Proxy Statement (definitive) (def 14a)

Date : 01/17/2020 @ 9:07PM
Source : Edgar (US Regulatory)
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Proxy Statement (definitive) (def 14a)


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TABLE OF CONTENTS1

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

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Filed by a Party other than the Registrant o

Check the appropriate box:

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Preliminary Proxy Statement

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material under §240.14a-12

 

CUBIC CORPORATION

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Fee paid previously with preliminary materials.

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

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Mission

Cubic is a technology-driven, market-leading global provider of innovative, mission-critical solutions that reduce congestion and increase operational effectiveness and readiness through superior situational understanding.

Purpose

Our teams innovate to make a positive difference in people's lives.

For more information about Cubic, please visit www.cubic.com or on Twitter @CubicCorp .

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LOGO

PRINCIPAL EXECUTIVE OFFICE
9333 Balboa Avenue
San Diego, California 92123

Dear Fellow Shareholders,                         


  

Fiscal 2019 was a successful year for Cubic, with new financial records and excellent progress on our strategic priorities. Over the last few years, we have transformed Cubic through investments to drive long-term growth, accelerate innovation, improve our cost structure and facilitate better collaboration across the enterprise. Our 2019 financial results, including Sales of $1,496 million, up 24% year-on-year, were in line with our annual guidance provided to investors and reflect our team's strong focus on meeting our commitments. We continue to execute our technology-driven, market-leading strategy propelled by significant backlog, franchise wins, strategic partnerships and transformational acquisitions.
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While growing the Company to record levels and winning new business, we continued to make progress on our human resources initiatives to support and develop our talented employees. We are focused on developing a highly engaged, "all-in" culture and we measure this through quarterly employee surveys. Starting in fiscal 2020, our annual performance goals for leaders across the Company specify that we will hold ourselves accountable for performing in the top quartile for employee engagement. Additionally, we are launching several initiatives focused on fostering inclusive and diverse environments to strengthen our culture.

In June 2019, we shared the news of the unexpected passing of long-time Board member Edwin Guiles. Ed was not only an exceptional leader, but also a great friend and mentor. He will be deeply missed. Shortly after Ed's passing, the Board appointed David Melcher as Lead Independent Director. Dave has exemplary leadership skills and I am confident he will continue to help steer Cubic toward further success.

In fiscal 2020, we have continued our active Board refreshment with two new directors: Denise Devine, a financial leader and innovator with a breadth of experience developing and commercializing technology platforms, and Carolyn Flowers, a seasoned executive and thought leader in the transportation industry. I look forward to their leadership as we continue to develop innovative technologies, guided by our key priority of Winning the Customer. We are grateful to John Warner who will retire from the Board at the 2020 Annual Meeting after more than a decade of dedicated service.

2020 ANNUAL MEETING OF SHAREHOLDERS

You are cordially invited to attend Cubic Corporation's 2020 Annual Meeting of Shareholders, which will be held at our headquarters located at 9333 Balboa Avenue, San Diego, California 92123, on February 17, 2020, at 11:00 a.m. Pacific Time. For more information, please review this proxy statement and the enclosed 2019 annual report.

Your vote is important. Whether or not you plan to attend the meeting, we urge you to read the proxy statement carefully and to vote by telephone or Internet, or by signing and returning the enclosed proxy.

On behalf of the Board of Directors, thank you for your continued support of Cubic Corporation.

    Sincerely,

 

 

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    Bradley H. Feldmann
Chairman, President and Chief Executive Officer
January 17, 2020    

CAST YOUR VOTE RIGHT AWAY

    Your vote is very important. New York Stock Exchange ("NYSE") rules state that if your shares are held through a broker, bank or other nominee, they cannot vote on your behalf on non-discretionary matters. Please cast your vote on all of the proposals listed below to ensure that your shares are represented.


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LOGO

    
    
  NOTICE OF 2020 ANNUAL MEETING

LOGO

When   February 17, 2020
11:00 a.m. Pacific Time
   
   




Where


 



Cubic Headquarters
9333 Balboa Avenue
San Diego, California 92123
   

 

 


 


 

Election of nine directors to hold office for a one-year term:
    Proposal
1
 

Prithviraj Banerjee

Bruce G. Blakley

Maureen Breakiron-Evans

Denise L. Devine

Bradley H. Feldmann

 

Carolyn A. Flowers

Janice M. Hamby

David F. Melcher

Steven J. Norris

   
Items
of
Business



  Proposal
2
  Advisory vote on named executive officer compensation
   
    Proposal
3
  Ratification of independent registered public accounting firm
   
      Transact any other business that may properly come before the meeting
   


Attending the
Annual Meeting

 

All shareholders are invited to attend.

You must provide photo identification and appropriate proof of ownership.

   
Who Can Vote   Only shareholders of record at the close of business on December 19, 2019 will be entitled to vote at the meeting. The transfer books will not be closed.
   

Date of Mailing

  On or about January 17, 2020

We direct your attention to the accompanying proxy statement. Whether or not you plan to attend the meeting in person, you are urged to submit your proxy or voting instructions as promptly as possible by Internet, telephone or mail to ensure your representation and the presence of a quorum at the Annual Meeting. If you attend the meeting and wish to vote in person, you may withdraw your proxy or voting instructions and vote your shares personally. Your proxy is revocable in accordance with the procedures set forth in the proxy statement.

San Diego, California

January 17, 2020

  By Order of the Board of Directors,

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    Hilary L. Hageman
Corporate Secretary

Table of Contents

    
    
  TABLE OF CONTENTS

 

     

1   PROXY SUMMARY

1

 

 

 

2020 Annual Meeting of Shareholders

1

 

 

 

Proposals and Voting Recommendations

2

 

 

 

Proposal 1 Election of Directors

4

 

 

 

Director Skills and Qualifications

5

 

 

 

Corporate Governance Highlights

5

 

 

 

Shareholder Engagement

6

 

 

 

Proposal 2 Advisory Vote on Named Executive Officer Compensation

8

 

 

 

Proposal 3 Ratification of Independent Registered Public Accounting Firm


 


 


 


 


 
9   PROXY STATEMENT

9

 

 

 

Outstanding Shares and Voting Rights

 

 

 

 

 
10   PROPOSAL 1 ELECTION OF DIRECTORS

10

 

 

 

The Board of Directors

18

 

 

 

Board Committees

 

 

 

 

 
27   PROPOSAL 2 ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION

 

 

 

 

 
28   NAMED EXECUTIVE OFFICERS

 

 

 

 

 
29   COMPENSATION DISCUSSION AND ANALYSIS

29

 

 

 

Section 1: Overview of Performance and Compensation Highlights

34

 

 

 

Section 2: Key Objectives and Setting Executive Compensation

         
38       Section 3: Fiscal Year 2019 Executive Compensation Decisions

50

 

 

 

Section 4: Other Compensation Matters and Benefit Programs

 

 

 

 

 
53   EXECUTIVE COMPENSATION TABLES

 

 

 

 

 
66   OWNERSHIP OF COMMON STOCK

 

 

 

 

 
67   CERTAIN TRANSACTIONS AND RELATIONSHIPS

67

 

 

 

Related Persons

 

 

 

 

 
67   SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

 

 

 

 
68   PROPOSAL 3 RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

 

 
69   DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS

 

 

 

 

 
69   EXECUTIVE OFFICERS

 

 

 

 

 
71   ANNUAL REPORT

 

 

 

 

 
71   SHAREHOLDERS SHARING THE SAME ADDRESS

 

 

 

 

 
72   OTHER MATTERS


Table of Contents

    
    
  PROXY SUMMARY

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.

2020 Annual Meeting of Shareholders

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Proposals and Voting Recommendations

Proposal

  Board Recommendation
Page

1

  Election of nine directors to hold office for a one-year term     FOR
each nominee
  10

2

 

Advisory vote on named executive officer compensation

 
 

FOR

 

27

3

  Ratification of the appointment of Ernst & Young LLP to serve as the Company's independent registered public accounting firm for fiscal year 2020     FOR   68

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PROXY SUMMARY

Proposal 1 Election of Directors

Director Nominees




Name



 



Age






Director
Since







Independent







Principal Occupation






Committee
Memberships




Other Current
Public
Company
Boards






Other Current
Directorships
                             
Bradley H. Feldmann   58   2014
Chairman
  No   President and CEO of Cubic  



Classified Business
Oversight (Financial Expert)

     

Aerospace Industries Association

National Defense Industrial Association

UrbanLife

                             
Prithviraj Banerjee   59   2018   Yes   Chief Technology Officer, ANSYS Corporation  

Executive
Compensation

Technology Strategy (Chair)

     


Software Motor
Corporation

                             
Bruce G. Blakley   74   2008   Yes   Retired Managing Partner, Coopers & Lybrand (now PricewaterhouseCoopers) and faculty member at University of California, San Diego  

Audit and Compliance (Chair and Financial Expert)

Nominating,
Governance, Ethics and
Corporate
Responsibility1

     



Hunter Industries

                             
Maureen Breakiron-Evans   65   2017   Yes   Former CFO, Towers Perrin  

Audit and Compliance (Financial Expert)

Technology Strategy

 

Ally Financial, Inc.

Cognizant Technology Solutions Corp.

 



Stetson University

                             
Denise L. Devine   64   2019   Yes   Founder and CEO of FNB Holdings, LLC and Co-Founder, CAO and CFO of RTM Vital Signs, LLC  

Audit and Compliance (Financial Expert)

Technology Strategy

 


AgroFresh Solutions, Inc.

Fulton Financial Corporation

 


AUS, Inc.

