0001069258-20-000044 | 10-Q | XBRL Viewer | Kratos Defense Security Solutions INC

COVER PAGE - shares	9 Months Ended
COVER PAGE - shares	Sep. 27, 2020	Oct. 23, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 27, 2020
Document Transition Report	false
Entity File Number	001-34460
Entity Registrant Name	KRATOS DEFENSE & SECURITY SOLUTIONS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	13-3818604
Entity Address, Address Line One	10680 Treena St.
Entity Address, Address Line Two	Suite 600
Entity Address, City or Town	San Diego
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92131
City Area Code	858
Local Phone Number	812-7300
Title of 12(b) Security	Common Stock, $0.001 par value
Trading Symbol	KTOS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		122,756,128
Entity Central Index Key	0001069258
Current Fiscal Year End Date	--12-27
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Sep. 27, 2020	Dec. 29, 2019
Current assets:
Cash and cash equivalents	$ 374.7	$ 172.6
Restricted cash	0.7	0.0
Accounts receivable, net	83.9	85.0
Unbilled receivables, net	192.7	179.4
Inventoried costs	78.3	61.1
Prepaid expenses	17.9	9.4
Other current assets	22.6	11.4
Current assets of discontinued operations	0.0	3.3
Total current assets	770.8	522.2
Property, plant and equipment, net	136.1	116.9
Operating lease right-of-use assets	40.1	42.1
Goodwill	475.3	455.6
Intangible assets, net	42.0	39.5
Other assets	8.9	9.7
Total assets	1,473.2	1,186.0
Current liabilities:
Accounts payable	54.7	53.8
Accrued expenses	28.8	32.7
Accrued compensation	45.4	37.1
Accrued interest	6.4	1.6
Billings in excess of costs and earnings on uncompleted contracts	36.3	34.3
Current portion of operating lease liabilities	8.9	9.9
Other current liabilities	16.2	10.0
Current liabilities of discontinued operations	3.0	3.3
Total current liabilities	199.7	182.7
Long-term debt	300.3	295.1
Operating lease liabilities, net of current portion	35.7	37.6
Other long-term liabilities	84.7	78.7
Long-term liabilities of discontinued operations	2.6	2.8
Total liabilities	623.0	596.9
Commitments and contingencies (Note 15)
Redeemable noncontrolling interest	14.9	15.0
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized, 0 shares outstanding at September 27, 2020 and December 29, 2019	0.0	0.0
Common stock, $0.001 par value, 195,000,000 shares authorized; 122,755,405 and 106,635,508 shares issued and outstanding at September 27, 2020 and December 29, 2019, respectively	0.0	0.0
Additional paid-in capital	1,545.4	1,286.5
Accumulated other comprehensive loss	0.4	(0.4)
Accumulated deficit	(710.5)	(712.0)
Total stockholders’ equity	835.3	574.1
Total liabilities and stockholders’ equity	$ 1,473.2	$ 1,186.0

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 27, 2020	Dec. 29, 2019
Preferred Stock:
Par value (in dollars 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)	122,755,405	106,635,508
Shares outstanding (in shares)	122,755,405	106,635,508

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 27, 2020	Sep. 29, 2019	Sep. 27, 2020	Sep. 29, 2019
Total revenues	$ 202.0	$ 184.1	$ 541.3	$ 532.4
Total costs	144.9	135.5	392.4	390.8
Gross profit	57.1	48.6	148.9	141.6
Selling, general and administrative expenses	36.3	32.5	107.2	97.7
Merger and acquisition expenses	0.1	0.1	1.5	1.9
Research and development expenses	7.7	4.6	19.4	13.0
Restructuring expenses and other	0.3	(0.1)	0.5	0.3
Operating income from continuing operations	12.7	11.5	20.3	28.7
Other expense:
Interest expense, net	(5.9)	(5.4)	(16.9)	(16.2)
Other income (expense), net	0.8	(0.7)	0.6	(1.1)
Total other expense, net	(5.1)	(6.1)	(16.3)	(17.3)
Income from continuing operations before income taxes	7.6	5.4	4.0	11.4
Provision for income taxes from continuing operations	5.0	2.8	1.8	3.8
Income from continuing operations	2.6	2.6	2.2	7.6
Discontinued operations:
Income(loss) from operations of discontinued component	(0.2)	0.0	(1.0)	2.4
Income tax benefit	0.0	0.0	0.2	0.0
Income (loss) from discontinued operations	(0.2)	0.0	(0.8)	2.4
Net income	2.4	2.6	1.4	10.0
Less: Net income (loss) attributable to noncontrolling interest	0.0	0.1	(0.1)	0.5
Net income attributable to Kratos	$ 2.4	$ 2.5	$ 1.5	$ 9.5
Basic income per common share attributable to Kratos:
Income from continuing operations (in dollars per share)	$ 0.02	$ 0.02	$ 0.02	$ 0.07
Income (loss) from discontinued operations (in dollars per share)	0	0	(0.01)	0.02
Net income per common share (in dollars per share)	0.02	0.02	0.01	0.09
Diluted income per common share attributable to Kratos:
Income from continuing operations (in dollars per share)	0.02	0.02	0.02	0.07
Income (loss) from discontinued operations (in dollars per share)	0	0	(0.01)	0.02
Net income per common share (in dollars per share)	$ 0.02	$ 0.02	$ 0.01	$ 0.09
Weighted average common shares outstanding:
Basic (in shares)	123.1	106.5	112.9	105.8
Diluted (in shares)	126.4	109.9	115.9	109.0
Comprehensive Income
Net income (from above)	$ 2.4	$ 2.6	$ 1.4	$ 10.0
Change in cumulative translation adjustment	0.9	(0.2)	0.8	(0.3)
Comprehensive income	3.3	2.4	2.2	9.7
Less: Comprehensive income (loss) attributable to noncontrolling interest	0.0	0.1	(0.1)	0.5
Comprehensive income attributable to Kratos	3.3	2.3	2.3	9.2
Service revenues
Total revenues	67.6	70.8	194.1	207.1
Total costs	50.5	50.2	141.9	142.8
Product sales
Total revenues	134.4	113.3	347.2	325.3
Total costs	$ 94.4	$ 85.3	$ 250.5	$ 248.0

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - USD ($) $ in Millions	Total	Redeemable Noncontrolling Interest	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit
Balance, beginning of period at Dec. 30, 2018		$ 0.0
Redeemable Noncontrolling Interest
Net income (loss)		0.5
Changes in noncontrolling interest	$ 0.0	15.0
Balance, end of period at Sep. 29, 2019		15.5
Balance, beginning of period (in shares) at Dec. 30, 2018			103,800,000
Balance, beginning of period at Dec. 30, 2018	519.3		$ 0.0	$ 1,244.5	$ (0.7)	$ (724.5)
Increase (Decrease) in Stockholders' Equity
Stock-based compensation	8.2			8.2
Issuance of common stock for employee stock purchase plan, options and warrants (in shares)			500,000
Issuance of common stock for employee stock purchase plan, options and warrants	3.9			3.9
Restricted stock issued and related taxes (in shares)			200,000
Restricted stock issued and related taxes	(0.9)			(0.9)
Issuance of common stock for acquisitions (in shares)			1,800,000
Issuance of common stock for acquisitions	27.0			27.0
Net income (loss)	9.5					9.5
Other comprehensive income (loss), net of tax	(0.3)				(0.3)
Changes in noncontrolling interest	0.0	15.0
Balance, end of period (in shares) at Sep. 29, 2019			106,300,000
Balance, end of period at Sep. 29, 2019	566.7		$ 0.0	1,282.7	(1.0)	(715.0)
Balance, beginning of period at Jun. 30, 2019		15.4
Redeemable Noncontrolling Interest
Net income (loss)		0.1
Balance, end of period at Sep. 29, 2019		15.5
Balance, beginning of period (in shares) at Jun. 30, 2019			105,900,000
Balance, beginning of period at Jun. 30, 2019	559.5		$ 0.0	1,277.8	(0.8)	(717.5)
Increase (Decrease) in Stockholders' Equity
Stock-based compensation	2.8			2.8
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	2.2			2.2
Restricted stock issued and related taxes (in shares)			100,000
Restricted stock issued and related taxes	(0.1)			(0.1)
Net income (loss)	2.5					2.5
Other comprehensive income (loss), net of tax	(0.2)				(0.2)
Balance, end of period (in shares) at Sep. 29, 2019			106,300,000
Balance, end of period at Sep. 29, 2019	$ 566.7		$ 0.0	1,282.7	(1.0)	(715.0)
Balance, beginning of period at Dec. 29, 2019		15.0
Redeemable Noncontrolling Interest
Net income (loss)		(0.1)
Balance, end of period at Sep. 27, 2020		14.9
Balance, beginning of period (in shares) at Dec. 29, 2019	106,635,508		106,600,000
Balance, beginning of period at Dec. 29, 2019	$ 574.1		$ 0.0	1,286.5	(0.4)	(712.0)
Increase (Decrease) in Stockholders' Equity
Stock-based compensation	$ 14.5			14.5
Issuance of common stock for employee stock purchase plan, options and warrants (in shares)	400,000
Issuance of common stock for employee stock purchase plan, options and warrants	$ 5.3			5.3
Restricted stock issued and related taxes (in shares)			200,000
Restricted stock issued and related taxes	$ (1.3)			(1.3)
Issuance of common stock for cash	15,500,000
Issuance of common stock for cash	$ 240.4			240.4
Net income (loss)	1.5			0.0		1.5
Other comprehensive income (loss), net of tax	$ 0.8			0.0
Balance, end of period (in shares) at Sep. 27, 2020	122,755,405		122,700,000
Balance, end of period at Sep. 27, 2020	$ 835.3		$ 0.0	1,545.4	0.4	(710.5)
Balance, beginning of period at Jun. 28, 2020		14.9
Balance, end of period at Sep. 27, 2020		$ 14.9
Balance, beginning of period (in shares) at Jun. 28, 2020			122,500,000
Balance, beginning of period at Jun. 28, 2020	824.5		$ 0.0	1,537.9	(0.5)	(712.9)
Increase (Decrease) in Stockholders' Equity
Stock-based compensation	5.0			5.0
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	2.7			2.7
Restricted stock issued and related taxes (in shares)			0
Restricted stock issued and related taxes	(0.1)			(0.1)
Issuance of common stock for cash	(0.1)			(0.1)
Net income (loss)	2.4					2.4
Other comprehensive income (loss), net of tax	$ 0.9				0.9
Balance, end of period (in shares) at Sep. 27, 2020	122,755,405		122,700,000
Balance, end of period at Sep. 27, 2020	$ 835.3		$ 0.0	$ 1,545.4	$ 0.4	$ (710.5)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	9 Months Ended
	Sep. 27, 2020	Sep. 29, 2019
Operating activities:
Net income	$ 1.4	$ 10.0
Income (loss) from discontinued operations	(0.8)	2.4
Income from continuing operations	2.2	7.6
Adjustments to reconcile income from continuing operations to net cash provided by operating activities from continuing operations:
Depreciation and amortization	18.5	16.8
Amortization of lease right-of-use assets	7.3	8.7
Stock-based compensation	14.5	8.2
Deferred income taxes	(0.3)	(4.1)
Amortization of deferred financing costs	0.7	0.7
Provision for doubtful accounts	0.2	0.0
Changes in assets and liabilities, net of acquisitions:
Accounts receivable	6.4	7.4
Unbilled receivables	(12.3)	2.0
Inventoried costs	(4.8)	(10.3)
Prepaid expenses and other assets	(15.8)	(0.2)
Operating lease liabilities	(8.0)	(3.1)
Accounts payable	(1.7)	(6.5)
Accrued expenses	(4.9)	(0.3)
Accrued compensation	6.5	0.9
Accrued interest	4.8	4.8
Billings in excess of costs and earnings on uncompleted contracts	(2.7)	(2.8)
Income tax receivable and payable	(1.4)	1.7
Other liabilities	9.9	(1.3)
Net cash provided by operating activities from continuing operations	19.1	30.2
Investing activities:
Cash paid for acquisitions, net of cash acquired	(43.9)	(17.6)
Capital expenditures	(23.0)	(17.9)
Proceeds from sale of assets	0.1	0.3
Net cash used in investing activities from continuing operations	(66.8)	(35.2)
Financing activities:
Proceeds from the issuance of long-term debt	4.8	0.0
Proceeds from the issuance of common stock, net of issuance costs	240.4	0.0
Repayment of debt	(0.7)	0.0
Payments under finance leases	(0.5)	(0.4)
Proceeds from exercise of restricted stock units, employee stock options, and employee stock purchase plan	4.0	3.0
Net cash provided by financing activities from continuing operations	248.0	2.6
Net cash flows of continuing operations	200.3	(2.4)
Net operating cash flows of discontinued operations	2.1	0.8
Effect of exchange rate changes on cash, cash equivalents and restricted cash	0.4	(0.4)
Net increase (decrease) in cash, cash equivalents and restricted cash	202.8	(2.0)
Cash, cash equivalents and restricted cash at beginning of period	172.6	183.0
Cash, cash equivalents and restricted cash at end of period	$ 375.4	$ 181.0

