Document and Entity Information (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 28, 2014	Mar. 06, 2015	Jun. 29, 2014
Document And Entity Information
Entity Registrant Name	KRATOS DEFENSE & SECURITY SOLUTIONS, INC.
Entity Central Index Key	0001069258
Current Fiscal Year End Date	--12-28
Entity Filer Category	Accelerated Filer
Document Type	10-K
Document Period End Date	Dec. 28, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Current Reporting Status	Yes
Entity Common Stock, Shares Outstanding		58,273,919
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Public Float			$ 349.4

CONSOLIDATED BALANCE SHEETS (USD $) In Millions, unless otherwise specified	Dec. 28, 2014	Dec. 29, 2013
Current assets:
Cash and cash equivalents	$ 34.7	$ 55.7
Restricted cash	5.4	5.0
Accounts receivable, net	248.2	265.8
Inventoried costs	68.0	74.6
Income taxes receivable	1.3	2.1
Prepaid expenses	8.5	10.4
Other current assets	8.8	16.7
Total current assets	374.9	430.3
Property, plant and equipment, net	82.6	84.8
Goodwill	596.4	596.4
Intangible assets, net	52.3	69.9
Other assets	32.6	35.2
Total assets	1,138.8	1,216.6
Current liabilities:
Accounts payable	48.4	61.9
Accrued expenses	34.2	46.2
Accrued compensation	46.4	44.9
Accrued interest	5.6	5.2
Billings in excess of costs and earnings on uncompleted contracts	52.1	52.5
Deferred income tax liability	30.3	28.4
Other current liabilities	6.8	8.1
Current portion of long-term debt	1.0	1.0
Current portion of capital lease obligations	0.1	0.3
Current liabilities of discontinued operations	1.2	2.5
Total current liabilities	226.1	251.0
Long-term debt principal, net of current portion	622.0	628.8
Long-term debt premium	0	14.5
Line of credit	41.0	0
Capital lease obligations, net of current portion	0	0.1
Deferred income tax liability	0.9	0.7
Other long-term liabilities	24.5	25.5
Long-term liabilities of discontinued operations	0	0.2
Total liabilities	914.5	920.8
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000,000 authorized, 0 shares outstanding at December 29, 2013 and December 28, 2014	0	0
Common stock, $0.001 par value, 195,000,000 shares authorized; 57,056,892 and 57,801,978 shares issued and outstanding at December 29, 2013 and December 28, 2014, respectively	0	0
Additional paid-in capital	863.4	856.0
Accumulated other comprehensive loss	(1.7)	(0.8)
Accumulated deficit	(637.4)	(559.4)
Total stockholders' equity	224.3	295.8
Total liabilities and stockholders’ equity	$ 1,138.8	$ 1,216.6

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 28, 2014	Dec. 29, 2013
Preferred Stock:
Par value (usd per share)	$ 0.001	$ 0.001
Shares authorized (in shares)	5,000,000	5,000,000
Shares outstanding (in shares)	0	0
Common Stock:
Par value (in dollars per share)	$ 0.001	$ 0.001
Shares authorized (in shares)	195,000,000	195,000,000
Shares issued (in shares)	57,801,978	57,056,892
Shares outstanding (in shares)	57,801,978	57,056,892

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 28, 2014	Dec. 29, 2013	Dec. 30, 2012
Income Statement [Abstract]
Service revenues	$ 390.8	$ 443.6	$ 450.0
Product sales	477.2	507.0	519.2
Total revenues	868.0	950.6	969.2
Cost of service revenues	304.6	335.2	350.8
Cost of product sales	345.2	375.4	361.2
Total costs	649.8	710.6	712.0
Gross profit	218.2	240.0	257.2
Selling, general and administrative expenses	173.4	193.0	193.1
Merger and acquisition related items	0.2	(3.8)	(2.7)
Research and development expenses	23.0	21.4	17.8
Impairment of goodwill and intangible assets	0	0	96.6
Unused office space and other restructuring	1.7	(2.4)	2.1
Operating income (loss) from continuing operations	19.9	31.8	(49.7)
Other income (expense):
Interest expense, net	(54.3)	(63.7)	(66.1)
Loss on extinguishment of debt	(39.1)	0	0
Other income, net	0.6	0	1.3
Total other expense, net	(92.8)	(63.7)	(64.8)
Loss from continuing operations before income taxes	(72.9)	(31.9)	(114.5)
Provision (benefit) for income taxes from continuing operations	5.1	0	(1.6)
Income (loss) from continuing operations	(78.0)	(31.9)	(112.9)
Loss from discontinued operations	0	(5.3)	(1.5)
Net loss	(78.0)	(37.2)	(114.4)
Basic and diluted loss per common share:
Net loss from continuing operations (in dollars per share)	$ (1.35)	$ (0.56)	$ (2.41)
Net loss from discontinued operations (in dollars per share)	$ 0.00	$ (0.09)	$ (0.03)
Net loss per common share (in dollars per share)	$ (1.35)	$ (0.65)	$ (2.44)
Weighted average common shares outstanding:
Basic and diluted (in shares)	57.6	56.8	46.9
Comprehensive Loss
Net loss from above	(78.0)	(37.2)	(114.4)
Other comprehensive loss:
Change in cumulative translation adjustment	(0.4)	0	(0.4)
Post retirement benefit reserve adjustment net of tax expense	(0.5)	0	(0.2)
Other comprehensive loss, net of tax	(0.9)	0	(0.6)
Comprehensive loss	$ (78.9)	$ (37.2)	$ (115.0)

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (USD $) In Millions, except Share data, unless otherwise specified	Total	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit
Balance at Dec. 25, 2011	$ 312.6	$ 0	$ 720.6	$ (0.2)	$ (407.8)
Balance (in shares) at Dec. 25, 2011		32,400,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock for employee stock purchase plan, options and warrants (in shares)		200,000
Issuance of common stock for employee stock purchase plan, options and warrants	0		0
Issuance of common stock for cash (in shares)		20,000,000
Issuance of common stock for cash	97.0		97.0
Issuance of common stock for acquisitions (in shares)		4,000,000
Issuance of common stock for acquisitions	23.8		23.8
Common stock repurchased for employee stock purchase plan	(0.7)		(0.7)
Stock-based compensation	6.6		6.6
Restricted stock units traded for taxes (in shares)		0
Restricted stock units traded for taxes	(0.2)		(0.2)
Net loss	(114.4)				(114.4)
Other comprehensive loss, net of tax	(0.6)			(0.6)
Balance at Dec. 30, 2012	324.1	0	847.1	(0.8)	(522.2)
Balance (in shares) at Dec. 30, 2012		56,600,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock for employee stock purchase plan, options and warrants (in shares)		300,000
Issuance of common stock for employee stock purchase plan, options and warrants	1.6		1.6
Stock-based compensation	7.4		7.4
Restricted stock units traded for taxes (in shares)		100,000
Restricted stock units traded for taxes	(0.1)		(0.1)
Net loss	(37.2)				(37.2)
Other comprehensive loss, net of tax	0			0
Balance at Dec. 29, 2013	295.8	0	856.0	(0.8)	(559.4)
Balance (in shares) at Dec. 29, 2013	57,056,892	57,000,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock for employee stock purchase plan, options and warrants (in shares)		700,000
Issuance of common stock for employee stock purchase plan, options and warrants	3.9		3.9
Stock-based compensation	3.8		3.8
Restricted stock units traded for taxes (in shares)		100,000
Restricted stock units traded for taxes	(0.3)		(0.3)
Net loss	(78.0)				(78.0)
Other comprehensive loss, net of tax	(0.9)			(0.9)
Balance at Dec. 28, 2014	$ 224.3	$ 0	$ 863.4	$ (1.7)	$ (637.4)
Balance (in shares) at Dec. 28, 2014	57,801,978	57,800,000