Ben Franklin Technology Partners of Southeastern Pennsylvania

                             
Carolyn A. Flowers   70   2019   Yes   Managing Principal, InfraStrategies LLC  



Executive
Compensation

Technology Strategy

     

American Public Transportation Association

Women's Transportation
Seminar

Eno Foundation

                             
Janice M. Hamby   61   2015   Yes   Retired Rear Admiral, U.S. Navy; former Chancellor, College of Information and Cyberspace, National Defense University and President, and Co-Owner of Fair Winds Farm LLC; Doctor of Management  

Classified Business
Oversight (Chair)

Nominating,
Governance, Ethics and
Corporate
Responsibility

Executive
Compensation

     





American Armed Forces
Mutual Aid

                             
David F. Melcher   65   2018
Lead Independent Director (As of July 2019)
  Yes   Former President and CEO of Exelis Inc., Former President and CEO of the Aerospace Industries Association, and retired Lieutenant General, U.S. Army  

Classified Business
Oversight (Financial Expert)

Executive
Compensation (Chair)

Nominating,
Governance, Ethics and
Corporate
Responsibility

 

Becton Dickinson & Company

 




Uniformed Services Automobile Association

                             
Steven J. Norris   74   2014   Yes   Partner, Norris McDonough LLP; Chair, Soho Estates; President, ITS UK; and former Member of Parliament  

Audit and Compliance

Nominating,
Governance, Ethics and
Corporate
Responsibility (Chair)

 

Driver Group (Chair)

 


Optare PLC

This Land Ltd.

                             
(1)
Effective November 21, 2019, the Ethics and Corporate Responsibility and Nominating and Corporate Governance Committees were combined into one new committee: Nominating, Governance, Ethics and Corporate Responsibility Committee.

2 www.cubic.com/investor-relations


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PROXY SUMMARY

Director Diversity

Our Board nominees represent a diverse mix of backgrounds, qualifications, skills and experiences that contribute to a well-rounded Board, well-positioned to

effectively oversee our strategy. We have a balance of new and tenured directors, reflecting our commitment to proactive Board refreshment.

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GRAPHIC     2020 Notice and Proxy Statement / 3


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PROXY SUMMARY

Director Skills and Qualifications

The table below summarizes some of the key experience and skills of our director nominees. This summary is not intended to be an exhaustive list of each of our director nominee's skills or contributions to the Board.

GRAPHIC

4 www.cubic.com/investor-relations


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PROXY SUMMARY

 

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Shareholder Engagement

We actively engage with our shareholders on a year-round basis to discuss Cubic's strategy, financial performance and key business developments. We participate in numerous investor conferences, hold our own shareholder engagement events and meet one-on-one with current and prospective shareholders in a variety of forums.

After our annual shareholder meeting, the Board reviews the voting results and any shareholder feedback. We implement a governance-focused outreach plan designed to solicit our shareholders' input on matters such as corporate governance, executive compensation and corporate social responsibility. We extend meeting invitations to our largest shareholders in late summer and early fall. Our engagement team includes our Chairman and Chief Executive Officer, Chief Financial Officer, General Counsel and Vice President of Investor Relations, and may include our Lead Independent Director and other Board members and executives as appropriate. The Board reviews the shareholder feedback from these discussions and implements changes, if appropriate. The engagement team may also conduct outreach ahead of the annual shareholder meeting to discuss matters to be voted on at our upcoming Annual Meeting.

As part of our annual engagement, we expect to continue to reach out to our largest shareholders holding in the aggregate at least 50% of our total outstanding shares.

As a result, in part, of our discussions with shareholders and, in part, our focus on continuous improvement and better alignment with shareholder interests, we have implemented key changes to our executive compensation program and corporate governance in the last two years, including:

GRAPHIC     2020 Notice and Proxy Statement / 5


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PROXY SUMMARY

Executive Compensation and Alignment with Shareholders

 

Modifications to our long-term incentive plan for fiscal year 2019 to include a relative total shareholder return ("TSR") multiplier measured over the three-year performance period

Modifications to our annual incentive plan for fiscal year 2020 to include a cash flow metric

Effective for fiscal year 2020, increasing executive and director stock ownership guidelines

Modifications to our long-term incentive plan for fiscal year 2020 to reduce the maximum payout on performance awards from 250% to 200% of target and limit the relative TSR modifier to 1.0 if absolute TSR is negative for the performance period

Shareholder Rights and Board Accountability

 

Implementation of majority voting for director elections

Elimination of supermajority voting requirements for certain business combinations, bylaw amendments and certificate of incorporation amendments

Proposal 2 Advisory Vote on Named Executive Officer Compensation

Executive Compensation Philosophy

We align the interests of management with those of shareholders and other stakeholders through our executive compensation programs to ensure Cubic's future as a technology-driven, market-leading global company that makes the world better through innovation, technology solutions and world-class products. Our policies intend to support the development of a strong executive team provided with appropriate incentives that support the business

strategy, build and retain the team and address different risks associated with compensation. We strive to provide a total compensation package that fairly and equitably rewards our senior leadership as a team and as individuals, from each of whom we expect superior performance. Our total direct compensation program is designed so that the majority of pay is variable or "at risk," with emphasis on performance over the long term.

6 www.cubic.com/investor-relations


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PROXY SUMMARY

Fiscal 2019 Compensation Summary For Named Executive Officers

Name and Principal Position

 

Salary
($)




Bonus
($)






Non-Equity
Incentive Plan
Compensation
($)







Stock
Awards
($)







Change in
Pension
Value
($)







All Other
Compensation
($)





Total
($)


 

Bradley H. Feldmann

    933,090         774,120     4,101,667     19,435     53,652     5,881,964    

Chairman, President and

                                             

Chief Executive Officer

                                             

Anshooman Aga

    478,938         334,815     1,025,450         34,901     1,874,104    

Executive Vice President and

                                             

Chief Financial Officer

                                             

Matthew J. Cole(1)

    516,355         207,465     717,802         65,223     1,506,845    

Former Senior Vice President, Cubic Corporation

                                             

and President, Cubic Transportation Systems

                                             

Michael R. Twyman

    511,288         522,780     717,802         41,236     1,793,106    

Senior Vice President, Cubic Corporation

                                             

and President, Cubic Mission Solutions

                                             

Michael Knowles

    329,809         287,672     512,725         22,358     1,152,564    

Senior Vice President, Cubic Corporation

                                             

and President, Cubic Global Defense (effective October 1, 2018)

                                             
(1)
On January 6, 2020, Mr. Cole notified the Company of his resignation from his position as Senior Vice President of Cubic and President of Cubic Transportation Systems, effective January 13, 2020.

The table above is an excerpt from the Summary Compensation Table. For a complete discussion of our executive compensation program and the full Summary Compensation Table, please see the "Executive Compensation and Other Information" section of this proxy statement.

Fiscal 2019 Total Target Compensation Mix

The charts below show that the significant majority of target total direct compensation for our Named Executive Officers ("NEOs") is variable or "at-risk," and tied to achievement of performance objectives or stock price performance.

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GRAPHIC     2020 Notice and Proxy Statement / 7


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PROXY SUMMARY

Proposal 3 Ratification of Independent Registered Public Accounting Firm

The Board is seeking your confirmation of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending September 30, 2020.

The following table sets forth the aggregate fees billed to us by Ernst & Young LLP, our independent auditor, for 2019 and 2018.

 
Fiscal Years Ended September 30,
 
     

Services Rendered

 
2019

2018

Audit fees(1)

  $ 3,648,000   $ 4,988,000    

Audit-related fees(2)

    138,000     136,000    

Tax fees(3)

    115,000     172,000    

All other fees(4)

    7,000     5,000    

Total fees

  $ 3,908,000   $ 5,301,000    
(1)
For professional services rendered for the audits of our 2019 and 2018 annual financial statements, the reviews of our financial statements included in our Quarterly Reports on Forms 10-Q, statutory audits of foreign subsidiaries and consultation on accounting matters during fiscal years 2019 and 2018. The audit fees for 2019 are estimated. The final amount of the fees for those services may vary from the estimate provided.

(2)
These fees included due diligence procedures.

(3)
These fees were primarily for foreign tax compliance and consulting as well as consulting regarding U.S. tax reform.

(4)
These fees were for EY online services.

8 www.cubic.com/investor-relations


Table of Contents

    
    
  PROXY STATEMENT

We encourage your personal attendance.

Proxies in the form enclosed and/or as shown at www.proxyvote.com are solicited by the Board of Directors (the "Board") for use at the Annual Meeting of Shareholders to be held in San Diego, California, on February 17, 2020, and at any adjournments or postponements of the meeting. Execution of a proxy will not in any way affect a shareholder's right to attend the meeting and vote in person, and any shareholder giving a proxy has the right to revoke it at any time before it is exercised by filing with the Corporate Secretary of Cubic Corporation ("Cubic" or the "Company") a written revocation or duly executed proxy bearing a later date or by attending the meeting and voting in person. The proxy will be suspended if the shareholder is present at the meeting and elects to vote in person.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 17, 2020

This proxy statement and our 2019 annual report are available electronically at www.proxyvote.com.


Outstanding Shares and Voting Rights    

A quorum of shareholders is required. A quorum exists if a majority of the common shares issued and outstanding and entitled to vote are represented by shareholders present at the meeting or by proxy. Abstentions and broker non-votes will be counted towards the quorum requirement. 31,274,052 shares of our common stock were outstanding at the record date of December 19, 2019.

Each holder of common shares is entitled to one vote for each share held on the record date. Votes will be counted by the Inspector of Elections. Abstentions will be counted towards the vote total for each proposal, and will have the same effect as "Against" votes. Broker non-votes have no effect on, and are not counted towards the vote total for any proposal. Advisory votes are not binding, but the Board will consider the outcome of such votes when making future decisions.

If you are a beneficial holder and do not provide specific voting instructions to your broker, we expect that the organization that holds your shares will not be authorized to vote your shares, which would result in "broker non-votes," on proposals other than Proposal 3 ratifying the selection of Ernst & Young LLP as the Company's independent public accountant for 2020. However, whether brokers have discretion to vote on matters is ultimately up to the NYSE (which regulates certain banks, brokers and other nominees), and the NYSE may make a determination that is different from what we expect, which could result in your shares being voted in a manner you would not choose yourself. Accordingly, we strongly encourage you to submit your

proxy and exercise your right to vote as a shareholder to ensure your shares are voted as you want them.

In Proposal 1, nominees for director are to be elected by an affirmative vote of a majority of the votes cast in favor of such nominee's election. Any incumbent nominee for director who does not receive an affirmative vote of a majority of the votes cast in favor of such nominee must promptly tender his or her resignation after the Annual Meeting. Proposals 2 and 3 require an affirmative vote of a majority of shares having voting power, present in person or represented by proxy.