Summary of Significant Accounting Policies	9 Months Ended
Summary of Significant Accounting Policies	Sep. 27, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Summary of Significant Accounting Policies	Summary of Significant Accounting Policies All references to the “Company” and “Kratos” refer to Kratos Defense & Security Solutions, Inc., a Delaware corporation, and its subsidiaries. (a) Basis of Presentation The information as of September 27, 2020 and for the three and nine months ended September 27, 2020 and September 29, 2019 is unaudited. The condensed consolidated balance sheet as of December 29, 2019 was derived from the Company’s audited consolidated financial statements at that date. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods presented. The results have been prepared in accordance with the instructions to Form 10-Q and do not necessarily include all information and footnotes necessary for presentation in accordance with accounting principles generally accepted in the U.S. (“GAAP”). These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the Company’s audited annual consolidated financial statements for the fiscal year ended December 29, 2019, included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 24, 2020 (the “Form 10-K”). Interim operating results are not necessarily indicative of operating results expected in subsequent periods or for the year as a whole. (b) Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company, its 100% owned subsidiaries and its majority owned subsidiaries, FTT Inc. and FTT Core (each as defined below), each of which is 80.1% owned. All inter-company transactions have been eliminated in consolidation. Noncontrolling interest consists of the remaining 19.9% interest in FTT Inc. and FTT Core. See Note 12 for further information related to the redeemable noncontrolling interest. (c) Fiscal Year The Company has a 52/53 week fiscal year ending on the last Sunday of the calendar year. The three month periods ended September 27, 2020 and September 29, 2019 consisted of 13-week periods. The nine month periods ended September 27, 2020 and September 29, 2019 consisted of 39-week periods. There are 52 calendar weeks in the fiscal years ending on December 27, 2020 and December 29, 2019. (d) Accounting Estimates There have been no significant changes in the Company’s accounting estimates for the nine months ended September 27, 2020 as compared to the accounting estimates described in the Form 10-K. (e) Accounting Standards Updates In June 2016, the FASB issued ASU 2016-13 (“ASU 2016-13”), Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The main objective of this update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company has adopted ASU 2016-13 effective December 30, 2019. The implementation of this guidance did not have a material impact on its unaudited condensed consolidated financial statements. (f) Fair Value of Financial Instruments The carrying amounts and the related estimated fair values of the Company’s long-term debt financial instruments not measured at fair value on a recurring basis at September 27, 2020 and December 29, 2019 are presented in Note 10. The carrying value of all other financial instruments, including cash equivalents, accounts receivable, unbilled receivables, accounts payable, accrued expenses, billings in excess of cost and earnings on uncompleted contracts, income taxes payable and short-term debt, approximated their estimated fair values at September 27, 2020 and December 29, 2019 due to the short-term nature of these instruments.

Acquisitions

9 Months Ended

Sep. 27, 2020

Business Combinations [Abstract]

Acquisitions

FTT Entities

On February 27, 2019, the Company acquired 80.1% of the issued and outstanding shares of capital stock of Florida Turbine Technologies Inc., a Florida corporation (“FTT Inc.”), and 80.1% of the membership interests in FTT CORE, LLC, a Delaware limited liability company (“FTT Core” and, together with FTT Inc. and their respective subsidiaries, “FTT”), for an aggregate purchase price of approximately $60 million. The purchase price was $33 million in cash, with approximately $17.7 million paid at close and approximately $15.3 million to be paid over a three-year period, subject to adjustments for transaction expenses, indebtedness, cash on hand, certain amounts payable or potentially payable to employees of FTT and post-closing working capital adjustments, and 1,825,406 shares of common stock (with a value of approximately $27 million). On October 6, 2020, final proceeds related to net working capital adjustments of $1.95 million were distributed to the shareholders of FTT.

FTT is a leading turbomachinery design and manufacturing company specializing in engineering, development, and testing of gas turbines, propulsion components, engine and other systems for military and commercial applications. FTT is now the Kratos Turbine Technologies Division (the “KTT Division”), which is focused on the development and production of small, affordable, high-performance jet engines for the next generation of tactical weapon systems and tactical jet unmanned aerial systems. The KTT Division is included in the Kratos Government Solutions (“KGS”) 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 goodwill represents the value the Company expects to be created by enabling it to accelerate FTT’s small engine development programs, and facilitate integration of these leading-edge engine solutions with evolving Kratos tactical systems.

Simultaneously with the execution of the Purchase Agreement among the Company and the Sellers (as defined in such agreement) (the “Purchase Agreement”) and completion of the acquisition, the Company, FTT Inc., FTT Core and the Sellers entered into an exchange agreement (the “Exchange Agreement”) pursuant to which, among other things, (i) FTT Core was converted into a Delaware corporation, (ii) beginning in January 2024, the Holders (as defined in the Exchange Agreement) will have an annual right (the “Put Right”) to sell all of the minority interests in FTT Inc. and FTT Core (the “Minority Interests”) to the Company at a purchase price based on a specified multiple of the trailing 12 months EBITDA of FTT Inc., FTT Core and each of their respective subsidiaries (the “Acquired Companies”), subject to adjustment as set forth in the Exchange Agreement (the “Minority Interest Purchase Price”) (provided, however, that following certain events, including a change of control, the Put Right will be accelerated and the Minority Interest Purchase Price will be a specified increased multiple of the trailing 12 months EBITDA of the Acquired Companies), and (iii) beginning in January 2025, the Company will have an annual right to purchase all of the Minority Interests from the Holders at the Minority Interest Purchase Price.

The transaction has been accounted for using the acquisition method of accounting, which requires, among other things, that the assets acquired, the liabilities assumed, and the noncontrolling interest be recognized at their fair values as of the acquisition date. The fair value measurements are based primarily on significant inputs not observable in the marketplace and

thus represent Level 3 measurements. The following table summarizes the allocation of the purchase price over the estimated fair values of the major assets acquired, liabilities assumed, and noncontrolling interest (in millions):


Accounts receivable	$	8.1
Unbilled receivables	4.9
Inventoried costs	7.8
Other current assets	1.8
Property and equipment	5.7
Intangible assets	30.8
Goodwill	23.3
Total identifiable net assets acquired	82.4
Total identifiable net liabilities assumed	(7.5)
Net assets before noncontrolling interest	74.9
Noncontrolling interest	(14.9)
Net assets acquired, excluding cash	$	60.0

As of February 27, 2019, net liabilities included $7.5 million of current liabilities. There was no contingent purchase consideration associated with the acquisition of an 80.1% majority interest in FTT. The identifiable intangible assets include customer relationships of $19.7 million with a useful life of 13 years, in-process research and development of $8.5 million that will commence amortization at the completion of the development project, backlog of $2.1 million with a useful life of two years, and trade name of $0.5 million with a useful life of two years. The Company also established a deferred tax liability of $7.0 million for the increase in the financial statement basis of the acquired assets of FTT and a corresponding increase in goodwill. The goodwill recorded in this transaction is not expected to be tax-deductible.

The amounts of revenue and operating loss of FTT included in the Company's condensed consolidated statement of operations for the three months ended September 29, 2019 were $16.3 million and $0.7 million, respectively. The amounts of revenue and operating income of FTT included in the Company's condensed consolidated statement of operations for the nine months ended September 29, 2019 were $37.7 million and $1.0 million, respectively. Included in Merger and acquisition expenses for the nine months ended September 29, 2019 were transaction expenses of $1.3 million, related to the acquisition of FTT.

