Implementation of the New Revenue Recognition Standard (Tables)

9 Months Ended

Jun. 30, 2019

Implementation of the New Revenue Recognition Standard

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

The table below presents the cumulative effect of the changes made to our Condensed Consolidated Balance Sheet as of October 1, 2018 due to the adoption of ASC 606 (in thousands):

			Adjustments		October 1, 2018
	September 30,		Due to		As Adjusted
	2018		ASC 606		Under ASC 606
ASSETS
Current assets:
Cash and cash equivalents	$	111,834	$	—	$	111,834
Cash in consolidated VIE		374		—		374
Restricted cash		17,400		—		17,400
Restricted cash in consolidated VIE		10,000		—		10,000
Accounts receivable, net		392,367		(236,743)		155,624
Contract assets		—		272,210		272,210
Recoverable income taxes		91		—		91
Inventories		84,199		(22,511)		61,688
Assets held for sale		8,177		—		8,177
Other current assets		43,705		—		43,705
Total current assets		668,147		12,956		681,103
Long-term contracts receivables		6,134		(6,134)		—
Long-term contracts financing receivables		—		56,228		56,228
Long-term contracts financing receivables in consolidated VIE		—		38,990		38,990
Long-term capitalized contract costs		84,924		(84,924)		—
Long-term capitalized contract costs in consolidated VIE		1,258		(1,258)		—
Property, plant and equipment, net		117,546		—		117,546
Deferred income taxes		4,713		389		5,102
Goodwill		333,626		—		333,626
Purchased intangibles, net		73,533		—		73,533
Other assets		14,192		—		14,192
Other noncurrent assets in consolidated VIE		810		—		810
Total assets	$	1,304,883	$	16,247	$	1,321,130
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	—	$	—	$	—
Trade accounts payable		125,414		(3,011)		122,403
Trade accounts payable in consolidated VIE		165		—		165
Contract liabilities		—		70,127		70,127
Customer advances		75,941		(75,941)		—
Accrued compensation and other current liabilities		118,233		583		118,816
Income taxes payable		8,586		—		8,586
Total current liabilities		328,339		(8,242)		320,097
Long-term debt		199,793		—		199,793
Long-term debt in consolidated VIE		9,056		—		9,056
Other long-term liabilities		43,486		—		43,486
Other long-term liabilities in consolidated VIE		13		—		13
Shareholders’ equity:
Common stock		45,008		—		45,008
Retained earnings		801,834		19,834		821,668
Accumulated other comprehensive loss		(110,643)		—		(110,643)
Treasury stock at cost		(36,078)		—		(36,078)
Shareholders’ equity related to Cubic		700,121		19,834		719,955
Noncontrolling interest in VIE		24,075		4,655		28,730
Total shareholders’ equity		724,196		24,489		748,685
Total liabilities and shareholders’ equity	$	1,304,883	$	16,247	$	1,321,130

The table below presents how the adoption of ASC 606 affected certain line items on our Condensed Consolidated Statements of Operations for the three and nine month periods ended June 30, 2019 (in thousands, except per share data):

	Three months ended June 30, 2019						Nine months ended June 30, 2019
					As Reported						As Reported
	Under		Effect of		Under		Under		Effect of		Under
	ASC 605		ASC 606		ASC 606		ASC 605		ASC 606		ASC 606
Net sales:
Products	$	240,604	$	15,296	$	255,900	$	588,754	$	72,143	$	660,897
Services		126,790		(11)		126,779		365,099		(719)		364,380
		367,394		15,285		382,679		953,853		71,424		1,025,277
Costs and expenses:
Products		179,281		11,153		190,434		433,351		58,505		491,856
Services		77,224		—		77,224		243,851		—		243,851
Selling, general and administrative expenses		81,673		494		82,167		210,791		557		211,348
Research and development		12,470		—		12,470		38,236		—		38,236
Amortization of purchased intangibles		9,717		—		9,717		32,677		—		32,677
Gain on sale of fixed assets		(32,563)		—		(32,563)		(32,563)		—		(32,563)
Restructuring costs		8,505		—		8,505		12,254		—		12,254
		336,307		11,647		347,954		938,597		59,062		997,659
Operating income		31,087		3,638		34,725		15,256		12,362		27,618
Other income (expenses):
Interest and dividend income		39		1,657		1,696		169		4,174		4,343
Interest expense		(6,132)		—		(6,132)		(14,695)		—		(14,695)
Other income (expense), net		(8,714)		—		(8,714)		(17,069)		—		(17,069)
Income (loss) from continuing operations before income taxes		16,280		5,295		21,575		(16,339)		16,536		197
Income tax provision (benefit)		1,113		(84)		1,029		(467)		162		(305)
Income (loss) from continuing operations		15,167		5,379		20,546		(15,872)		16,374		502
Net loss from discontinued operations		(202)		—		(202)		(1,541)		—		(1,541)
Net income (loss)		14,965		5,379		20,344		(17,413)		16,374		(1,039)
Less noncontrolling interest in loss of VIE		(7,074)		3,508		(3,566)		(16,940)		7,970		(8,970)
Net income (loss) attributable to Cubic	$	22,039	$	1,871	$	23,910	$	(473)	$	8,404	$	7,931
Amounts attributable to Cubic:
Net income from continuing operations		22,241		1,871		24,112		1,068		8,404		9,472
Net loss from discontinued operations		(202)		—		(202)		(1,541)		—		(1,541)
Net income (loss) attributable to Cubic	$	22,039	$	1,871	$	23,910	$	(473)	$	8,404	$	7,931
Net income (loss) per share:
Basic earnings per share attributable to Cubic	$	0.71	$	0.06	$	0.77	$	(0.02)	$	0.28	$	0.26
Diluted earnings per share attributable to Cubic	$	0.71	$	0.06	$	0.77	$	(0.02)	$	0.28	$	0.26