Proposal
Vote
Required


Broker Discretionary
Voting Expected
to be Allowed
Election of Directors Majority of
votes cast
No
Advisory Vote on Named Executive Officer Compensation Majority of
shares present in person or represented by proxy
No
Ratification of Ernst & Young LLP Majority of
shares present in person or represented by proxy
Yes
Shareholder Proposals, if properly presented at the Annual Meeting Majority of
shares present in person or represented by proxy
No

There are no rights of appraisal or similar rights of dissenters with respect to any matter to be acted upon at the Annual Meeting.

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Table of Contents


  PROPOSAL 1
  ELECTION OF DIRECTORS



Our Board of Directors ("Board") has nine members who are to be elected by a majority vote at the Annual Meeting, each to hold office for one year and until his or her successor is elected. The Nominating, Governance, Ethics and Corporate Responsibility Committee and the Board have recommended the election of the nine directors listed below. Eight nominated directors are independent ("Independent Directors") and one is an executive employee of the Company. Proxy holders will, unless

authorization to do so is withheld, vote the proxies received by them for the election of the listed directors, in accordance with this proxy authorization. The proxies cannot be voted for a greater number of persons than the number of nominees named. Although it is not contemplated that any nominee will be unable to serve as a director, in such event, the proxies will be voted by the proxy holders for such other persons as may be designated by the Board.

The Board of Directors

Board Leadership Structure

The Board regularly evaluates the appropriate leadership structure of the Company and currently believes that the Company and its shareholders are best served by not having a formal policy on whether the same individual may serve as both Chief Executive Officer and Chairman. This flexibility allows the Board to elect the most appropriate director as Chairman, while maintaining the ability to separate the Chairman and Chief Executive Officer roles if necessary. While the Board is confident that the combined Chairman and CEO structure, balanced by a strong Lead Independent Director position, is best suited to the current needs of the business, the Board remains committed to evaluating Cubic's leadership structure on an ongoing basis as part of its annual self-assessment.

Chairman

Currently, the Company's Chairman and Chief Executive Officer roles are held by Mr. Feldmann. The Board believes that this structure serves the Company and its shareholders well based primarily on Mr. Feldmann's background, skills and experience, as detailed in his biography below, including his history with Cubic and

successful track record spearheading the Company's strategic growth plan, including strong improvements to financial performance, IT infrastructure, operations and talent development.

The Chairman has the authority to call meetings of the Board and presides at such meetings. He has primary responsibility for shaping Board agendas (in consultation with the Lead Independent Director) and will communicate with all directors on key issues and concerns outside of Board meetings.

Lead Independent Director

Ed Guiles served as Lead Independent Director until his passing in June 2019. Following his passing, General David Melcher was unanimously elected by the Board as the new Lead Independent Director and has been serving in this capacity since July 2019. General Melcher was appointed as Lead Independent Director because of his strong contributions to the Board and his deep expertise in the defense industry, including his leadership experience as a public company president and chief executive officer. The table below describes the key duties and responsibilities of the Lead Independent Director.

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Table of Contents

PROPOSAL 1 ELECTION OF DIRECTORS | The Board of Directors

Key Responsibilities of Lead Independent Director

Review with the Chairman and approve all Board meeting agendas

   

Call and chair all meetings of the Independent Directors

   

Preside at all meetings of the Board at which the Chairman is not present

   

Facilitate full and candid Board discussions and discussions among Independent Directors outside of Board meetings, including oversight of the CEO

   

Be authorized to attend all committee meetings, as appropriate

   

Serve as the liaison between the Independent Directors and the Chairman

   

Be available for consultation and communication with significant shareholders

   

Collaborate with the Executive Compensation Committee on the annual performance evaluation of the CEO

   

Collaborate with the Nominating, Governance, Ethics and Corporate Responsibility Committee on the performance and structure of the Board and its committees, including the performance of individual directors

   

Guide the CEO succession planning process in conjunction with the Nominating, Governance, Ethics and Corporate Responsibility Committee

   

Meetings

The Board met seven times during fiscal year 2019.

During that year, each director attended at least 75% of the total number of meetings held during such director's term of service by the Board and each committee of the Board on which such director served.

Non-employee directors regularly meet without management present at the conclusion of each regular Board meeting and the Audit and Compliance Committee meetings and at other times as necessary.

During fiscal year 2019, the Lead Independent Directors, Mr. Guiles and General Melcher, chaired these sessions for the Board, and Mr. Blakley chaired these sessions for the Audit and Compliance Committee.

The Board encourages its members to attend the Annual Meeting of Shareholders. The 2019 Annual Meeting was attended by all directors.

Independent Directors

The Nominating, Governance, Ethics and Corporate Responsibility Committee determined and the Board agreed that all directors nominated, except Mr. Feldmann, met the independence standards of the

NYSE and the categorical independence standards adopted by the Company's Board as defined in the Company's Corporate Governance Guidelines.

Board Qualifications

The Nominating, Governance, Ethics and Corporate Responsibility Committee and the Board believe the nominees are qualified to serve the best interests of our

shareholders and should be elected because they possess the following experience, qualifications, attributes and skills.

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PROPOSAL 1 ELECTION OF DIRECTORS | The Board of Directors

LOGO     Chairperson

  LOGO     Financial Expert   GRAPHIC     Chairman of the Board   LOGO     Lead Independent Director

DIRECTOR NOMINEES


GRAPHIC

   

BRADLEY H. FELDMANN

 

 

PRESIDENT AND CHIEF EXECUTIVE OFFICER

 

 

Age 58

 

 

Director since 2014

 

 

GRAPHIC Chairman since 2018

 

 

 

 

 

Committees

 

 

Classified Business Oversight  LOGO

   
    Background

 

 

Mr. Feldmann has served as Chairman of the Board of Directors of Cubic since February 2018, Chief Executive Officer ("CEO") of Cubic since July 2014, and as President since January 2013. He also served as Chief Operating Officer of Cubic from January 2013 to July 2014. Prior to that, he was President of the companies comprising the Cubic Defense Systems segment, a role he assumed in 2008. He previously worked at Cubic Defense Systems from 1989 to 1999.

 

 

Prior to rejoining Cubic in 2008, Mr. Feldmann held senior leadership positions at OMNIPLEX World Services Corporation and ManTech International. He is a Board Leadership Fellow of the National Association of Corporate Directors, a member of the Aerospace Industries Association Board of Governors and is a member of the Board of the National Defense Industrial Association and serves on their Executive Committee and as Chair of the Finance Committee. He also serves on the Board of UrbanLife, a non-profit organization, as Chair of the Finance Committee.

 

 

Qualifications

            

 

Extensive defense, intelligence and transportation industry expertise

Long history and successful track record with Cubic; spearheaded the Company's strategic growth plan, including customer-centric innovations, strong improvements to financial performance, IT infrastructure, operations and talent development

Executive management experience at global companies


 

 

 

 

 

 

 

 

 

GRAPHIC

   

PRITHVIRAJ BANERJEE

 

 

CHIEF TECHNOLOGY OFFICER,
ANSYS CORPORATION

 

 

Age 59

 

 

Director since 2018

 

 

Independent

 

 

 

 

 

Committees

 

 

Executive Compensation

   

Technology Strategy  LOGO

 

 

    Background

 

 

Dr. Banerjee has served as Chief Technology Officer of ANSYS Corporation since October 2018, and prior to that, served as a senior client partner for Korn Ferry from June 2017 to October 2018 where he was responsible for the Internet of Things and digital transformation advisory services within the organization's global industrial practice. Prior to his role at Korn Ferry, Dr. Banerjee was the Executive Vice President and Chief Technology Officer for Schneider Electric SE from September 2015 to June 2017, and served in several senior leadership roles including Managing Director of Global Technology R&D at Accenture PLC from 2013 to 2015; Chief Technology Officer and Executive Vice President of ABB Ltd. from 2012 to 2013; and Senior Vice President of Research and Director of HP Labs at Hewlett-Packard.

 

 

Dr. Banerjee founded AccelChip, a developer of products and services for electronic design automation in 2000 and BINACHIP, where he was also Chairman and Chief Scientist in 2006. He has also served as Dean of the College of Engineering at the University of Illinois at Chicago, Walter P. Murphy Professor and Chairman of Electrical and Computer Engineering ("ECE") at Northwestern University and Professor of ECE at the University of Illinois. From 2013 to 2019, Dr. Banerjee served on the Board of Directors of Cray Inc., a company that specialized in supercomputers and solutions for storage and analytics.

 

 

Qualifications

            

 

Leadership experience in engineering, disruptive technology and research and development

Global experience in both public and private sectors with a track record of driving innovation and technology differentiation


 

 

 

 

 

 

 

 

 

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PROPOSAL 1 ELECTION OF DIRECTORS | The Board of Directors

GRAPHIC

   

BRUCE G. BLAKLEY

 

 

RETIRED MANAGING PARTNER,
COOPERS & LYBARND AND FACULTY MEMBER AT UNIVERSITY OF CALIFORNIA, SAN DIEGO

 

 

Age 74

 

 

Director since 2008

 

 

Independent

 

 

 

 

 

Committees

 

 

Audit and Compliance  LOGO   LOGO

   

Nominating, Governance, Ethics and Corporate Responsibility

   
    Background

 

 

Mr. Blakley was an audit partner and, from 1996 to 1998, was Managing Partner in the San Diego office of the national accounting firm Coopers & Lybrand (PricewaterhouseCoopers since 1998). He was employed there in auditing private and public companies and consulting with their boards of directors and executives for 32 years until his retirement in 2005. He maintains his CPA license, teaches at the University of California, San Diego, and serves as a Director of a privately held manufacturing company. He previously served as a Director and Chair of the Audit Committee of Excel Trust, Inc. from April 2010 to August 2015 and as Board Chair of The San Diego Foundation, a non-profit organization with over $575 million in assets, including as Chair of its Finance, Audit, and Executive Committees, and as a Director of The San Diego Foundation for 14 years.

 

 

Qualifications

            

 

Public, private and non-profit business experience as well as experience in academia

Extensive financial expertise including financial reporting, accounting and controls

Enhanced corporate governance experience


 

 

 

 

 

 

 

 

 

GRAPHIC

   

MAUREEN BREAKIRON-EVANS

 

 

FORMER CHIEF FINANCIAL OFFICER, TOWERS PERRIN

 

 

Age 65

 

 

Director since 2017

 

 

Independent

 

 

 

 

 

Committees

 

 

Audit and Compliance LOGO

   

Technology Strategy

   

Other Public Company Boards

 

 

Ally Financial, Inc.