A summary of the consideration paid for the acquired ownership in FTT is as follow:


Cash paid	$	20.7
Deferred purchase consideration	15.3
Common stock issued	27.0
	63.0
Less: Cash acquired	(3.0)
Total consideration	$	60.0

Pro Forma Financial Information

The following tables summarize the supplemental condensed consolidated statements of operations information on an unaudited pro forma basis as if the acquisition of FTT occurred on December 31, 2018 and include adjustments that were directly attributable to the foregoing transactions. There are no material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. 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 transaction been completed as of the beginning of the period, nor are they indicative of results of operations that may occur in the future.

For the nine months ended September 29, 2019 (all amounts, except per share amounts, are in millions):


Pro forma revenues	$	540.5
Pro forma net income before tax	$	10.6
Pro forma net income	$	11.8
Pro forma net income attributable to Kratos	$	11.6

Basic pro forma income per share attributable to Kratos	$	0.11
Diluted pro forma income per share attributable to Kratos	$	0.11

The weighted average common shares used to calculate income per share also reflects the issuance of 1,825,406 shares of our common stock in conjunction with the acquisition. Comparable amounts for the three months ended September 29, 2019 are not presented as the results for FTT for the quarter were fully included in the condensed consolidated financial statements.

Technical Directions, Inc.

On February 24, 2020, the Company acquired Technical Directions, Inc.(“TDI”), a turbine technology company focused on tactical unmanned aerial drones, missile and other systems for approximately $10.5 million in cash, subject to adjustments for transaction expenses, indebtedness, cash on hand, and post-closing working capital adjustments. Working capital adjustments of $0.3 million were settled in the third quarter of 2020. The allocation of the total consideration for this acquisition to the tangible and identifiable intangible assets acquired and liabilities assumed is preliminary until the Company obtains final information regarding their fair values. However, the Company does not expect any adjustment to such allocations to be material to the Company's consolidated financial statements. The operating results of the acquisition have been included in the Company’s results of operations from the effective acquisition date. The amount of net sales and earnings of TDI included in the condensed consolidated statement of operations for the nine months ended September 27, 2020 are not material. Had the acquisition occurred as of December 29, 2019, net sales, net income from consolidated operations, net income attributable to Kratos, and basic and diluted net income per share attributable to Kratos on a pro forma basis for the nine months ended September 27, 2020 would not have been materially different than the reported amounts. TDI is included in the Kratos Unmanned Systems (“US”) segment.

Optimized Performance Machining, Inc.

On April 17, 2020, the Company acquired Optimized Performance Machining, Inc.(“OPM”), a company that primarily operates in the industrial machinery and equipment repair business industry for approximately $1.8 million in cash, subject to adjustments for transaction expenses, indebtedness, cash on hand, and post-closing working capital adjustments. Working capital adjustments of $0.03 million were settled in the third quarter of 2020. The allocation of the total consideration for this acquisition to the tangible and identifiable intangible assets acquired and liabilities assumed is preliminary until the Company obtains final information regarding their fair values. However, the Company does not expect any adjustment to such allocations to be material to the Company's unaudited condensed consolidated financial statements. The operating results of the acquisition have been included in the Company’s results of operations from the effective acquisition date. The amount of net sales and earnings of OPM included in the condensed consolidated statement of operations for the nine months ended September 27, 2020 are not material. Had the acquisition occurred as of December 29, 2019, net sales, net income from consolidated operations, net income attributable to Kratos, and basic and diluted net income per share attributable to Kratos on a pro forma basis for the nine months ended September 27, 2020 would not have been materially different than the reported amounts. OPM is included in the Kratos US segment.

CPI ASC Signal Division, Inc.

On June 15, 2020, Kratos Integral Holdings, LLC entered into a Stock Purchase Agreement to acquire CPI ASC Signal Division, Inc. (“ASC Signal”) from Communications & Power Industries LLC for approximately $35 million in cash, subject to adjustments for transaction expenses, indebtedness, cash on hand, and working capital adjustments. ASC Signal is a manufacturer of high-performance, highly engineered antenna systems for satellite communications, radar, electronic warfare, and high frequency applications. On June 30, 2020, the acquisition was completed following the satisfaction of all closing conditions, including receipt of regulatory approval from all required government authorities.

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 goodwill represents the value the Company expects to be created by integrating ASC Signal’s existing business with Kratos’ related products and customers.

The transaction has been accounted for using the acquisition method of accounting, which requires, among other things, that the assets acquired and the liabilities assumed be recognized at their fair values as of the acquisition date. The fair value measurements are based primarily on significant inputs not observable in the marketplace and thus represent Level 3 measurements. The following table summarizes the preliminary allocation of the purchase price over the estimated fair values of the major assets acquired and liabilities assumed (in millions):


Accounts receivable	$	5.6
Unbilled receivables	0.9
Inventoried costs	10.4
Other current assets	3.2
Property and equipment	10.0
Intangible assets	4.3
Goodwill	9.7
Total identifiable net assets acquired	44.1
Total identifiable net liabilities assumed	(11.2)
Net assets acquired, excluding cash	$	32.9

Based on the Company’s preliminary estimate of fair value, as of June 30, 2020, net liabilities included $9.1 million of current liabilities. The identifiable intangible assets include trade names of $0.1 million with a remaining useful life of 1 year, customer relationships of $2.0 million with remaining useful lives of 5 years, and developed technology of $2.2 million with a remaining useful life of 7 years. The Company also established a deferred tax liability of $1.3 million for the difference between the financial statement basis and tax basis of the acquired assets of ASC Signal and a corresponding increase in goodwill. The goodwill recorded in this transaction is not expected to be tax-deductible.

The amounts of revenue and operating income of ASC Signal included in the Company's condensed consolidated statement of operations for the three months ended September 27, 2020 were $10.2 million and $0.7 million, respectively. Included in Merger and acquisition expenses for the three and nine months ended September 27, 2020 were transaction expenses of $0.1 million and $1.1 million, respectively, related to the acquisition of ASC Signal.

A summary of the consideration paid for the acquired ownership in ASC Signal is as follows:


Cash paid	$	34.9
Less: Cash acquired	(2.0)
Total consideration	$	32.9

Pro Forma Financial Information

The following tables summarize the supplemental condensed consolidated statements of operations information on an unaudited pro forma basis as if the acquisition of ASC Signal occurred on December 30, 2019 and include adjustments that were directly attributable to the foregoing transactions. There are no material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings (loss). 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 transaction been completed as of the beginning of the period, nor are they indicative of results of operations that may occur in the future.

For the nine months ended September 27, 2020 (all amounts, except per share amounts, are in millions):


Pro forma revenues	$	559.1
Pro forma net loss before tax	$	(0.7)
Pro forma net loss	$	(3.4)

Basic pro forma loss per share	$	(0.03)
Diluted pro forma loss per share	$	(0.03)

Revenue Recognition

9 Months Ended

Sep. 27, 2020

Revenue from Contract with Customer [Abstract]

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606 revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these goods or services.

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. Once the contract is identified and determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. The majority of the Company’s contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on the relative standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is the expected-cost-plus-margin approach, under which the Company forecasts the expected costs of satisfying a performance obligation and then adds an appropriate margin for that distinct good or service.

Remaining Performance Obligations

The Company calculates revenues from remaining performance obligations as the dollar value of the remaining performance obligations on executed contracts. On September 27, 2020, the Company had approximately $873.1 million of remaining performance obligations. The Company expects to recognize approximately 22% of the remaining performance obligations as revenue in 2020, an additional 35% by 2021, and the balance thereafter.

Contract Estimates

Due to the nature of the work required to be performed on many performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgment. On a quarterly basis, the Company conducts its contract cost Estimate at Completion (“EAC”) process by reviewing the progress and execution of outstanding performance obligations within its contracts. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs. The risks and opportunities include management’s judgment about the ability and cost to achieve the schedule (e.g., the number and type of milestone events), technical requirements (e.g., a newly-developed product versus a mature product) and other contract requirements. Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length of time to complete the performance obligation (e.g., to estimate increases in wages and prices for materials and related support cost allocations), execution by subcontractors, the availability and timing of funding from customers and overhead cost rates, among other variables.

In addition, certain of the Company’s long-term contracts contain award fees, incentive fees, or other provisions that can either increase or decrease the transaction price. These variable amounts generally are awarded upon achievement of certain performance metrics, program milestones or cost targets and can be based upon customer discretion. Variable consideration is estimated at the most likely amount to which the Company is expected to be entitled. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available.

Contracts are often modified to account for changes in contract specifications and requirements. Contract modifications are considered to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of the Company’s contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price, and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.

As a result of the EAC process, any quarterly adjustments to revenues, cost of sales, and the related impact to operating income are recognized as necessary in the period they become known. These adjustments may result from positive program performance, and may result in an increase in operating income during the performance of individual performance obligations, if it is determined the Company will be successful in mitigating risks surrounding the technical, schedule and cost aspects of those performance obligations or realizing related opportunities. Likewise, these adjustments may result in a decrease in operating income if it is determined the Company will not be successful in mitigating these risks or realizing related opportunities. Changes in estimates of net sales, cost of sales and the related impact to operating income are recognized quarterly on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on current and prior periods. A significant change in one or more of these estimates could affect the profitability of one or more of the Company’s contracts. When estimates of total costs to be incurred on a performance obligation exceed total estimates of revenue to be earned, a provision for the entire loss on the performance obligation is recognized in the period the loss is determined. No cumulative catch-up adjustment on any one contract was material to the Company’s unaudited condensed consolidated financial statements for the three and nine-month periods ended September 27, 2020, and September 29, 2019. Likewise, total cumulative catch-up adjustments were not material for the three and nine-month periods ended September 27, 2020, and September 29, 2019.

Contract Assets and Liabilities

For each of the Company’s contracts, the timing of revenue recognition, customer billings, and cash collections results in a net contract asset or liability at the end of each reporting period. Fixed-price contracts are typically billed to the customer either using progress payments, whereby amounts are billed monthly as costs are incurred or work is completed, or performance based payments, which are based upon the achievement of specific, measurable events or accomplishments defined and valued at contract inception. Cost-type contracts are typically billed to the customer on a monthly or semi-monthly basis.

