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 December 31, 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
Preferred Stock Purchase Rights	—	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 January 21, 2021, there were 31,834,085 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 December 31, 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	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 6.	Exhibits	46

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
	December 31,
	2020		2019
Net sales:
Products	$	181,489	$	200,604
Services		137,305		128,235
		318,794		328,839
Costs and expenses:
Products		138,019		166,843
Services		83,430		82,648
Selling, general and administrative expenses		63,660		65,915
Research and development		12,146		8,422
Amortization of purchased intangibles		16,107		10,089
Gain on sale of property, plant and equipment		—		(170)
Restructuring costs		4,135		1,575
		317,497		335,322
Operating income (loss)		1,297		(6,483)
Other income (expenses):
Interest and dividend income		1,789		2,218
Interest expense		(8,171)		(5,363)
Other income (expense), net		1,296		(127)
Loss from continuing operations before income taxes		(3,789)		(9,755)
Income tax provision		3,489		6,246
Loss from continuing operations		(7,278)		(16,001)
Net loss from discontinued operations		—		(584)
Net loss		(7,278)		(16,585)
Less noncontrolling interest in net income of VIE		5,717		3,990
Net loss attributable to Cubic	$	(12,995)	$	(20,575)
Amounts attributable to Cubic:
Net loss from continuing operations	$	(12,995)	$	(19,991)
Net loss from discontinued operations		—		(584)
Net loss attributable to Cubic	$	(12,995)	$	(20,575)
Net loss per share:
Basic
Continuing operations attributable to Cubic	$	(0.41)	$	(0.64)
Discontinued operations	$	—	$	(0.02)
Basic earnings per share attributable to Cubic	$	(0.41)	$	(0.66)
Diluted
Continuing operations attributable to Cubic	$	(0.41)	$	(0.64)
Discontinued operations	$	—	$	(0.02)
Diluted earnings per share attributable to Cubic	$	(0.41)	$	(0.66)
Weighted average shares used in per share calculations:
Basic		31,562		31,273
Diluted		31,562		31,273

See Notes to Condensed Consolidated Financial Statements.

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CUBIC CORPORATION

CONDENSED CONSOLIDATED

STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(amounts in thousands)

	Three Months Ended
	December 31,
	2020		2019
Net loss	$	(7,278)	$	(16,585)
Other comprehensive income (loss):
Foreign currency translation		11,537		10,480
Change in unrealized gains/losses from cash flow hedges:
Change in fair value of cash flow hedges, net of tax		(45)		(1,185)
Adjustment for net gains/losses realized and included in net income, net of tax		(185)		49
Total change in unrealized gains/losses realized from cash flow hedges, net of tax		(230)		(1,136)
Total other comprehensive income		11,307		9,344
Total comprehensive income (loss)		4,029		(7,241)
Noncontrolling interest in comprehensive income of consolidated VIE, net of tax		5,717		3,990
Comprehensive loss attributable to Cubic, net of tax	$	(1,688)	$	(11,231)

See Notes to Condensed Consolidated Financial Statements.

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CUBIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(amounts in thousands)

	December 31,		September 30,
	2020		2020
ASSETS
Current assets:
Cash and cash equivalents	$	112,451	$	128,619
Cash of consolidated VIE		1,337		1,065
Restricted cash		29,610		25,478
Restricted cash of consolidated VIE		3,822		1,822
Accounts receivable:
Billed		98,116		161,473
Allowance for doubtful accounts		(1,359)		(1,498)
		96,757		159,975
Contract assets		288,256		268,773
Recoverable income taxes		17,707		17,434
Inventories		130,865		127,251
Other current assets		38,389		32,626
Other current assets of consolidated VIE		34		31
Total current assets		719,228		763,074
Long-term contracts financing receivables		65,738		64,642
Long-term contracts financing receivables of consolidated VIE		241,814		221,245
Property, plant and equipment, net		165,576		166,301
Operating lease right-of-use asset		84,646		87,167
Deferred income taxes		5,599		4,790
Goodwill		787,741		784,882
Purchased intangibles, net		194,467		210,361
Other assets		34,789		21,759
Total assets	$	2,299,598	$	2,324,221
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	207,040	$	215,716
Trade accounts payable		106,410		156,953
Trade accounts payable of consolidated VIE		23		49
Contract liabilities		80,429		75,546
Accrued compensation and current liabilities		124,233		126,388
Other current liabilities of consolidated VIE		100		85
Income taxes payable		1,116		799
Current portion of long-term debt		11,250		11,250
Total current liabilities		530,601		586,786
Long-term debt		428,143		430,115
Long-term debt of consolidated VIE		187,688		163,348
Operating lease liability		78,616		80,568
Financing lease liability		10,386		395
Other noncurrent liabilities		67,648		68,939
Other noncurrent liabilities of consolidated VIE		2,638		5,890
Shareholders’ equity:
Common stock		297,655		295,986
Retained earnings		837,477		850,472
Accumulated other comprehensive loss		(138,296)		(149,603)
Treasury stock at cost - 8,945 shares		(36,078)		(36,078)
Shareholders’ equity related to Cubic		960,758		960,777
Noncontrolling interest in VIE		33,120		27,403
Total shareholders’ equity		993,878		988,180
Total liabilities and shareholders’ equity	$	2,299,598	$	2,324,221

See Notes to Condensed Consolidated Financial Statements.

5

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in thousands)

	Three Months Ended
	December 31,
	2020		2019
Operating Activities:
Net loss	$	(7,278)	$	(16,585)
Net loss from discontinued operations		—		584
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		24,661		16,950
Share-based compensation expense		4,679		4,477
Change in fair value of contingent consideration		(576)		(3,005)
Change in fair value of interest rate swap of consolidated VIE		(3,252)		(4,337)
Deferred income taxes		(1,138)		993
Other items		3,611		4,295
Changes in operating assets and liabilities, net of effects from acquisitions		(42,877)		(50,934)
NET CASH USED IN OPERATING ACTIVITIES FROM CONTINUING OPERATIONS		(22,170)		(47,562)
NET CASH USED IN OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS		—		(44)
NET CASH USED IN OPERATING ACTIVITIES		(22,170)		(47,606)
Investing Activities:
Purchases of property, plant and equipment		(6,664)		(11,833)
Receipt of withheld proceeds from sale of trade receivables		1,842		5,521
NET CASH USED IN INVESTING ACTIVITIES		(4,822)		(6,312)
Financing Activities:
Proceeds from short-term borrowings		81,858		157,500
Principal payments on short-term borrowings		(90,690)		(126,500)
Principal payments on long-term borrowings		(1,972)		—
Proceeds from long-term borrowings of consolidated VIE		22,534		20,186
Principal payments on finance lease liability		(18)		—
Proceeds from stock issued under employee stock purchase plan		—		1,169
Purchase of common stock		(3,010)		(3,621)
NET CASH PROVIDED BY FINANCING ACTIVITIES		8,702		48,734
Effect of exchange rates on cash		8,526		4,021
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(9,764)		(1,163)
Cash, cash equivalents and restricted cash at the beginning of the period		156,984		95,621
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT THE END OF THE PERIOD	$	147,220	$	94,458
Supplemental disclosure of non-cash investing and financing activities:
Withheld proceeds from the sale of trade receivables to be received in fiscal 2021		640		—

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 December 31, 2020
					Accumulated
					Other				Noncontrolling		Number
	Common		Retained		Comprehensive		Treasury		Interest in		of Shares
	Stock		Earnings		Loss		Stock		VIE		Outstanding
October 1, 2020	$	295,986	$	850,472	$	(149,603)	$	(36,078)	$	27,403	31,329
Net income (loss)		—		(12,995)		—		—		5,717	—
Other comprehensive income, net of tax		—		—		11,307		—		—	—
Stock issued under equity incentive plans		—		—		—		—		—	547
Purchase of common stock		(3,010)		—		—		—		—	(66)
Share-based compensation		4,679		—		—		—		—	—
December 31, 2020	$	297,655	$	837,477	$	(138,296)	$	(36,078)	$	33,120	31,810

	For the Three Months Ended December 31, 2019
					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)		—		(20,575)		—		—		3,990	—
Other comprehensive income, net of tax		—		—		9,344		—		—	—
Stock issued under equity incentive plans		—		—		—		—		—	149
Stock issued under employee stock purchase plan		1,169		—		—		—		—	—
Purchase of common stock		(3,621)		—		—		—		—	(53)
Share-based compensation		4,477		—		—		—		—	—
Cumulative effect of accounting standard adoption		—		(824)		—		—		—	—
December 31, 2019	$	276,497	$	841,549	$	(130,349)	$	(36,078)	$	22,909	31,274

See Notes to Condensed Consolidated Financial Statements.

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CUBIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

December 31, 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 quarter ended December 31, 2020 are not necessarily indicative of the results that may be expected for our fiscal year ending September 30, 2021 (“fiscal 2021”). 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, 2020 (“fiscal 2020”).

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.

As described in Note 14, we concluded that the combination of our legacy Cubic Mission Solutions (“CMS”) and our legacy Cubic Global Defense (“CGD”) segments into our new Cubic Mission and Performance Solutions (“CMPS”) segment resulted in CMPS becoming a single operating segment beginning on October 1, 2020. Applicable prior period amounts have been adjusted retrospectively to reflect the reportable segment change.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“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. We adopted ASU 2016-13 on October 1, 2020. The adoption of this standard did not have a material 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. We adopted ASU 2017-04 on October 1, 2020. The adoption of ASU 2017-04 did not have an impact on our consolidated financial statements and would only have the potential to impact the amount of goodwill impairment recorded in the event that goodwill is determined to be impaired in the future.

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. We adopted ASU 2018-13 on October 1, 2020. The adoption of this standard did not have an 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. We adopted ASU 2018-14 on October 1, 2020. The adoption of this standard did not have a significant impact on our consolidated financial statements.

8

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. We adopted ASU 2018-15 on October 1, 2020. The adoption of this standard did not have a significant impact on our consolidated financial statements.

Recent Accounting Pronouncements – Not Yet Adopted

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 — Acquisitions and Divestitures

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 have been included in our consolidated financial statements since the respective date of each acquisition.

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. 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 began consolidating Pixia into our financial statements. The acquisition-date fair value of consideration transferred is $245.2 million and is comprised of cumulative 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 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		3.8
Deferred taxes		(17.6)
Other net assets acquired (liabilities assumed)		(1.8)
Net identifiable assets acquired		72.2
Goodwill		173.0
Net assets acquired	$	245.2

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

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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 CMPS business and strengthening our capability of developing and integrating products in our CMPS 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 CMPS segment and is not expected to be deductible for tax purposes.

Delerrok Inc.

In fiscal 2018 and 2019 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. 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 $36.8 million, resulting in our ownership of all of Delerrok’s shares of common stock. Prior to January 3, 2020, we accounted for our investment in Delerrok using the cost method of accounting. We began consolidating Delerrok in our financial statements effective January 3, 2020. The acquisition-date fair value of consideration is $45.1 million and is comprised of total cash paid of $43.5 million plus the fair value of contingent consideration of $1.6 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	$	14.9
Trade name		0.9
Accounts receivable		0.9
Other net assets acquired (liabilities assumed)		(0.3)
Deferred tax liability		(1.7)
Net identifiable assets acquired		14.7
Goodwill		30.4
Net assets acquired	$	45.1

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 ten 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.

Operating Results

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

	Three Months Ended
	December 31, 2020
	Delerrok		Pixia
Sales	$	0.3	$	2.3
Operating loss		(1.1)		(8.0)
Net loss after taxes		(1.1)		(8.0)

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

	Three Months Ended
	December 31, 2020
	Delerrok		Pixia
Amortization	$	0.4	$	7.2
Acquisition-related expenses		0.4		0.5
Gain from changes in fair value of contingent consideration		(0.9)		—

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		Pixia
2021	$	1.7	$	28.7
2022		1.6		12.7
2023		1.6		7.3
2024		1.6		7.3
2025		1.6		7.3
Thereafter		6.4		3.2

Pro Forma Information

The following unaudited pro forma information presents our consolidated results of operations as if Pixia and Delerrok had been included in our consolidated results since October 1, 2019 (in millions):

	Three Months Ended
	December 31,
	2020		2019
Net sales	$	318.8	$	333.1
Net loss	$	(13.0)	$	(28.8)

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. 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, 2019, and it does not purport to project our future operating results.

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Goodwill

Changes in goodwill for the three months ended December 31, 2020 were as follows for each of our reporting units (in thousands):

	Cubic Transportation		Cubic Mission
	Systems		Performance Solutions		Total
Net balances at October 1, 2020	$	287,668	$	497,214	$	784,882
Acquisitions		(260)		—		(260)
Foreign currency exchange rate changes		2,229		890		3,119
Net balances at December 31, 2020	$	289,637	$	498,104	$	787,741

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.

We complete our annual goodwill impairment test each year as of July 1 separately for each of our reporting units.

For our fiscal 2020 impairment test we concluded there was no impairment of goodwill and in the first quarter of fiscal 2021 we concluded that no circumstances were present that required an interim impairment test.

Note 3 – Variable Interest Entities

In accordance with Accounting Standards Codification (“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 they are 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, or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity.

We continually assess 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 that could potentially be significant to the VIE. We consider the VIE design, ownership and voting structure, contractual relationships, distribution of profits and losses, risks, responsibilities, and indebtedness in determining if we are the primary beneficiary.

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 created a 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. We have concluded that we are not the primary beneficiary of Boston HoldCo, and thus we have not consolidated the financial statements of Boston HoldCo. In June 2020, MBTA and Boston OpCo executed an amended agreement (the “Amended MBTA Contract”), which modified certain provisions of the Original MBTA Contract

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 December 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 at the

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full service commencement date, fixed payments of $618.0 million during the full service 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 under the Amended MBTA Contract 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 totaling $26.2 million 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. Boston HoldCo is able to draw on this letter of credit in certain liquidity instances, but no amounts have been drawn through December 31, 2020.

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. Under the Boston OpCo Amended Credit Agreement, the long-term debt facilities allow for draws up to an aggregate of $421.6 million during the design and build phase of the Amended MBTA Contract. The long-term debt facilities, including all interest and fees incurred, are required to be repaid on a fixed monthly schedule commencing 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%. Boston OpCo incurred debt issuance and modification costs of $9.2 million during fiscal 2020 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. Unamortized deferred financing costs are netted against long-term debt and amounted to $17.0 million and $17.2 million at December 31, 2020 and September 30, 2020, respectively. 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.

Upon execution of the Boston OpCo Amended Credit Agreement, Boston OpCo terminated its existing interest rate swaps and paid termination costs of $34.4 million to the counterparties. Additionally, 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. Boston OpCo’s interest rate swaps were not designated as effective hedges, and as such unrealized gains (losses) are included in other income (expense), net. At December 31, 2020 and September 30, 2020, the outstanding notional principal amounts on open interest rate swaps were $215.0 million and $194.0 million, respectively. The fair value of Boston OpCo’s interest rate swaps were $2.6 million and $5.9 million at December 31, 2020 and September 30, 2020, respectively, and is recorded as a liability in other noncurrent liabilities in our condensed consolidated balance sheets. As a result of changes in the fair value of its interest rate swaps, Boston OpCo recognized gains of $3.3 million, and $4.3 million for the three months ended December 31, 2020 and 2019, respectively. See Note 7 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:

	December 31,		September 30,
	2020		2020
	(in thousands)
Cash	$	1,337	$	1,065
Restricted cash		3,822		1,822
Other current assets		34		31
Long-term contracts financing receivable		241,814		221,245
Total assets	$	247,007	$	224,163
Trade accounts payable	$	23	$	49
Accrued compensation and other current liabilities		100		85
Due to Cubic		22,674		27,259
Other noncurrent liabilities		2,638		5,890
Long-term debt		187,688		163,348
Total liabilities	$	213,123	$	196,631
Total Cubic equity		764		129
Noncontrolling interests		33,120		27,403
Total liabilities and owners' equity	$	247,007	$	224,163

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 $2.9 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
	December 31,
	2020		2019
Revenue	$	4,021	$	1,245
Operating income		3,717		972
Other income (expense), net		3,252		3,071
Interest income		1,373		1,553
Interest expense		(1,989)		(1,159)

Note 4 — 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 amounts):

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	Three Months Ended
	December 31,
	2020		2019
Operating income (loss)	$	1,338	$	(6,168)
Net income (loss) from continuing operations		1,059		(5,762)
Net income (loss) from continuing operations attributable to Cubic		970		(5,762)
Diluted income (loss) per share attributable to Cubic		0.03		(0.18)

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 December 31, 2020, our ending backlog was $3.681 billion, compared to $3.667 billion at September 30, 2020. We expect to recognize approximately 30% of our December 31, 2020 backlog over the next 12 months as revenue, and approximately 45% over the next 24 months, with the remainder recognized thereafter.

Accounts Receivable:

The components of accounts receivable are as follows (in thousands):

	December 31,		September 30,
	2020		2020
Accounts receivable
Billed	$	98,116	$	161,473
Allowance for doubtful accounts		(1,359)		(1,498)
Net accounts receivable	$	96,757	$	159,975

Amounts billed include $26.4 million and $82.2 million due on U.S. federal government contracts at December 31, 2020 and September 30, 2020, 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 December 31, 2020 and September 30, 2020, we sold $6.4 million and $18.4 million, respectively, of outstanding trade receivables to financial institutions. During the three months ended December 31, 2020, we received $1.8 million related to withheld proceeds from receivables we sold as of September 30, 2020, which is included in cash provided by investing activities in our Condensed Consolidated Statements of Cash Flows.

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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):

	December 31,		September 30,
	2020		2020
Contract assets	$	288,256	$	268,773
Contract liabilities	$	80,429	$	75,546

Contract assets increased $19.5 million during the three months ended December 31, 2020, due to revenue recognized in excess of billings related to the satisfaction or partial satisfaction of performance obligations. There were no significant impairment losses related to our contract assets during the three months ended December 31, 2020.

Contract liabilities increased $4.9 million during the three months ended December 31, 2020, due to payments received in excess of revenue recognized on these performance obligations. During the three months ended December 31, 2020, we recognized $26.7 million of our contract liabilities at September 30, 2020 as revenue. We expect our contract liabilities to be recognized as revenue over the next 24 months.

Note 5 — 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 share price for each fiscal period using the treasury stock method. 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.

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
	December 31,
	2020		2019
Weighted average shares - basic		31,562		31,273
Effect of dilutive securities		—		—
Weighted average shares - diluted		31,562		31,273
Number of anti-dilutive securities		1,226		1,112

Note 6 — Balance Sheet Details

Restricted Cash

Cash and cash equivalents excluded $33.4 million and $27.3 million of restricted cash at December 31, 2020 and

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September 30, 2020, 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):

	December 31,		September 30,
	2020		2020
Finished products	$	18,503	$	14,838
Work in process and inventoried costs under long-term contracts		69,347		73,076
Materials and purchased parts		43,015		39,337
Net inventories	$	130,865	$	127,251

At December 31, 2020, work in process and inventoried costs under long-term contracts included approximately $6.6 million in costs incurred outside the scope of work or in advance of a contract award compared to $5.3 million at September 30, 2020. We believe it is probable that we will recover the costs inventoried at December 31, 2020, plus a profit margin, under contract change orders or awards within the next year.

Property, Plant and Equipment

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

	December 31,		September 30,
	2020		2020
Land and land improvements	$	7,200	$	7,423
Buildings and improvements		50,166		49,716
Machinery and other equipment		145,176		132,962
Software		124,753		121,890
Leasehold improvements		23,381		22,295
Construction and internal-use software development in progress		13,853		21,409
Accumulated depreciation and amortization		(198,953)		(189,394)
	$	165,576	$	166,301

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 $10.1 million at December 31, 2020 and $9.6 million at September 30, 2020.

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 $7.2 million at December 31, 2020 and $6.8 million at September 30, 2020 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 7 — 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.

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● 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):

	December 31, 2020								September 30, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Current derivative assets	$	—	$	1,443	$	—	$	1,443	$	—	$	1,398	$	—	$	1,398
Noncurrent derivative assets		—		770		—		770		—		222		—		222
Total assets measured at fair value	$	—	$	2,213	$	—	$	2,213	$	—	$	1,620	$	—	$	1,620
Liabilities
Current derivative liabilities		—		6,055		—		6,055		—		4,557		—		4,557
Noncurrent derivative liabilities		—		14,013		—		14,013		—		14,070		—		14,070
Contingent consideration to seller of H4 Global		—		—		1,296		1,296		—		—		1,148		1,148
Contingent consideration to seller of Deltenna		—		—		3,180		3,180		—		—		3,004		3,004
Contingent consideration to seller of Shield		—		—		5,566		5,566		—		—		5,566		5,566
Contingent consideration to seller of Delerrok		—		—		—		—		—		—		900		900
Total liabilities measured at fair value	$	—	$	20,068	$	10,042	$	30,110	$	—	$	18,627	$	10,618	$	29,245

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 December 31, 2020, we have the following remaining contingent consideration arrangements with the sellers of companies which we acquired:

H4 Global: A payment of $1.3 million was made in January 2021 based on a percentage of the value of H4 contracts entered into from October 1, 2015 through September 30, 2020.

Deltenna: Payments of up to $7.4 million if Deltenna meets certain sales goals from the date of acquisition 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 52% as of December 31, 2020 and September 30, 2020. The selected discount rate was 10.5% as of December 31, 2020 and September 30, 2020.

Shield: Payments of up to $10.0 million if Shield meets certain sales goals from the date of acquisition through July 31, 2025. The fair value of the contingent consideration was estimated based on Monte Carlo simulations, which uses a

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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 December 31, 2020 and September 30, 2020 were 31% and 16%, respectively. The selected discount rate was based primarily on an analysis of publicly traded comparable companies and was 5.7% at December 31, 2020 and September 30, 2020.

Nuvotronics: Payments of up to $8.0 million if Nuvotronics meets certain gross profit goals for the 12-month periods 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 December 31, 2020, the fair value of the Nuvotronics contingent consideration was determined to be zero as its forecasted gross profit amounts were below the payout thresholds.

Delerrok: As of December 31, 2020, the value of the Delerrok contingent consideration was determined to be zero as its sales amount were below the payout threshold for the measurement period that lapsed on December 31, 2020.

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 December 31, 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, 2020	$	1,148	$	3,004	$	5,566	$	—	$	900	$	10,618
Total remeasurement (gain) loss recognized in earnings		148		176		—		—		(900)		(576)
Balance as of December 31, 2020	$	1,296	$	3,180	$	5,566	$	—	$	—	$	10,042

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 December 31, 2020.

In fiscal 2019 and 2020, we invested $5.0 million and $1.2 million, respectively, 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 funds operating loss was $0.1 million for the three-months ended December 31, 2020, and is 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-months ended December 31, 2019. Our investment balance is included within other assets in our Condensed Consolidated Statements of Operations and amounted to $5.5 million and $5.6 million as of December 31, 2020 and September 30, 2020, respectively.

We did not have any significant non-financial assets or liabilities measured at fair value on a non-recurring basis in the first quarter of fiscal 2021 or fiscal 2020 other than assets and liabilities acquired in business acquisitions described in Note 2 and the RSUs that contain performance and market-based vesting criteria described in Note 11.

Note 8 — Financing Arrangements

On March 27, 2020, we 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 December 31, 2020, the weighted average interest rate on outstanding borrowings under the Credit Facility was 1.95%. The Credit Facility is unsecured, but it is guaranteed by certain significant domestic subsidiaries of Cubic.

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On April 1, 2020, we entered into 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 as of December 31, 2020 have an interest rate of approximately 2.49% and outstanding notional principal amounts of $500.0 million. See Note 7 for a description of the measurement of fair value of our derivative financial instruments.

Debt issuance and modification costs of $3.4 million were incurred in connection with the execution of the Credit Facility and are classified 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 December 31, 2020, our total debt issuance costs for our Term Loan and Revolving Line of Credit had an unamortized balance of $5.2 million.

The available credit under our Revolving Line of Credit is reduced by any letters of credit issued under the Credit Facility. As of December 31, 2020, there were $441.6 million of borrowings under the Term Loan and $207.0 million of borrowings under the Revolving Line of Credit. Letters of credit outstanding under the Credit Facility totaled $94.6 million at December 31, 2020, which reduced our available line of credit to $548.4 million. The $94.6 million of letters of credit includes both financial letters of credit and performance guarantees.

As of December 31, 2020, we had letters of credit and bank guarantees outstanding totaling $101.2 million, which includes the $94.6 million of letters of credit issued under the Revolving Line of Credit and $6.6 million of letters of credit issued under other facilities. The $101.2 million of letters of credit and bank guarantees includes $97.5 million that guarantees either our performance or customer advances under certain contracts and $3.7 million of financial letters of credit 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 also use surety bonds as an alternative to letters of credit.

We have entered into a short-term borrowing arrangement in the United Kingdom for up to £15.0 million British Pounds (equivalent to approximately $20.5 million at December 31, 2020) to help meet the short-term working capital requirements of our subsidiary located in the United Kingdom. At December 31, 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 December 31, 2020 was $29.6 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 December 31, 2020, we were in compliance with all covenants under the Credit Facility.

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 $5.1 million at December 31, 2020 and September 30, 2020.

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Note 9 — Leases

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 and financing leases expire at various dates through 2032 and 2025, respectively, 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 and our right-of-use assets for financing leases are included in other assets on our Condensed Consolidated Balance Sheets. Our lease liabilities for operating and financing leases are included in other current liabilities for the current portion and separately in operating and financing 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. Our finance lease expense consists of amortization of the right-of-use asset and interest expense. Amortization expense is recognized on a straight-line basis over the lease term and is included in cost of sales and selling, general and administrative expenses in our consolidated statement of operations. Interest expense is calculated using the effective interest method and is included in interest expense in our consolidated statement of operations. We also sublease certain immaterial properties and sublease income is included as a reduction of rental expense.

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

Operating Lease Portfolio

	December 31,		September 30,
	2020		2020
Right-of-use assets	$	84.6	$	87.2
Short-term lease liability		15.7		16.8
Long-term lease liability		78.6		80.6
Weighted average remaining lease term		7.4 years		7.6 years
Weighted average discount rate		3.0%		3.0%

Finance Lease Portfolio

	December 31,		September 30,
	2020		2020
Right-of-use assets	$	13.2	$	0.5
Short-term lease liability		2.8		0.2
Long-term lease liability		10.4		0.4
Weighted average remaining lease term		4.9 years		2.4 years
Weighted average discount rate		1.75%		1.7%

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Lease Expense

	Three Months Ended
	December 31,
	2020		2019
Lease Expense
Operating lease expense	$	4.9	$	4.6
Finance lease expense
Amortization of right-of-use asset		0.1		—
Interest on lease liabilities		—		—
Short-term lease expense		—		0.4
Variable lease expense		0.9		1.1
Total lease expense	$	5.9	$	6.1

Other Information

	Three Months Ended
	December 31,
	2020		2019
Cash paid related to lease liabilities
Finance lease - cash paid for interest	$	—	$	—
Operating lease - cash paid for fixed payments		4.8		4.5
Finance lease - cash paid for finance lease liabilities		—		—
Right-of-use assets obtained in exchange for new finance lease liabilities		12.6		—
Right-of-use assets obtained in exchange for new operating lease liabilities		0.2		9.6

Maturities of Lease Liabilities

Our future minimum lease commitments of our operating and finance leases on an undiscounted basis, reconciled to the lease liability at December 31, 2020 were as follows (in millions):

	Financing		Operating
2021	$	2.9	$	12.8
2022		2.9		16.3
2023		2.7		14.2
2024		2.7		13.4
2025		2.6		11.1
Thereafter		—		37.9
Total lease payments		13.8		105.7
Less: imputed interest		(0.6)		(11.4)
Present value of lease liabilities	$	13.2	$	94.3

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, a financial institution owns the buildings and we acted as the construction agent. We began leasing the real property for a term of five years upon the completion of the buildings in December 2020, which is reflected in our finance lease right-of-use assets and finance lease liabilities presented above. 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 December 31, 2020, we were in compliance with all covenants included in these agreements.

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Note 10 — Pension Plans

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

	Three Months Ended
	December 31,
	2020		2019
Service cost	$	158	$	165
Interest cost		1,333		1,531
Expected return on plan assets		(2,649)		(2,946)
Amortization of actuarial loss		1,140		1,001
Administrative expenses		89		86
Net pension cost (benefit)	$	71	$	(163)

Note 11 - 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. Participants receive the full benefit of the underlying common stock upon vesting.

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 and 2021 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.

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 and 2021, 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.

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.

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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, 2020 and 2021:

	RSUs granted during fiscal 2021
Valuation Date	November 17, 2020
Grant date fair value per RSU	$57.71
Performance period begins	October 1, 2020
Performance period ends	September 30, 2023
Risk-free interest rate	0.2%
Expected volatility	50%
	RSUs granted during fiscal 2020
Valuation Date	September 17, 2020
Grant date fair value per RSU	$41.13
Performance period begins	October 1, 2019
Performance period ends	September 30, 2022
Risk-free interest rate	0.1%
Expected volatility	52%

At December 31, 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 456,011 RSUs with time-based vesting, and 400,878 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, 2020	554,423	$	58.54
Granted	234,899		60.99
Vested	(226,934)		58.34
Forfeited	(11,147)		59.85
Unvested at December 31, 2020	551,241	$	59.64

	Unvested RSUs with Performance-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2020	137,770	$	61.40
Granted	—		—
Vested	(110,247)		61.40
Forfeited	(27,523)		61.40
Unvested at December 31, 2020	—	$	—

	Unvested RSUs with Performance- and Market-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2020	471,496	$	51.56
Granted	277,250		57.71
Vested	—		—
Forfeited	(11,690)		50.77
Unvested at December 31, 2020	737,056	$	53.88

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

	Three Months Ended
	December 31,
	2020		2019
Cost of sales	$	601	$	539
Selling, general and administrative		4,078		3,938
	$	4,679	$	4,477

As of December 31, 2020, there was $59.3 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 $50.8 million, which is expected to be recognized over a weighted average period of 1.4 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 2020 and fiscal 2021. 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 12 – Income Taxes

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 December 31, 2020, we concluded it is more appropriate to determine income tax expense for the period using a blend of the discrete effective tax rate method for U.S. operations and the estimated annual effective tax rate method for foreign operations.

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The income tax expense recognized on the pre-tax loss from continuing operations for the three months ended December 31, 2020 resulted in tax expense of $3.5 million, or negative 92% effective tax rate, as compared to tax expense of $6.2 million, or negative 64% effective tax rate, for the three month ended December 31, 2019. The variability in tax expense and effective tax rates relates to the difference in jurisdictional mix of earnings and discrete impacts related to current year changes to the existing U.S. deferred tax valuation allowance.

Note 13 — 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.

The following table shows the notional principal amounts of our outstanding derivative instruments as of December 31, 2020 and September 30, 2020 (in thousands):

	Notional Principal
	December 31, 2020		September 30, 2020
Instruments receiving hedge accounting treatment:
Foreign currency forwards	$	118,922	$	92,931
Interest rate swaps		595,000		595,000
Instruments not receiving hedge accounting treatment:
Foreign currency forwards	$	4,842	$	4,298

Included in the amounts not receiving hedge accounting treatment at December 31, 2020 and September 30, 2020 were foreign currency forwards with notional principal amounts of $4.8 million and $4.3 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 $0.8 million for both of the three months ended December 31, 2020 and 2019. Unrealized gains or losses are included in other income (expense), net in our condensed consolidated statements of operations.

We hold pay-fixed/receive-variable interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with the lease obligations for our two new buildings located on our existing corporate campus. At December 31, 2020 and September 30, 2020, the outstanding notional principal amounts on these interest rate swaps were $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). As a result of changes in the fair value of the interest rate swaps, unrealized gains were $0.1 million and unrealized losses were $1.4 million for the three months ended December 31, 2020, and 2019, respectively.

In April 2020, we entered into interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with the Credit Facility. At December 31, 2020 and September 30, 2020, the interest rate swaps contain outstanding notional principal amounts of $500.0 million and were designated as effective cash flow hedges, and as such, unrealized gains (losses) are included in accumulated other comprehensive income (loss). Unrealized gains as a result of changes in the fair value of the interest rate swaps were $1.0 million for the three months ended December 31, 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 as of December 31, 2020 and September 30, 2020. 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.

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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 December 31, 2020 or September 30, 2020.

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	December 31, 2020		September 30, 2020
Asset derivatives:
Foreign currency forwards	Other current assets	$	1,443	$	1,398
Foreign currency forwards	Other assets		770		222
Total		$	2,213	$	1,620
Liability derivatives:
Foreign currency forwards	Accrued compensation and current liabilities	$	6,055	$	4,557
Foreign currency forwards	Other noncurrent liabilities		1,968		866
Interest rate swaps	Other noncurrent liabilities		12,045		13,204
Total		$	20,068	$	18,627

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
	December 31, 2020				December 31, 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	$	(1,100)	$	255	$	(1,583)	$	(66)
Interest rate swaps		1,159		—		—		—
Total	$	59	$	255	$	(1,583)	$	(66)

Foreign currency forwards designated as accounting hedges had realized gains of $0.2 million for the three-months ended December 31, 2020. The amount of realized gains were immaterial for the three-months ended December 31, 2019.

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-months ended December 31, 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 twelve months is $3.3 million, net of income taxes.

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Note 14 — 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. In August 2020, we implemented a plan to realign and combine our legacy CMS and CGD segments into our new CMPS segment. At September 30, 2020, we concluded that CMS and CGD remained separate operating segments based upon factors including the nature of information presented to our chief executive officer and Board of Directors and the consequential level at which certain resource allocations and performance assessments were made. In the first quarter of fiscal 2021, we began providing financial information to our chief executive officer and Board of Directors at the CMPS level, which allowed resource allocation decisions and performance assessments to be made at that level. As such, we concluded that CMPS became an operating segment beginning on October 1, 2020. Applicable prior period amounts have been adjusted retrospectively to reflect the reportable segment change.

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.

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

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

	Three Months Ended
	December 31,
	2020		2019
Sales:
Cubic Transportation Systems	$	197.1	$	188.6
Cubic Mission and Performance Solutions		121.7		140.2
Total sales	$	318.8	$	328.8
Operating income (loss):
Cubic Transportation Systems	$	31.7	$	14.3
Cubic Mission and Performance Solutions		(16.5)		(8.6)
Unallocated corporate expenses		(13.9)		(12.2)
Total operating income (loss)	$	1.3	$	(6.5)
Depreciation and amortization:
Cubic Transportation Systems	$	7.5	$	7.1
Cubic Mission and Performance Solutions		15.1		9.2
Corporate		2.1		0.7
Total depreciation and amortization	$	24.7	$	17.0

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.

