Quarterly Report (10-q)

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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 Quarter Ended March 31, 2015

001-08931

Commission File Number

CUBIC CORPORATION

Exact Name of Registrant as Specified in its Charter

Delaware		95-1678055
State of Incorporation		IRS Employer Identification No.

9333 Balboa Avenue
San Diego, California 92123
Telephone (858) 277-6780

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, and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer x		Accelerated filer o

Non-accelerated filer o		Small Reporting Company o

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

As of May 4, 2015, registrant had only one class of common stock of which there were 26,882,875 shares outstanding (after deducting 8,945,300 shares held as treasury stock).

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CUBIC CORPORATION

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended March 31, 2015

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		Page

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Statements of Income (Loss)	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39
Item 4.	Controls and Procedures	39

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	41
Item 6.	Exhibits	41

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EXPLANATORY NOTE REGARDING AUDIT COMMITTEE INVESTIGATION

As disclosed in Item 2.02 of Form 8-K furnished on February 17, 2015, the Audit Committee of Cubic Corporation (“Company”, “we”, and “us”) conducted an investigation with the assistance of Latham & Watkins LLP and Deloitte FAS LLP to review the Company’s controls and procedures in connection with programs that are accounted for under the percentage of completion method. The Company’s internal controls identified the issue which led to the investigation. As a result of the investigation, the Audit Committee and management of the Company have together determined that at September 30, 2014, the total estimated costs of certain of the Company’s Cubic Global Defense Systems (CGD Systems) segment (formerly known as Cubic Defense Systems (CDS) segment) contracts were inappropriately reduced during its accounting close for the year ended September 30, 2014. The inappropriate reduction of the estimated costs to complete these contracts resulted in the overstatement of CGD Systems sales and operating income by approximately $750,000 for the fourth quarter and full year of fiscal 2014. This error, in addition to other unrelated immaterial errors that have been identified by the Company’s management, are considered cumulatively immaterial and have been corrected in the financial statements for the quarter ended December 31, 2014.

See Note 1, “Basis for Presentation” of the Notes to Condensed Consolidated Financial Statements in “Part I - Item 1. Financial Statements” and “Part I - Item 4. Controls and Procedures” for further detail.

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PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)

(amounts in thousands, except per share data)

	Six Months Ended						Three Months Ended
	March 31,						March 31,
	2015			2014			2015			2014
Net sales:
Products	$	259,122		$	268,770		$	130,510		$	146,789
Services	398,200			392,859			208,324			207,703
	657,322			661,629			338,834			354,492

Costs and expenses:
Products	194,545			196,944			90,121			110,185
Services	305,337			324,180			156,045			162,693
Selling, general and administrative	100,476			85,019			52,922			48,265
Research and development	6,892			9,873			2,640			4,959
Amortization of purchased intangibles	14,429			11,403			8,494			6,010
Restructuring costs	5,258			203			5,406			203
	626,937			627,622			315,628			332,315

Operating income	30,385			34,007			23,206			22,177

Other income (expense):
Interest and dividend income	903			363			438			118
Interest expense	(1,933		)	(1,613		)	(1,062		)	(752		)
Other income (expense) - net	(900		)	40			16			386

Income before income taxes	28,455			32,797			22,598			21,929

Income taxes	34,304			8,248			33,609			5,809

Net income (loss)	(5,849		)	24,549			(11,011		)	16,120

Less noncontrolling interest in income of VIE	23			69			13			28

Net income (loss) attributable to Cubic	$	(5,872	)	$	24,480		$	(11,024	)	$	16,092

Net income (loss) per share attributable to Cubic
Basic	$	(0.22	)	$	0.91		$	(0.41	)	$	0.60
Diluted	$	(0.22	)	$	0.91		$	(0.41	)	$	0.60

Dividends per common share	$	0.14		$	0.12		$	0.14		$	0.12

Weighted average shares used in per share calculations:
Basic	26,861			26,785			26,862			26,786
Diluted	26,861			26,892			26,862			26,901

See accompanying notes.

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CUBIC CORPORATION

CONDENSED CONSOLIDATED

STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(in thousands)

	Six Months Ended						Three Months Ended
	March 31,						March 31,
	2015			2014			2015			2014

Net income (loss)	$	(5,849	)	$	24,549		$	(11,011	)	$	16,120
Other comprehensive income (loss):
Foreign currency translation	(33,057		)	11,862			(19,094		)	3,645
Change in net unrealized gains/losses from cash flow hedges:
Change in fair value of cash flow hedges, net of tax	967			(181		)	300			(1,288		)
Adjustment for net gains/losses realized and included in net income, net of tax	(868		)	(23		)	(392		)	(55		)
Total change in net unrealized gains/losses from cash flow hedges, net of tax	99			(204		)	(92		)	(1,343		)
Total other comprehensive income (loss)	(32,958		)	11,658			(19,186		)	2,302
Total comprehensive income (loss)	$	(38,807	)	$	36,207		$	(30,197	)	$	18,422

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CUBIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

	March 31,			September 30,
	2015			2014
ASSETS
Current assets:
Cash and cash equivalents	$	208,104		$	215,849
Restricted cash	69,157			69,056
Marketable securities	4,482			1,196
Accounts receivable - net	376,425			394,179
Recoverable income taxes	15,516			16,055
Inventories - net	48,779			38,775
Deferred income taxes and other current assets	28,122			30,277
Total current assets	750,585			765,387

Long-term contract receivables	14,310			15,870
Long-term capitalized contract costs	73,070			76,209
Property, plant and equipment - net	70,754			64,149
Deferred income taxes	2,701			17,849
Goodwill	237,395			184,141
Purchased intangibles - net	85,463			63,618
Other assets	23,670			7,383
	$	1,257,948		$	1,194,606

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	55,000		$	—
Trade accounts payable	22,986			31,344
Customer advances	117,890			91,690
Accrued compensation and other current liabilities	144,082			133,367
Income taxes payable	10,174			12,737
Deferred income taxes	4,773			474
Current portion of long-term debt	514			563
Total current liabilities	355,419			270,175

Long-term debt	101,412			101,827
Other long-term liabilities	58,457			40,103

Shareholders’ equity:
Common stock	23,308			20,669
Retained earnings	793,514			803,059
Accumulated other comprehensive loss	(38,330		)	(5,372		)
Treasury stock at cost	(36,078		)	(36,078		)
Shareholders’ equity related to Cubic	742,414			782,278
Noncontrolling interest in variable interest entity	246			223
Total shareholders’ equity	742,660			782,501
	$	1,257,948		$	1,194,606

See accompanying notes.

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CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Six Months Ended						Three Months Ended
	March 31,						March 31,
	2015			2014			2015			2014
Operating Activities:
Net income (loss)	$	(5,849	)	$	24,549		$	(11,011	)	$	16,120
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	20,064			15,229			11,117			7,852
Share-based compensation expense	5,291			2,585			4,238			1,725
Changes in operating assets and liabilities net of effects from acquisitions	41,592			(71,662		)	48,473			(15,201		)
NET CASH PROVIDED BY (USED IN) IN OPERATING ACTIVITIES	61,098			(29,299		)	52,817			10,496

Investing Activities:
Acquisition of businesses, net of cash acquired	(89,460		)	(79,683		)	(6,037		)	(10,708		)
Purchases of property, plant and equipment	(2,580		)	(10,947		)	(1,704		)	(6,025		)
Purchases of marketable securities	(4,590		)	—			(4,590		)	—
Proceeds from sales or maturities of marketable securities	1,196			4,055			1,196			4,055
Purchases of other assets	(2,993		)	—			(641		)	—
NET CASH USED IN INVESTING ACTIVITIES	(98,427		)	(86,575		)	(11,776		)	(12,678		)

Financing Activities:
Proceeds from short-term borrowings	70,000			30,000			10,000			10,000
Principal payments on short-term borrowings	(15,000		)	—			(15,000		)	—
Principal payments on long-term debt	(269		)	(284		)	(131		)	(144		)
Proceeds from issuance of common stock	—			113			—			113
Purchases of common stock	(1,723		)	—			(141		)	—
Dividends paid	(3,627		)	(3,215		)	(3,627		)	(3,215		)
Net change in restricted cash	(101		)	397			(42		)	457
Contingent consideration payments related to acquisitions of businessess	—			(1,117		)	—			(447		)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	49,280			25,894			(8,941		)	6,764

Effect of exchange rates on cash	(19,696		)	11,431			(11,259		)	(615		)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(7,745		)	(78,549		)	20,841			3,967

Cash and cash equivalents at the beginning of the period	215,849			203,892			187,263			121,376

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	$	208,104		$	125,343		$	208,104		$	125,343

Supplemental disclosure of non-cash investing and financing activities:

Liability incurred to acquire DTECH, net	$	8,854		$	—		$	—		$	—
Liability incurred to acquire Intific, net	$	1,173		$	2,233		$	—		$	2,233
Liability incurred to acquire ITMS, net	$	—		$	3,301		$	—		$	—
Liability incurred to acquire internal use software	$	10,800		$	—		$	10,800		$	—

See accompanying notes.

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CUBIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

March 31, 2015

Note 1 — Basis for Presentation

Cubic Corporation (“we”, “us”, 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 accounting principles generally accepted in the United States for complete financial statements.

In our opinion, all adjustments necessary for a fair presentation of these financial statements have been included, and are of a normal and recurring nature, with the exceptions discussed within the Audit Committee Investigation and Correction of Immaterial Errors subsections below, considered necessary to fairly state the financial position of Cubic Corporation at March 31, 2015 and September 30, 2014; the results of its operations for the three- and six-month periods ended March 31, 2015 and 2014; and its cash flows for the three- and six-month periods ended March 31, 2015 and 2014. Operating results for the three- and six-month periods ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending September 30, 2015. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended September 30, 2014.

In February 2015, we implemented a plan to restructure our defense services and defense systems businesses into a single business called Cubic Global Defense (CGD) to better align our defense business organizational structure with customer requirements, increase operational efficiencies and improve collaboration and innovation across the company. After this restructuring there is now a single, combined management structure for our legacy Cubic Defense Systems (CDS) and legacy Mission Support Services (MSS) segments. However, for segment financial reporting purposes, we continue to report the financial results of our defense systems and defense services segments separately. These two reporting segments have been renamed Cubic Global Defense Systems (CGD Systems) and Cubic Global Defense Services (CGD Services), respectively. There have been no significant changes in the operations that are included in each of these reporting segments as a result of the restructuring.

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.

Audit Committee Investigation

Our Audit Committee has conducted an investigation with the assistance of Latham & Watkins LLP and Deloitte FAS LLP to review our controls and procedures in connection with programs that are accounted for under the percentage of completion method. Through the application of the Company’s internal controls, management identified an issue which led to the investigation. As a result of the investigation, the Audit Committee and management of the Company have together determined that as of September 30, 2014, the total estimated costs of certain of our CGD Systems segment contracts were inappropriately reduced during its accounting close for the year ended September 30, 2014. The inappropriate reduction of the estimated costs to complete these contracts resulted in the overstatement of CGD Systems sales and operating income by approximately $750,000 for the fourth quarter and full year of fiscal 2014.

Correction of Immaterial Errors

During the accounting close for our March 31, 2015 financial statements, we identified certain errors, unrelated to the matters described in the paragraph above, in our September 30, 2014 financial statements. These errors included an overstatement of revenue recognition on one contract and the understatement of cost of sales on a small number of contracts. The cumulative impact of these errors resulted in an overstatement of the Company’s operating income for the year ended September 30, 2014 of $1.6 million.

The cumulative amount of the errors described in the two paragraphs above overstated the Company’s operating income for fiscal 2014 by $2.4 million and understated the Company’s operating income for 2013 and prior years, cumulatively, by $0.3 million. The impact of correcting the above mentioned errors in the quarter ended December 31, 2014 understated operating income for the quarter by $2.1 million. The impact of correcting these errors (overstated) understated the following amounts in the quarter ended December 31, 2014 (in thousands):

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	Audit Committee
	Investigation
	Error		Other Errors			Total Errors

Net sales:
Products	$	747	$	517		$	1,264

Costs and expenses:
Products	—		138			138
Services	—		438			438
Selling, general and administrative	—		(1,385		)	(1,385		)
	—		(809		)	(809		)

Operating income	747		1,326			2,073

Income before income taxes	747		1,326			2,073

Income taxes	299		490			789

Net income attributable to Cubic	$	448	$	836		$	1,284

Based on a qualitative and quantitative analysis of these errors, management concluded that all such errors are cumulatively and individually considered immaterial to the 2014 financial statements and are immaterial to the expected full year results for 2015 and had no effect on the trend of financial results. As such, these errors have been corrected in the financial statements for the quarter ended December 31, 2014.

Interim Goodwill Impairment Test

At March 31, 2015 our Defense Services reporting unit had $94.4 million of goodwill. In the second quarter of fiscal 2015, we learned that our Defense Services business had not won two contracts for new work on which it had submitted proposals. Consequently, in the second quarter our Defense Services business lowered its internal profitability projections. As such, in the second quarter of fiscal 2015 we believed that it was appropriate to perform an interim goodwill impairment test for our Defense Services reporting unit.

The test for goodwill impairment is a two-step process. The first step of the test is performed by comparing the fair value of each reporting unit to its carrying value, including recorded goodwill. If the carrying value of a reporting unit exceeds its fair value, the second step is performed to measure the amount of the impairment, if any, by comparing the implied fair value of goodwill to its carrying value. Any resulting impairment determined would be recorded in the current period.

Determining the fair value of a reporting unit for purposes of the goodwill impairment test is judgmental in nature and involves the use of estimates and assumptions. These estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and also the magnitude of any such charge. Estimates of fair value are primarily determined using discounted cash flows and market multiples from publicly traded comparable companies. These approaches use significant estimates and assumptions including projected future cash flows, discount rate reflecting the inherent risk in future cash flows, perpetual growth rate and determination of appropriate market comparables. Based upon the results of the first step of the impairment analysis that we performed, the estimated fair value for our Defense Services reporting unit exceeded its carrying value. As such, no impairment of goodwill was recorded in connection with our interim impairment test.

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Unforeseen negative changes in future business or other market conditions for any of our reporting units including margin compression or loss of business, could cause recorded goodwill to be impaired in the future. Also, changes in estimates and assumptions we make in conducting our goodwill assessment could affect the estimated fair value of our reporting units and could result in a goodwill impairment charge in a future period.

There have been no material changes to our significant accounting policies as compared with the significant accounting policies described in our Annual Report on Form 10-K for the year ended September 30, 2014.

Recent Accounting Pronouncements

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists which requires companies to present in the financial statements an unrecognized tax benefit as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward except to the extent such items are not available or not intended to be used at the reporting date to settle any additional income taxes that would result from the disallowance of a tax position. In such instances, the unrecognized tax benefit is required to be presented in the financial statements as a liability and not be combined with deferred tax assets. This amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Accordingly, we adopted this standard in the first quarter of fiscal year 2015. This adoption did not have a significant impact on our financial statements.

