Segment Information

The Company operates in two 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.

As discussed in “Discontinued Operations” in Note 3, on February 28, 2018, the Company entered into a Purchase Agreement to sell the operations of its Public Safety & Security business unit which had previously been reported as a separate reportable business segment. Accordingly, PSS and its subsidiaries have been classified as held for sale and reported in discontinued operations in the accompanying condensed consolidated financial statements for all periods presented.

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.

Revenues, depreciation and amortization, and operating income (loss) generated by the Company’s reportable segments for the three month periods ended April 1, 2018 and March 26, 2017 are as follows (in millions):



	Three Months Ended
	April 1, 2018			March 26, 2017
Revenues:
Kratos Government Solutions
Service revenues	$	46.0		$	49.2
Product sales	69.2			67.2
Total Kratos Government Solutions	115.2			116.4
Unmanned Systems
Service revenues	—			—
Product sales	27.8			15.6
Total Unmanned Systems	27.8			15.6
Total revenues	$	143.0		$	132.0
Depreciation & amortization:
Kratos Government Solutions	$	3.6		$	3.7
Unmanned Systems	0.9			1.8
Total depreciation and amortization	$	4.5		$	5.5
Operating income (loss) from continuing operations:
Kratos Government Solutions	$	7.9		$	9.1
Unmanned Systems	0.8			(5.0		)
Total segment operating income	8.7			4.1
Unallocated corporate expense, net	(1.7		)	(2.7		)
Total operating income from continuing operations	$	7.0		$	1.4