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Sales by Geographic Region (in millions):

	Three months ended December 31, 2020
	CTS		CMPS		Total
United States	$	111.9	$	80.3	$	192.2
United Kingdom		47.9		8.0		55.9
Australia		29.1		9.6		38.7
Far East/Middle East		1.0		15.8		16.8
Other		7.2		8.0		15.2
Total sales	$	197.1	$	121.7	$	318.8
	Three months ended December 31, 2019
	CTS		CMPS		Total
United States	$	96.7	$	79.0	$	175.7
United Kingdom		47.6		4.5		52.1
Australia		36.4		7.8		44.2
Far East/Middle East		1.3		36.7		38.0
Other		6.6		12.2		18.8
Total sales	$	188.6	$	140.2	$	328.8

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 December 31, 2020
	CTS		CMPS		Total
U.S. Federal Government and State and Local Municipalities	$	107.6	$	79.3	$	186.9
Other		89.5		42.4		131.9
Total sales	$	197.1	$	121.7	$	318.8
	Three months ended December 31, 2019
	CTS		CMPS		Total
U.S. Federal Government and State and Local Municipalities	$	93.5	$	82.0	$	175.5
Other		95.1		58.2		153.3
Total sales	$	188.6	$	140.2	$	328.8

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Sales by Contract Type: The vast majority 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 December 31, 2020
	CTS		CMPS		Total
Fixed Price	$	194.4	$	101.8	$	296.2
Other		2.7		19.9		22.6
Total sales	$	197.1	$	121.7	$	318.8
	Three months ended December 31, 2019
	CTS		CMPS		Total
Fixed Price	$	184.5	$	124.8	$	309.3
Other		4.1		15.4		19.5
Total sales	$	188.6	$	140.2	$	328.8

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 December 31, 2020
	CTS		CMPS		Total
Product	$	100.1	$	81.4	$	181.5
Service		97.0		40.3		137.3
Total sales	$	197.1	$	121.7	$	318.8
	Three months ended December 31, 2019
	CTS		CMPS		Total
Product	$	93.4	$	107.2	$	200.6
Service		95.2		33.0		128.2
Total sales	$	188.6	$	140.2	$	328.8

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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 December 31, 2020
	CTS		CMPS		Total
Point in Time	$	18.8	$	25.0	$	43.8
Over Time		178.3		96.7		275.0
Total sales	$	197.1	$	121.7	$	318.8
	Three months ended December 31, 2019
	CTS		CMPS		Total
Point in Time	$	17.7	$	39.3	$	57.0
Over Time		170.9		100.9		271.8
Total sales	$	188.6	$	140.2	$	328.8

Note 15 — Restructuring Costs

In the fourth quarter of fiscal 2020, we announced our NextCUBIC transformation to restructure the way we work and operate as a business. Part of this initiative included establishing a Transformation Office and appointing a Chief Transformation Officer to identify, vet, plan and implement improvement initiatives across Cubic. Coinciding with this initiative, we also announced the combination of CGD and CMS into CMPS. This combination will help us optimize customer access and presence, leverage key enablers across the combined businesses and realize untapped cross-segment technical synergies to capture organizational efficiencies. The significant portion 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. Other restructuring charges related to headcount reductions initiated to optimize our cost positions. Our NextCUBIC transformation initiatives will continue through fiscal 2021, and our consulting fees that will be incurred in the future are generally contingent upon the achievement of future cost savings, the total expected restructuring costs related to these initiatives cannot currently be estimated.

In the first quarter of fiscal 2021, CMPS also incurred costs related to modifying its go-to market and legal structure in the Middle East. The total cost of these efforts is not expected to be significantly greater than those incurred through December 31, 2020.

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

	Three Months Ended
	December 31,
	2020		2019
Restructuring costs:
Cubic Transportation Systems	$	0.2		0.4
Cubic Mission and Performance Solutions		3.1		0.1
Unallocated corporate expenses		0.8		1.1
Total restructuring costs	$	4.1	$	1.6

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The following table presents a rollforward of our restructuring liability as of December 31, 2020, which is included within accrued compensation and other current liabilities within our condensed consolidated balance sheet (in millions):

	Restructuring Liability		Restructuring Liability
	Employee Separation and Other		Consulting Costs
Balance as of October 1, 2020	$	5.2	$	0.8
Accrued costs		4.1		—
Cash payments		(5.2)		(0.8)
Balance as of December 31, 2020	$	4.1	$	—

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 16 — 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.

Note 17 — Subsequent Event – Agreement and Plan of Merger

On February 7, 2021, we executed an Agreement and Plan of Merger by and among the Company, Atlas CC Acquisition Corp. and Atlas Merger Sub Inc., pursuant to which the Company will be acquired by Veritas Capital and Evergreen Coast Capital Corporation at a price of $70.00 per outstanding share of common stock of the Company in an all-cash transaction. The transaction is expected to close during the third quarter of fiscal 2021, subject to customary closing conditions, including the receipt of shareholder and regulatory approvals.

There can be no assurance that the transaction will close in the timeframe contemplated or on the terms anticipated, if at all.

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CUBIC CORPORATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

December 31, 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 two reportable business segments: Cubic Transportation Systems (“CTS”) and Cubic Mission and Performance Solutions (“CMPS”).

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.

CMPS provides networked C4ISR capabilities for defense, intelligence, security and commercial missions and is a leading provider of live, virtual, constructive and game-based training solutions for the U.S. and allied forces. CMPS’s core competencies include protected wide-band communications for space, aircraft, unmanned aerial vehicle, 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 and offers cloud-based platforms designed to manage and share large amounts of imagery data, wide-area motion imagery and geospatial data. It’s LVC training solutions blend virtual and constructive elements into live training to provide the highest fidelity and most threat realistic secure training environments.

We have concluded that the combination of our legacy Cubic Mission Solutions (“CMS”) and our legacy Cubic Global Defense (“CGD”) segments into our new Cubic Mission and Performance Solutions (“CMPS”) segment resulted in CMPS becoming a single operating segment beginning on October 1, 2020. Applicable prior period amounts have been adjusted retrospectively to reflect the reportable segment change.

The three months ended December 31, 2020 and 2019 represent the first quarters of our fiscal years ending September 30, 2021 (“fiscal 2021”) and September 30, 2020 (“fiscal 2020”), respectively.

COVID-19 Update

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The COVID-19 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 in order to reduce the potential impacts of the pandemic. To date we have not experienced significant disruptions in our supply chain, nor have we experienced any significant disruptions at our manufacturing facilities.

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 impacting our transit agency customer’s revenue, with uncertainty surrounding the pace and timing of recovery. 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. While the U.S. National Defense Strategy continues to drive demand, our CMPS business has experienced some delays in timing of orders and shipments due to the COVID-19 pandemic.

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.

The extent to which COVID-19 will adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including the severity and duration of the outbreak and the effectiveness of actions to contain or mitigate its effects. While we expect the pandemic to continue to negatively impact our results, the current level of uncertainty over the economic and operational impacts of COVID-19 could lead to variability in results.

Consolidated Financial Results

	Three Months Ended
	December 31,
	2020		2019		% Change
	(in millions, except per share data)
Sales	$	318.8	$	328.8		(3)	%
Operating income (loss)		1.3		(6.5)		nm
Net loss from continuing operations attributable to Cubic		(13.0)		(20.0)		35	%
Diluted loss per share from continuing operations attributable to Cubic		(0.41)		(0.64)		36	%
Adjusted EBITDA		29.7		11.4		161	%
Adjusted net income (loss)		11.9		(3.7)		nm
Adjusted EPS		0.38		(0.12)		nm

Note on non-GAAP measures: Throughout the following results of operations discussion, we disclose certain non-U.S. generally accepted accounting principles (“GAAP”) financial measures, including Adjusted EBITDA, Adjusted Net Income and Adjusted EPS. For an explanation and reconciliation of such measures, see the section titled ‘Non-GAAP Financial Information’ below.

Sales: Sales for the first quarter of fiscal 2021 decreased 3% to $318.8 million from $328.8 million in the same period last year. The decrease in sales from CMPS of 13% was partially offset by an increase in sales from CTS of 5%. The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar had a favorable impact on sales of $3.9 million for the first quarter of fiscal 2021 compared to the same period last year. Sales generated by businesses we acquired during fiscal 2020 totaled $2.6 million for the first quarter of fiscal 2021, compared to no sales in the first fiscal quarter of last year.

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

Gross Margin: Our gross margin percentage on product sales increased to 24% in the first quarter of fiscal 2021, as compared to 17% in the same period last year. The increase was primarily due to improved contract performance on a number of CTS design and build contracts and on secure communications contracts at CMPS. Our gross margin percentage on service sales increased to 39% in the first quarter of fiscal 2021, as compared to 36% in the first quarter of last year, driven primarily by the impact of productivity initiatives in CTS.

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Selling, General and Administrative: Selling, General and Administrative (“SG&A”) expenses decreased in the first quarter of fiscal 2021 to $63.7 million compared to $65.9 million in the same period last year. As a percentage of sales, SG&A expenses were 20% in both the first quarter of fiscal 2021 and 2020. The decrease in SG&A expense was driven by cost reduction initiatives at both CTS and CMPS.

Restructuring: Restructuring expenses increased to $4.1 million in the first quarter of fiscal 2021 compared to $1.6 million in the same period last year. In the first quarter of fiscal 2021, CMPS also incurred costs related to modifying its go-to market and legal structure in the Middle East.

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
	December 31,
	2020		2019
Company-Sponsored Research and Development Expense:
Cubic Transportation Systems	$	2,664	$	1,234
Cubic Mission and Performance Solutions		9,417		6,746
Unallocated corporate expenses		65		442
Total company-sponsored research and development expense	$	12,146	$	8,422

The increase in Company-sponsored R&D expense in the first quarter of fiscal 2021 was primarily due to the acceleration of work on CMPS secure communication 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
	December 31,
	2020		2019
Cost of Contract Research and Development Activities:
Cubic Transportation Systems	$	13,921	$	14,790
Cubic Mission and Performance Solutions		19,473		15,186
Total cost of contract research and development activities	$	33,394	$	29,976

Amortization of Purchased Intangibles: Amortization of purchased intangibles for the first quarter of fiscal 2021 increased to $16.1 million from $10.1 million in the same period last year. The increase in amortization expense was driven by the completion of our acquisitions of Delerrok and Pixia in January 2020.

Operating Income (Loss): Our operating income increased to $1.3 million in the first quarter of fiscal 2021 compared to an operating loss of $6.5 million in the same period last year. CTS operating income increased to $31.7 million for the first quarter of fiscal 2021 compared to $14.3 million last year primarily due to improved contract performance. This increase was partially offset by an increased operating loss from CMPS of $16.5 million in the first quarter compared to $8.6 million in the same period last year. Our operating results, and particularly the CMPS operating results, were significantly impacted by accounting for businesses acquired in fiscal 2020. On a consolidated basis, the businesses that we acquired during fiscal 2020 had operating losses totaling $9.1 million in the first quarter of fiscal 2021, as compared to no amounts in the same period last year. The operating losses include acquisition-related expenses, including amortization of intangible assets, of $7.6 million in the first quarter of fiscal 2021, as compared to no amounts in the same period last year.

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Unallocated corporate and other costs for the first quarter of fiscal 2021 were $13.9 million compared to $12.0 million in the same period last year. The increase was primarily driven by strategic advisory services incurred in the first quarter of fiscal 2021.

The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar had a net favorable impact on operating income in the first quarter of fiscal 2021 of $0.8 million as 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 $1.8 million in the first quarter of fiscal 2021 compared to $2.2 million in the same period last year. Interest expense was $8.2 million in the first quarter of fiscal 2021 compared to $5.4 million in the same period last year. The increase in interest expense was due to higher average debt balances in the first quarter of fiscal 2021, 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.

Other Income (Expense): Other income (expense) netted to income of $1.3 million in the first quarter of fiscal 2021 compared to expense of $0.1 million in the first quarter of fiscal 2020. 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 months ended December 31, 2020 resulted in an effective tax rate of negative 92%, which differs from the effective tax rates of 186% and negative 64% for the year ended September 30, 2020 and for the three months ended December 31, 2019, respectively. The variability in effective tax rates primarily relates to the difference in both the level and jurisdictional mix of earnings, discrete impacts related to current year changes to the existing U.S. deferred tax valuation allowance, and the impact of deferred tax liabilities acquired in business combinations.

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 changes in U.S. or foreign tax law, the impact of acquisitions, fluctuations in the need for a valuation allowance against deferred tax assets, and our ability to take advantage of available tax attributes. After considering these impacts, we have determined that a reliable estimate of the annual effective tax rate for fiscal 2021 cannot be made.

Net Loss from Continuing Operations attributable to Cubic: Our net loss from continuing operations attributable to Cubic in the first quarter of fiscal 2021 was $13.0 million compared to a loss of $20.0 million in the first quarter of fiscal 2020. The decrease in net loss from continuing operations attributable to Cubic was primarily due to the increase in operating income as described above.

Adjusted EBITDA: Adjusted EBITDA increased to $29.7 million in the first quarter of fiscal 2021 compared to $11.4 million in the same period last year. The increase in Adjusted EBITDA was due to the same factors described above in operating income (loss), but excludes amortization expense, restructuring costs and acquisition-related expenses.

Adjusted Net Income (Loss): Our Adjusted Net Income increased to $11.9 million in the first quarter of fiscal 2021 compared to Adjusted Net Loss of $3.7 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, acquisition-related expenses and non-operating gains and losses.

Adjusted EPS: Adjusted EPS increased to $0.38 in the first quarter of fiscal 2021 compared to negative $0.12 in the first quarter last year. The changes in Adjusted EPS was due to the same factors that impacted Adjusted Net Income (Loss) noted above.

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CTS Segment

	Three Months Ended
	December 31,
	2020		2019		% Change
	(in millions)
Sales	$	197.1	$	188.6		5	%
Operating income		31.7		14.3		122	%
Adjusted EBITDA		35.8		22.2		61	%

Sales: CTS sales for the first quarter of fiscal 2021 increased 5% to $197.1 million from $188.6 million in the first quarter last year. Sales were higher in the U.S. due to increased work on our system development contracts in Boston, the Bay Area, and Chicago. Sales were lower in Australia due to lower work on our system development contract in Brisbane, and sales were relatively flat in the U.K. The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar resulted in an increase in sales of $3.2 million for the first quarter of fiscal 2021, compared to the first quarter last year.

Operating Income: CTS operating income for the first quarter of fiscal 2021 increased 122% to $31.7 million compared to $14.3 million in the first quarter last year. Operating income was higher in the U.S., U.K., and Australia due to increased work and higher profitability on our system development contracts in the U.S. and the impact of cost savings initiatives in all our regions. The average exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar resulted in an increase in operating income of $0.7 million for the first quarter of fiscal 2021 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 first quarter of fiscal 2021 compared to $4.4 million in the first quarter of fiscal 2020. The increase in amortization expense is a result of the amortization of intangible assets acquired in our purchase of Delerrok in January 2020.

Adjusted EBITDA: CTS Adjusted EBITDA increased 61% to $35.8 million in the first quarter of fiscal 2021 compared to $22.2 million in the first quarter of fiscal 2020. The increase in Adjusted EBITDA was primarily driven by the same factors that drove the increase in operating income described above.

CMPS Segment

	Three Months Ended
	December 31,
	2020		2019		% Change
	(in millions)
Sales	$	121.7	$	140.2		(13)	%
Operating loss		(16.5)		(8.6)		92	%
Adjusted EBITDA		2.7		(1.8)		nm

Sales: CMPS sales for the first quarter of fiscal 2021 decreased 13% to $121.7 million from $140.2 million in the first quarter last year. The decrease in sales primarily resulted from reduced work on an air combat training system program in the far east, which was partially offset by higher sales from our C2ISR business. Businesses acquired by CMPS in fiscal 2020 had sales of $2.3 million for the first quarter of fiscal 2021 and had no sales in the first quarter of fiscal 2020.

Operating Loss: The CMPS operating loss for the first quarter of fiscal 2021 increased to $16.5 million compared to an operating loss of $8.6 million in the same period last year. The increase in operating loss was driven by a $3.0 million increase in restructuring expense, a $2.6 million increase in R&D expense, and $8.0 million in operating losses incurred

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by Pixia in the first quarter of fiscal 2021 driven primarily by $7.2 million of amortization of purchased intangibles and $0.5 million of acquisition-related costs. Partially offsetting these losses were cost saving initiatives that resulted in $4.3 million in reduced SG&A expense as well as an increase in profits on higher sales from our C2ISR business.

Amortization of Purchased Intangibles: Amortization of purchased intangibles included in the CMPS results amounted to $11.3 million in the first quarter of fiscal 2021 compared to $5.7 million in the first quarter of fiscal 2020. The increase in amortization was due to the amortization of purchased intangibles related to our acquisition of Pixia in January 2020.

Adjusted EBITDA: CMPS Adjusted EBITDA was $2.7 million in the first quarter of fiscal 2021 compared to a loss of $1.8 million in the first quarter of fiscal 2020. The change in Adjusted EBITDA was primarily driven by the same factors that drove the change in operating loss described above, excluding amortization of purchased intangibles, acquisition-related expenses, and restructuring expenses.

Backlog

	December 31,		September 30,
	2020		2020
	(in millions)
Total backlog
Cubic Transportation Systems	$	3,173.0	$	3,139.9
Cubic Mission and Performance Solutions		508.5		527.1
Total	$	3,681.5	$	3,667.0

Total backlog increased by $14.5 million from September 30, 2020 to December 31, 2020 including the impact of foreign currency exchange rates. Changes in exchange rates between the prevailing currencies in our foreign operations and the U.S. dollar as of December 31, 2020 increased backlog by a net $76.1 million as compared to September 30, 2020.

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

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

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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 below.

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
	December 31,
	2020		2019
(in millions, except per share data)
GAAP EPS	$	(0.41)	$	(0.64)
GAAP Net loss from continuing operations attributable to Cubic	$	(13.0)	$	(20.0)
Noncontrolling interest in net income of VIE		5.7		4.0
Amortization of purchased intangibles		16.1		10.1
Gain on sale of fixed assets		—		(0.2)
Restructuring costs		4.1		1.6
Acquisition-related expenses (gains), excluding amortization		2.4		(0.7)
Strategic and IT system resource planning expenses		0.6		1.1
Other non-operating expense (income), net		(1.3)		0.1
Noncontrolling interest in Adjusted Net Income of VIE		(2.8)		(1.2)
Tax impact related to acquisitions1		0.3		—
Tax impact related to non-GAAP adjustments2		(0.2)		1.5
Adjusted Net Income (Loss)	$	11.9	$	(3.7)
Adjusted EPS	$	0.38	$	(0.12)
Weighted Average Diluted Shares Outstanding (in thousands)		31,562		31,273

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
(in millions, except margin data)	December 31,
Cubic Transportation Systems	2020		2019
Sales	$	197.1	$	188.6
Operating income	$	31.7	$	14.3
Depreciation and amortization		7.5		7.1
Noncontrolling interest in EBITDA of VIE		(3.4)		(0.9)
Acquisition-related expenses (gains), excluding amortization		(0.2)		1.3
Restructuring costs		0.2		0.4
Adjusted EBITDA	$	35.8	$	22.2
Adjusted EBITDA margin		18.2%		11.8%
	Three Months Ended
	December 31,
Cubic Mission and Performance Solutions	2020		2019
Sales	$	121.7	$	140.2
Operating loss	$	(16.5)	$	(8.6)
Depreciation and amortization		15.1		9.2
Acquisition-related expenses (gains), excluding amortization		1.0		(2.2)
Gain on sale of fixed assets		-		(0.2)
Restructuring costs		3.1		-
Adjusted EBITDA	$	2.7	$	(1.8)
Adjusted EBITDA margin		2.2%		(1.3)%
	Three Months Ended
	December 31,
Cubic Consolidated	2020		2019
Sales	$	318.8	$	328.8
Net loss from continuing operations attributable to Cubic	$	(13.0)	$	(20.0)
Noncontrolling interest in net income of VIE		5.7		4.0
Income tax provision		3.5		6.2
Interest expense, net		6.4		3.1
Other non-operating expense (income), net		(1.3)		0.1
Operating income (loss)	$	1.3	$	(6.5)
Depreciation and amortization		24.7		17.0
Noncontrolling interest in EBITDA of VIE		(3.4)		(0.9)
Acquisition-related expenses (gains), excluding amortization		2.4		(0.7)
Strategic and IT system resource planning expenses		0.6		1.1
Gain on sale of fixed assets		-		(0.2)
Restructuring costs		4.1		1.6
Adjusted EBITDA	$	29.7	$	11.4
Adjusted EBITDA margin		9.3%		3.5%

Note: Amounts may not sum due to rounding

Liquidity and Capital Resources

Operating activities used cash of $22.2 million for the first quarter of fiscal 2021 primarily due to payments to vendors and contractors for goods and services received related to our significant work on customer contracts in the fourth quarter of fiscal 2020, which was partially offset by increased collections for those goods and services. Our use of cash from operating activities includes cash outflows of $20.3 million from our consolidated VIE. As further described below, our consolidated operating cash flows exclude $19.7 million of cash received by Cubic from our consolidated VIE in the first quarter of fiscal 2021.

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Investing activities used cash of $4.8 million for the first quarter of fiscal 2021, including capital expenditures of $6.6 million, partially offset by $1.8 million of proceeds received related to the sale of trade receivables to banks which are required to be classified as investing activities under GAAP, as further described below.

Financing activities provided cash of $8.7 million for the first quarter of fiscal 2021 and included net payments of $8.8 million and $2.0 million on short-term and long-term borrowings, respectively. Net long-term borrowings undertaken by our consolidated VIE were $22.5 million for the first quarter of fiscal 2021. See discussion of our consolidated VIE in the section below.

Consolidated Variable Interest Entity

In March 2018, Cubic and John Laing, an unrelated 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 created a wholly owned entity, Boston AFC 2.0 OpCo. LLC (“Boston OpCo”), which 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.

Because we consolidate Boston OpCo, any payments from Boston OpCo to Cubic are excluded from our cash flows provided by operating activities, 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. Boston OpCo’s draws on its non-recourse debt amounted to $22.6 million in the first quarter of fiscal 2021. Payments we received from Boston OpCo that were not included in our cash provided by operating activities totaled $19.7 million in the first quarter of fiscal 2021 and have totaled a cumulative $157.0 million since the inception of our contract with Boston OpCo in March 2018.

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. The long-term debt facilities allow for draws up to an aggregate of $421.6 million during the design and build phase. The long-term debt facilities, including all interest and fees incurred, are required to be repaid on a fixed monthly schedule commencing 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%. At December 31, 2020, the outstanding balance on the long-term debt facilities was $204.7 million, which is presented net of unamortized deferred financing costs of $17.0 million. The revolving credit facility allows for draws up to a maximum aggregate amount of $15.8 million during the operate and maintain phase. Boston OpCo’s debt is nonrecourse with respect to Cubic and our subsidiaries.

The Boston OpCo Amended Credit Agreement contains covenants that require Boston OpCo and Cubic to maintain progress on the delivery within a specified timeline and budget and provide regular reporting on such progress. It 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 incurring penalties due to the lenders thereunder.

Upon execution of 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. At December 31, 2020, the outstanding notional principal amounts on open interest rate swaps were $215.0 million.

Financing Arrangements

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 December 31, 2020, the

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weighted average interest rate on outstanding borrowings under the Credit Facility was 1.95%. The Credit Facility is unsecured, but it is guaranteed by certain significant domestic subsidiaries of Cubic.

On April 1, 2020, we entered into 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 as of December 31, 2020 have an interest rate of approximately 2.49% and outstanding notional principal amounts of $500.0 million.

The available credit under our Revolving Line of Credit is reduced by any letters of credit issued under the Credit Facility. As of December 31, 2020, there were $441. 6 million of borrowings under the Term Loan and $207.0 million of borrowings under the Revolving Line of Credit. Letters of credit outstanding under the Credit Facility totaled $94.6 million at December 31, 2020, which reduced our available line of credit to $548.4 million. The $94.6 million of letters of credit includes both financial letters of credit and performance guarantees.

As of December 31, 2020, we had letters of credit and bank guarantees outstanding totaling $101.2 million, which includes the $94.6 million of letters of credit issued under the Revolving Line of Credit and $6.6 million of letters of credit issued under other facilities. The $101.2 million of letters of credit and bank guarantees includes $97.5 million that guarantees either our performance or customer advances under certain contracts and $3.7 million of financial letters of credit 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 also use surety bonds as an alternative to letters of credit.

We have entered into a short-term borrowing arrangement in the United Kingdom for up to £15.0 million British Pounds (equivalent to approximately $20.5 million at December 31, 2020) to help meet the short-term working capital requirements of our subsidiary located in the United Kingdom. At December 31, 2020, no amounts were outstanding under this arrangement.

We maintain a cash account with a bank in the U.K. 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 December 31, 2020 was $29.6 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 December 31, 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 December 31, 2020, we sold $6.4 million of outstanding trade receivables to financial institutions.

Our financial condition remains strong with net working capital of $188.6 million and a current ratio of 1.4 to 1 at December 31, 2020. We expect that cash on hand and our Revolving Credit Agreement will be adequate to meet our working capital requirements for the foreseeable future. Our total debt to capital ratio at December 31, 2020 was 65%.

As of December 31, 2020, the majority of the $142.1 million of our cash, cash equivalents and restricted cash was held by our foreign subsidiaries, primarily in the U.K., New Zealand and Australia

Future repatriations of foreign earnings will generally be exempt from U.S. tax. We will continue to provide applicable deferred taxes based on the tax liability or withholding taxes that would be due upon repatriation of the undistributed foreign earnings.

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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.

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 2020.

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 2020 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;

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

● 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

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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 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 December 31, 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 2020.

ITEM 4. CONTROLS AND PROCEDURES

We performed an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 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 December 31, 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 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 September 21, 2020, File No. 001-08931, Exhibit 3.2.
3.3	Certificate of Designations of Series A Junior Participating Preferred Stock. Incorporated by reference to Current Report on Form 8-K filed September 21, 2020, File No. 001-08931, Exhibit 3.1.
10.1*	Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the Cubic Corporation 2015 Incentive Award Plan (for awards granted during fiscal year 2021).
10.2*	Form of Performance Restricted Stock Unit Award Grant Notice and Performance Restricted Stock Unit Award Agreement under the Cubic Corporation 2015 Incentive Award Plan (for awards granted during fiscal year 2021).
10.3*	Form of Restricted Stock Award Grant Notice and Restricted Stock Award Agreement under the Cubic Corporation 2015 Incentive Award Plan (for awards granted during fiscal year 2021).
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 December 31, 2020, formatted in Inline eXtensible Business Reporting Language (Inline XBRL): (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.

* Indicates management contract or compensatory plan or arrangement.

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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:	February 8, 2021	/s/ Anshooman Aga
		Anshooman Aga
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)
Date:	February 8, 2021	/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

Time-Based Vesting Version

CUBIC CORPORATION

2015 INCENTIVE AWARD PLAN

RESTRICTED STOCK UNIT AWARD GRANT NOTICE AND
RESTRICTED STOCK UNIT AWARD AGREEMENT

Cubic Corporation, a Delaware corporation (the “Company”), pursuant to its 2015 Incentive Award Plan (the “Plan”), hereby grants to the participant listed below (“Participant”), an award of restricted stock units (“Restricted Stock Units” or “RSUs”) with respect to the number of shares of the Company’s Common Stock (the “Shares”) indicated below. Each RSU is hereby granted in tandem with a corresponding dividend equivalent, as further described in Article II of the Restricted Stock Unit Agreement (the “Dividend Equivalents”).  This award for Restricted Stock Units and the corresponding Dividend Equivalents (this “Award”) is subject to all of the terms and conditions as set forth herein, in the Restricted Stock Unit Award Agreement attached hereto as Exhibit A (the “Restricted Stock Unit Agreement”) and in the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Restricted Stock Unit Agreement.

Participant:	%%FIRST_NAME%-% %%MIDDLE_NAME%-% %%LAST_NAME%-%
Grant Date:	%%OPTION_DATE,'Month DD, YYYY'%-%
Total Number of RSUs:	%%TOTAL_SHARES_GRANTED,'999,999,999'%-%
Distribution Schedule:	Subject to the terms of the Restricted Stock Unit Agreement, the RSUs (and their corresponding Dividend Equivalents) shall be distributable in accordance with Section 1.1 of the Restricted Stock Unit Agreement.
Vesting Schedule:	Subject to the terms of the Restricted Stock Unit Agreement, the RSUs shall vest as set forth on Exhibit B to this Grant Notice.

By electronically accepting this Grant Agreement, Participant agrees to be bound by the terms and conditions of the Plan, the Restricted Stock Unit Agreement and this Grant Notice.  In addition, Participant explicitly acknowledges and agrees to be bound by the Restrictive Covenants set forth in Section 3.6 of the Restricted Stock Unit Agreement.  Participant has reviewed the Restricted Stock Unit Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Restricted Stock Unit Agreement and the Plan.  Participant has been provided with a copy or electronic access to a copy of the prospectus for the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Restricted Stock Unit Agreement.  The Award is subject to the terms and conditions of the Plan which are incorporated herein by reference. In the event of any inconsistency between the Plan and the Restricted Stock Unit Agreement, the terms of the Plan shall control.

Participant acknowledges that his or her acceptance of the terms and conditions of the Plan, the Restricted Stock Unit Agreement and this Grant Notice by his or her electronic acceptance of the Grant Agreement is a condition to the receipt of this Award.  As a result, unless otherwise determined by the Administrator, in the event Participant does not electronically accept this Grant Notice within ninety (90) days of the Grant Date, this Award shall be forfeited and Participant shall have no further rights thereto.

Participant acknowledges that Section 4.5 of the Restricted Stock Unit Agreement amends the governing law of Participant’s Invention & Secrecy Agreement (as defined in the Restricted Stock Unit Agreement) and hereby agrees to such amendment.

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EXHIBIT A

TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE

RESTRICTED STOCK UNIT AWARD AGREEMENT

Pursuant to the Restricted Stock Unit Award Grant Notice (the “Grant Notice”) to which this Restricted Stock Unit Award Agreement (this “Agreement”) is attached, the Company has granted to Participant the right to receive the number of RSUs set forth in the Grant Notice, and their corresponding Dividend Equivalents pursuant to Article II, subject to all of the terms and conditions set forth in this Agreement, the Grant Notice and the Plan.

ARTICLE I

AWARD OF RESTRICTED STOCK UNITS

1.1        Award of Restricted Stock Units.

(a)         Award. In consideration of Participant’s continued employment or service with the Company or any Subsidiary thereof and for other good and valuable consideration, the Company hereby grants to Participant the right to receive the number of RSUs set forth in the Grant Notice and their corresponding Dividend Equivalents pursuant to Article II, subject to all of the terms and conditions set forth in this Agreement, the Grant Notice and the Plan. Prior to actual issuance of any Shares, the RSUs, the Dividend Equivalents and the Award represent an unsecured obligation of the Company, payable only from the general assets of the Company.

(b)         Vesting. The RSUs subject to the Award shall vest in accordance with the Vesting Schedule set forth in Exhibit B to the Grant Notice. Unless and until the RSUs have vested in accordance with the Vesting Schedule set forth in the Grant Notice, Participant will have no right to any distribution with respect to such RSUs.  Unless otherwise provided in Exhibit B to the Grant Notice, in the event of Participant’s Termination of Service prior to the vesting of all of the RSUs, any unvested RSUs will terminate automatically without any further action by the Company and be forfeited without further notice and at no cost to the Company.

(c)         Distribution of RSUs.

(i)          Shares of Common Stock shall be distributed to Participant (or in the event of Participant’s death, to his or her estate) with respect to Participant’s vested RSUs, subject to the terms and provisions of the Plan and this Agreement, within ten (10) days following:

(A)        if Participant is or will be a Retirement Eligible Employee at any time on or after the Grant Date, the first to occur of:

(1)         the Scheduled Vesting Date for such RSUs as specified in the Vesting Schedule set forth in Exhibit B to the Grant Notice; or

(2)         Participant's death; or

(B)        if Participant is not and will not be a Retirement Eligible Employee at any time during the period beginning on the Grant Date and ending on the final Scheduled

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Vesting Date specified in the Vesting Schedule set forth in Exhibit B to the Grant Notice, the date on which such RSUs vest as specified in the Vesting Schedule set forth in Exhibit B to the Grant Notice.

(ii)         All distributions of the RSUs shall be made by the Company in the form of whole shares of Common Stock.

(iii)       Neither the time nor form of distribution of Common Stock with respect to the RSUs and the Dividend Equivalents may be changed, except as may be permitted by the Administrator in accordance with the Plan and Section 409A of the Code and the Treasury Regulations thereunder.

(iv)        Participant understands and agrees that, if Participant is or will be a Retirement Eligible Employee at any time on or after the Grant Date, certain tax withholding amounts may be due prior to an issuance of shares of Common Stock under this Section 1.1(c) if the RSUs fail to be subject to a substantial risk of forfeiture for purposes of Section 83 of the Code prior to such date.  If shares of Common Stock are issued on an accelerated basis to satisfy the Federal Insurance Contributions Act tax imposed under Sections 3101, 3121(a) or 3121(v)(2) of the Code (the “FICA Tax”) as provided in this Section 1.1(c)(iv) as a result of the lapse of the substantial risk of forfeiture for purposes of Section 83 of the Code prior to the issuance of shares of Common Stock under this Section 1.1(c), then Participant may have income tax at source on wages imposed under Section 3401 of the Code or the corresponding withholding provisions of applicable state, local or foreign tax laws (together with the FICA Tax, the “FICA-Related Taxes”).  Participant's FICA-Related Taxes shall be satisfied through the accelerated issuance and withholding of Shares otherwise issuable pursuant to the RSUs having a then-current Fair Market Value not exceeding the amount necessary to satisfy the FICA-Related Taxes of the Company and its Subsidiaries based on the minimum applicable statutory withholding rates (or such higher rate as may be determined by the Administrator, which higher rate may not exceed the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting principles in the United States of America), provided, that, such Shares shall be rounded up to the nearest whole share to the extent rounding up to the nearest whole share does not result in the liability classification of the applicable Award under generally accepted accounting principles in the United States of America).  Participant's FICA-Related Taxes shall constitute a Tax Withholding Obligation for purposes of Section 1.2 below and Section 1.2(b) shall apply to any shares of Common Stock withheld by the Company pursuant to this Section 1.1(c)(iv).

(d)         Generally. Shares issued under the Award shall be issued to Participant or Participant’s beneficiaries, as the case may be, at the sole discretion of the Administrator, in either (i) uncertificated form, with the Shares recorded in the name of Participant in the books and records of the Company’s transfer agent with appropriate notations regarding the restrictions on transfer imposed pursuant to this Agreement; or (ii) certificate form.  In no event will fractional shares be issued upon settlement of the Award.  In lieu of any fractional Share, the Company shall make a cash payment to Participant equal to the Fair Market Value of such fractional Share on the date the RSUs and the Dividend Equivalents are settled pursuant to this Section 1.1.

1.2        Tax Withholding.

(a)         The Company shall not be obligated to deliver any certificate representing Shares issuable with respect to the RSUs or any cash payment in respect of the Dividend Equivalents to Participant or his or her legal representative unless and until Participant or his or her legal representative shall have paid or otherwise satisfied in full the amount of all federal, state, local and foreign taxes applicable with respect to the taxable income of Participant resulting from the vesting of the RSUs or the Dividend

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Equivalents, the distribution of the Shares issuable with respect thereto, the settlement of the Dividend Equivalents or any other taxable event related to the RSUs or the Dividend Equivalents (the “Tax Withholding Obligation”).

(b)         Unless Participant elects to satisfy the Tax Withholding Obligation by some other means in accordance with clause (c) below prior to the time the Tax Withholding Obligation arises, Participant’s acceptance of this Award constitutes Participant’s instruction and authorization to the Company to, and the Company shall, withhold a net number of vested Shares otherwise issuable pursuant to the RSUs having a then-current Fair Market Value not exceeding the amount necessary to satisfy the Tax Withholding Obligation of the Company and its Subsidiaries with respect to the vesting or distribution of the RSUs based on the minimum applicable statutory withholding rates (or such higher rate as may be determined by the Administrator, which higher rate may not exceed the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting principles in the United States of America), provided, that, such Shares shall be rounded up to the nearest whole Share to the extent rounding up to the nearest whole share does not result in the liability classification of the applicable Award under generally accepted accounting principles in the United States of America).  In the event Participant’s Tax Withholding Obligation will be satisfied under this Section 1.2(b), then the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on Participant’s behalf a whole number of shares from those Shares issuable to Participant upon settlement of the RSUs as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy Participant’s Tax Withholding Obligation with respect to the vesting or distribution of the RSUs.  Participant’s acceptance of this Award constitutes Participant’s instruction and authorization to the Company and such brokerage firm to complete the transactions described above, including the transactions described in the previous sentence, as applicable.  Any Shares to be sold at the Company’s direction through a broker-assisted sale will be sold on the day the Tax Withholding Obligation with respect to the vesting or distribution of the RSUs arises or as soon thereafter as practicable.  The Shares may be sold as part of a block trade with other participants of the Plan in which all participants receive an average price.  Participant will be responsible for all broker’s fees and other costs of sale, and Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale. To the extent the proceeds of such sale exceed Participant’s Tax Withholding Obligation with respect to the vesting or distribution of the RSUs, the Company agrees to pay such excess in cash to Participant as soon as practicable. Participant acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy Participant’s Tax Withholding Obligation.