In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments contained in this update change the criteria for reporting discontinued operations and enhance the reporting requirements for discontinued operations. Under the revised standard, a discontinued operation must represent a strategic shift that has or will have a major effect on an entity’s operations and financial results. Examples could include a disposal of a major line of business, a major geographical area, a major equity method investment, or other major parts of an entity. The revised standard will also allow an entity to have certain continuing cash flows or involvement with the component after the disposal. Additionally, the standard requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. We adopted this standard in the second quarter of fiscal year 2015. This adoption did not have a significant impact on our financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance and will require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. ASU 2014-09 will be effective for us starting in the first quarter of fiscal 2018. However, on April 1, 2015, the FASB voted to propose a one-year deferral to the effective date, but to permit entities to adopt one year earlier if they choose (i.e., the original effective date). The proposal will be subject to the FASB’s due process requirement, which includes a period for public comments. ASU 2014-09 allows for two methods of adoption: (a) “full retrospective” adoption, meaning the standard is applied to all periods presented, or (b) “modified retrospective” adoption, meaning the cumulative effect of applying ASU 2014-09 is recognized as an adjustment to the fiscal 2018 opening retained earnings balance. We have not yet determined which method of adoption we will select. As the new standard will supersede substantially all existing revenue guidance affecting us under GAAP, it could impact revenue and cost recognition on a significant number of contracts across our business segments, in addition to our business processes and our information technology systems. As a result, our evaluation of the effect of the new standard will likely extend over several future periods.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern, which requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and provide related footnote disclosures. The guidance is effective for annual and interim reporting periods beginning on or after December 15, 2016. Early adoption is permitted for financial statements that have not been previously issued. This adoption is not expected to have a significant impact on our financial statements.

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The new standard modifies current guidance on consolidation under the variable interest model and the voting model. ASU 2015-02 will be effective for the Company beginning in the first quarter of fiscal 2016. We are currently evaluating the impact of the ASU 2015-02 on our financial statements.

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Note 2 — Acquisitions

Each of the following acquisitions has been treated as a business combination for accounting purposes. The results of operations of each acquired business has been included in our consolidated financial statements since the respective date of each acquisition.

DTECH LABS, Inc.

On December 16, 2014 we acquired all of the outstanding capital stock of DTECH LABs, Inc. (DTECH). DTECH, based in Sterling, VA, is a provider of modular networking and baseband communications equipment and adds networking capability to our secure communications business in our CGD Systems segment. In addition, this acquisition expands the portfolio of product offerings and the customer base of our CGD Systems segment.

For the three months ending March 31, 2015, the amount of DTECH’s sales and net loss after taxes included in our Condensed Consolidated Statement of Income (Loss) were $10.8 million and $1.0 million, respectively. For the six months ended March 31, 2015, the amount of DTECH’s sales and net loss after taxes included in our Condensed Consolidated Statement of Income (Loss) were $11.8 million and $1.8 million, respectively. Included in DTECH’s operating results for the six months ended March 31, 2015 are $0.8 million of transaction and acquisition related costs before related income taxes.

The purchase agreement states that the cost of the acquisition is approximately $99.5 million, adjusted by the difference between the net working capital acquired and the targeted working capital amounts and adjusted for other acquisition related payments made upon closing, plus a contingent amount of up to $15.0 million based upon DTECH’s achievement of revenue and gross profit targets in the future. The acquisition date fair value of the consideration transferred is estimated to be $99.2 million. In December 2014, we paid cash of approximately $83.4 million and in March 2015, we paid cash of approximately $6.0 million. At March 31, 2015 we have recorded a liability of $8.9 million as an estimate of the fair value of additional cash consideration that will be due to the seller in the future. The fair value of the additional consideration is made up of two components, the holdback consideration and the contingent consideration.

Approximately $5.4 million of cash consideration (Holdback Consideration) will be paid to the seller over time when certain events occur in the future. The fair value of the Holdback Consideration is estimated to approximate $5.0 million using a discounted cash flow model, based upon the expected timing of the payment of the Holdback Consideration. In addition to the Holdback Consideration, we will pay the seller up to $15.0 million of contingent cash consideration based upon DTECH’s achievement of revenue and gross profit targets. The purchase agreement specifies independent revenue and gross profit targets for the period from our acquisition of DTECH through September 30, 2015, and separately for each of fiscal 2016 and fiscal 2017. The total fair value of the contingent consideration has been estimated at $3.9 million using a real options approach (see Note 5 for further discussion of fair value measurements). The contingent consideration liability will be re-measured to fair value at each reporting date until the contingency is resolved and any changes in fair value will be recognized in earnings. There has been no change in the estimated fair value of the total estimated contingent payments to be made to the seller since the date of the acquisition.

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The acquisition of DTECH was paid for with a combination of funds from our existing cash resources and borrowings on our revolving credit facility. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

Customer relationships	$	35.1
Non compete agreements	0.7
Backlog	2.1
Cash	0.9
Accounts receivable	5.4
Inventory	4.1
Warranty obligation	(0.4		)
Tax liabilities	(3.3		)
Accounts payable and accrued expenses	(3.4		)
Other net assets acquired	0.2
Net identifiable assets acquired	41.4
Goodwill	57.8
Net assets acquired	$	99.2

The estimated fair values of the assets acquired and liabilities assumed, including the fair value of purchased intangibles, are preliminary estimates pending the finalization of our valuation analyses. The estimated fair value of the accounts receivable, inventory, warranty obligation, accounts payable and accrued expenses will be finalized as further information is received from the seller regarding these items and analysis of this information is completed.

The preliminary 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 customer relationships and backlog valuation used the excess earnings approach and the non-compete agreements used the with-and-without approach.

The intangible assets will be amortized using a combination of straight-line and accelerated methods based on the expected cash flows from the assets, over a weighted average useful life of two years from the date of acquisition and is expected to be deductible for tax purposes.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of DTECH with our existing CGD Systems business, including the synergies expected from combining the networking and secure communications technologies of DTECH, and complementary products that will enhance our overall product and service portfolio. The goodwill also consists of 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 CGD Systems segment and is expected to be deductible for tax purposes.

Based upon the preliminary estimate of the fair value of identifiable intangible assets, the estimated amortization expense related to the intangible assets recorded in connection with our acquisition of DTECH for future periods is as follows (in millions):

Year Ended September 30,
2015	$	9.2
2016	8.0
2017	6.8
2018	5.5
2019	4.1
Thereafter	4.3

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Intific

On February 28, 2014 we acquired all of the outstanding capital stock of Intific Inc. (Intific). Intific is focused on software and game-based solutions in modeling and simulation, training and education, cyber warfare, and neuroscience. The acquisition of Intific expanded the portfolio of services and customer base of our CGD Systems segment.

For the three months ended March 31, 2015, the amount of Intific’s sales and net loss after taxes included in our Condensed Consolidated Statement of Income (Loss) were $3.4 million and $0.5 million, respectively. For the three months ended March 31, 2014, the amount of Intific’s sales and net loss after taxes included in our Condensed Consolidated Statement of Income (Loss) were $0.8 million and $2.1 million, respectively. Included in Intific’s operating results for the three months ended March 31, 2014 are $0.2 million of transaction and acquisition related costs and $3.1 million of compensation expense which was paid to Intific employees upon the close of the acquisition.

For the six months ended March 31, 2015, the amount of Intific’s sales and net loss after taxes included in our Condensed Consolidated Statement of Income (Loss) were $6.8 million and $1.2 million, respectively.

The acquisition date fair value of the consideration transferred was $12.4 million. Through March 31, 2015, we have paid cash of approximately $11.2 million to the seller and as of March 31, 2015 we have accrued a liability of $1.2 million for the remaining cash to be paid.

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

Customer relationships	$	2.0
Technology	0.7
Backlog	0.7
Other intangible assets	0.2
Accounts receivable	1.5
Deferred tax assets	1.5
Accounts payable and accrued expenses	(0.6		)
Deferred tax liabilities	(1.5		)
Other net assets acquired	0.5
Net identifiable assets acquired	5.0
Goodwill	7.4
Net assets acquired	$	12.4

The net deferred tax assets and liabilities offset each other to a negligible amount. However, the deferred tax liabilities of $1.5 million were primarily recorded to reflect the tax impact of amortization related to identified intangible assets that is not expected to be deductible for tax purposes, net of acquisition consideration that is a tax deductible expense. The deferred tax assets of $1.5 million primarily related to the future tax deduction for the cancellation of unvested options.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of Intific with our existing CGD Systems business and the acquired assembled workforce. The anticipated synergies include the ability to expand services offerings and cost reductions. The amount recorded as goodwill is allocated to our CGD Systems segment and is not expected to be deductible for tax purposes.

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The estimated amortization expense related to the intangible assets recorded in connection with our acquisition of Intific for future periods is as follows (in millions):

Year Ended September 30,
2015	$	0.9
2016	0.7
2017	0.6
2018	0.5
2019	0.2
Thereafter	0.1

ITMS

On November 26, 2013 we acquired all of the outstanding capital stock of Intelligent Transport Management Solutions Limited (ITMS) from Serco Limited. ITMS is a provider of traffic management systems technology, traffic and road enforcement and maintenance of traffic signals, emergency equipment and other critical road and tunnel infrastructure. The acquisition of ITMS expands the portfolio of services and customer base of our Cubic Transportation Systems (CTS) segment.

For the three months ended March 31, 2015, the amount of ITMS’ sales and net loss after taxes included in our Condensed Consolidated Statement of Income (Loss) were $12.2 million and $0.5 million, respectively. For the three months ended March 31, 2014, the amount of ITMS’ sales and net loss after taxes included in our Condensed Consolidated Statement of Income (Loss) were $12.6 million and $0.2 million, respectively.

For the six months ended March 31, 2015, the amount of ITMS’ sales and net loss after taxes included in our Condensed Consolidated Statement of Income (Loss) were $22.2 million and $1.6 million, respectively. For the six months ended March 31, 2014, the amount of ITMS’ sales and net loss after taxes included in our Condensed Consolidated Statement of Income (Loss) were $17.3 million and $0.7 million, respectively. Included in the ITMS operating results are $0.1 million and $0.5 million of transaction costs incurred during the three and six months ended March 31, 2014, respectively.

The acquisition date fair value of the consideration transferred was $72.2 million. We paid the seller cash of $69.0 million in November 2013 and in May 2014, we paid the remaining cash of $3.2 million

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

Customer relationships	$	15.7
Intellectual property	1.6
Backlog	5.7
Supplier relationships	0.6
Agreements with seller	1.3
Accounts receivable - billed	4.4
Accounts receivable - unbilled	6.9
Deferred tax liabilities, net	(0.2		)
Deferred revenue	(2.6		)
Accounts payable and accrued expenses	(4.6		)
Other net assets acquired	2.6
Net identifiable assets acquired	31.4
Goodwill	40.8
Net assets acquired	$	72.2

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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 customer relationships and backlog valuation used the excess earnings approach and the non-compete agreement and seller agreements valuations used the with-and-without approach. The supplier relationship and intellectual property valuations used the replacement cost approach.

The intangible assets will be amortized using a combination of straight-line and accelerated methods based on the expected cash flows from the assets, over a weighted average useful life of two years from the date of acquisition. Future amortization of purchased intangibles is not deductible for tax purposes.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of ITMS with our existing CTS business and the acquired assembled workforce. The anticipated synergies include the ability to expand services offerings and cost reductions. The amount recorded as goodwill is allocated to our CTS segment and is not expected to be deductible for tax purposes.

The estimated amortization expense related to the intangible assets recorded in connection with our acquisition of ITMS for future periods is as follows (in millions):

Year Ended September 30,
2015	$	5.9
2016	4.9
2017	3.9
2018	2.9
2019	0.9
Thereafter	0.1

Changes in goodwill for the six months ended March 31, 2015 were as follows (in millions):

				Cubic Global		Cubic Global
	Transportation			Defense		Defense
	Systems			Services		Systems			Total

Balances at September 30, 2014	$	59.2		$	94.4	$	30.6		$	184.2
Acquisitions	—			—		57.8			57.8
Foreign currency exchange rate changes	(4.2		)	—		(0.4		)	(4.6		)
Balances at March 31, 2015	$	55.0		$	94.4	$	88.0		$	237.4

Pro forma information

The following unaudited pro forma information presents our consolidated results of operations as if DTECH, Intific and ITMS had been included in our consolidated results since October 1, 2013 (in millions):

	Six Months Ended					Three Months Ended
	March 31,					March 31,
	2015			2014		2015			2014
Net sales	$	667.0		$	694.0	$	338.8		$	367.3

Net income (loss) attributable to Cubic	$	(4.8	)	$	24.1	$	(11.0	)	$	16.4

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The pro forma information includes adjustments to give effect to pro forma events that are directly attributable to the acquisitions and have a continuing impact on operations including the amortization of purchased intangibles and the elimination of interest expense for the repayment of debt. There were no material, nonrecurring pro forma adjustments directly attributable to the business combinations included in the reported pro forma sales and net income (loss) attributable to Cubic. No adjustments were made for transaction expenses, other adjustments 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, 2013, and it does not purport to project our future operating results.

Note 3 — Net Income (Loss) Per Share

Basic net income (loss) per share (EPS) is computed by dividing the net income (loss) 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, 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 restricted stock units. Dilutive restricted stock units are calculated based on the average share price for each fiscal period using the treasury stock method. For RSUs with performance-based vesting, no common equivalent shares are included in the computation of diluted EPS until the related performance criteria have been met. In periods with a net loss, common equivalent shares are not included in the computation of diluted EPS, because to do so would be anti-dilutive.

Basic and diluted EPS are computed as follows (amounts in thousands, except per share data).

	Six Months Ended					Three Months Ended
	March 31,					March 31,
	2015			2014		2015			2014

Net income (loss) attributable to Cubic	$	(5,872	)	$	24,480	$	(11,024	)	$	16,092

Weighted average shares - basic	26,861			26,785		26,862			26,786
Effect of dilutive securities	—			107		—			115
Weighted average shares - diluted	26,861			26,892		26,862			26,901

Net income (loss) per share attributable to Cubic, basic	$	(0.22	)	$	0.91	$	(0.41	)	$	0.60
Effect of dilutive securities	—			—		—			—
Net income (loss) per share attributable to Cubic, diluted	$	(0.22	)	$	0.91	$	(0.41	)	$	0.60

Anti-dilutive employee share-based awards	762			15		762			—

Note 4 — Balance Sheet Details

Marketable Securities

Marketable securities consist of fixed time deposits with short-term maturities. Marketable securities are classified and accounted for as available-for-sale. These investments are recorded at fair value in the accompanying Condensed Consolidated Balance Sheets and the change in fair value is recorded, net of taxes, as a component of other comprehensive income (loss). There have been no significant realized or unrealized gains or losses on these marketable securities to date. Marketable securities have been classified as current assets in the accompanying Condensed Consolidated Balance Sheets based upon the nature of the securities and availability for use in current operations.

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Accounts Receivable

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

	March 31,			September 30,
	2015			2014

Trade and other receivables	$	13,244		$	30,593
Long-term contracts:
Billed	98,364			121,871
Unbilled	279,426			258,074
Allowance for doubtful accounts	(299		)	(489		)
Total accounts receivable	390,735			410,049
Less estimated amounts not currently due	(14,310		)	(15,870		)
Current accounts receivable	$	376,425		$	394,179

The amount classified as not currently due is an estimate of the amount of long-term contract accounts receivable that will not be collected within one year from March 31, 2015 under transportation systems contracts in the U.S. and Australia based upon the payment terms in the contracts. The non-current balance at September 30, 2014 represented non-current amounts due from customers under transportation systems contracts in the same locations.

