Segment Information

6 Months Ended

Jun. 26, 2011

Segment Information

Segment Information

Note 13. Segment Information

The Company operates in two principal business segments: Kratos Government Solutions and Public Safety and Security. The Company organizes its business segments based on the nature of the services offered. In the following table, total operating income of the 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 operating segments, and other miscellaneous corporate activities. Transactions between segments are generally negotiated and accounted for under terms and conditions similar to other government and commercial contracts.

Revenues, operating income, and assets generated or held by the Company’s current reporting segments for the three and six months ended June 27, 2010 and June 26, 2011 are as follows (in millions):

	Three months ended						Six months ended
	June 27, 2010			June 26, 2011			June 27, 2010			June 26, 2011
Revenues:
Kratos Government Solutions	$	91.6		$	145.3		$	153.1		$	242.7
Public Safety & Security	7.5			25.8			14.7			51.2
Total revenues	$	99.1		$	171.1		$	167.8		$	293.9
Operating income:
Kratos Government Solutions	$	6.6		$	9.7		$	10.6		$	16.3
Public Safety & Security	—			1.7			—			2.9
Unallocated corporate expense, net	(2.1		)	(2.7		)	(2.5		)	(9.1		)
Total operating income	$	4.5		$	8.7		$	8.1		$	10.1

	As of December 26, 2010		As of June 26, 2011
Assets:
Kratos Government Solutions	$	406.5	$	743.5
Public Safety & Security	97.3		98.7
Discontinued operations	0.5		0.1
Corporate activities	31.2		70.1
Total assets	$	535.5	$	912.4

The increase in assets in the KGS segment is primarily attributable to the acquisition of Herley. The increase in assets in corporate activities is primarily due to an increase in cash and cash equivalents from the sale of $285.0 million of Additional Notes and the issuance of common stock during for the six months ended June 26, 2011. See Notes 2, 5 and 9.