   

Cognizant Technology Solutions Corp.

   
    Background

 

 

Ms. Breakiron-Evans served as the Chief Financial Officer of Towers Perrin, a global professional services company from 2007 through 2008. Prior to that she was Vice President and General Auditor of CIGNA Corporation, a health services organization, from 2005 to 2006, and was Executive Vice President and Chief Financial Officer of Inovant, LLC, VISA's captive technology development and transaction processing company from 2001 to 2004. She served 16 years in public accounting, ultimately as a partner at Arthur Andersen LLP through 1994.

 

 

Ms. Breakiron-Evans currently serves on the Boards of Cognizant Technology Solutions Corp., where she serves as Chair of the Audit Committee and on the Nominating and Corporate Governance Committee, and Ally Financial, Inc., where she serves on the Audit Committee and Digital Transformation Committee. She recently served on the Heartland Payment Systems, Inc. board, where she served as Chair of the Audit Committee until its sale in April 2016. Ms. Breakiron-Evans served on the board of the Federal Home Loan Bank-Pittsburgh from 2011 through 2014. She received an NACD Cyber Security Certificate in 2017 and is a Board Leadership Fellow of the National Association of Corporate Directors.

 

 

Qualifications

            

 

Experience as an Audit Partner with a strong command of the financial reporting and tax issues facing public companies

Former chief financial officer with extensive leadership, technology, financial and risk management experience


 

 

 

 

 

 

 

 

 

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PROPOSAL 1 ELECTION OF DIRECTORS | The Board of Directors

GRAPHIC

   

DENISE L. DEVINE

 

 

FOUNDER AND CEO OF FNB HOLDINGS, LLC AND CO-FOUNDER AND CFO OF RTM VITAL SIGNS, LLC

 

 

Age 64

 

 

Director since 2019

 

 

Independent

 

 

 

 

 

Committees

 

 

Audit and Compliance LOGO

   

Technology Strategy

   

Other Public Company Boards

 

 

AgroFresh Solutions, Inc.

Fulton Financial Corporation

   
    Background

 

 

Ms. Devine was the founder and since 2014 has served as the Chief Executive Officer of FNB Holdings, LLC and since 2014 was co-founder, Chief Administrative Officer and Chief Financial Officer of RTM Vital Signs, LLC. Ms. Devine was also founder and previously served for more than ten years as the Chief Executive Officer of Nutripharm, Inc. Ms. Devine previously served as Chief Financial Officer for Energy Solutions International and in financial management positions for Campbell Soup Company.

 

 

Ms. Devine has served as Chair of the Pennsylvania State Board of Accountancy and on the Board of the American Institute of CPAs. Ms. Devine has served as a director of Fulton Financial Corporation since 2012 and as a director of AgroFresh Solutions, Inc. since 2018. Ms. Devine was a member of the Board of Trustees of Villanova University from 2005 to 2015, where she was the Chair of the Audit and Risk Committee. She has also served as a member of the Board of Trustees of Lourdes Health System from 2010 to 2019 and on the Board of AUS, Inc. a privately-owned company, since 2016 and was appointed to the Board of Ben Franklin Technology Partners of Southeastern Pennsylvania in 2016. Ms. Devine is a certified public accountant.

 

 

Qualifications

            

 

Global leadership experience spanning from entrepreneurial start-ups to Fortune 100 corporations

Extensive financial and capital markets experience

Deep experience developing and commercializing technology platforms

Co-inventor on more than twenty U.S. and international patents


 

 

 

 

 

 

 

 

 

GRAPHIC

   

CAROLYN A. FLOWERS

 

 

MANAGING PRINCIPAL, INFRASTRATEGIES LLC, FORMER AMERICAS TRANSIT PRACTICE LEADER—AECOM

 

 

Age 70

 

 

Director since 2019

 

 

Independent

 

 

 

 

 

Committees

 

 

Executive Compensation

   

Technology Strategy

   
    Background

 

 

Ms. Flowers has served as a Partner and Managing Principal of InfraStrategies LLC since February 2019. Ms. Flowers is an experienced transportation executive who was formerly the Senior Vice President of Americas Transit Market Sector at AECOM where she was responsible for client and industry relations and business development in the U.S. and Canada from March 2017 to February 2019. Prior to joining AECOM, she served as the acting administrator of the Federal Transit Administration under President Obama from January 2015 through January 2017.

 

 

Ms. Flowers was the CEO and Director of Public Transit for the Charlotte Area Transit System from January 2010 to January 2015 and spent 19 years at Los Angeles County Metropolitan Transportation Authority where she completed her tenure as its Chief Operating Officer. Ms. Flowers currently serves on the American Public Transportation Association's (APTA) Board of Directors. She previously served as Co-Chair of the Reauthorization Task Force and Publication Advisory, Leadership, Legislative and Awards committees. She currently serves on the Finance Committee of APTA.

 

 

Qualifications

            

 

Recognized thought leader in the transportation and infrastructure space

Unique understanding in the areas of policy, public-private partnerships and creative collaboration among stakeholders and the business community

Extensive leadership experience in public transportation


 

 

 

 

 

 

 

 

 

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PROPOSAL 1 ELECTION OF DIRECTORS | The Board of Directors

GRAPHIC

   

JANICE M. HAMBY

 

 

RETIRED REAR ADMIRAL, U.S. NAVY

 

 

Age 61

 

 

Director since 2015

 

 

Independent

 

 

 

 

 

Committees

 

 

Classified Business Oversight LOGO

   

Executive Compensation

   

Nominating, Governance, Ethics and Corporate Responsibility

   
    Background

 

 

Admiral Hamby retired as a U.S. Navy Rear Admiral in 2012 and is an information technology expert with more than 30 years of experience in the U.S. Navy cyber security arena, most recently as a Deputy Chief Information Officer for the U.S. Department of Defense from 2011 to 2012. Prior to that she served as Vice Director, Command, Control, Computers and Communications for the Joint Chiefs of Staff. She subsequently served as the Chancellor at the College of Information and Cyberspace, National Defense University in Washington, D.C., from October 2014 until July 2018. Admiral Hamby served twice as Commanding Officer of critical telecommunications and technology services organizations, as well as on the staffs of the Chairman of the Joint Chiefs of Staff and the Commander of Multi-National Force in Iraq. She holds a Doctor of Management degree and consults and speaks on cyber security and leadership. She co-owns and operates Fair Winds Farm, LLC with her husband.

 

 

Qualifications

            

 

Strong background in directing and implementing information technology systems in complex organizations as well as deep experience in cyber security

Extensive defense industry and military leadership experience

Experience in strategy development, human capital management and development, and international negotiations


 

 

 

 

 

 

 

 

 

GRAPHIC

   

DAVID F. MELCHER

 

 

FORMER PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR OF EXELIS, INC., FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE AEROSPACE INDUSTRIES ASSOCIATION, AND RETIRED LIEUTENANT GENERAL, U.S. ARMY

 

 

Age 65

 

 

Director since 2018

 

 

LOGO Lead Independent Director since 2019

 

 

Independent

 

 

 

 

 

Committees

 

 

Classified Business Oversight  LOGO

   

Executive Compensation LOGO

   

Nominating, Governance, Ethics and Corporate Responsibility

   

Other Public Company Boards

 

 

Becton Dickinson & Company

   
    Background

 

 

General Melcher served as the President and CEO of the Aerospace Industries Association from June 2015 through the end of December 2017 and served on the FAA's NextGen Advisory Council until 2017. From 2011 to 2015, he was President, CEO, and a member of the Board of Directors of Exelis Inc., a diversified, global aerospace defense, information and technology services company, spun off from ITT Corporation in 2011 and acquired by Harris Corporation in 2015. From 2008 to 2011, he was the President of ITT's Defense and Information Solutions business and retired from the Army as a Lieutenant General in 2008 after a successful 32-year career. He served in the Pentagon as the Army's Military Deputy for Budget and Deputy Chief of Staff for Programs.

 

 

General Melcher served on the Board of Directors of CR Bard Corporation from 2014 to 2017 and was a member of the Audit, Finance and Compensation and Personnel Committees. Becton Dickinson and Co ("BD") acquired CR Bard on December 29, 2017 and General Melcher was appointed to serve on BD's Board of Directors as of that date, as well as the Audit and Compensation and Management Development Committees. As of August 2019, he was elected to the Uniformed Services Automobile Association (USAA) board of directors and serves on the Audit and Compensation and Workforce committees. General Melcher was also selected in September 2019 as a member of the General Motors Defense, LLC board of managers.

 

 

Qualifications

            

 

Extensive aerospace and defense industry leadership expertise, including as a former public company CEO

Experience with military programs and budgeting

Background in strategy, business development, finance and engineering

Extensive corporate governance experience


 

 

 

 

 

 

 

 

 

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PROPOSAL 1 ELECTION OF DIRECTORS | The Board of Directors

GRAPHIC

   

STEVEN J. NORRIS

 

 

CHAIR, SOHO ESTATES; PRESIDENT, ITS UK; AND FORMER MEMBER OF PARLIAMENT

 

 

Age 74

 

 

Director since 2014

 

 

Independent

 

 

 

 

 

Committees

 

 

Audit and Compliance

   

Nominating, Governance, Ethics and Corporate Responsibility LOGO

   

Other Public Company Boards

 

 

Driver Group Plc LOGO

 

 

    Background

 

 

Mr. Norris is a recognized authority on transport and infrastructure issues. Before joining the Cubic Board in 2014, he served as a member of the Cubic Transportation Systems, Inc. ("CTS") strategic advisory board from 2012 to 2014. He is the chair of Soho Estates, one of the largest real estate operations in the United Kingdom, and was appointed Chairman of Driver Group Plc in March 2015 and as a Director of Optare PLC in August 2014. He also serves as the President of ITS UK, the sister organization of ITS US, which represents transport technology business in their respective countries.

 

 

Mr. Norris became a Member of Parliament in 1983 and remained in government service until 1997. While serving as Parliamentary Undersecretary of State for Transport and Minister for Transport in former Prime Minister Sir John Major's government, Norris was responsible for the Jubilee Line Extension, the largest extension of the London Underground network to date. He is also a former member of the Board of Transport for London, which operates the London public transit system.

