BUSINESS SEGMENT INFORMATION

12 Months Ended

Sep. 30, 2014

BUSINESS SEGMENT INFORMATION

BUSINESS SEGMENT INFORMATION

NOTE 16—BUSINESS SEGMENT INFORMATION

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

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

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

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

Years ended September 30,	2014			2013			2012
Sales:
Transportation Systems	$	599.7		$	529.5		$	522.2
Mission Support Services	398.1			468.7			491.4
Defense Systems	400.6			363.0			389.4
Other	—			0.2			1.1
Total sales	$	1,398.4		$	1,361.4		$	1,404.1
Operating income (loss):
Transportation Systems	$	65.9		$	66.8		$	84.6
Mission Support Services	7.8			(36.1		)	21.1
Defense Systems	26.8			14.2			35.3
Unallocated corporate expenses and other	(8.0		)	(4.2		)	(4.8		)
Total operating income	$	92.5		$	40.7		$	136.2
Assets:
Transportation Systems	$	422.2		$	369.8		$	268.4
Mission Support Services	195.8			205.2			212.8
Defense Systems	252.4			228.9			211.2
Corporate and other	324.2			304.5			322.2
Total assets	$	1,194.6		$	1,108.4		$	1,014.6
Depreciation and amortization:
Transportation Systems	$	11.5		$	5.0		$	3.7
Mission Support Services	10.7			13.0			12.5
Defense Systems	7.4			6.1			5.5
Corporate and other	0.8			1.3			1.2
Total depreciation and amortization	$	30.4		$	25.4		$	22.9
Capital expenditures:
Transportation Systems	$	1.8		$	2.8		$	2.7
Mission Support Services	—			0.3			1.1
Defense Systems	13.2			4.6			8.9
Corporate and other	1.6			1.4			1.5
Total expenditures for long-lived assets	$	16.6		$	9.1		$	14.2

Years ended September 30,	2014		2013		2012
Geographic Information:
Sales (a):
United States	$	749.9	$	741.7	$	742.2
United Kingdom	294.4		267.4		283.2
Canada	9.0		30.4		54.8
Australia	161.9		148.5		181.9
Middle East	42.0		35.4		38.0
Far East	76.6		78.2		56.9
Other	64.6		59.8		47.1
Total sales	$	1,398.4	$	1,361.4	$	1,404.1

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

Long-lived assets, net:
United States	$	49.8	$	43.9	$	42.4
United Kingdom	9.3		9.2		9.5
Other foreign countries	6.3		6.6		6.1
Total long-lived assets, net	$	65.4	$	59.7	$	58.0

MSS and CDS segment sales include $651.5 million, $691.8 million and $699.4 million in 2014, 2013 and 2012, respectively, of sales to U.S. government agencies. CTS segment sales include $213.2 million, $193.4 million and $184.7 million in 2014, 2013 and 2012, respectively, of sales under various contracts with our customer, Transport for London. No other customer accounts for 10% or more of our revenues for any periods presented.

Changes in estimates on contracts for which revenue is recognized using the cost-to-cost percentage-of-completion method increased operating income by approximately $1.3 million in 2014, decreased operating income by approximately $1.7 million in 2013 and increased operating income by approximately $15.7 million in 2012. These adjustments increased net income by approximately $3.5 million ($0.13 per share) in 2014, decreased $0.3 million ($0.01 per share) in 2013 and increased net income by approximately $10.7 million ($0.40 per share) in 2012.

Certain of our transportation systems service contracts contain service level or system usage incentives, for which we recognize revenues when the incentive award is fixed or determinable. These contract incentives are generally based upon monthly service levels or monthly performance and become fixed or determinable on a monthly basis. However, one of our transportation systems service contracts contains annual system usage incentives which are based upon system usage compared to annual baseline amounts. For this contract the annual system usage incentives are not considered fixed or determinable until the end of the contract year for which the incentives are measured, which falls within the second quarter of our fiscal year. During the years ended September 30, 2014, 2013, and 2012, we recognized sales of $12.2 million, $13.2 million, and $12.2 million, respectively related to annual system usage incentives on this transportation systems contract which resulted in additional operating income of the same amounts in these respective periods.

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

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

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

Liability as of September 30, 2012	$	—
Accrued costs	8,139
Cash payments	(5,919		)
Liability as of September 30, 2013	$	2,220
Accrued costs	1,094
Cash payments	(2,538		)
Liability as of September 30, 2014	$	776