (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Disaggregation of Revenue
Sales	$ 350,439	$ 382,679	$ 1,000,760	$ 1,025,277
Point in time
Disaggregation of Revenue
Sales	70,800	106,700	171,000	240,300
Over time
Disaggregation of Revenue
Sales	279,600	276,000	829,800	785,000
Cubic Transportation Systems
Disaggregation of Revenue
Sales	215,500	212,700	601,800	595,200
Cubic Transportation Systems | Point in time
Disaggregation of Revenue
Sales	26,500	29,700	72,300	68,200
Cubic Transportation Systems | Over time
Disaggregation of Revenue
Sales	189,000	183,000	529,500	527,000
Cubic Mission Solutions
Disaggregation of Revenue
Sales	69,000	95,000	167,200	203,300
Cubic Mission Solutions | Point in time
Disaggregation of Revenue
Sales	41,400	76,000	93,900	169,200
Cubic Mission Solutions | Over time
Disaggregation of Revenue
Sales	27,600	19,000	73,300	34,100
Cubic Global Defense Systems
Disaggregation of Revenue
Sales	65,900	75,000	231,800	226,800
Cubic Global Defense Systems | Point in time
Disaggregation of Revenue
Sales	2,900	1,000	4,800	2,900
Cubic Global Defense Systems | Over time
Disaggregation of Revenue
Sales	$ 63,000	$ 74,000	$ 227,000	$ 223,900

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Restructuring Costs - Restructuring Charges (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Restructuring plan
Restructuring costs	$ 3,393	$ 8,505	$ 8,775	$ 12,254
Unallocated corporate expenses
Restructuring plan
Restructuring costs	2,100	4,500	6,400	7,400
Cubic Transportation Systems
Restructuring plan
Restructuring costs	200	1,400	700	2,200
Cubic Mission Solutions
Restructuring plan
Restructuring costs	400		400
Cubic Global Defense Systems
Restructuring plan
Restructuring costs	$ 700	$ 2,600	$ 1,300	$ 2,700

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Restructuring costs - Rollforward of restructuring liability (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Restructuring liability
Accrued costs	$ 3,393	$ 8,505	$ 8,775	$ 12,254
Employee Separation and other
Restructuring liability
Balance as of the beginning of the period			2,000
Accrued costs			7,000
Cash payments			(8,300)
Balance as of the end of the period	700		700
Consulting Costs
Restructuring liability
Balance as of the beginning of the period			800
Accrued costs			1,800
Cash payments			(2,200)
Balance as of the end of the period	$ 400		$ 400

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Acquisitions and Divestitures - Delerrok Inc. (Details) - Delerrok Inc. - USD ($) $ in Millions	Dec. 31, 2019	Nov. 30, 2019
Equity method investment
Purchase price of capital stock	$ 8.3
Ownership percentage	17.50%
Option to purchase remaining percentage of capital stock		82.50%