(c)         At any time not less than five (5) business days before any Tax Withholding Obligation arises, Participant may elect to satisfy the Tax Withholding Obligation by delivering to the Company an amount that the Company determines is sufficient to satisfy the Tax Withholding Obligation in one or more of the forms specified below:

(i)          by the deduction of such amount from other compensation payable to Participant;

(ii)         by tendering vested Shares owned by Participant having a then-current Fair Market Value not exceeding the amount necessary to satisfy the Tax Withholding Obligation of the Company and its Subsidiaries based on the minimum applicable statutory withholding rates (or such higher rate as may be determined by the Administrator, which higher rate may not exceed the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting

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principles in the United States of America), provided, that, such Shares shall be rounded up to the nearest whole Share to the extent rounding up to the nearest whole share does not result in the liability classification of the applicable Award under generally accepted accounting principles in the United States of America);

(iii)       through the delivery of a notice that Participant has placed a market sell order with a broker acceptable to the Company with respect to the Shares issuable pursuant to the RSUs then vesting and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company or its Subsidiary with respect to which the Tax Withholding Obligation arises in satisfaction of such obligation; provided that payment of such proceeds is then made to the Company or the applicable Subsidiary at such time as may be required by the Administrator, but in any event not later than the settlement of such sale; or

(iv)        in any combination of the foregoing.

(d)         To the maximum extent permitted by applicable law, the Company further has the authority to deduct or withhold such amount as is necessary to satisfy any Tax Withholding Obligation from other compensation payable to Participant with respect to any taxable event arising from vesting of the RSUs or the Dividend Equivalents, the receipt of the Shares upon settlement of the RSUs or the settlement of the Dividend Equivalents.

ARTICLE II

DIVIDEND EQUIVALENTS

2.1        Grant of Dividend Equivalents.  The Company hereby grants to Participant an award of Dividend Equivalents as set forth in this Article II (the “Dividend Equivalents”), subject to all of the terms and conditions in this Agreement and the Plan.  The Dividend Equivalents hereunder shall remain outstanding from the Grant Date through the earlier to occur of (a) the termination or forfeiture for any reason of the RSU to which such Dividend Equivalent corresponds, or (b) the delivery to Participant of the shares of Common Stock underlying the RSU to which such Dividend Equivalent corresponds.  Participant shall not be entitled to any payment under a Dividend Equivalent with respect to any dividend with a record date that occurs prior to the Grant Date or after the termination of such RSU for any reason, whether due to payment, forfeiture or otherwise.  If any RSU linked to a Dividend Equivalent fails to vest or is forfeited for any reason, then (a) the linked Dividend Equivalent shall be forfeited as well, (b) any amounts otherwise payable in respect of such Dividend Equivalent shall be forfeited without payment, and (c) the Company shall have no further obligations in respect of such Dividend Equivalent.

2.2        Payment of Dividend Equivalents.  Dividend Equivalents shall be paid in cash only on the number of shares of Common Stock underlying the RSUs that vest in accordance with this Agreement by determining the sum of the cash dividends paid or payable on such number of shares of Common Stock with respect to each record date that occurs between the Grant Date and the date on which the RSUs are settled pursuant to Section 1.1(c) (without any interest or compounding). The payment of cash in settlement of the Dividend Equivalents shall occur at the same time as the vested RSUs to which such Dividend Equivalents correspond are settled pursuant to Section 1.1(c).

2.3        Separate Payments.  Dividend Equivalents and any amounts that may become distributable in respect thereof shall be treated separately from the RSUs and the rights arising in connection therewith for purposes of the designation of time and form of payments required by Section 409A of the Code.

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ARTICLE III

RESTRICTIONS

3.1        Award and Interests Not Transferable. This Award, including the RSUs and the Dividend Equivalents awarded hereunder, may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the Shares issuable pursuant to the Award have been issued, and all restrictions applicable to such Shares have lapsed. This Award and the rights and privileges conferred hereby, including the RSUs and the Dividend Equivalents awarded hereunder, shall not be liable for the debts, contracts or engagements of Participant or his or her successors in interest and shall not be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.

3.2        Rights as Stockholder. Neither Participant nor any person claiming under or through Participant shall have any of the rights or privileges of a stockholder of the Company in respect of any Shares issuable hereunder unless and until certificates representing such Shares (which may be in uncertificated form) will have been issued and recorded on the books and records of the Company or its transfer agents or registrars, and delivered to Participant (including through electronic delivery to a brokerage account). After such issuance, recordation and delivery, Participant shall have all the rights of a stockholder of the Company, including with respect to the right to vote the Shares and the right to receive any cash or share dividends or other distributions paid to or made with respect to the Shares.

3.3        Trading Restrictions.  The Company may establish periods from time to time during which Participant’s ability to engage in transactions involving the Company’s Common Stock is subject to specific restrictions (“Restricted Periods”).  Participant may be subject to restrictions giving rise to a Restricted Period for any reason that the Company determines appropriate, including, restrictions generally applicable to employees or groups of employees or restrictions applicable to Participant during an investigation of allegations of misconduct or conduct detrimental to the Company or any Subsidiary by Participant.

3.4        Award Subject to Clawback.  This Award, including the RSUs and the Dividend Equivalents awarded hereunder, and any Shares issuable upon vesting of the RSUs or the cash issuable upon settlement of the Dividend Equivalents, are subject to forfeiture, recovery by the Company or other action pursuant to, in addition to the provisions set forth in Section 3.6 of this Agreement, any clawback or recoupment policy which the Company may adopt from time to time pursuant to laws or regulations, including without limitation, any such policy which the Company may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by applicable law.

3.5        Conditions to Issuance of Shares or Settlement of Award.  The Company shall not be required to issue or deliver any Shares issuable upon the vesting of the RSUs or settle the Dividend Equivalents prior to the fulfillment of all of the following conditions:  (a) the admission of the Shares to listing on all stock exchanges on which such Shares are then listed, (b) the completion of any registration or other qualification of the Shares under any state or federal law or under rulings or regulations of the U.S. Securities and Exchange Commission or other governmental regulatory body, which the Administrator shall, in its sole and absolute discretion, deem necessary and advisable, (c) the obtaining of any approval or other clearance from any state or federal governmental agency that the Administrator shall, in its absolute discretion, determine to be necessary or advisable, (d) the lapse of any such reasonable period of time following the date the RSUs vest as the Administrator may from time to time establish for reasons of

A-5

administrative convenience, and (e) the receipt by the Company of full payment of any applicable withholding tax in any manner permitted under Section 1.2 above.

3.6        Restrictive Covenants.

(a)         Forfeiture for Violation of Restrictive Covenants.  The grant of the RSUs provided herein and Participant’s agreement to the Restrictive Covenants (as defined below) are intended to be mutually dependent promises and in the event Participant breaches or threatens to breach the Restrictive Covenants, then to the greatest extent permitted by applicable law: (i) RSUs that have not yet been settled (whether vested or unvested) shall immediately be cancelled; (ii) any Shares issued upon settlement of the RSUs during the time period that is twelve (12) months prior to and twelve (12) months following Participant’s Termination of Service, or at any time following Participant's Actual Retirement Date, that have not yet been sold by Participant shall be forfeited back to the Company for no consideration; and (iii) if Participant received Shares upon settlement of the RSUs during the time period that is twelve (12) months prior to and twelve (12) months following Participant’s Termination of Service, or at any time following Participant's Actual Retirement Date, and subsequently sold the received Share(s), any gain represented by the fair market value of the Shares issued upon settlement of the RSUs on the settlement date multiplied by the number of Shares issued to Participant upon settlement of the RSUs shall be paid by Participant to the Company, in cash, without regard to any market price decrease or increase subsequent to the settlement of the RSUs.

(b)         Certain Covenants.  Participant acknowledges that, to assist Participant in the performance of Participant’s duties, the Company agrees to provide and shall provide and has provided Participant with Confidential Information (as defined below) and materials.  Due to the sensitive nature of this Confidential Information, Participant acknowledges that the Company has legitimate business and competitive interests and legal rights to require non-disclosure of the Confidential Information to other companies and/or individuals and to require that the Confidential Information be used only for the benefit of the Company.  Therefore, in order to protect the Company’s Confidential Information and the Company’s business goodwill and competitive position, and in exchange for the Company providing Participant the consideration set forth herein, and in order to protect the value of the equity-based compensation provided to Participant in this Agreement, Participant agrees:

(i)          At any time during the term of Participant’s service to the Company and thereafter for so long as such Confidential Information remains confidential, other than by reason of its wrongful disclosure (whether directly or indirectly) by Participant, Participant will not use, disclose or allow to be disclosed to any person, firm, or corporation, the Company’s Confidential Information, unless previously authorized by the Company for use in the pursuit of Company business;

(ii)         During the term of Participant’s service to the Company (which for purposes of this Section shall be deemed to include any period for which Participant continues to be paid by the Company following termination or resignation) and for a period of twelve (12) months following Participant’s termination of service, whether voluntary or involuntary, Participant will not, anywhere in the world, directly or indirectly, compete with any portion of the Business (as defined below) of the Company in any way, or act as an officer, director, employee, consultant, lender, partner, trustee, member, shareholder, or agent of any person or entity that is engaged in any business in competition with the Business as now conducted by the Company or its Subsidiaries or in which the Company or its Subsidiaries becomes engaged during the term of Participant’s service to the Company, including, without limitation, any member of the Competitive Group.  Notwithstanding the foregoing, this clause (ii) shall not (A) preclude Participant from going to work for a separate business unit of any member of the Competitive Group that is not engaged in the Business, or (B) apply to services rendered by Participant in California after the date Participant’s service by the Company terminates (which for purposes of this Section shall be

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deemed to include any period for which Participant continues to be paid by the Company following termination or resignation);

(iii)       Both during Participant’s service to the Company and for a period of twelve (12) months following Participant’s termination of service, whether voluntary or involuntary, Participant will not: (A) directly or indirectly solicit, entice, induce or attempt to induce or influence any employee or independent contractor of the Company to terminate or alter his, her or its relationship with the Company; and (B) provide any information about the Company’s employees or independent contractors to any other person for the purpose of assisting any third party to solicit the Company’s employees for outside employment; and

(iv)        Following Participant's Actual Retirement Date, Participant will not accept a full-time position, or becomes a part-time employee, consultant or advisor to any member of the Competitive Group without the prior written approval of the Company. Notwithstanding the foregoing, this clause (iv) shall not (A) preclude Participant from going to work for a separate business unit of any member of the Competitive Group that is not engaged in the Business, or (B) apply to services rendered by Participant in California after the date Participant’s service by the Company terminates (which for purposes of this Section shall be deemed to include any period for which Participant continues to be paid by the Company following Participant's Actual Retirement Date).

(c)         Use of Certain Information.  Participant shall not knowingly use in his or her work for the Company, any ideas, processes, code, inventions, improvements, developments and discoveries subject to any right or obligation of a third party, including trade secrets, patents, copyrights, trademarks, or open source obligations.

(d)         Business Opportunities.  Participant will promptly disclose to the Company any business opportunity of which Participant becomes aware during his/her employment or service to the Company that relates to any products or services planned, under development, developed, produced or marketed by the Company.  Participant will not take advantage of or divert any such opportunity for his/her (or any other person or entity) own gain, profit or benefit, without the prior written consent of the Company.

(e)         Company Materials.  All Company Materials are the Company’s property and may not be copied or removed from the Company’s premises (physically or electronically), unless done for the sole benefit of the Company as part of Participant’s job responsibilities or expressly approved by an authorized representative of the Company, for the benefit of the Company.

(f)         Return of Company Materials.  Immediately upon the Participant’s Termination of Service for any reason, or upon Company’s request at any other time, Participant will deliver to Company all Company Materials.  Participant shall not retain, copy, or remove (either physically or electronically) any Company Materials from Company premises, computers, or other electronic equipment or storage devices.

(g)         Definitions.  For purposes of this Section 3.6:

(i)          The term “Business” shall mean the business of providing integrated payment and information solutions and related services for intelligent travel applications to transportation and traffic management entities, as well as providing mission-centered training systems and services, C4ISR systems, intelligence, and cyber solutions for the United States and allied nations.

(ii)         The term “Confidential Information” or “Company Confidential Information” means all forms and types of business, technical, financial, economic, sales, marketing or

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customer information of the Company that Participant receives, develops or has access to as a result of his/her employment or service to the Company, which has not been previously disclosed to the general public by an authorized Company representative or customer, regardless of whether such information would be deemed a trade secret under applicable law.  Confidential Information shall be interpreted broadly and includes, but is not limited to, business strategies and plans, financial information, projections, pricing and cost information, proposals, lists of present or future customers, all information obtained from or about current or future customers, supplier lists and information, plans and results of research and development, reports, manuals, policies, personnel information (other than Participant’s own information), evaluations, designs, specifications, blueprints, drawings, patterns, compilations, formulas, programs, software, prototypes, methods, processes, devices, procedures, “Inventions,” special techniques of any kind peculiar to the Company’s operations, or other confidential or proprietary information or intellectual property related to the Business, products, services, or plans of the Company, whether tangible or intangible, and whether stored or memorialized physically, electronically, photographically, or in Participant’s memory.  This specifically includes all information the Company receives from customers or other third parties that is not generally known to the public or is subject to a confidentiality agreement.

(iii)       The term “Company” means the Company, its Subsidiaries and its affiliates.

(iv)        The term “Company Materials” means all forms of written or recorded information, data, or materials, including, but not limited to, documents, files, memoranda, notes, lists, as well as photographs, drawings, blueprints, and schematics (and all copies thereof) relating to the Company’s business, customers, suppliers, products or services, whether in tangible or electronic form (including items stored in computer memories, computer disks, thumb drives, CDs, or any other electronic means), whether made or compiled by Participant or others.

(v)         The term “Competitive Group” includes, but is not limited to, the following entities: ACS, Accenture, Active Exhaust, BAE Systems, Bering Sea Environmental, Boeing, Booz Allen Hamilton, DRS Training & Control Systems, Elbit Systems, Engility, General Dynamics, HP Enterprise Services, Information Assurance Specialist, IBM, Israeli Aircraft Industries, Kapsch-Group Beteiligungs, L-3, LG, Leidos, Lockheed Martin, Northrup Grumman, Raytheon, Rockwell Collins, Royal Imtech, Ruag, SAIC, Saab Training Systems, Scheidt and Bachmann, Thales, Xerox, Siemens, TransCore, Trapeze Group, IVU Traffic Technologies, Indra Sistemas, Init AG (and U.S. subsidiaries), Econolite Group, Trafficware, and Q-Free ASA (and U.S. subsidiaries), as well as any entity that is a successor to, acquires a majority of the assets of, or merges in whole or in part with any of the foregoing entities.

(vi)        The term “Inventions” includes, but is not limited to, any creation, discovery, development, idea, technique, formula, method, process, use, apparatus, product, device, machine, composition, code, design, program, technical data, configuration of any kind, or improvements to any of these things, which is discovered, conceived, developed, made or produced by Participant (alone or in conjunction with others), whether or not patentable or registerable under patent, copyright or similar statutes.

(vii)       The term “Restrictive Covenants” means the restrictions set forth in this Section 3.6 or, if Participant is a party to an employment agreement with the Company, which agreement sets forth provisions regarding Confidential Information, non-solicitation or non-competition that are more restrictive than the provisions set forth in this Section 3.6, the provisions set forth in such employment agreement.

(h)         Reasonableness of Restrictions.  Participant has carefully read and considered the Restrictive Covenants, and, having done so, agrees and acknowledges that the Restrictive Covenants limit

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Participant’s ability to engage in competition during the period provided for above.  Participant expressly warrants and represents that these restrictions with respect to time and scope of activity are reasonable and necessary to protect the Confidential Information and the Company’s business goodwill and competitive position.

(i)          Remedies for Breach.  In the event of a breach of any of the Restrictive Covenants, in addition to the forfeiture provisions set forth in Section 3.6(a), the Company shall have the right to seek monetary damages for any such breach.  In addition, in the event of a breach or threatened breach of any of the Restrictive Covenants, the Company shall have the right to seek equitable relief, including specific performance by means of an injunction against Participant or against Participant’s partners, agents, representatives, servants, employers, employees, and/or any and all persons acting directly or indirectly by or with him or her, to prevent or restrain any such breach.

(j)          Blue Penciling.  In the event a court of competent jurisdiction determines that the geographic area, duration, or scope of activity of any restriction under this Agreement is more extensive than is necessary to protect the legitimate business interests of the Company or are otherwise unenforceable, the Company may, in its sole discretion, reform and modify the restrictions under this Agreement to the extent required to render them valid and enforceable under applicable law.

(k)         Defend Trade Secrets Act.  The federal Defend Trade Secrets Act of 2016 provides immunity in certain circumstances to employees, contractors, and consultants for limited disclosures of a company’s trade secrets. Specifically, employees, contractors, and consultants may disclose trade secrets: (i) in confidence, either directly or indirectly, to a federal, state, or local government official, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Additionally, employees, contractors, and consultants who file retaliation lawsuits for reporting a suspected violation of law may also: (A) disclose the trade secret to his/her attorney, and (B) use the information in related court proceeding, as long as the individual files documents containing the trade secret under seal, and does not otherwise disclose the trade secret except pursuant to court order.

ARTICLE IV

OTHER PROVISIONS

4.1        No Right to Continued Employment, Service or Awards.

(a)         Nothing in the Plan, the Grant Notice, or this Agreement shall confer upon Participant any right to continue in the employ or service of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, except to the extent expressly provided otherwise in a written agreement between the Company or any Subsidiary and Participant.

(b)         The grant of the Award is a one-time benefit and does not create any contractual or other right to receive a grant of Awards or benefits in lieu of Awards in the future.  Future grants, if any, will be at the sole discretion of the Company.  In addition, the value of the Award is an extraordinary item of compensation outside the scope of any employment contract.  As such, the Award is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments. The future value of the underlying Common Stock is unknown and cannot be predicted with certainty.

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4.2        Adjustments. Participant acknowledges that the Award, including the vesting of the Award and the number of Shares subject to the Award, is subject to adjustment in the discretion of the Administrator upon the occurrence of certain events as provided in this Agreement and Section 11 of the Plan.

4.3        Notices.  Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s corporate headquarters or to the then-current email address for the Secretary of the Company, and any notice to be given to Participant shall be addressed to Participant at the most recent physical or email address for Participant listed in the Company’s personnel records. By a notice given pursuant to this Section 4.3, either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

4.4        Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

4.5       Governing Law; Venue; Severability. The laws of the state in which Participant resides shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. The parties agree that any suit, action, or proceeding arising out of or relating to the Plan or this Agreement shall be brought in the United States District Court for the Southern District of California (or should such court lack jurisdiction to hear such action, suit or proceeding, in a California state court in San Diego County, California) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection a party may have to the laying of venue for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Agreement shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.  Notwithstanding anything to the contrary contained in the Participant’s Employee Inventions & Secrecy Agreement (the “Inventions & Secrecy Agreement”), Section 16 of such agreement is hereby amended to be consistent with this Section 4.5 and this constitutes an amendment of such Inventions & Secrecy Agreement to change the governing law of such agreement to be consistent with this Section 4.5 (with references therein to the “Agreement” to continue to be deemed references to the Inventions & Secrecy Agreement).

4.6        Conformity to Securities Laws. Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated thereunder by the United States Securities and Exchange Commission, including, without limitation, Rule 16b-3 under the Exchange Act. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Awards are granted, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan, the Grant Notice and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

4.7        Tax Representations. Participant has reviewed with Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by the Grant Notice and this Agreement. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant

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(and not the Company) shall be responsible for Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

4.8        Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.

4.9        Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the RSUs, the Dividend Equivalents, the Plan and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

4.10      Amendment, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator; provided that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall impair any rights or obligations under this Agreement in any material way without the prior written consent of Participant.

4.11      Paperless Administration.  By accepting this Award, Participant hereby agrees to receive documentation related to the Award by electronic delivery, such as a system using an internet website or interactive voice response, maintained by the Company or a third party designated by the Company.

4.12      Entire Agreement.  The Plan, the Grant Notice, this Agreement and the Inventions & Secrecy Agreement constitute the entire agreement of the parties and supersede in their entirety all oral, implied or written promises, statements, understandings, undertakings and agreements between the Company and Participant with respect to the subject matter hereof, including without limitation, the provisions of any employment agreement or offer letter regarding equity awards to be awarded to Participant by the Company, or any other oral, implied or written promises, statements, understandings, undertakings or agreements by the Company or any of its representatives regarding equity awards to be awarded to Participant by the Company. Notwithstanding the foregoing, Section 3.6 of this Agreement is in addition to and does not limit the effect of other agreements or understandings between Participant and the Company or any Subsidiary with respect to matters addressed therein, including the Inventions & Secrecy Agreement or any other agreement with respect to prohibitions against solicitation and the protection of the Company’s trade secrets and confidential information and noncompetition and nonsolicitation covenants of Participant; provided, however, that to the extent the provisions of Section 3.6 of this Agreement are more restrictive that any such agreements, including the Inventions & Secrecy Agreement, Participant and the company agree that the provisions of Section 3.6 of this Agreement shall govern.

4.13      Section 409A.

(a)         Notwithstanding any other provision of the Plan, this Agreement or the Grant Notice, the Plan, this Agreement and the Grant Notice shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the Code (together with any Treasury Regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Grant Date, “Section 409A”). The Administrator may, in its discretion, adopt such amendments to the Plan, this Agreement or the Grant Notice or adopt

A-11

other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate to comply with the requirements of Section 409A.

(b)         Unless Participant is or will be a Retirement Eligible Employee at any time on or after the Grant Date, this Agreement is not intended to provide for any deferral of compensation subject to Section 409A of the Code, and, accordingly, the Shares issuable pursuant to the RSUs and the cash issuable upon settlement of the Dividend Equivalents corresponding thereto shall be distributed to Participant no later than the later of: (i) the fifteenth (15^th) day of the third month following Participant’s first taxable year in which such RSUs are no longer subject to a substantial risk of forfeiture, and (ii) the fifteenth (15^th) day of the third month following first taxable year of the Company in which such RSUs are no longer subject to substantial risk of forfeiture, as determined in accordance with Section 409A and any Treasury Regulations and other guidance issued thereunder.

(c)         For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment that Participant may be eligible to receive under this Agreement shall be treated as a separate and distinct payment.

(d)         If a Change in Control constitutes a payment event with respect to any portion of the RSUs which constitute a deferral of compensation and is subject to Section 409A of the Code, the transaction or event described above with respect to such payment must also constitute a “change in control event,” as defined in Treasury Regulation §1.409A-3(i)(5) to the extent required by Section 409A of the Code.

(e)         If Participant's Termination of Service constitutes a payment event with respect to any portion of the RSUs which constitute a deferral of compensation and is subject to Section 409A of the Code, Participant's Termination of Service must also constitute a “separation from service” (as defined in Section 1.409A-1(h) of the Treasury Regulations), and, further, if Participant is a “specified employee” (as determined in accordance with Section 409A(a)(2)(B)(i) of the Code and Treasury Regulation Section 1.409A-1(i)) on the date of his or her “separation from service” (as defined in Section 1.409A-1(h) of the Treasury Regulations), the delivery of any shares of Common Stock to be delivered to Participant upon and as a result of such “separation from service” shall be delayed to the extent necessary to avoid a prohibited distribution under Section 409A(2)(B)(i) of the Code, and such shares of Common Stock shall be distributed to Participant on the earlier of (i) the expiration of the six-month period measured from the date of Participant's “separation from service,” or (ii) the date of Participant’s death, or (iii) such earlier date as is permitted under Section 409A of the Code and the Treasury Regulations thereunder)).

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EXHIBIT B

TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE

VESTING SCHEDULE

1.          Time-Based Vesting.  The RSUs shall vest in three (3) equal installments as follows (each such date, the “Scheduled Vesting Date” for such portion of the RSUs):

First installment –     %%VEST_DATE_PERIOD1,'Month DD, YYYY'%-%

Second installment - %%VEST_DATE_PERIOD2,'Month DD, YYYY'%-%

Third installment -    %%VEST_DATE_PERIOD3,'Month DD, YYYY'%-%

2.          Accelerated Vesting.

(a)         Notwithstanding the foregoing, the RSUs shall vest immediately (i) in the event Participant’s Termination of Service as a result of his or her death or Disability, (ii) upon Participant’s Covered Termination (provided that, in the event of a Covered Termination pursuant to clause (i) of the definition of Covered Termination, such acceleration will occur on the date of the Change in Control occurring within three (3) months following Participant's Termination of Service), or (iii) upon Participant's Actual Retirement Date.

(b)         In order to be eligible to receive accelerated vesting under clause (iii) of Section 2(a) above upon Participant's Actual Retirement Date, Participant, to the extent he or she is a Retirement Eligible Employee on or after the Grant Date, must provide the Company with written notice of the Retirement Eligible Employee’s intention to retire at least twelve (12) months prior to the Retirement Eligible Employee’s Actual Retirement Date (the “Retirement Notice Period”), and, except in the event of Participant's Termination of Service due to his or her Covered Termination, death or Disability during the Retirement Notice Period, remain employed with the Company through the duration of such Retirement Notice Period.  Such written notice must be in a form reasonably acceptable to the Company and include a representation of the Retirement Eligible Employee that the Retirement Eligible Employee is terminating from the Company for retirement purposes and has not accepted, and does not plan to accept, a full-time position at another employer which is a competitor of the Company.  The Administrator may, in its discretion, allow for a shorter notice period for reasons including but not limited to health issues by the Retirement Eligible Employee or his or her family, or in the best interests of the Company.  Notwithstanding the foregoing, the requirements in this Section 2(b) shall not apply following a Change in Control and no Retirement Notice Period shall apply (or, in the case of a Retirement Notice Period that commenced prior to such Change in Control, such period will expire immediately upon such Change in Control).

(c)         Interaction with Transition Protection Plan.  The terms of this Agreement shall govern the acceleration of the Award and shall supersede the provisions of the Company's Transition Protection Plan with respect to this Award.

3.          Forfeiture.  Any portion of the Award and any RSUs which do not vest pursuant to Sections 1 or 2 above shall automatically and without further action be cancelled and forfeited by Participant, and Participant shall have no further right or interest in or with respect to such portion of the Award or RSUs.

4.          Definitions.  For purposes of this Agreement, the following terms shall have the meanings given below:

(a)         “Actual Retirement Date” means the last date, due to retirement on or after an Eligible Employee's Retirement Date, of a Retirement Eligible Employee's employment with the Company Group, subject to compliance with Section 2(b) above.

(b)         “Company Group” means the Company and its Subsidiaries

(c)         “Constructive Termination” means a voluntary termination of employment by Participant after one of the following is undertaken without Participant’s express written consent:

(i)          a change in the Participant’s position with the Company (or its Subsidiary employing the Participant) that materially reduces the Participant’s authority, duties or responsibilities or the level of management to which he or she reports;

(ii)         a material reduction in Participant’s base compensation (except for base compensation decreases generally applicable to the Company’s other similarly-situated employees); provided that if a Retirement Eligible Employee voluntarily reduces his or her hours of employment, his or her salary, bonus, benefits and conditions of employment may be adjusted in an appropriate and proportional manner without constituting Good Reason; or

(iii)       an increase in Participant’s one-way driving distance from Participant’s principal personal residence to the principal office or business location at which Participant is required to perform services of more than 50 miles, except for required travel for the Company’s business to the extent substantially consistent with Participant’s prior business travel obligations;

(iv)        a material breach by the Company of any provisions of this Agreement or any enforceable written agreement between the Company and Participant.

Notwithstanding the foregoing, a voluntary termination shall not be deemed a Constructive Termination unless (x) Participant provides the Company with written notice that Participant believes that an event described above has occurred, (y) such notice is given within three (3) months of the date the event occurred, and (z) the Company does not rescind or cure the conduct giving rise to the event described above within ten (10) days of receipt by the Company of such notice from Participant.  A Participant’s resignation from employment with the Company for Good Reason must occur within ninety (90) days following the expiration of the foregoing cure period.

(d)         “Covered Termination” means (i) if Participant is a "Participant" in the Company's Transition Protection Plan at the time of his or her termination, Participant’s Involuntary Termination Without Cause or Constructive Termination during the period commencing three (3) months prior to and ending eighteen (18) months following the effective date of a Change in Control, (ii) if Participant is not a "Participant" in the Company's Transition Protection Plan at the time of his or her termination, Participant’s Involuntary Termination Without Cause or Constructive Termination within twelve (12) months following the effective date of a Change in Control, or (iii) Participant's Involuntary Termination Without Cause or Constructive Termination during the Retirement Notice Period.

(e)         “Eligible Employee Retirement Date” means the date on which an Employee has attained the age of sixty (60) and ten (10) years of uninterrupted, full-time employment or service with the Company Group (which, for this purpose, shall include service with their predecessors), as measured from the Employee’s hire date.

(f)         “Involuntary Termination Without Cause” shall mean Participant’s involuntary termination of employment by the Company other than for one of the following reasons:

(i)          the willful and continued failure of Participant to perform substantially his or her duties to the Company, other than any failure resulting from circumstances outside Participant’s control, or from incapacity of Participant due to physical or mental illness or Disability, or following Participant’s delivery of notice of Constructive Termination, after a written demand for substantial performance is delivered to Participant, which demand specifically identifies the manner in which the Company believes the Participant has not substantially performed his or her duties satisfactorily, and provided that the Company demonstrates that such failure has a demonstrably harmful impact on the Company or its reputation, and provided further that Participant has been given a period of at least thirty (30) days to cure his or her failure in performance.  No act or failure to act shall be considered “willful” unless it is done, or omitted to be done, in bad faith or without reasonable belief that the action was in the best interests of the Company or its Subsidiaries;

(ii)         Participant’s gross negligence or breach of fiduciary duty to the Company involving personal profit, personal dishonesty or recklessness, or Participant’s material breach of any agreement with the Company, including a material violation of Company policies and procedures; provided that such termination of employment occurs within twelve (12) months following the Company’s discover of such event; or

(iii)       Participant’s conviction (which has become final) or entry of a plea of guilty or nolo contendere regarding an act that would be deemed a felony under California or Federal criminal statutes (or any comparable criminal laws of any jurisdiction in which Participant is permanently employed by the Company or a Subsidiary) that has a demonstrably harmful impact on the Company’s business or reputation, as determined in good faith by the Company’s Executive Compensation Committee, provided that such termination of employment occurs within twelve (12) months following the Company’s discover of such event.

(g)         “Retirement Eligible Employee” means any Employee of the Company Group who has reached his or her Eligible Employee Retirement Date.

Notice of Restricted Stock Unit of CUBIC CORPORATION

Company Name	Cubic Corporation
Plan	%%EQUITY_PLAN%-%
Participant ID	%%EMPLOYEE_IDENTIFIER%-%
Participant Name	%%FIRST_NAME%-% %%MIDDLE_NAME%-% %%LAST_NAME%-%
Participant Address	%%ADDRESS_LINE_1%-% %%ADDRESS_LINE_2%-% %%ADDRESS_LINE_3%-%
Grant/Award Type	Restricted Stock Unit
Share Amount	%%TOTAL_SHARES_GRANTED,’999,999,999’%-%
Grant/Award Price	%%OPTION_PRICE,’$999,999,999.99%-%
Grant/Award Date	%%OPTION_DATE,’Month DD, YYYY’ %-%
Expiration Date	11/21/2030

VESTING SCHEDULE

Vesting Date	No. of Shares	Percent
%%VEST_DATE_PERIOD1,’Month DD, YYYY’%-%	%%SHARES_PERIOD1,'999,999,999'%-%	33 1/3%
%%VEST_DATE_PERIOD2, ’Month DD, YYYY’%-%	%%decode(SHARES_PERIOD2, 0, null, SHARES_PERIOD2),’999,999,999’%-%	33 1/3%
%%VEST_DATE_PERIOD3, ’Month DD, YYYY’%-%	%%decode(SHARES_PERIOD3, 0, null, SHARES_PERIOD3) ,’999,999,999’%-%	33 1/3%

EX-10.2

Exhibit.10.2

Performance-Based Vesting Version

CUBIC CORPORATION

2015 INCENTIVE AWARD PLAN

PERFORMANCE RESTRICTED STOCK UNIT AWARD GRANT NOTICE AND
PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT

Cubic Corporation, a Delaware corporation (the “Company”), pursuant to its 2015 Incentive Award Plan (the “Plan”), hereby grants to the participant listed below (“Participant”), an award of performance based restricted stock units (“Performance Restricted Stock Units” or “PRSUs”) with respect to the number of shares of the Company’s Common Stock (the “Shares”) indicated below. Each PRSU is hereby granted in tandem with a corresponding dividend equivalent, as further described in Article II of the Performance Restricted Stock Unit Agreement (the “Dividend Equivalents”).  This award for Performance Restricted Stock Units and the corresponding Dividend Equivalents (this “Award”) is subject to all of the terms and conditions as set forth herein, in the Performance Restricted Stock Unit Award Agreement attached hereto as Exhibit A (the “Performance Restricted Stock Unit Agreement”) and in the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Performance Restricted Stock Unit Agreement.

Participant:	%%FIRST_NAME%-% %%MIDDLE_NAME%-% %%LAST_NAME%-%
Grant Date:	%%OPTION_DATE,'Month DD, YYYY'%-%
Target Number of PRSUs (as adjusted pursuant to Article II and Section 4.2):	%%TOTAL_SHARES_GRANTED,'999,999,999'%-%
Maximum % of PRSUs (as adjusted pursuant to Article II and Section 4.2):	200% of Target
Distribution Schedule:	Subject to the terms of the Performance Restricted Stock Unit Agreement, the PRSUs (and their corresponding Dividend Equivalents) shall be distributable in accordance with Section 1.1 of the Performance Restricted Stock Unit Agreement.
Vesting Schedule:	Subject to the terms of the Performance Restricted Stock Unit Agreement, the PRSUs shall vest as set forth on Exhibit B to this Grant Notice.

By electronically accepting this Grant Agreement, Participant agrees to be bound by the terms and conditions of the Plan, the Performance Restricted Stock Unit Agreement and this Grant Notice.  In addition, Participant explicitly acknowledges and agrees to be bound by the Restrictive Covenants set forth in Section 3.6 of the Performance Restricted Stock Unit Agreement.  Participant has reviewed the Performance Restricted Stock Unit Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Performance Restricted Stock Unit Agreement and the Plan.  Participant has been provided with a copy or electronic access to a copy of the prospectus for the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Performance Restricted Stock Unit Agreement.  The Award is subject to the terms and conditions of the Plan which are incorporated herein by reference. In the event of any inconsistency between the Plan and the Performance Restricted Stock Unit Agreement, the terms of the Plan shall control.

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Participant acknowledges that his or her acceptance of the terms and conditions of the Plan, the Performance Restricted Stock Unit Agreement and this Grant Notice by his or her electronic acceptance of the Grant Agreement is a condition to the receipt of this Award.  As a result, unless otherwise determined by the Administrator, in the event Participant does not electronically accept this Grant Notice within ninety (90) days of the Grant Date, this Award shall be forfeited and Participant shall have no further rights thereto.

Participant acknowledges that Section 4.5 of the Performance Restricted Stock Unit Agreement amends the governing law of Participant’s Invention & Secrecy Agreement (as defined in the Performance Restricted Stock Unit Agreement) and hereby agrees to such amendment.

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EXHIBIT A

TO PERFORMANCE RESTRICTED STOCK UNIT AWARD GRANT NOTICE

PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT

Pursuant to the Performance Restricted Stock Unit Award Grant Notice (the “Grant Notice”) to which this Performance Restricted Stock Unit Award Agreement (this “Agreement”) is attached, the Company has granted to Participant the right to receive the number of PRSUs set forth in the Grant Notice, and their corresponding Dividend Equivalents pursuant to Article II, subject to all of the terms and conditions set forth in this Agreement, the Grant Notice and the Plan.

ARTICLE I

AWARD OF PERFORMANCE RESTRICTED STOCK UNITS

1.1Award of Performance Restricted Stock Units.

(a)Award. In consideration of Participant’s continued employment or service with the Company or any Subsidiary thereof and for other good and valuable consideration, the Company hereby grants to Participant the right to receive the number of PRSUs set forth in the Grant Notice and their corresponding Dividend Equivalents pursuant to Article II, subject to all of the terms and conditions set forth in this Agreement, the Grant Notice and the Plan. Prior to actual issuance of any Shares, the PRSUs, the Dividend Equivalents and the Award represent an unsecured obligation of the Company, payable only from the general assets of the Company.