Contract assets consist of unbilled receivables, primarily related to long-term contracts where revenue recognized under the cost-to-cost method exceeds amounts billed to customers. Unbilled receivables are classified as current assets and, in accordance with industry practice, include amounts that may be billed and collected beyond one year due to the long term nature of many of the Company’s contracts. Accumulated contract costs in unbilled receivables include direct production costs, factory and engineering overhead, production tooling costs, and, for government contracts, recovery of allowable general and administrative expenses. Unbilled receivables also include certain estimates of variable consideration described above. The Company’s contracts that give rise to contract assets are not considered to include a significant financing component as the payment terms are intended to protect the customer in the event the Company does not perform on its obligations under the contract.

Contract liabilities include advance payments and billings in excess of revenue recognized. Certain customers make advance payments prior to the satisfaction of the Company’s performance obligations on the contract. These amounts are recorded as contract liabilities until such performance obligations are satisfied, either over time as costs are incurred or at a point in time when deliveries are made. The Company’s contracts that give rise to contract liabilities do not include a significant financing component as the underlying advance payments received are generally utilized to pay for contract costs within a one-year period or are used to ensure the customer meets contractual requirements.

Net contract assets and liabilities are as follows (in millions):


	September 27, 2020		December 29, 2019		Net Change
Contract assets	$	192.7	$	179.4	$	13.3
Contract liabilities	$	36.3	$	34.3	$	2.0
Net contract assets	$	156.4	$	145.1	$	11.3

Contract assets increased $13.3 million during the nine months ended September 27, 2020, primarily due to the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations for which the Company has not yet billed the customers. There were no significant impairment losses related to any receivables or contract assets arising from the Company’s contracts with customers during the nine months ended September 27, 2020. Contract liabilities increased $2.0 million during the nine months ended September 27, 2020, primarily due to payments received in excess of revenue recognized on these performance obligations. For the three and nine months ended September 27, 2020 the Company recognized revenue of $3.5 million and $23.5 million, respectively, that was previously included in the contract liabilities that existed at December 29, 2019. For the three and nine months ended September 29, 2019 the Company recognized revenue of $5.3 million and $26.6 million, respectively, that was previously included in the contract liabilities that existed at December 30, 2018.

In November 2019, a large training solutions program was terminated for convenience (“T for C”) by the customer. Under a T for C, a contractor is entitled to seek specified costs through a termination settlement process including (1) the contract price for completed supplies and services accepted by the government but not previously paid for; (2) the cost incurred in the performance of work terminated plus a reasonable profit on those costs; and (3) its costs incurred in settling with subcontractors and preparing and settling the termination proposal. Under a T for C, the Company would not be able to collect the total withheld amounts until the settlement terms of the T for C have been negotiated and agreed to with the customer. At September 27, 2020 and December 29, 2019, approximately $11.5 million in unbilled receivables remained outstanding on this project. In addition, the Company is currently in dispute with an international customer in the US segment over approximately $10.0 million in unbilled receivables outstanding as of September 27, 2020 and December 29, 2019. The dispute concerns the completion of certain system requirements and certain contractual milestones. Although there could be a delay in billing and collecting amounts due to the Company under the aforementioned contracts, management has evaluated the present facts of the matters and performed a reassessment of the contractual amounts due and has determined that no adjustment to previously recognized revenue, or the corresponding unbilled receivables, is necessary at September 27, 2020.

Disaggregation of Revenue

The following series of tables presents the Company’s revenue disaggregated by several categories. For the majority of contracts, the customer obtains control or receives benefits as work is performed on the contract. Revenue by contract type was as follows (in millions):


	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Kratos Government Solutions
Fixed price	$	113.3	$	114.6	$	315.9	$	346.2
Cost plus fee	27.7		15.6		62.9		39.1
Time and materials	7.5		8.2		25.0		24.0
Total Kratos Government Solutions	148.5		138.4		403.8		409.3
Unmanned Systems
Fixed price	39.6		38.9		95.5		100.1
Cost plus fee	12.9		6.6		39.8		22.1
Time and materials	1.0		0.2		2.2		0.9
Total Unmanned Systems	53.5		45.7		137.5		123.1
Total Revenues	$	202.0	$	184.1	$	541.3	$	532.4

Revenue by customer was as follows (in millions):


	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Kratos Government Solutions
U.S. Government (1)	$	98.7	$	89.1	$	273.4	$	272.2
International (2)	34.5		29.6		87.4		82.9
U.S. Commercial and other customers	15.3		19.7		43.0		54.2
Total Kratos Government Solutions	148.5		138.4		403.8		409.3
Unmanned Systems
U.S. Government (1)	46.6		37.1		125.4		104.8
International (2)	6.5		8.3		11.4		17.3
U.S. Commercial and other customers	0.4		0.3		0.7		1.0
Total Unmanned Systems	53.5		45.7		137.5		123.1
Total Revenues	$	202.0	$	184.1	$	541.3	$	532.4

(1) Sales to the U.S. Government include sales from contracts for which the Company is the prime contractor, as well as those for which the

Company is a subcontractor and the ultimate customer is the U.S. Government. Each of the Company’s segments derives substantial revenue

from the U.S. Government. These sales include foreign military sales contracted through the U.S. Government.

(2) International sales include sales from contracts for which the Company is the prime contractor, as well as those for which the Company is a

subcontractor and the ultimate customer is an international customer. These sales include direct sales with governments outside the U.S. and

commercial sales with customers outside the U.S.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

+ Details

Discontinued Operations

9 Months Ended

Sep. 27, 2020

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued OperationsOn February 28, 2018, the Company entered into a Stock Purchase Agreement to sell the operations of Kratos Public Safety & Security Solutions, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“PSS”), to Securitas Electronic Security, Inc., a Delaware corporation (“Buyer”). On June 11, 2018, the Company completed the sale of all of the issued and outstanding capital stock of PSS to Buyer for a purchase price of $69 million in cash, subject to a closing net working capital adjustment (the “Transaction”). The Company and the Buyer are currently in a dispute regarding the closing net working capital adjustment. The amount in dispute is approximately $8 million.

To date, the Company has collected approximately $6.8 million of the retained net working capital. The Company currently expects that the remaining net working capital retained by the Company will be collected during 2020 once certain legacy projects are completed and the project close-out process has been completed. The Company currently expects to recognize a net approximate break-even on the sale of the PSS business once the aggregate net proceeds from the Transaction have been collected, excluding the impact of the final settlement and determination of the closing net working capital adjustment. Any changes or adjustments to the expected net proceeds will be reflected in future periods.

The following table presents the results of discontinued operations (in millions):


	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Revenue	$	—	$	0.2	$	—	$	0.3
Cost of sales	—		—		0.1		0.7
Selling, general and administrative expenses	0.2		0.1		0.9		0.7

Other (income) expense	—		0.1		—		(3.5)
Income (loss) from discontinued operations before income taxes	(0.2)		—		(1.0)		2.4


Income tax benefit	—		—		0.2		—
Income (loss) from discontinued operations	$	(0.2)	$	—	$	(0.8)	$	2.4

Revenue and operating results for the three and nine months ended September 27, 2020 and September 29, 2019 reflected the performance on contracts related to the working capital retained by the Company and legal expenses incurred related to the ongoing working capital dispute with the Buyer of PSS.

The following is a summary of the assets and liabilities of discontinued operations in the accompanying condensed consolidated balance sheets as of September 27, 2020 and December 29, 2019 (in millions):


	September 27, 2020		December 29, 2019

Accounts receivable, net	$	—	$	3.3


Current assets of discontinued operations	$	—	$	3.3







Accounts payable	$	0.2	$	0.2
Accrued expenses	0.1		0.3


Other current liabilities	2.7		2.8
Current liabilities of discontinued operations	$	3.0	$	3.3
Other long-term liabilities of discontinued operations	$	2.6	$	2.8

Goodwill and Intangible Assets

9 Months Ended

Sep. 27, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

(a) Goodwill

The carrying amounts of goodwill as of September 27, 2020 and December 29, 2019 by reportable segment are as follows (in millions):


	As of September 27, 2020
	Kratos Government Solutions		Unmanned Systems		Total
Gross value	$	607.9	$	120.7	$	728.6
Less accumulated impairment	239.5		13.8		253.3
Net	$	368.4	$	106.9	$	475.3


	As of December 29, 2019
	Kratos Government Solutions		Unmanned Systems		Total
Gross value	$	597.8	$	111.1	$	708.9
Less accumulated impairment	239.5		13.8		253.3
Net	$	358.3	$	97.3	$	455.6

(b) Purchased Intangible Assets

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


	As of September 27, 2020						As of December 29, 2019
	Gross Value		Accumulated Amortization		Net Value		Gross Value		Accumulated Amortization		Net Value
Acquired finite-lived intangible assets:
Customer relationships	$	75.0	$	(55.2)	$	19.8	$	72.3	$	(53.3)	$	19.0
Contracts and backlog	32.7		(30.3)		2.4		32.0		(28.4)		3.6
Developed technology and technical know-how	28.6		(25.1)		3.5		25.0		(23.8)		1.2
Trade names	2.0		(1.8)		0.2		1.9		(1.6)		0.3
In-process research and development	9.2		—		9.2		8.5		—		8.5

Total finite-lived intangible assets	147.5		(112.4)		35.1		139.7		(107.1)		32.6
Indefinite-lived trade names	6.9		—		6.9		6.9		—		6.9
Total intangible assets	$	154.4	$	(112.4)	$	42.0	$	146.6	$	(107.1)	$	39.5

Consolidated amortization expense related to intangible assets subject to amortization was $1.7 million and $1.7 million for the three months ended September 27, 2020 and September 29, 2019, respectively, and $5.4 million and $5.2 million for the nine months ended September 27, 2020 and September 29, 2019, respectively.