Inventories

Inventories consist of the following (in thousands):

	March 31,			September 30,
	2015			2014

Work in process and inventoried costs under long-term contracts	$	60,480		$	58,440
Materials and purchased parts	2,985			125
Customer advances	(14,686		)	(19,790		)
Net inventories	$	48,779		$	38,775

Pursuant to contract provisions, agencies of the U.S. government and certain other customers have title to, or security interest in, inventories related to such contracts as a result of advances, performance-based payments, and progress payments. Contract advances, performance-based payments and progress payments received are recorded as an offset against the related inventory balances for contracts that are accounted for on a percentage-of-completion basis using units-of-delivery as the basis to measure progress toward completing the contract. This determination is performed on a contract by contract basis. Any amount of payments received in excess of the cumulative amount of accounts receivable and inventoried costs for a contract is classified as customer advances, which is classified as a liability on the balance sheet.

At March 31, 2015, work in process and inventoried costs under long-term contracts includes approximately $1.1 million in costs incurred outside the scope of work or in advance of a contract award compared to $2.3 million at September 30, 2014. We believe it is probable that we will recover the costs inventoried at March 31, 2015, plus a profit margin, under contract change orders or awards within the next year.

Long-term Capitalized Costs

Long-term capitalized contract costs consist of costs incurred on a contract to develop and manufacture a transportation fare system for a customer for which revenue recognition did not begin until the customer began operating the system in the fourth fiscal quarter of 2013. These capitalized costs are being recognized as cost of sales based upon the ratio of revenue recorded during the period compared to the revenue expected to be recognized over the term of the contract, which is through January 2024. Long-term capitalized costs that were recognized as cost of sales totaled $2.1 million and $3.9 million for the quarter and six-month periods

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ended March 31, 2015, respectively and $0.8 million and $1.3 million for the quarter and six-month periods ended March 31, 2014, respectively. The balance of long-term capitalized costs at March 31, 2015 is expected to be recognized as cost of sales in approximately equal quarterly amounts in future months through the term of the contract.

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 long-term liabilities in our Condensed Consolidated Balance Sheets and totaled $9.9 million and $9.5 million at March 31, 2015 and September 30, 2014, respectively.

In the first quarter of fiscal 2015, we began making 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 as of March 31, 2015 was $3.0 million. These assets are classified as other non-current assets and consist of insurance contracts with a carrying value of $2.0 million and marketable securities with a carrying value of $1.0 million. The carrying value of the life insurance contracts is based on the cash surrender value of the policies. The marketable securities in the rabbi trust are carried at fair value, which is based upon quoted market prices for identical securities. 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 Income.

Note 5 — 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 fair value of cash equivalents and short-term investments approximates their cost. The fair value of our marketable securities is determined based on quoted market prices for identical securities. 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 our contingent consideration liability to the seller of DTECH is revalued to its 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. The fair value of the contingent consideration was estimated using a real options approach. Each annual payment was modeled using a portfolio of long and short digital options written on the underlying earnings metric (revenue or gross profit). The strike price for each option is the respective earnings threshold as specified in the agreement, and the spot price is calibrated to the revenue and gross profit forecast by calculating the present value of the corresponding projected earnings metric using a risk-adjusted discount rate. The volatility for the underlying earnings metrics was estimated to be 22% based on analysis of comparable guideline public companies. The risk-free rate was selected based on the quoted yields for U.S. Treasury securities with terms matching the earn-out payment period. The inputs to this model are significant unobservable inputs and therefore represent Level 3 measurements within the fair value hierarchy. There was no change in the fair value of the contingent consideration between the date of the acquisition of DTECH and March 31, 2015; therefore, no contingent consideration expense was recorded in the quarter. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date 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.

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The following table presents assets and liabilities measured and recorded at fair value on our balance sheets on a recurring basis (in thousands):

	March 31, 2015
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	30,149	$	26,746	$	—	$	56,895
Marketable securities	—		4,482		—		4,482
Current derivative assets	—		12,976		—		12,976
Noncurrent derivative assets	—		15,710		—		15,710
Marketable securities in rabbi trust	998		—		—		998
Total assets measured at fair value	$	31,147	$	59,914	$	—	$	91,061
Liabilities
Current derivative liabilities	$	—	$	12,036	$	—	$	12,036
Noncurrent derivative liabilities	—		15,710		—		15,710
Current contingent consideration to seller of DTECH	—		—		1,679		1,679
Noncurrent contingent consideration to seller of DTECH	—		—		2,221		2,221
Total liabilities measured at fair value	$	—	$	27,746	$	3,900	$	31,646

	September 30, 2014
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	46,183	$	34,511	$	—	$	80,694
Marketable securities	—		1,196		—		1,196
Current derivative assets	—		7,389		—		7,389
Noncurrent derivative assets	—		5,920		—		5,920
Total assets measured at fair value	$	46,183	$	49,016	$	—	$	95,199
Liabilities
Current derivative liabilities	$	—	$	6,645	$	—	$	6,645
Noncurrent derivative liabilities	—		5,878		—		5,878
Total liabilities measured at fair value	$	—	$	12,523	$	—	$	12,523

We carry financial instruments, including cash equivalents, accounts receivable, accounts payable and accrued liabilities at cost, which we believe approximates fair value because of the short-term maturity of these instruments.

The following table presents the estimated fair value and carrying value of our long-term debt (in millions):

	March 31,		September 30,
	2015		2014
Fair value	$	101.9	$	99.6
Carrying value	$	103.5	$	102.4

The fair value of long-term debt is calculated by discounting the value of the note based on market interest rates for similar debt instruments, which is a Level 2 technique.

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Note 6 — Financing Arrangements

In March 2013, we entered into a note purchase and private shelf agreement pursuant to which we issued $100.0 million of senior unsecured notes, bearing interest at a rate of 3.35% and maturing on March 12, 2025. Interest on these notes is due semi-annually and principal payments are due from 2021 through 2025. In addition, pursuant to the agreement, through March 2016 we may from time to time issue and sell, and the purchasers may in their sole discretion purchase, additional senior notes in aggregate principal amount of up to $25.0 million that will have terms, including interest rate, as we and the purchasers may agree upon at the time of issuance.

We have a committed five-year revolving credit agreement (Revolving Credit Agreement) with a group of financial institutions in the amount of $200 million, which expires in May 2017. The available line of credit is reduced by any letters of credit issued under the Revolving Credit Agreement. As of March 31, 2015, there were borrowings totaling $55.0 million under this agreement and there were letters of credit outstanding totaling $25.6 million, which reduce the available line of credit to $119.4 million.

We have a secured letter of credit facility agreement with a bank (Secured Letter of Credit Facility) which is cancellable by us at any time upon the completion of certain conditions to the satisfaction of the bank. At March 31, 2015 there were letters of credit outstanding under this agreement of $62.5 million. Restricted cash at March 31, 2015 of $69.2 million was held on deposit in the U.K. as collateral in support of this Secured Letter of Credit Facility. We are required to leave the cash in the restricted account so long as the bank continues to maintain associated letters of credit under the facility. The maximum amount of letters of credit currently allowed by the facility is $62.8 million, and any increase above this amount would require bank approval and additional restricted funds to be placed on deposit. We may choose at any time to terminate the facility and move the associated letters of credit to another credit facility. Letters of credit outstanding under the Secured Letter of Credit Facility do not reduce the available line of credit under the Revolving Credit Agreement.

As of March 31, 2015, we had letters of credit and bank guarantees outstanding totaling $77.1 million, including the letters of credit outstanding under the Revolving Credit Agreement and the Secured Letter of Credit Facility, which guarantee either our performance or customer advances under certain contracts. In addition, we had financial letters of credit outstanding totaling $22.8 million as of March 31, 2015, which primarily guarantee 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 maintain short-term borrowing arrangements in New Zealand and Australia totaling $0.5 million New Zealand dollars (equivalent to approximately $0.4 million) and $3.0 million Australian dollars (equivalent to approximately $2.3 million) to help meet the short- term working capital requirements of our subsidiaries in those countries. At March 31, 2015, no amounts were outstanding under these borrowing arrangements.

The terms of certain of our lending and credit agreements include provisions that require and/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 March 31, 2015, these agreements do not restrict such distributions to shareholders. We have been unable to comply with covenants requiring us to provide our lenders with interim financial information on a timely basis. However, we have entered into consents with our lenders which have included extensions to the dates by which we are required to deliver our interim financial information to May 29, 2015, and as such we are not in default under our lending arrangements or credit agreements.

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 other current liabilities on the balance sheet amounted to $8.7 million and $9.1 million as of March 31, 2015 and September 30, 2014, respectively.

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Note 7 — Pension Plans

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

	Six Months Ended						Three Months Ended
	March 31,						March 31,
	2015			2014			2015			2014
Service cost	$	339		$	306		$	167		$	154
Interest cost	4,585			4,956			2,253			2,485
Expected return on plan assets	(6,880		)	(6,556		)	(3,492		)	(3,287		)
Amortization of actuarial loss	338			397			184			199
Administrative expenses	79			76			41			38
Net pension benefit	$	(1,539	)	$	(821	)	$	(847	)	$	(411	)

Note 8 - Stockholders’ Equity

Long Term Equity Incentive Plan

On March 21, 2013, the Executive Compensation Committee of the Board of Directors (Compensation Committee) approved a long- term equity incentive award program. Through March 31, 2015, the Compensation Committee has granted 544,192 RSU’s with time-based vesting and 488,604 RSU’s with performance-based vesting under this program.

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

The RSUs granted with time-based vesting 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 through such vesting date.

The performance-based RSUs granted to participants vest over three-year performance periods based on Cubic’s achievement of performance goals established by the Compensation Committee over the performance periods, subject to the recipient’s continued service through the end of the respective performance periods. For the performance-based RSUs granted to date, the vesting will be contingent upon Cubic meeting one of three types of vesting criteria over the performance period. These three categories of vesting criteria consist of revenue growth targets, earnings targets, and return on equity targets. The level at which Cubic performs against scalable targets over the performance periods will determine the percentage of the RSUs that will ultimately vest.

Through March 31, 2015, Cubic has granted 1,032,796 restricted stock units of which 208,968 have vested. The grant date fair value of each restricted stock unit is the fair market value of one share of our common stock at the grant date. At March 31, 2015, 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 365,002.

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The following table summarizes our RSU activity:

	Unvested Restricted Stock Units
	Number of Shares		Weighted- Average Grant- Date Fair Value
Unvested at September 30, 2014	642,949		$	46.43
Granted	301,211		48.13
Vested	(138,974	)	45.81
Forfeited	(43,341	)	47.48
Unvested at March 31, 2015	761,845		$	47.17

Note 9 - Stock-Based Compensation

We recorded non-cash compensation expense related to stock-based awards for the three- and six-month period ended March 31, 2015 and 2014 as follows (in thousands):

	Six Months Ended				Three Months Ended
	March 31,				March 31,
	2015		2014		2015		2014
Cost of sales	$	419	$	205	$	246	$	144
Selling, general and administrative	4,872		2,380		3,992		1,581
	$	5,291	$	2,585	$	4,238	$	1,725

In the second quarter of fiscal 2015, the Board of Directors approved the acceleration of vesting of certain restricted stock units for the Company’s Advisor to the Chief Executive Officer, and former Chief Executive Officer in connection with his retirement. We recognized $1.7 million of stock-based compensation expense in the second quarter of fiscal 2015 as a result of this stock award.

As of March 31, 2015, there was $27.6 million of unrecognized compensation cost 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 $17.5 million. This amount is expected to be recognized over a weighted-average period of 1.6 years.

We are required to 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 as of March 31, 2015. To the extent the actual forfeiture rate is different from what we have estimated, stock-based compensation related to these awards will be different from our expectations.

Note 10 — Income Taxes

Our effective tax rate for the three months ended March 31, 2015 was 148% as compared to 22% for the year ended September 30, 2014. The effective tax rate for the three months ended March 31, 2015 is higher than the prior full year effective tax rate due to the Company establishing a valuation allowance against U.S. deferred tax assets that resulted in a charge to income tax expense of $29.3 million with an unfavorable impact on the effective tax rate of 130% for the quarter ended March 31, 2015.

The amount of net unrecognized tax benefits was $7.5 million as of March 31, 2015 and $4.7 million as of September 30, 2014, exclusive of interest and penalties. The increase in net unrecognized tax benefits was primarily related to acquisitions. At March 31, 2015, the amount of net unrecognized tax benefits from permanent tax adjustments that, if recognized, would favorably impact the effective rate was $4.7 million. During the next 12 months, it is reasonably possible that resolution of reviews by taxing authorities, both domestic and international, could be reached with respect to approximately $1.0 million of the net unrecognized tax benefits depending on the timing of examinations and expiration of statute of limitations, either because our tax positions are sustained or because we agree to their disallowance and pay the related income tax.

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We are subject to ongoing audits from various taxing authorities in the jurisdictions in which we do business. As of March 31, 2015, the tax years open under the statute of limitations in significant jurisdictions include fiscal years 2011-2014 in the U.S. We believe we have adequately provided for uncertain tax issues that have not yet been resolved with federal, state and foreign tax authorities.

Companies are required to assess whether a valuation allowance should be recorded against their deferred tax assets (“DTAs”) based on the consideration of all available evidence, using a “more likely than not” realization standard. The four sources of taxable income that must be considered in determining whether DTAs will be realized are, (1) future reversals of existing taxable temporary differences (i.e. offset of gross deferred tax assets against gross deferred tax liabilities); (2) taxable income in prior carryback years, if carryback is permitted under the tax law; (3) tax planning strategies and (4) future taxable income exclusive of reversing temporary differences and carryforwards.

In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified. We have evaluated our DTAs, including an assessment of our cumulative income or loss over the prior three-year period and future periods, to determine if a valuation allowance was required. A significant negative factor in our assessment was Cubic’s three-year cumulative U.S. loss history at the end of the fiscal year 2014 and projected for fiscal year 2015.

After a review of the four sources of taxable income described above and in view of our three-year cumulative U.S. loss, we recorded an increase in our valuation allowance on U.S. DTAs, with a corresponding charge to our income tax provision, of approximately $29.3 million in the second quarter of fiscal 2015. Through March 31, 2015, a total valuation allowance of $45.4 million has been established for U.S. net deferred tax assets, certain foreign operating losses and other foreign assets.

If sufficient positive evidence arises in the future, such as a sustained return to profitability in the U.S., any existing valuation allowance could be reversed as appropriate, decreasing income tax expense in the period that such conclusion is reached.

The non-cash charge to establish a valuation allowance does not have any impact on the Company’s consolidated operations or cash flows, nor does such an allowance preclude the Company from using loss carryforwards or other deferred tax assets in the future. Until the Company re-establishes a pattern of continuing profitability in the U.S. tax jurisdiction, in accordance with the applicable accounting guidance, U.S. income tax expense or benefit related to the recognition of deferred tax assets in the condensed consolidated statement of operations for future periods will be offset by decreases or increases in the valuation allowance with no net effect on the consolidated condensed statement of operations.