(b)Vesting. The PRSUs subject to the Award shall vest in accordance with the Vesting Schedule set forth in Exhibit B to the Grant Notice. Unless and until the PRSUs have vested in accordance with the Vesting Schedule set forth in the Grant Notice, Participant will have no right to any distribution with respect to such PRSUs.  Unless otherwise provided in Exhibit B to the Grant Notice, in the event of Participant’s Termination of Service prior to the vesting of all of the PRSUs, any unvested PRSUs will terminate automatically without any further action by the Company and be forfeited without further notice and at no cost to the Company.

(c)Distribution of PRSUs.

(i)Shares of Common Stock shall be distributed to Participant (or in the event of Participant’s death, to his or her estate) with respect to Participant’s vested PRSUs, subject to the terms and provisions of the Plan and this Agreement, within ten (10) days following:

(A)if Participant is or will be a Retirement Eligible Employee at any time on or after the Grant Date, the earliest to occur of:

(1)between October 1, 2023 and December 31, 2023; or

(2)the date of Participant's death; or

(B)if Participant is not and will not be a Retirement Eligible Employee at any time during the period beginning on the Grant Date and ending on September 30, 2023, the date on which such PRSUs vest as specified in the Vesting Schedule set forth in Exhibit B to the Grant

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Notice (or, in the event the vesting date is the date of a Change in Control, the PRSUs (and their corresponding Dividend Equivalents) shall be settled immediately prior to such Change in Control).

(ii)All distributions of the PRSUs shall be made by the Company in the form of whole shares of Common Stock.

(iii)Neither the time nor form of distribution of Common Stock with respect to the PRSUs and the Dividend Equivalents may be changed, except as may be permitted by Administrator in accordance with the Plan and Section 409A of the Code and the Treasury Regulations thereunder.

(iv)Participant understands and agrees that, if Participant is or will be a Retirement Eligible Employee at any time on or after the Grant Date, certain tax withholding amounts may be due prior to an issuance of shares of Common Stock under this Section 1.1(c) if the RSUs fail to be subject to a substantial risk of forfeiture for purposes of Section 83 of the Code prior to such date.  If shares of Common Stock are issued on an accelerated basis to satisfy the Federal Insurance Contributions Act tax imposed under Sections 3101, 3121(a) or 3121(v)(2) of the Code (the “FICA Tax”) as provided in this Section 1.1(c)(iv) as a result of the lapse of the substantial risk of forfeiture for purposes of Section 83 of the Code prior to the issuance of shares of Common Stock under this Section 1.1(c), then Participant may have income tax at source on wages imposed under Section 3401 of the Code or the corresponding withholding provisions of applicable state, local or foreign tax laws (together with the FICA Tax, the “FICA-Related Taxes”).  Participant's FICA-Related Taxes shall be satisfied through the accelerated issuance and withholding of Shares otherwise issuable pursuant to the RSUs having a then-current Fair Market Value not exceeding the amount necessary to satisfy the FICA-Related Taxes of the Company and its Subsidiaries based on the minimum applicable statutory withholding rates (or such higher rate as may be determined by the Administrator, which higher rate may not exceed the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting principles in the United States of America), provided, that, such Shares shall be rounded up to the nearest whole share to the extent rounding up to the nearest whole share does not result in the liability classification of the applicable Award under generally accepted accounting principles in the United States of America).  Participant's FICA-Related Taxes shall constitute a Tax Withholding Obligation for purposes of Section 1.2 below and Section 1.2(b) shall apply to any shares of Common Stock withheld by the Company pursuant to this Section 1.1(c)(iv).

(d)Generally. Shares issued under the Award shall be issued to Participant or Participant’s beneficiaries, as the case may be, at the sole discretion of the Administrator, in either (i) uncertificated form, with the Shares recorded in the name of Participant in the books and records of the Company’s transfer agent with appropriate notations regarding the restrictions on transfer imposed pursuant to this Agreement; or (ii) certificate form.  In no event will fractional shares be issued upon settlement of the Award.  In lieu of any fractional Share, the Company shall make a cash payment to Participant equal to the Fair Market Value of such fractional Share on the date the PRSUs and the Dividend Equivalents are settled pursuant to this Section 1.1.

1.2Tax Withholding.

(a)The Company shall not be obligated to deliver any certificate representing Shares issuable with respect to the PRSUs or any cash payment in respect of the Dividend Equivalents to Participant or his or her legal representative unless and until Participant or his or her legal representative shall have paid or otherwise satisfied in full the amount of all federal, state, local and foreign taxes applicable with respect to the taxable income of Participant resulting from the vesting of the PRSUs or the

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Dividend Equivalents, the distribution of the Shares issuable with respect thereto, the settlement of the Dividend Equivalents, or any other taxable event related to the PRSUs or the Dividend Equivalents (the “Tax Withholding Obligation”).

(b)Unless Participant elects to satisfy the Tax Withholding Obligation by some other means in accordance with clause (c) below, prior to the time the Tax Withholding Obligation arises, Participant’s acceptance of this Award constitutes Participant’s instruction and authorization to the Company to, and the Company shall, withhold a net number of vested Shares otherwise issuable pursuant to the PRSUs having a then-current Fair Market Value not exceeding the amount necessary to satisfy the Tax Withholding Obligation of the Company and its Subsidiaries with respect to the vesting or distribution of the PRSUs based on the minimum applicable statutory withholding rates (or such higher rate as may be determined by the Administrator, which higher rate may not exceed the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting principles in the United States of America), provided, that, such Shares shall be rounded up to the nearest whole Share to the extent rounding up to the nearest whole share does not result in the liability classification of the applicable Award under generally accepted accounting principles in the United States of America).  In the event Participant’s Tax Withholding Obligation will be satisfied under this Section 1.2(b), then the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on Participant’s behalf a whole number of shares from those Shares issuable to Participant upon settlement of the PRSUs as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy Participant’s Tax Withholding Obligation with respect to the vesting or distribution of the PRSUs.  Participant’s acceptance of this Award constitutes Participant’s instruction and authorization to the Company and such brokerage firm to complete the transactions described above, including the transactions described in the previous sentence, as applicable.  Any Shares to be sold at the Company’s direction through a broker-assisted sale will be sold on the day the Tax Withholding Obligation with respect to the vesting or distribution of the PRSUs arises or as soon thereafter as practicable.  The Shares may be sold as part of a block trade with other participants of the Plan in which all participants receive an average price.  Participant will be responsible for all broker’s fees and other costs of sale, and Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale. To the extent the proceeds of such sale exceed Participant’s Tax Withholding Obligation with respect to the vesting or distribution of the PRSUs, the Company agrees to pay such excess in cash to Participant as soon as practicable. Participant acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy Participant’s Tax Withholding Obligation.

(c)At any time not less than five (5) business days before any Tax Withholding Obligation arises, Participant may elect to satisfy the Tax Withholding Obligation by delivering to the Company an amount that the Company determines is sufficient to satisfy the Tax Withholding Obligation in one or more of the forms specified below:

(i)by the deduction of such amount from other compensation payable to Participant;

(ii)by tendering vested Shares owned by Participant having a then-current Fair Market Value not exceeding the amount necessary to satisfy the Tax Withholding Obligation of the Company and its Subsidiaries based on the minimum applicable statutory withholding rates (or such higher rate approved by the Administrator, which rate may not exceed the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting principles in the

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United States of America) and, to the extent such Shares were acquired by the Participant from the Company as compensation, the Shares must have been held for the minimum period required by applicable accounting rules to avoid a charge to the Company’s earnings for financial reporting purposes, provided, that, such Shares shall be rounded up to the nearest whole Share to the extent rounding up to the nearest whole share does not result in the liability classification of the applicable Award under generally accepted accounting principles in the United States of America);

(iii)through the delivery of a notice that Participant has placed a market sell order with a broker acceptable to the Company with respect to the Shares issuable pursuant to the PRSUs then vesting and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company or its Subsidiary with respect to which the Tax Withholding Obligation arises in satisfaction of such obligation; provided that payment of such proceeds is then made to the Company or the applicable Subsidiary at such time as may be required by the Administrator, but in any event not later than the settlement of such sale; or

(iv)in any combination of the foregoing.

(d)To the maximum extent permitted by applicable law, the Company further has the authority to deduct or withhold such amount as is necessary to satisfy any Tax Withholding Obligation from other compensation payable to Participant with respect to any taxable event arising from vesting of the PRSUs or the Dividend Equivalents, the receipt of the Shares upon settlement of the PRSUs or the settlement of the Dividend Equivalents.

ARTICLE II

DIVIDEND EQUIVALENTS

2.1Grant of Dividend Equivalents.  The Company hereby grants to Participant an award of Dividend Equivalents as set forth in this Article II (the “Dividend Equivalents”), subject to all of the terms and conditions in this Agreement and the Plan.  The Dividend Equivalents hereunder shall remain outstanding from the Grant Date through the earlier to occur of (a) the termination or forfeiture for any reason of the PRSU to which such Dividend Equivalent corresponds, or (b) the delivery to Participant of the shares of Common Stock underlying the PRSU to which such Dividend Equivalent corresponds.  Participant shall not be entitled to any payment under a Dividend Equivalent with respect to any dividend with a record date that occurs prior to the Grant Date or after the termination of such PRSU for any reason, whether due to payment, forfeiture or otherwise.  If any PRSU linked to a Dividend Equivalent fails to vest or is forfeited for any reason, then (a) the linked Dividend Equivalent shall be forfeited as well, (b) any amounts otherwise payable in respect of such Dividend Equivalent shall be forfeited without payment, and (c) the Company shall have no further obligations in respect of such Dividend Equivalent.

2.2Payment of Dividend Equivalents.  Dividend Equivalents shall be paid in cash only on the number of shares of Common Stock underlying the PRSUs that vest in accordance with this Agreement by determining the sum of the cash dividends paid or payable on such number of shares of Common Stock with respect to each record date that occurs between the Grant Date and the date on which the PRSUs are settled pursuant to Section 1.1(c) (without any interest or compounding).  The payment of cash in settlement of the Dividend Equivalents shall occur at the same time as the vested PRSUs to which such Dividend Equivalents correspond are settled pursuant to Section 1.1(c).

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2.3Separate Payments.  Dividend Equivalents and any amounts that may become distributable in respect thereof shall be treated separately from the PRSUs and the rights arising in connection therewith for purposes of the designation of time and form of payments required by Section 409A of the Code.

ARTICLE III

RESTRICTIONS

3.1Award and Interests Not Transferable. This Award, including the PRSUs and the Dividend Equivalents awarded hereunder, may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the Shares issuable pursuant to the Award have been issued, and all restrictions applicable to such Shares have lapsed. This Award and the rights and privileges conferred hereby, including the PRSUs and the Dividend Equivalents awarded hereunder, shall not be liable for the debts, contracts or engagements of Participant or his or her successors in interest and shall not be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.

3.2Rights as Stockholder. Neither Participant nor any person claiming under or through Participant shall have any of the rights or privileges of a stockholder of the Company in respect of any Shares issuable hereunder unless and until certificates representing such Shares (which may be in uncertificated form) will have been issued and recorded on the books and records of the Company or its transfer agents or registrars, and delivered to Participant (including through electronic delivery to a brokerage account). After such issuance, recordation and delivery, Participant shall have all the rights of a stockholder of the Company, including with respect to the right to vote the Shares and the right to receive any cash or share dividends or other distributions paid to or made with respect to the Shares.

3.3Trading Restrictions.  The Company may establish periods from time to time during which Participant’s ability to engage in transactions involving the Company’s Common Stock is subject to specific restrictions (“Restricted Periods”).  Participant may be subject to restrictions giving rise to a Restricted Period for any reason that the Company determines appropriate, including, restrictions generally applicable to employees or groups of employees or restrictions applicable to Participant during an investigation of allegations of misconduct or conduct detrimental to the Company or any Subsidiary by Participant.

3.4Award Subject to Clawback.  This Award, including the PRSUs and the Dividend Equivalents awarded hereunder, and any Shares issuable upon vesting of the PRSUs or the cash issuable upon settlement of the Dividend Equivalents, are subject to forfeiture, recovery by the Company or other action pursuant to, in addition to the provisions set forth in Section 3.6 of this Agreement, any clawback or recoupment policy which the Company may adopt from time to time pursuant to laws or regulations, including without limitation, any such policy which the Company may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by applicable law.

3.5Conditions to Issuance of Shares or Settlement of Award.  The Company shall not be required to issue or deliver any Shares issuable upon the vesting of the PRSUs or settle the Dividend Equivalents prior to the fulfillment of all of the following conditions:  (a) the admission of the Shares to listing on all stock exchanges on which such Shares are then listed, (b) the completion of any registration or other qualification of the Shares under any state or federal law or under rulings or regulations of the U.S.

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Securities and Exchange Commission or other governmental regulatory body, which the Administrator shall, in its sole and absolute discretion, deem necessary and advisable, (c) the obtaining of any approval or other clearance from any state or federal governmental agency that the Administrator shall, in its absolute discretion, determine to be necessary or advisable, (d) the lapse of any such reasonable period of time following the date the PRSUs vest as the Administrator may from time to time establish for reasons of administrative convenience, and (e) the receipt by the Company of full payment of any applicable withholding tax in any manner permitted under Section 1.2 above.

3.6Restrictive Covenants.

(a)Forfeiture for Violation of Restrictive Covenants.  The grant of the PRSUs provided herein and Participant’s agreement to the Restrictive Covenants (as defined below) are intended to be mutually dependent promises and in the event Participant breaches or threatens to breach the Restrictive Covenants, then to the greatest extent permitted by applicable law: (i) PRSUs that have not yet been settled (whether vested or unvested) shall immediately be cancelled; (ii) any Shares issued upon settlement of the PRSUs during the time period that is twelve (12) months prior to and twelve (12) months following Participant’s Termination of Service, or at any time following Participant's Actual Retirement Date, that have not yet been sold by Participant shall be forfeited back to the Company for no consideration; and (iii) if Participant received Shares upon settlement of the PRSUs during the time period that is twelve (12) months prior to and twelve (12) months following Participant’s Termination of Service, or at any time following Participant's Actual Retirement Date, and subsequently sold the received Share(s), any gain represented by the fair market value of the Shares issued upon settlement of the PRSUs on the settlement date multiplied by the number of Shares issued to Participant upon settlement of the PRSUs shall be paid by Participant to the Company, in cash, without regard to any market price decrease or increase subsequent to the settlement of the PRSUs.

(b)Certain Covenants.  Participant acknowledges that, to assist Participant in the performance of Participant’s duties, the Company agrees to provide and shall provide and has provided Participant with Confidential Information (as defined below) and materials.  Due to the sensitive nature of this Confidential Information, Participant acknowledges that the Company has legitimate business and competitive interests and legal rights to require non-disclosure of the Confidential Information to other companies and/or individuals and to require that the Confidential Information be used only for the benefit of the Company.  Therefore, in order to protect the Company’s Confidential Information and the Company’s business goodwill and competitive position, and in exchange for the Company providing Participant the consideration set forth herein, and in order to protect the value of the equity-based compensation provided to Participant in this Agreement, Participant agrees:

(i)At any time during the term of Participant’s service to the Company and thereafter for so long as such Confidential Information remains confidential, other than by reason of its wrongful disclosure (whether directly or indirectly) by Participant, Participant will not use, disclose or allow to be disclosed to any person, firm, or corporation, the Company’s Confidential Information, unless previously authorized by the Company for use in the pursuit of Company business;

(ii)During the term of Participant’s service to the Company (which for purposes of this Section shall be deemed to include any period for which Participant continues to be paid by the Company following termination or resignation) and for a period of twelve (12) months following Participant’s termination of service, whether voluntary or involuntary, Participant will not, anywhere in the world, directly or indirectly, compete with any portion of the Business (as defined below) of the Company in any way, or act as an officer, director, employee, consultant, lender, partner, trustee, member, shareholder, or agent of any person or entity that is engaged in any business in competition with the

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Business as now conducted by the Company or its Subsidiaries or in which the Company or its Subsidiaries becomes engaged during the term of Participant’s service to the Company, including, without limitation, any member of the Competitive Group.  Notwithstanding the foregoing, this clause (ii) shall not (A) preclude Participant from going to work for a separate business unit of any member of the Competitive Group that is not engaged in the Business, or (B) apply to services rendered by Participant in California after the date Participant’s service by the Company terminates (which for purposes of this Section shall be deemed to include any period for which Participant continues to be paid by the Company following termination or resignation);

(iii)Both during Participant’s service to the Company and for a period of twelve (12) months following Participant’s termination of service, whether voluntary or involuntary, Participant will not: (A) directly or indirectly solicit, entice, induce or attempt to induce or influence any employee or independent contractor of the Company to terminate or alter his, her or its relationship with the Company; and (B) provide any information about the Company’s employees or independent contractors to any other person for the purpose of assisting any third party to solicit the Company’s employees for outside employment; and

(iv)Following Participant's Actual Retirement Date, Participant will not accept a full-time position, or becomes a part-time employee, consultant or advisor to any member of the Competitive Group without the prior written approval of the Company. Notwithstanding the foregoing, this clause (iv) shall not (A) preclude Participant from going to work for a separate business unit of any member of the Competitive Group that is not engaged in the Business, or (B) apply to services rendered by Participant in California after the date Participant’s service by the Company terminates (which for purposes of this Section shall be deemed to include any period for which Participant continues to be paid by the Company following Participant's Actual Retirement Date).

(c)Use of Certain Information.  Participant shall not knowingly use in his or her work for the Company, any ideas, processes, code, inventions, improvements, developments and discoveries subject to any right or obligation of a third party, including trade secrets, patents, copyrights, trademarks, or open source obligations.

(d)Business Opportunities.  Participant will promptly disclose to the Company any business opportunity of which Participant becomes aware during his/her employment or service to the Company that relates to any products or services planned, under development, developed, produced or marketed by the Company.  Participant will not take advantage of or divert any such opportunity for his/her (or any other person or entity) own gain, profit or benefit, without the prior written consent of the Company.

(e)Company Materials.  All Company Materials are the Company’s property and may not be copied or removed from the Company’s premises (physically or electronically), unless done for the sole benefit of the Company as part of Participant’s job responsibilities or expressly approved by an authorized representative of the Company, for the benefit of the Company.

(f)Return of Company Materials.  Immediately upon the Participant’s Termination of Service for any reason, or upon Company’s request at any other time, Participant will deliver to Company all Company Materials.  Participant shall not retain, copy, or remove (either physically or electronically) any Company Materials from Company premises, computers, or other electronic equipment or storage devices.

(g)Definitions.  For purposes of this Section 3.6:

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(i)The term “Business” shall mean the business of providing integrated payment and information solutions and related services for intelligent travel applications to transportation and traffic management entities, as well as providing mission-centered training systems and services, C4ISR systems, intelligence, and cyber solutions for the United States and allied nations.

(ii)The term “Confidential Information” or “Company Confidential Information” means all forms and types of business, technical, financial, economic, sales, marketing or customer information of the Company that Participant receives, develops or has access to as a result of his/her employment or service to the Company, which has not been previously disclosed to the general public by an authorized Company representative or customer, regardless of whether such information would be deemed a trade secret under applicable law.  Confidential Information shall be interpreted broadly and includes, but is not limited to, business strategies and plans, financial information, projections, pricing and cost information, proposals, lists of present or future customers, all information obtained from or about current or future customers, supplier lists and information, plans and results of research and development, reports, manuals, policies, personnel information (other than Participant’s own information), evaluations, designs, specifications, blueprints, drawings, patterns, compilations, formulas, programs, software, prototypes, methods, processes, devices, procedures, “Inventions,” special techniques of any kind peculiar to the Company’s operations, or other confidential or proprietary information or intellectual property related to the Business, products, services, or plans of the Company, whether tangible or intangible, and whether stored or memorialized physically, electronically, photographically, or in Participant’s memory.  This specifically includes all information the Company receives from customers or other third parties that is not generally known to the public or is subject to a confidentiality agreement.

(iii)The term “Company” means the Company, its Subsidiaries and affiliates.

(iv)The term “Company Materials” means all forms of written or recorded information, data, or materials, including, but not limited to, documents, files, memoranda, notes, lists, as well as photographs, drawings, blueprints, and schematics (and all copies thereof) relating to the Company’s business, customers, suppliers, products or services, whether in tangible or electronic form (including items stored in computer memories, computer disks, thumb drives, CDs, or any other electronic means), whether made or compiled by Participant or others.

(v)The term “Competitive Group” includes, but is not limited to, the following entities: ACS, Accenture, Active Exhaust, BAE Systems, Bering Sea Environmental, Boeing, Booz Allen Hamilton, DRS Training & Control Systems, Elbit Systems, Engility, General Dynamics, HP Enterprise Services, Information Assurance Specialist, IBM, Israeli Aircraft Industries, Kapsch-Group Beteiligungs, L-3, LG, Leidos, Lockheed Martin, Northrup Grumman, Raytheon, Rockwell Collins, Royal Imtech, Ruag, SAIC, Saab Training Systems, Scheidt and Bachmann, Thales, Xerox, Siemens, TransCore, Trapeze Group, IVU Traffic Technologies, Indra Sistemas, Init AG (and U.S. subsidiaries), Econolite Group, and Q-Free ASA (and U.S. subsidiaries), as well as any entity that is a successor to, acquires a majority of the assets of, or merges in whole or in part with any of the foregoing entities.

(vi)The term “Inventions” includes, but is not limited to, any creation, discovery, development, idea, technique, formula, method, process, use, apparatus, product, device, machine, composition, code, design, program, technical data, configuration of any kind, or improvements to any of these things, which is discovered, conceived, developed, made or produced by Participant (alone or in conjunction with others), whether or not patentable or registerable under patent, copyright or similar statutes.

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(vii)The term “Restrictive Covenants” means the restrictions set forth in this Section 3.6 or, if Participant is a party to an employment agreement with the Company, which agreement sets forth provisions regarding Confidential Information, non-solicitation or non-competition that are more restrictive than the provisions set forth in this Section 3.6, the provisions set forth in such employment agreement.

(h)Reasonableness of Restrictions.  Participant has carefully read and considered the Restrictive Covenants, and, having done so, agrees and acknowledges that the Restrictive Covenants limit Participant’s ability to engage in competition during the period provided for above.  Participant expressly warrants and represents that these restrictions with respect to time and scope of activity are reasonable and necessary to protect the Confidential Information and the Company’s business goodwill and competitive position.

(i)Remedies for Breach.  In the event of a breach of any of the Restrictive Covenants, in addition to the forfeiture provisions set forth in Section 3.6(a), the Company shall have the right to seek monetary damages for any such breach.  In addition, in the event of a breach or threatened breach of any of the Restrictive Covenants, the Company shall have the right to seek equitable relief, including specific performance by means of an injunction against Participant or against Participant’s partners, agents, representatives, servants, employers, employees, and/or any and all persons acting directly or indirectly by or with him or her, to prevent or restrain any such breach.

(j)Blue Penciling.  In the event a court of competent jurisdiction determines that the geographic area, duration, or scope of activity of any restriction under this Agreement is more extensive than is necessary to protect the legitimate business interests of the Company or are otherwise unenforceable, the Company may, in its sole discretion, reform and modify the restrictions under this Agreement to the extent required to render them valid and enforceable under applicable law.

(k)Defend Trade Secrets Act.  The federal Defend Trade Secrets Act of 2016 provides immunity in certain circumstances to employees, contractors, and consultants for limited disclosures of a company’s trade secrets. Specifically, employees, contractors, and consultants may disclose trade secrets: (i) in confidence, either directly or indirectly, to a federal, state, or local government official, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Additionally, employees, contractors, and consultants who file retaliation lawsuits for reporting a suspected violation of law may also: (A) disclose the trade secret to his/her attorney, and (B) use the information in related court proceeding, as long as the individual files documents containing the trade secret under seal, and does not otherwise disclose the trade secret except pursuant to court order.

ARTICLE IV

OTHER PROVISIONS

4.1No Right to Continued Employment, Service or Awards.

(a)Nothing in the Plan, the Grant Notice, or this Agreement shall confer upon Participant any right to continue in the employ or service of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, except to the extent expressly provided otherwise in a written agreement between the Company or any Subsidiary and Participant.

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(b)The grant of the Award is a one-time benefit and does not create any contractual or other right to receive a grant of Awards or benefits in lieu of Awards in the future.  Future grants, if any, will be at the sole discretion of the Company.  In addition, the value of the Award is an extraordinary item of compensation outside the scope of any employment contract.  As such, the Award is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments. The future value of the underlying Common Stock is unknown and cannot be predicted with certainty.

4.2Adjustments. Participant acknowledges that the Award, including the vesting of the Award and the number of Shares subject to the Award, is subject to adjustment in the discretion of the Administrator upon the occurrence of certain events as provided in this Agreement and Section 11 of the Plan.

4.3Notices.  Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s corporate headquarters or to the then-current email address for the Secretary of the Company, and any notice to be given to Participant shall be addressed to Participant at the most recent physical or email address for Participant listed in the Company’s personnel records. By a notice given pursuant to this Section 4.3, either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

4.4Titles.  Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

4.5Governing Law; Venue; Severability. The laws of the state in which Participant resides shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. The parties agree that any suit, action, or proceeding arising out of or relating to the Plan or this Agreement shall be brought in the United States District Court for the Southern District of California (or should such court lack jurisdiction to hear such action, suit or proceeding, in a California state court in San Diego County, California) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection a party may have to the laying of venue for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Agreement shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.    Notwithstanding anything to the contrary contained in the Participant’s Employee Inventions & Secrecy Agreement (the “Inventions & Secrecy Agreement”), Section 16 of such agreement is hereby amended to be consistent with this Section 4.5 and this constitutes an amendment of such Inventions & Secrecy Agreement to change the governing law of such agreement to be consistent with this Section 4.5 (with references therein to the “Agreement” to continue to be deemed references to the Inventions & Secrecy Agreement).

4.6Conformity to Securities Laws. Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated thereunder by the United States Securities and Exchange Commission, including, without limitation, Rule 16b-3 under the Exchange Act. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Awards are

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granted, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan, the Grant Notice and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

4.7Tax Representations. Participant has reviewed with Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by the Grant Notice and this Agreement. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

4.8Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.

4.9Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the PRSUs, the Dividend Equivalents, the Plan and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

4.10Amendment, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator; provided that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall impair any rights or obligations under this Agreement in any material way without the prior written consent of Participant.

4.11Paperless Administration.  By accepting this Award, Participant hereby agrees to receive documentation related to the Award by electronic delivery, such as a system using an internet website or interactive voice response, maintained by the Company or a third party designated by the Company.

4.12Entire Agreement.  The Plan, the Grant Notice, this Agreement and the Inventions & Secrecy Agreement constitute the entire agreement of the parties and supersede in their entirety all oral, implied or written promises, statements, understandings, undertakings and agreements between the Company and Participant with respect to the subject matter hereof, including without limitation, the provisions of any employment agreement or offer letter regarding equity awards to be awarded to Participant by the Company, or any other oral, implied or written promises, statements, understandings, undertakings or agreements by the Company or any of its representatives regarding equity awards to be awarded to Participant by the Company. Notwithstanding the foregoing, Section 3.6 of this Agreement is in addition to and does not limit the effect of other agreements or understandings between Participant and the Company or any Subsidiary with respect to matters addressed therein, including the Inventions & Secrecy Agreement or any other agreement with respect to prohibitions against solicitation and the protection of the Company’s trade secrets and confidential information and noncompetition and nonsolicitation covenants of Participant; provided, however, that to the extent the provisions of Section 3.6 of this Agreement are more restrictive that any such agreements, including the Inventions & Secrecy Agreement, Participant and the company agree that the provisions of Section 3.6 of this Agreement shall govern.

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4.13Section 409A.

(a)Notwithstanding any other provision of the Plan, this Agreement or the Grant Notice, the Plan, this Agreement and the Grant Notice shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the Code (together with any Treasury Regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Grant Date, “Section 409A”). The Administrator may, in its discretion, adopt such amendments to the Plan, this Agreement or the Grant Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate to comply with the requirements of Section 409A.

(b)Unless Participant is or will be a Retirement Eligible Employee at any time on or after the Grant Date, this Agreement is not intended to provide for any deferral of compensation subject to Section 409A of the Code, and, accordingly, the Shares issuable pursuant to the PRSUs and the cash issuable upon settlement of the Dividend Equivalents corresponding thereto shall be distributed to Participant no later than the later of: (i) the fifteenth (15^th) day of the third month following Participant’s first taxable year in which such PRSUs are no longer subject to a substantial risk of forfeiture, and (ii) the fifteenth (15^th) day of the third month following first taxable year of the Company in which such PRSUs are no longer subject to substantial risk of forfeiture, as determined in accordance with Section 409A and any Treasury Regulations and other guidance issued thereunder.

(c)For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment that Participant may be eligible to receive under this Agreement shall be treated as a separate and distinct payment.

(d)If Participant's Termination of Service constitutes a payment event with respect to any portion of the RSUs which constitute a deferral of compensation and is subject to Section 409A of the Code, Participant's Termination of Service must also constitute a “separation from service” (as defined in Section 1.409A-1(h) of the Treasury Regulations), and, further, if Participant is a “specified employee” (as determined in accordance with Section 409A(a)(2)(B)(i) of the Code and Treasury Regulation Section 1.409A-1(i)) on the date of his or her “separation from service” (as defined in Section 1.409A-1(h) of the Treasury Regulations), the delivery of any shares of Common Stock to be delivered to Participant upon and as a result of such “separation from service” shall be delayed to the extent necessary to avoid a prohibited distribution under Section 409A(2)(B)(i) of the Code, and such shares of Common Stock shall be distributed to Participant on the earlier of (i) the expiration of the six-month period measured from the date of Participant's “separation from service,” or (ii) the date of Participant’s death, or (iii) such earlier date as is permitted under Section 409A of the Code and the Treasury Regulations thereunder))

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EXHIBIT B

TO PERFORMANCE RESTRICTED STOCK UNIT AWARD GRANT NOTICE

VESTING SCHEDULE

1.Performance-Based Vesting.  The PRSUs shall vest as follows:

(a)Performance Vesting Provisions.  In the event the Measurement Date (as defined below) occurs on September 30, 2023, such number of PRSUs shall vest on the Determination Date (as defined below) as is determined as follows:

(i)Sales Growth.  Subject to adjustment pursuant to clause (iii) below, such number of PRSUs shall be eligible to vest based on the Company’s calculated Sales Growth Achievement Percentage (as defined below) during the Performance Period as is determined by multiplying (i) the Target PRSUs set forth in the Grant Notice, by (ii) 50% weighting, by (iii) the Sales Growth Achievement Percentage determined as of the Measurement Date.  The Sales Growth Achievement Percentage shall be determined based on the Sales Growth Factor for the Performance Period pursuant to the chart set forth below:

Compound Annual Sales Growth Rate for Performance Period	Sales Growth Factor	Sales Growth Achievement Percentage
Less than 2.0%/year	Less than 1.0405	0%
2.0%/year	1.0405	50%
5.0%/year	1.1034	100%
8.5%/year or Greater	1.1798 or Greater	200%

If the Company’s Sales Growth Factor for the Performance Period is between two achievement levels, the Sales Growth Achievement Percentage for such fiscal year shall be determined by linear interpolation between the applicable achievement levels.

(ii)Adjusted EBITDA Growth.  Subject to adjustment pursuant to clause (iii) below, such number of PRSUs shall be eligible to vest based on the Company’s calculated Adjusted EBITDA Growth Achievement Percentage (as defined below) during the Performance Period as is determined by multiplying (i) the Target PRSUs set forth in the Grant Notice, by (ii) 50% weighting, by (iii) Adjusted EBITDA Growth Achievement Percentage determined as of the Measurement Date.  The Adjusted EBITDA Growth Achievement Percentage shall be determined based on the Adjusted EBITDA Growth Factor for the Performance Period pursuant to the chart set forth below:

Compound Annual Adjusted EBITDA Growth Rate for Performance Period	Adjusted EBITDA Growth Factor	Adjusted EBITDA Growth Achievement Percentage
Less than 2.25%/year	Less than 1.0457	0%
2.25%/year	1.0457	50%
5.5%/year	1.1141	100%
9.25%/year or Greater	1.1967 or Greater	200%

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If the Company’s Adjusted EBITDA Growth Factor for the Performance Period is between two achievement levels, the Adjusted EBITDA Growth Achievement Percentage shall be determined by linear interpolation between the applicable achievement levels.

(iii)Relative TSR Performance.  The Company's Relative TSR Performance  (as defined below) will result in a multiplier to the Initial Eligible PRSUs (as defined below) to determine the total number of PRSUs that will vest on the Determination Date, with the total number of PRSUs that shall vest on the Determination Date being determined by multiplying (A) the Initial Eligible PRSUs by (B) the “TSR Multiplier” (determined as follows):

Relative TSR Performance	TSR Multiplier
Company TSR is 2500 basis points or more above the Russell 2000 Index TSR	125%
Company TSR is 1000 basis points above the Russell 2000 Index TSR	110%
Company TSR is equal to the Russell 2000 Index TSR	100%
Company TSR is 1000 basis points below the Russell 2000 Index TSR	90%
Company TSR is 2500 basis points or more below the Russell 2000 Index TSR	75%

If the Company TSR relative to the Russell 2000 Index TSR for the Performance Period is between two achievement levels, the TSR Multiplier shall be determined by linear interpolation between the applicable achievement levels.

Notwithstanding the foregoing, if the Company TSR is negative for the Performance Period, the TSR Multiplier shall in no event exceed 100%. In addition, the total PRSUs vesting after applying the TSR multiplier shall in no event exceed 200% of target.

(iv)Continued Service Requirement.  Subject to clauses (b), (c), (d) and (e) below, Participant must not have experienced a Termination of Service prior to the Determination Date in order to be eligible for vesting pursuant to this clause (a).

(b)Effect of a Change in Control.  Notwithstanding clause (a) above:

(i)Upon the occurrence of a Change in Control occurring prior to September 30, 2023, such number of PRSUs shall be deemed “Vesting Eligible PRSUs” for purposes of this Award as is equal to (A) the Target PRSUs, multiplied by (B) the greater of (A) 100% or (B) the TSR Multiplier calculated as of the date of the Change in Control in accordance with Section 1(a)(iii) above using the date of the Change in Control as the Measurement Date.  The Vesting Eligible PRSUs, as determined pursuant to this clause (b)(i), shall vest on September 30, 2023, provided that Participant has not experienced a Termination of Service prior to such date; provided, however, that in the event of Participant's Termination of Service due to Participant's Covered Termination, Actual Retirement Date, death or Disability, in each case following a Change in Control, all of the Vesting Eligible PRSUs shall vest as of the date of Participant's Termination of Service; provided, further, that in the event of Participant's Termination of Service due to Participant's Qualifying Termination following a Change in Control that does not constitute a Covered Termination, such number of the Vesting Eligible PRSUs shall vest as of the date of Participant's

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Termination of Service as is determined by multiplying such Vesting Eligible PRSUs by the percentage determined by dividing (x) the number of calendar days elapsed from the beginning of the Performance Period through and including the date of such Termination of Service, by (y) one thousand ninety-five. In the event Participant's Termination of Service due to Participant's Actual Retirement Date, Disability, Qualifying Termination or Covered Termination precedes the occurrence of a Change in Control, such portion of Participant's Vesting Eligible PRSUs, as determined pursuant to this clause (b)(i), as Participant shall be eligible to vest in after application of clause (c) below shall vest upon the occurrence of the Change in Control (subject to proration as provided in clause (c) below).

(ii)If a Change in Control occurs and this Award is not continued, converted, assumed, or replaced by the surviving or successor entity in such Change in Control, then, immediately prior to the Change in Control, the Vesting Eligible PRSUs (as determined pursuant to this Section 1(b)), to the extent not continued, converted, assumed, or replaced, shall become fully vested, in accordance with Section 13.2(d) of the Plan.