Inventoried Costs

9 Months Ended

Sep. 27, 2020

Inventory Disclosure [Abstract]

Inventoried Costs

Inventoried costs, consisted of the following components (in millions):


	September 27, 2020		December 29, 2019
Raw materials	$	46.5	$	39.1
Work in process	27.6		20.3
Finished goods	4.2		1.7



Total inventoried costs	$	78.3	$	61.1

Net Income (Loss) per Common Share	9 Months Ended
Net Income (Loss) per Common Share	Sep. 27, 2020
Earnings Per Share [Abstract]
Net Income (Loss) per Common Share	Net Income (Loss) per Common Share The Company calculates net income (loss) per share in accordance with FASB Accounting Standards Codification Topic 260, Earnings per Share (Topic 260). Under Topic 260, basic net income (loss) per common share attributable to the Kratos shareholders is calculated by dividing net income (loss) attributable to Kratos by the weighted-average number of common shares outstanding during the reporting period. Diluted net income (loss) per common share attributable to the Kratos shareholders reflects the effects of potentially dilutive securities. The dilutive impact of potentially dilutive common shares is determined by applying the treasury stock method. Shares from stock options and awards, excluded from the calculation of diluted net income per share because their inclusion would have been anti-dilutive, were 0.0 million and 0.6 million for the three and nine months ended September 27, 2020, respectively.

Leases

9 Months Ended

Sep. 27, 2020

Leases [Abstract]

Leases

The Company leases certain facilities, office space, vehicles and equipment. Lease assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists. Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using an incremental borrowing rate generally applicable to the location of the lease asset, unless the implicit rate is readily determinable. Lease assets also include any upfront lease payments made and exclude lease incentives. Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised. The Company has operating lease arrangements with lease and non-lease components. The non-lease components in these arrangements are not significant when compared to the lease components. For all operating leases, the Company accounts for the lease and non-lease components as a single component.

Variable lease payments are generally expensed as incurred. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the expense for these short-term leases is recognized on a straight-line basis over the lease term.

The depreciable life of lease assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

The components of lease expense were as follows (in millions):


	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Amortization of right of use assets - finance leases	$	0.6	$	0.5	$	1.6	$	1.5
Interest on lease liabilities - finance leases	0.6		0.6		1.9		1.9
Operating lease cost	2.7		3.6		9.1		10.2
Short-term lease cost	0.2		0.1		0.6		0.5
Variable lease cost (cost excluded from lease payments)	—		—		0.1		0.1
Sublease income	(0.1)		(0.8)		(1.1)		(2.4)
Total lease cost	$	4.0	$	4.0	$	12.2	$	11.8

The components of leases on the balance sheet were as follows (in millions):


	September 27, 2020		December 29, 2019
Operating Leases:
Operating lease right-of-use assets	$	40.1	$	42.1
Current portion of operating lease liabilities	$	8.9	$	9.9
Operating lease liabilities, net of current portion	$	35.7	$	37.6
Finance leases:
Property, plant and equipment, net	$	37.0	$	38.1
Other current liabilities	$	0.8	$	0.6
Other long-term liabilities	$	38.9	$	38.4

Cash paid for amounts included in the measurement of lease liabilities was as follows (in millions):



	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Finance lease - cash paid for interest	$	0.6	$	0.6	$	1.9	$	1.9
Finance lease - financing cash flows	$	0.2	$	0.1	$	0.5	$	0.4
Operating lease - operating cash flows (fixed payments)	$	2.9	$	3.6	$	10.2	$	10.9

Other supplemental noncash information (in millions):


	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020			September 29, 2019
Operating lease liabilities arising from obtaining right-of-use assets, including impact of ASC 842 adoption	$	3.8	$	4.3	$	4.8		$	60.1
Finance lease liabilities arising from obtaining right-of-use assets, including impact of ASC 842 adoption	$	0.8	$	—	$	1.2		$	39.6

Weighted-average remaining lease term (in years):
Operating leases					5.36			5.79
Finance leases					18.01			19.17

Weighted-average discount rate:
Operating leases					6.50		%	6.50		%
Finance leases					6.52		%	6.53		%

The maturity of lease liabilities is (in millions):


	Operating Leases		Finance Leases
2020 (1)	$	2.8	$	0.8
2021	11.3		3.4
2022	9.9		3.4
2023	9.2		3.5
2024	7.1		3.5
Thereafter	12.7		54.9
Total lease payments	53.0		69.5
Less: imputed interest	(8.4)		(29.8)
Total present value of lease liabilities	$	44.6	$	39.7
(1) Excludes the nine months ended September 27, 2020.

Leases

The depreciable life of lease assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

The components of lease expense were as follows (in millions):


	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Amortization of right of use assets - finance leases	$	0.6	$	0.5	$	1.6	$	1.5
Interest on lease liabilities - finance leases	0.6		0.6		1.9		1.9
Operating lease cost	2.7		3.6		9.1		10.2
Short-term lease cost	0.2		0.1		0.6		0.5
Variable lease cost (cost excluded from lease payments)	—		—		0.1		0.1
Sublease income	(0.1)		(0.8)		(1.1)		(2.4)
Total lease cost	$	4.0	$	4.0	$	12.2	$	11.8

The components of leases on the balance sheet were as follows (in millions):


	September 27, 2020		December 29, 2019
Operating Leases:
Operating lease right-of-use assets	$	40.1	$	42.1
Current portion of operating lease liabilities	$	8.9	$	9.9
Operating lease liabilities, net of current portion	$	35.7	$	37.6
Finance leases:
Property, plant and equipment, net	$	37.0	$	38.1
Other current liabilities	$	0.8	$	0.6
Other long-term liabilities	$	38.9	$	38.4

Cash paid for amounts included in the measurement of lease liabilities was as follows (in millions):



	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Finance lease - cash paid for interest	$	0.6	$	0.6	$	1.9	$	1.9
Finance lease - financing cash flows	$	0.2	$	0.1	$	0.5	$	0.4
Operating lease - operating cash flows (fixed payments)	$	2.9	$	3.6	$	10.2	$	10.9

Other supplemental noncash information (in millions):


	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020			September 29, 2019
Operating lease liabilities arising from obtaining right-of-use assets, including impact of ASC 842 adoption	$	3.8	$	4.3	$	4.8		$	60.1
Finance lease liabilities arising from obtaining right-of-use assets, including impact of ASC 842 adoption	$	0.8	$	—	$	1.2		$	39.6

Weighted-average remaining lease term (in years):
Operating leases					5.36			5.79
Finance leases					18.01			19.17

Weighted-average discount rate:
Operating leases					6.50		%	6.50		%
Finance leases					6.52		%	6.53		%

The maturity of lease liabilities is (in millions):


	Operating Leases		Finance Leases
2020 (1)	$	2.8	$	0.8
2021	11.3		3.4
2022	9.9		3.4
2023	9.2		3.5
2024	7.1		3.5
Thereafter	12.7		54.9
Total lease payments	53.0		69.5
Less: imputed interest	(8.4)		(29.8)
Total present value of lease liabilities	$	44.6	$	39.7
(1) Excludes the nine months ended September 27, 2020.

Income Taxes

9 Months Ended

Sep. 27, 2020

Income Tax Disclosure [Abstract]

Income Taxes

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which, along with earlier issued IRS guidance, provides for the deferral of certain taxes. The CARES Act, among other things, removed the 80% limitation on the utilization of net operating losses in tax years 2018-2020, and contains numerous other provisions which may benefit the Company. The CARES Act did not have a material impact on the Company’s effective tax rate for the nine months ended September 27, 2020.

A reconciliation of the income tax expense (benefit) from continuing operations computed by applying the statutory federal income tax rate of 21% to income from continuing operations before income taxes to the provision for income taxes from continuing operations for the three and nine months ended September 27, 2020 and September 29, 2019 was as follows (in millions):


	For the Three Months Ended				For the Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Income tax expense at federal statutory rate	$	1.6	$	1.1	$	0.8	$	2.4
State and foreign taxes, net of federal tax benefit and valuation allowance	1.9		1.3		1.2		2.5
Release of valuation allowance due to acquisitions	(0.1)		(1.3)		(1.0)		(4.7)

Nondeductible expenses and other	2.5		0.3		1.2		0.7
Impact of deferred tax liabilities for indefinite-lived assets	1.1		0.3		0.5		0.6
Increase in reserves for uncertain tax positions	2.2		2.5		1.2		5.4
Decrease in federal valuation allowance	(4.2)		(1.4)		(2.1)		(3.1)
Provision for income taxes from continuing operations	$	5.0	$	2.8	$	1.8	$	3.8

In assessing the Company’s ability to realize deferred tax assets, management considers, on a periodic basis, whether it is more likely than not that some portion or all of its deferred tax assets will not be realized. In making this assessment, the Company has concluded that negative evidence, including cumulative losses in recent years, continues to outweigh the positive evidence. Accordingly, the Company has maintained a full valuation allowance against the Company’s U.S. federal, combined state and certain foreign net deferred tax assets. However, given the Company’s more recent earnings history, management believes that it is possible that within the next 12 months, sufficient positive evidence may become available to allow management to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets with a potential corresponding decrease to income tax expense for the period the release is recorded. The exact timing and amount of the valuation allowance release would be predicated on the basis of the level of profitability that the Company is able to actually achieve and believes that it would sustain.

Federal and state income tax laws impose restrictions on the utilization of net operating loss (“NOL”) and tax credit carryforwards in the event that an “ownership change” occurs for tax purposes, as defined by Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”). In general, an ownership change occurs when shareholders owning 5% or more of a “loss corporation” (a corporation entitled to use NOLs or other loss carryovers) have increased their ownership of stock in such corporation by more than 50 percentage points during any three-year period. The annual base Section 382 limitation is calculated by multiplying the loss corporation’s value at the time of the ownership change by the greater of the long-term tax-exempt rate determined by the Internal Revenue Service in the month of the ownership change or the two preceding months. This base limitation is subject to adjustments, including an increase for built-in gains recognized in the five-year period after the ownership change.

In March 2010, an “ownership change” occurred that will limit the utilization of NOL carryforwards. In July 2011, another “ownership change” occurred. The March 2010 ownership change limitation is more restrictive. In prior years, the Company acquired corporations with NOL carryforwards at the date of acquisition (“Acquired NOLs”). The Acquired NOLs are subject to separate limitations that may further restrict the use of Acquired NOLs. As a result, the Company’s federal annual utilization of NOL carryforwards was limited to $27.0 million a year for the five years succeeding the March 2010 ownership change and $11.6 million for each year thereafter subject to separate limitations for Acquired NOLs. If the entire limitation amount is not utilized in a year, the excess can be carried forward and utilized in future years.