Note 11 — 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. We do not use any derivative financial instruments for trading or other speculative purposes.

All derivatives are recorded at fair value, however, the classification of gains and losses resulting from changes in the fair values of derivatives are dependent on the intended use of the derivative and its resulting designation. If a derivative is designated as a fair value hedge, then a change in the fair value of the derivative is offset against the change in the fair value of the underlying hedged item and only the ineffective portion of the hedge, if any, is recognized in earnings. If a derivative is designated as a cash flow hedge, then the effective portion of a change in the fair value of the derivative is recognized as a component of accumulated other comprehensive loss until the underlying hedged item is recognized in earnings, or the forecasted transaction is no longer probable of occurring. If a derivative does not qualify as a highly effective hedge, any change in fair value is immediately recognized in earnings. We formally document all hedging relationships for all derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transactions. We classify the fair value of all derivative contracts as current or non- current assets or liabilities, depending on the realized and unrealized gain or loss position of the hedged contract at the balance sheet date, and the timing of future cash flows. The cash flows from derivatives treated as hedges are classified in the Condensed Consolidated Statements of Cash Flows in the same category as the item being hedged.

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The following table shows the notional principal amounts of our outstanding derivative instruments as of March 31, 2015 and September 30, 2014 (in thousands):

	Notional Principal
	March 31, 2015		September 30, 2014
Instruments designated as accounting hedges:
Foreign currency forwards	$	242,700	$	249,628

Instruments not designated as accounting hedges:
Foreign currency forwards	$	141,776	$	136,955

Included in the amounts not designated as accounting hedges above at March 31, 2015 and September 30, 2014 are foreign currency forwards with notional principal amounts of $133.8 million and $132.1 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 has approximately offset an equal and opposite amount of gains or losses related to the foreign currency exposure.

The notional principal amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of the Company’s exposure to credit or market loss. Credit risk represents the Company’s 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. The Company’s exposure to credit loss and market risk will vary over time as a function of interest and currency exchange rates. The amount of credit risk from derivative instruments and hedging activities was not material for the three months ended March 31, 2015 and 2014. Although the table above reflects the notional principal amounts of the Company’s 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.

The Company generally enters into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. The Company presents its derivative assets and derivative liabilities at their gross fair values. The Company did not have any derivative instruments with credit-risk related contingent features that would require it to post collateral as of March 31, 2015 or September 30, 2014.

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 as of March 31, 2015 and September 30, 2014 (in thousands):

		Fair Value
	Balance Sheet Location	March 31, 2015		September 30, 2014
Asset derivatives:
Foreign currency forwards	Other current assets	$	12,966	$	7,389
Foreign currency forwards	Other noncurrent assets	15,710		5,920
		$	28,676	$	13,309
Liability derivatives:
Foreign currency forwards	Other current liabilities	$	12,026	$	6,645
Foreign currency forwards	Other noncurrent liabilities	15,710		5,878
Total		$	27,736	$	12,523

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The tables below present gains and losses recognized in other comprehensive income (loss) for the three and six months ended March 31, 2015 and 2014 related to derivative financial instruments designated as cash flow hedges, as well as the amount of gains and losses reclassified into earnings during those periods (in thousands):

	Six Months Ended
	March 31, 2015				March 31, 2014						March 31, 2015		March 31, 2014
Derivative Type	Gains (losses) recognized in OCI		Gains (losses) reclassified into earnings - Effective Portion		Gains (losses) recognized in OCI			Gains (losses) reclassified into earnings - Effective Portion		Location of gain (loss)	Gains (losses) recognized - Ineffective Portion and amount excluded from effectiveness testing
Foreign currency forwards	$	152	$	1,336	$	(97	)	$	35	Other income/(expense), net	$	—	$	—
Forward starting swap	—		—		(217		)	—		Other income/(expense), net	—		837
	$	152	$	1,336	$	(314	)	$	35		$	—	$	837

	Three Months Ended
	March 31, 2015					March 31, 2014						March 31, 2015		March 31, 2014
Derivative Type	Gains (losses) recognized in OCI			Gains (losses) reclassified into earnings - Effective Portion		Gains (losses) recognized in OCI			Gains (losses) reclassified into earnings - Effective Portion		Location of gain (loss)	Gains (losses) recognized - Ineffective Portion and amount excluded from effectiveness testing
Foreign currency forwards	$	(142	)	$	604	$	(2,066	)	$	84	Other income/(expense), net	$	—	$	—
Forward starting swap	—			—		—			—		Other income/(expense), net	—		434
	$	(142	)	$	604	$	(2,066	)	$	84		$	—	$	434

The amount of gains and losses from derivative instruments and hedging activities classified as not highly effective did not have a material impact on the results of operations for the three and six months ended March 31, 2015. For the three and six months ended March 31, 2014, we recognized a gain of $0.4 million and $0.8 million, respectively, related to derivative instruments classified as not highly effective. 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 $0.6 million, net of income taxes.

Foreign currency forwards

In order to limit our exposure to foreign currency exchange rate risk we generally hedge those commitments greater than $50,000 by using foreign currency exchange forward and option contracts that are denominated in currencies other than the functional currency of the subsidiary responsible for the commitment, typically the British pound, Canadian dollar, Singapore dollar, euro, Swedish krona, New Zealand dollar and Australian dollar. These contracts are designed to be effective hedges regardless of the direction or magnitude of any foreign currency exchange rate change, because they result in an equal and opposite income or cost stream that offsets the change in the value of the underlying commitment.

Forward starting swap

In July 2012 we entered into a forward starting swap contract with a bank in order to manage our exposure to fluctuations in interest rates related to an anticipated financing. This forward starting swap terminated on July 1, 2014. During the quarter and six-months ended March 31, 2014 we recognized gains related to the forward starting swap of $0.4 million and $0.8 million, respectively.

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Note 12 — Segment Information

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

	Six Months Ended						Three Months Ended
	March 31,						March 31,
	2015			2014			2015			2014
Sales:
Cubic Transportation Systems	$	278.2		$	276.1		$	146.7		$	149.0
Cubic Global Defense Services	186.5			199.9			97.5			100.7
Cubic Global Defense Systems	192.6			185.6			94.6			104.8
Total sales	$	657.3		$	661.6		$	338.8		$	354.5

Operating income (loss):
Cubic Transportation Systems	$	39.1		$	19.9		$	27.0		$	16.8
Cubic Global Defense Services	1.1			4.2			1.1			1.4
Cubic Global Defense Systems	(0.4		)	12.8			2.3			5.7
Unallocated corporate expenses and other	(9.4		)	(2.9		)	(7.2		)	(1.7		)
Total operating income	$	30.4		$	34.0		$	23.2		$	22.2

Depreciation and amortization:
Cubic Transportation Systems	$	5.7		$	5.8		$	2.6		$	3.2
Cubic Global Defense Services	4.3			5.8			1.9			2.6
Cubic Global Defense Systems	9.4			3.2			6.2			1.8
Other	0.7			0.4			0.5			0.2
Total depreciation and amortization	$	20.1		$	15.2		$	11.2		$	7.8

Changes in estimates on contracts for which revenue is recognized using the cost-to-cost-percentage-of-completion method had no impact on operating income for the three months ended March 31, 2015 and March 31, 2014, and decreased operating income by $13.5 million for the six months ended March 31, 2015 and increased operating income by $2.5 million for the six months ended March 31, 2014.

These adjustments had no impact on net income (loss) for the three months ended March 31, 2015 and March 31, 2014, and increased net loss by $8.3 million ($0.31 per share) and increased net income by $2.5 million ($0.09 per share) for the six months ended March 31, 2015 and 2014, respectively.

Note 13 — Legal Matters

In November 2011, we received a claim from a public transit authority customer which alleged that the authority incurred a loss of transit revenue due to the inappropriate and illegal actions of one of our former employees, who has pled guilty to the charges. This individual was employed to work on a contract we acquired in a business combination in 2009 and had allegedly been committing these illegal acts from almost two years prior to our acquisition of the contract, until his arrest in May 2011. The transit system was designed and installed by a company unrelated to us. The transit authority sought recoupment from us of a total amount of $4.5 million for alleged lost revenue, fees and damages. In March 2012, the county superior court entered a default judgment against our former employee and others for $2.9 million based upon the estimated loss of revenue by the public transit authority customer. In 2012, we recorded an accrued cost of $2.9 million within general and administrative expense in the transportation systems segment based upon the court’s assessment of these losses. In July 2014, we entered into a settlement agreement with the customer for a cash payment of $2.6 million plus an assignment of forty percent of any insurance proceeds we receive under relevant insurance policies. In June 2014 we reduced our accrued costs to $2.6 million. In March 2015, our insurer paid us $1.8 million related to this matter and we paid our customer forty percent of this amount, or $0.7 million, in connection with the settlement agreement with the customer. We recognized a gain of the net amount of $1.1 million as a reduction of general and administrative expenses in the first quarter of fiscal 2015.

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In October and December of 2013, and January of 2014, lawsuits were filed in the United States District Court for the Northern District of Illinois, Eastern Division against us and one of our transit customers alleging variously, among other things, breach of contract, violation of the Illinois Consumer Fraud Act, unjust enrichment and violation of the Electronic Funds Act. In January 2014, these cases were consolidated into a single case and the plaintiffs are seeking to have the case certified as a class action. Plaintiffs variously claim, among other things, that: (i) they were wrongly charged for calling the call center that we operate for patrons of our transit customer, (ii) they were wrongly charged for a transfer and a second fare, (iii) they were not credited the cost of a transit card even after registration of the card, as is required under the terms of the cardholder agreement, and (iv) they were double charged for rides taken. We are undertaking the defense of the transit customer pursuant to our contractual obligations to that customer. We are investigating the matter and are vigorously defending this lawsuit. As this case remains in its early stages, we cannot estimate the probability of loss or any range of estimate of possible loss.

Also in October 2013, a lawsuit was filed in the Circuit Court of Cook County, Illinois, County Department, Chancery Division against our same transit customer alleging conversion and unjust enrichment. This lawsuit was later amended and refiled in May 2014. The plaintiff alleged his bank debit card was charged two dollars and twenty-five cents for his ride on the transit system rather than the ride being charged to his transit fare card. This plaintiff was also seeking to have his case certified as a class action for all patrons whose bank cards were charged in the same manner. We undertook the defense of this matter pursuant to our contractual obligations to our transit customer. We entered into a settlement agreement with the plaintiff in March 2015 whereby we paid the plaintiff $4,000 and the plaintiff voluntarily withdrew his case.

In October 2014, a lawsuit was filed in the United States District Court, Northern District of Illinois against us and our same transit customer alleging infringement of various patents held by the plaintiff. We are investigating the matter and plan to vigorously defend the lawsuit. We are also undertaking defense of our customer in this matter pursuant to our contractual obligations to that customer. Due to the preliminary nature of this case, we cannot estimate the probability of loss or any range of estimate of possible loss.

In January 2015, we received $3.6 million as a settlement of a claim related to the reimbursement of expenses we incurred primarily in 2014 for a proposal prepared for a prospective customer of our transportation systems business. This $3.6 million settlement has been recorded as a reduction of research and development and general and administrative expenses in the quarter ended March 31, 2015.

We are not a party to any other material pending proceedings and we consider all other matters to be ordinary proceedings incidental to the business. We believe the outcome of these other proceedings will not have a materially adverse effect on our financial position, results of operations, or cash flows.

Note 14 — Restructuring Costs

In February 2015, we implemented a plan to restructure our defense services and defense systems businesses into a single business called Cubic Global Defense to better align our defense business organizational structure with customer requirements, increase operational efficiencies and improve collaboration and innovation across the company. The restructuring plan includes a reduction in global employee headcount by approximately 100. We incurred a restructuring charge of $5.4 million in the second quarter of fiscal 2015. The total costs of the restructuring plan are not expected to be significantly greater than the charges incurred to date. Restructuring charges incurred by business segment were as follows (in millions):

	Six Months Ended					Three Months Ended
	March 31,					March 31,
	2015		2014			2015		2014

Restructuring costs:
Cubic Transportation Systems	$	0.4	$	—		$	0.6	$	—
Cubic Global Defense Services	0.2		—			0.2		—
Cubic Global Defense Systems	4.2		0.3			4.1		0.3
Unallocated corporate expenses and other	0.5		(0.1		)	0.5		(0.1		)
Total restructuring costs	$	5.3	$	0.2		$	5.4	$	0.2

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The following table presents a rollforward of our restructuring liability as of March 31, 2015, which is included within accrued compensation and other current liabilities within our Condensed Consolidated Balance Sheets (in millions):

	Restructuring Liability
	Employee Separation

Liability as of September 30, 2014	$	0.8
Accrued costs	5.3
Cash payments	(0.7		)
Liability as of March 31, 2015	$	5.4

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

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CUBIC CORPORATION

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

March 31, 2015

We are a leading international provider of cost-effective systems and solutions that address the transportation and global defense markets’ most pressing and demanding requirements. We are engaged in the design, development, manufacture, integration, and sustainment of advanced technology systems and products. We also provide a broad range of engineering, training, technical, logistic, and information technology services. We serve the needs of various federal and regional government agencies in the U.S. and other allied nations around the world with products and services that have both defense and civil applications. Our main areas of focus are in transportation payment and information systems, defense, intelligence, homeland security, and information technology, including cyber security.

We operate in three reportable business segments: Cubic Transportation Systems (CTS), Cubic Global Defense Services (CGD Services) and Cubic Global Defense Systems (CGD Systems). We organize our business segments based on the nature of the products and services offered.

CTS is a systems integrator that develops and provides fare collection infrastructure, services and technology, traffic management and road enforcement systems and services, and real-time passenger information systems and services for transportation authorities and operators worldwide. We offer fare collection devices, software systems and multiagency, multimodal transportation integration technologies, as well as a full suite of operational services that help agencies efficiently collect fares, manage operations, reduce revenue leakage and make transportation more convenient. We provide a wide range of services for transportation authorities in major markets worldwide, including computer hosting services, call center and web services, payment media issuance and distribution services, retail point of sale network management, payment processing and enforcement, financial clearing and settlement, software application support and outsourced asset operations and maintenance.

CGD Services is a leading provider of highly specialized support services to the U.S. government and allied nations. Services provided include live, virtual and constructive training, real-world mission rehearsal exercises, professional military education, intelligence support, information technology, information assurance and related cyber support, development of military doctrine, consequence management, infrastructure protection and force protection, as well as support to field operations, and logistics.

CGD Systems is focused on two primary lines of business: Training Systems and Secure Communications. CGD Systems is a diversified supplier of live and virtual military training systems, and secure communication systems and products to the U.S. Department of Defense, other U.S. government agencies and allied nations. We design and manufacture instrumented range systems for fighter aircraft, armored vehicles and infantry force-on-force live training weapons effects simulations, laser-based tactical and communication systems, and precision gunnery solutions. Our secure communications products are aimed at intelligence, surveillance, asset tracking and search and rescue markets. Our acquisition of DTECH LABs, Inc. in December 2014, added networking capability to our secure communications business.

