Segment Information

12 Months Ended

Dec. 28, 2014

Segment Reporting [Abstract]

Segment Information

Segment Information

The Company historically operated in two reportable segments: Kratos Government Solutions (“KGS”) and Public Safety & Security (“PSS”). In the fourth quarter of 2014, the Company expanded the number of reportable segments to three as we separated the KGS segment into two reportable segments: KGS and Unmanned Systems (“US”). As a result, the KGS reportable segment is comprised of an aggregation of Kratos’ Government Solutions operating segments, including our electronic products, satellite communications, modular systems and rocket support operating segments.

The new Unmanned Systems reportable segment consists of our unmanned aerial, ground, seaborne and command, control and communications system business. The KGS and US segments provide products, solutions and services primarily for mission critical national security priorities. KGS and US customers primarily include national security related agencies, the DoD, intelligence agencies and classified agencies, and to a lesser degree, international government agencies and domestic and international commercial customers. The PSS segment provides independent integrated solutions for advanced homeland security, public safety, critical infrastructure, and security and surveillance systems for government and commercial applications. PSS customers are in the critical infrastructure, power generation, power transport, nuclear energy, financial, IT, healthcare, education, transportation and petro-chemical industries, as well as certain government and military customers.

The Company organizes its reportable segments based on the nature of the products, solutions and services offered. Transactions between segments are generally negotiated and accounted for under terms and conditions similar to other government and commercial contracts. This presentation is consistent with the Company's operating structure. In the following table, prior year financial information has been recast to conform to the current reportable segments, and total operating income of the reportable business segments is reconciled to the corresponding consolidated amount. The reconciling item “corporate activities” includes costs for certain stock-based compensation programs (including stock-based compensation costs for stock options, employee stock purchase plan and restricted stock units), the effects of items not considered part of management's evaluation of segment operating performance, merger and acquisition expenses, corporate costs not allocated to the segments, and other miscellaneous corporate activities.

Revenues, operating income (loss) and assets disclosed below provided by the Company's reportable segments for the years ended December 30, 2012, December 29, 2013, and December 28, 2014, are as follows (in millions):

	2012			2013			2014
Revenues:
Unmanned Systems
Service revenues	$	—		$	—		$	—
Product sales	92.3			121.6			81.5
Total Unmanned Systems	92.3			121.6			81.5
Kratos Government Solutions
Service revenues	264.0			233.9			207.4
Product sales	426.9			385.4			382.7
Total Kratos Government Solutions	690.9			619.3			590.1
Public Safety & Security
Service revenues	186			209.7			183.4
Product sales	—			—			13.0
Total Public Safety & Security	186			209.7			196.4
Total revenues	$	969.2		$	950.6		$	868.0
Depreciation and amortization:
Unmanned Systems	$	9.0		$	20.3		$	7.3
Kratos Government Solutions	45.5			29.6			29.8
Public Safety & Security	3.5			3.5			2.0
Total depreciation and amortization	$	58.0		$	53.4		$	39.1
Operating income (loss) from continuing operations:
Unmanned Systems	$	3.5		$	(16.9	)	$	(9.6	)
Kratos Government Solutions	(45.0		)	43.3			38.5
Public Safety & Security	(2.5		)	8.3			(4.4		)
Corporate activities	(5.7		)	(2.9		)	(4.6		)
Total operating income (loss) from continuing operations	$	(49.7	)	$	31.8		$	19.9

Revenues from foreign customers were approximately $116.2 million or 12%, $100.9 million or 11% and $113.5 million or 13% of total revenue for the years ended December 30, 2012, December 29, 2013, and December 28, 2014, respectively.

In 2012, the Company recorded an impairment of goodwill and intangible assets of $83.7 million related to the KGS reportable segment and an impairment of intangible assets of $12.9 million related to the PSS reportable segment. See Note 2.

In 2012 Corporate activities had a benefit from corporate merger and acquisition expenses of approximately $2.7 million due to a reduction in contingent consideration, settlement of a dispute on fees, and a change in estimate of indemnity obligations related to former directors and officers of Integral. In 2013 the Corporate activities had a benefit from merger related items of $2.0 million due to the reduction in a $3.1 million liability as a result of the final settlement of the indemnity obligations related to former directors and officers of Integral on July 1, 2013, partially offset by other merger expenses and legal fees related to prior acquisitions.

Included in the 2013 and 2014 operating loss for the Unmanned Systems Segment is increased costs of $7.6 million and $3.1 million, respectively, related to certain retrofits necessary to address product design changes as well as due to a contract conversion adjustment on certain of our aerial platforms.

Reportable segment assets are as follows (in millions):

	December 29, 2013		December 28, 2014
Assets:
Kratos Government Solutions	$	847.5	$	802.6
Unmanned Systems	178.1		173.2
Public Safety & Security	122.6		100.2
Corporate activities	68.4		62.8
Total assets	$	1,216.6	$	1,138.8

Assets of foreign subsidiaries in the KGS segment were $95.9 million and $98.2 million as of December 29, 2013 and December 28, 2014, respectively.