 

 

Qualifications

            

 

Recognized authority on transportation and infrastructure issues

Deep experience in government affairs

Global leadership experience drawing from many years in government service in the UK


 

 

 

 

 

 

 

 

 

Voting Recommendation

    The Board recommends that you vote FOReach of the nine nominees listed above.

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PROPOSAL 1 ELECTION OF DIRECTORS | The Board of Directors

Board Committee Members

  Name Audit &
Compliance


Executive
Compensation


Nominating,
Governance,
Ethics and
Corporate
Responsibility(1)





Classified
Business
Oversight



Technology
Strategy


 
  Bradley H. Feldmann GRAPHIC   GRAPHIC       GRAPHIC    

 


Prithviraj Banerjee


 


GRAPHIC


 


 


GRAPHIC


 

 


Bruce G. Blakley


GRAPHIC   GRAPHIC


 


GRAPHIC


 


 


 

 


Maureen Breakiron-Evans


GRAPHIC   GRAPHIC


 


 


 


GRAPHIC


 

 


Denise L. Devine


GRAPHIC   GRAPHIC


 


 


 


GRAPHIC


 

 


Carolyn A. Flowers


 


GRAPHIC


 


 


GRAPHIC


 

 


Janice M. Hamby


 


GRAPHIC


GRAPHIC


GRAPHIC


 


 

 


David F. Melcher
GRAPHIC   GRAPHIC


 


GRAPHIC


GRAPHIC


GRAPHIC


 


 

 


Steven J. Norris


GRAPHIC


 


GRAPHIC


 


 


 
Meetings in 2019 5 5 4 1 7  
(1)
Effective November 21, 2019, the Ethics and Corporate Responsibility and Nominating and Corporate Governance Committees were combined into one new committee, the Nominating, Governance, Ethics and Corporate Responsibility Committee. In fiscal year 2019 the Nominating and Corporate Governance Committee had four meetings and the Ethics and Corporate Responsibility Committee had four meetings.

Communications with Directors

Any interested person may communicate at any time with the whole Board, the Independent Directors or any individual director with the correspondence addressed to "Board of Directors" or "Independent Directors" or to a named director, by writing to:

GRAPHIC

 

Cubic Corporation
c/o Corporate Secretary
9333 Balboa Avenue
San Diego, CA 92123


or by e-mail to:

GRAPHIC

 

CorporateSecretary@Cubic.com

The Corporate Secretary will promptly relay all communications to the appropriate directors, other than communications that are unrelated to the duties and responsibilities of the Board or its committees. Those unrelated matters include, without limitation, business solicitations, advertisements and surveys; requests for donations and sponsorships; job referral materials such as resumes; product-related communications; unsolicited ideas and business proposals; and material that is determined to be illegal or otherwise inappropriate. The Corporate Secretary will coordinate responses, if appropriate.

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PROPOSAL 1 ELECTION OF DIRECTORS | Board Committees

Board Committees

Audit & Compliance Committee

       

Bruce G. Blakley LOGO GRAPHIC

 

Denise L. Devine GRAPHIC

 

 

 

 

Maureen Breakiron-Evans GRAPHIC


Steven J. Norris

 

 

 

 


All members are independent and financially literate.

  Responsibilities

    Oversee the Company's financial reporting process.

    Responsible for the appointment, retention and termination of independent auditors and their compensation.

    Resolve disputes between management and auditors.

    Pre-approve all audit and non-audit services according to a written plan and budget submitted by the auditors.

    Meet quarterly (at a minimum) with the auditors and review their periodic reports.

    Discuss with auditors the scope and plan for the audit and include management in its review of accounting and financial controls, assessment of business risks and legal and ethical compliance programs.

  Committee Composition

During fiscal year 2019, Mr. Blakley, Ms. Breakiron-Evans, Mr. Guiles, Mr. Norris and Dr. Warner served as members of the Audit and Compliance Committee. In November 2019, Ms. Devine was appointed to the Audit and Compliance Committee to replace Mr. Guiles and Dr. Warner.

  Qualifications

Each member of the Audit and Compliance Committee is independent as defined under Section 303A.02 of the NYSE Listed Company Manual, Section 10A-3 under the Securities Exchange Act of 1934, as amended, and in our Corporate Governance Guidelines, and is financially literate. Mr. Blakley, Ms. Breakiron-Evans and Ms. Devine are our Audit and Compliance Committee Financial Experts with extensive accounting experience.

Mr. Blakley, Ms. Breakiron-Evans and Ms. Devine have all served on the audit committee of another publicly-held company. Mr. Blakley previously served as chair of an audit committee for Excel Trust, Inc., a publicly held real estate investment trust, until August 2015. The trust is unrelated to Cubic and its subsidiaries and does not present any conflicts of interest for Cubic or the industry in which it operates.

Ms. Breakiron-Evans currently serves as Chair of the Audit Committee of the Board of Cognizant Technology Solutions Corp., and on the Audit Committee of the Board of Ally Financial, Inc. She recently served as Chair of the Audit Committee of the Board of Heartland Payment Systems, Inc. until its sale in April 2016. The companies are unrelated to Cubic and its subsidiaries and do not present any conflicts of interest for Cubic or the industry in which it operates.

Ms. Devine currently serves on the Audit Committee for AgroFresh Solutions, Inc. and Fulton Financial Corporation. She previously served as Chair of the Audit Committee of Villanova University. The companies and organizations are unrelated to Cubic and its subsidiaries and do not present any conflicts of interest for Cubic or the industry in which it operates.

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PROPOSAL 1 ELECTION OF DIRECTORS |Board Committees

Report of the Audit and Compliance Committee

The Committee selected Ernst & Young LLP as the independent registered public accountants ("Accountants") of the Company for fiscal year 2019. The Committee has reviewed and discussed with management and the Accountants the audited financial statements of the Company for the fiscal year ended September 30, 2019. The Committee met with the Accountants on numerous occasions and discussed the matters required to be discussed under generally accepted auditing standards and the matters listed in Public Company Accounting Oversight Board ("PCAOB") AS 1301 (Communications with Audit Committees), has received from the Accountants the written disclosures and the letter required by the PCAOB (Independence Discussions with Audit Committees), and has discussed with the Accountants their independence.

Based on its review of the audited financial statements for fiscal year 2019 and its discussions with management and the Accountants, the Committee recommended to our Board that the 2019 audited financial statements be included in the Company's Annual Report on Form 10-K.

The Committee recently conducted a competitive selection process to determine the Company's independent registered public accounting firm for the fiscal year ending September 30, 2020. The Committee invited one international public accounting firm to participate in this process in addition to the incumbent, Ernst & Young. As a result of an extensive review process, the Committee approved the continuation of Ernst & Young as the Company's independent registered public accounting firm for the fiscal year ending September 30, 2020.

AUDIT AND COMPLIANCE COMMITTEE

Bruce G. Blakley, Chair
Maureen Breakiron-Evans
Denise L. Devine
Steven J. Norris

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PROPOSAL 1 ELECTION OF DIRECTORS |Board Committees

Executive Compensation Committee

       

David F. Melcher LOGO LOGO GRAPHIC

 

Janice M. Hamby


 

 

 

Carolyn A. Flowers

 

Prithviraj Banerjee


 

 

 


All members are independent.

  Responsibilities

    Establish and oversee the Company's executive compensation programs.

    Approve employment and severance arrangements and other material commitments concerning the Company's executive officers.

    Annually review and approve goals and objectives relevant to compensation for executive officers, evaluate each executive's performance in light of those goals and objectives, and either as a committee or together with the other Independent Directors of the Board, determine and approve the executives' compensation.

  Committee Composition

During fiscal year 2019, Messrs. Blakley, Guiles, Admiral Hamby, General Melcher and Dr. Banerjee served as members of the Executive Compensation Committee. In November 2019, Ms. Flowers was appointed to the Executive Compensation Committee to replace Messrs. Blakley and Guiles.

  Qualifications

Each of the members of the Executive Compensation Committee is independent as defined under Section 303A.02 of the NYSE Listed Company Manual and in our Corporate Governance Guidelines.

Compensation Committee Interlocks and Participation

During fiscal year 2019, none of the members serving on the Executive Compensation Committee served either as a director or as a member of the compensation committee of any other entity whose executive officers served either as a director or as a member of the Executive Compensation Committee of the Company. Therefore, there were no "interlocks" with other

companies within the meaning of the proxy rules of the Securities and Exchange Commission. No member of the Executive Compensation Committee is a former or current officer or employee of Cubic or any of its subsidiaries. See also the section "Executive Compensation and Other Information" later herein.

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PROPOSAL 1 ELECTION OF DIRECTORS |Board Committees


Nominating, Governance, Ethics and Corporate Responsibility Committee

Steven J. Norris LOGO

 

Janice M. Hamby


 

 

 

Bruce G. Blakley GRAPHIC

 

David F. Melcher LOGO GRAPHIC


 

 

 


All members are independent.

  Responsibilities

    Track important legal and regulatory changes and new concepts in public company governance.

    Oversee annual Board, Board member and committee evaluations.

    Make recommendations regarding Board composition, Board committee structure and Board refreshment.

    Oversee the Board's annual self-evaluations and peer member evaluations with third party evaluations conducted every three years.

    Review succession planning process for executive management, other members of senior management and Board succession.

    Review and recommend to management and the Board objective policies and procedures that best serve Cubic's and its shareholders' interests in maintaining a business environment with high standards of ethics, integrity and compliance in the area of corporate responsibility, including topics such as conflict minerals, human trafficking, global data privacy, human testing, employee relations, health and safety, political participation and environmental stewardship.

  Committee Composition

During fiscal year 2019, Ms. Breakiron-Evans, General Melcher, Mr. Norris and Dr. Warner served as members of the Nominating & Corporate Governance Committee, and Admiral Hamby, Mr. Norris and Dr. Warner served as members of the Ethics and Corporate Responsibility Committee. In November 2019, the Nominating & Corporate Governance and Ethics and Corporate Responsibility Committees were combined to form the new Nominating, Governance, Ethics and Corporate Responsibility Committee. Mr. Blakley and Admiral Hamby were appointed to the Nominating, Governance, Ethics and Corporate Responsibility Committee to replace Ms. Breakiron-Evans and Dr. Warner.