For the nine months ended September 27, 2020, there was no impact of such limitations on the income tax provision, since the amount of taxable income did not exceed the annual limitation amount. However, future equity offerings or

acquisitions that have equity as a component of the purchase price could also cause an “ownership change.” If and when any other “ownership change” occurs, utilization of the NOLs or other tax attributes may be further limited.

As discussed elsewhere, deferred tax assets relating to the NOL and credit carryforwards are offset by a full valuation allowance. In addition, utilization of state tax loss carryforwards is dependent upon sufficient taxable income apportioned to the states.

The Company is subject to taxation in the U.S. and various state and foreign tax jurisdictions. The Company’s tax years for 2000 and later are subject to examination by the U.S. and state tax authorities due to the existence of the NOL carryforwards. Generally, the Company’s tax years for 2002 and later are subject to examination by various foreign tax authorities as well.

As of December 29, 2019, the Company had $24.0 million of unrecognized tax benefits that, if recognized, would impact the Company’s effective income tax rate, subject to possible offset by a change in the deferred tax asset valuation allowance. During the nine months ended September 27, 2020, unrecognized tax benefits increased by $1.1 million relating to various current and prior year positions.

The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. For the nine months ended September 27, 2020 and September 29, 2019, the Company recorded an expense for interest and penalties of $0.3 million and $1.1 million, respectively. For the nine months ended September 27, 2020 and September 29, 2019, there was no material benefit recorded related to the removal of interest and penalties. The Company believes that it is reasonably possible that as much as $0.2 million of the liabilities for uncertain tax positions will expire within the next twelve months due to the expiration of various applicable statutes of limitations.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

Debt

9 Months Ended

Sep. 27, 2020

Debt Disclosure [Abstract]

Debt

(a) Issuance of 6.5% Senior Secured Notes due 2025

In November 2017, the Company issued and sold $300 million aggregate principal amount of 6.5% Senior Secured Notes due 2025 (the “6.5% Notes”) in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The Company incurred debt issuance costs of $6.6 million associated with the 6.5% Notes. The Company utilized the net proceeds from the sale of the 6.5% Notes, as well as cash from its recent equity offering to extinguish its outstanding 7.00% Senior Secured Notes due in 2019 (the “7% Notes”). The total reacquisition price of the 7% Notes was $385.2 million, including a $12.0 million call premium, and $0.3 million of accrued interest.

The 6.5% Notes are governed by the Indenture, dated as of November 20, 2017 (the “Indenture”), among the Company, the Company’s existing and future domestic subsidiaries parties thereto (the “Subsidiary Guarantors”) and Wilmington Trust, National Association, as trustee and collateral agent. A Subsidiary Guarantor can be released from its guarantee if (a) all of the capital stock issued by such Subsidiary Guarantor or all or substantially all of the assets of such Subsidiary Guarantor are sold or otherwise disposed of; (b) the Company designates such Subsidiary Guarantor as an Unrestricted Subsidiary (as defined in the Indenture); (c) the Company exercises its legal defeasance option or its covenant defeasance option; or (d) upon satisfaction and discharge of the Indenture or payment in full in cash of the principal of, premium, if any, and accrued and unpaid interest on the 6.5% Notes.

The 6.5% Notes bear interest at a rate of 6.5% per year from the date of original issuance or from the most recent payment date on which interest has been paid or provided for. Interest on the 6.5% Notes is payable in arrears on May 30 and November 30 of each year, beginning on May 30, 2018. The 6.5% Notes are fully and unconditionally guaranteed by the Subsidiary Guarantors.

The 6.5% Notes and the guarantees (as set forth in the Indenture) are the Company’s senior secured obligations and are equal in right of payment with all other senior obligations of the Subsidiary Guarantors’ existing and future secured debt to the extent of the assets securing that secured debt. The Company’s obligations under the 6.5% Notes are secured by a first priority lien on substantially all of the Company’s assets and the assets of the Subsidiary Guarantors, except with respect to accounts receivable, inventory, deposit accounts, securities accounts, cash, securities and general intangibles (other than intellectual property), on which the holders of the 6.5% Notes have a second priority lien, junior to the lien securing the Company’s obligations under the Credit Agreement (as defined below).

The 6.5% Notes will be redeemable by the Company, in whole or in part, at any time on or after November 30, 2020 at the respective redemption prices specified in the Indenture. In addition, the Company may redeem up to 40% of the 6.5% Notes

before November 30, 2020 with the net proceeds of certain equity offerings. The Company may also redeem some or all of the 6.5% Notes before November 30, 2020 at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest, to, but excluding, the redemption date, if any, plus a “make whole” premium. In addition, during each 12-month period commencing on the issue date and ending on or prior to November 30, 2020, the Company may redeem up to 10% of the original aggregate principal amount of the 6.5% Notes issued under the Indenture at a redemption price of 103.000% of the principal amount thereof, plus accrued and unpaid interest, to, but excluding, the date of redemption, if any. The Company may also be required to make an offer to purchase the 6.5% Notes upon a change of control and certain sales of its assets.

The Indenture contains covenants limiting, among other things, the Company’s ability and the Subsidiary Guarantors’ ability to: (a) pay dividends on or make distributions or repurchase or redeem the Company’s capital stock or make other restricted payments; (b) incur additional debt and guarantee debt; (c) prepay, redeem or repurchase certain debt; (d) issue certain preferred stock or similar equity securities; (e) make loans and investments; (f) sell assets; (g) incur liens; (h) consolidate, merge, sell or otherwise dispose of all or substantially all of the Company’s assets; (i) enter into transactions with affiliates; and (j) enter into agreements restricting the Company’s ability and certain of its subsidiaries’ ability to pay dividends. These covenants are subject to a number of exceptions. As of September 27, 2020, the Company was in compliance with the covenants contained in the Indenture governing the 6.5% Notes.

The terms of the Indenture require that the net cash proceeds from asset dispositions be either utilized to (i) repay or prepay amounts outstanding under the Credit Agreement unless such amounts are reinvested in similar collateral, (ii) permanently reduce other indebtedness, (iii) make an investment in assets that replace the collateral of the 6.5% Notes or (iv) a combination of (i), (ii) and (iii). To the extent there are any remaining net proceeds from the asset disposition after application of (i), (ii) and (iii), such amounts are required to be utilized to repurchase the 6.5% Notes at par.

The Indenture also provides for events of default which, if any such event occurs, would permit or require the principal, premium, if any, interest, if any, and any other monetary obligations on all the then-outstanding 6.5% Notes to become or to be declared due and payable immediately.

As of September 27, 2020, there was $300.0 million of 6.5% Notes outstanding.

(b) Other Indebtedness

Credit and Security Agreement

On November 20, 2017, the Company entered into an amended and restated credit and security agreement (the “Credit Agreement”), with the lenders from time to time party thereto, SunTrust Bank, as Agent (the “Agent”), PNC Bank, National Association (“PNC Bank”), as Joint Lead Arranger and Documentation Agent, and SunTrust Robinson Humphrey, Inc. (“SunTrust”), as Joint Lead Arranger and Sole Book Runner. The Credit Agreement established a five-year senior secured revolving credit facility in the aggregate principal amount of $90.0 million (subject to a potential increase of the aggregate principal amount to $115.0 million, subject to the Agent’s and applicable lenders’ approval as described therein), consisting of a subline for letters of credit in an amount not to exceed $50.0 million, as well as a swingline loan in an aggregate principal amount at any time outstanding not to exceed $10.0 million. The obligations under the Credit Agreement are secured by (i) a first priority lien on the Company’s accounts receivable, inventory, deposit accounts, securities accounts, cash, securities and general intangibles (other than intellectual property) and (ii) a second priority lien, junior to the lien securing the Company’s 6.5% Notes, on all of the Company’s other assets.

Borrowings under the revolving credit facility may take the form of a base rate revolving loan, Eurodollar revolving loan or swingline loan. Base rate revolving loans and swingline loans will bear interest at a rate per annum equal to the sum of the Applicable Margin (as defined in the Credit Agreement) from time to time in effect plus the highest of (i) the Agent’s prime lending rate, as in effect at such time, (ii) the federal funds rate, as in effect at such time, plus 0.50% per annum and (iii) the Adjusted LIBO Rate (as defined in the Credit Agreement) determined at such time for an interest period of one month, plus 1.00% per annum. Eurodollar revolving loans will bear interest at a rate per annum equal to the sum of the Applicable Margin from time to time in effect plus the Adjusted LIBO Rate. The Applicable Margin varies between 1.00%-1.50% for base rate revolving loans and swingline loans and 2.00%-2.50% for Eurodollar loans, and is based on several factors including the Company’s then-existing borrowing base and the lenders’ total commitment amount and revolving credit exposure. The calculation of the Company’s borrowing base takes into account several items relating to the Company and its subsidiaries, including amounts due and owing under billed and unbilled accounts receivable, then held eligible raw materials inventory, work-in-process inventory, and applicable reserves.

The Credit Agreement contains certain covenants, which include, but are not limited to, restrictions on indebtedness,

liens, and investments, and limits on other various payments, as well as a financial covenant relating to a minimum fixed charge coverage ratio. Events of default under the terms of the Credit Agreement include, but are not limited to: failure of the Company to pay any principal of any loans in full when due and payable; failure of the Company to pay any interest on any loan or any fee or other amount payable under the Credit Agreement within three business days after the date when due and payable; failure of the Company or any of its subsidiaries to comply with certain covenants and agreements, subject to applicable grace periods and/or notice requirements; any representation, warranty or statement made in or pursuant to the Credit Agreement or any related writing or any other material information furnished by the Company or any of its subsidiaries to the Agent or the lenders proving to be false or erroneous; and the occurrence of an event or condition having or reasonably likely to have a material adverse effect, which includes a material adverse effect on the business, operations, condition (financial or otherwise) or prospects of the Company or the ability of the Company to repay its obligations. Where an event of default arises from certain bankruptcy events, the commitments will automatically and immediately terminate and the principal of, and interest then outstanding on, all of the loans will become immediately due and payable. Subject to certain notice requirements and other conditions, upon the occurrence of an event of default, including the occurrence of a condition having or reasonably likely to have a material adverse effect, commitments may be terminated and the principal of, and interest then outstanding on, all of the loans may become immediately due and payable. As of September 27, 2020, no event of default had occurred and the Company believes that events or conditions having a material adverse effect, giving rise to an acceleration of any amounts outstanding under the Credit Agreement, have not occurred and the likelihood of such events or conditions occurring is remote.

