Segment Information

The Company operates in two reportable segments. The KGS reportable segment is comprised of an aggregation of KGS operating segments, including the microwave electronic products, satellite communications, modular systems, defense and rocket support services, and turbine technologies 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 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 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 generated by the Company’s reportable segments for the three month periods ended March 31, 2019 and April 1, 2018 are as follows (in millions):



	Three Months Ended
	March 31, 2019			April 1, 2018
Revenues:
Kratos Government Solutions
Service revenues	$	62.6		$	46.0
Product sales	62.9			69.2
Total Kratos Government Solutions	125.5			115.2
Unmanned Systems
Service revenues	—			—
Product sales	34.9			27.8
Total Unmanned Systems	34.9			27.8
Total revenues	$	160.4		$	143.0
Depreciation & amortization:
Kratos Government Solutions	$	3.9		$	3.6
Unmanned Systems	1.2			0.9
Total depreciation and amortization	$	5.1		$	4.5
Operating income from continuing operations:
Kratos Government Solutions	$	11.4		$	7.9
Unmanned Systems	0.6			0.8
Total segment operating income	12.0			8.7
Unallocated corporate expense, net	(3.8		)	(1.7		)
Total operating income from continuing operations	$	8.2		$	7.0

Included in the unallocated corporate expense, net, for the three months ended March 31, 2019 is transaction expenses of $1.2 million related to the acquisition of FTT.