(c)Vesting Upon Qualifying Termination, Covered Termination or Disability Prior to Determination Date and Change in Control.  Notwithstanding the foregoing, in the event Participant experiences a Termination of Service prior to the Determination Date and prior to a Change in Control as a result of his or her Qualifying Termination, Covered Termination or Disability, the PRSUs shall continue to be eligible to vest on the Determination Date pursuant to clause (a) or upon a Change in Control pursuant to clause (b) above, as applicable, based on the Company's performance for the Performance Period, with the exception that the number of PRSUs or Vesting Eligible PRSUs that shall vest pursuant to clause (a) or (b), as applicable (if any), shall be multiplied by the percentage determined by dividing (x) the number of calendar days elapsed from the beginning of the Performance Period through and including the date of such Termination of Service, by (y) one thousand ninety-five; provided, however, that if such Termination of Service due to a Qualifying Termination, Covered Termination or Disability occurs during the Retirement Notice Period or due to a Covered Termination pursuant to clause (i) of the definition of Covered Termination within three (3) months prior to a Change in Control, no proration shall apply.

(d)Vesting Upon Actual Retirement Date Prior to Determination Date and Change in Control.

(i)Notwithstanding the foregoing, in the event Participant experiences a Termination of Service prior to the Determination Date and prior to a Change in Control as a result of his or her Actual Retirement Date, the PRSUs shall continue to be eligible to vest on the Determination Date pursuant to clause (a) or upon a Change in Control pursuant to clause (b) above, as applicable, based on the Company's performance for the Performance Period.

(ii)In order to be eligible to receive accelerated vesting under this clause (d) upon Participant's Actual Retirement Date, Participant, to the extent he or she is a Retirement Eligible Employee on or after the Grant Date, must provide the Company with written notice of the Retirement Eligible Employee’s intention to retire at least twelve (12) months prior to the Retirement Eligible Employee’s Actual Retirement Date (the “Retirement Notice Period”), and, except as provided in clauses (b) and (c) above or clause (e) below in the event of a Change in Control or his or her Termination of Service due to Covered Termination, Disability or death, as applicable, remain employed with the Company through the duration of such Retirement Notice Period.  Such written notice must be in a form reasonably acceptable to the Company and include a representation of the Retirement Eligible Employee that the Retirement Eligible Employee is terminating from the Company for retirement purposes and has not accepted, and does not plan to accept, a full-time position at another employer which is a competitor of the Company.  The Administrator may, in its discretion, allow for a shorter notice period for reasons including

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but not limited to health issues by the Retirement Eligible Employee or his or her family, or in the best interests of the Company. Notwithstanding the foregoing, the requirements in this Section 1(d)(ii) shall not apply following a Change in Control and no Retirement Notice Period shall apply (or, in the case of a Retirement Notice Period that commenced prior to such Change in Control, such period will expire immediately upon such Change in Control).

(e)Vesting Upon Death Prior to Determination Date and Change in Control.  Notwithstanding the foregoing, 100% of the Target PRSUs granted shall vest immediately in the event of Participant’s Termination of Service as a result of his or her death prior to the Determination Date and prior to a Change in Control.

(f)Maximum PRSUs.  In no event will more than the Maximum PRSUs set forth in the Grant Notice vest pursuant to this Agreement.

(g)Interaction with Transition Protection Plan.  The terms of this Agreement shall govern the acceleration of the Award and shall supersede the provisions of the Company's Transition Protection Plan with respect to this Award.

2.Forfeiture.  Subject to Sections 1(b), (c), (d) and (e) above, Participant must not have experienced a Termination of Service prior to the Determination Date in order to be eligible for vesting in the Award.  Any portion of the Award and any PRSUs which do not vest pursuant to Section 1 above shall automatically and without further action be cancelled and forfeited by Participant, and Participant shall have no further right or interest in or with respect to such portion of the Award or PRSUs.

3.Definitions.  For purposes of this Agreement, the following terms shall have the meanings given below:

(a)“Actual Cumulative Sales Amount” means the aggregate of the Company’s Sales (as defined below) during the Performance Period.  If the Company acquires or divests a business or businesses during the Performance Period, the Sales of those businesses shall be excluded from the Actual Cumulative Sales Amount unless the Committee elects to adjust the Baseline Cumulative Sales Amount upward to account for the effects of an acquisition, in which case the sales of such acquired company would be included in the Actual Cumulative Sales Amount.  In addition, for purposes of calculating the Actual Cumulative Sales Amount, the actual Sales of any Subsidiaries of the Company that is denominated in currencies other than the US Dollar shall be translated at the same currency exchange rate used to calculate the Baseline Cumulative Sales Amount.

(b)“Actual Cumulative Adjusted EBITDA Amount” means the aggregate of the Company’s Adjusted EBITDA (as defined below) during the Performance Period. If the Company acquires or divests a business or businesses during the Performance Period, the Adjusted EBITDA of those businesses shall be excluded from the Actual Cumulative Adjusted EBITDA Amount unless the Committee elects to adjust the Baseline Cumulative Adjusted EBITDA Amount upward to account for the effects of an acquisition, in which case the Adjusted EBITDA of such acquired company would be included in the Actual Cumulative Adjusted EBITDA Amount. In addition, for purposes of calculating the Actual Cumulative Adjusted EBITDA Amount, the actual Adjusted EBITDA of any Subsidiaries of the Company that is denominated in currencies other than the US Dollar shall be translated at the same currency exchange rate used to calculate the Baseline Cumulative Adjusted EBITDA Amount.

(c)“Actual Retirement Date” means the last date, due to retirement on or after an Eligible Employee's Retirement Date, of a Retirement Eligible Employee's employment with the Company

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Group, subject to compliance with Section 1(d)(ii) above.

(d)“Adjusted EBITDA” means (i) net income (loss) attributable to the Company plus or minus the following amounts to the extent that these items were added or deducted in determining net income (loss): plus interest expense, less interest income, plus provision for income taxes, less benefit for income taxes, plus depreciation, plus amortization of purchased intangible assets, plus goodwill impairment charges, plus intangible asset impairment charges, plus fixed asset and other long-lived asset impairment charges, plus other non-operating expense, less non-operating income, plus expenses incurred to implement the Company’s Enterprise Resource Planning (ERP) systems and improve its supply chain management, plus expenses incurred related to contemplated or completed business acquisitions or divestitures including retention bonus expenses, due diligence and consulting costs incurred in connection with the acquisitions or divestitures, expense recognized as a result of the seller modifying employee equity awards or cash bonuses, expenses recognized related to the change in the fair value of contingent consideration for acquisitions, plus expenses incurred related to restructuring the Company, including the costs of a reduction in force and other associated costs such as consultants, such as presented in the Company’s 8-K filing with the U.S. Securities and Exchange Commission on November 20, 2019.

(e)“Adjusted EBITDA Growth Factor” for the Performance Period means (i) the Company's Actual Cumulative Adjusted EBITDA for the Performance Period as defined by the Committee divided by (ii) the Baseline Cumulative Adjusted EBITDA Amount.  The "Adjusted EBITDA Growth Factor" shall be calculated to the fourth decimal point.

(f)“Baseline Cumulative Sales Amount” means $4,428,705,000.  If the Company divests a segment or other lesser component of its business during the Performance Period, the Baseline Cumulative Sales Amount shall be adjusted downward commensurate with the amount of Sales related to that segment or lesser component of the business that was included in the calculation of the Baseline Cumulative Sales Amount.  The Committee may also elect to adjust the Baseline Cumulative Sales Amount upward to account for the effects of acquisition(s) if the Committee desires to include such acquisition(s) in the Actual Cumulative Sales Amount.

(g)“Baseline Cumulative Adjusted EBITDA Amount” means $474,882,000. If the Company divests a segment or other lesser component of its business during the Performance Period, the Baseline Cumulative Adjusted EBITDA Amount shall be adjusted downward commensurate with the amount of adjusted EBITDA related to that segment or lesser component of the business that was included in the calculation of the Baseline Cumulative Adjusted EBITDA Amount.  The Committee may also elect to adjust the Baseline Cumulative Adjusted EBITDA Amount upward to account for the effects of acquisition(s) if the Committee desires to include such acquisition(s) in the Actual Cumulative Adjusted EBITDA Amount.

(h)“Closing Average Period” means the trading days during the thirty (30) days preceding the last day of the Performance Period.

(i)“Closing Average Russell 2000 Index Value” means (i) if the Measurement Date is September 30, 2023, the average, over the trading days in the Closing Average Period, of the closing value of the Russell 2000 Index or (ii) if the Measurement Date is the date of a Change in Control, the closing value of the Russell 2000 Index on the last trading day prior to the Change in Control.

(j)“Closing Average Share Value” means (i) if the Measurement Date is September 30, 2023, the average, over the trading days in the Closing Average Period, of the closing price of the

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Company’s Common Stock, or (ii) if the Measurement Date is the date of a Change in Control, the closing price of the Company’s Common Stock on the last trading day prior to the Change in Control.

(k)“Company Group” means the Company and its Subsidiaries.

(l)“Company TSR” means the Closing Average Share Value divided by the Opening Average Share Value, less one, expressed as a percentage.  The Company TSR calculation will exclude any dividends paid on the Company's Common Stock, except in the case of any extraordinary, special or non-recurring dividend where an upward adjustment in the amount of such dividend shall be made to the Closing Average Share Value at the end of the Performance Period.

(m)“Constructive Termination” means a voluntary termination of employment by Participant after one of the following is undertaken without Participant’s express written consent:

(i)a change in the Participant’s position with the Company (or its Subsidiary employing the Participant) that materially reduces the Participant’s authority, duties or responsibilities or the level of management to which he or she reports;

(ii)a material reduction in Participant’s base compensation (except for base compensation decreases generally applicable to the Company’s other similarly-situated employees); provided that if a Retirement Eligible Employee voluntarily reduces his or her hours of employment, his or her salary, bonus, benefits and conditions of employment may be adjusted in an appropriate and proportional manner without constituting Good Reason; or

(iii)an increase in Participant’s one-way driving distance from Participant’s principal personal residence to the principal office or business location at which Participant is required to perform services of more than 50 miles, except for required travel for the Company’s business to the extent substantially consistent with Participant’s prior business travel obligations;

(iv)a material breach by the Company of any provisions of this Agreement or any enforceable written agreement between the Company and Participant.

Notwithstanding the foregoing, a voluntary termination shall not be deemed a Constructive Termination unless (x) Participant provides the Company with written notice that Participant believes that an event described above has occurred, (y) such notice is given within three (3) months of the date the event occurred, and (z) the Company does not rescind or cure the conduct giving rise to the event described above within ten (10) days of receipt by the Company of such notice from Participant.  A Participant’s Constructive Termination must occur within ninety (90) days following the expiration of the foregoing cure period.

(n)“Covered Termination” means (i) if Participant is a “Participant” in the Company's Transition Protection Plan at the time of his or her termination, Participant’s Qualifying Termination during the period commencing three (3) months prior to and ending eighteen (18) months following the effective date of a Change in Control, (ii) if Participant is not a “Participant” in the Company's Transition Protection Plan at the time of his or her termination, Participant’s Qualifying Termination within twelve (12) months following the effective date of a Change in Control, or (iii) Participant's Qualifying Termination during the Retirement Notice Period.

(o)“Determination Date” means, in the event the Measurement Date is September 30, 2023, the date on which the Committee certifies in writing the Company’s Sales Growth Achievement

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Percentage, Adjusted EBITDA Achievement Percentage, and Relative TSR Performance for the Performance Period.  The Company expects the Determination Date will occur prior to November 30, 2023, but in all events such date shall occur prior to December 15, 2023.

(p)“Eligible Employee Retirement Date” means the date on which an Employee has attained the age of sixty (60) and ten (10) years of uninterrupted, full-time employment or service with the Company Group (which, for this purpose, shall include service with their predecessors), as measured from the Employee’s hire date.

(q)“Initial Eligible PRSUs” shall be determined by adding (i) the number of PRSUs eligible to vest pursuant to clause (a)(i) based on the Sales Growth Achievement Percentage for the Performance Period, and (ii) the number of PRSUs eligible to vest pursuant to clause (a)(ii) based on the Adjusted EBITDA Growth Achievement Percentage.

(r)“Involuntary Termination Without Cause” means Participant’s involuntary termination of employment by the Company other than for one of the following reasons:

(i)The willful and continued failure of Participant to perform substantially his or her duties to the Company as those duties exist on the date of termination, other than any failure resulting from circumstances outside Participant’s control, or from incapacity of Participant due to physical or mental illness or Disability, or following Participant’s delivery of notice of Constructive Termination, after a written demand for substantial performance is delivered to Participant, which demand specifically identifies the manner in which the Company believes the Participant has not substantially performed his or her duties satisfactorily, and provided that the Company demonstrates that such failure has a demonstrably harmful impact on the Company or its reputation, and provided further that Participant has been given a period of at least thirty (30) days to cure his or her failure in performance.  No act or failure to act shall be considered “willful” unless it is done, or omitted to be done, in bad faith or without reasonable belief that the action was in the best interests of the Company or its Subsidiaries;

(ii)Participant’s gross negligence or breach of fiduciary duty to the Company involving personal profit, personal dishonesty or recklessness, or Participant’s material breach of any agreement with the Company, including a material violation of Company policies and procedures; provided that such termination of employment occurs within twelve (12) months following the Company’s discovery of such event; or

(iii)Participant’s conviction (which has become final) or entry of a plea of guilty or nolo contendere regarding an act that would be deemed a felony under California or Federal criminal statutes (or any comparable criminal laws of any jurisdiction in which Participant is permanently employed by the Company or a Subsidiary) that has a demonstrably harmful impact on the Company’s business or reputation, as determined in good faith by the Company’s Executive Compensation Committee, provided that such termination of employment occurs within twelve (12) months following the Company’s discover of such event.

(s)“Measurement Date” means the first to occur of (i) September 30, 2023, or (ii) the date of a Change in Control.

(t)“Opening Average Period” means the trading days during the thirty (30) days preceding the first day of the Performance Period.

Internal

B-7

(u)“Opening Average Share Value” means the average, over the trading days in the Opening Average Period, of the closing price of the Company’s Common Stock

(v)“Opening Average Russell 2000 Index Value” means the average, over the trading days in the Opening Average Period, of the closing value of the Russell 2000 Index.

(w)“Performance Period” means the period beginning on October 1, 2020 and ending on the Measurement Date.

(x)“Qualifying Termination” means a Participant's Involuntary Termination Without Cause or Constructive Termination.

(y)"Relative TSR Performance" means the Company's TSR less the Russell 2000 Index TSR, in each case for the Performance Period, expressed in basis points.

(z)“Retirement Eligible Employee” means any Employee of the Company Group who has reached his or her Eligible Employee Retirement Date.

(aa)"Russell 2000 Index" means the Russell 2000 Index, or in the event such index is discontinued or its methodology is significantly changed, a comparable index selected by the Administrator in good faith.

(bb)“Russell 2000 Index TSR” means the Closing Average Russell 2000 Index Value divided by the Opening Average Russell 2000 Index Value, less one, expressed as a percentage.  The Russell 2000 Index TSR calculation will be based on the companies traded on the index as of the applicable dates and is used as of the applicable dates even if companies are added or removed from the index during the Performance Period. The Russell 2000 Index TSR will exclude any dividends paid.

(cc)“Sales” means the revenues from the Company’s sales, determined in accordance with accounting principles generally accepted in the United States.

(dd)“Sales Growth Factor” for the Performance Period shall mean (i) the Company’s Actual Cumulative Sales Amount for the Performance Period divided by (ii) the Baseline Cumulative Sales Amount.  The “Sales Growth Factor” shall be calculated to the fourth decimal point.

Internal

B-8

Notice of Performance Stock Unit of CUBIC CORPORATION

Company Name	Cubic Corporation
Plan	%%EQUITY_PLAN%-%
Participant ID	%%EMPLOYEE_IDENTIFIER%-%
Participant Name	%%FIRST_NAME%-% %%MIDDLE_NAME%-% %%LAST_NAME%-%
Participant Address	%%ADDRESS_LINE_1%-% %%ADDRESS_LINE_2%-% %%ADDRESS_LINE_3%-%
Grant/Award Type	Performance Stock Unit
Share Amount	%%TOTAL_SHARES_GRANTED,’999,999,999’%-%
Grant/Award Price	%%OPTION_PRICE,'$999,999,999.99'%-%
Grant/Award Date	%%OPTION_DATE,'Month DD, YYYY'%-%
Expiration Date

VESTING SCHEDULE

Vesting Date	No. of Shares	Percent
%%VEST_DATE_PERIOD1,’Month DD, YYYY’%-%	%%SHARES_PERIOD1,'999,999,999'%-%%	100%

Internal

B-9

EX-10.3

Exhibit 10.3

Time-Based Vesting Version (FY21)

CUBIC CORPORATION

2015 INCENTIVE AWARD PLAN

RESTRICTED STOCK AWARD GRANT NOTICE AND
RESTRICTED STOCK AWARD AGREEMENT

Cubic Corporation, a Delaware corporation (the “Company”), pursuant to its 2015 Incentive Award Plan (the “Plan”), hereby grants to the participant listed below (“Participant”), an award of the number of restricted shares (“Restricted Shares”) of the Company’s Common Stock (the “Shares”) indicated below. Each Restricted Share is hereby granted in tandem with a corresponding dividend right, as further described in Article II of the Restricted Stock Agreement (the “Dividend Rights”).  This award for Restricted Shares and the corresponding Dividend Rights (this “Award”) is subject to all of the terms and conditions as set forth herein, in the Restricted Stock Award Agreement attached hereto as Exhibit A (the “Restricted Stock Agreement”) and in the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Restricted Stock Agreement.  This Restricted Stock Agreement and grant of Restricted Shares hereunder are issued in exchange for the Restricted Stock Unit Agreement dated November 27, 2020 (the “FY21 Restricted Stock Unit Agreement”) and the Restricted Shares replace the corresponding number of restricted stock units remaining outstanding thereunder.  The terms of this Restricted Stock Agreement are intended to be substantively consistent with the terms of the FY21 Restricted Stock Unit Agreement, other than providing for restricted shares instead of restricted stock units.

Participant:	%%FIRST_NAME_MIDDLE_NAME_LAST_NAME%-%
Grant Date:	December 30, 2020
Total Number of Restricted Shares:	%%TOTAL_SHARES_GRANTED,'999,999,999'%-%
Vesting Schedule:	Subject to the terms of the Restricted Stock Agreement, the Restricted Shares shall vest as set forth on Exhibit B to this Grant Notice.

This award replaces the FY21 Restricted Stock Unit Agreement and related Grant Notice previously granted to and accepted by Participant, which agreement and notice are hereby cancelled.  In addition, Participant has previously acknowledged and agreed to be bound by the Restrictive Covenants set forth in Section 3.6 of the Restricted Stock Agreement, which are the same as the Restrictive Covenants in the FY21 Restricted Stock Unit Agreement.  Participant’s prior acceptance of the FY21 Restricted Stock Unit Agreement is deemed to constitute Participant’s acceptance of and agreement with the terms of this Grant Notice, the Restricted Stock Agreement and the Plan, including the cancellation of the FY21 Restricted Stock Agreement and related Grant Notice.  Participant has been provided with a copy or electronic access to a copy of the prospectus for the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Restricted Stock Agreement.  The Award is subject to the terms and conditions of the Plan which are incorporated herein by reference. In the event of any inconsistency between the Plan and the Restricted Stock Agreement, the terms of the Plan shall control.

As Participant previously acknowledged through acceptance of the FY21 Restricted Stock Unit Agreement, Section 4.5 of the Restricted Stock Agreement (which replaces the FY21 Restricted Stock Unit Agreement) amends the governing law of Participant’s Invention & Secrecy Agreement (as defined in the Restricted Stock Agreement) and has agreed to such amendment.

1

EXHIBIT A

TO RESTRICTED STOCK AWARD GRANT NOTICE

RESTRICTED STOCK AWARD AGREEMENT

Pursuant to the Restricted Stock Award Grant Notice (the “Grant Notice”) to which this Restricted Stock Award Agreement (this “Agreement”) is attached, the Company has granted to Participant the number of Restricted Shares set forth in the Grant Notice, and their corresponding Dividend Rights pursuant to Article II, subject to all of the terms and conditions set forth in this Agreement, the Grant Notice and the Plan.

ARTICLE I

AWARD OF RESTRICTED SHARES

1.1        Award of Restricted Shares.

(a)       Award. In consideration of Participant’s continued employment or service with the Company or any Subsidiary thereof and for other good and valuable consideration, the Company hereby grants to Participant the number of Restricted Shares set forth in the Grant Notice and their corresponding Dividend Rights pursuant to Article II, subject to all of the terms and conditions set forth in this Agreement, the Grant Notice and the Plan. The Dividend Rights represent an unsecured obligation of the Company, payable only from the general assets of the Company.

(b)      Issuance of Restricted Shares.  As soon as practicable after the Grant Date, the Company shall cause the Restricted Shares to be evidenced by a book-entry in Participant’s name with the Company’s transfer agent or by one or more stock certificates issued in Participant’s name.  Until the Restricted Shares vest as provided in Section 1.1(c) below, (i) any Restricted Shares evidenced by a book-entry shall be subject to transfer restrictions and bear an appropriate legend referring to the restricted nature of the Restricted Shares evidenced thereby, and (ii) any stock certificate evidencing Restricted Shares shall be held by the Company or its designee, and bear an appropriate legend referring to the restricted nature of the Restricted Shares evidenced thereby.  In the case of any stock certificate evidencing Restricted Shares, Participant shall sign and deliver to the Company or its designee an assignment separate from such certificate, in blank, which will be held by the Company or its designee until the Restricted Shares evidenced by the certificate vest.

(c)       Vesting and Delivery of Unrestricted Shares. The Restricted Shares subject to the Award shall vest in accordance with the Vesting Schedule set forth in Exhibit B to the Grant Notice. Upon vesting of any Restricted Shares, the restrictions on the Restricted Shares will lapse and the Company shall cause the restrictions on any book-entry or certificate issued in Participant’s name to be removed and unrestricted Shares to be delivered to Participant.  Unless otherwise provided in Exhibit B to the Grant Notice, in the event of Participant’s Termination of Service prior to the vesting of all of the Restricted Shares, any unvested Restricted Shares will be forfeited automatically without any further action by the Company and without further notice and at no cost to the Company.

1.2        Tax Consequences and Withholding.

(a)         Participant understands that unless a proper and timely Section 83(b) election has been made as further described below, generally under Section 83 of the Code, at the time the Restricted Shares vest, Participant will be obligated to recognize ordinary income and be taxed in an amount equal to

the then-current Fair Market Value as of the date of vesting for the Restricted Shares then vesting.  Participant has been informed that, with respect to the grant of the Restricted Shares, an election may be filed by Participant with the Internal Revenue Service, within thirty (30) days of the Grant Date, electing pursuant to Section 83(b) of the Code to be taxed currently on the Fair Market Value of the Restricted Shares on the Grant Date.  Participant acknowledges that it is Participant’s sole responsibility to timely file the election under Section 83(b) of the Code.  If Participant makes such election, Participant shall promptly provide the Company a copy and the Company may require at the time of such election an additional payment for withholding tax purposes based on the Fair Market Value of the Restricted Shares as of the Grant Date.  Notwithstanding the foregoing, Participant may not make a Section 83(b) election unless and until the Company has publicly announced entering into a definitive agreement involving the sale or merger of the Company.

(b)         The Company shall not be obligated to deliver any certificate representing unrestricted Shares or remove the restrictions from any book-entry or deliver any cash payment in respect of the Dividend Rights to Participant or his or her legal representative unless and until Participant or his or her legal representative shall have paid or otherwise satisfied in full the amount of all federal, state, local and foreign taxes applicable with respect to the taxable income of Participant resulting from the vesting of the Restricted Shares or the Dividend Rights or any other taxable event related to the Restricted Shares or the Dividend Rights (the “Tax Withholding Obligation”).

(c)         Unless Participant elects to satisfy the Tax Withholding Obligation by some other means in accordance with clause (d) below prior to the time the Tax Withholding Obligation arises, receipt of this Award constitutes Participant’s instruction and authorization to the Company to, and the Company shall, forfeit a number of unrestricted Shares to be delivered upon vesting of the Restricted Shares having a then-current Fair Market Value not exceeding the amount necessary to satisfy the Tax Withholding Obligation of the Company and its Subsidiaries with respect to the vesting of the Restricted Shares based on the minimum applicable statutory withholding rates (or such higher rate as may be determined by the Administrator, which higher rate may not exceed the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting principles in the United States of America), provided, that, such Shares shall be rounded up to the nearest whole Share to the extent rounding up to the nearest whole share does not result in the liability classification of the applicable Award under generally accepted accounting principles in the United States of America).  In the event Participant’s Tax Withholding Obligation will be satisfied under this Section 1.2(c), then the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on Participant’s behalf a whole number of shares from those Shares as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy Participant’s Tax Withholding Obligation with respect to the the Restricted Shares.  Receipt of this Award constitutes Participant’s instruction and authorization to the Company and such brokerage firm to complete the transactions described above, including the transactions described in the previous sentence, as applicable.  Any Shares to be sold at the Company’s direction through a broker-assisted sale will be sold on the day the Tax Withholding Obligation with respect to the vesting of the Restricted Shares arises or as soon thereafter as practicable.  The Shares may be sold as part of a block trade with other participants of the Plan in which all participants receive an average price.  Participant will be responsible for all broker’s fees and other costs of sale, and Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale. To the extent the proceeds of such sale exceed Participant’s Tax Withholding Obligation with respect to the the Restricted Shares, the Company agrees to pay such excess in cash to Participant as soon as practicable. Participant acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy Participant’s Tax Withholding Obligation.

(d)         At any time not less than five (5) business days before any Tax Withholding Obligation arises, Participant may elect to satisfy the Tax Withholding Obligation by delivering to the Company an amount that the Company determines is sufficient to satisfy the Tax Withholding Obligation in one or more of the forms specified below:

(i)          by the deduction of such amount from other compensation payable to Participant;

(ii)         by tendering Shares owned by Participant having a then-current Fair Market Value not exceeding the amount necessary to satisfy the Tax Withholding Obligation of the Company and its Subsidiaries based on the minimum applicable statutory withholding rates (or such higher rate as may be determined by the Administrator, which higher rate may not exceed the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting principles in the United States of America), provided, that, such Shares shall be rounded up to the nearest whole Share to the extent rounding up to the nearest whole share does not result in the liability classification of the applicable Award under generally accepted accounting principles in the United States of America);

(iii)       through the delivery of a notice that Participant has placed a market sell order with a broker acceptable to the Company with respect to the Restricted Shares then vesting and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company or its Subsidiary with respect to which the Tax Withholding Obligation arises in  satisfaction of such obligation; provided that payment of such proceeds is then made to the Company or the applicable Subsidiary at such time as may be required by the Administrator, but in any event not later than the settlement of such sale; or

(iv)        in any combination of the foregoing.

(e)         To the maximum extent permitted by applicable law, the Company further has the authority to deduct or withhold such amount as is necessary to satisfy any Tax Withholding Obligation from other compensation payable to Participant with respect to any taxable event arising from the Restricted Shares or the Dividend Rights.

ARTICLE II

DIVIDEND RIGHTS

2.1        Dividend Rights.  The Participant shall be entitled to the dividends payable with respect to the Restricted Shares as set forth in this Article II (the “Dividend Rights”), subject to all of the terms and conditions in this Agreement and the Plan.  The Dividend Rights hereunder shall also include the Dividend Equivalents previously accrued and unpaid under the FY21 Restricted Stock Unit Agreement and shall be linked to Restricted Shares issued in conversion for the corresponding restricted stock units that had been issued under the FY21 Restricted Stock Unit Agreement.  The Dividend Rights hereunder shall remain outstanding from the Grant Date through the earlier to occur of (a) the termination or forfeiture for any reason of the Restricted Shares to which such Dividend Right corresponds, or (b) the vesting and lapse of restrictions on the Restricted Shares to which such Dividend Right corresponds.  Participant shall not be entitled to any payment under a Dividend Right with respect to any dividend with a record date that occurs prior to the Grant Date or after the termination of such Restricted Shares for any reason, whether due to vesting, forfeiture or otherwise.  If any Restricted Share linked to a Dividend Right  fails to vest or is forfeited for any reason, then (a) the linked Dividend Right shall be forfeited as well, (b) any amounts

otherwise payable in respect of such Dividend Right shall be forfeited without payment, and (c) the Company shall have no further obligations in respect of such Dividend Right.

2.2       Payment of Dividend Rights.  Dividend Rights shall be paid in cash only on the number of Restricted Shares that vest in accordance with this Agreement by determining the sum of the cash dividends paid or payable on such number of shares of Common Stock with respect to each record date that occurs between the Grant Date and the date on which the Restricted Shares vest pursuant to Section 1.1(c) (without any interest or compounding). The payment of cash in settlement of the Dividend Rights shall occur at the same time as the restrictions lapse on vested Restricted Shares to which such Dividend Rights correspond.

ARTICLE III

RESTRICTIONS

3.1        Restricted Shares Not Transferable. The Restricted Shares may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the Restricted Shares become vested. This Award and the rights and privileges conferred hereby, including the Restricted Shares and the Dividend Rights payable hereunder, shall not be liable for the debts, contracts or engagements of Participant or his or her successors in interest and shall not be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.

3.2        Rights as Stockholder. As of the Grant Date, Participant shall have the rights of a stockholder with respect to the Restricted Shares (including voting rights), except as otherwise provided in this Restricted Stock Agreement, including Article II regarding Dividend Rights.  Upon delivery of unrestricted Shares upon vesting of the Restricted Shares, Participant shall have all the rights of a stockholder of the Company, including with respect to the right to vote the Shares and the right to receive any cash or share dividends or other distributions paid to or made with respect to the Shares.

3.3       Trading Restrictions.  The Company may establish periods from time to time during which Participant’s ability to engage in transactions involving the Shares after the Restricted Shares have vested is subject to specific restrictions (“Restricted Periods”).  Participant may be subject to restrictions giving rise to a Restricted Period for any reason that the Company determines appropriate, including, restrictions generally applicable to employees or groups of employees or restrictions applicable to Participant during an investigation of allegations of misconduct or conduct detrimental to the Company or any Subsidiary by Participant.

3.4        Award Subject to Clawback.  This Award, including the Restricted Shares and the Dividend Rights awarded hereunder, and any unrestricted Shares issuable upon vesting of the Restricted Shares or the cash issuable upon settlement of the Dividend Rights, are subject to forfeiture, recovery by the Company or other action pursuant to, in addition to the provisions set forth in Section 3.6 of this Agreement, any clawback or recoupment policy which the Company may adopt from time to time pursuant to laws or regulations, including without limitation, any such policy which the Company may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by applicable law.

3.5        Conditions to Issuance of Shares or Settlement of Award.  The Company shall not be required to release the restrictions on the Restricted Shares or settle the Dividend Rights prior to the

fulfillment of all of the following conditions:  (a) the lapse of any such reasonable period of time following the date the Restricted Shares vest as the Administrator may from time to time establish for reasons of administrative convenience, and (b) the receipt by the Company of full payment of any applicable withholding tax in any manner permitted under Section 1.2 above.

3.6        Restrictive Covenants.

(a)         Forfeiture for Violation of Restrictive Covenants.  Pursuant to the grant of the FY21 Restricted Stock Unit Agreement, which is the predecessor to this Award of Restricted Shares, the Participant agreed to the Restrictive Covenants (as defined below) as a mutually dependent promise, and Participant agreed that, in the event Participant breaches or threatens to breach the Restrictive Covenants, then to the greatest extent permitted by applicable law: (i) Restricted Shares (as a replacement to the restricted stock units under the FY21 Restricted Stock Unit Agreement) that have not yet vested shall immediately be cancelled; (ii) any Restricted Shares that became vested during the time period that is twelve (12) months prior to and twelve (12) months following Participant’s Termination of Service that have not yet been sold by Participant shall be forfeited back to the Company for no consideration; and (iii) if Participant became vested in Restricted Shares during the time period that is twelve (12) months prior to and twelve (12) months following Participant’s Termination of Service and subsequently sold the received Share(s), any gain represented by the fair market value of such Restricted Shares upon the vesting of the Restricted Shares multiplied by the number of Restricted Shares that became vested shall be paid by Participant to the Company, in cash, without regard to any market price decrease or increase subsequent to the vesting of the Restricted Shares.

(b)        Certain Covenants.  Participant acknowledged that, to assist Participant in the performance of Participant’s duties, the Company agrees to provide and shall provide and has provided Participant with Confidential Information (as defined below) and materials.  Due to the sensitive nature of this Confidential Information, Participant acknowledges that the Company has legitimate business and competitive interests and legal rights to require non-disclosure of the Confidential Information to other companies and/or individuals and to require that the Confidential Information be used only for the benefit of the Company.  Therefore, in order to protect the Company’s Confidential Information and the Company’s business goodwill and competitive position, and in exchange for the Company providing Participant the consideration set forth herein, and in order to protect the value of the equity-based compensation provided to Participant in this Agreement, Participant agrees:

(i)          At any time during the term of Participant’s service to the Company and thereafter for so long as such Confidential Information remains confidential, other than by reason of its wrongful disclosure (whether directly or indirectly) by Participant, Participant will not use, disclose or allow to be disclosed to any person, firm, or corporation, the Company’s Confidential Information, unless previously authorized by the Company for use in the pursuit of Company business;

(ii)         During the term of Participant’s service to the Company (which for purposes of this Section shall be deemed to include any period for which Participant continues to be paid by the Company following termination or resignation) and for a period of twelve (12) months following Participant’s termination of service, whether voluntary or involuntary, Participant will not, anywhere in the world, directly or indirectly, compete with any portion of the Business (as defined below) of the Company in any way, or act as an officer, director, employee, consultant, lender, partner, trustee, member, shareholder, or agent of any person or entity that is engaged in any business in competition with the Business as now conducted by the Company or its Subsidiaries or in which the Company or its Subsidiaries becomes engaged during the term of Participant’s service to the Company, including, without limitation, any member of the Competitive Group.  Notwithstanding the foregoing, this clause (ii) shall not (A) preclude Participant from going to work for a separate business unit of any member of the Competitive

Group that is not engaged in the Business, or (B) apply to services rendered by Participant in California after the date Participant’s service by the Company terminates (which for purposes of this Section shall be deemed to include any period for which Participant continues to be paid by the Company following termination or resignation); and

(iii)       Both during Participant’s service to the Company and for a period of twelve (12) months following Participant’s termination of service, whether voluntary or involuntary, Participant will not: (A) directly or indirectly solicit, entice, induce or attempt to induce or influence any employee or independent contractor of the Company to terminate or alter his, her or its relationship with the Company; and (B) provide any information about the Company’s employees or independent contractors to any other person for the purpose of assisting any third party to solicit the Company’s employees for outside employment.

(c)         Use of Certain Information.  Participant shall not knowingly use in his or her work for the Company, any ideas, processes, code, inventions, improvements, developments and discoveries subject to any right or obligation of a third party, including trade secrets, patents, copyrights, trademarks, or open source obligations.

(d)       Business Opportunities.  Participant will promptly disclose to the Company any business opportunity of which Participant becomes aware during his/her employment or service to the Company that relates to any products or services planned, under development, developed, produced or marketed by the Company.  Participant will not take advantage of or divert any such opportunity for his/her (or any other person or entity) own gain, profit or benefit, without the prior written consent of the Company.

(e)         Company Materials.  All Company Materials are the Company’s property and may not be copied or removed from the Company’s premises (physically or electronically), unless done for the sole benefit of the Company as part of Participant’s job responsibilities or expressly approved by an authorized representative of the Company, for the benefit of the Company.

(f)       Return of Company Materials.  Immediately upon the Participant’s Termination of Service for any reason, or upon Company’s request at any other time, Participant will deliver to Company all Company Materials.  Participant shall not retain, copy, or remove (either physically or electronically) any Company Materials from Company premises, computers, or other electronic equipment or storage devices.

(g)         Definitions.  For purposes of this Section 3.6:

(i)          The term “Business” shall mean the business of providing integrated payment and information solutions and related services for intelligent travel applications to transportation and traffic management entities, as well as providing mission-centered training systems and services, C4ISR systems, intelligence, and cyber solutions for the United States and allied nations.