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Consolidated Overview

Sales for the quarter ended March 31, 2015 decreased 4% to $338.8 million from $354.5 million in the second quarter of last year. Sales from CTS, CGD Services and CGD Systems decreased 2%, 3% and 10%, respectively, compared to the second quarter of last year. For the first six months of the fiscal year, sales decreased to $657.3 million compared to $661.6 million last year, a decrease of 1%. CGD Services sales decreased 7% compared to the first six months of last year, while CTS and CGD Systems sales increased 1% and 4%, respectively. The average exchange rates between the prevailing currency in our foreign operations and the U.S. dollar resulted in a decrease in sales of $12.8 million for the second quarter and $18.0 million for the six-month period compared to the same periods last year. Sales generated by businesses we acquired during 2015 and 2014 totaled $26.4 million and $40.8 million for the three- and six-month periods ended March 31, 2015 and $13.4 million and $18.1 million for the three- and six-month periods ended March 31, 2014, respectively. See the segment discussions following for further analysis of segment sales.

Operating income was $23.2 million in the second quarter compared to $22.2 million in the second quarter of last year, an increase of 5%. CTS operating income increased by 61% while CGD Services and CGD Systems operating income decreased 21% and 60%, respectively. Restructuring charges of $5.4 million were incurred during the second quarter of fiscal 2015, primarily related to the CGD Systems business, compared to $0.2 million in 2014. Businesses we acquired during 2015 and 2014 contributed operating losses of $2.7 million for the three months ended March 31, 2015 compared to an operating loss of $3.7 million, including $0.2 million of transaction-related costs and $3.1 million of compensation expense, which was paid to Intific Inc. (Intific) employees upon the acquisition by Cubic, for the three months ended March 31, 2014. Unallocated corporate and other costs for the second quarter of 2015 were $7.2 million compared to $1.7 million in 2014. The increase in unallocated corporate costs is primarily related to costs incurred in the second quarter of 2015 for strategic and IT system resource planning of $1.3 million, $2.5 million of consulting and legal fees related to an investigation by the Audit Committee of the Board of Directors and a $1.7 million increase in stock-based compensation that has not been allocated to segment operations as certain portions of these costs are not recoverable in our contracts with the U.S. government. The average exchange rates between the prevailing currency in our foreign operations and the U.S. dollar resulted in a decrease in operating income of $2.4 million for the second quarter compared to the same period last year.

Operating income for the six-month period decreased 11% to $30.4 million from $34.0 million last year. CGD Services and CGD Systems operating income decreased 74% and 103%, respectively, compared to the first six months of last year, while CTS operating income increased 96%. Operating results for the six-month period included the restructuring costs mentioned above. Businesses we acquired in 2015 and 2014 generated operating losses of $6.2 million for the six months ended March 31, 2015 compared to an operating loss of $4.2 million, including $0.6 million of transaction-related costs and $3.1 million of compensation expense, which was paid to Intific employees upon the acquisition by Cubic, for the six months ended March 31, 2014. The average exchange rates between the prevailing currency in our foreign operations and the U.S. dollar resulted in decreases in operating income of $3.1 million for the six-month period compared to the same period last year. The correction of immaterial errors reduced operating income in the first half of fiscal 2015 by $2.1 million. See Note 1, “Basis for Presentation” of the Notes to Condensed Consolidated Financial Statements in “Part I - Item 1. Financial Statements” for further detail.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) increased by14% to $34.3 million in the quarter from $30.0 million in the second quarter of last year. For the first six months of the fiscal year, Adjusted EBITDA increased to $50.4 million compared to $49.2 million last year. The changes in Adjusted EBITDA for the quarter ended March 31, 2015 are primarily related to the changes in operating income for the corresponding periods. See the reconciliation below of this non-GAAP metric to net income (loss) and an explanation of why we believe it to be an important measure of performance.

Net loss attributable to Cubic for the second quarter of fiscal 2015 was $11.0 million, or 41 cents per share, compared to net income attributable to Cubic of $16.1 million, or 60 cents per share last year. The change was primarily caused by an increase in income tax expense, as described below.

For the first six months of the year, net loss attributable to Cubic was $5.9 million, or 22 cents per share, compared to net income attributable to Cubic of $24.5 million, or 91 cents per share last year. The change for the six-month period was primarily due to an increase in income tax expense, in addition to a decrease in operating income. Included in other income was a net foreign currency exchange loss of $1.7 million in the first six months this year compared to a loss of $1.2 million last year, before applicable income taxes.

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Our gross margin percentage on product sales increased to 31% in the second quarter of 2015 from 25% last year, and decreased to 25% in the first six months of 2015 from 27% last year. The increase in the gross margin percentage in the second quarter of 2015 is primarily due to higher margins on higher sales of air combat training systems.

Our gross margin percentage on service sales increased to 25% in the second quarter of 2015 from 22% last year, and increased to 23% in the first six months of 2015 from 17% last year. The increase in the gross margin percentages on services sales for the three- and six-month periods ended March 31, 2015 is primarily due to a decrease in losses incurred on a transportation contract in Chicago. The cost of providing services during the initial seven months of providing services under this contract, through March 31, 2014, were substantially higher than in subsequent periods. In addition, revenue recognized on this contract is limited to billable amounts, which were significantly less than costs incurred to provide these services during the initial months of providing these services; however, billable amounts have continued to increase as the contract has progressed.

Selling, general and administrative (SG&A) expenses increased in the second quarter of 2015 to $52.9 million compared to $48.3 million in 2014. For the six-month period, SG&A increased to $100.5 million compared to $85.0 million last year. As a percentage of sales, SG&A expenses were 16% for the second quarter and 15% for the six-month period of fiscal 2015 compared to 14% and 13%, respectively, in 2014. The increase in SG&A expenses in the second quarter was due to SG&A expenses associated with companies we acquired during or subsequent to the second quarter of fiscal 2014, and related to the increase in unallocated corporate expenses described above.

Company funded research and development expenditures (R&D), which relate to new defense and transportation technologies under development, decreased to $2.6 million for the second quarter compared to $5.0 million last year, and decreased to $6.9 million for the six-month period this year compared to $9.9 million last year. The primary reason for the decrease in R&D costs is that we received a settlement of a claim related to the reimbursement of expenses we incurred primarily in 2014 for a proposal prepared for a prospective customer of our transportation systems business. Approximately $2.3 million of this reimbursement was for R&D expenses incurred and was credited against our expense in the second quarter. Amortization of purchased intangibles increased for the second quarter of 2015 to $8.5 million compared to $6.0 million last year due to the increase in intangible assets related to businesses acquired during 2014 and 2015. Amortization of purchased intangibles for the first six months of 2015 increased to $14.4 million from $11.4 million in 2014.

The Tax Increase Prevention Act of 2014, which reinstated the U.S. federal research and development tax credit retroactively from January 1, 2014 through December 31, 2014, was enacted into law during the first quarter of fiscal 2015. Therefore, the tax benefit resulting from the reinstatement for a portion of fiscal 2015 was reflected in our estimated annual effective tax rate for fiscal 2015. Additionally, a net discrete tax benefit of approximately $0.8 million was recorded in the first quarter of fiscal 2015 related to the reinstatement of the federal research and development tax credit for fiscal 2014. In addition, our provision for uncertain tax positions was reduced in the second quarter by $1.1 million due to the expiration of a foreign statute of limitations. Lastly, after considering our recent history of U.S. losses and management’s expectation of additional near-term U.S. losses for GAAP purposes, a valuation allowance was recorded on our U.S. net deferred tax assets which resulted in a charge to income tax expense of $29.3 million and an overall impact of $1.09 per share. After consideration of the impact of these items, we estimate our annual effective income tax rate for fiscal 2015 will be approximately 63%, inclusive of the unfavorable impact from the deferred tax valuation allowance recorded against U.S. net deferred tax assets. The effective rate for fiscal 2015 could be affected by, among other factors, the mix of business between the U.S. and foreign jurisdictions, audits of our records by taxing authorities, and fluctuations in the need for a valuation allowance against US deferred tax assets.

Cubic Transportation Systems Segment (CTS)

	Six Months Ended				Three Months Ended
	March 31,				March 31,
	2015		2014		2015		2014
	(in millions)
Cubic Transportation Systems Segment Sales	$	278.2	$	276.1	$	146.7	$	149.0

Cubic Transportation Systems Segment Operating Income	$	39.1	$	19.9	$	27.0	$	16.8

CTS sales decreased 2% in the second quarter to $146.7 million compared to $149.0 million last year, and increased 1% for the six-month period to $278.2 million from $276.1 million last year. Sales from ITMS, a company we acquired in December 2013, contributed sales of $12.2 million and $22.2 million during the quarter and six months ended March 31, 2015, respectively, compared to $12.6 million and $17.3 million during the quarter and six months ended March 31, 2014, respectively. Revenue recognized on a system development and operation contract in Chicago was higher in the second quarter and six-month period of 2015 than in the second quarter and six-month period of 2014. For this Chicago contract, the recognition of sales is limited to billable amounts and billable amounts have continued to increase as the contract has progressed. We also recognized higher sales on a services contract in Australia. These increases in sales were partially offset by decreased work on system development contracts in the U.K. and U.S.

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The average exchange rates between the prevailing currency in our foreign operations and the U.S. dollar resulted in a decrease in sales of $10.7 million for the second quarter and $14.8 million for the six-month period compared to the same periods last year.

CTS operating income increased 61% in the second quarter to $27.0 million compared to $16.8 million last year, and increased 96% for the six-month period to $39.1 million from $19.9 million last year. The increase was attributable to the increase in gross margins on a contract in Chicago as described above and the proceeds from a claim settlement of $3.6 million mentioned above. These increases in operating income were partially offset by slightly lower margins on services work in the U.K. The average exchange rates between the prevailing currency in our foreign operations and the U.S. dollar resulted in decreases in operating income of $1.9 million for the second quarter and $2.4 million for the six-month period compared to the same period last year.

ITMS had an operating loss of $0.3 million and $1.2 million for the quarter and six months ended March 31, 2015, respectively, compared to an operating loss of $0.3 million and $0.8 million for the quarter and six months ended March 31, 2014, respectively.

Cubic Global Defense Services Segment (CGD Services)

	Six Months Ended				Three Months Ended
	March 31,				March 31,
	2015		2014		2015		2014
	(in millions)
Cubic Global Defense Services Segment Sales	$	186.5	$	199.9	$	97.5	$	100.7

Cubic Global Defense Services Segment Operating Income	$	1.1	$	4.2	$	1.1	$	1.4

CGD Services sales decreased 3% in the second quarter to $97.5 million compared to $100.7 million last year, and decreased 7% for the six-month period to $186.5 million from $199.9 million last year. Sales for the second quarter were lower primarily because there were fewer training exercises conducted under our Joint Readiness Training Center contract in the second quarter of 2015 as compared to the second quarter of last year. Sales were also lower from this contract for the first half of the year, representing about half of the decrease in sales for that period. In addition, sales were lower in the first two quarters due to competitive pressures driving down bid prices and a general reduction in the number of training exercises and other support requirements for our U.S. government customers. These reductions were partially offset by growth in the Simulator Training business area for both the three and six-month periods.

CGD Services operating income decreased 21% in the second quarter to $1.1 million compared to $1.4 million last year, and decreased 74% for the six-month period to $1.1 million from $4.2 million last year. The decreased operating income for the quarter resulted from the sales decreases described above including the number of training exercises supported and reduced profit margins on contracts due to competitive pressures driving down bid prices. In addition CGD Services had higher compensation costs than normal during the first quarter of fiscal 2015 due to the costs of recruiting new executive management and incurred restructuring charges of $0.2 million in the quarter ended March 31, 2015.

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Cubic Global Defense Systems Segment (CGD Systems)

	Six Months Ended					Three Months Ended
	March 31,					March 31,
	2015			2014		2015		2014
	(in millions)

Cubic Global Defense Systems Segment Sales	$	192.6		$	185.6	$	94.6	$	104.8

Cubic Global Defense Systems Segment Operating Income (Loss)	$	(0.4	)	$	12.8	$	2.3	$	5.7

CGD Systems sales decreased 10% in the second quarter to $94.6 million compared to $104.8 million last year, and increased 4% for the six-month period to $192.6 million from $185.6 million last year. Sales were lower from datalinks, ground combat training systems and engagement skills trainers, while sales were higher from air combat training systems and acquired business, as described below.

Intific, a training systems business acquired by CGD Systems in February 2014 contributed sales of $3.4 million and $6.8 million for the three- and six-month periods ended March 31, 2015, respectively, compared to $0.8 million for the three- and six-month periods ended March 31, 2014. In addition, DTECH, a business acquired by CGD Systems in December 2014 contributed sales of $10.8 million and $11.8 million for the three- and six-month periods ended March 31, 2015, respectively.

The average exchange rates between the prevailing currency in our foreign operations and the U.S. dollar resulted in a decrease in sales of $2.2 million for the second quarter and $3.3 million for the six-month period compared to the same period last year.

CGD Systems operating income decreased 60% in the second quarter to $2.3 million compared to $5.7 million last year, and decreased 103% for the six-month period to an operating loss of $0.4 million from operating income of $12.8 million last year. The decreased operating income for the second quarter resulted from restructuring charges of $4.1 million in 2015 compared to $0.3 million in 2014. In addition, lower operating income on lower sales of ground combat training systems and engagement skills trainers contributed to the decrease, offset by higher operating income from higher sales of air combat training systems. For the six-month period, in addition to the above factors, an increase in estimated costs to complete a contract for the development of a training system due to higher than expected development costs, in part resulting from customer directed work outside the scope of the contract, resulted in a loss of $5.1 million from this contract. While we expect to recover some or all of these costs through a contract claim process, at this time it is not possible to determine the amount, if any, of the amount that will be recovered.

Intific incurred operating losses of $0.9 million and $2.0 million for the three- and six-month periods ended March 31, 2015, respectively, compared to $3.4 million for the three- and six-month periods ended March 31, 2014. In addition, DTECH incurred operating losses of $1.5 million and $3.0 million for the three- and six-month periods ended March 31, 2015, respectively, including $0.8 million of transaction and acquisition related costs incurred in the first quarter.

The average exchange rates between the prevailing currency in our foreign operations and the U.S. dollar resulted in a decrease in operating income of $0.5 million for the second quarter and $0.7 million for the six-month period compared to the same periods last year.

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Backlog

	March 31,		September 30,
	2015		2014
	(in millions)

Total backlog
Transportation Systems	$	1,877.6	$	1,994.6
Cubic Global Defense Services	574.4		616.0
Cubic Global Defense Systems	649.9		569.6
Total	$	3,101.9	$	3,180.2

Funded backlog
Transportation Systems	$	1,877.6	$	1,994.6
Cubic Global Defense Services	160.9		170.9
Cubic Global Defense Systems	649.9		569.6
Total	$	2,688.4	$	2,735.1

Total backlog decreased $78.3 million from September 30, 2014 to March 31, 2015. Decreases in backlog for CTS and CGD Services were partially offset by an increase in backlog for CGD Systems. A secure communications business we acquired in December 2014 had backlog of $7.3 million at the date of acquisition. Changes in exchange rates between the prevailing currency in our foreign operations and the U.S. dollar as of the end of the quarter decreased backlog by $120.6 million compared to September 30, 2014, more than accounting for the overall decrease.

