Segment Information

3 Months Ended

Mar. 25, 2012

Segment Information

Segment Information

Note 13. Segment Information

The Company operates in two principal business segments: Kratos Government Solutions and Public Safety & 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 disclosed below provided by the Company’s segments for the three months ended March 27, 2011 and March 25, 2012 are as follows (in millions):

	Three months ended
	March 27, 2011			March 25, 2012
Revenues:
Kratos Government Solutions	$	97.4		$	174.4
Public Safety & Security	25.4			40.6
Total revenues	$	122.8		$	215.0
Depreciation and amortization:
Kratos Government Solutions	$	4.1		$	12.8
Public Safety & Security	0.7			0.9
Total depreciation and amortization	$	4.8		$	13.7
Operating income:
Kratos Government Solutions	$	6.6		$	9.0
Public Safety & Security	1.2			1.2
Unallocated corporate expense, net	(6.4		)	(2.0		)
Total operating income	$	1.4		$	8.2

Merger and acquisition expenses which were included in unallocated corporate expense, net for the three months ended March 27, 2011 and March 25, 2012 were $5.8 million and $0.9 million, respectively.

	As of December 25, 2011		As of March 25, 2012
Assets:
Kratos Government Solutions	$	1,041.1	$	1,028.2
Public Safety & Security	88.6		116.3
Corporate activities	86.4		92.9
Total assets	$	1,216.1	$	1,237.4

The increase in assets in the PSS segment is primarily attributable to the acquisition of assets on December 30, 2011.