(ii)         The term “Confidential Information” or “Company Confidential Information” means all forms and types of business, technical, financial, economic, sales, marketing or customer information of the Company that Participant receives, develops or has access to as a result of his/her employment or service to the Company, which has not been previously disclosed to the general public by an authorized Company representative or customer, regardless of whether such information would be deemed a trade secret under applicable law.  Confidential Information shall be interpreted broadly and includes, but is not limited to, business strategies and plans, financial information, projections, pricing and cost information, proposals, lists of present or future customers, all information obtained from or about current or future customers, supplier lists and information, plans and results of research and development,

reports, manuals, policies, personnel information (other than Participant’s own information), evaluations, designs, specifications, blueprints, drawings, patterns, compilations, formulas, programs, software, prototypes, methods, processes, devices, procedures, “Inventions,” special techniques of any kind peculiar to the Company’s operations, or other confidential or proprietary information or intellectual property related to the Business, products, services, or plans of the Company, whether tangible or intangible, and whether stored or memorialized physically, electronically, photographically, or in Participant’s memory.  This specifically includes all information the Company receives from customers or other third parties that is not generally known to the public or is subject to a confidentiality agreement.

(iii)       The term “Company” means the Company, its Subsidiaries and its affiliates.

(iv)        The term “Company Materials” means all forms of written or recorded information, data, or materials, including, but not limited to, documents, files, memoranda, notes, lists, as well as photographs, drawings, blueprints, and schematics (and all copies thereof) relating to the Company’s business, customers, suppliers, products or services, whether in tangible or electronic form (including items stored in computer memories, computer disks, thumb drives, CDs, or any other electronic means), whether made or compiled by Participant or others.

(v)         The term “Competitive Group” includes, but is not limited to, the following entities: ACS, Accenture, Active Exhaust, BAE Systems, Bering Sea Environmental, Boeing, Booz Allen Hamilton, DRS Training & Control Systems, Elbit Systems, Engility, General Dynamics, HP Enterprise Services, Information Assurance Specialist, IBM, Israeli Aircraft Industries, Kapsch-Group Beteiligungs, L-3, LG, Leidos, Lockheed Martin, Northrup Grumman, Raytheon, Rockwell Collins, Royal Imtech, Ruag, SAIC, Saab Training Systems, Scheidt and Bachmann, Thales, Xerox, Siemens, TransCore, Trapeze Group, IVU Traffic Technologies, Indra Sistemas, Init AG (and U.S. subsidiaries), Econolite Group, Trafficware, and Q-Free ASA (and U.S. subsidiaries), as well as any entity that is a successor to, acquires a majority of the assets of, or merges in whole or in part with any of the foregoing entities.

(vi)        The term “Inventions” includes, but is not limited to, any creation, discovery, development, idea, technique, formula, method, process, use, apparatus, product, device, machine, composition, code, design, program, technical data, configuration of any kind, or improvements to any of these things, which is discovered, conceived, developed, made or produced by Participant (alone or in conjunction with others), whether or not patentable or registerable under patent, copyright or similar statutes.

(vii)       The term “Restrictive Covenants” means the restrictions set forth in this Section 3.6 or, if Participant is a party to an employment agreement with the Company, which agreement sets forth provisions regarding Confidential Information, non-solicitation or non-competition that are more restrictive than the provisions set forth in this Section 3.6, the provisions set forth in such employment agreement.

(h)         Reasonableness of Restrictions.  Participant has carefully read and considered the Restrictive Covenants, and, having done so, agrees and acknowledges that the Restrictive Covenants limit Participant’s ability to engage in competition during the period provided for above.  Participant expressly warrants and represents that these restrictions with respect to time and scope of activity are reasonable and necessary to protect the Confidential Information and the Company’s business goodwill and competitive position.

(i)          Remedies for Breach.  In the event of a breach of any of the Restrictive Covenants, in addition to the forfeiture provisions set forth in Section 3.6(a), the Company shall have the right to seek

monetary damages for any such breach.  In addition, in the event of a breach or threatened breach of any of the Restrictive Covenants, the Company shall have the right to seek equitable relief, including specific performance by means of an injunction against Participant or against Participant’s partners, agents, representatives, servants, employers, employees, and/or any and all persons acting directly or indirectly by or with him or her, to prevent or restrain any such breach.

(j)          Blue Penciling.  In the event a court of competent jurisdiction determines that the geographic area, duration, or scope of activity of any restriction under this Agreement is more extensive than is necessary to protect the legitimate business interests of the Company or are otherwise unenforceable, the Company may, in its sole discretion, reform and modify the restrictions under this Agreement to the extent required to render them valid and enforceable under applicable law.

(k)         Defend Trade Secrets Act.  The federal Defend Trade Secrets Act of 2016 provides immunity in certain circumstances to employees, contractors, and consultants for limited disclosures of a company’s trade secrets. Specifically, employees, contractors, and consultants may disclose trade secrets: (i) in confidence, either directly or indirectly, to a federal, state, or local government official, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Additionally, employees, contractors, and consultants who file retaliation lawsuits for reporting a suspected violation of law may also: (A) disclose the trade secret to his/her attorney, and (B) use the information in related court proceeding, as long as the individual files documents containing the trade secret under seal, and does not otherwise disclose the trade secret except pursuant to court order.

ARTICLE IV

OTHER PROVISIONS

4.1        No Right to Continued Employment, Service or Awards.

(a)         Nothing in the Plan, the Grant Notice, or this Agreement shall confer upon Participant any right to continue in the employ or service of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, except to the extent expressly provided otherwise in a written agreement between the Company or any Subsidiary and Participant.

(b)        The grant of the Award is a one-time benefit and does not create any contractual or other right to receive a grant of Awards or benefits in lieu of Awards in the future.  Future grants, if any, will be at the sole discretion of the Company.  In addition, the value of the Award is an extraordinary item of compensation outside the scope of any employment contract.  As such, the Award is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments. The future value of the Company’s Common Stock is unknown and cannot be predicted with certainty.

4.2      Adjustments. Participant acknowledges that the Award, including the vesting of the Award and the number of Shares subject to the Award, is subject to adjustment in the discretion of the Administrator upon the occurrence of certain events as provided in this Agreement and Section 11 of the Plan.

4.3        Notices.  Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s corporate

headquarters or to the then-current email address for the Secretary of the Company, and any notice to be given to Participant shall be addressed to Participant at the most recent physical or email address for Participant listed in the Company’s personnel records. By a notice given pursuant to this Section 4.3, either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

4.4        Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

4.5       Governing Law; Venue; Severability. The laws of the state in which Participant resides shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. The parties agree that any suit, action, or proceeding arising out of or relating to the Plan or this Agreement shall be brought in the United States District Court for the Southern District of California (or should such court lack jurisdiction to hear such action, suit or proceeding, in a California state court in San Diego County, California) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection a party may have to the laying of venue for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Agreement shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.  Notwithstanding anything to the contrary contained in the Participant’s Employee Inventions & Secrecy Agreement (the “Inventions & Secrecy Agreement”), Section 16 of such agreement was amended pursuant to the FY21 Restricted Stock Unit Agreement to be consistent with this Section 4.5 so as to amend such Inventions & Secrecy Agreement to change the governing law of such agreement to be consistent with this Section 4.5 (with references therein to the “Agreement” to continue to be deemed references to the Inventions & Secrecy Agreement).

4.6       Conformity to Securities Laws. Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated thereunder by the United States Securities and Exchange Commission, including, without limitation, Rule 16b-3 under the Exchange Act. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Awards are granted, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan, the Grant Notice and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

4.7        Tax Representations. Participant has reviewed with Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by the Grant Notice and this Agreement. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

4.8        Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.

4.9        Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Restricted Shares, the Dividend Rights, the Plan and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

4.10      Amendment, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator; provided that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall impair any rights or obligations under this Agreement in any material way without the prior written consent of Participant.

4.11     Paperless Administration.  Participant has agreed to receive documentation related to the Award by electronic delivery, such as a system using an internet website or interactive voice response, maintained by the Company or a third party designated by the Company.

4.12    Entire Agreement.  The Plan, the Grant Notice, this Agreement and the Inventions & Secrecy Agreement constitute the entire agreement of the parties and supersede in their entirety all oral, implied or written promises, statements, understandings, undertakings and agreements between the Company and Participant with respect to the subject matter hereof, including without limitation, the provisions of any employment agreement or offer letter regarding equity awards to be awarded to Participant by the Company, or any other oral, implied or written promises, statements, understandings, undertakings or agreements by the Company or any of its representatives regarding equity awards to be awarded to Participant by the Company. Notwithstanding the foregoing, Section 3.6 of this Agreement is in addition to and does not limit the effect of other agreements or understandings between Participant and the Company or any Subsidiary with respect to matters addressed therein, including the Inventions & Secrecy Agreement or any other agreement with respect to prohibitions against solicitation and the protection of the Company’s trade secrets and confidential information and noncompetition and nonsolicitation covenants of Participant; provided, however, that to the extent the provisions of Section 3.6 of this Agreement are more restrictive that any such agreements, including the Inventions & Secrecy Agreement, Participant and the Company agree that the provisions of Section 3.6 of this Agreement shall govern.

EXHIBIT B

TO RESTRICTED STOCK AWARD GRANT NOTICE

VESTING SCHEDULE

1.          Time-Based Vesting.  The Restricted Shares shall vest in three (3) equal installments as follows (each such date, the “Scheduled Vesting Date” for such portion of the Restricted Share):

First installment –     October 1, 2021

Second installment - October 1, 2022

Third installment -    October 1, 2023

2.          Accelerated Vesting.

(a)         Notwithstanding the foregoing, the Restricted Shares shall vest immediately (i) in the event Participant’s Termination of Service as a result of his or her death or Disability or (ii) upon Participant’s Covered Termination (provided that, in the event of a Covered Termination pursuant to clause (i) of the definition of Covered Termination, such acceleration will occur on the date of the Change in Control occurring within three (3) months following Participant's Termination of Service).

(b)         Interaction with Transition Protection Plan.  The terms of this Agreement shall govern the acceleration of the Award and shall supersede the provisions of the Company's Transition Protection Plan with respect to this Award.

3.        Forfeiture.  Any portion of the Award and any Restricted Shares which do not vest pursuant to Sections 1 or 2 above shall automatically and without further action be cancelled and forfeited by Participant, and Participant shall have no further right or interest in or with respect to such portion of the Award or Restricted Share.

4.          Definitions.  For purposes of this Agreement, the following terms shall have the meanings given below:

(a)         “Constructive Termination” means a voluntary termination of employment by Participant after one of the following is undertaken without Participant’s express written consent:

(i)          a change in the Participant’s position with the Company (or its Subsidiary employing the Participant) that materially reduces the Participant’s authority, duties or responsibilities or the level of management to which he or she reports;

(ii)         a material reduction in Participant’s base compensation (except for base compensation decreases generally applicable to the Company’s other similarly-situated employees); or

(iii)       an increase in Participant’s one-way driving distance from Participant’s principal personal residence to the principal office or business location at which Participant is required to perform services of more than 50 miles, except for required travel for the Company’s business to the extent substantially consistent with Participant’s prior business travel obligations; or

(iv)        a material breach by the Company of any provisions of this Agreement or any enforceable written agreement between the Company and Participant.

Notwithstanding the foregoing, a voluntary termination shall not be deemed a Constructive Termination unless (x) Participant provides the Company with written notice that Participant believes that an event described above has occurred, (y) such notice is given within three (3) months of the date the event occurred, and (z) the Company does not rescind or cure the conduct giving rise to the event described above within ten (10) days of receipt by the Company of such notice from Participant.  A Participant’s resignation from employment with the Company for Good Reason must occur within ninety (90) days following the expiration of the foregoing cure period.

(b)         “Covered Termination” means (i) if Participant is a "Participant" in the Company's Transition Protection Plan at the time of his or her termination, Participant’s Involuntary Termination Without Cause or Constructive Termination during the period commencing three (3) months prior to and ending eighteen (18) months following the effective date of a Change in Control, or (ii) if Participant is not a "Participant" in the Company's Transition Protection Plan at the time of his or her termination, Participant’s Involuntary Termination Without Cause or Constructive Termination within twelve (12) months following the effective date of a Change in Control.

(c)         “Involuntary Termination Without Cause” shall mean Participant’s involuntary termination of employment by the Company other than for one of the following reasons:

(i)          the willful and continued failure of Participant to perform substantially his or her duties to the Company, other than any failure resulting from circumstances outside Participant’s control, or from incapacity of Participant due to physical or mental illness or Disability, or following Participant’s delivery of notice of Constructive Termination, after a written demand for substantial performance is delivered to Participant, which demand specifically identifies the manner in which the Company believes the Participant has not substantially performed his or her duties satisfactorily, and provided that the Company demonstrates that such failure has a demonstrably harmful impact on the Company or its reputation, and provided further that Participant has been given a period of at least thirty (30) days to cure his or her failure in performance.  No act or failure to act shall be considered “willful” unless it is done, or omitted to be done, in bad faith or without reasonable belief that the action was in the best interests of the Company or its Subsidiaries;

(ii)         Participant’s gross negligence or breach of fiduciary duty to the Company involving personal profit, personal dishonesty or recklessness, or Participant’s material breach of any agreement with the Company, including a material violation of Company policies and procedures; provided that such termination of employment occurs within twelve (12) months following the Company’s discover of such event; or

(iii)       Participant’s conviction (which has become final) or entry of a plea of guilty or nolo contendere regarding an act that would be deemed a felony under California or Federal criminal statutes (or any comparable criminal laws of any jurisdiction in which Participant is permanently employed by the Company or a Subsidiary) that has a demonstrably harmful impact on the Company’s business or reputation, as determined in good faith by the Company’s Executive Compensation Committee, provided that such termination of employment occurs within twelve (12) months following the Company’s discover of such event.

Notice of Restricted Stock Award of CUBIC CORPORATION

Company Name	Cubic Corporation
Plan	%%EQUITY_PLAN%-%
Participant ID	%%EMPLOYEE_IDENTIFIER%-%
Participant Name	%%FIRST_NAME_MIDDLE_NAME_LAST_NAME%-%
Participant Address	%%ADDRESS_LINE_1%-% %%ADDRESS_LINE_2%-% %%ADDRESS_LINE_3%-%
Grant/Award Type	Restricted Stock
Share Amount	%%TOTAL_SHARES_GRANTED,'999,999,999'%-%
Grant/Award Price	%%OPTION_PRICE,'$999,999,999.99'%-%
Grant/Award Date	%%OPTION_DATE,'MONTH DD, YYYY'%-%
Company Name	Cubic Corporation

VESTING SCHEDULE

Vesting Date 1: October 1, 2021

No. of Shares: %%SHARES_PERIOD1,'999,999,999'%-%

Percent: 33 1/3%

Vesting Date 2: October 1, 2022

No. of Shares: %%SHARES_PERIOD2,'999,999,999'%-%

Percent: 33 1/3%

Vesting Date 3: October 1, 2023

No. of Shares: %%SHARES_PERIOD3,'999,999,999'%-%

Percent: 33 1/3%

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: February 8, 2021

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: February 8, 2021

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 December 31, 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: February 8, 2021

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 December 31, 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: February 8, 2021

XML

Document and Entity Information - shares	3 Months Ended
	Dec. 31, 2020	Jan. 21, 2021
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Dec. 31, 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
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		31,834,085
Current Fiscal Year End Date	--09-30
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Entity Central Index Key	0000026076
Amendment Flag	false
Common Stock
Document Information [Line Items]
Title of 12(b) Security	Common Stock, no par value
Trading Symbol	CUB
Security Exchange Name	NYSE
Preferred Stock Purchase Rights
Document Information [Line Items]
Title of 12(b) Security	Preferred Stock Purchase Rights
No Trading Symbol Flag	true
Security Exchange Name	NYSE

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Net sales:
Net sales	$ 318,794	$ 328,839
Costs and expenses:
Selling, general and administrative expenses	63,660	65,915
Research and development	12,146	8,422
Amortization of purchased intangibles	16,107	10,089
Gain on sale of property, plant and equipment		(170)
Restructuring costs	4,135	1,575
Total costs and expenses	317,497	335,322
Operating income (loss)	1,297	(6,483)
Other income (expenses):
Interest and dividend income	1,789	2,218
Interest expense	(8,171)	(5,363)
Other income (expense), net	1,296	(127)
Loss from continuing operations before income taxes	(3,789)	(9,755)
Income tax provision	3,489	6,246
Loss from continuing operations	(7,278)	(16,001)
Net loss from discontinued operations		(584)
Net loss	(7,278)	(16,585)
Less noncontrolling interest in net income of VIE	5,717	3,990
Net loss attributable to Cubic	(12,995)	(20,575)
Amounts attributable to Cubic:
Net loss from continuing operations	(12,995)	(19,991)
Net loss from discontinued operations		(584)
Net loss attributable to Cubic	$ (12,995)	$ (20,575)
Basic
Continuing operations attributable to Cubic (in dollars per share)	$ (0.41)	$ (0.64)
Discontinued operations (in dollars per share)		(0.02)
Basic earnings per share attributable to Cubic (in dollars per share)	(0.41)	(0.66)
Diluted
Continuing operations attributable to Cubic (in dollars per share)	(0.41)	(0.64)
Discontinued operations (in dollars per share)		(0.02)
Diluted earnings per share attributable to Cubic (in dollars per share)	$ (0.41)	$ (0.66)
Weighted average shares used in per share calculations:
Basic (in shares)	31,562	31,273
Diluted (in shares)	31,562	31,273
Products
Net sales:
Net sales	$ 181,489	$ 200,604
Costs and expenses:
Costs	138,019	166,843
Services
Net sales:
Net sales	137,305	128,235
Costs and expenses:
Costs	$ 83,430	$ 82,648

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net loss	$ (7,278)	$ (16,585)
Other comprehensive income (loss):
Foreign currency translation	11,537	10,480
Change in unrealized gains/losses from cash flow hedges:
Change in fair value of cash flow hedges, net of tax	(45)	(1,185)
Adjustment for net gains/losses realized and included in net income, net of tax	(185)	49
Total change in unrealized gains/losses realized from cash flow hedges, net of tax	(230)	(1,136)
Total other comprehensive income	11,307	9,344
Total comprehensive income (loss)	4,029	(7,241)
Noncontrolling interest in comprehensive income of consolidated VIE, net of tax	5,717	3,990
Comprehensive loss attributable to Cubic, net of tax	$ (1,688)	$ (11,231)

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2020	Sep. 30, 2020
Accounts receivable:
Billed	$ 98,116	$ 161,473
Allowance for doubtful accounts	(1,359)	(1,498)
Accounts receivable - net	96,757	159,975
Contract assets	288,256	268,773
Recoverable income taxes	17,707	17,434
Inventories	130,865	127,251
Total current assets	719,228	763,074
Property, plant and equipment, net	165,576	166,301
Operating lease right-of-use asset	84,646	87,167
Deferred income taxes	5,599	4,790
Goodwill	787,741	784,882
Purchased intangibles, net	194,467	210,361
Other assets	34,789	21,759
Total assets	2,299,598	2,324,221
Current liabilities:
Short-term borrowings	207,040	215,716
Contract liabilities	80,429	75,546
Accrued compensation and current liabilities	124,233	126,388
Income taxes payable	1,116	799
Current portion of long-term debt	11,250	11,250
Total current liabilities	530,601	586,786
Operating lease liability	78,616	80,568
Finance lease liability	10,386	395
Shareholders' equity:
Common stock	297,655	295,986
Retained earnings	837,477	850,472
Accumulated other comprehensive loss	(138,296)	(149,603)
Treasury stock at cost - 8,945 shares	(36,078)	(36,078)
Shareholders' equity related to Cubic	960,758	960,777
Noncontrolling interest in VIE	33,120	27,403
Total shareholders' equity	993,878	988,180
Total liabilities and shareholders' equity	2,299,598	2,324,221
Cubic Corporation Excluding VIE
Current assets:
Cash and cash equivalents	112,451	128,619
Restricted cash	29,610	25,478
Accounts receivable:
Other current assets	38,389	32,626
Long-term contracts financing receivables	65,738	64,642
Current liabilities:
Trade accounts payable	106,410	156,953
Long-term debt	428,143	430,115
Other noncurrent liabilities	67,648	68,939
VIE
Current assets:
Cash and cash equivalents	1,337	1,065
Restricted cash	3,822	1,822
Accounts receivable:
Other current assets	34	31
Long-term contracts financing receivables	241,814	221,245
Total assets	247,007	224,163
Current liabilities:
Trade accounts payable	23	49
Other current liabilities	100	85
Long-term debt	187,688	163,348
Other noncurrent liabilities	2,638	5,890
Shareholders' equity:
Shareholders' equity related to Cubic	764	129
Noncontrolling interest in VIE	33,120	27,403
Total liabilities and shareholders' equity	$ 247,007	$ 224,163

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares shares in Thousands	Dec. 31, 2020	Sep. 30, 2020
CONDENSED CONSOLIDATED BALANCE SHEETS
Treasury stock, shares	8,945	8,945

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Operating Activities:
Net loss	$ (7,278)	$ (16,585)
Net loss from discontinued operations		584
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	24,661	16,950
Share-based compensation expense	4,679	4,477
Change in fair value of contingent consideration	(576)	(3,005)
Deferred income taxes	(1,138)	993
Other items	3,611	4,295
Changes in operating assets and liabilities, net of effects from acquisitions	(42,877)	(50,934)
NET CASH USED IN OPERATING ACTIVITIES FROM CONTINUING OPERATIONS	(22,170)	(47,562)
NET CASH USED IN OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS		(44)
NET CASH USED IN OPERATING ACTIVITIES	(22,170)	(47,606)
Investing Activities:
Purchases of property, plant and equipment	(6,664)	(11,833)
Receipt of withheld proceeds from sale of trade receivables	1,842	5,521
NET CASH USED IN INVESTING ACTIVITIES	(4,822)	(6,312)
Financing Activities:
Proceeds from short-term borrowings	81,858	157,500
Principal payments on short-term borrowings	(90,690)	(126,500)
Principal payments on long-term borrowings	(1,972)
Principal payments on finance lease liability	(18)
Proceeds from stock issued under employee stock purchase plan		1,169
Purchase of common stock	(3,010)	(3,621)
NET CASH PROVIDED BY FINANCING ACTIVITIES	8,702	48,734
Effect of exchange rates on cash	8,526	4,021
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(9,764)	(1,163)
Cash, cash equivalents and restricted cash at the beginning of the period	156,984	95,621
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT THE END OF THE PERIOD	147,220	94,458
Supplemental disclosure of non-cash investing and financing activities:
Withheld proceeds from the sale of trade receivables to be received in fiscal 2021	640
VIE
Adjustments to reconcile net income to net cash used in operating activities:
Change in fair value of interest rate swap of consolidated VIE	(3,252)	(4,337)
Financing Activities:
Proceeds from long-term borrowings of consolidated VIE	$ 22,534	$ 20,186

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Common Stock	Retained Earnings Cumulative effect of accounting standard adoption	Retained Earnings	Accumulated Other Comprehensive Loss	Treasury Stock	Noncontrolling Interest in VIE	Total
Balance at Sep. 30, 2019	$ 274,472	$ (824)	$ 862,948	$ (139,693)	$ (36,078)	$ 18,919
Balance (in shares) at Sep. 30, 2019							31,178
Increase (Decrease) in Stockholders' Equity
Net income (loss)			(20,575)			3,990	$ (20,575)
Other comprehensive income, net of tax				9,344			$ 9,344
Stock issued under equity incentive plans (in shares)							149
Stock issued under employee stock purchase plans, value	1,169
Purchase of common stock, value	(3,621)
Purchase of common stock (in shares)							(53)
Share - based compensation	4,477
Balance at Dec. 31, 2019	276,497		841,549	(130,349)	(36,078)	22,909
Balance (in shares) at Dec. 31, 2019							31,274
Balance at Sep. 30, 2020	295,986		850,472	(149,603)	(36,078)	27,403	$ 988,180
Balance (in shares) at Sep. 30, 2020							31,329
Increase (Decrease) in Stockholders' Equity
Net income (loss)			(12,995)			5,717	$ (12,995)
Other comprehensive income, net of tax				11,307			$ 11,307
Stock issued under equity incentive plans (in shares)							547
Purchase of common stock, value	(3,010)
Purchase of common stock (in shares)							(66)
Share - based compensation	4,679
Balance at Dec. 31, 2020	$ 297,655		$ 837,477	$ (138,296)	$ (36,078)	$ 33,120	$ 993,878
Balance (in shares) at Dec. 31, 2020							31,810

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Basis for Presentation

3 Months Ended

Dec. 31, 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 quarter ended December 31, 2020 are not necessarily indicative of the results that may be expected for our fiscal year ending September 30, 2021 (“fiscal 2021”). 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, 2020 (“fiscal 2020”).

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.

As described in Note 14, we concluded that the combination of our legacy Cubic Mission Solutions (“CMS”) and our legacy Cubic Global Defense (“CGD”) segments into our new Cubic Mission and Performance Solutions (“CMPS”) segment resulted in CMPS becoming a single operating segment beginning on October 1, 2020. Applicable prior period amounts have been adjusted retrospectively to reflect the reportable segment change.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“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. We adopted ASU 2016-13 on October 1, 2020. The adoption of this standard did not have a material 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. We adopted ASU 2017-04 on October 1, 2020. The adoption of ASU 2017-04 did not have an impact on our consolidated financial statements and would only have the potential to impact the amount of goodwill impairment recorded in the event that goodwill is determined to be impaired in the future.

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. We adopted ASU 2018-13 on October 1, 2020. The adoption of this standard did not have an 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. We adopted ASU 2018-14 on October 1, 2020. The adoption of this standard did not 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. We adopted ASU 2018-15 on October 1, 2020. The adoption of this standard did not have a significant impact on our consolidated financial statements.

Recent Accounting Pronouncements – Not Yet Adopted

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

3 Months Ended

Dec. 31, 2020

Acquisitions and Divestitures

Acquisitions and Divestitures

Note 2 — Acquisitions and Divestitures

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 have been included in our consolidated financial statements since the respective date of each acquisition.

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. 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 began consolidating Pixia into our financial statements. The acquisition-date fair value of consideration transferred is $245.2 million and is comprised of cumulative 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 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		3.8
Deferred taxes		(17.6)
Other net assets acquired (liabilities assumed)		(1.8)
Net identifiable assets acquired		72.2
Goodwill		173.0
Net assets acquired	$	245.2

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 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 CMPS business and strengthening our capability of developing and integrating products in our CMPS 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 CMPS segment and is not expected to be deductible for tax purposes.

Delerrok Inc.

In fiscal 2018 and 2019 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. 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 $36.8 million, resulting in our ownership of all of Delerrok’s shares of common stock. Prior to January 3, 2020, we accounted for our investment in Delerrok using the cost method of accounting. We began consolidating Delerrok in our financial statements effective January 3, 2020. The acquisition-date fair value of consideration is $45.1 million and is comprised of total cash paid of $43.5 million plus the fair value of contingent consideration of $1.6 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	$	14.9
Trade name		0.9
Accounts receivable		0.9
Other net assets acquired (liabilities assumed)		(0.3)
Deferred tax liability		(1.7)
Net identifiable assets acquired		14.7
Goodwill		30.4
Net assets acquired	$	45.1

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 ten 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.

Operating Results

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

	Three Months Ended
	December 31, 2020
	Delerrok		Pixia
Sales	$	0.3	$	2.3
Operating loss		(1.1)		(8.0)
Net loss after taxes		(1.1)		(8.0)

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

	Three Months Ended
	December 31, 2020
	Delerrok		Pixia
Amortization	$	0.4	$	7.2
Acquisition-related expenses		0.4		0.5
Gain from changes in fair value of contingent consideration		(0.9)		—

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		Pixia
2021	$	1.7	$	28.7
2022		1.6		12.7
2023		1.6		7.3
2024		1.6		7.3
2025		1.6		7.3
Thereafter		6.4		3.2

Pro Forma Information

The following unaudited pro forma information presents our consolidated results of operations as if Pixia and Delerrok had been included in our consolidated results since October 1, 2019 (in millions):

	Three Months Ended
	December 31,
	2020		2019
Net sales	$	318.8	$	333.1
Net loss	$	(13.0)	$	(28.8)

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. 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, 2019, and it does not purport to project our future operating results.

Goodwill

Changes in goodwill for the three months ended December 31, 2020 were as follows for each of our reporting units (in thousands):

	Cubic Transportation		Cubic Mission
	Systems		Performance Solutions		Total
Net balances at October 1, 2020	$	287,668	$	497,214	$	784,882
Acquisitions		(260)		—		(260)
Foreign currency exchange rate changes		2,229		890		3,119
Net balances at December 31, 2020	$	289,637	$	498,104	$	787,741

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.

We complete our annual goodwill impairment test each year as of July 1 separately for each of our reporting units.

For our fiscal 2020 impairment test we concluded there was no impairment of goodwill and in the first quarter of fiscal 2021 we concluded that no circumstances were present that required an interim impairment test.

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Variable Interest Entities

3 Months Ended

Dec. 31, 2020

Variable Interest Entities

Variable Interest Entities

Note 3 – Variable Interest Entities

In accordance with Accounting Standards Codification (“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 they are 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, or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity.

We continually assess 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 that could potentially be significant to the VIE. We consider the VIE design, ownership and voting structure, contractual relationships, distribution of profits and losses, risks, responsibilities, and indebtedness in determining if we are the primary beneficiary.

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 created a 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. We have concluded that we are not the primary beneficiary of Boston HoldCo, and thus we have not consolidated the financial statements of Boston HoldCo. In June 2020, MBTA and Boston OpCo executed an amended agreement (the “Amended MBTA Contract”), which modified certain provisions of the Original MBTA Contract

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 December 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 at the

full service commencement date, fixed payments of $618.0 million during the full service 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 under the Amended MBTA Contract 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 totaling $26.2 million 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. Boston HoldCo is able to draw on this letter of credit in certain liquidity instances, but no amounts have been drawn through December 31, 2020.

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. Under the Boston OpCo Amended Credit Agreement, the long-term debt facilities allow for draws up to an aggregate of $421.6 million during the design and build phase of the Amended MBTA Contract. The long-term debt facilities, including all interest and fees incurred, are required to be repaid on a fixed monthly schedule commencing 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%. Boston OpCo incurred debt issuance and modification costs of $9.2 million during fiscal 2020 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. Unamortized deferred financing costs are netted against long-term debt and amounted to $17.0 million and $17.2 million at December 31, 2020 and September 30, 2020, respectively. 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.

Upon execution of the Boston OpCo Amended Credit Agreement, Boston OpCo terminated its existing interest rate swaps and paid termination costs of $34.4 million to the counterparties. Additionally, 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. Boston OpCo’s interest rate swaps were not designated as effective hedges, and as such unrealized gains (losses) are included in other income (expense), net. At December 31, 2020 and September 30, 2020, the outstanding notional principal amounts on open interest rate swaps were $215.0 million and $194.0 million, respectively. The fair value of Boston OpCo’s interest rate swaps were $2.6 million and $5.9 million at December 31, 2020 and September 30, 2020, respectively, and is recorded as a liability in other noncurrent liabilities in our condensed consolidated balance sheets. As a result of changes in the fair value of its interest rate swaps, Boston OpCo recognized gains of $3.3 million, and $4.3 million for the three months ended December 31, 2020 and 2019, respectively. See Note 7 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:

	December 31,		September 30,
	2020		2020
	(in thousands)
Cash	$	1,337	$	1,065
Restricted cash		3,822		1,822
Other current assets		34		31
Long-term contracts financing receivable		241,814		221,245
Total assets	$	247,007	$	224,163
Trade accounts payable	$	23	$	49
Accrued compensation and other current liabilities		100		85
Due to Cubic		22,674		27,259
Other noncurrent liabilities		2,638		5,890
Long-term debt		187,688		163,348
Total liabilities	$	213,123	$	196,631
Total Cubic equity		764		129
Noncontrolling interests		33,120		27,403
Total liabilities and owners' equity	$	247,007	$	224,163

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 $2.9 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
	December 31,
	2020		2019
Revenue	$	4,021	$	1,245
Operating income		3,717		972
Other income (expense), net		3,252		3,071
Interest income		1,373		1,553
Interest expense		(1,989)		(1,159)

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Revenue Recognition

3 Months Ended

Dec. 31, 2020

Revenue Recognition

Revenue Recognition

Note 4 — 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 amounts):

	Three Months Ended
	December 31,
	2020		2019
Operating income (loss)	$	1,338	$	(6,168)
Net income (loss) from continuing operations		1,059		(5,762)
Net income (loss) from continuing operations attributable to Cubic		970		(5,762)
Diluted income (loss) per share attributable to Cubic		0.03		(0.18)

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 December 31, 2020, our ending backlog was $3.681 billion, compared to $3.667 billion at September 30, 2020. We expect to recognize approximately 30% of our December 31, 2020 backlog over the next 12 months as revenue, and approximately 45% over the next 24 months, with the remainder recognized thereafter.

Accounts Receivable:

The components of accounts receivable are as follows (in thousands):

	December 31,		September 30,
	2020		2020
Accounts receivable
Billed	$	98,116	$	161,473
Allowance for doubtful accounts		(1,359)		(1,498)
Net accounts receivable	$	96,757	$	159,975

Amounts billed include $26.4 million and $82.2 million due on U.S. federal government contracts at December 31, 2020 and September 30, 2020, 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 December 31, 2020 and September 30, 2020, we sold $6.4 million and $18.4 million, respectively, of outstanding trade receivables to financial institutions. During the three months ended December 31, 2020, we received $1.8 million related to withheld proceeds from receivables we sold as of September 30, 2020, 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):

	December 31,		September 30,
	2020		2020
Contract assets	$	288,256	$	268,773
Contract liabilities	$	80,429	$	75,546

Contract assets increased $19.5 million during the three months ended December 31, 2020, due to revenue recognized in excess of billings related to the satisfaction or partial satisfaction of performance obligations. There were no significant impairment losses related to our contract assets during the three months ended December 31, 2020.

Contract liabilities increased $4.9 million during the three months ended December 31, 2020, due to payments received in excess of revenue recognized on these performance obligations. During the three months ended December 31, 2020, we recognized $26.7 million of our contract liabilities at September 30, 2020 as revenue. We expect our contract liabilities to be recognized as revenue over the next 24 months.

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Net Income (Loss) Per Share

3 Months Ended

Dec. 31, 2020

Net Income (Loss) Per Share

Net Income (Loss) Per Share

Note 5 — 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 share price for each fiscal period using the treasury stock method. 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.

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
	December 31,
	2020		2019
Weighted average shares - basic		31,562		31,273
Effect of dilutive securities		—		—
Weighted average shares - diluted		31,562		31,273
Number of anti-dilutive securities		1,226		1,112

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Balance Sheet Details

3 Months Ended

Dec. 31, 2020

Balance Sheet Details

Balance Sheet Details

Note 6 — Balance Sheet Details

Restricted Cash

Cash and cash equivalents excluded $33.4 million and $27.3 million of restricted cash at December 31, 2020 and

September 30, 2020, 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):

	December 31,		September 30,
	2020		2020
Finished products	$	18,503	$	14,838
Work in process and inventoried costs under long-term contracts		69,347		73,076
Materials and purchased parts		43,015		39,337
Net inventories	$	130,865	$	127,251

At December 31, 2020, work in process and inventoried costs under long-term contracts included approximately $6.6 million in costs incurred outside the scope of work or in advance of a contract award compared to $5.3 million at September 30, 2020. We believe it is probable that we will recover the costs inventoried at December 31, 2020, plus a profit margin, under contract change orders or awards within the next year.

Property, Plant and Equipment

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

	December 31,		September 30,
	2020		2020
Land and land improvements	$	7,200	$	7,423
Buildings and improvements		50,166		49,716
Machinery and other equipment		145,176		132,962
Software		124,753		121,890
Leasehold improvements		23,381		22,295
Construction and internal-use software development in progress		13,853		21,409
Accumulated depreciation and amortization		(198,953)		(189,394)
	$	165,576	$	166,301

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 $10.1 million at December 31, 2020 and $9.6 million at September 30, 2020.