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 28, 2014	Dec. 29, 2013	Dec. 30, 2012
Operating activities:
Net loss	$ (78.0)	$ (37.2)	$ (114.4)
Loss from discontinued operations	0	(5.3)	(1.5)
Loss from continuing operations	(78.0)	(31.9)	(112.9)
Adjustments to reconcile net loss from continuing operations to net cash provided by operating activities from continuing operations:
Depreciation and amortization	39.1	53.4	58.0
Deferred income taxes	2.3	(0.4)	(2.5)
Stock-based compensation	3.8	7.4	6.6
Impairment of goodwill and intangible assets	0	0	96.6
Loss on extinguishment of debt	39.1	0	0
Amortization of deferred financing costs	3.2	5.1	5.1
Amortization of premium and discount on Senior Secured Notes	(0.9)	(4.2)	(4.2)
Provision for doubtful accounts	1.5	1.0	0.4
Change in accrual for excess facilities	0.2	(4.7)	1.8
Changes in assets and liabilities, net of acquisitions:
Accounts receivable	16.1	4.9	2.8
Inventoried costs	6.5	20.0	(5.2)
Prepaid expenses	2.2	1.9	(1.7)
Other assets	1.4	(7.0)	(0.2)
Accounts payable	(13.5)	(22.0)	25.6
Accrued expenses	(12.1)	(0.7)	(10.3)
Accrued compensation	1.4	(3.0)	4.3
Accrued interest	0.4	(1.1)	1.2
Billings in excess of costs and earnings on uncompleted contracts	(2.4)	8.8	(5.0)
Income tax receivable and payable	0.8	1.6	(0.7)
Other liabilities	(3.4)	(6.5)	(7.4)
Net cash provided by operating activities from continuing operations	7.7	22.6	52.3
Investing activities:
Cash paid for acquisitions, net of cash acquired	(2.6)	2.2	(149.4)
Proceeds from the disposition of discontinued operations	0	1.3	0.3
Cash transferred from (to) restricted cash	(0.4)	0.4	0.6
Capital expenditures	(14.2)	(16.6)	(16.6)
Net cash used in investing activities from continuing operations	(17.2)	(12.7)	(165.1)
Financing activities:
Proceeds from the issuance of long-term debt, net of issuance costs	618.5	0	0
Extinguishment of long-term debt	(661.5)	0	0
Proceeds from the issuance of common stock, net of issuance costs	0	0	97.0
Borrowing under credit facility	41.0	0	50.0
Repayments under credit facility	(1.0)	(1.0)	(51.0)
Cash paid for contingent acquisition consideration	0	(2.1)	(2.5)
Debt issuance costs	(10.0)	0	(1.2)
Proceeds from exercise of restricted stock units, employee stock options, and employee stock purchase plan	3.3	1.5	0
Other	0	(0.4)	(1.4)
Net cash provided by (used in) financing activities from continuing operations	(9.7)	(2.0)	90.9
Net cash flows of continuing operations	(19.2)	7.9	(21.9)
Net operating cash flows of discontinued operations	(1.6)	(1.3)	1.3
Effect of exchange rate changes on cash and cash equivalents	(0.2)	0.1	0
Net increase (decrease) in cash and cash equivalents	(21.0)	6.7	(20.6)
Cash and cash equivalents at beginning of year	55.7	49.0	69.6
Cash and cash equivalents at end of year	34.7	55.7	49.0
Supplemental disclosure of cash flow information:
Cash paid during the year for interest	57.1	63.8	64.0
Net cash paid during the year for income taxes	1.2	0.2	2.7
Non-cash investing and financing activities:
Common stock and stock options issued for acquisitions	0	0	23.8
Liability for contingent cash consideration	0	0	2.1
Supplemental disclosures of non-cash investing and financing transactions:
Fair value of assets acquired in acquisitions	0	0	218.3
Liabilities assumed in acquisitions	$ 0	$ 0	$ 35.2

Organization and Summary of Significant Accounting Policies

12 Months Ended

Dec. 28, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Summary of Significant Accounting Policies


(a)	Description of Business

Kratos Defense & Security Solutions, Inc. (“Kratos” or the “Company”) is a specialized technology focused security business providing mission critical products, solutions and services for domestic and international customers, with our principal customers being agencies of the U.S. Government. Our core capabilities are sophisticated engineering, manufacturing, technology development, system integration, and test and evaluation offerings for national security platforms and programs. Our principal products and solutions are related to Command, Control, Communications, Computing, Combat Systems, Intelligence, Surveillance and Reconnaissance (“C5ISR”). We offer our customers products, solutions, services and expertise to support their mission critical needs by leveraging our skills across our core offering areas in C5ISR.

The Company designs, engineers and manufactures specialized electronic products, components, subsystems and systems for intelligence, surveillance, and reconnaissance (ISR), electronic attack, electronic warfare, radar, and missile system platforms; integrated product, software and technology solutions for satellite communications; products and solutions for unmanned systems; products and services related to cybersecurity and cyberwarfare; products and solutions for ballistic missile defense; weapons systems trainers; advanced network engineering and information technology services; weapons systems lifecycle support and sustainment; military weapon range operations and technical services; and public safety, critical infrastructure security and surveillance systems. The Company believes our stable customer base, strong customer relationships, intellectual property, broad array of contract vehicles, "designed in" positions on strategic national security platforms, large technically oriented employee base possessing specialized skills, specialized manufacturing facilities and equipment, extensive list of past performance qualifications, and significant management and operational capabilities position us for success.

The Company conducts most of its business with the U.S. Government (which includes foreign military sales) and performs work as the prime contractor, subcontractor, or preferred supplier. The Company also conducts business with local, state, and foreign governments and domestic and international commercial customers.