The table below quantifies the impact of adopting ASC 606 on segment net sales and operating income (loss) for the three and nine month periods ended June 30, 2019 (in thousands):

	Three months ended June 30, 2019						Nine months ended June 30, 2019
					As Reported						As Reported
	Under		Effect of		Under		Under		Effect of		Under
	ASC 605		ASC 606		ASC 606		ASC 605		ASC 606		ASC 606
Sales:
Cubic Transportation Systems	$	201,935	$	10,737	$	212,672	$	557,234	$	37,938	$	595,172
Cubic Mission Solutions		94,352		626		94,978		202,392		914		203,306
Cubic Global Defense		71,107		3,922		75,029		194,227		32,572		226,799
Total sales	$	367,394	$	15,285	$	382,679	$	953,853	$	71,424	$	1,025,277
Operating income (loss):
Cubic Transportation Systems	$	14,489	$	2,788	$	17,277	$	29,348	$	7,700	$	37,048
Cubic Mission Solutions		1,187		43		1,230		(12,045)		(88)		(12,133)
Cubic Global Defense		1,121		807		1,928		5,248		4,750		9,998
Unallocated corporate expenses		14,290		—		14,290		(7,295)		—		(7,295)
Total operating income	$	31,087	$	3,638	$	34,725	$	15,256	$	12,362	$	27,618

The table below presents how the impact of the adoption of ASC 606 affected certain line items on our Condensed Consolidated Balance Sheet at June 30, 2019 (in thousands):

					As Reported
	Under		Effect of		Under
	ASC 605		ASC 606		ASC 606
ASSETS
Current assets:
Cash and cash equivalents	$	62,522	$	—	$	62,522
Cash in consolidated VIE		359		—		359
Restricted cash		17,062		—		17,062
Restricted cash in consolidated VIE		9,967		—		9,967
Accounts receivable, net		394,777		(215,928)		178,849
Contract assets		(5,052)		280,474		275,422
Recoverable income taxes		8,481		220		8,701
Inventories		171,247		(46,950)		124,297
Assets held for sale		—		—		—
Other current assets		40,615		—		40,615
Other current assets in consolidated VIE		53		—		53
Total current assets		700,031		17,816		717,847
Long-term contracts receivables		3,201		(3,201)		—
Long-term contracts financing receivables		—		38,885		38,885
Long-term contracts financing receivables in consolidated VIE		—		90,233		90,233
Long-term capitalized contract costs		119,331		(119,331)		—
Long-term capitalized contract costs in consolidated VIE		2,255		(2,255)		—
Property, plant and equipment, net		137,004		—		137,004
Deferred income taxes		4,867		235		5,102
Goodwill		578,945		—		578,945
Purchased intangibles, net		175,207		—		175,207
Other assets		70,396		—		70,396
Other noncurrent assets in consolidated VIE		1,266		—		1,266
Total assets	$	1,792,503	$	22,382	$	1,814,885
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	231,000	$	—	$	231,000
Trade accounts payable		156,544		(2,253)		154,291
Trade accounts payable in consolidated VIE		88		—		88
Contract liabilities		—		62,266		62,266
Customer advances		78,760		(78,760)		—
Accrued compensation and other current liabilities		92,327		—		92,327
Accrued compensation and other current liabilities in consolidated VIE		183		—		183
Income taxes payable		1,026		266		1,292
Current portion of long-term debt		10,713		—		10,713
Total current liabilities		570,641		(18,481)		552,160
Long-term debt		189,103		—		189,103
Long-term debt in consolidated VIE		45,991		—		45,991
Other long-term liabilities		45,152		—		45,152
Other long-term liabilities in consolidated VIE		16,897		—		16,897
Shareholders’ equity:
Common stock		268,965		—		268,965
Retained earnings		797,158		28,238		825,396
Accumulated other comprehensive loss		(112,470)		—		(112,470)
Treasury stock at cost		(36,078)		—		(36,078)
Shareholders’ equity related to Cubic		917,575		28,238		945,813
Noncontrolling interest in VIE		7,144		12,625		19,769
Total shareholders’ equity		924,719		40,863		965,582
Total liabilities and shareholders’ equity	$	1,792,503	$	22,382	$	1,814,885