Segment Information

3 Months Ended

Mar. 26, 2017

Segment Reporting [Abstract]

Segment Information

Segment Information

The Company operates in three reportable segments. The Kratos Government Solutions (“KGS”) reportable segment is comprised of an aggregation of KGS operating segments, including the microwave electronic products, satellite communications, modular systems and defense and rocket support services operating segments. The Unmanned Systems (“US”) reportable segment consists of its unmanned aerial system and unmanned ground and seaborne system businesses. 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 U.S. Department of Defense (the “DoD”), intelligence agencies and classified agencies, and to a lesser degree, international government agencies and domestic and international commercial customers. The Public Safety & Security (“PSS”) reportable 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 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. This presentation is consistent with the Company’s operating structure. 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.

During the three months ended March 27, 2016, the PSS reportable segment recorded a $1.9 million charge related to a litigation settlement of a contract dispute and the KGS reportable segment recorded a $3.0 million impairment charge of the carrying value of inventories as a result of the decision to close one of its manufacturing facilities and the exit of certain lower margin product business lines.

 Revenues, depreciation and amortization, and operating income (loss) generated by the Company’s reportable segments for the three month periods ended March 26, 2017 and March 27, 2016 are as follows (in millions):

	Three Months Ended
	March 26, 2017			March 27, 2016
Revenues:
Kratos Government Solutions
Service revenues	$	48.2		$	52.4
Product sales	67.2			56.2
Total Kratos Government Solutions	115.4			108.6
Public Safety & Security
Service revenues	36.8			30.2
Product sales	—			—
Total Public Safety & Security	36.8			30.2
Unmanned Systems
Service revenues	—			—
Product sales	15.6			14.2
Total Unmanned Systems	15.6			14.2
Total revenues	$	167.8		$	153.0
Depreciation & amortization:
Kratos Government Solutions	$	3.7		$	4.1
Public Safety & Security	0.1			0.1
Unmanned Systems	1.8			1.9
Total depreciation and amortization	$	5.6		$	6.1
Operating income (loss) from continuing operations:
Kratos Government Solutions	$	9.6		$	(1.8	)
Public Safety & Security	(0.2		)	(2.7		)
Unmanned Systems	(5.0		)	(4.2		)
Total segment operating income (loss)	4.4			(8.7		)
Unallocated corporate expense, net	(2.7		)	(1.5		)
Total operating income (loss) from continuing operations	$	1.7		$	(10.2	)