The measurement of a minimum fixed charge coverage ratio under the Credit Agreement was modified in November 2017 to require measurement if Excess Availability (as defined in the Credit Agreement) is less than 50% of the lesser of the borrowing base or the total commitment amount.

On June 11, 2018, the Company entered into a first amendment (the “First Amendment”) to the amended and restated Credit Agreement. Among other things, the First Amendment permitted the sale of the PSS business, provided that certain conditions, including application of the proceeds in accordance with the terms of documents governing the Company’s outstanding indebtedness, were satisfied.

As of September 27, 2020, there were no borrowings outstanding on the Credit Agreement and $6.1 million was outstanding on letters of credit, resulting in net borrowing base availability of $69.1 million. The Company was in compliance with the financial covenants of the Credit Agreement and its amendments as of September 27, 2020.

Israel Debt

During August 2020, the Company entered into two 5-year term loans with two banks in Israel representing an aggregate principal amount of approximately $4.8 million. These loans were subsidized by the State of Israel as part of a COVID-19 relief package with interest at Israeli NIS prime interest, plus a margin of 1.5%. The first year of interest is paid by the State of Israel with subsequent interest and principal payments due monthly, commencing in August 2021. The Company intends to repay these loans at the end of the first year.

Fair Value of Long-term Debt

Carrying amounts and the related estimated fair values of the Company’s long-term debt financial instruments not measured at fair value on a recurring basis at September 27, 2020 and December 29, 2019 are presented in the following table:


	As of September 27, 2020						As of December 29, 2019
$ in millions	Principal		Carrying Amount		Fair Value		Principal		Carrying Amount		Fair Value
Total long-term debt including current portion	$	304.8	$	300.5	$	318.3	$	300.0	$	295.1	$	322.1

The fair value of the Company’s long-term debt was based upon actual trading activity (Level 1, Observable inputs -quoted prices in active markets).

As of September 27, 2020, the difference between the carrying amount of $300.5 million and the principal amount of $304.8 million presented in the table above is the unamortized debt issuance costs of $4.3 million, which are being accreted to interest expense over the term of the related debt. As of December 29, 2019, the difference between the carrying amount of $295.1 million and the principal amount of $300.0 million presented in the table above is the unamortized debt issuance costs of $4.9 million, which are being accreted to interest expense over the term of the related debt.

Segment Information

9 Months Ended

Sep. 27, 2020

Segment Reporting [Abstract]

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, training, and cybersecurity, 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 Corporate activities 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 and nine month periods ended September 27, 2020 and September 29, 2019 are as follows (in millions):


	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Revenues:
Kratos Government Solutions
Service revenues	$	67.6	$	70.8	$	194.1	$	207.1
Product sales	80.9		67.6		209.7		202.2
Total Kratos Government Solutions	148.5		138.4		403.8		409.3







Unmanned Systems product sales	53.5		45.7		137.5		123.1
Total revenues	$	202.0	$	184.1	$	541.3	$	532.4
Depreciation & amortization:
Kratos Government Solutions	$	4.5	$	4.5	$	13.6	$	13.2

Unmanned Systems	1.7		1.2		4.9		3.6
Total depreciation and amortization	$	6.2	$	5.7	$	18.5	$	16.8
Operating income from continuing operations:
Kratos Government Solutions	$	14.1	$	11.1	$	31.1	$	33.2

Unmanned Systems	3.7		3.3		5.2		5.6

Corporate activities	(5.1)		(2.9)		(16.0)		(10.1)
Total operating income from continuing operations	$	12.7	$	11.5	$	20.3	$	28.7

Included in Corporate activities for the three and nine months ended September 27, 2020 is $0.1 million and $1.1 million of transaction expenses, respectively, related to the acquisition of ASC Signal. Included in Corporate activities for the three and nine months ended September 29, 2019 is $0.0 million and $1.3 million of transaction expenses, respectively, related to the acquisition of FTT.

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 31
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8924-108599

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 34
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8981-108599

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 21
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8721-108599

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 40
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9031-108599

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (f)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 26
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8844-108599

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 41
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9038-108599

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8736-108599

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+ Details

Redeemable Noncontrolling Interest	9 Months Ended
Redeemable Noncontrolling Interest	Sep. 27, 2020
Noncontrolling Interest [Abstract]
Redeemable Noncontrolling Interest	Redeemable Noncontrolling InterestAs discussed in “Acquisition” in Note 2, in connection with the Company’s acquisition of FTT, (i) beginning in January 2024, the Holders will have an annual Put Right to sell all of the Minority Interests to the Company at a purchase price based on a specified multiple of the trailing 12 months EBITDA of the Acquired Companies, subject to adjustment as set forth in the Exchange Agreement (provided, however, that following certain events, including a change of control, the Put Right will be accelerated and the Minority Interest Purchase Price will be a specified increased multiple of the trailing 12 months EBITDA of the Acquired Companies as set forth in the Exchange Agreement); and (ii) beginning in January 2025, the Company will have an annual right to purchase all of the Minority Interests from the Holders at the Minority Interest Purchase Price. The Company adjusts the carrying value of such redeemable noncontrolling interest based on an allocation of subsidiary earnings based on ownership interest. Redeemable noncontrolling interest is recorded outside of permanent equity at the higher of its carrying value or management’s estimate of the amount (the “Redemption Amount”) that the Company could be required to pay in connection with the Put Right. Adjustments to the Redemption Amount will have a corresponding effect on net income per share attributable to Kratos shareholders. As of September 27, 2020, no adjustment of the carrying value of the redeemable noncontrolling interest was required.

Stockholders’ Equity – Common Stock	9 Months Ended
Stockholders’ Equity – Common Stock	Sep. 27, 2020
Equity [Abstract]
Stockholders’ Equity – Common Stock	Stockholders’ Equity – Common StockOn June 23, 2020, the Company sold 15,525,000 shares of its common stock at a public offering price of $16.25 per share in an underwritten offering. The Company received gross proceeds of approximately $252.3 million. After deducting underwriting fees and other offering expenses, the Company received approximately $240.4 million in net proceeds. The Company expects to use the net proceeds for general corporate purposes, including for potential strategic “tuck-in” acquisitions, to further position the Company for projected growth from new and anticipated increased production and to facilitate its long-term strategy.

Significant Customers	9 Months Ended
Significant Customers	Sep. 27, 2020
Risks and Uncertainties [Abstract]
Significant Customers	Significant Customers Revenue from the U.S. Government, which includes foreign military sales contracted through the U.S. Government, includes revenue from contracts for which the Company is the prime contractor as well as those for which the Company is a subcontractor and the ultimate customer is the U.S. Government. The KGS and US segments have substantial revenue from the U.S. Government. Sales to the U.S. Government amounted to approximately $145.3 million and $126.2 million, or 72% and 69% of total Kratos revenue, for the three months ended September 27, 2020 and September 29, 2019, respectively, and $398.8 million and $377.0 million, or 74% and 71% of total Kratos revenue for the nine months ended September 27, 2020 and September 29, 2019, respectively.

Commitments and Contingencies	9 Months Ended
Commitments and Contingencies	Sep. 27, 2020
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies In addition to commitments and obligations in the ordinary course of business, the Company is subject to various claims, pending and potential legal actions for damages, investigations relating to governmental laws and regulations and other matters arising out of the normal conduct of the Company’s business. The Company assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its unaudited condensed consolidated financial statements. An estimated loss contingency is accrued in the unaudited condensed consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing litigation contingencies is highly subjective and requires judgments about future events. When evaluating contingencies, the Company may be unable to provide a meaningful estimate due to a number of factors, including but not limited to the procedural status of the matter in question, the presence of complex or novel legal theories, and the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed in litigation against it may be unsupported, exaggerated or unrelated to possible outcomes and, as such, are not meaningful indicators of its potential liability. The Company regularly reviews contingencies to determine the adequacy of its accruals and related disclosures. The amount of ultimate loss may differ from these estimates. It is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies. Whether any losses finally determined in any claim, action, investigation or proceeding could reasonably have a material effect on the Company’s business, financial condition, results of operations or cash flows will depend on a number of variables, including the timing and amount of such losses; the structure and type of any remedies; the monetary significance any such losses, damages or remedies may have on the condensed consolidated financial statements; and the unique facts and circumstances of the particular matter that may give rise to additional factors. Legal and Regulatory Matters U.S. Government Cost Claims The Company’s contracts with the DoD are subject to audit by the Defense Contract Audit Agency (“DCAA”). As a result of these audits, from time to time the Company is advised of claims concerning potential disallowed, overstated or disputed costs. For example, during the course of recent audits of the Company’s contracts, the DCAA is closely examining and questioning certain of the established and disclosed practices that it had previously audited and accepted. The Company’s personnel regularly scrutinizes costs incurred and allocated to contracts with the U.S. Government for compliance with regulatory standards. For those Company subsidiaries and fiscal years which have not yet been audited by the DCAA or for those audits which are in process which have not been completed by the DCAA, the Company cannot reasonably estimate the range of loss, if any, that may result from audits and reviews in which it is currently involved given the inherent difficulty in predicting regulatory action, fines and penalties, if any, and the various remedies and levels of judicial review available to the Company in the event of an adverse finding. As a result, the Company has not recorded any liability related to these matters. Other Litigation Matters The Company is subject to normal and routine litigation arising from the ordinary course and conduct of business and, at times, as a result of acquisitions and dispositions. Such disputes include, for example, commercial, employment, intellectual property, environmental and securities matters. The aggregate amounts accrued related to these matters are not material to the total liabilities of the Company. The Company intends to defend itself in any such matters and does not currently believe that the outcome of any such matters will have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