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 $7.2 million at December 31, 2020 and $6.8 million at September 30, 2020 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

3 Months Ended

Dec. 31, 2020

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Note 7 — 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):

	December 31, 2020								September 30, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Current derivative assets	$	—	$	1,443	$	—	$	1,443	$	—	$	1,398	$	—	$	1,398
Noncurrent derivative assets		—		770		—		770		—		222		—		222
Total assets measured at fair value	$	—	$	2,213	$	—	$	2,213	$	—	$	1,620	$	—	$	1,620
Liabilities
Current derivative liabilities		—		6,055		—		6,055		—		4,557		—		4,557
Noncurrent derivative liabilities		—		14,013		—		14,013		—		14,070		—		14,070
Contingent consideration to seller of H4 Global		—		—		1,296		1,296		—		—		1,148		1,148
Contingent consideration to seller of Deltenna		—		—		3,180		3,180		—		—		3,004		3,004
Contingent consideration to seller of Shield		—		—		5,566		5,566		—		—		5,566		5,566
Contingent consideration to seller of Delerrok		—		—		—		—		—		—		900		900
Total liabilities measured at fair value	$	—	$	20,068	$	10,042	$	30,110	$	—	$	18,627	$	10,618	$	29,245

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 December 31, 2020, we have the following remaining contingent consideration arrangements with the sellers of companies which we acquired:

H4 Global: A payment of $1.3 million was made in January 2021 based on a percentage of the value of H4 contracts entered into from October 1, 2015 through September 30, 2020.

Deltenna: Payments of up to $7.4 million if Deltenna meets certain sales goals from the date of acquisition 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 52% as of December 31, 2020 and September 30, 2020. The selected discount rate was 10.5% as of December 31, 2020 and September 30, 2020.

Shield: Payments of up to $10.0 million if Shield meets certain sales goals from the date of acquisition 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 December 31, 2020 and September 30, 2020 were 31% and 16%, respectively. The selected discount rate was based primarily on an analysis of publicly traded comparable companies and was 5.7% at December 31, 2020 and September 30, 2020.

Nuvotronics: Payments of up to $8.0 million if Nuvotronics meets certain gross profit goals for the 12-month periods 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 December 31, 2020, the fair value of the Nuvotronics contingent consideration was determined to be zero as its forecasted gross profit amounts were below the payout thresholds.

Delerrok: As of December 31, 2020, the value of the Delerrok contingent consideration was determined to be zero as its sales amount were below the payout threshold for the measurement period that lapsed on December 31, 2020.

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 December 31, 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, 2020	$	1,148	$	3,004	$	5,566	$	—	$	900	$	10,618
Total remeasurement (gain) loss recognized in earnings		148		176		—		—		(900)		(576)
Balance as of December 31, 2020	$	1,296	$	3,180	$	5,566	$	—	$	—	$	10,042

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 December 31, 2020.

In fiscal 2019 and 2020, we invested $5.0 million and $1.2 million, respectively, 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 funds operating loss was $0.1 million for the three-months ended December 31, 2020, and is 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-months ended December 31, 2019. Our investment balance is included within other assets in our Condensed Consolidated Statements of Operations and amounted to $5.5 million and $5.6 million as of December 31, 2020 and September 30, 2020, respectively.

We did not have any significant non-financial assets or liabilities measured at fair value on a non-recurring basis in the first quarter of fiscal 2021 or fiscal 2020 other than assets and liabilities acquired in business acquisitions described in Note 2 and the RSUs that contain performance and market-based vesting criteria described in Note 11.

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Financing Arrangements

3 Months Ended

Dec. 31, 2020

Financing Arrangements

Financing Arrangements

Note 8 — Financing Arrangements

On March 27, 2020, we 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 December 31, 2020, the weighted average interest rate on outstanding borrowings under the Credit Facility was 1.95%. The Credit Facility is unsecured, but it is guaranteed by certain significant domestic subsidiaries of Cubic.

On April 1, 2020, we entered into 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 as of December 31, 2020 have an interest rate of approximately 2.49% and outstanding notional principal amounts of $500.0 million. See Note 7 for a description of the measurement of fair value of our derivative financial instruments.

Debt issuance and modification costs of $3.4 million were incurred in connection with the execution of the Credit Facility and are classified 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 December 31, 2020, our total debt issuance costs for our Term Loan and Revolving Line of Credit had an unamortized balance of $5.2 million.

The available credit under our Revolving Line of Credit is reduced by any letters of credit issued under the Credit Facility. As of December 31, 2020, there were $441.6 million of borrowings under the Term Loan and $207.0 million of borrowings under the Revolving Line of Credit. Letters of credit outstanding under the Credit Facility totaled $94.6 million at December 31, 2020, which reduced our available line of credit to $548.4 million. The $94.6 million of letters of credit includes both financial letters of credit and performance guarantees.

As of December 31, 2020, we had letters of credit and bank guarantees outstanding totaling $101.2 million, which includes the $94.6 million of letters of credit issued under the Revolving Line of Credit and $6.6 million of letters of credit issued under other facilities. The $101.2 million of letters of credit and bank guarantees includes $97.5 million that guarantees either our performance or customer advances under certain contracts and $3.7 million of financial letters of credit 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 also use surety bonds as an alternative to letters of credit.

We have entered into a short-term borrowing arrangement in the United Kingdom for up to £15.0 million British Pounds (equivalent to approximately $20.5 million at December 31, 2020) to help meet the short-term working capital requirements of our subsidiary located in the United Kingdom. At December 31, 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 December 31, 2020 was $29.6 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 December 31, 2020, we were in compliance with all covenants under the Credit Facility.

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 $5.1 million at December 31, 2020 and September 30, 2020.

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Leases

3 Months Ended

Dec. 31, 2020

Leases

Leases

Note 9 — Leases

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 and financing leases expire at various dates through 2032 and 2025, respectively, 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 and our right-of-use assets for financing leases are included in other assets on our Condensed Consolidated Balance Sheets. Our lease liabilities for operating and financing leases are included in other current liabilities for the current portion and separately in operating and financing 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. Our finance lease expense consists of amortization of the right-of-use asset and interest expense. Amortization expense is recognized on a straight-line basis over the lease term and is included in cost of sales and selling, general and administrative expenses in our consolidated statement of operations. Interest expense is calculated using the effective interest method and is included in interest expense in our consolidated statement of operations. We also sublease certain immaterial properties and sublease income is included as a reduction of rental expense.

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

Operating Lease Portfolio

	December 31,		September 30,
	2020		2020
Right-of-use assets	$	84.6	$	87.2
Short-term lease liability		15.7		16.8
Long-term lease liability		78.6		80.6
Weighted average remaining lease term		7.4 years		7.6 years
Weighted average discount rate		3.0%		3.0%

Finance Lease Portfolio

	December 31,		September 30,
	2020		2020
Right-of-use assets	$	13.2	$	0.5
Short-term lease liability		2.8		0.2
Long-term lease liability		10.4		0.4
Weighted average remaining lease term		4.9 years		2.4 years
Weighted average discount rate		1.75%		1.7%

Lease Expense

	Three Months Ended
	December 31,
	2020		2019
Lease Expense
Operating lease expense	$	4.9	$	4.6
Finance lease expense
Amortization of right-of-use asset		0.1		—
Interest on lease liabilities		—		—
Short-term lease expense		—		0.4
Variable lease expense		0.9		1.1
Total lease expense	$	5.9	$	6.1

Other Information

	Three Months Ended
	December 31,
	2020		2019
Cash paid related to lease liabilities
Finance lease - cash paid for interest	$	—	$	—
Operating lease - cash paid for fixed payments		4.8		4.5
Finance lease - cash paid for finance lease liabilities		—		—
Right-of-use assets obtained in exchange for new finance lease liabilities		12.6		—
Right-of-use assets obtained in exchange for new operating lease liabilities		0.2		9.6

Maturities of Lease Liabilities

Our future minimum lease commitments of our operating and finance leases on an undiscounted basis, reconciled to the lease liability at December 31, 2020 were as follows (in millions):

	Financing		Operating
2021	$	2.9	$	12.8
2022		2.9		16.3
2023		2.7		14.2
2024		2.7		13.4
2025		2.6		11.1
Thereafter		—		37.9
Total lease payments		13.8		105.7
Less: imputed interest		(0.6)		(11.4)
Present value of lease liabilities	$	13.2	$	94.3

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, a financial institution owns the buildings and we acted as the construction agent. We began leasing the real property for a term of five years upon the completion of the buildings in December 2020, which is reflected in our finance lease right-of-use assets and finance lease liabilities presented above. 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 December 31, 2020, we were in compliance with all covenants included in these agreements.

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Pension Plans

3 Months Ended

Dec. 31, 2020

Pension Plans

Pension Plans

Note 10 — Pension Plans

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

	Three Months Ended
	December 31,
	2020		2019
Service cost	$	158	$	165
Interest cost		1,333		1,531
Expected return on plan assets		(2,649)		(2,946)
Amortization of actuarial loss		1,140		1,001
Administrative expenses		89		86
Net pension cost (benefit)	$	71	$	(163)

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Stockholders' Equity

3 Months Ended

Dec. 31, 2020

Stockholders' Equity

Stockholders' Equity

Note 11 - 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. Participants receive the full benefit of the underlying common stock upon vesting.

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 and 2021 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.

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 and 2021, 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.

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, 2020 and 2021:

	RSUs granted during fiscal 2021
Valuation Date	November 17, 2020
Grant date fair value per RSU	$57.71
Performance period begins	October 1, 2020
Performance period ends	September 30, 2023
Risk-free interest rate	0.2%
Expected volatility	50%
	RSUs granted during fiscal 2020
Valuation Date	September 17, 2020
Grant date fair value per RSU	$41.13
Performance period begins	October 1, 2019
Performance period ends	September 30, 2022
Risk-free interest rate	0.1%
Expected volatility	52%

At December 31, 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 456,011 RSUs with time-based vesting, and 400,878 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, 2020	554,423	$	58.54
Granted	234,899		60.99
Vested	(226,934)		58.34
Forfeited	(11,147)		59.85
Unvested at December 31, 2020	551,241	$	59.64

	Unvested RSUs with Performance-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2020	137,770	$	61.40
Granted	—		—
Vested	(110,247)		61.40
Forfeited	(27,523)		61.40
Unvested at December 31, 2020	—	$	—

	Unvested RSUs with Performance- and Market-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2020	471,496	$	51.56
Granted	277,250		57.71
Vested	—		—
Forfeited	(11,690)		50.77
Unvested at December 31, 2020	737,056	$	53.88

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

	Three Months Ended
	December 31,
	2020		2019
Cost of sales	$	601	$	539
Selling, general and administrative		4,078		3,938
	$	4,679	$	4,477

As of December 31, 2020, there was $59.3 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 $50.8 million, which is expected to be recognized over a weighted average period of 1.4 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 2020 and fiscal 2021. 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

3 Months Ended

Dec. 31, 2020

Income Taxes

Income Taxes

Note 12 – Income Taxes

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 December 31, 2020, we concluded it is more appropriate to determine income tax expense for the period using a blend of the discrete effective tax rate method for U.S. operations and the estimated annual effective tax rate method for foreign operations.

The income tax expense recognized on the pre-tax loss from continuing operations for the three months ended December 31, 2020 resulted in tax expense of $3.5 million, or negative 92% effective tax rate, as compared to tax expense of $6.2 million, or negative 64% effective tax rate, for the three month ended December 31, 2019. The variability in tax expense and effective tax rates relates to the difference in jurisdictional mix of earnings and discrete impacts related to current year changes to the existing U.S. deferred tax valuation allowance.

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Derivative Instruments and Hedging Activities

3 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

Note 13 — 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.

The following table shows the notional principal amounts of our outstanding derivative instruments as of December 31, 2020 and September 30, 2020 (in thousands):

	Notional Principal
	December 31, 2020		September 30, 2020
Instruments receiving hedge accounting treatment:
Foreign currency forwards	$	118,922	$	92,931
Interest rate swaps		595,000		595,000
Instruments not receiving hedge accounting treatment:
Foreign currency forwards	$	4,842	$	4,298

Included in the amounts not receiving hedge accounting treatment at December 31, 2020 and September 30, 2020 were foreign currency forwards with notional principal amounts of $4.8 million and $4.3 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 $0.8 million for both of the three months ended December 31, 2020 and 2019. Unrealized gains or losses are included in other income (expense), net in our condensed consolidated statements of operations.

We hold pay-fixed/receive-variable interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with the lease obligations for our two new buildings located on our existing corporate campus. At December 31, 2020 and September 30, 2020, the outstanding notional principal amounts on these interest rate swaps were $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). As a result of changes in the fair value of the interest rate swaps, unrealized gains were $0.1 million and unrealized losses were $1.4 million for the three months ended December 31, 2020, and 2019, respectively.

In April 2020, we entered into interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with the Credit Facility. At December 31, 2020 and September 30, 2020, the interest rate swaps contain outstanding notional principal amounts of $500.0 million and were designated as effective cash flow hedges, and as such, unrealized gains (losses) are included in accumulated other comprehensive income (loss). Unrealized gains as a result of changes in the fair value of the interest rate swaps were $1.0 million for the three months ended December 31, 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 as of December 31, 2020 and September 30, 2020. 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 December 31, 2020 or September 30, 2020.

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	December 31, 2020		September 30, 2020
Asset derivatives:
Foreign currency forwards	Other current assets	$	1,443	$	1,398
Foreign currency forwards	Other assets		770		222
Total		$	2,213	$	1,620
Liability derivatives:
Foreign currency forwards	Accrued compensation and current liabilities	$	6,055	$	4,557
Foreign currency forwards	Other noncurrent liabilities		1,968		866
Interest rate swaps	Other noncurrent liabilities		12,045		13,204
Total		$	20,068	$	18,627

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
	December 31, 2020				December 31, 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	$	(1,100)	$	255	$	(1,583)	$	(66)
Interest rate swaps		1,159		—		—		—
Total	$	59	$	255	$	(1,583)	$	(66)

Foreign currency forwards designated as accounting hedges had realized gains of $0.2 million for the three-months ended December 31, 2020. The amount of realized gains were immaterial for the three-months ended December 31, 2019.

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-months ended December 31, 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 twelve months is $3.3 million, net of income taxes.

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Segment Information

3 Months Ended

Dec. 31, 2020

Segment Information

Segment Information

Note 14 — 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. In August 2020, we implemented a plan to realign and combine our legacy CMS and CGD segments into our new CMPS segment. At September 30, 2020, we concluded that CMS and CGD remained separate operating segments based upon factors including the nature of information presented to our chief executive officer and Board of Directors and the consequential level at which certain resource allocations and performance assessments were made. In the first quarter of fiscal 2021, we began providing financial information to our chief executive officer and Board of Directors at the CMPS level, which allowed resource allocation decisions and performance assessments to be made at that level. As such, we concluded that CMPS became an operating segment beginning on October 1, 2020. Applicable prior period amounts have been adjusted retrospectively to reflect the reportable segment change.

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.

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

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

	Three Months Ended
	December 31,
	2020		2019
Sales:
Cubic Transportation Systems	$	197.1	$	188.6
Cubic Mission and Performance Solutions		121.7		140.2
Total sales	$	318.8	$	328.8
Operating income (loss):
Cubic Transportation Systems	$	31.7	$	14.3
Cubic Mission and Performance Solutions		(16.5)		(8.6)
Unallocated corporate expenses		(13.9)		(12.2)
Total operating income (loss)	$	1.3	$	(6.5)
Depreciation and amortization:
Cubic Transportation Systems	$	7.5	$	7.1
Cubic Mission and Performance Solutions		15.1		9.2
Corporate		2.1		0.7
Total depreciation and amortization	$	24.7	$	17.0

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 December 31, 2020
	CTS		CMPS		Total
United States	$	111.9	$	80.3	$	192.2
United Kingdom		47.9		8.0		55.9
Australia		29.1		9.6		38.7
Far East/Middle East		1.0		15.8		16.8
Other		7.2		8.0		15.2
Total sales	$	197.1	$	121.7	$	318.8
	Three months ended December 31, 2019
	CTS		CMPS		Total
United States	$	96.7	$	79.0	$	175.7
United Kingdom		47.6		4.5		52.1
Australia		36.4		7.8		44.2
Far East/Middle East		1.3		36.7		38.0
Other		6.6		12.2		18.8
Total sales	$	188.6	$	140.2	$	328.8

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 December 31, 2020
	CTS		CMPS		Total
U.S. Federal Government and State and Local Municipalities	$	107.6	$	79.3	$	186.9
Other		89.5		42.4		131.9
Total sales	$	197.1	$	121.7	$	318.8
	Three months ended December 31, 2019
	CTS		CMPS		Total
U.S. Federal Government and State and Local Municipalities	$	93.5	$	82.0	$	175.5
Other		95.1		58.2		153.3
Total sales	$	188.6	$	140.2	$	328.8

Sales by Contract Type: The vast majority 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 December 31, 2020
	CTS		CMPS		Total
Fixed Price	$	194.4	$	101.8	$	296.2
Other		2.7		19.9		22.6
Total sales	$	197.1	$	121.7	$	318.8
	Three months ended December 31, 2019
	CTS		CMPS		Total
Fixed Price	$	184.5	$	124.8	$	309.3
Other		4.1		15.4		19.5
Total sales	$	188.6	$	140.2	$	328.8

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 December 31, 2020
	CTS		CMPS		Total
Product	$	100.1	$	81.4	$	181.5
Service		97.0		40.3		137.3
Total sales	$	197.1	$	121.7	$	318.8
	Three months ended December 31, 2019
	CTS		CMPS		Total
Product	$	93.4	$	107.2	$	200.6
Service		95.2		33.0		128.2
Total sales	$	188.6	$	140.2	$	328.8

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 December 31, 2020
	CTS		CMPS		Total
Point in Time	$	18.8	$	25.0	$	43.8
Over Time		178.3		96.7		275.0
Total sales	$	197.1	$	121.7	$	318.8
	Three months ended December 31, 2019
	CTS		CMPS		Total
Point in Time	$	17.7	$	39.3	$	57.0
Over Time		170.9		100.9		271.8
Total sales	$	188.6	$	140.2	$	328.8

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Restructuring Costs

3 Months Ended

Dec. 31, 2020

Restructuring Costs

Restructuring Costs

Note 15 — Restructuring Costs

In the fourth quarter of fiscal 2020, we announced our NextCUBIC transformation to restructure the way we work and operate as a business. Part of this initiative included establishing a Transformation Office and appointing a Chief Transformation Officer to identify, vet, plan and implement improvement initiatives across Cubic. Coinciding with this initiative, we also announced the combination of CGD and CMS into CMPS. This combination will help us optimize customer access and presence, leverage key enablers across the combined businesses and realize untapped cross-segment technical synergies to capture organizational efficiencies. The significant portion 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. Other restructuring charges related to headcount reductions initiated to optimize our cost positions. Our NextCUBIC transformation initiatives will continue through fiscal 2021, and our consulting fees that will be incurred in the future are generally contingent upon the achievement of future cost savings, the total expected restructuring costs related to these initiatives cannot currently be estimated.

In the first quarter of fiscal 2021, CMPS also incurred costs related to modifying its go-to market and legal structure in the Middle East. The total cost of these efforts is not expected to be significantly greater than those incurred through December 31, 2020.

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

	Three Months Ended
	December 31,
	2020		2019
Restructuring costs:
Cubic Transportation Systems	$	0.2		0.4
Cubic Mission and Performance Solutions		3.1		0.1
Unallocated corporate expenses		0.8		1.1
Total restructuring costs	$	4.1	$	1.6

The following table presents a rollforward of our restructuring liability as of December 31, 2020, which is included within accrued compensation and other current liabilities within our condensed consolidated balance sheet (in millions):

	Restructuring Liability		Restructuring Liability
	Employee Separation and Other		Consulting Costs
Balance as of October 1, 2020	$	5.2	$	0.8
Accrued costs		4.1		—
Cash payments		(5.2)		(0.8)
Balance as of December 31, 2020	$	4.1	$	—

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

3 Months Ended

Dec. 31, 2020

Legal Matters

Legal Matters

Note 16 — 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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Subsequent Event

3 Months Ended

Dec. 31, 2020

Subsequent Events

Subsequent Events

Note 17 — Subsequent Event – Agreement and Plan of Merger

On February 7, 2021, we executed an Agreement and Plan of Merger by and among the Company, Atlas CC Acquisition Corp. and Atlas Merger Sub Inc., pursuant to which the Company will be acquired by Veritas Capital and Evergreen Coast Capital Corporation at a price of $70.00 per outstanding share of common stock of the Company in an all-cash transaction. The transaction is expected to close during the third quarter of fiscal 2021, subject to customary closing conditions, including the receipt of shareholder and regulatory approvals.

There can be no assurance that the transaction will close in the timeframe contemplated or on the terms anticipated, if at all.

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Basis for Presentation (Policies)

3 Months Ended

Dec. 31, 2020

Basis for Presentation

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“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. We adopted ASU 2016-13 on October 1, 2020. The adoption of this standard did not have a material 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. We adopted ASU 2017-04 on October 1, 2020. The adoption of ASU 2017-04 did not have an impact on our consolidated financial statements and would only have the potential to impact the amount of goodwill impairment recorded in the event that goodwill is determined to be impaired in the future.

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. We adopted ASU 2018-13 on October 1, 2020. The adoption of this standard did not have an 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. We adopted ASU 2018-14 on October 1, 2020. The adoption of this standard did not 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. We adopted ASU 2018-15 on October 1, 2020. The adoption of this standard did not have a significant impact on our consolidated financial statements.

Recent Accounting Pronouncements – Not Yet Adopted

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)

3 Months Ended

Dec. 31, 2020

Acquisitions and Divestitures

Schedule of Business Combination Operating Results

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

	Three Months Ended
	December 31, 2020
	Delerrok		Pixia
Sales	$	0.3	$	2.3
Operating loss		(1.1)		(8.0)
Net loss after taxes		(1.1)		(8.0)

Schedule of Business Combination components of operating results

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

	Three Months Ended
	December 31, 2020
	Delerrok		Pixia
Amortization	$	0.4	$	7.2
Acquisition-related expenses		0.4		0.5
Gain from changes in fair value of contingent consideration		(0.9)		—

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		Pixia
2021	$	1.7	$	28.7
2022		1.6		12.7
2023		1.6		7.3
2024		1.6		7.3
2025		1.6		7.3
Thereafter		6.4		3.2

Schedule of unaudited pro forma information

The following unaudited pro forma information presents our consolidated results of operations as if Pixia and Delerrok had been included in our consolidated results since October 1, 2019 (in millions):

	Three Months Ended
	December 31,
	2020		2019
Net sales	$	318.8	$	333.1
Net loss	$	(13.0)	$	(28.8)

Schedule of changes in the carrying amount of goodwill

Changes in goodwill for the three months ended December 31, 2020 were as follows for each of our reporting units (in thousands):

	Cubic Transportation		Cubic Mission
	Systems		Performance Solutions		Total
Net balances at October 1, 2020	$	287,668	$	497,214	$	784,882
Acquisitions		(260)		—		(260)
Foreign currency exchange rate changes		2,229		890		3,119
Net balances at December 31, 2020	$	289,637	$	498,104	$	787,741

PIXIA Corp

Acquisitions and Divestitures

Schedule of estimated fair values of the assets acquired and liabilities assumed at the acquisition date

The following table summarizes the 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		3.8
Deferred taxes		(17.6)
Other net assets acquired (liabilities assumed)		(1.8)
Net identifiable assets acquired		72.2
Goodwill		173.0
Net assets acquired	$	245.2

Delerrok Inc.

Acquisitions and Divestitures

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	$	14.9
Trade name		0.9
Accounts receivable		0.9
Other net assets acquired (liabilities assumed)		(0.3)
Deferred tax liability		(1.7)
Net identifiable assets acquired		14.7
Goodwill		30.4
Net assets acquired	$	45.1

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Variable Interest Entities (Tables)

3 Months Ended

Dec. 31, 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:

	December 31,		September 30,
	2020		2020
	(in thousands)
Cash	$	1,337	$	1,065
Restricted cash		3,822		1,822
Other current assets		34		31
Long-term contracts financing receivable		241,814		221,245
Total assets	$	247,007	$	224,163
Trade accounts payable	$	23	$	49
Accrued compensation and other current liabilities		100		85
Due to Cubic		22,674		27,259
Other noncurrent liabilities		2,638		5,890
Long-term debt		187,688		163,348
Total liabilities	$	213,123	$	196,631
Total Cubic equity		764		129
Noncontrolling interests		33,120		27,403
Total liabilities and owners' equity	$	247,007	$	224,163

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
	December 31,
	2020		2019
Revenue	$	4,021	$	1,245
Operating income		3,717		972
Other income (expense), net		3,252		3,071
Interest income		1,373		1,553
Interest expense		(1,989)		(1,159)

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Revenue Recognition (Tables)

3 Months Ended

Dec. 31, 2020

Schedule of components of accounts receivable

The components of accounts receivable are as follows (in thousands):

	December 31,		September 30,
	2020		2020
Accounts receivable
Billed	$	98,116	$	161,473
Allowance for doubtful accounts		(1,359)		(1,498)
Net accounts receivable	$	96,757	$	159,975

Schedule of contract assets and liabilities

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

	December 31,		September 30,
	2020		2020
Contract assets	$	288,256	$	268,773
Contract liabilities	$	80,429	$	75,546

ASU 2014-09

Schedule of aggregate impact of net changes in contract estimates

The aggregate impact of net changes in contract estimates are presented in the table below (amounts in thousands, except per share amounts):

	Three Months Ended
	December 31,
	2020		2019
Operating income (loss)	$	1,338	$	(6,168)
Net income (loss) from continuing operations		1,059		(5,762)
Net income (loss) from continuing operations attributable to Cubic		970		(5,762)
Diluted income (loss) per share attributable to Cubic		0.03		(0.18)

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Net Income (Loss) Per Share (Tables)

3 Months Ended

Dec. 31, 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
	December 31,
	2020		2019
Weighted average shares - basic		31,562		31,273
Effect of dilutive securities		—		—
Weighted average shares - diluted		31,562		31,273
Number of anti-dilutive securities		1,226		1,112

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Balance Sheet Details (Tables)

3 Months Ended

Dec. 31, 2020

Balance Sheet Details

Components of inventories

Inventories consist of the following (in thousands):

	December 31,		September 30,
	2020		2020
Finished products	$	18,503	$	14,838
Work in process and inventoried costs under long-term contracts		69,347		73,076
Materials and purchased parts		43,015		39,337
Net inventories	$	130,865	$	127,251

Components of property, plant and equipment

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

	December 31,		September 30,
	2020		2020
Land and land improvements	$	7,200	$	7,423
Buildings and improvements		50,166		49,716
Machinery and other equipment		145,176		132,962
Software		124,753		121,890
Leasehold improvements		23,381		22,295
Construction and internal-use software development in progress		13,853		21,409
Accumulated depreciation and amortization		(198,953)		(189,394)
	$	165,576	$	166,301

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Fair Value Of Financial Instruments (Tables)

3 Months Ended

Dec. 31, 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):

	December 31, 2020								September 30, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Current derivative assets	$	—	$	1,443	$	—	$	1,443	$	—	$	1,398	$	—	$	1,398
Noncurrent derivative assets		—		770		—		770		—		222		—		222
Total assets measured at fair value	$	—	$	2,213	$	—	$	2,213	$	—	$	1,620	$	—	$	1,620
Liabilities
Current derivative liabilities		—		6,055		—		6,055		—		4,557		—		4,557
Noncurrent derivative liabilities		—		14,013		—		14,013		—		14,070		—		14,070
Contingent consideration to seller of H4 Global		—		—		1,296		1,296		—		—		1,148		1,148
Contingent consideration to seller of Deltenna		—		—		3,180		3,180		—		—		3,004		3,004
Contingent consideration to seller of Shield		—		—		5,566		5,566		—		—		5,566		5,566
Contingent consideration to seller of Delerrok		—		—		—		—		—		—		900		900
Total liabilities measured at fair value	$	—	$	20,068	$	10,042	$	30,110	$	—	$	18,627	$	10,618	$	29,245

Summary of change in fair value of contingent consideration liability

As of December 31, 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, 2020	$	1,148	$	3,004	$	5,566	$	—	$	900	$	10,618
Total remeasurement (gain) loss recognized in earnings		148		176		—		—		(900)		(576)
Balance as of December 31, 2020	$	1,296	$	3,180	$	5,566	$	—	$	—	$	10,042

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Leases (Tables)

3 Months Ended

Dec. 31, 2020

Leases

Schedule of Operating Lease Portfolio

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

Operating Lease Portfolio

	December 31,		September 30,
	2020		2020
Right-of-use assets	$	84.6	$	87.2
Short-term lease liability		15.7		16.8
Long-term lease liability		78.6		80.6
Weighted average remaining lease term		7.4 years		7.6 years
Weighted average discount rate		3.0%		3.0%

Finance Lease Portfolio

	December 31,		September 30,
	2020		2020
Right-of-use assets	$	13.2	$	0.5
Short-term lease liability		2.8		0.2
Long-term lease liability		10.4		0.4
Weighted average remaining lease term		4.9 years		2.4 years
Weighted average discount rate		1.75%		1.7%

Schedule of operating Expense and Other Information

Lease Expense

	Three Months Ended
	December 31,
	2020		2019
Lease Expense
Operating lease expense	$	4.9	$	4.6
Finance lease expense
Amortization of right-of-use asset		0.1		—
Interest on lease liabilities		—		—
Short-term lease expense		—		0.4
Variable lease expense		0.9		1.1
Total lease expense	$	5.9	$	6.1

Other Information

	Three Months Ended
	December 31,
	2020		2019
Cash paid related to lease liabilities
Finance lease - cash paid for interest	$	—	$	—
Operating lease - cash paid for fixed payments		4.8		4.5
Finance lease - cash paid for finance lease liabilities		—		—
Right-of-use assets obtained in exchange for new finance lease liabilities		12.6		—
Right-of-use assets obtained in exchange for new operating lease liabilities		0.2		9.6

Schedule of Maturities of Lease Liabilities

Our future minimum lease commitments of our operating and finance leases on an undiscounted basis, reconciled to the lease liability at December 31, 2020 were as follows (in millions):

	Financing		Operating
2021	$	2.9	$	12.8
2022		2.9		16.3
2023		2.7		14.2
2024		2.7		13.4
2025		2.6		11.1
Thereafter		—		37.9
Total lease payments		13.8		105.7
Less: imputed interest		(0.6)		(11.4)
Present value of lease liabilities	$	13.2	$	94.3

Finance Lease, Liability, Fiscal Year Maturity [Table Text Block]

	Financing		Operating
2021	$	2.9	$	12.8
2022		2.9		16.3
2023		2.7		14.2
2024		2.7		13.4
2025		2.6		11.1
Thereafter		—		37.9
Total lease payments		13.8		105.7
Less: imputed interest		(0.6)		(11.4)
Present value of lease liabilities	$	13.2	$	94.3

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Pension Plans (Tables)

3 Months Ended

Dec. 31, 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
	December 31,
	2020		2019
Service cost	$	158	$	165
Interest cost		1,333		1,531
Expected return on plan assets		(2,649)		(2,946)
Amortization of actuarial loss		1,140		1,001
Administrative expenses		89		86
Net pension cost (benefit)	$	71	$	(163)

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Stockholders' Equity (Tables)

3 Months Ended

Dec. 31, 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, 2020 and 2021:

	RSUs granted during fiscal 2021
Valuation Date	November 17, 2020
Grant date fair value per RSU	$57.71
Performance period begins	October 1, 2020
Performance period ends	September 30, 2023
Risk-free interest rate	0.2%
Expected volatility	50%
	RSUs granted during fiscal 2020
Valuation Date	September 17, 2020
Grant date fair value per RSU	$41.13
Performance period begins	October 1, 2019
Performance period ends	September 30, 2022
Risk-free interest rate	0.1%
Expected volatility	52%

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, 2020	554,423	$	58.54
Granted	234,899		60.99
Vested	(226,934)		58.34
Forfeited	(11,147)		59.85
Unvested at December 31, 2020	551,241	$	59.64

	Unvested RSUs with Performance-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2020	137,770	$	61.40
Granted	—		—
Vested	(110,247)		61.40
Forfeited	(27,523)		61.40
Unvested at December 31, 2020	—	$	—

	Unvested RSUs with Performance- and Market-Based Vesting
		Weighted Average
	Number of Shares	Grant-Date Fair Value per Share
Unvested at September 30, 2020	471,496	$	51.56
Granted	277,250		57.71
Vested	—		—
Forfeited	(11,690)		50.77
Unvested at December 31, 2020	737,056	$	53.88

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
	December 31,
	2020		2019
Cost of sales	$	601	$	539
Selling, general and administrative		4,078		3,938
	$	4,679	$	4,477

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Derivative Instruments and Hedging Activities (Tables)

3 Months Ended

Dec. 31, 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 December 31, 2020 and September 30, 2020 (in thousands):

	Notional Principal
	December 31, 2020		September 30, 2020
Instruments receiving hedge accounting treatment:
Foreign currency forwards	$	118,922	$	92,931
Interest rate swaps		595,000		595,000
Instruments not receiving hedge accounting treatment:
Foreign currency forwards	$	4,842	$	4,298

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	December 31, 2020		September 30, 2020
Asset derivatives:
Foreign currency forwards	Other current assets	$	1,443	$	1,398
Foreign currency forwards	Other assets		770		222
Total		$	2,213	$	1,620
Liability derivatives:
Foreign currency forwards	Accrued compensation and current liabilities	$	6,055	$	4,557
Foreign currency forwards	Other noncurrent liabilities		1,968		866
Interest rate swaps	Other noncurrent liabilities		12,045		13,204
Total		$	20,068	$	18,627

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
	December 31, 2020				December 31, 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	$	(1,100)	$	255	$	(1,583)	$	(66)
Interest rate swaps		1,159		—		—		—
Total	$	59	$	255	$	(1,583)	$	(66)

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Segment Information (Tables)

3 Months Ended

Dec. 31, 2020

Segment Information

Schedule of business segment financial data

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

	Three Months Ended
	December 31,
	2020		2019
Sales:
Cubic Transportation Systems	$	197.1	$	188.6
Cubic Mission and Performance Solutions		121.7		140.2
Total sales	$	318.8	$	328.8
Operating income (loss):
Cubic Transportation Systems	$	31.7	$	14.3
Cubic Mission and Performance Solutions		(16.5)		(8.6)
Unallocated corporate expenses		(13.9)		(12.2)
Total operating income (loss)	$	1.3	$	(6.5)
Depreciation and amortization:
Cubic Transportation Systems	$	7.5	$	7.1
Cubic Mission and Performance Solutions		15.1		9.2
Corporate		2.1		0.7
Total depreciation and amortization	$	24.7	$	17.0

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 December 31, 2020
	CTS		CMPS		Total
United States	$	111.9	$	80.3	$	192.2
United Kingdom		47.9		8.0		55.9
Australia		29.1		9.6		38.7
Far East/Middle East		1.0		15.8		16.8
Other		7.2		8.0		15.2
Total sales	$	197.1	$	121.7	$	318.8
	Three months ended December 31, 2019
	CTS		CMPS		Total
United States	$	96.7	$	79.0	$	175.7
United Kingdom		47.6		4.5		52.1
Australia		36.4		7.8		44.2
Far East/Middle East		1.3		36.7		38.0
Other		6.6		12.2		18.8
Total sales	$	188.6	$	140.2	$	328.8

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 December 31, 2020
	CTS		CMPS		Total
U.S. Federal Government and State and Local Municipalities	$	107.6	$	79.3	$	186.9
Other		89.5		42.4		131.9
Total sales	$	197.1	$	121.7	$	318.8
	Three months ended December 31, 2019
	CTS		CMPS		Total
U.S. Federal Government and State and Local Municipalities	$	93.5	$	82.0	$	175.5
Other		95.1		58.2		153.3
Total sales	$	188.6	$	140.2	$	328.8

Sales by Contract Type: The vast majority 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 December 31, 2020
	CTS		CMPS		Total
Fixed Price	$	194.4	$	101.8	$	296.2
Other		2.7		19.9		22.6
Total sales	$	197.1	$	121.7	$	318.8
	Three months ended December 31, 2019
	CTS		CMPS		Total
Fixed Price	$	184.5	$	124.8	$	309.3
Other		4.1		15.4		19.5
Total sales	$	188.6	$	140.2	$	328.8

