Segment Information

12 Months Ended

Dec. 25, 2016

Segment Reporting [Abstract]

Segment Information

Segment Information

The KGS reportable segment is comprised of an aggregation of KGS operating segments, including defense and rocket support services, our microwave electronic products and satellite communications, technical and training solutions, and modular systems operating segments. The US 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 for mission critical national security programs. 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 designs, engineers, deploys, operates, integrates into command and control infrastructure, maintains and operates security and surveillance solutions for homeland security, public safety, critical infrastructure, government and commercial customers. PSS customers include those 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. In the following table total operating income (loss) from continuing operations of the reportable business segments is reconciled to the corresponding consolidated amount. The reconciling item “unallocated corporate expense, net” 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.

As discussed in “Discontinued Operations” in Note 8 of these Notes to Consolidated Financial Statements, the Company began reporting the Herley Entities as discontinued operations effective in the second quarter of fiscal 2015. Prior to the decision to sell the Herley Entities, the Company reported their financial results in the KGS reportable segment. Accordingly, segment results have been recast for 2015 and prior periods presented to reflect the disposition of the Herley Entities as discontinued operations.

As certain overhead type costs previously allocated to the Herley Entities are not allocable to discontinued operations, prior period corporate costs have been reallocated amongst the continuing reportable segments.

Revenues, operating income (loss) and assets disclosed below provided by the Company’s reportable segments for the years ended December 25, 2016, December 27, 2015, and December 28, 2014, are as follows (in millions):

	2016			2015			2014
Revenues:
Kratos Government Solutions
Service revenues	$	221.0		$	209.5		$	207.4
Product sales	244.8			236.6			277.7
Total Kratos Government Solutions	465.8			446.1			485.1
Public Safety & Security
Service revenues	127.1			144.7			183.4
Product sales	—			—			13.0
Total Public Safety & Security	127.1			144.7			196.4
Unmanned Systems
Service revenues	—			—			—
Product sales	75.8			66.3			81.5
Total Unmanned Systems	75.8			66.3			81.5
Total revenues	$	668.7		$	657.1		$	763.0
Depreciation and amortization:
Kratos Government Solutions	$	14.9		$	18.2		$	23.1
Public Safety & Security	0.5			0.6			2.0
Unmanned Systems	7.4			6.7			7.3
Total depreciation and amortization	$	22.8		$	25.5		$	32.4
Operating income (loss) from continuing operations:
Kratos Government Solutions	$	17.3		$	16.1		$	24.4
Public Safety & Security	(3.0		)	2.6			(4.9		)
Unmanned Systems	(27.7		)	(16.2		)	(9.8		)
Corporate activities	(5.2		)	(7.0		)	(4.4		)
Total operating income (loss) from continuing operations	$	(18.6	)	$	(4.5	)	$	5.3

Revenues from foreign customers were approximately $80.1 million or 12%, $73.2 million or 11% and $89.0 million or 12% of total revenue for the years ended December 25, 2016, December 27, 2015, and December 28, 2014, respectively.

Included in the 2016 operating losses for the US reportable segment is an $18.7 million loss accrual recorded on the Air Force Research Laboratory (“AFRL”) Low-Cost Attritable Strike UAS Demonstration (“LCASD”) cost share contract awarded in July 2016. Included in the 2015 and 2014 operating losses for the US reportable segment are increased costs of $5.7 million, and $3.1 million respectively, primarily related to certain retrofits necessary to address product design changes as well as due to a contract conversion adjustment on certain of the Company's aerial platforms.

Included in the 2016 operating losses for the PSS reportable segment is a $1.9 million charge related to the settlement of a contract dispute and $4.1 million in unexpected cost growth on several large long-term security integration projects which are nearing completion.

Included in the 2016 operating income for the KGS reportable segment is a $9.2 million charge that was recorded in the Company’s modular systems business as a result of the closure of one of its manufacturing facilities, and the exit from certain lower margin product business lines.

Reportable segment assets are as follows (in millions):

	December 25, 2016		December 27, 2015		December 28, 2014
Assets:
Kratos Government Solutions	$	609.8	$	606.8	$	618.9
Unmanned Systems	172.1		162.0		166.1
Public Safety & Security	92.0		96.8		100.2
Discontinued operations	—		—		190.8
Corporate activities	74.7		37.7		55.2
Total assets	$	948.6	$	903.3	$	1,131.2

Assets of foreign subsidiaries in the KGS segment were $113.7 million, $106.2 million and $115.5 million as of December 25, 2016, December 27, 2015 and December 28, 2014,respectively.