  Qualifications and Policy

Each of the members of the Nominating, Governance, Ethics and Corporate Responsibility Committee is independent as defined under Section 303A.02 of the NYSE Listed Company Manual and in our Corporate Governance Guidelines.

The Committee's policy is to consider Board candidate recommendations of shareholders that are received by the Corporate Secretary at least 120 days prior to the one-year anniversary of the mailing of notice of the previous annual meeting of shareholders. In considering additions to the Board or filling vacancies, the Committee assesses current needs of the Company and considers candidates' expertise, experience and background. The Committee does not have a formal diversity policy that is applied when evaluating candidates but takes diversity, including geographic, gender, age, ethnic and racial diversity, into account among other factors it considers. In such circumstances, the Committee seeks recommendations from the Board, senior management personnel and relevant professional organizations regarding potential candidates.

The Committee will also review any shareholder recommendations on file. The Committee evaluates candidates submitted by shareholders using the same criteria as candidates identified by the Board, senior management personnel and other sources. The Committee screens and personally interviews appropriate candidates. Selected candidates may meet with additional Board members, certain members of management and the Chair of the Board. The Committee evaluates responses and recommends to the full Board the name of any candidate it feels should become a nominee for election or appointment.

The Committee conducted an extensive search for two additional directors in fiscal year 2019, using criteria based on a matrix that set forth existing skills, experience and tenure and the qualities, skills and diversity sought in future candidates. Carolyn A. Flowers was recommended by Matthew J. Cole, former President of Cubic Transportation Systems, Inc. Denise L. Devine was recommended by Maureen Breakiron-Evans.

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PROPOSAL 1 ELECTION OF DIRECTORS |Board Committees

The newly combined Nominating, Governance, Ethics and Corporate Responsibility Committee will also review and recommend to management and the Board objective policies and procedures that best serve Cubic's and its shareholders' interests in maintaining a business environment of high standards of ethics, integrity and compliance. The Committee will also focus on corporate responsibility matters, including topics such as conflict minerals, human trafficking, global data privacy, human testing, employee relations, health and safety, political participation and environmental stewardship.

Board Service Guidelines

The Company's Corporate Governance Guidelines generally limit individual Board service by tenure and/or age as described in the table below. These metrics are not absolute but are guidelines for maximums. When either of the individual maximums are reached, there must be compelling reasons for a director's continued participation on the Board. When both maximums are reached, there will be a strong presumption for transition off the Board.

 

Succession planning process for near-term and 5-year needs of Cubic Corporation

Annual individual director evaluations

Regular Board refreshment to ensure staggered terms, ages and diversity

Endeavor to limit individual Board tenure to 12 years and/or age 75 maximum

Service on no more than 3 other public company boards

 


Classified Business Oversight Committee



 
 

Admiral Janice M. Hamby  LOGO

 

David F. Melcher  LOGO GRAPHIC


 

Bradley H. Feldmann  GRAPHIC   GRAPHIC


 

 



 
   

  Responsibilities

    Provide oversight of the Company's business activities that for purposes of national security have been designated as classified by the United States government.

The Committee meets on an as-needed basis.


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PROPOSAL 1 ELECTION OF DIRECTORS |Board Committees


Technology Strategy Committee



 
 

Prithviraj Banerjee LOGO

 

Denise L. Devine GRAPHIC

 

 

Maureen Breakiron-Evans GRAPHIC

 

Carolyn A. Flowers


 


All members are independent.

  Responsibilities

    Provide oversight of Cubic's technology directions and cyber resilience consistent with Cubic's strategic plan.

    Provide advice on our digital strategy and reviews our research and development ("R&D") investments to ensure they support the competitiveness of our products and services.

    Review the technical competencies within Cubic and advises on the R&D organization and structure to support the R&D investment.

Risk Management

The Board reviews and approves the procedures adopted and conclusions reached by our Executive Management Committee ("EMC") and discusses with the General Counsel, who is responsible for the Enterprise Risk Management ("ERM") process, and the CEO, the major risk exposures and the steps that have been taken to monitor and control such exposures.

The EMC reviews and assesses perceived risks to the enterprise as a whole and its major subsidiaries. It works with relevant managers and develops mitigation and remediation plans. Periodic reports are brought to the attention of the Board by the General Counsel.

We have an ERM process for the parent company and sub-groups for our business segments. Each group consists of its senior officers who meet periodically to

identify, assess and rank the perceived severity of risks unique to their businesses. Appropriate mitigation plans and training are implemented. To date, the EMC has not identified any risks, capable of control, that it believes cannot be reasonably controlled or mitigated.

The Board's focus and concern is to identify, and ensure the Company has a plan to respond to those few issues which could seriously impact our, or one of our material divisions', short or long-term ability to continue normal operations.

In conjunction with the risk management review, the Board also addresses our legal compliance efforts in certain complex areas, such as export control, antitrust and foreign corrupt practices.

Compliance Steering Committee

Cubic has an internal Compliance Steering Committee ("CSC"), comprised of senior leaders with a wide variety of subject-matter expertise and authority, led by the Vice President of Compliance reporting to the Nominating, Governance, Ethics and Corporate Responsibility Committee. The CSC's mission is to promote a culture of ethical integrity and legal accountability across the global organization and to mitigate risks associated with compliance. The program that the CSC supports includes, among other things, an employee Code of Business Conduct, a Code of Conduct for Third Parties, a third party due diligence and management system, an anonymous and global complaint reporting mechanism for both employees and third parties (Cubic Helpline), global mechanisms for employees to report conflicts of

interest and any environmental, health or safety concerns, a complaint investigation and reporting process, regular communications to and training of Cubic employees on matters of ethics and compliance, global surveys regarding the Company's ethical culture, and regular reporting to senior management and the Nominating, Governance, Ethics and Corporate Responsibility Committee regarding the effectiveness of program components. We require all employees to receive annual training related to our Code of Business Conduct and related policies in order to confirm that employees are familiar with those standards of conduct and to mitigate the risks associated with employees' failure to meet those standards.

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PROPOSAL 1 ELECTION OF DIRECTORS |Board Committees

In addition to the Board's and the EMC's review of risk through the ERM process described above, the Board's committees are also involved in the assessment of risks relevant to their area of responsibility and the implementation of actions designed to address or mitigate those risks. The types of risks that are considered by the committees include:

Audit and Compliance   Risks related to tax, accounting, financial reporting systems and processes, and legal and regulatory compliance
Classified Business Oversight   Risks related to classified and sensitive high-risk work, supporting defense, intelligence, and international clients, as well as personnel performance, information security and industrial security
Executive Compensation   Risks related to our compensation and benefit programs
Nominating, Governance, Ethics and Corporate Responsibility   Risks related to our corporate governance, management and internal ethics policies
Technology Strategy   Risks related to our growth initiatives and strategic plans

Corporate Governance Materials

Board Committee Charters
Audit and
Compliance
Committee Charter


 
  Classified Business
Oversight
Committee Charter


 
  Executive
Compensation
Committee Charter


 
  Nominating,
Governance, Ethics and
Corporate
Responsibility
Committee Charter




 
  Technology
Strategy Committee
Charter

 

Governance Documents
Code of Ethical
Conduct

 
  Code of Business
Conduct

 
  Code of Business Conduct
for Third Parties

 
  Corporate Governance
Guidelines

 
  Cubic, UK Tax
Strategy – 2019

Each of our Board Committee Charters and Corporate Governance documents are available at www.cubic.com/investor-relations/governance. Cubic's UK Tax Strategy – 2019 is available at www.cubic.com/united-kingdom-disclosures. The information contained on our website is not incorporated by reference in, or considered part of, this proxy statement.

Hedging Policy

Pursuant to Cubic's insider trading policy, all directors and executive officers, as well as other employees who are designated as subject to the policy ("Designated Employees"), are prohibited from purchasing financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) that are designed to hedge or offset any decrease in the market value of equity securities which: (1) have been granted to the director, executive officer or Designated Employee by the Company as part of their compensation, or (2) are held directly or indirectly by the director, executive officer or Designated Employee. Designated Employees are selected by the Company as those employees that may have or be exposed to insider trading information by nature of their position.

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PROPOSAL 1 ELECTION OF DIRECTORS |Board Committees

Director Compensation

The following table represents the annualized retainer fees payable to each of the directors for service on the Board and on various committees of the Board. Based on an evaluation in November 2019 by Pay Governance LLC, our Executive Compensation Committee's independent compensation consultant and the evolving requirements for service, the annual retainers for the non-employee directors were revised commencing with fiscal year 2020. Specifically, the base annual retainer for all non-employee directors was increased, in exchange for

which the additional retainers for committee chairs were decreased or left at the same levels, and the additional retainers for committee membership were eliminated, as noted in the table below. The value of the annual equity awards to non-employee directors remained unchanged at $135,000. The changes to director compensation were recommended by the independent compensation consultant after a review of the Company's peers.

Annualized Retainer




FY 2019
($)


 

FY 2020
($)


Director Base Annual Retainer

    60,000         90,000    

Lead Independent Director Base Additional Annual Retainer

    25,000         30,000    

Audit and Compliance Committee

                   

Chair

    24,000         20,000    

Classified Business Oversight Committee

                   

Chair

    5,000         5,000    

Executive Compensation Committee

                   

Chair

    15,000         15,000    

Nominating, Governance, Ethics and Corporate Responsibility Committee

                   

Chair

    10,000         10,000    

Technology Strategy Committee

                   

Chair

    10,000         7,500    

 

Non-employee directors also participate in the Company's equity plan. In November 2018, each non-employee director received an award of 2,268 restricted stock units ("RSUs"). The non-employee directors' awards granted during fiscal 2019, other than those received by Mr. Guiles, vest in two equal installments on each of October 1, 2019 and 2020. The RSUs awarded to Mr. Guiles in fiscal 2019 vested in June 2019 when Mr. Guiles passed away. All of the non-employee directors' RSUs will also vest in full upon death or a change in control of the Company.

Commencing with the RSUs awarded to our non-employee directors in November 2019, non-employee director RSUs will vest on the next occurring October 1 following the grant date and will be eligible for accelerated vesting upon a director's retirement from the Board. Retirement for this purpose is generally defined as retirement from the Board after 6 years of service.

Employee directors receive no additional compensation for their service as directors. All non-employee directors are reimbursed for travel expenses.