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 December 31, 2020
	CTS		CMPS		Total
Product	$	100.1	$	81.4	$	181.5
Service		97.0		40.3		137.3
Total sales	$	197.1	$	121.7	$	318.8
	Three months ended December 31, 2019
	CTS		CMPS		Total
Product	$	93.4	$	107.2	$	200.6
Service		95.2		33.0		128.2
Total sales	$	188.6	$	140.2	$	328.8

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 December 31, 2020
	CTS		CMPS		Total
Point in Time	$	18.8	$	25.0	$	43.8
Over Time		178.3		96.7		275.0
Total sales	$	197.1	$	121.7	$	318.8
	Three months ended December 31, 2019
	CTS		CMPS		Total
Point in Time	$	17.7	$	39.3	$	57.0
Over Time		170.9		100.9		271.8
Total sales	$	188.6	$	140.2	$	328.8

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Restructuring Costs (Tables)

3 Months Ended

Dec. 31, 2020

Restructuring Costs

Schedule of restructuring charges incurred

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

	Three Months Ended
	December 31,
	2020		2019
Restructuring costs:
Cubic Transportation Systems	$	0.2		0.4
Cubic Mission and Performance Solutions		3.1		0.1
Unallocated corporate expenses		0.8		1.1
Total restructuring costs	$	4.1	$	1.6

Schedule of rollforward of restructuring liability

The following table presents a rollforward of our restructuring liability as of December 31, 2020, which is included within accrued compensation and other current liabilities within our condensed consolidated balance sheet (in millions):

	Restructuring Liability		Restructuring Liability
	Employee Separation and Other		Consulting Costs
Balance as of October 1, 2020	$	5.2	$	0.8
Accrued costs		4.1		—
Cash payments		(5.2)		(0.8)
Balance as of December 31, 2020	$	4.1	$	—

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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	Sep. 30, 2019	Jun. 27, 2019	Sep. 30, 2018
Delerrok Inc.
Equity method investment
Purchase price of capital stock				$ 8.3		$ 8.3
Ownership percentage				17.50%		17.50%
Remaining outstanding shares purchased (as a percent)	82.50%	82.50%	82.50%
Fair value of consideration transferred	$ 45.1
Cash consideration paid	36.8		$ 43.5
Contingent consideration	$ 1.6	$ 1.6	$ 1.6
PIXIA Corp
Equity method investment
Purchase price of capital stock					$ 50.0
Ownership percentage					20.00%
Remaining outstanding shares purchased (as a percent)	80.00%	80.00%	80.00%
Fair value of consideration transferred	$ 197.8	$ 245.2
Cash consideration paid		247.8
Dividend from equity method investment		2.0
Income (loss) from equity method investments		$ (0.6)

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Acquisitions and Divestitures - Consolidated Business Acquisitions (Details) - USD ($) $ in Thousands			3 Months Ended		6 Months Ended
	Jan. 03, 2020	Jun. 27, 2019	Dec. 31, 2020	Dec. 31, 2019	Jan. 03, 2020	Sep. 30, 2020
Purchase price allocation
Goodwill			$ 787,741			$ 784,882
Sales and results of operations
Sales			318,794	$ 328,839
Operating loss			1,297	(6,483)
Net loss after taxes			(12,995)	(20,575)
Gain from changes in fair value of contingent consideration			(576)	$ (3,005)
PIXIA Corp
Estimated acquisition-date fair value of consideration
Fair value of consideration transferred	$ 197,800				$ 245,200
Purchase price allocation
Accounts receivable, prepaids and other assets		$ 3,800
Deferred tax liability		(17,600)
Other net assets acquired (liabilities assumed)		(1,800)
Net identifiable assets acquired		72,200
Goodwill		173,000
Net assets acquired		$ 245,200
Weighted average useful life of intangible assets		4 years
Sales and results of operations
Sales			2,300
Operating loss			(8,000)
Net loss after taxes			(8,000)
Amortization			7,200
Acquisition-related expenses			500
Estimated amortization expense related to the intangible assets
2021			28,700
2022			12,700
2023			7,300
2024			7,300
2025			7,300
Thereafter			3,200
PIXIA Corp | Trade names
Purchase price allocation
Indefinite intangible assets		$ 5,700
PIXIA Corp | Backlog
Purchase price allocation
Amortizable intangible assets		42,500
PIXIA Corp | Customer relationships
Purchase price allocation
Amortizable intangible assets		25,500
PIXIA Corp | Technology
Purchase price allocation
Amortizable intangible assets		$ 14,100
Delerrok Inc.
Estimated acquisition-date fair value of consideration
Fair value of consideration transferred	45,100
Purchase price allocation
Accounts receivable	900				900
Deferred tax liability	(1,700)				(1,700)
Other net assets acquired (liabilities assumed)	(300)				(300)
Net identifiable assets acquired	14,700				14,700
Goodwill	30,400				30,400
Net assets acquired	$ 45,100				45,100
Weighted average useful life of intangible assets	10 years
Sales and results of operations
Sales			300
Operating loss			(1,100)
Net loss after taxes			(1,100)
Amortization			400
Acquisition-related expenses			400
Gain from changes in fair value of contingent consideration			(900)
Estimated amortization expense related to the intangible assets
2021			1,700
2022			1,600
2023			1,600
2024			1,600
2025			1,600
Thereafter			$ 6,400
Delerrok Inc. | Trade names
Purchase price allocation
Indefinite intangible assets	$ 900				900
Delerrok Inc. | Technology
Purchase price allocation
Amortizable intangible assets	$ 14,900				$ 14,900

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Acquisitions and Divestitures - Goodwill and Pro forma information (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Unaudited pro forma information
Net sales	$ 318,800	$ 333,100
Net loss	(13,000)	$ (28,800)
Adjustments made for transaction expenses	0
Changes in the carrying amount of goodwill
Net balances at the beginning of the period	784,882
Acquisitions	(260)
Foreign currency exchange rate changes	3,119
Net balance at the end of the period	787,741
Impairment of goodwill	0
Cubic Transportation Systems
Changes in the carrying amount of goodwill
Net balances at the beginning of the period	287,668
Acquisitions	(260)
Foreign currency exchange rate changes	2,229
Net balance at the end of the period	289,637
Cubic Mission Performance Solutions
Changes in the carrying amount of goodwill
Net balances at the beginning of the period	497,214
Foreign currency exchange rate changes	890
Net balance at the end of the period	$ 498,104

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Variable Interest Entities - Narrative (Details) $ in Thousands	3 Months Ended		12 Months Ended
	Dec. 31, 2020 USD ($) item	Dec. 31, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Mar. 31, 2018 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
Revenue recognition
Contract term	12 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Revenue recognition
Contract term	24 months
Revolving Credit Agreement
Revenue recognition
Maximum borrowing capacity under credit agreement				$ 800,000
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%
MBTA | Design and Build Phase | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-10-01
Revenue recognition
Contract term	4 years
MBTA | Operate and Maintain Phase | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-10-01
Revenue recognition
Contract term	12 years
Cubic Corporation Excluding VIE
Revenue recognition
Restricted cash	$ 29,610		$ 25,478
VIE
Revenue recognition
Restricted cash	3,822		1,822
P3 Joint Venture
Revenue recognition
Maximum exposure to loss	2,900
OpCo. | Interest Rate Swaps | Not Designated as Hedging Instrument
Revenue recognition
Notional principal outstanding derivative instruments	215,000		194,000
Unrealized gains	3,300	$ 4,300
OpCo. | Interest Rate Swaps | Not Designated as Hedging Instrument | Other noncurrent liabilities
Revenue recognition
Fair value interest rate swaps	2,600		5,900
OpCo. | P3 Credit Agreement | Revolving Credit Agreement
Revenue recognition
Maximum borrowing capacity under credit agreement	15,800
OpCo. | P3 Credit Agreement | Long-term Debt Facility
Revenue recognition
Maximum borrowing capacity under credit agreement	$ 421,600
OpCo. | Boston OpCo Amended Credit Agreement
Revenue recognition
Number of long-term debt facilities | item	2
Debt issuance and modification costs			9,200
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
Unamortized deferred financing costs	17,000		$ 17,200
OpCo. | Original MBTA Contract
Revenue recognition
Expected contract revenue	175,800
OpCo. | Original MBTA Contract | Design and Build Phase
Revenue recognition
Expected contract revenue	43,500
OpCo. | Original MBTA Contract | Operate and Maintain Phase
Revenue recognition
Expected contract revenue	618,000
OpCo. | MBTA
Revenue recognition
Expected contract revenue	$ 596,400
Cubic Transportation Systems | HoldCo.
Revenue recognition
Ownership percentage	10.00%
Cubic Transportation Systems | HoldCo. | Letter of credit agreement
Revenue recognition
Maximum borrowing capacity under credit agreement					$ 2,900
Borrowings outstanding under credit agreement	$ 0
John Laing | HoldCo.
Revenue recognition
Ownership percentage	90.00%
John Laing | HoldCo. | Equity Bridge Loan
Revenue recognition
Loan amount					$ 26,200

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Variable Interest Entities - Net assets and liabilities (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Sep. 30, 2020
ASSETS
Other noncurrent assets	$ 34,789		$ 21,759
Total assets	2,299,598		2,324,221
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity related to Cubic	960,758		960,777
Noncontrolling interest in VIE	33,120		27,403
Total liabilities and shareholders' equity	2,299,598		2,324,221
Revenue	318,794	$ 328,839
Operating income (loss)	1,297	(6,483)
Other income (expense), net	1,296	(127)
VIE
ASSETS
Cash	1,337		1,065
Restricted cash	3,822		1,822
Other current assets	34		31
Long-term contracts financing receivables	241,814		221,245
Total assets	247,007		224,163
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable	23		49
Accrued compensation and other current liabilities	100		85
Due to Cubic	22,674		27,259
Other noncurrent liabilities	2,638		5,890
Long-term debt	187,688		163,348
Total liabilities	213,123		196,631
Shareholders' equity related to Cubic	764		129
Noncontrolling interest in VIE	33,120		27,403
Total liabilities and shareholders' equity	247,007		$ 224,163
Revenue	4,021	1,245
Operating income (loss)	3,717	972
Other income (expense), net	3,252	3,071
Interest income	1,373	1,553
Interest Expense	$ (1,989)	$ (1,159)

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Revenue Recognition (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Operating income (loss)	$ 1,297	$ (6,483)
Net income (loss) from continuing operations	(7,278)	(16,001)
Net income (loss) from continuing operations attributable to Cubic	$ (12,995)	$ (19,991)
Diluted income (loss) per share attributable to Cubic	$ (0.41)	$ (0.66)
ASU 2014-09 | ASC 606
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Operating income (loss)	$ 1,338	$ (6,168)
Net income (loss) from continuing operations	1,059	(5,762)
Net income (loss) from continuing operations attributable to Cubic	$ 970	$ (5,762)
Diluted income (loss) per share attributable to Cubic	$ 0.03	$ (0.18)

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Revenue Recognition - Backlog (Details) - USD ($) $ in Millions	Dec. 31, 2020	Sep. 30, 2020
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining performance obligation	$ 3,681	$ 3,667
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
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]: 2022-01-01
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 - Accounts Receivable (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Sep. 30, 2020
Accounts receivable
Billed	$ 98,116		$ 161,473
Allowance for doubtful accounts	(1,359)		(1,498)
Accounts receivable - net	96,757		159,975
Trade receivables sold to a financial institution	6,400		18,400
Receipt of withheld proceeds from sale of trade receivables	1,842	$ 5,521
U.S. federal government contracts
Accounts receivable
Amounts billed	$ 26,400		$ 82,200

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Revenue Recognition - Contract Assets and Liabilities (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Sep. 30, 2020
Contract Assets and Liabilities
Contract assets	$ 288,256	$ 268,773
Contract liabilities	80,429	$ 75,546
Increase (decrease) in contract asset	19,500
Impairment losses related to contract assets	0
Increase (decrease) in contract liabilities	4,900
Revenue recognized included in contract liability	$ 26,700

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Net Income (Loss) Per Share (Details) - shares shares in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Weighted-average number of shares outstanding
Weighted average shares - basic	31,562	31,273
Weighted average shares - diluted	31,562	31,273
Number of anti-dilutive securities	1,226	1,112

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Balance Sheet Details (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Sep. 30, 2020
Restricted Cash
Restricted cash	$ 33,400	$ 27,300
Inventories
Finished products	18,503	14,838
Work in process and inventoried costs under long-term contracts	69,347	73,076
Materials and purchased parts	43,015	39,337
Net inventories	130,865	127,251
Costs incurred outside the scope of work or in advance of a contract award	6,600	5,300
Property, Plant and Equipment
Accumulated depreciation and amortization	(198,953)	(189,394)
Property, plant and equipment - net	165,576	166,301
Deferred Compensation Plan
Deferred compensation	10,100	9,600
Carrying value of Rabbi trust to fund deferred compensation liabilities	7,200	6,800
Land and land improvements
Property, Plant and Equipment
Property, plant and equipment, Gross	7,200	7,423
Buildings and improvements
Property, Plant and Equipment
Property, plant and equipment, Gross	50,166	49,716
Machinery and other equipment
Property, Plant and Equipment
Property, plant and equipment, Gross	145,176	132,962
Software
Property, Plant and Equipment
Property, plant and equipment, Gross	124,753	121,890
Leasehold improvements
Property, Plant and Equipment
Property, plant and equipment, Gross	23,381	22,295
Construction and internal-use software development in progress
Property, Plant and Equipment
Property, plant and equipment, Gross	$ 13,853	$ 21,409

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Fair Value of Financial Instruments - Recurring Basis (Details) - Assets and liabilities measured at fair value - USD ($) $ in Thousands	Dec. 31, 2020	Sep. 30, 2020
Assets
Current derivative assets	$ 1,443	$ 1,398
Noncurrent derivative assets	770	222
Total assets measured at fair value	2,213	1,620
Liabilities
Current derivative liabilities	6,055	4,557
Noncurrent derivative liabilities	14,013	14,070
Total liabilities measured at fair value	30,110	29,245
Deltenna
Liabilities
Contingent consideration to seller	3,180	3,004
Shield Aviation
Liabilities
Contingent consideration to seller	5,566	5,566
H4 Global
Liabilities
Contingent consideration to seller	1,296	1,148
Delerrok Inc.
Liabilities
Contingent consideration to seller		900
Level 2
Assets
Current derivative assets	1,443	1,398
Noncurrent derivative assets	770	222
Total assets measured at fair value	2,213	1,620
Liabilities
Current derivative liabilities	6,055	4,557
Noncurrent derivative liabilities	14,013	14,070
Total liabilities measured at fair value	20,068	18,627
Level 3
Liabilities
Total liabilities measured at fair value	10,042	10,618
Level 3 | Deltenna
Liabilities
Contingent consideration to seller	3,180	3,004
Level 3 | Shield Aviation
Liabilities
Contingent consideration to seller	5,566	5,566
Level 3 | H4 Global
Liabilities
Contingent consideration to seller	$ 1,296	1,148
Level 3 | Delerrok Inc.
Liabilities
Contingent consideration to seller		$ 900

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Fair Value of Financial Instruments - Contingent Consideration (Details) $ in Thousands, item in Millions		3 Months Ended	12 Months Ended
	Jan. 31, 2021 USD ($)	Dec. 31, 2020 USD ($) item	Sep. 30, 2020 USD ($)	Jan. 03, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)
Assets and liabilities measured at fair value on a recurring basis
Assets		$ 2,299,598	$ 2,324,221
Franklin Blackhorse, L.P
Assets and liabilities measured at fair value on a recurring basis
Investment			1,200		$ 5,000
Franklin Blackhorse, L.P | Other Assets
Assets and liabilities measured at fair value on a recurring basis
Assets		5,500	5,600
Franklin Blackhorse, L.P | Other income (expense)
Assets and liabilities measured at fair value on a recurring basis
Net loss from equity method investment		(100)
Level 3
Change in fair value of our Level 3 contingent consideration
Balance at the Beginning period		10,618
Total remeasurement (gain) loss recognized in earnings		(576)
Balance at the ending period		10,042	10,618
H4 Global | Subsequent event
Assets and liabilities measured at fair value on a recurring basis
Contingent consideration for certain goals	$ 1,300
H4 Global | Level 3
Change in fair value of our Level 3 contingent consideration
Balance at the Beginning period		1,148
Total remeasurement (gain) loss recognized in earnings		148
Balance at the ending period		1,296	1,148
Deltenna | Level 3
Change in fair value of our Level 3 contingent consideration
Balance at the Beginning period		3,004
Total remeasurement (gain) loss recognized in earnings		176
Balance at the ending period		3,180	$ 3,004
Deltenna | Maximum
Assets and liabilities measured at fair value on a recurring basis
Contingent consideration for certain goals		$ 7,400
Deltenna | Volatility for underlying revenue metrics
Assets and liabilities measured at fair value on a recurring basis
Measurement inputs for contingent consideration		52
Deltenna | Discount Rate
Assets and liabilities measured at fair value on a recurring basis
Measurement inputs for contingent consideration		10.5	10.5
Shield Aviation
Assets and liabilities measured at fair value on a recurring basis
Determination of fair value of contingent consideration | item		1
Revenue risk adjustment used in determination of fair value of contingent consideration			16.00%
Shield Aviation | Level 3
Change in fair value of our Level 3 contingent consideration
Balance at the Beginning period		$ 5,566
Balance at the ending period		5,566	$ 5,566
Shield Aviation | Maximum
Assets and liabilities measured at fair value on a recurring basis
Contingent consideration for certain goals		$ 10,000
Shield Aviation | Volatility for underlying revenue metrics
Assets and liabilities measured at fair value on a recurring basis
Volatility for underlying earnings metrics used in determination of fair value of contingent consideration		31.00%
Shield Aviation | Discount Rate
Assets and liabilities measured at fair value on a recurring basis
Measurement inputs for contingent consideration		5.7	5.7
Nuvotronics
Assets and liabilities measured at fair value on a recurring basis
Determination of fair value of contingent consideration | item		1
Period for contingent consideration contracts		12 months
Contingent consideration, fair value		$ 0
Nuvotronics | Maximum
Assets and liabilities measured at fair value on a recurring basis
Contingent consideration for certain goals		8,000
Delerrok Inc.
Assets and liabilities measured at fair value on a recurring basis
Contingent consideration				$ 1,600
Investment					$ 8,300	$ 8,300
Contingent consideration, fair value		0
Delerrok Inc. | Level 3
Change in fair value of our Level 3 contingent consideration
Balance at the Beginning period		900
Total remeasurement (gain) loss recognized in earnings		$ (900)
Balance at the ending period			$ 900

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Financing Arrangements - Extinguishment of Debt (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Sep. 30, 2019
Financial arrangement
Principal payments on long-term borrowings	$ 1,972
Revolving Credit Agreement
Financial arrangement
Maximum borrowing capacity under credit agreement		$ 800,000

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Financing Arrangements - Credit Facility (Details) £ in Millions, $ in Millions	Apr. 01, 2020 USD ($)	Mar. 27, 2020 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 GBP (£)	Sep. 30, 2019 USD ($)
Debt Instrument [Line Items]
Letters of Credit and bank guarantees outstanding			$ 101.2
United Kingdom
Debt Instrument [Line Items]
Maximum borrowing capacity under credit agreement			20.5	£ 15.0
Borrowings outstanding under credit agreement			0.0
Cash on deposit as collateral			29.6
Performance guarantee | Letter of credit agreement
Debt Instrument [Line Items]
Letters of credit outstanding			97.5
Letters of credit primarily for self-insured liabilities
Debt Instrument [Line Items]
Letters of credit outstanding			3.7
Fair value of instruments			0.0
Revolving Credit Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity under credit agreement					$ 800.0
Other Credit Facility
Debt Instrument [Line Items]
Letters of credit outstanding			$ 6.6
Credit Facility
Debt Instrument [Line Items]
Loan amount	$ 500.0
Weighted average interest rate on outstanding borrowings (as a percent)			1.95%	1.95%
Debt issuance costs incurred		$ 3.4
Unamortized debt issuance costs			$ 5.2
Credit Facility | LIBOR
Debt Instrument [Line Items]
Variable interest rate (as a percent)	2.49%
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			441.6
Credit Facility | Revolving Credit Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity under credit agreement		$ 850.0
Borrowings outstanding under credit agreement			207.0
Letters of credit outstanding			94.6
Available amount under line of credit			$ 548.4

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Financing Arrangements - Underwritten Public Offering (Details) - USD ($) $ in Millions	Dec. 31, 2020	Sep. 30, 2020
Financing Arrangements
Self-insurance liabilities	$ 5.1	$ 5.1

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Leases - Lease Portfolio (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Sep. 30, 2020	Dec. 31, 2019
Leases
Operating Lease Right-of-use assets	$ 84,646	$ 87,167	$ 87,200
Operating Lease, Short-term lease liability	15,700		16,800
Operating Lease Long-term lease liability	$ 78,616	80,568	$ 80,600
Operating Lease Weighted average remaining lease term	7 years 4 months 24 days		7 years 7 months 6 days
Operating Lease Weighted average discount rate	3.00%		3.00%
Finance Lease, Right-of-use assets	$ 13,200	500
Finance Lease, short-term lease liability	2,800	200
Finance Lease, Long-term lease liability	$ 10,386	$ 395
Finance Lease, Weighted average remaining lease term	4 years 10 months 24 days	2 years 4 months 24 days
Finance Lease, Weighted average discount rate	1.75%	1.70%

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Leases - Lease Expense (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Leases
Operating lease expense	$ 4.9	$ 4.6
Finance lease expense Amortization of right-of-use asset	0.1
Short-term lease expense		0.4
Variable lease expense	0.9	1.1
Total lease expense	$ 5.9	$ 6.1

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Leases - Other Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Leases
Operating lease - cash paid for fixed payments	$ 4,800	$ 4,500
Finance lease - cash paid for finance lease liabilities	18
Right-of-use assets obtained in exchange for new finance lease liabilities	12,600
Right-of-use assets obtained in exchange for new operating lease liabilities	$ 200	$ 9,600

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Leases - Maturities of Lease Liabilities (Details) $ in Millions	Dec. 31, 2020 USD ($)	Sep. 30, 2019 building
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
2021	$ 12.8
2022	16.3
2023	14.2
2024	13.4
2025	11.1
Thereafter	37.9
Total lease payments	105.7
Less: imputed interest	(11.4)
Present value of operating lease liabilities	94.3
Finance Lease, Liability, Payment, Due [Abstract]
2021	2.9
2022	2.9
2023	2.7
2024	2.7
2025	2.6
Total lease payments	13.8
Less: imputed interest	(0.6)
Present value of financing lease liabilities	$ 13.2
Number of buildings | building		2
Lease term		5 years

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Pension Plans (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Components of net periodic pension cost (benefit)
Service cost	$ 158	$ 165
Interest cost	1,333	1,531
Expected return on plan assets	(2,649)	(2,946)
Amortization of actuarial loss	1,140	1,001
Administrative expenses	89	86
Net pension cost (benefit)	$ 71	$ (163)

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Stockholders' Equity - Narrative (Details)	3 Months Ended	12 Months Ended
	Dec. 31, 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)	456,011
Performance-based RSUs
Stockholders' Equity
Vesting period	3 years
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)	400,878
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. 17, 2020	Sep. 17, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value units granted (per share)	$ 57.71	$ 41.13
Risk-free interest rate(as a percent)	0.20%	0.10%
Expected volatility (as a percent)	50.00%	52.00%

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Stockholders' Equity - RSU activity (Details)	3 Months Ended
	Dec. 31, 2020 $ / shares shares
Time-based RSUs
Number of Shares
Balance unvested at the beginning of the period (in shares) | shares	554,423
Granted (in shares) | shares	234,899
Vested (in shares) | shares	(226,934)
Forfeited (in shares) | shares	(11,147)
Balance unvested at the end of the period (in shares) | shares	551,241
Weighted Average Grant-Date Fair Value
Balance unvested at the beginning of the period (in dollars per share) | $ / shares	$ 58.54
Granted (in dollars per share) | $ / shares	60.99
Vested (in dollars per share) | $ / shares	58.34
Forfeited (in dollars per share) | $ / shares	59.85
Balance unvested at the end of the period (in dollars per share) | $ / shares	$ 59.64
Performance-based RSUs
Number of Shares
Balance unvested at the beginning of the period (in shares) | shares	137,770
Vested (in shares) | shares	(110,247)
Forfeited (in shares) | shares	(27,523)
Weighted Average Grant-Date Fair Value
Balance unvested at the beginning of the period (in dollars per share) | $ / shares	$ 61.40
Vested (in dollars per share) | $ / shares	61.40
Forfeited (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	471,496
Granted (in shares) | shares	277,250
Forfeited (in shares) | shares	(11,690)
Balance unvested at the end of the period (in shares) | shares	737,056
Weighted Average Grant-Date Fair Value
Balance unvested at the beginning of the period (in dollars per share) | $ / shares	$ 51.56
Granted (in dollars per share) | $ / shares	57.71
Forfeited (in dollars per share) | $ / shares	50.77
Balance unvested at the end of the period (in dollars per share) | $ / shares	$ 53.88

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Stockholders' Equity - Non-cash compensation expense (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Sep. 30, 2020
Stockholders' Equity
Non-cash compensation expense related to stock-based awards	$ 4,679	$ 4,477
Estimated forfeiture rate (as a percent)	12.50%		12.50%
Cost of sales
Stockholders' Equity
Non-cash compensation expense related to stock-based awards	$ 601	539
Selling, general and administrative
Stockholders' Equity
Non-cash compensation expense related to stock-based awards	4,078	$ 3,938
RSUs
Stockholders' Equity
Unrecognized compensation cost related to unvested awards	59,300
Aggregate fair value of awards	$ 50,800
Weighted-average period of recognition	1 year 4 months 24 days

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Income Taxes
Effective tax rate (as a percent)	(92.00%)	(64.00%)
Income tax provision (benefit)	$ 3,489	$ 6,246

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Derivative Instruments and Hedging Activities - Notional principal amounts (Details) $ in Thousands	3 Months Ended
	Dec. 31, 2020 USD ($) building	Dec. 31, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 building	Aug. 31, 2019 USD ($)
Derivative Instruments and Hedging Activities
Number of buildings | building				2
Two Buildings on Existing Campus
Derivative Instruments and Hedging Activities
Unrealized gain (loss) on derivative	$ 100	$ (1,400)
Number of building under lease | building	2
Maximum
Derivative Instruments and Hedging Activities
Term of derivative contract	5 years
Instruments receiving hedge accounting treatment | Foreign currency forwards
Derivative Instruments and Hedging Activities
Notional principal outstanding derivative instruments	$ 118,922		$ 92,931
Instruments receiving hedge accounting treatment | Interest Rate Swaps
Derivative Instruments and Hedging Activities
Notional principal outstanding derivative instruments	595,000		595,000
Instruments receiving hedge accounting treatment | Interest Rate Swaps | Credit Facility
Derivative Instruments and Hedging Activities
Notional principal outstanding derivative instruments	500,000		500,000
Unrealized gain (loss) on derivative	1,000
Instruments receiving hedge accounting treatment | Interest Rate Swaps | Two Buildings on Existing Campus
Derivative Instruments and Hedging Activities
Notional principal amount					$ 95,000
Instruments not receiving hedge accounting treatment | Foreign currency forwards
Derivative Instruments and Hedging Activities
Notional principal outstanding derivative instruments	4,842		4,298
Notional principal outstanding derivative instruments designed to manage exposure	4,800		$ 4,300
Unrealized gain (loss) on derivative	$ 800	$ 800

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Derivative Instruments and Hedging Activities - Fair value of derivative financial instruments (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Sep. 30, 2020
Derivative Instruments and Hedging Activities
Asset derivatives	$ 2,213	$ 1,620
Liability derivatives	20,068	18,627
Foreign currency forwards | Other current assets
Derivative Instruments and Hedging Activities
Asset derivatives	1,443	1,398
Foreign currency forwards | Other assets
Derivative Instruments and Hedging Activities
Asset derivatives	770	222
Foreign currency forwards | Accrued compensation and current liabilities
Derivative Instruments and Hedging Activities
Liability derivatives	6,055	4,557
Foreign currency forwards | Other noncurrent liabilities
Derivative Instruments and Hedging Activities
Liability derivatives	1,968	866
Interest Rate Swaps | Other noncurrent liabilities
Derivative Instruments and Hedging Activities
Liability derivatives	$ 12,045	$ 13,204

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Derivative Instruments and Hedging Activities - Gains and losses recognized (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Derivative instruments and hedging activities
Gains (losses) recognized in OCI	$ 59	$ (1,583)
Gains (losses) reclassified into earnings - Effective Portion	255	(66)
Estimated unrealized net gains (losses) from cash flow hedges which are expected to be reclassified into earnings in the next twelve months	3,300
Foreign currency forwards
Derivative instruments and hedging activities
Gains (losses) recognized in OCI	(1,100)	(1,583)
Gains (losses) reclassified into earnings - Effective Portion	255	$ (66)
Realized gain (loss) on derivative	200
Interest Rate Swaps
Derivative instruments and hedging activities
Gains (losses) recognized in OCI	$ 1,159

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Segment Information - Business Segment Financial Data (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Segment Information
Sales	$ 318,794	$ 328,839
Operating income (loss)	1,297	(6,483)
Depreciation and amortization	24,661	16,950
Cubic Transportation Systems
Segment Information
Sales	197,100	188,600
Operating income (loss)	31,700	14,300
Depreciation and amortization	7,500	7,100
Cubic Mission and Performance Solutions
Segment Information
Sales	121,700	140,200
Operating income (loss)	(16,500)	(8,600)
Depreciation and amortization	15,100	9,200
Corporate
Segment Information
Depreciation and amortization	2,100	700
Unallocated corporate expenses
Segment Information
Operating income (loss)	$ (13,900)	$ (12,200)

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Segment Information - Sales by Geographical Region (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Disaggregation of Revenue
Sales	$ 318,794	$ 328,839
United States
Disaggregation of Revenue
Sales	192,200	175,700
United Kingdom
Disaggregation of Revenue
Sales	55,900	52,100
Australia
Disaggregation of Revenue
Sales	38,700	44,200
Far East/Middle East
Disaggregation of Revenue
Sales	16,800	38,000
Other foreign countries
Disaggregation of Revenue
Sales	15,200	18,800
Cubic Transportation Systems
Disaggregation of Revenue
Sales	197,100	188,600
Cubic Transportation Systems | United States
Disaggregation of Revenue
Sales	111,900	96,700
Cubic Transportation Systems | United Kingdom
Disaggregation of Revenue
Sales	47,900	47,600
Cubic Transportation Systems | Australia
Disaggregation of Revenue
Sales	29,100	36,400
Cubic Transportation Systems | Far East/Middle East
Disaggregation of Revenue
Sales	1,000	1,300
Cubic Transportation Systems | Other foreign countries
Disaggregation of Revenue
Sales	7,200	6,600
Cubic Mission and Performance Solutions
Disaggregation of Revenue
Sales	121,700	140,200
Cubic Mission and Performance Solutions | United States
Disaggregation of Revenue
Sales	80,300	79,000
Cubic Mission and Performance Solutions | United Kingdom
Disaggregation of Revenue
Sales	8,000	4,500
Cubic Mission and Performance Solutions | Australia
Disaggregation of Revenue
Sales	9,600	7,800
Cubic Mission and Performance Solutions | Far East/Middle East
Disaggregation of Revenue
Sales	15,800	36,700
Cubic Mission and Performance Solutions | Other foreign countries
Disaggregation of Revenue
Sales	$ 8,000	$ 12,200

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Segment Information - Sales by End Customer (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Disaggregation of Revenue
Sales	$ 318,794	$ 328,839
U.S. Federal Government and State and Local Municipalities
Disaggregation of Revenue
Sales	186,900	175,500
Other
Disaggregation of Revenue
Sales	131,900	153,300
Cubic Transportation Systems
Disaggregation of Revenue
Sales	197,100	188,600
Cubic Transportation Systems | U.S. Federal Government and State and Local Municipalities
Disaggregation of Revenue
Sales	107,600	93,500
Cubic Transportation Systems | Other
Disaggregation of Revenue
Sales	89,500	95,100
Cubic Mission and Performance Solutions
Disaggregation of Revenue
Sales	121,700	140,200
Cubic Mission and Performance Solutions | U.S. Federal Government and State and Local Municipalities
Disaggregation of Revenue
Sales	79,300	82,000
Cubic Mission and Performance Solutions | Other
Disaggregation of Revenue
Sales	$ 42,400	$ 58,200

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Segment Information - Sales by Contract Type (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Disaggregation of Revenue
Sales	$ 318,794	$ 328,839
Fixed Price
Disaggregation of Revenue
Sales	296,200	309,300
Other
Disaggregation of Revenue
Sales	22,600	19,500
Cubic Transportation Systems
Disaggregation of Revenue
Sales	197,100	188,600
Cubic Transportation Systems | Fixed Price
Disaggregation of Revenue
Sales	194,400	184,500
Cubic Transportation Systems | Other
Disaggregation of Revenue
Sales	2,700	4,100
Cubic Mission and Performance Solutions
Disaggregation of Revenue
Sales	121,700	140,200
Cubic Mission and Performance Solutions | Fixed Price
Disaggregation of Revenue
Sales	101,800	124,800
Cubic Mission and Performance Solutions | Other
Disaggregation of Revenue
Sales	$ 19,900	$ 15,400

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Segment Information - Sales by Deliverable Type (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Disaggregation of Revenue
Sales	$ 318,794	$ 328,839
Products
Disaggregation of Revenue
Sales	181,489	200,604
Services
Disaggregation of Revenue
Sales	137,305	128,235
Cubic Transportation Systems
Disaggregation of Revenue
Sales	197,100	188,600
Cubic Transportation Systems | Products
Disaggregation of Revenue
Sales	100,100	93,400
Cubic Transportation Systems | Services
Disaggregation of Revenue
Sales	97,000	95,200
Cubic Mission and Performance Solutions
Disaggregation of Revenue
Sales	121,700	140,200
Cubic Mission and Performance Solutions | Products
Disaggregation of Revenue
Sales	81,400	107,200
Cubic Mission and Performance Solutions | Services
Disaggregation of Revenue
Sales	$ 40,300	$ 33,000

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Segment Information - Revenue Recognition Method (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Disaggregation of Revenue
Sales	$ 318,794	$ 328,839
Point in time
Disaggregation of Revenue
Sales	43,800	57,000
Over time
Disaggregation of Revenue
Sales	275,000	271,800
Cubic Transportation Systems
Disaggregation of Revenue
Sales	197,100	188,600
Cubic Transportation Systems | Point in time
Disaggregation of Revenue
Sales	18,800	17,700
Cubic Transportation Systems | Over time
Disaggregation of Revenue
Sales	178,300	170,900
Cubic Mission and Performance Solutions
Disaggregation of Revenue
Sales	121,700	140,200
Cubic Mission and Performance Solutions | Point in time
Disaggregation of Revenue
Sales	25,000	39,300
Cubic Mission and Performance Solutions | Over time
Disaggregation of Revenue
Sales	$ 96,700	$ 100,900

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Restructuring Costs - Restructuring Charges (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Restructuring plan
Restructuring costs	$ 4,135	$ 1,575
Unallocated corporate expenses
Restructuring plan
Restructuring costs	800	1,100
Cubic Transportation Systems
Restructuring plan
Restructuring costs	200	400
Cubic Mission and Performance Solutions
Restructuring plan
Restructuring costs	$ 3,100	$ 100

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Restructuring Costs - Rollforward of Restructuring Liability (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Restructuring liability
Accrued costs	$ 4,135	$ 1,575
Employee Separation and other
Restructuring liability
Balance as of the beginning of the period	5,200
Accrued costs	4,100
Cash payments	(5,200)
Balance as of the end of the period	4,100
Consulting Costs
Restructuring liability
Balance as of the beginning of the period	800
Cash payments	$ (800)

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Subsequent Events (Detail)	Feb. 07, 2021 $ / shares
Subsequent event | Veritas Captial and Evergreen Coat Captial Corporation
Subsequent Events
Cash per share to be received (in dollars per share)	$ 70.00