The difference between total backlog and funded backlog represents options under multiyear CGD Services service contracts. Funding for these contracts comes from annual operating budgets of the U.S. government and the options are normally exercised annually. Funded backlog includes unfilled firm orders for our products and services for which funding has been both authorized and appropriated by the customer (Congress, in the case of U.S. government agencies). Options for the purchase of additional systems or equipment are not included in backlog until exercised. In addition to the amounts identified above, we have been selected as a participant in or, in some cases, the sole contractor for several substantial indefinite delivery/ indefinite quantity (ID/IQ) contracts. ID/IQ contracts are not included in backlog until an order is received. In the past, many of the contracts we were awarded in CGD Services were long-term in nature, spanning periods of five to ten years. The U.S. Department of Defense now awards shorter-term contracts for the services we provide and increasingly relies upon ID/IQ contracts which can result in a lower backlog and/or lower funded backlog due to the shorter-term nature of Task Orders issued under these ID/IQ awards. We also have several service contracts in our transportation business that include contingent revenue provisions tied to meeting certain performance criteria. These variable revenues are also not included in the amounts identified above.

Adjusted EBITDA

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) represents net income (loss) attributable to Cubic before interest, taxes, non-operating income, goodwill impairment charges, depreciation and amortization. We believe that the presentation of Adjusted EBITDA included in this report provides useful information to investors with which to analyze our operating trends and performance and ability to service and incur debt. Also, Adjusted EBITDA is a factor we use in measuring our performance and compensating certain of our executives. Further, we believe Adjusted EBITDA facilitates company-to-company operating performance comparisons by backing out potential differences caused by variations in capital structures (affecting net interest expense), taxation, the age and book depreciation of property, plant and equipment (affecting relative depreciation expense), goodwill impairment charges and non-operating expenses which may vary for different companies for reasons unrelated to operating performance. In addition, we believe that Adjusted EBITDA is frequently used by securities analysts, investors and other interested parties in their evaluation of companies, many of which present an Adjusted EBITDA measure when reporting their results. Adjusted EBITDA is not a measurement of financial performance under U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income (loss) as a measure of performance. In addition, other companies may define Adjusted EBITDA differently and, as a result, our measure of Adjusted EBITDA may not be directly comparable to Adjusted EBITDA of other companies. Furthermore, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

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· Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

· Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

· Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

· Adjusted EBITDA does not reflect our provision for income taxes, which may vary significantly from period to period; and

· Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally. You are cautioned not to place undue reliance on Adjusted EBITDA.

The following table reconciles Adjusted EBITDA to net income (loss) attributable to Cubic, which we consider to be the most directly comparable GAAP financial measure to Adjusted EBITDA:

	Six Months Ended						Three Months Ended
	March 31,						March 31,
	2015			2014			2015			2014
	(in thousands)
Reconciliation:
Net income (loss) attributable to Cubic	$	(5,872	)	$	24,480		$	(11,024	)	$	16,092
Add:
Provision for income taxes	34,304			8,248			33,609			5,809
Interest expense, net	1,030			1,250			624			634
Other expense (income), net	900			(40		)	(16		)	(386		)
Noncontrolling interest in income of VIE	23			69			13			28
Depreciation and amortization	20,064			15,229			11,117			7,852
ADJUSTED EBITDA	$	50,449		$	49,236		$	34,323		$	30,029

Liquidity and Capital Resources

Operating activities provided cash of $61.1 million for the six-month period primarily due to the excess of cash received from customers over the cash paid to vendors and employees. For the six months ended March 31, 2015, all three segments contributed to cash provided by operating activities.

Investing activities for the six-month period included $89.5 million of cash paid related to the acquisition of a business in our CGD Systems segment, capital expenditures of $2.6 million and the funding of a rabbi trust related to our deferred compensation plan of $3.0 million. Financing activities for the six-month period consisted primarily of the net receipt of proceeds of $55.0 million from short-term borrowings that, in addition to existing cash resources, was used to finance the business acquisition discussed above, $1.7 million repurchase of common stock in connection with our stock-based compensation plan and a dividend paid to shareholders of $3.6 million.

A change in exchange rates between foreign currencies, primarily between the Australian dollar and the U.S. dollar and between the British Pound and the U.S. dollar, resulted in a decrease of $19.7 million to our cash balance as of March 31, 2015 compared to September 30, 2014, and a decrease to Accumulated Other Comprehensive Income of $33.0 million during the six-month period.

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We have a committed revolving credit agreement with a group of financial institutions in the amount of $200.0 million that expires in May 2017 (Revolving Credit Agreement). The available line of credit on the Revolving Credit Agreement is reduced by any letters of credit issued under the agreement. As of March 31, 2015, there were borrowings totaling $55.0 million under this agreement. Any borrowings under the Revolving Credit Agreement bear interest at a variable rate, which was 1.64% at March 31, 2015. At March 31, 2015 there were letters of credit outstanding under the Revolving Credit Agreement totaling $25.6 million, which reduce the available line of credit to $119.4 million.

We have a secured letter of credit facility agreement with a bank (Secured Letter of Credit Facility) which is cancellable by us at any time upon the completion of certain conditions to the satisfaction of the bank. At March 31, 2015, there were letters of credit outstanding under this agreement of $62.5 million. In support of the Secured Letter of Credit Facility, we placed $69.2 million of our cash on deposit in the U.K. as collateral in a restricted account with the bank providing the facility. We are required to leave the cash in the restricted account so long as the bank continues to maintain associated letters of credit under the facility. The maximum amount of letters of credit currently allowed by the facility is $62.8 million, and any increase above this amount would require bank approval and additional restricted funds to be placed on deposit. We may choose at any time to terminate the facility and move the associated letters of credit to another credit facility. Letters of credit outstanding under the Secured Letter of Credit Facility do not reduce the available line of credit available under the Revolving Credit Agreement.

In March 2013, we entered into a note purchase and private shelf agreement pursuant to which we issued $100.0 million of senior unsecured notes, bearing interest at a rate of 3.35% and maturing on March 12, 2025. Interest on these notes is due semi-annually and principal payments are due from 2021 through 2025. In addition, pursuant to the agreement, through March 2016 we may from time to time issue and sell, and the purchasers may in their sole discretion purchase additional senior notes in aggregate principal amount of up to $25.0 million that will have terms, including interest rate, as we and the purchasers may agree upon at the time of issuance.

As of March 31, 2015, $176.1 million of the $208.1 million of our cash and cash equivalents was held by our foreign subsidiaries. We also had $69.2 million of restricted cash in the U.K. at March 31, 2015. If any of these funds held by our foreign subsidiaries are needed for our operations in the U.S., we would be required to accrue and pay U.S. taxes to repatriate these funds. However, our intent is to permanently reinvest these funds outside of the U.S. and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations. The $4.5 million of marketable securities is held in New Zealand.

Our financial condition remains strong with working capital of $395.2 million and a current ratio of 2.1 to 1 at March 31, 2015. We expect that cash on hand, cash flows from operations, and our unused lines of credit will be adequate to meet our liquidity requirements for the foreseeable future.

Recent Accounting Pronouncements

In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments contained in this update change the criteria for reporting discontinued operations and enhance the reporting requirements for discontinued operations. Under the revised standard, a discontinued operation must represent a strategic shift that has or will have a major effect on an entity’s operations and financial results. Examples could include a disposal of a major line of business, a major geographical area, a major equity method investment, or other major parts of an entity. The revised standard will also allow an entity to have certain continuing cash flows or involvement with the component after the disposal. Additionally, the standard requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. This ASU is effective for reporting periods beginning after December 15, 2014 with early adoption permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issue. This adoption is not expected to have a significant impact on our financial statements.

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transactions. ASU 2014-09 will be effective for us starting in the first quarter of fiscal 2018. ASU 2014-09 allows for two methods of adoption: (a) “full retrospective” adoption, meaning the standard is applied to all periods presented, or (b) “modified retrospective” adoption, meaning the cumulative effect of applying ASU 2014-09 is recognized as an adjustment to the fiscal 2018 opening retained earnings balance. We have not yet determined which method of adoption we will select. As the new standard will supersede substantially all existing revenue guidance affecting us under GAAP, it could impact revenue and cost recognition on a significant number of contracts across our business segments, in addition to our business processes and our information technology systems. As a result, our evaluation of the effect of the new standard will likely extend over several future periods.

Critical Accounting Policies, Estimates and Judgments

Our financial statements are prepared in accordance with accounting principles that are generally accepted in the United States. 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 changes to our Critical Accounting Policies included in “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies, Estimates and Judgments” in our Annual Report on Form 10-K for the year ended September 30, 2014, other than as follows.

Valuation of Goodwill

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 on an annual basis and when circumstances indicate that an impairment is more likely than not. Such circumstances include a significant adverse change in the business climate for one of our reporting units or a decision to dispose of a reporting unit or a significant portion of a reporting unit. The test for goodwill impairment is a two-step process. The first step of the test is performed by comparing the fair value of each reporting unit to its carrying value, including recorded goodwill. If the carrying value of a reporting unit exceeds its fair value, the second step is performed to measure the amount of the impairment, if any, by comparing the implied fair value of goodwill to its carrying value. Any resulting impairment determined would be recorded in the current period.

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For the first step of this interim goodwill impairment test, the discounted cash flows used in the fair value analyses were based on updated discrete financial forecasts that were developed in the second quarter of fiscal 2015 by management for planning purposes. We used a two and a half year forecast for this interim impairment test. Cash flows beyond the discrete forecasts were estimated based on projected growth rates and financial ratios, influenced by an analysis of historical ratios and by calculating a terminal value at the end of two and a half years. The future cash flows were discounted to present value using a discount rate of 12.0%. The estimated fair value for our Defense Services reporting unit exceeded its carrying value by over 20%. As such, no impairment of goodwill was recorded in connection with our interim impairment test.

Regarding our annual impairment test that was most recently performed as of July 1, 2014, for the first step of our fiscal 2014 impairment test, the discounted cash flows used in the fair value analyses were based on discrete financial forecasts developed by management for planning purposes. We used five year forecasts for our Defense Services and the Defense Systems reporting units, and we used a three year forecast for our Transportation Systems reporting unit. Cash flows beyond the discrete forecasts were estimated based on projected growth rates and financial ratios, influenced by an analysis of historical ratios and by calculating a terminal value at the end of five years for our Defense Services and Defense Systems reporting units, and three years for our Transportation Systems reporting unit. The future cash flows were discounted to present value using a discount rate of 11.0% for our Defense Systems reporting unit, 12.5% for our Defense Services reporting unit and 10.5% for our Transportation Systems reporting unit. The estimated fair values for our three reporting units exceeded their carrying values by over 20%.

For further information, refer to “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies, Estimates and Judgments” and the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended September 30, 2014.

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING INFORMATION

This report, including the documents incorporated by reference herein, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to the safe harbor created by such Act. Any statements about our expectations, beliefs, plans, objectives, assumptions, future events or our future financial and/or operating performance 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 in “Part I - Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2014, and throughout this report that could cause actual results to differ materially from those expressed in these statements. Such risks, estimates, assumptions and uncertainties include, among others:

· unanticipated issues related to the restatement of our financial statements for fiscal years 2013 and 2012;

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

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

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

· 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;

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· 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;

· 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;

· 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 report.

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 and/or operating performance is not necessarily a reliable indicator of future performance and you should not use our historical performance to anticipate results or future period trends. Further, any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New 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 March 31, 2015 have not changed materially from those described under “Item 7A. Quantitative and Qualitative Disclosure about Market Risk” in our Annual Report on Form 10-K for the year ended September 30, 2014.

ITEM 4 - CONTROLS AND PROCEDURES

We performed an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2015. 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 (SEC) 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.

We have identified certain deficiencies in internal control that failed to prevent or detect in a timely manner the errors described in the sections, “Audit Committee Investigation” and “Correction of Immaterial Errors” in Note 1, “Basis for Presentation” of the Notes to Condensed Consolidated Financial Statements in “Part I - Item 1. Financial Statements”. These control deficiencies include the lack of sufficient precision in the review and supervision of the estimated costs to complete contracts of our Cubic Global Defense Systems segment as well as the lack of sufficient precision of review and supervision of revenue calculations and cost accruals of our Cubic Transportation Systems segment. Based upon our assessment of the control deficiencies identified, including assessment of compensating controls that were designed to prevent and detect material errors of the types identified, we have concluded that these deficiencies do not individually, or in aggregate, constitute a material weakness.

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A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We are currently in the process of developing and implementing new and revised control procedures over financial reporting related to the control deficiencies identified above.

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2015 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

In January 2015, we received $3.6 million as a settlement of a claim related to the reimbursement of expenses we incurred in 2014 for a proposal prepared for a prospective customer of our transportation systems business. This $3.6 million settlement has been recorded as a reduction of research and development and general and administrative expenses in the quarter ended March 31, 2015.

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In addition to the matters described above, we are subject to various claims and legal proceedings that arise in the ordinary course of our business from time to time, including claims and legal proceedings that have been asserted against us by customers, former employees and competitors. We have accrued for estimated losses in the accompanying unaudited consolidated financial statements for matters where we believe the likelihood of an adverse outcome is probable and the amount of the loss is reasonably estimable. Based on currently available information, management does not believe that the ultimate outcome of these unresolved matters, individually or in the aggregate, are likely to have a material adverse effect on our financial position, results of operations, or cash flows. However, litigation is subject to inherent uncertainties and our views on these matters may change in the future. Were an unfavorable outcome to occur in any one or more of those matters or the matters described above, over and above the amount, if any, that has been estimated and accrued in our unaudited consolidated financial statements, it could have a material adverse effect on our business, financial condition, results of operations and/or cash flows in the period in which the unfavorable outcome occurs or becomes both probable and estimable, and potentially in future periods.

ITEM 1A - RISK FACTORS

There have been no material changes to the risk factors disclosed in “Part I - Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended September 30, 2014, other than as follows:

Unforeseen problems with the implementation and maintenance of our information systems could have an adverse effect on our operations.

As a part of our ongoing effort to upgrade our current information systems, we have begun the process of designing and implementing new enterprise resource planning software and other software applications to manage certain of our business operations. The cost of the software and integration are expected to range from $55 million to $60 million and are expected to be implemented in phases over the next 2.5 years. As we implement and add functionality, problems could arise that we have not foreseen, including interruptions in service, loss of data, or reduced functionality. Such problems could adversely impact our ability to provide quotes, take customer orders, and otherwise run our business in a timely manner. In addition, if our new systems fail to provide accurate and increased visibility into pricing and cost structures, it may be difficult to improve or maximize our profit margins. As a result, our results of operations and cash flows could be adversely affected.