Directors are also allowed to defer some or all of their cash compensation. One director elected to defer all of his cash compensation received during fiscal year 2019.

Our directors are also subject to stock ownership guidelines to further align the interests of directors with the Company's shareholders, as described further below under "Compensation Discussion and Analysis," as well as a policy against engaging in hedging transactions with respect to Company stock, as described further above under "Hedging Policy."

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PROPOSAL 1 ELECTION OF DIRECTORS |Board Committees

Director Compensation Fiscal Year 2019

The following table sets forth a summary of the compensation paid to our non-employee directors pursuant to the Company's compensation policies for fiscal year 2019.

DIRECTOR COMPENSATION

Name





Fees Earned or
Paid in Cash(1)
($)






Stock
Awards(2)
($)



Change in Pension Value
and Nonqualified Deferred
Compensation Earnings(3)
($)






Total
($)


 

Prithviraj Banerjee

    77,500     135,000       212,500    

Bruce G. Blakley

    91,500     135,000       226,500    

Maureen Breakiron-Evans

    82,000     135,000       217,000    

Edwin A. Guiles(4)

    84,000     135,000       219,000    

Janice M. Hamby

    82,925     135,000       217,925    

David F. Melcher

    90,625     135,000       225,625    

Steven J. Norris

    87,000     135,000       222,000    

John H. Warner, Jr.(5)

    90,750     135,000       225,750    
(1)
Mr. Feldmann, who served as an executive director during fiscal year 2019, received no additional compensation for his service as a director during that time and is not included in this table.

(2)
This column represents the aggregate grant date fair value, calculated in accordance with FASB ASC Topic 718, of the RSUs granted in fiscal year 2019. These amounts generally reflect the amount that the Company expects to expense in its financial statements over the award's vesting schedule, and do not correspond to the actual value that will be realized by the directors. For additional information on the valuation assumptions used in the calculation of these amounts, refer to note 1 to the financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2019, as filed with the SEC. The aggregate number of RSUs outstanding as of September 30, 2019 held by each non-employee director was as follows: Mr. Banerjee (2,105); Mr. Blakley (2,716); Ms. Breakiron Evans (2,716); Admiral Hamby (2,716); General Melcher (2,717); Mr. Norris (2,716); Dr. Warner (2,716).

(3)
In fiscal year 2019, one of the non-employee directors elected to participate in the Cubic Corporation Amended and Restated Deferred Compensation Plan. Earnings are not reported in the non-employee Director Compensation Table because the earnings are not above market or preferential.

(4)
Mr. Guiles passed away on June 7, 2019 and all of his outstanding equity awards vested at this time.

(5)
Dr. Warner is not standing for reelection at the Annual Meeting. Upon his retirement from the Board, all of his outstanding equity awards will vest.

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  PROPOSAL 2
  ADVISORY VOTE ON NAMED EXECUTIVE
  OFFICER COMPENSATION
    

In accordance with Section 14A of the Securities Exchange Act of 1934, as amended, the Board is seeking your approval, on an advisory basis, of the compensation of our named executive officers as disclosed in this proxy statement, including the Compensation Discussion and Analysis and other related tables and disclosure. Accordingly, the Board recommends that you vote "FOR" the following resolution:


"Resolved, that the compensation of Cubic's named executive officers during fiscal year 2019, as described in its proxy statement for its 2020 Annual Meeting of Shareholders, including the Compensation Discussion and Analysis and other related tables and disclosure, is hereby approved."

This proposal, commonly known as "say-on-pay," gives you the opportunity to express your views on the Company's executive compensation practices. Because your vote is advisory, it will not be binding upon the Board. However, the Executive Compensation Committee will carefully consider the outcome of the vote when

making future executive compensation decisions. At our 2019 Annual Meeting, shareholders approved our named executive officer compensation policies by a strong majority, with approximately 96% of shareholder votes cast in favor of our 2019 say-on-pay resolution (excluding abstentions and broker non-votes). We expect to bring a similar proposal to you at each annual meeting of shareholders.

2019   96% approval
2018   94% approval

As described more fully in the Compensation Discussion and Analysis herein, the Board believes that the Company's executive compensation policies are balanced, appropriately focused on pay for performance principles, aligned with the long-term interests of our shareholders, and enable the Company to attract and retain experienced senior executives.

Voting Recommendation

    The Board recommends that you vote FOR this proposal.

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  EXECUTIVE COMPENSATION AND
  OTHER INFORMATION

Executive Compensation and Other Information – Table of Contents


28

  NAMED EXECUTIVE OFFICERS

 

 

 

 

 

29

  COMPENSATION DISCUSSION AND ANALYSIS

29

 

SECTION 1: OVERVIEW OF PERFORMANCE AND COMPENSATION HIGHLIGHTS

29

 

2019 Performance Highlights

31

 

2019 Compensation Elements

32

 

Fiscal Year Target Total Compensation Mix

32

 

2019 Key Executive Compensation Outcomes

33

 

Investor Feedback, Response to the 2019 Say-On-Pay Vote and Key Changes to Compensation Program

33

 

Key Changes to Long-Term Equity Incentives from Fiscal Year 2018 to Fiscal Year 2019

33

 

Key Changes to Executive Compensation Program for Fiscal Year 2020

34

 

Review of Executive Compensation Best Practices

34

 

SECTION 2: KEY OBJECTIVES AND SETTING EXECUTIVE COMPENSATION

34

 

Guiding Principles and Objectives

36

 

Setting Executive Compensation

37

 

Comparable Company Compensation Data and Peer Group Used for Fiscal Year 2019 Executive Compensation Decisions

38

 

SECTION 3: FISCAL YEAR 2019 EXECUTIVE COMPENSATION DECISIONS


Named Executive Officers

The following individuals are our named executive officers for fiscal year 2019 as listed in the Summary Compensation Table below (the "Named Executive Officers" or "NEOs").

    Bradley H. Feldmann       Chairman, President and Chief Executive Officer
    Anshooman Aga       Executive Vice President and Chief Financial Officer
    Matthew J. Cole       Former Senior Vice President of Cubic and President of Cubic Transportation Systems(1)
    Michael R. Twyman       Senior Vice President of Cubic and President of Cubic Mission Solutions
    Michael Knowles       Senior Vice President of Cubic and President of Cubic Global Defense
(1)
On January 6, 2020, Mr. Cole notified the Company of his resignation from his position as Senior Vice President of Cubic and President of Cubic Transportation Systems, effective January 13, 2020.

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COMPENSATION DISCUSSION AND ANALYSIS | Section 1

Compensation Discussion and Analysis

This Compensation Discussion and Analysis describes the Company's compensation philosophy and the objectives of the Company's compensation program for its executive officers, including the NEOs, and how the Executive Compensation Committee oversees the executive compensation program. This Compensation Discussion and Analysis also describes the compensation determination process for fiscal year 2019 and how each element of compensation was determined.

SECTION 1: OVERVIEW OF PERFORMANCE AND COMPENSATION HIGHLIGHTS

2019 Performance Highlights

Overall, Cubic delivered another year of strong improvement in our financial performance while continuing to invest in R&D, strategic acquisitions, talent development and business optimization to further advance our strategy.

GRAPHIC

GRAPHIC

In 2019, Cubic delivered strong growth driven by the Cubic Transportation Systems and Cubic Mission Solutions business segments. While Sales declined slightly in the Cubic Global Defense business segment, disciplined cost

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COMPENSATION DISCUSSION AND ANALYSIS | Section 1

management and solid project execution drove increases in Operating Income and Adjusted EBITDA for this segment. Compared to fiscal 2018, Cubic's total Sales increased 24% to $1,496 million.

Our growth also reflects expansion through acquisitions to advance our strategic priorities in transportation and defense by further enhancing our portfolio with customer-centric innovations, expanding our addressable markets and positioning Cubic for continued growth and margin expansion. Excluding the impact of acquisitions, Sales increased approximately 18%. Our 2019 results also reflect the impact of the new revenue recognition standard (ASC 606), which increased Sales by $109.2 million, including organic growth from Cubic's next-generation fare payment system contract in Boston and other projects. For a discussion of the impact of the adoption of ASC 606, see "Recently Adopted Accounting Pronouncements" in Note 1 of the Consolidated Financial Statements of the Form 10-K.

Net Income from continuing operations attributable to Cubic increased to $51.1 million compared to $8.1 million in fiscal 2018. Earnings Per Share (GAAP EPS) increased 476% to $1.67 in 2019 compared to $0.29 in 2018. Adjusted Earnings Per Share (Adjusted EPS) increased 43% to $3.13 in 2019 compared to $2.19 in 2018. The table below reconciles Adjusted EPS to GAAP EPS. Adjusted EBITDA increased 40% to $146.6 million compared to $104.6 million in fiscal 2018. Please see pages 52 through 54 of our Annual Report on Form 10-K filed with the SEC on November 20, 2019, for a reconciliation of Net Income to Adjusted EBITDA.

GAAP Net Income to Adjusted Net Income Reconciliation and
GAAP EPS to Adjusted EPS Reconciliation


 

Years Ended September 30,
 
       

(In millions, except per share data)

 
2017

2018

2019

GAAP EPS

  $ (0.95 ) $ 0.29   $ 1.67    

GAAP Net income (loss) from continuing operations attributable to Cubic

  $ (25.7 ) $ 8.1   $ 51.1    

Noncontrolling interest in the loss of the VIE

        (0.3 )   (9.8 )  

Amortization of purchased intangibles

    30.2     27.1     42.1    

Gain on sale of fixed assets

    0.4         (32.5 )  

Restructuring costs

    2.3     5.0     15.4    

Acquisition related expenses, excluding amortization

    (0.2 )   4.5     13.4    

Strategic and IT system resource planning expenses

    34.4     24.1     8.3    

Other non-operating expense (income), net

    (0.4 )   0.7     20.0    

Noncontrolling interest in Adjusted Net Income of VIE

            (9.7 )  

Tax impact related to acquisitions(1)

    (0.1 )   (1.2 )   (6.6 )  

Impact of US Tax Reform

        (7.0 )      

Tax impact related to non-GAAP adjustments(2)

    3.0     (1.0 )   3.9    

Adjusted net income

  $ 43.9   $ 60.0   $ 95.6    

Adjusted EPS

  $ 1.62   $ 2.19   $ 3.13    

Weighted Average Diluted Shares Outstanding (in thousands)

    27,173     27,351     30,606    
(1)
Represents the tax accounting impact of significant discrete items recorded at the time of acquisition.

