Segment Information

9 Months Ended

Sep. 25, 2022

Segment Reporting [Abstract]

Segment Information

Segment Information

The Company operates in two reportable segments. The KGS reportable segment is comprised of an aggregation of KGS operating business units, including the Company’s microwave electronics products, space, satellite and cyber, training solutions, C5ISR/modular systems, turbine technologies and defense and rocket support services operating segments. The US reportable segment consists of the Company’s unmanned aerial, unmanned ground, unmanned 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 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. 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 Corporate activities includes costs for certain stock-based compensation programs (including stock-based compensation costs for stock options, the 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 and nine month periods ended September 25, 2022 and September 26, 2021 are as follows (in millions): 

	Three Months Ended				Nine Months Ended
	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
Revenues:
Kratos Government Solutions
Service revenues	$	87.3	$	50.5	$	231.3	$	163.3
Product sales	91.3		88.8		258.7		259.1
Total Kratos Government Solutions	178.6		139.3		490.0		422.4
Unmanned Systems
Service revenues	1.3		1.1		4.0		3.6
Product sales	48.7		60.2		155.0		173.9
Total Unmanned Systems	50.0		61.3		159.0		177.5
Total revenues	$	228.6	$	200.6	$	649.0	$	599.9
Depreciation and amortization:
Kratos Government Solutions	$	7.0	$	4.3	$	17.1	$	13.2
Unmanned Systems	1.9		1.8		5.7		6.2
Total depreciation and amortization	$	8.9	$	6.1	$	22.8	$	19.4
Operating income (loss) from continuing operations:
Kratos Government Solutions	$	3.3	$	14.6	$	18.4	$	27.6
Unmanned Systems	(0.1)		2.6		(4.6)		10.9
Corporate activities	(6.8)		(6.7)		(20.5)		(19.8)
Total operating income (loss) from continuing operations	$	(3.6)	$	10.5	$	(6.7)	$	18.7

The US Operating loss for the nine months ended September 25, 2022 includes a $5.5 million litigation settlement charge related to the resolution of a dispute with an international customer, for which the contractual arrangement was entered into in March 2011, prior to Kratos’ acquisition of Composite Engineering Inc. (“CEi”). The KGS Operating income for the three and nine months ended September 25, 2022 includes $6.4 million of expenses related to certain non-recoverable costs, including rate and cost growth items, resulting from the inability to hire the required planned direct labor base both internally and by the Company’s subcontractors to execute on its backlog, due to a continuing challenging environment in both hiring and retaining skilled manufacturing personnel, including approximately $3.4 million in expenses in the Company’s C5ISR business, and non-recoverable indirect cost rate growth resulting from a smaller than planned direct labor base due to delays in customer program execution and awards in the Company’s Training Solutions business of approximately $3.0 million.