The Company operates in three principal reportable segments: Kratos Government Solutions (“KGS”), Kratos Unmanned Systems ("US") and Public Safety & Security (“PSS”). The Company organizes its reportable segments based on the nature of the services offered. Transactions between segments are generally negotiated and accounted for under terms and conditions similar to other government and commercial contracts, and these intercompany transactions are eliminated in consolidation. The financial statements in this Annual Report on Form 10-K (this “Annual Report”) are presented in a manner consistent with the Company's operating structure. For additional information regarding the Company's operating segments, see Note 14 of the Notes to the Consolidated Financial Statements.


(b)	Principles of Consolidation and Basis of Presentation

The Consolidated Financial Statements include the accounts of Kratos and its 100% owned subsidiaries, for which all intercompany transactions have been eliminated in consolidation.

In June 2012, the Company committed to a plan to sell certain lines of business associated with antennas, satellite-cased products and fly-away terminals of the non-core businesses acquired in the Integral Systems, Inc. (“Integral”) acquisition. In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 205, Presentation of Financial Statements (“Topic 205”), these businesses have been classified as held for sale and reported in discontinued operations in the accompanying Consolidated Financial Statements. See Note 9.

The Company has a 52/53 week fiscal year ending on the last Sunday of the calendar year, with interim fiscal periods ending on the last Sunday of each calendar quarter. There were 52 calendar weeks in the fiscal years ended on December 29, 2013 and December 28, 2014. There were 53 calendar weeks in the fiscal year ended on

December 30, 2012.


(d)	Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include revenue recognition, allowance for doubtful accounts, warranties, inventory valuation, valuation of long-lived assets including identifiable intangibles and goodwill, accounting for income taxes including the related valuation allowance on the deferred tax asset and uncertain tax positions, contingencies and litigation, contingent acquisition consideration, stock-based compensation, losses on unused office space, and business combination purchase price allocations. In the future, the Company may realize actual results that differ from the current reported estimates and if the estimates that the Company has used change in the future, such changes could have a material impact on the Company's consolidated financial position, results of operations and cash flows.


(e)	Revenue Recognition

The Company generates its revenue from three different types of contractual arrangements: cost-plus-fee contracts, time-and-materials contracts, and fixed-price contracts. Revenue on cost-plus-fee contracts is recognized to the extent of allowable costs incurred plus an estimate of the applicable fees earned. The Company considers fees under cost-plus-fee contracts to be earned in proportion to the allowable costs incurred in performance of the contract and recognizes the relevant portion of the expected fee to be awarded by the customer at the time such fee can be reasonably estimated, based on factors such as its prior award experience and communications with the customer regarding performance, including any interim performance evaluations rendered by the customer. Revenue on time-and-materials contracts is recognized to the extent of billable rates times hours delivered for services provided, to the extent of material cost for products delivered to customers, and to the extent of expenses incurred on behalf of the customers.

The Company has three basic categories of fixed-price contracts: fixed unit price, fixed-price-level of effort, and fixed-price-completion. Revenue recognition methods on fixed-price contracts will vary depending on the nature of the work and the contract terms. Revenues on fixed-price service contracts are recorded as work is performed in accordance with ASC Topic 605, Revenue Recognition (“Topic 605”), specifically Topic 605-10-S99, which generally requires revenue to be deferred until all of the following have occurred: (1) there is a contract in place; (2) delivery has occurred or services have been provided; (3) the price is fixed or determinable; and, (4) collectability is reasonably assured. Revenues on fixed-price contracts that require delivery of specific items may be recorded based on a price per unit as units are delivered. Revenue for fixed-price contracts in which the Company is paid a specific amount to provide services for a stated period of time is recognized ratably over the service period.

On a portion of the fixed price-completion contracts, revenue is recognized in accordance with Topic 605 using the percentage-of-completion method based on the ratio of total costs incurred to date compared to estimated total costs to complete the contract. Estimates of costs to complete include material, direct labor, overhead, and allowable indirect expenses for government contracts. These cost estimates are reviewed and, if necessary, revised on a contract-by-contract basis. If, as a result of this review, management determines that a loss on a contract is evident, then the full amount of estimated loss is charged to operations in the period. As of December 29, 2013 and December 28, 2014, the provisions for losses on contracts were $4.8 million and $2.9 million, respectively.

In certain instances, when the Company's customers have requested that it commence work prior to receipt of the contract award and funding and it has incurred costs related to that specific anticipated contract, and the Company believes recoverability of the costs is probable, it may defer those costs incurred until the associated contract has been awarded and funded by the customer.

In accounting for the Company's long-term contracts for production of products provided to the U.S. Government, the Company utilizes both cost-to-cost and units delivered measures under the percentage-of-completion method of accounting under the provisions of Topic 605. Under the units delivered measure of the percentage-of-completion method of accounting, sales are recognized as the units are accepted by the customer generally using sales values for units in accordance with the contract terms. The Company estimates profit as the difference between total estimated revenue and total estimated cost of a contract and recognizes that profit over the life of the contract based on units delivered or as computed on the basis of the estimated final average unit costs plus profit. The Company classifies contract revenues as product sales or service revenues depending upon the predominant attributes of the relevant underlying contracts.

Significant management judgments and estimates, including but not limited to the estimated costs to complete projects, must be made and used in connection with the revenue recognized in any accounting period. A cancellation, schedule delay, or modification of a fixed-price contract which is accounted for using the percentage-of-completion method may adversely affect the Company's gross margins for the period in which the contract is modified or canceled. Under certain circumstances, a cancellation or negative modification could result in the Company having to reverse revenue that was recognized in a prior period, thus significantly reducing the amount of revenues recognized for the period in which the adjustment is made. Correspondingly, a positive modification may positively affect gross margins. In addition, a schedule delay or modifications can result in an increase in estimated cost to complete the project, which would also result in an impact to gross margins. Material differences may result in the amount and timing of the Company's revenue for any period if management made different judgments or utilized different estimates.

It is the Company's policy to review any arrangement containing software or software deliverables and services against the criteria contained in ASC Topic 985, Software (“Topic 985”). Under the provisions of Topic 985, the Company reviews the contract value of software deliverables and services and determines allocations of the contract value based on vendor-specific objective evidence (“VSOE”) of fair value for each of the software elements. All software arrangements requiring significant production, modification, or customization of the software are accounted for in conformity with Topic 605.

The Company's contracts may include the provision of more than one of its services (“multiple element arrangements”). In these situations, the Company applies the guidance of Topic 605. Accordingly, for applicable arrangements, revenue recognition includes the proper identification of separate units of accounting and the allocation of revenue across all elements based on relative fair values.

For multiple element arrangements that include hardware products containing software essential to the hardware products' functionality, the Company allocates revenue to all deliverables based on their relative selling prices. In such circumstances, the Company uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) VSOE, (ii) third-party evidence of selling price (“TPE”), and (iii) best estimate of the selling price (“ESP”).