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

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COMPENSATION DISCUSSION AND ANALYSIS | Section 1

2019 Compensation Elements

Three primary elements make up our executive compensation program: base salary, annual incentives and long-term incentives. The chart below summarizes these compensation elements for fiscal year 2019, which are described in more detail in the discussion that follows.

GRAPHIC

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COMPENSATION DISCUSSION AND ANALYSIS | Section 1

Fiscal Year Target Total Compensation Mix

The charts below show that the significant majority of target total direct compensation for our NEOs is variable or "at-risk," and tied to achievement of performance objectives or stock price performance.

GRAPHIC

2019 Key Executive Compensation Outcomes

    Market-based Base Salary Adjustments. The Executive Compensation Committee approved adjustments to the NEOs' base salaries for fiscal year 2019 based on its review of comparable company data and an evaluation of the NEOs' individual performance. Mr. Feldmann's base salary was increased by 6.8% over fiscal year 2018, while the other NEOs' base salary increases averaged 9.3% over fiscal year 2018 (which average excludes the increase for Mr. Knowles of 21.1%, which represented an increase in connection with his promotion to the position of Senior Vice President of Cubic and President of Cubic Global Defense for fiscal year 2019).

    Annual Incentive Plan. The Executive Compensation Committee has full discretion as to the form and amount of the annual incentive payments to our NEOs. As Cubic closed the 2019 fiscal year, despite strong year-over-year growth, negative discretion resulting in multipliers ranging from 0.7 to 0.9 was applied to the NEO's 2019 annual incentive payouts based on qualitative measures of business performance that were outside the plan formulas.


    The Executive Compensation Committee then approved individual performance multipliers for the NEOs ranging from 0.95 to 1.20. Finally, in order to achieve our fiscal year 2019 financial commitments and to enhance retention and long-term performance, the Executive Compensation Committee determined that the 2019 annual incentives for the NEOs and other key employees would be satisfied in the form of time-based restricted stock units ("RSUs") and performance-based restricted stock units ("PRSUs"), with a 20% enhancement added to avoid adverse tax consequences to the NEOs under applicable tax rules and to recognize the transition from cash to equity settlement of the 2019 annual incentives.

    No Vesting of Fiscal Year 2017-2019 PRSUs. All of the 2017-2019 PRSUs were forfeited following the end of the three-year performance period that ended on September 30, 2019 as a result of the level of Sales growth, Adjusted EBITDA growth and return on equity ("ROE") falling below threshold levels for the three-year performance period without adjustment for the sale of the Global Defense Services business on May 31, 2018.

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COMPENSATION DISCUSSION AND ANALYSIS | Section 1

Investor Feedback, Response to the 2019 Say-On-Pay Vote and Key Changes to Compensation Program

As described in Proposal 2, Cubic seeks an annual non-binding advisory say-on-pay vote from its shareholders to approve the compensation of its Named Executive Officers as described in the Compensation Discussion and Analysis and other related tables and disclosure.

In February 2019, we held our most recent say-on-pay vote, with approximately 96% of shareholder votes cast in favor of our 2019 say-on-pay resolution (excluding abstentions and broker non-votes). While this represented overwhelming support of our executive compensation program, our Executive Compensation Committee takes into consideration the outcome of our say-on-pay votes as they review executive compensation decisions.

Based in part on feedback from discussions with shareholders following our two most recent say-on-pay votes and, in part, on its reevaluation of our compensation program and advice from its independent compensation consultant to better align our program with shareholder interests, the Executive Compensation Committee implemented certain changes to our executive compensation program for fiscal year 2019 and fiscal year 2020, as described below.

Key Changes to Long-Term Equity Incentives from Fiscal Year 2018 to Fiscal Year 2019

In response to the foregoing feedback and certain changes in our business, our executive compensation program for fiscal 2019 contained a few key changes to the PRSUs that comprise 50% of our long-term equity incentive program.

    In view of the divestiture of the Global Defense Services business and known acquisitions in the pipeline, we adopted a transitional approach whereby Adjusted EBITDA growth and Sales growth would be equally-weighted and measured over three one-year periods with the average of the performance in each of those three years determining the basis for the final assessment of performance.

    Eliminated the ROE metric for plan simplicity.

    Added a relative TSR modifier to ensure that PRSUs reward long-term performance for shareholders.

      The relative TSR modifier adjusts the final number of PRSUs earned up or down by 25% by comparing Cubic's relative TSR to the Russell 2000 index TSR for the performance period based on a scale established by the Executive Compensation Committee.

      The total shares that may be earned at the end of the three-year performance is capped at 250% of the target number of PRSUs, a result that can only occur if maximum achievements are earned in both Sales growth and Adjusted EBITDA growth, in addition to Cubic's TSR for the performance period being at least 2,500 basis points above the Russell 2000 Index TSR for the performance period.

Key Changes to Executive Compensation Program for Fiscal Year 2020

Our executive compensation program for fiscal 2020 contains a few key changes to the annual incentive awards and RSUs and PRSUs.

    Annual Incentive Plan. For fiscal year 2020, the Executive Compensation Committee replaced the invested capital and asset turnover metrics with operating cash flow to reflect feedback from shareholders and our financial priorities for fiscal year 2020.

    PRSUs. Fiscal year 2020 PRSU awards incorporate the following key changes:

      Completing our transition to a performance-based and shareholder return focused long-term incentive plan, the fiscal year 2020 PRSUs return to the measurement of Sales growth and Adjusted EBITDA growth against three-year cumulative performance goals. In addition, Sales growth and Adjusted EBITDA growth will be calculated in a manner to exclude the effect of acquisitions or divestitures and foreign exchange rates.

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COMPENSATION DISCUSSION AND ANALYSIS | Section 2

        The relative TSR modifier (up or down by 25%) is unchanged from the 2019 awards, but the modifier is capped at 1.0 if Cubic's absolute TSR is negative over the three-year performance period.

        The total shares that may be earned at the end of the three-year performance is capped at 200% of the target number of PRSUs.

        Removed single trigger vesting upon a change in control.

    RSUs. Fiscal year 2020 RSU awards will vest ratably over three years, consistent with competitive norms.

Review of Executive Compensation Best Practices

Below is a summary of best practices we have implemented and practices we avoid.

  Our Executive Compensation Best Practices

 


 

Stock ownership guidelines apply to both executive officers and directors

 


 

Independent compensation consultant
    Clawback policy for incentive compensation     No tax gross-ups
    "Double trigger" change-in-control agreements     No employment contracts
    Modest perquisites     No hedging by executive officers and directors
    Long-term equity incentive award program aligns executive incentives with shareholder interests     No repricing of stock options without stockholder approval
    Executive compensation program that received strong shareholder response (96% of votes cast voted in favor) in 2019 say-on-pay vote        

SECTION 2: KEY OBJECTIVES AND SETTING EXECUTIVE COMPENSATION

Guiding Principles and Objectives

We align the interests of management with those of shareholders and other stakeholders through our executive compensation programs to ensure Cubic's future as a technology-driven, market-leading global company that makes the world better through innovation, technology solutions, and world-class products. Our policies intend to support the development of a strong executive team provided with appropriate incentives that support the business strategy, build and retain the team and address different risks associated with compensation. We strive to provide a total compensation package that fairly and equitably rewards our senior leadership team as a team and as individuals, from each of whom we expect superior performance. Our total direct compensation program is designed so that the majority of pay is variable or "at risk," with emphasis on performance over the long term.

Our executive compensation and benefits programs are guided by the following principles:

Pay for Performance

    Our incentive programs are tied to multiple growth goals that we believe are leading indicators of shareholder value to be achieved in manners consistent with our values.

    We measure performance as a team and by each individual executive's contribution to outcomes.

Retention of a Strong Leadership Team

    Compensation opportunities are intended to be competitive against our peers and broader industry competitors for talent.

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COMPENSATION DISCUSSION AND ANALYSIS | Section 2
    By allowing pay to exceed median when performance warrants, we expect to be able to attract and retain the kind of leadership that is demanded by the complexity of opportunities and challenges in our business.

Aligned with Shareholder Interests

    We balance fixed and variable compensation opportunities to manage risk while emphasizing performance.

    All of our long-term incentives are earned in the form of equity that vests over time on the basis of performance and/or continued contribution.

    Stock ownership guidelines and our compensation recovery policy encourage long-term results for shareholders.

Use of Comparable Company Compensation Data

    Our pay opportunities and our compensation programs are reviewed against a peer group and comparable company data and best practices, as further described below, and are modified when we can better attract, retain, and motivate as a result.

    We strive to target overall target compensation at the median for seasoned performers, but our actual compensation can vary between the lower and the upper quartiles based on delivered performance, with such variances determined in the discretion of our Executive Compensation Committee.

Pay Positioning

    Our Executive Compensation Committee reviews competitive peer and survey compensation at the 25th, 50th, and 75th percentiles in order to understand how the marketplace pays for roles similar to our NEOs. Without targeting a specific percentile for target total direct compensation, the Executive Compensation Committee expects that actual executive compensation will vary between the lower and the upper quartiles based on experience and delivered performance.

    In setting fiscal year 2019 executive compensation, after a review of the comparable company data, the Executive Compensation Committee noted that Mr. Feldmann's total direct target compensation was below the median of chief executives at comparable companies in the peer group and survey data. After evaluating his performance and experience, the Executive Compensation Committee approved increases to Mr. Feldmann's base salary and long-term incentive award target value that brought his total direct target compensation to a level somewhat above the 50th percentile of the comparable company data.

    Additionally, the Executive Compensation Committee noted that the total direct target compensation of the other NEOs fell below the 50th percentile of executives in comparable positions and approved recommendations presented by Mr. Feldmann for base salary increases and adjustments to their target long-term incentive award values to bring, on average, total direct compensation approximating the 50th percentile of the comparable company data.

    While the Executive Compensation Committee used this comparable company data as a guide in determining which compensation components to increase and by how much, the final determinations were not made by reference to specific targeted levels for any of the individual compensation components.

Oversight

    Our compensation programs and their outcomes are approved by an independent Executive Compensation Committee.

    By overseeing the establishment and evo