ITEM 6 - EXHIBITS

(a) The following exhibits are included herein:

Exhibit No.		Description
3.1		Amended and Restated Certificate of Incorporation. Incorporated by reference to Form 10-Q for the quarter ended June, 30, 2006, file No. 001-08931, Exhibit 3.1.
3.2		Amended and Restated Bylaws. Incorporated by reference to Form 8-K filed April 22, 2014, file No. 001-08931, Exhibit 3.1.
10.1*		Cubic Corporation Employee Stock Purchase Plan. Incorporated by reference to Appendix B of the Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on January 13, 2015.
10.2*		Cubic Corporation 2015 Incentive Award Plan. Incorporated by reference to Appendix A of the Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on January 13, 2015.
10.3*		Form of Time-Based Vesting Restricted Stock Unit Award Grant Notice and Award Agreement under the Cubic Corporation 2015 Incentive Award Plan.
10.4*		Form of Performance-Based Vesting Restricted Stock Unit Award Grant Notice and Award Agreement under the Cubic Corporation 2015 Incentive Award Plan.
10.5*		Form of Non-Employee Direct Restricted Stock Unit Award Grant Notice and Award Agreement under the Cubic Corporation 2015 Incentive Award Plan.
10.6*		Separation Agreement, dated February 27, 2015, by and between Cubic Corporation and William W. Boyle.
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 March 31, 2015, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Income, (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.

* 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	May 18, 2015	/s/ John D. Thomas
		John D. Thomas
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)


Date	May 18, 2015	/s/ Mark A. Harrison
		Mark A. Harrison
		Senior Vice President and Corporate Controller
		(Principal Accounting Officer)

Exhibit 10.3

Time-Based Vesting Version

CUBIC CORPORATION

2015 EQUITY INCENTIVE PLAN

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

Cubic Corporation, a Delaware corporation (the “Company”), pursuant to its 2015 Equity Incentive 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:

Grant Date:

Total Number of RSUs:

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. 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 Board (or any Committee to which administration of the Plan has been delegated by the Board) 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 Board (or any Committee to which administration of the Plan has been delegated by the Board), 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.

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 Affiliate 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 Continuous 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.

(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 Board (or any Committee to which administration of the Plan has been delegated by the Board) in accordance with the Plan and Section 409A of the Code and the Treasury Regulations thereunder.

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(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 Board (or any Committee to which administration of the Plan has been delegated by the Board), 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, 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 settlement of 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 Affiliates with respect to the vesting or distribution of the RSUs based on the minimum applicable statutory withholding rates. 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:

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

(ii) with the consent of the Board (or any Committee to which administration of the Plan has been delegated by the Board), 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 Affiliates based on the minimum applicable statutory withholding rates;

(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 Affiliate 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 Affiliate at such time as may be required by the Board (or any Committee to which administration of the Plan has been delegated by the Board), 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 and 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).

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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.

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 Affiliate 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 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.

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U.S. Securities and Exchange Commission or other governmental regulatory body, which the Board (or any Committee to which administration of the Plan has been delegated by the Board) 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 Board (or any Committee to which administration of the Plan has been delegated by the Board) 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 Board (or any Committee to which administration of the Plan has been delegated by the Board) 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.

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 Affiliate or shall interfere with or restrict in any way the rights of the Company and any Affiliate, 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 Affiliate 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.

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 Board (or any Committee to which administration of the Plan has been delegated by the Board) 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.

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4.5 Governing Law; Venue; Severability. The laws of the State of California 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.

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 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 Board (or any Committee to which administration of the Plan has been delegated by the Board); 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.

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4.12 Entire Agreement. The Plan, the Grant Notice and this 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.

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 Board (or any Committee to which administration of the Plan has been delegated by the Board) 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 Board (or any Committee to which administration of the Plan has been delegated by the Board) determines are necessary or appropriate to comply with the requirements of Section 409A.

(b) 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 Dividend Equivalents corresponding thereto shall be distributed to Participant no later than the later of: (i) the fifteenth (15th) 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 (15th) 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.

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EXHIBIT B

TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE

VESTING SCHEDULE

1. Time-Based Vesting. The RSUs shall vest in four (4) equal installments as follows:

First installment — October 1, 2014

Second installment - October 1, 2015

Third installment - October 1, 2016

Fourth installment - October 1, 2017

2. Accelerated Vesting. Notwithstanding the foregoing, the RSUs shall vest immediately (a) in the event Participant’s Continuous Service terminates as a result of his or her death or Disability, or (b) upon Participant’s Covered Termination.

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) “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 substantial reduction in the nature or scope of Participant’s authority, duties, function or responsibilities (and not simply a change in title or reporting relationships) in effect immediately prior to the effective date of the Change in Control; provided, however, that it shall not be a “Constructive Termination” if, following the effective date of the Change in Control, either (A) the Company is retained as a separate legal entity or business unit and Participant holds the same position in such legal entity or business unit as Participant held before such effective date, or (B) the Participant holds a position with authority, duties, function or responsibilities comparable (though not necessarily identical, in view of the relative sizes of the Company and the entity involved in the Change in Control) to those of Participant prior to the effective date of the Change in Control;

(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;

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

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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” shall mean 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 as those duties exist on the date of the Change in Control, 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 Affiliates;

(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 an Affiliate) 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.

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Exhibit 10.4

Performance-Based Vesting Version

CUBIC CORPORATION

2015 EQUITY INCENTIVE PLAN

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

Cubic Corporation, a Delaware corporation (the “Company”), pursuant to its 2015 Equity Incentive 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 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:

Grant Date:

Target Number of RSUs (as adjusted pursuant to Article II and Section 4.2):

Maximum Number of RSUs (as adjusted pursuant to Article II and Section 4.2):

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.

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 Board (or any Committee to which administration of the Plan has been delegated by the Board), in the event Participant does not electronically accept this Grant Agreement within ninety (90) days of the Grant Date, this Award shall be forfeited and Participant shall have no further rights thereto.

EXHIBIT A

TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE

RESTRICTED STOCK UNIT AWARD AGREEMENT

ARTICLE I

AWARD OF RESTRICTED STOCK UNITS

1.1 Award of Restricted Stock Units.

(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 within ten (10) days following the date on which such RSUs vest as specified in the Vesting Schedule set forth in Exhibit B to the Grant Notice (or, in the event the vesting date is the date of a Change in Control, the RSUs (and their corresponding Dividend Equivalents) shall be settled immediately prior to such Change in Control), subject to the terms and provisions of the Plan and this Agreement.

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

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 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 Affiliates with respect to the vesting or distribution of the RSUs based on the minimum applicable statutory withholding rates. 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.

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(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 Affiliates based on the minimum applicable statutory withholding rates; or

(iv) in any combination of the foregoing.

ARTICLE II

DIVIDEND EQUIVALENTS

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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).

ARTICLE III

RESTRICTIONS

3.1 Award and Interests Not Transferable. This Award, including the RSUs awarded hereunder and the Dividend Equivalents, 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.

3.4 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 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 with 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.

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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 Board (or any Committee to which administration of the Plan has been delegated by the Board) 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 Board (or any Committee to which administration of the Plan has been delegated by the Board) 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 Board (or any Committee to which administration of the Plan has been delegated by the Board) 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.

ARTICLE IV

OTHER PROVISIONS

4.1 No Right to Continued Employment, Service or Awards.

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 3.3, 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.

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4.13 Section 409A.

(b) 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 (15th) 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 (15th) 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.

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EXHIBIT B

TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE

VESTING SCHEDULE

1. Performance-Based Vesting. The RSUs shall vest based on the Company’s Sales Growth Rate (as defined below), Return on Equity (as defined below) and EBITDA Growth Rate (as defined below) for the Performance Period (as defined below) as follows:

(a) Performance Vesting Provisions. In the event the Measurement Date (as defined below) occurs on September 30, 2017, such number of RSUs shall vest on the Determination Date (as defined below) as is determined as follows:

(i) Sales Growth. Such number of RSUs shall vest based on the Company’s calculated Sales Growth Factor during the Performance Period as is determined by multiplying (i) the Target RSUs set forth in the Grant Notice, by (ii) 50%, by (iii) Sales Growth Achievement Percentage (as defined in the chart below) determined pursuant to the chart set forth below as of the Measurement Date.

Sales Growth Rate For Performance Period	Sales Growth Factor	Sales Growth Achievement Percentage
Less than 2.5%/year	1.0500	0	%
2.5%/year	1.0500	25	%
5.0%/year	1.1000	100	%
7.5%/year or Greater	1.1500 or Greater	200	%

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

(ii) Return on Equity Performance. Such number of RSUs shall vest based on the Company’s Return on Equity during the Performance Period as is determined by multiplying (i) the Target RSUs set forth in the Grant Notice, by (ii) 30%, by (iii) the Return on Equity Achievement Percentage (as defined in the chart below) determined pursuant to the chart set forth below as of the Measurement Date.

Return on Equity Achieved During Performance Period	Return on Equity Achievement Percentage
Less than 8.000%	0	%
8.000%	25	%
11.00%	100	%
14.000% or Greater	200	%

If the Company’s Return on Equity achievement is between two achievement levels, the Return on Equity Achievement Percentage shall be determined by linear interpolation between the applicable achievement levels.

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(iii) EBITDA Growth. Such number of RSUs shall vest based on the Company’s calculated EBITDA Growth Factor during the Performance Period as is determined by multiplying (i) the Target RSUs set forth in the Grant Notice, by (ii) 30%, by (iii) EBITDA Growth Achievement Percentage (as defined in the chart below) determined pursuant to the chart set forth below as of the Measurement Date.

EBITDA Growth Rate for Performance Period	EBITDA Growth Factor	EBITDA Growth Achievement Percentage
Less than 3.0%/year	1.0600	0	%
3.0%/year	1.0600	25	%
6.0% /year	1.1200	100	%
9.0%/year or Greater	1.1800 or Greater	200	%

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

(iii) Continued Service Requirement. Subject to clauses (b) and (c) below, Participant must not have experienced a termination of Continuous Service prior to September 30, 2017 in order to be eligible for vesting pursuant to this clause (a).

(b) Vesting Upon a Change in Control. Notwithstanding the foregoing, such number of RSUs shall vest immediately prior to the date of such Change in Control as is equal to the Target RSUs. Participant must not have experienced a termination of Continuous Service prior to the date of such Change in Control in order to be eligible for vesting pursuant to this clause (b).

(c) Vesting Upon Covered Termination, Death or Disability. Notwithstanding the foregoing, such number of RSUs as is equal to the Target RSUs shall vest immediately in the event Participant’s Continuous Service terminates as a result of his or her Covered Termination, death or Disability; provided, however, that in the event of Participant’s Covered Termination, the Target RSUs 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 Covered Termination, by (y) one thousand ninety-five.

2. Forfeiture. Any portion of the Award and any RSUs 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 RSUs.

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 during the Performance Period, determined in accordance with accounting principles generally accepted in the United States.

(b) “Actual Cumulative EBITDA Amount” means the aggregate of the Company’s EBITDA (as defined below) during the Performance Period, as presented in the Company’s filings with the U.S. Securities and Exchange Commission.

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(d) “Baseline Cumulative EBITDA Amount” means $ .

(e) “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 substantial reduction in the nature or scope of Participant’s authority, duties, function or responsibilities (and not simply a change in title or reporting relationships);

(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

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

(f) “Covered Termination” shall mean Participant’s Involuntary Termination Without Cause or Constructive Termination.

(g) “Determination Date” means the date on which the Committee certifies in writing the Company’s Sales Growth Rate and Return on Equity for the Performance Period. The Company expects the Determination Date will occur prior to November 30, 2017, but in all events such date shall occur during 2017.

(h) “EBITDA” means net income attributable to the Company, 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 all as presented in the Company’s consolidated financial statements in the Company’s filings with the U.S. Securities and Exchange Commission.

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

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

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(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 Affiliates;

(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 an Affiliate) 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.

(k) “Measurement Date” means September 30, 2017.

(l) “Performance Period” means the period beginning on October 1, 2014 and ending on the Measurement Date.

(m) “Return on Equity” for the Performance Period shall mean the Company’s net income return on equity for the Performance Period, expressed as an average annual percentage of beginning equity (to the third decimal point), determined as follows:

(i) the sum of:

(A) the percentage determined by dividing (A) the Company’s net income for the fiscal year ending September 30, 2015, by (B) the Company’s beginning equity as of October 1, 2014; plus

(B) the percentage determined by dividing (A) the Company’s net income for the fiscal year ending September 30, 2016, by (B) the Company’s beginning equity as of October 1, 2015; plus

(C) the percentage determined by dividing (A) the Company’s net income for the fiscal year ending September 30, 2017, by (B) the Company’s beginning equity as of October 1, 2016;

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(ii) divided by three (3).

The Company’s Return on Equity shall be determined in accordance with accounting principles generally accepted in the United States.

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

(o) “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, and the “Sales Growth Factor” shall be calculated to the fourth decimal point.

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Exhibit 10.5

Non-Employee Director Version

CUBIC CORPORATION

2015 EQUITY INCENTIVE PLAN

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

Participant:

Grant Date:

Total Number of RSUs:

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.

EXHIBIT A

TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE

RESTRICTED STOCK UNIT AWARD AGREEMENT

ARTICLE I

AWARD OF RESTRICTED STOCK UNITS

1.1 Award of Restricted Stock Units.

(a) Award. In consideration of Participant’s continued service with the Company or any Affiliate 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.

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

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1.2 Tax Withholding. 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, the distribution of the Shares issuable with respect thereto, or any other taxable event related to the RSUs or settlement of the Dividend Equivalents.

ARTICLE II

DIVIDEND EQUIVALENTS

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).

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ARTICLE III

RESTRICTIONS

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 directors or restrictions applicable to Participant during an investigation of allegations of misconduct or conduct detrimental to the Company or any Affiliate by Participant.

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advisable, (d) the lapse of any such reasonable period of time following the date the RSUs vest as the Board (or any Committee to which administration of the Plan has been delegated by the Board) 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.

ARTICLE IV

OTHER PROVISIONS

4.1 No Right to Continued Employment, Service or Awards.

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.

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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.

4.12 Entire Agreement. The Plan, the Grant Notice and this 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, 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.

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4.13 Section 409A.

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EXHIBIT B

TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE

VESTING SCHEDULE

1. Time-Based Vesting. The RSUs shall vest in two (2) equal installments as follows:

First installment — October 1, 2015

Second installment — October 1, 2016

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Exhibit 10.6

SEPARATION AGREEMENT AND GENERAL RELEASE

This Separation Agreement and General Release (“Agreement”) is made by and between Cubic Corporation (“CUBIC”) and William Boyle (“EMPLOYEE”) with respect to the following facts:

A. EMPLOYEE and CUBIC have mutually agreed to separate EMPLOYEE’s employment.

B. CUBIC and EMPLOYEE wish to enter into an agreement with regard to the separation of that employment relationship to resolve any and all issues relating to CUBIC’s employment of EMPLOYEE and the separation thereof.

THE PARTIES THEREFORE AGREE AND PROMISE in consideration of all of the following terms and conditions as follows:

1. Separation Date. EMPLOYEE’s last day of active employment with CUBIC will be March 31, 2015 (“Separation Date”). Between March 1, 2015 and March 31, 2015, EMPLOYEE’s monthly gross salary shall be $3,000 dollars.