VSOE generally exists only when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable. TPE is determined based on competitor prices for similar deliverables when sold separately. Generally, the Company's offerings contain significant differentiation such that comparable pricing of products with similar functionality cannot be obtained. Furthermore, the Company is unable to reliably determine what similar competitor products' selling prices are on a stand-alone basis. Therefore, the Company typically is unable to obtain TPE of selling price. ESP reflects the Company's best estimates of what the selling prices of elements would be if they were sold regularly on a stand-alone basis. The Company determines ESP for a product or service by considering multiple factors including, but not limited to major product groupings, geographies, market conditions, competitive landscape, internal costs, gross margin objectives and pricing practices. The determination of ESP is made through consultation with management, taking into consideration the Company's marketing strategy.

The Company accounts for multiple element arrangements that consist only of software or software-related products, including the sale of upgrades to previously sold software, in accordance with industry specific software accounting guidance. For such transactions, revenue on arrangements that include multiple elements is allocated to each element based on the relative fair value of each element, and fair value is determined by VSOE. If the Company cannot objectively determine the fair value of any undelivered element included in such multiple element arrangements, the Company defers revenue until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements. Under certain of the Company's contractual arrangements, the Company may also recognize revenue for out-of-pocket expenses in accordance with Topic 605. Depending on the contractual arrangement, these expenses may be reimbursed with or without a fee.

Under certain of its contracts, the Company provides supplier procurement services and materials for its customers. The Company records revenue on these arrangements on a gross or net basis in accordance with Topic 605, depending on the specific circumstances of the arrangement. The Company considers the following criteria, among others, for recording revenue on a gross or net basis:


(1)	Whether the Company acts as a principal in the transaction;


(2)	Whether the Company takes title to the products;


(3)	Whether the Company assumes risks and rewards of ownership, such as risk of loss for collection, delivery or returns;


(4)	Whether the Company serves as an agent or broker, with compensation on a commission or fee basis; and,


(5)	Whether the Company assumes the credit risk for the amount billed to the customer subsequent to delivery.

For federal contracts, the Company follows U.S. Government procurement and accounting standards in assessing the allowability and the allocability of costs to contracts. Due to the significance of the judgments and estimation processes, it is likely that materially different amounts could be recorded if different assumptions were used or if the underlying circumstances were to change. The Company closely monitors the consistent application of its critical accounting policies and compliance with contract accounting. Business operations personnel conduct periodic contract status and performance reviews. When adjustments in estimated contract revenues or costs are required, any significant changes from prior estimates are included in earnings in the current period. Also, regular and recurring evaluations of contract cost, scheduling and technical matters are performed by management personnel who are independent from the business operations personnel performing work under the contract. Costs incurred and allocated to contracts with the U.S. Government are scrutinized for compliance with regulatory standards by the Company's personnel, and are subject to audit by the Defense Contract Audit Agency.

From time to time, the Company may proceed with work based on customer direction prior to the completion and signing of formal contract documents. The Company has a formal review process for approving any such work. Revenue associated with such work is recognized only when it can be reliably estimated and realization is probable. The Company bases its estimates on previous experiences with the customer, communications with the customer regarding funding status, and its knowledge of available funding for the contract or program. As of December 29, 2013 and December 28, 2014, approximately $3.7 million and $1.6 million, respectively, of the Company's unbilled accounts receivable balance were under an authorization to proceed or work order from its customers where a formal purchase order had not yet been received.

Costs incurred for shipping and handling are included in cost of product sales at the time the related revenue is recognized. Amounts billed to a customer for shipping and handling are reported as revenue.


(f)	Inventoried costs

Inventoried costs are stated at the lower of cost or market. Cost is determined using the average cost or first-in, first-out methods and the applicable method is applied consistently within an operating entity. Inventoried costs primarily relate to work under fixed-price contracts using the percentage-of-completion under the units of delivery method of revenue recognition. These costs represent accumulated contract costs less the portion of such costs allocated to delivered items. Accumulated contract costs include direct production costs, factory and engineering overhead and production tooling costs. Pursuant to contract provisions of U.S. Government contracts, such customers may have title to, or a security interest in inventories related to such contracts as a result of advances, performance-based payments, and progress payments. The Company reflects those advances and payments as an offset against the related inventory balances.

The Company regularly reviews inventory quantities on hand, future purchase commitments with its suppliers, and the estimated utility of its inventory. If the Company's review indicates a reduction in utility below carrying value, it reduces its inventory to a new cost basis.

(g) Research and Development

Costs incurred in research and development activities are expensed as incurred in accordance with FASB ASC Topic 730, Research and Development.


(h)	Income Taxes

The Company records deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company maintains a valuation allowance on the deferred tax assets for which it is more likely than not that the Company will not realize the benefits of these tax assets in future tax periods. The valuation allowance is based on estimates of future taxable income by tax jurisdiction in which the Company operates, the number of years over which the deferred tax assets will be recoverable, and scheduled reversals of deferred tax liabilities.

In accordance with the recognition standards established by ASC Topic 740, Income Taxes (“Topic 740”), the Company makes a comprehensive review of its portfolio of uncertain tax positions regularly. In this regard, an uncertain tax position represents the Company's expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return or claim, which has not been reflected in measuring income tax expense for financial reporting purposes. Until these positions are sustained by the taxing authorities, the Company has not recognized the tax benefits resulting from such positions and reports the tax effects as a liability for uncertain tax positions in its Consolidated Balance Sheets.


(i)	Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation-Stock Compensation (“Topic 718”). All of the Company's stock-based compensation plans are considered equity plans under Topic 718, and compensation expense recognized is net of estimated forfeitures over the vesting period. The Company issues stock options and stock awards under its existing plans. The fair value of stock options is estimated on the date of grant using a Black-Scholes option-pricing model or a trinomial lattice options pricing model and is expensed on a straight-line basis over the remaining vesting period of the options, which is generally six or less years. The fair value of stock awards is determined based on the closing market price of the Company's common stock on the grant date and is adjusted at each reporting date based on the amount of shares ultimately expected to vest. Compensation expense for stock awards is expensed over the vesting period, usually five to ten years. Compensation expense for stock issued under the Company's employee stock purchase plan is estimated at the beginning date of the offering period using a Black-Scholes option-pricing model and is expensed on a straight-line basis over the period of the offering, which is generally six months.

For the years ended December 30, 2012, December 29, 2013 and December 28, 2014, there was no incremental tax benefit from stock options exercised in the periods. The following table shows the amounts recognized in the Consolidated Financial Statements for 2012, 2013 and 2014 for stock-based compensation expense related to stock options, stock awards and to stock offered under the Company's employee stock purchase plan (in millions, except per share amounts).



	2012			2013			2014
Selling, general and administrative expenses	$	6.6		$	7.4		$	3.8
Total cost of employee stock-based compensation included in operating income (loss) from continuing operations, before income tax	6.6			7.4			3.8
Impact on net income (loss) per common share:
Basic and diluted	$	(0.14	)	$	(0.13	)	$	(0.07	)


(j)	Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments, which results in bad debt expense. Management periodically determines the adequacy of this allowance by evaluating the comprehensive risk profiles of all individual customer receivable balances including, but not limited to, the customer's financial condition, credit agency reports, financial statements and overall current economic conditions. Additionally, on certain contracts whereby the Company performs services for a prime/general contractor, a specified percentage of the invoiced trade accounts receivable may be retained by the customer until the project is completed. The Company periodically reviews all retainages for collectability and records allowances for doubtful accounts when deemed appropriate, based on its assessment of the associated credit risks. Changes to estimates of contract value are recorded as adjustments to revenue and not as a component of the allowance for doubtful accounts. Individual accounts receivable are written off to the allowance for doubtful accounts when the Company becomes aware of a specific customer's inability to meet its financial obligation, and all collection efforts are exhausted.

The following table outlines the balance of the Company's Allowance for Doubtful Accounts for 2012, 2013 and 2014. The table identifies the additional provisions each year as well as the write-offs that utilized the allowance (in millions).



Allowance for Doubtful Accounts	Balance at Beginning of Year		Provisions		Write-offs/Recoveries			Balance at End of Year
Year ended December 30, 2012	$	2.0	$	0.4	$	(1.0	)	$	1.4
Year ended December 29, 2013	$	1.4	$	1.0	$	(0.2	)	$	2.2
Year ended December 28, 2014	$	2.2	$	1.5	$	(1.7	)	$	2.0


(k)	Cash and Cash Equivalents

The Company's cash equivalents consist of its highly liquid investments with an original maturity of three months or less when purchased by the Company.

The Company has restricted cash accounts of approximately $5.0 million at December 29, 2013 and $5.4 million at December 28, 2014. As of December 29, 2013 and December 28, 2014, restricted cash consists primarily of a deposit securing foreign letters of credit related to payment and performance bonds on international contracts.


(l)	Property and Equipment, Net

Property and equipment, net owned by the Company is depreciated over the estimated useful lives of individual assets. Equipment and facilities acquired under capital leases are amortized over the shorter of the lease term or the estimated useful life of the asset. Improvements, which significantly improve and extend the useful life of an asset, are capitalized and depreciated over the shorter of the lease period or the estimated useful life. Expenditures for maintenance and repairs are charged to operations as incurred.

Assets are depreciated predominately using the straight-line method, with the following lives:



		Years
Buildings and improvements		15 - 39
Machinery and equipment		3 - 10
Computer equipment and software		1 - 10
Vehicles, furniture, and office equipment		5
Leasehold improvements		Shorter of useful life or length of lease


(m)	Leases

The Company uses its incremental borrowing rate in the assessment of lease classification as capital or operating and defines the initial lease term to include renewal options determined to be reasonably assured. The Company conducts operations primarily under operating leases.

Most lease agreements for real property contain incentives for tenant improvements, rent holidays, or rent escalation clauses. For incentives for tenant improvements, the Company capitalizes the leasehold improvements which are depreciated over the shorter of the lease term or their estimated useful life and records a deferred rent liability which is amortized over the term of the lease as a reduction to rent expense. For rent holidays and rent escalation clauses during the lease term, the Company records minimum rental expenses on a straight-line basis over the term of the lease. For purposes of recognizing lease incentives, the Company uses the date of initial possession as the commencement date, which is generally when the Company is given the right of access to the space and begins to make improvements in preparation for intended use.


(n)	Acquisitions

The Company accounts for business combinations using the acquisition method of accounting as prescribed by ASC Topic 805, Business Combinations (“Topic 805”). The Company allocates the purchase price of its acquisitions to the tangible and intangible assets, and liabilities including certain contingent liabilities acquired based upon their estimated fair values. The excess of purchase price over those fair values is recorded as goodwill. Acquisition-related expenses and restructuring costs are recognized separately from the business combination and are expensed as incurred.


(o)	Goodwill and Other Intangible Assets, Net

In accordance with the provisions of ASC Topic 350, Intangibles-Goodwill and Other (“Topic 350”), the Company performs an annual impairment test for goodwill, or when evidence of a potential impairment exists. In the third quarter of fiscal year 2014, the Company prospectively changed its goodwill testing date from the last day of its fiscal year to the last day of its fiscal October. The change was to better align its impairment testing procedures with the completion of its annual financial and strategic planning process as discussed in Note 2, Goodwill and Other Intangible Assets, to the Consolidated Financial Statements. This change was applied prospectively beginning on November 2, 2014; retrospective application to prior periods is impracticable as the Company is unable to objectively determine, without the use of hindsight, the assumptions that would have been used in those earlier periods to estimate fair value. As a result, during fiscal year 2014, the Company tested its goodwill for impairment as of November 2, 2014 and concluded that there was no impairment of the carrying value of goodwill. The change in accounting principle related to changing the annual goodwill impairment testing date did not accelerate, delay, avoid, or cause an impairment charge.

When it is determined that impairment has occurred, a charge to operations is recorded. Goodwill and other purchased intangible asset balances are included in the identifiable assets of the reporting unit to which they have been assigned. Any goodwill impairment, as well as the amortization of other purchased intangible assets, is charged against the respective reporting units' operating income.

In accordance with Topic 350, the Company classifies intangible assets into three categories: (1) intangible assets with finite lives subject to amortization, (2) intangible assets with indefinite lives not subject to amortization, and (3) goodwill. The Company tests intangible assets with finite lives for impairment if conditions exist that indicate the carrying value may not be recoverable. Such conditions may include an economic downturn in a geographic market or a change in the assessment of future operations. The Company records an impairment charge when the carrying value of the finite lived intangible asset is not recoverable by the cash flows generated from the use of the asset.

The Company determines the useful lives of identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors considered when determining useful lives include the contractual term of any agreement, the history of the asset, the Company's long-term strategy for the use of the asset, any laws or other local regulations which could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. Intangible assets that are deemed to have finite lives are amortized, generally on a straight-line basis, over their useful lives, ranging from one to 15 years.

(p) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

Long-lived assets and certain identifiable intangibles are reviewed for impairment in accordance with ASC Topic 360, Property, Plant, and Equipment, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net cash flows (undiscounted and without interest) expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.


(q)	Fair Value of Financial Instruments

ASC Topic 825, Financial Instruments, requires that fair values be disclosed for the Company's financial instruments. The carrying amounts of cash equivalents, accounts receivable, accounts payable, accrued expenses, billings in excess of costs and earnings on uncompleted contracts, and income taxes payable, approximate fair value due to the short-term nature of these instruments. The fair value of the Company's long-term debt is based upon actual trading activity. The fair value of capital lease obligations is estimated based on quoted market prices for the same or similar obligations with the same remaining maturities.


(r)	Concentrations and Uncertainties

The Company maintains cash balances at various financial institutions and such balances commonly exceed the $250,000 insured amount by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to any significant credit risk with respect to such cash and cash equivalents.