2. Consideration to Employee. In full consideration of EMPLOYEE signing, returning, and not revoking this Agreement within the time periods specified below in paragraph 17, CUBIC will provide EMPLOYEE with the following benefits to which employee is not otherwise entitled:

a. Equity Acceleration. The parties acknowledge and agree that EMPLOYEE’s unvested equity awards will no longer vest under the existing vesting schedules set forth in the applicable award agreements and will instead be eligible to vest as described in this Section 2(a). Subject to the occurrence of the Effective Date (as defined below),

i. On the Separation Date, all of the 7,574 outstanding, unvested time-based restricted stock units granted to EMPLOYEE pursuant to that certain Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement dated December 12, 2013, shall vest and be settled in accordance with the terms of such agreement, less usual and customary payroll deductions and required taxes;

ii. On the Separation date, all of the 17,138 of the outstanding, unvested time-based restricted stock units granted to EMPLOYEE pursuant to that certain Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement dated March 21, 2013 shall vest and be settled in accordance with the terms of such agreement, less usual and customary payroll deductions and required taxes; and

iii. On the Separation Date, 6,055 of the outstanding, unvested performance-based restricted stock units granted to EMPLOYEE pursuant to that certain Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement dated December 12, 2013 shall vest and be settled in accordance with the terms of such agreement, less usual and customary payroll deductions and required taxes; and

iv. On the Separation Date, all of the 11,426 outstanding, unvested performance-based restricted stock units granted to EMPLOYEE pursuant to that certain Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement dated March 21, 2013, shall terminate.

Following the Separation Date, all of EMPLOYEE’s remaining unvested equity awards (other than those eligible to vest pursuant to this Section 2(a) upon the Effective Date), shall terminate.

EMPLOYEE agrees that the above equity acceleration constitutes adequate consideration for the full and final satisfaction of any and all claims of any nature and kind whatsoever that EMPLOYEE ever had, now has or may have against CUBIC and all other persons and entities released herein, arising through the date of this Agreement, including but not limited to any claims relating in any way to CUBIC’s employment of EMPLOYEE or the termination of EMPLOYEE’s employment.

3. General Release of All Claims. As a material inducement to CUBIC to enter into this Agreement, and in consideration of the other conditions herein, EMPLOYEE irrevocably and unconditionally releases CUBIC, its parent company, and any of their subsidiaries, divisions, affiliates, stockholders, predecessors, successors, assigns, agents, attorneys, directors, officers, employees, representatives and all persons acting by, through, under or in concert with any of them (collectively referred to as “Releasees”), from any and all claims, complaints, liabilities, obligations, agreements, damages, actions of any nature, known or unknown, suspected or unsuspected, that EMPLOYEE ever had, now has, or hereafter may have arising through the date of this Agreement, including but not limited to any claims arising out of EMPLOYEE’s employment relationship or the separation of EMPLOYEE’s employment relationship with CUBIC.

Also, without limiting the generality of the foregoing, EMPLOYEE agrees to waive any and all claims for breach of contract, breach of the covenant of good faith and fair dealing, employment discrimination, harassment, and retaliation in violation of any California or other state or federal statute or regulation, including but not limited to, claims for violation of Title VII of the Civil Rights Act of 1964, the Family and Medical Leave Act, the Age Discrimination in Employment Act (“ADEA”), the Older Workers Benefit Protection Act, the Americans with Disabilities Act, the California Fair Employment and Housing Act, the Employee Retirement Income Security Act of 1974, the federal Worker Adjustment and Retraining Notification (“WARN”) Act of 1988, the California WARN Act, the National Labor Relations Act, as well as claims for violation of California public policy or similar state or federal laws, violation of constitutional rights, as well as intentional and negligent infliction of emotional distress, defamation, fraud, and violation of the California Labor Code or similar state or federal laws.

This General Release provision does not apply to: (1) claims by EMPLOYEE for workers’ compensation benefits or unemployment insurance benefits, except claims for wrongful termination or discrimination under the Workers’ Compensation Act or the Unemployment Insurance Code; (2) any action to enforce or challenge the enforceability of this Agreement; or (3) any other claims that, by statute, cannot be released by this Agreement.

4. Waiver of Known and Unknown Claims. EMPLOYEE expressly waives and relinquishes all rights and benefits afforded by Section 1542 of the Civil Code of the State of California, and does so understanding and acknowledging the significance of this specific waiver of Section 1542. Section 1542 of the Civil Code of the State of California states as follows:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her, must have materially affected his or her settlement with the debtor.

EMPLOYEE understands that EMPLOYEE is a “creditor” within the meaning of Section 1542. Notwithstanding the provisions of Section 1542, this Agreement shall be in full settlement of all claims and disputes being released herein, including unknown claims.

5. Discovery of Different or Additional Facts. EMPLOYEE acknowledges that EMPLOYEE may discover facts different from, or in addition to, those EMPLOYEE now knows or believes to be true with respect to the claims, complaints, liabilities, obligations, agreements, damages and actions herein released, and agrees the release herein shall be and remain in effect in all respects as a complete and general release as to all matters released herein, notwithstanding any such different or additional facts.

6. Non-Disclosure of CUBIC Confidential Information. EMPLOYEE agrees that EMPLOYEE shall not use or disclose to any person(s) or entity(ies), public or private, at any time or in any manner, directly or indirectly, any “CUBIC Confidential Information,” including but not limited to, all forms and types of business, technical, financial, economic, sales, marketing or customer information of CUBIC that EMPLOYEE received, developed or had access to as a result of his/her employment with CUBIC, which has not been previously disclosed to the general public by an authorized CUBIC representative or customer, regardless of whether such information would be deemed a trade secret under applicable law.

CUBIC Confidential Information shall be interpreted broadly and also 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 EMPLOYEE’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 CUBIC’s operations, or other confidential or proprietary information or intellectual property related to the business, products, services, or plans of Company, whether tangible or intangible, and whether stored or memorialized physically, electronically, photographically, or in EMPLOYEE’s memory. This specifically includes all information CUBIC has received from customers or other third parties that is not generally known to the public or is subject to a confidentiality agreement

7. Pending and Future Claims. EMPLOYEE agrees to withdraw, with prejudice, any demand for arbitration or lawsuit EMPLOYEE may have against CUBIC and any other Releasees that is pending on the date that EMPLOYEE signs this Agreement. EMPLOYEE further agrees that, to the fullest extent permitted by law, EMPLOYEE will not initiate any demand for arbitration or lawsuit related to the matters released above, it being the intention of the parties that with the execution of this release, the Releasees will be absolutely, unconditionally and forever discharged of and from all obligations to or on behalf of EMPLOYEE related in any way to the matters discharged herein. In addition, EMPLOYEE agrees not to assist any other person or entity bringing any arbitration, lawsuit, or other legal action, that is opposed to CUBIC or any other Releasees unless compelled to do so by a court of law. However, this Agreement shall not preclude EMPLOYEE from filing a complaint with or participating in an investigation or

proceeding conducted by a federal or state government entity. EMPLOYEE nonetheless expressly releases EMPLOYEE’s right to receive any monetary damages, reward, or other personal relief based on a complaint or charge filed with a federal or state government entity by EMPLOYEE or on EMPLOYEE’s behalf.

8. Restrictions on EMPLOYEE’s Activities. As a material condition of receiving the equity acceleration, for a period of two (2) years following the Separation Date, EMPLOYEE shall not accept or engage in any employment, nor provide any services for remuneration in any other capacity (e.g., as an independent contractor, sole proprietor, partner, or joint venturer) for any person or business engaged in the provision of any services or the design, manufacturing or sale of any product, that is the same, substantially similar to or competitive with, any service or product of CUBIC (“Competitive Activities”). In the event EMPLOYEE engages in Competitive Activities within two years of his Separation Date, EMPLOYEE agrees that any equity he received as a result of the equity acceleration under this Agreement, or its cash equivalent if already sold, shall be returned to CUBIC.

9. Nonsolicitation. As a material condition of receiving the equity acceleration, for a period of two (2) years following the Separation Date, EMPLOYEE shall not take any action to directly or indirectly solicit any employee or contractor of CUBIC to terminate his, her or its relationship with CUBIC, including by making any solicitation or by providing to any person or entity information about the skills, capabilities, background, or compensation of any CUBIC employee or contractor (“Solicitation Activities”). In the event EMPLOYEE engages in Solicitation Activities in breach of this provision, EMPLOYEE agrees that, in addition to any damages caused to CUBIC by such Solicitation Activities, any equity he received as a result of the equity acceleration under this Agreement, or its cash equivalent if already sold, shall be returned to CUBIC. Nothing in this provision shall limit CUBIC’s right to seek injunctive relief related to any Solicitation Activities in breach of this provision.

10. Return of Company Property. EMPLOYEE agrees to return any and all equipment, property and materials in EMPLOYEE’s possession that belong to, or identify EMPLOYEE as an employee or representative of CUBIC, including but not limited to, files, records, credit cards, business cards, badges, card key passes, cell phones, computers, tablets, and keys by EMPLOYEE’s Separation Date.

11. California Law. This Agreement shall be governed by and interpreted according to the laws of the State of California.

12. Review of the Agreement and Voluntariness. EMPLOYEE acknowledges that EMPLOYEE has read this Agreement, fully understands EMPLOYEE’s rights, privileges and duties under the Agreement, and enters this Agreement freely and voluntarily, without coercion or duress.

13. Severability. If any term, part or provision of this Agreement is invalid or illegal, the validity of the Agreement’s other terms, parts and provisions shall not be affected thereby and said invalid or illegal term, part or provision shall be deemed not to be a part of this Agreement.

14. Binding on Successors. This Agreement and all of its provisions shall be binding upon, and inure to the benefit of, any successors, assigns, personal representatives or heirs of the parties hereto.

15. No External or Prior Representations. EMPLOYEE represents and acknowledges that, in executing this Agreement, EMPLOYEE does not rely and has not relied upon any representation or statement not set forth herein made by any of the Releasees, their agents or representatives.

16. Entire Agreement. Except as expressly stated herein, the parties acknowledge and represent that this Agreement contains the entire understanding between them with respect to the matters set forth herein and supersedes any prior inconsistent agreements or understandings. The parties further acknowledge that the terms of this Agreement are contractual and not a mere recital. This Agreement may only be modified by a writing signed by both parties.

17. Time for Consideration of Agreement. This Agreement is intended to satisfy the requirements of the Older Workers’ Benefit Protection Act, 29 U.S.C. sec. 626(f), for the release of claims under the ADEA. The following general provisions, along with the other provisions of this Agreement, are agreed to for this purpose:

a. EMPLOYEE is advised to consult with an attorney concerning the terms of this Agreement and the consequences of signing it and EMPLOYEE acknowledges and agrees that EMPLOYEE has obtained and considered any such legal advice EMPLOYEE deems necessary, such that EMPLOYEE is entering into this Agreement freely, knowingly, and voluntarily;

b. EMPLOYEE has twenty-one (21) days from receipt to review and consider this Agreement;

c. EMPLOYEE may use as much of this time as EMPLOYEE wishes prior to signing;

d. For a period of seven (7) days following the execution of this Agreement, EMPLOYEE may revoke the Agreement, and the Agreement shall not become effective or enforceable until the revocation time has expired;

e. To be effective, any revocation of this Agreement must be made by EMPLOYEE in writing, signed, dated and delivered to CUBIC’s Human Resources Department no later than seven (7) days from the execution of the Agreement. If the seventh day falls on a weekend or a holiday, EMPLOYEE’s revocation must be delivered on the next business day;

f. This Agreement shall become effective eight (8) days after it is signed by EMPLOYEE (“Effective Date”), unless revoked by EMPLOYEE prior to that time as set forth above; and

g. This Agreement does not waive or release any rights or claims that EMPLOYEE may have that arise after the execution of this Agreement.

18. Construction. This Agreement shall not be construed or interpreted for or against any party hereto based on the fact that one party’s attorney drafted this Agreement or caused this Agreement to be drafted.

19. Controversies Arising Out of Agreement. The parties agree that any judicially cognizable controversy or claim arising out of or relating to this Agreement or its breach shall

be resolved through a confidential and binding arbitration before a single neutral arbitrator in San Diego, California in accordance with the rules and procedures of the Judicial Arbitration and Mediation Services (“JAMS”). The JAMS rules and procedures may be found online at www.jamsadr.org. Both EMPLOYEE and CUBIC expressly waive their right to a jury trial. This paragraph 19 is intended to be the exclusive method for resolving any and all claims by the parties against each other for payment of damages under this Agreement or relating to EMPLOYEE’S employment; provided, however, that EMPLOYEE shall retain the right to pursue rights or claims expressly excluded from the general release of claims in paragraph 3, as well as EMPLOYEE’s rights to file or participate in a complaint or investigation with a government agency under paragraph 7. This Agreement shall not limit either party’s right to obtain any provisional remedy, including, without limitation, injunctive or similar relief, from any court of competent jurisdiction as may be necessary to protect their rights and interests pending the outcome of arbitration, including without limitation injunctive relief, in any court of competent jurisdiction pursuant to California Code of Civil Procedure §1281.8 or any similar statute of an applicable jurisdiction. Seeking any such relief shall not be deemed to be a waiver of such party’s right to compel arbitration. The parties shall each bear their own attorneys’ fees and costs related to such arbitration.

20. Non-Disclosure and Other Agreements. The parties agree that this Agreement will not supersede any existing Employee Inventions And Secrecy Agreement executed by EMPLOYEE while employed at CUBIC or any other agreements relating to CUBIC’s confidential information, proprietary information, trade secrets, or intellectual property.

21. Wages & Benefits Received. EMPLOYEE acknowledges that, with the exception of the equity acceleration offered in this Agreement, EMPLOYEE has been paid all wages, salary, overtime, bonuses, commissions, accrued PTO and employee benefits owed to EMPLOYEE through EMPLOYEE’s Separation Date, and that these amounts are not in any way consideration for this Agreement.

22. No Admissions. The parties agree that this Agreement is not an admission of any liability or fault whatsoever by EMPLOYEE or CUBIC, and shall not be used as such in any legal or administrative proceeding.

23. Other. By signing below, EMPLOYEE is acknowledging that EMPLOYEE has carefully read this Agreement, fully understands what it means, is entering into it knowingly and voluntarily and that all of EMPLOYEE’s representations in it are true. EMPLOYEE understands that the consideration period described in paragraph 17 started when EMPLOYEE was first given this Agreement, and EMPLOYEE waives any right to have it restarted or extended by any subsequent changes to this Agreement. EMPLOYEE acknowledges that CUBIC would not have given EMPLOYEE the special benefits EMPLOYEE is getting in exchange for this Agreement but for EMPLOYEE’s representations and promises that EMPLOYEE is making by signing it.

PLEASE READ CAREFULLY. THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN OR UNKNOWN CLAIMS.

AGREED AND ACCEPTED:

EMPLOYEE


William Boyle

Executed this day of , 2015 at , California

CUBIC CORPORATION


Darryl Albertson
Vice President, Human Resources

Executed this day of , 2015 at San Diego, California

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
President and Chief Executive Officer


Date: May 18, 2015

Exhibit 31.2

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

I, John D. Thomas, certify that:

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

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/ John D. Thomas
John D. Thomas
Executive Vice President and Chief Financial Officer

Date: May 18, 2015

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 March 31, 2015, (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
	President and Chief Executive Officer


	Date: May 18, 2015

EXHIBIT 32.2

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

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

	/s/ John D. Thomas
	John D. Thomas
	Executive Vice President and Chief Financial Officer


	Date: May 18, 2015

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