Financial instruments, which subject the Company to potential concentrations of credit risk, consist principally of the Company's billed and unbilled accounts receivable. The Company's accounts receivable result from sales to customers within the U.S. Government, state and local agencies and with commercial customers in various industries. The Company performs ongoing credit evaluations of its commercial customers. Credit is extended based on evaluation of the customer's financial condition and collateral is not required. Accounts receivable are recorded at the invoiced amount and do not bear interest. See Note 13 for a discussion of the Company's significant customers.

(s) Debt Issuance Costs

Fees paid to obtain debt financing or amendments under such debt financing are treated as debt issuance costs and are capitalized and amortized over the expected term of the related debt. These payments are shown as a financing activity in the Consolidated Statements of Cash Flows and are included in other current assets and other assets in the Consolidated Balance Sheets.


(t)	Interest Expense, Net

Interest expense, net in the Consolidated Statements of Operations and Comprehensive Loss is summarized in the following table (in millions):



	2012			2013			2014
Interest expense incurred primarily on the Company's Senior Secured Notes	$	(66.4	)	$	(63.9	)	$	(54.5	)
Miscellaneous interest income	0.3			0.2			0.2
Interest expense, net	$	(66.1	)	$	(63.7	)	$	(54.3	)


(u)	Foreign Currency

For operations outside the U.S. that prepare financial statements in currencies other than the U.S. dollar, results of operations and cash flows are translated at average exchange rates during the period, and assets and liabilities are generally translated at end-of-period exchange rates. Translation adjustments are included as a separate component of accumulated other comprehensive loss in the Consolidated Statements of Stockholders' Equity.

The Company transacts with foreign customers in currencies other than the U.S. dollar. It experiences realized and unrealized foreign currency gains or losses on foreign denominated receivables. In addition, certain intercompany transactions give rise to realized and unrealized foreign currency gains or losses. Also, any other transactions between the Company or its subsidiaries and a third-party, denominated in a currency different from the functional currency, are foreign currency transactions.

The aggregate foreign currency transaction loss included in determining net loss for the years ended December 30, 2012, December 29, 2013, and December 28, 2014 was approximately $0.6 million, $0.0 million, and $0.9 million, respectively, which is included in other income (expense), net on the accompanying Consolidated Statements of Operations and Comprehensive Loss.

(v) Product Warranties

Certain of the Company's products and services are covered by a warranty to be free from defects in material and workmanship for periods ranging from one to ten years. Optional extended warranty contracts can also be purchased with the revenue deferred and amortized over the extended warranty period. The Company accrues a warranty liability for estimated costs to provide products, parts or services to repair or replace products in satisfaction of warranty obligations. Warranty revenues related to extended warranty contracts are amortized to income, over the life of the contract, using the straight-line method. Costs under extended warranty contracts are expensed as incurred.

The Company's estimate of costs to service its warranty obligations is based upon historical experience and expectations of future conditions. To the extent that the Company experiences any changes in warranty claim activity or costs associated with servicing those claims, its warranty liability is adjusted accordingly.

(x) Recent Accounting Pronouncements

In April 2014, the FASB issued Accounting Standards Update 2014-08 ("ASU 2014-08") "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity". The amendments in ASU 2014-08 change the criteria for reporting discontinued operations and requires enhanced disclosures in this area. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. Examples include a disposal of a major geographic area, a major line of business, or a major equity method investment. In addition, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new guidance also requires disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. The amendments in ASU 2014-08 are effective in the first quarter of 2015 for public organizations with calendar year ends. Early adoption is permitted. The Company does not believe that the adoption of this guidance will have a material impact on its consolidated financial statements.

In May 2014, the FASB issued Accounting Standards Update 2014-09 ("ASU 2014-09") "Revenue from Contracts with Customers". ASU 2014-09 affects any entity using GAAP that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). ASU 2014-09 will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. ASU 2014-09 also supersedes some cost guidance included in ASC Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts. For a public entity, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented or apply the requirements in the year of adoption, through a cumulative adjustment. The Company has not yet selected a transition method nor has it determined the impact of adoption on its consolidated financial statements.

In August 2014, the FASB issued Accounting Standards Update 2014-15 ("ASU 2014-15") "Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern". ASU 2014-15 is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. Under GAAP, financial statements are prepared under the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. Financial reporting under this presumption is commonly referred to as the going concern basis of accounting. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities. Currently, GAAP lacks guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s ability to continue as a going concern or to provide related footnote disclosures. ASU 2014-15 provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. The amendments are effective for annual periods ending after December 15, 2016, including interim periods within that reporting period. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company does not believe that the adoption of this guidance will have a material impact on its consolidated financial statements.

- Definition

The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements.

+ References+ Details

Goodwill and Other Intangible Assets

12 Months Ended

Dec. 28, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets


(a)	Goodwill

The Company historically performed its annual impairment test for goodwill in accordance with Topic 350 as of the last day of each fiscal year or when evidence of potential impairment exists. In the third quarter of fiscal year 2014, the Company prospectively changed its goodwill testing date from the last day of its fiscal year to the last day of its fiscal October. The change was to better align its impairment testing procedures with the completion of its annual financial and strategic planning process. This change was applied prospectively beginning on November 2, 2014; retrospective application to prior periods is impracticable as the Company is unable to objectively determine, without the use of hindsight, the assumptions that would have been used in those earlier periods to estimate fair value.

The Company assesses goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. The Company determines its reporting units by first identifying its operating segments, and then assessing whether any components of these segments constitute a business for which discrete financial information is available and where segment management regularly reviews the operating results of that component. The Company aggregates components within an operating segment that have similar economic characteristics.

The Company concluded that goodwill was not impaired at November 2, 2014. In determining the fair value for the reporting units, there are key assumptions relating to our future operating performance and revenue growth. If the actual operating performance and financial results are not consistent with our assumptions, an impairment in our $596.4 million goodwill and $52.3 million long-lived intangibles could occur in future periods. Market factors that could impact our ability to successfully develop new products include the successful completion of certain unmanned system platforms, the successful acceptance of new unmanned system platforms, including from a political and budgetary standpoint. For example, the US reporting unit fair value includes assumptions that the development of the high performance UCAS product is successful and we are awarded future contracts for the UCAS product. Additionally, the US reporting unit fair value assumes that we will receive follow on orders for the Sub-Sonic Aerial Target ("SSAT"), which is currently under contract with the US Navy.

As a result of an internal organizational realignment in August 2013 the Company reorganized its KGS operating segment. As a result of this reorganization, the KGS reporting segment had five operating segments: Defense Rocket Support Services ("DRSS"), Electronic Products ("EP"), Technical and Training Solutions ("TTS"), Modular Systems ("MS"), and Unmanned Systems ("US"). All of the KGS operating segments provide technology based defense solutions, involving products and services, primarily for mission critical United States National Security priorities, with the primary focus relating to the nation’s C5ISR requirements. The PSS reportable business segment provides integrated solutions for advanced homeland security, public safety, critical infrastructure security, and security and surveillance systems for government, industrial and commercial customers. In the fourth quarter of 2014, we expanded the number of reportable segments to three as we separated the KGS segment into two reportable segments: KGS and Unmanned Systems (“US”). As a result, the KGS reportable segment is comprised of an aggregation of Kratos’ Government Solutions operating segments, including our electronic products, satellite communications, modular systems and rocket support operating segments. The Company has identified its reporting units to be the DRSS, EP, TTS, MS, US divisions and PSS, to be tested for potential impairment in its fiscal year 2014 annual test.

In order to test for potential impairment, the Company estimates the fair value of each of its reporting units based on a comparison and weighting of the income approach, specifically the discounted cash flow method and the market approach, which estimates the fair value of the Company's reporting units based upon comparable market prices and recent transactions and also validates the reasonableness of the implied multiples from the income approach. The Company reconciles the fair value of its reporting units to its market capitalization by calculating its market capitalization based upon an average of its stock price prior to and subsequent to the date the Company performs its analysis and assuming a control premium. The Company uses these methodologies to determine the fair value of its reporting units for comparison to their corresponding book values because there are no observable inputs available, a Level 3 measurement (See Note 10). If the book value exceeds the estimated fair value for a reporting unit a potential impairment is indicated, and Topic 350 prescribes the approach for determining the impairment amount, if any.

As a result of the Company's decision in June 2012 to dispose of certain non-core businesses acquired in the Integral acquisition in July 2011, the Company allocated $1.5 million of goodwill to discontinued operations, which resulted in an impairment charge (see Note 9). The Company then tested the goodwill remaining in the KGS reporting unit. The fair value of the KGS reporting unit exceeded its carrying value by 7.4% at that time.

During the fourth quarter of 2012, the KGS reporting unit was impacted by continued declining market valuations and the economic uncertainty in the U.S. defense industry. Congress was unable to agree on a budget that conformed with the Budget Control Act of 2011 requirements, which called for additional substantial defense spending reductions through sequestration. Congress and the President could not agree on budgetary, tax and spending issues, and as a result a FY 2013 budget was not passed and a six-month continuing resolution that funded the U.S. Government through March 27, 2013 was passed. These events significantly increased the likelihood of the sequester occurring which had negative consequences for the defense industry. In addition, as Congress and the Administration could not come to an agreement on terms of a possible national fiscal approach, they also failed to address other fiscal matters such as the debt ceiling. These events negatively impacted the Company's 2012 annual estimate of the fair value of the KGS reporting unit resulting in the book value of the KGS reporting unit exceeding its fair value in step one of the impairment test.

The Company performed the second step of the goodwill impairment test to measure the amount of the impairment loss, if any, of the KGS reporting unit. The second step of the test requires the allocation of the reporting unit's fair value to its assets and liabilities, including any unrecognized intangible assets, in a hypothetical analysis that calculates the implied fair value of goodwill as if the reporting unit was being acquired in a business combination. If the implied fair value of goodwill is less than the carrying value, the difference is recorded as an impairment loss. Based on the results of the step two analysis, the Company recorded an $82.0 million goodwill impairment in 2012 related to our KGS reporting unit.

As of December 28, 2014, the goodwill of the PSS, US and KGS reportable segments were $35.6 million, $97.3 million and $463.5 million, respectively.

The changes in the carrying amount of goodwill for the years ended December 29, 2013 and December 28, 2014 are as follows (in millions):



	Public Safety & Security		US		KGS			Total
Balance as of December 30, 2012	$	35.6	$	—	$	560.9		$	596.5
Retrospective adjustments	—				(0.1		)	(0.1		)
Balance as of December 30, 2012 after retrospective adjustments	35.6		—		560.8			596.4
2013 reorganization	—		97.3		(97.3		)	—
Balance as of December 29, 2013	35.6		97.3		463.5			596.4
2014 transactions	—		—		—			—
Balance as of December 28, 2014	$	35.6	$	97.3	$	463.5		$	596.4

The accumulated impairment losses as of December 28, 2014 were $247.4 million, of which $215.3 million was associated with the KGS reportable segment, $13.8 million was associated with the US reportable segment, and $18.3 million was associated with the PSS reportable segment.


(b)	Purchased Intangible Assets

The following table sets forth information for acquired finite-lived and indefinite-lived intangible assets (in millions):



	As of December 29, 2013							As of December 28, 2014
	Gross Value		Accumulated Amortization			Net Value		Gross Value		Accumulated Amortization			Net Value
Acquired finite-lived intangible assets:
Customer relationships	$	97.7	$	(53.7	)	$	44.0	$	99.0	$	(70.6	)	$	28.4
Contracts and backlog	80.0		(78.7		)	1.3		82.7		(80.0		)	2.7
Developed technology and technical know-how	22.1		(8.6		)	13.5		23.1		(10.9		)	12.2
Trade names	6.1		(3.1		)	3.0		6.0		(5.0		)	1.0
Favorable operating lease	1.8		(0.6		)	1.2		1.8		(0.7		)	1.1
Total finite-lived intangible assets	207.7		(144.7		)	63.0		212.6		(167.2		)	45.4
Acquired indefinite-lived intangible assets
Trade names	6.9		—			6.9		6.9		—			6.9
Total indefinite-lived intangible assets	6.9		—			6.9		6.9		—			6.9
Total intangible assets	$	214.6	$	(144.7	)	$	69.9	$	219.5	$	(167.2	)	$	52.3

The Company reviews intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Impairment losses, where identified, are determined as the excess of the carrying value over the estimated fair value of the long-lived asset. The recoverability of the carrying value of assets held for use is assessed based on a review of projected undiscounted cash flows. Prior to conducting step one of the 2012 goodwill impairment test, certain of the long-lived assets were assessed for recoverability. During 2012 the Company made the decision to minimize the use of the CMCI and HBE trade names as part of its overall branding strategy which resulted in a revised fair value of $6.9 million for such trade names, with a remaining useful life of two years. This resulted in an impairment of $14.6 million in 2012. The impairment related to the KGS and PSS reportable segments were $1.7 million and $12.9 million, respectively.

The aggregate amortization expense for finite-lived intangible assets was $43.9 million, $36.2 million and $22.5 million for the years ended December 30, 2012, December 29, 2013, and December 28, 2014, respectively. The Company records all amortization expense in selling, general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss.

The estimated future amortization expense of acquired intangible assets with finite lives as of December 28, 2014 is as follows (in millions):



Fiscal Year	Amount
2015	$	15.6
2016	10.9
2017	9.4
2018	4.3
2019	3.5
Thereafter	1.7
Total	$	45.4

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References+ Details

Acquisitions

12 Months Ended

Dec. 28, 2014

Business Combinations [Abstract]

Acquisitions

(a) Summary of Recent Acquisitions

Composite Engineering, Inc.

On July 2, 2012, the Company acquired Composite Engineering, Inc. (“CEi”) for approximately $164.2 million. The purchase price included consideration of $135.0 million in cash and 4.0 million shares of the Company's common stock, valued at $5.94 per share on July 2, 2012, or $23.8 million. As security for CEi's indemnification obligations, $10.7 million of the cash paid was placed into an escrow account. The Company was paid $1.0 million from the escrow account for working capital adjustments in July 2013, at which time the remaining escrow was released to the sellers. Also included in the purchase consideration was $5.5 million paid to retire certain pre-existing CEi debt and settle pre-existing accounts receivable from CEi. There was no contingent purchase consideration associated with the acquisition of CEi.

The Company made an election under Section 338(h)(10) of the Internal Revenue Code, which resulted in tax deductible goodwill related to this transaction. The Company estimated that the tax deductible goodwill and intangibles resulting from the election will approximate $136.3 million, to be available for deduction against Federal and California state income taxes over a 15-year period.

Certain CEi personnel entered into long-term employment agreements with the Company and on July 2, 2012, the Company granted restricted stock units (“RSUs”) for an aggregate 2.0 million shares of common stock as long-term retention inducement grants. The RSUs had an estimated value of $11.9 million on the grant date, vest on the fourth anniversary of the closing of the CEi acquisition, or earlier upon the occurrence of certain events, and are being accounted for as compensation expense over such four-year period. As of December 28, 2014, 520,000 shares remain unvested and not forfeited.

To fund the acquisition of CEi, on May 14, 2012, the Company sold 20.0 million shares of its common stock at a purchase price of $5.00 per share in an underwritten public offering. The Company received gross proceeds of approximately $100.0 million and net proceeds of approximately $97.0 million after deducting underwriting fees and other offering expenses. The Company used the net proceeds from this offering to fund a portion of the purchase price for the acquisition of CEi. In addition, the Company used borrowings of $40.0 million from its revolving line of credit to partially fund the purchase price of CEi.

CEi is a vertically integrated manufacturer and developer of unmanned aerial target systems and composite structures used for national security programs. Its drones are designed to replicate some of the most lethal aerial threats facing warfighters and strategic assets. CEi's customers include U.S. agencies and foreign governments. CEi is a part of the US reportable segment.

The excess of the purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in the acquisition was allocated to goodwill. The value of the goodwill represents the value the Company expects to be created by enabling it to strategically expand its strengths in the areas of design, engineering, development, manufacturing and production of unmanned aerial targets, and by enabling the Company to realize significant cross selling opportunities.

The transaction was accounted for using the acquisition method of accounting, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following table summarizes the fair values of the major assets acquired and liabilities assumed as of the acquisition date (in millions):



Cash	$	8.9
Accounts receivable	9.3
Inventoried costs	12.3
Other current assets	8.9
Property and equipment	8.1
Intangible assets	38.0
Goodwill	104.2
Total assets	189.7
Current liabilities	(25.7		)
Net assets acquired	$	164.0

The amounts of revenue and operating income of CEi included in the Company's Consolidated Statement of Operations and Comprehensive Loss for the year ended December 30, 2012 was $68.2 million and $1.6 million, respectively.

Critical Infrastructure Business

On December 30, 2011, the Company acquired selected assets of a critical infrastructure security and public safety system integration business (the “Critical Infrastructure Business”) for approximately $18.8 million.

The Critical Infrastructure Business designs, engineers, deploys, manages and maintains specialty security systems at some of the most strategic asset and critical infrastructure locations in the U.S. Additionally, these security systems are typically integrated into command and control system infrastructure or command centers. Approximately 15% of the revenues of the Critical Infrastructure Business are recurring in nature due to the operation, maintenance or sustainment of the security systems once deployed. The Critical Infrastructure Business is part of the Company's PSS reportable segment.

The excess of the purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in the acquisition was allocated to goodwill. The value of the goodwill represents the value the Company expects to be created by enabling it to strategically expand its strengths in the areas of homeland security solutions and will also enable the Company to realize significant cross selling opportunities and increase its sales of higher margin, fixed-price products.



Accounts receivable	$	23.4
Other assets	0.5
Intangible assets	2.0
Goodwill	2.6
Total assets	28.5
Current liabilities	(9.7		)
Net assets acquired	$	18.8

The goodwill recorded in this transaction is tax deductible.

Pro Forma Financial Information

The following tables summarize the supplemental Condensed Consolidated Statements of Operations and Comprehensive Loss information on an unaudited pro forma basis as if the acquisitions of CEi, and the Critical Infrastructure Business occurred on December 25, 2011 and include adjustments that were directly attributable to the foregoing transactions or were not expected to have a continuing impact on the Company. Both acquisitions were included in the results of operations for the full years ended December 29, 2013 and December 28, 2014. There are no material, nonrecurring pro forma adjustments directly attributable to the business combinations included in the reported pro forma revenue and operations for 2012. The pro forma results are for illustrative purposes only for the applicable period and do not purport to be indicative of the actual results that would have occurred had the transactions been completed as of the beginning of the period, nor are they indicative of results of operations that may occur in the future (all amounts, except per share amounts are in millions):



	Year Ended December 30, 2012
Pro forma revenues	$	1,019.5
Pro forma net loss before tax	(132.0		)
Pro forma net loss	(130.4		)
Net loss attributable to the registrant	(112.9		)
Basic and diluted pro forma loss per share	$	(2.31	)

The pro forma financial information reflects acquisition related expenses incurred, pro forma adjustments for the additional amortization associated with finite-lived intangible assets acquired, additional incremental interest expense, stock compensation related to the RSUs granted in the CEi transaction, and the related tax expense.

These adjustments are as follows (in millions except per share data):



	Year Ended December 30, 2012
Intangible amortization	$	16.2
Net change in stock compensation expense	2.2
Increase in weighted average common shares outstanding for shares issued and not already included in the weighted average common shares outstanding	9.6

- Definition

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 805

-SubTopic 30

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 805

-SubTopic 30

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 805

-SubTopic 20

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4922-128472

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 805

-SubTopic 20

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4926-128472

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 805

-SubTopic 20

-Section 50

-Paragraph 4

-URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4934-128472

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 805

-SubTopic 10

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1383-128463

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 805

-SubTopic 10

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1392-128463

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 805

-SubTopic 10

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1486-128463

Reference 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 805

-SubTopic 30

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 805

-SubTopic 10

-Section 50

-Paragraph 5

-URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1497-128463

Reference 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 805

-SubTopic 10

-Section 50

-Paragraph 4

-URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1490-128463

Reference 12: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 805

-SubTopic 30

-Section 50

-Paragraph 4

-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479

Reference 13: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 805

-SubTopic 20

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4845-128472

Reference 14: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 805

-SubTopic 10

-Section 50

-Paragraph 6

-URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1500-128463

Reference 15: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 805

-SubTopic 10

-Section 50

-Paragraph 7

-URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1524-128463

+ Details