Summary of Significant Accounting Policies (Policies)	9 Months Ended
Summary of Significant Accounting Policies (Policies)	Sep. 27, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Presentation	Basis of Presentation The information as of September 27, 2020 and for the three and nine months ended September 27, 2020 and September 29, 2019 is unaudited. The condensed consolidated balance sheet as of December 29, 2019 was derived from the Company’s audited consolidated financial statements at that date. In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods presented. The results have been prepared in accordance with the instructions to Form 10-Q and do not necessarily include all information and footnotes necessary for presentation in accordance with accounting principles generally accepted in the U.S. (“GAAP”). These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the Company’s audited annual consolidated financial statements for the fiscal year ended December 29, 2019, included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 24, 2020 (the “Form 10-K”). Interim operating results are not necessarily indicative of operating results expected in subsequent periods or for the year as a whole.
Principles of Consolidation	Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company, its 100% owned subsidiaries and its majority owned subsidiaries, FTT Inc. and FTT Core (each as defined below), each of which is 80.1% owned. All inter-company transactions have been eliminated in consolidation. Noncontrolling interest consists of the remaining 19.9% interest in FTT Inc. and FTT Core. See Note 12 for further information related to the redeemable noncontrolling interest.
Fiscal Year	Fiscal Year The Company has a 52/53 week fiscal year ending on the last Sunday of the calendar year. The three month periods ended September 27, 2020 and September 29, 2019 consisted of 13-week periods. The nine month periods ended September 27, 2020 and September 29, 2019 consisted of 39-week periods. There are 52 calendar weeks in the fiscal years ending on December 27, 2020 and December 29, 2019.
Accounting Estimates	Accounting EstimatesThere have been no significant changes in the Company’s accounting estimates for the nine months ended September 27, 2020 as compared to the accounting estimates described in the Form 10-K.
Accounting Standards Updates	Accounting Standards UpdatesIn June 2016, the FASB issued ASU 2016-13 (“ASU 2016-13”), Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The main objective of this update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company has adopted ASU 2016-13 effective December 30, 2019. The implementation of this guidance did not have a material impact on its unaudited condensed consolidated financial statements.
Fair Value of Financial Instruments	Fair Value of Financial Instruments The carrying amounts and the related estimated fair values of the Company’s long-term debt financial instruments not measured at fair value on a recurring basis at September 27, 2020 and December 29, 2019 are presented in Note 10. The carrying value of all other financial instruments, including cash equivalents, accounts receivable, unbilled receivables, accounts payable, accrued expenses, billings in excess of cost and earnings on uncompleted contracts, income taxes payable and short-term debt, approximated their estimated fair values at September 27, 2020 and December 29, 2019 due to the short-term nature of these instruments.
Net Income (Loss) per Common Share	Net Income (Loss) per Common Share The Company calculates net income (loss) per share in accordance with FASB Accounting Standards Codification Topic 260, Earnings per Share (Topic 260). Under Topic 260, basic net income (loss) per common share attributable to the Kratos shareholders is calculated by dividing net income (loss) attributable to Kratos by the weighted-average number of common shares outstanding during the reporting period. Diluted net income (loss) per common share attributable to the Kratos shareholders reflects the effects of potentially dilutive securities. The dilutive impact of potentially dilutive common shares is determined by applying the treasury stock method. Shares from stock options and awards, excluded from the calculation of diluted net income per share because their inclusion would have been anti-dilutive, were 0.0 million and 0.6 million for the three and nine months ended September 27, 2020, respectively.

Acquisitions (Tables)

9 Months Ended

Sep. 27, 2020

Business Combinations [Abstract]

Assets acquired and liabilities assumed

The following table summarizes the allocation of the purchase price over the estimated fair values of the major assets acquired, liabilities assumed, and noncontrolling interest (in millions):


Accounts receivable	$	8.1
Unbilled receivables	4.9
Inventoried costs	7.8
Other current assets	1.8
Property and equipment	5.7
Intangible assets	30.8
Goodwill	23.3
Total identifiable net assets acquired	82.4
Total identifiable net liabilities assumed	(7.5)
Net assets before noncontrolling interest	74.9
Noncontrolling interest	(14.9)
Net assets acquired, excluding cash	$	60.0

The following table summarizes the preliminary allocation of the purchase price over the estimated fair values of the major assets acquired and liabilities assumed (in millions):


Accounts receivable	$	5.6
Unbilled receivables	0.9
Inventoried costs	10.4
Other current assets	3.2
Property and equipment	10.0
Intangible assets	4.3
Goodwill	9.7
Total identifiable net assets acquired	44.1
Total identifiable net liabilities assumed	(11.2)
Net assets acquired, excluding cash	$	32.9

Consideration paid

A summary of the consideration paid for the acquired ownership in FTT is as follow:


Cash paid	$	20.7
Deferred purchase consideration	15.3
Common stock issued	27.0
	63.0
Less: Cash acquired	(3.0)
Total consideration	$	60.0

Schedule of Business Acquisitions, by Acquisition

A summary of the consideration paid for the acquired ownership in ASC Signal is as follows:


Cash paid	$	34.9
Less: Cash acquired	(2.0)
Total consideration	$	32.9

Pro forma information

For the nine months ended September 29, 2019 (all amounts, except per share amounts, are in millions):


Pro forma revenues	$	540.5
Pro forma net income before tax	$	10.6
Pro forma net income	$	11.8
Pro forma net income attributable to Kratos	$	11.6

Basic pro forma income per share attributable to Kratos	$	0.11
Diluted pro forma income per share attributable to Kratos	$	0.11

For the nine months ended September 27, 2020 (all amounts, except per share amounts, are in millions):


Pro forma revenues	$	559.1
Pro forma net loss before tax	$	(0.7)
Pro forma net loss	$	(3.4)

Basic pro forma loss per share	$	(0.03)
Diluted pro forma loss per share	$	(0.03)

Revenue Recognition (Tables)

9 Months Ended

Sep. 27, 2020

Revenue from Contract with Customer [Abstract]

Schedule of net contract assets (liabilities)

Net contract assets and liabilities are as follows (in millions):


	September 27, 2020		December 29, 2019		Net Change
Contract assets	$	192.7	$	179.4	$	13.3
Contract liabilities	$	36.3	$	34.3	$	2.0
Net contract assets	$	156.4	$	145.1	$	11.3

Schedule of disaggregation of revenue


	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Kratos Government Solutions
Fixed price	$	113.3	$	114.6	$	315.9	$	346.2
Cost plus fee	27.7		15.6		62.9		39.1
Time and materials	7.5		8.2		25.0		24.0
Total Kratos Government Solutions	148.5		138.4		403.8		409.3
Unmanned Systems
Fixed price	39.6		38.9		95.5		100.1
Cost plus fee	12.9		6.6		39.8		22.1
Time and materials	1.0		0.2		2.2		0.9
Total Unmanned Systems	53.5		45.7		137.5		123.1
Total Revenues	$	202.0	$	184.1	$	541.3	$	532.4

Revenue by customer was as follows (in millions):


	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Kratos Government Solutions
U.S. Government (1)	$	98.7	$	89.1	$	273.4	$	272.2
International (2)	34.5		29.6		87.4		82.9
U.S. Commercial and other customers	15.3		19.7		43.0		54.2
Total Kratos Government Solutions	148.5		138.4		403.8		409.3
Unmanned Systems
U.S. Government (1)	46.6		37.1		125.4		104.8
International (2)	6.5		8.3		11.4		17.3
U.S. Commercial and other customers	0.4		0.3		0.7		1.0
Total Unmanned Systems	53.5		45.7		137.5		123.1
Total Revenues	$	202.0	$	184.1	$	541.3	$	532.4

(1) Sales to the U.S. Government include sales from contracts for which the Company is the prime contractor, as well as those for which the

Company is a subcontractor and the ultimate customer is the U.S. Government. Each of the Company’s segments derives substantial revenue

from the U.S. Government. These sales include foreign military sales contracted through the U.S. Government.

(2) International sales include sales from contracts for which the Company is the prime contractor, as well as those for which the Company is a

subcontractor and the ultimate customer is an international customer. These sales include direct sales with governments outside the U.S. and

commercial sales with customers outside the U.S.

Discontinued Operations (Tables)

9 Months Ended

Sep. 27, 2020

Discontinued Operations and Disposal Groups [Abstract]

Schedule of discontinued operations, income statement and balance sheet

The following table presents the results of discontinued operations (in millions):


	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Revenue	$	—	$	0.2	$	—	$	0.3
Cost of sales	—		—		0.1		0.7
Selling, general and administrative expenses	0.2		0.1		0.9		0.7

Other (income) expense	—		0.1		—		(3.5)
Income (loss) from discontinued operations before income taxes	(0.2)		—		(1.0)		2.4


Income tax benefit	—		—		0.2		—
Income (loss) from discontinued operations	$	(0.2)	$	—	$	(0.8)	$	2.4


	September 27, 2020		December 29, 2019

Accounts receivable, net	$	—	$	3.3


Current assets of discontinued operations	$	—	$	3.3







Accounts payable	$	0.2	$	0.2
Accrued expenses	0.1		0.3


Other current liabilities	2.7		2.8
Current liabilities of discontinued operations	$	3.0	$	3.3
Other long-term liabilities of discontinued operations	$	2.6	$	2.8

- Definition

Tabular disclosure of information related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component.

+ References

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+ Details

Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 27, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill

The carrying amounts of goodwill as of September 27, 2020 and December 29, 2019 by reportable segment are as follows (in millions):


	As of September 27, 2020
	Kratos Government Solutions		Unmanned Systems		Total
Gross value	$	607.9	$	120.7	$	728.6
Less accumulated impairment	239.5		13.8		253.3
Net	$	368.4	$	106.9	$	475.3


	As of December 29, 2019
	Kratos Government Solutions		Unmanned Systems		Total
Gross value	$	597.8	$	111.1	$	708.9
Less accumulated impairment	239.5		13.8		253.3
Net	$	358.3	$	97.3	$	455.6

Schedule of intangible assets (finite-lived)

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


	As of September 27, 2020						As of December 29, 2019
	Gross Value		Accumulated Amortization		Net Value		Gross Value		Accumulated Amortization		Net Value
Acquired finite-lived intangible assets:
Customer relationships	$	75.0	$	(55.2)	$	19.8	$	72.3	$	(53.3)	$	19.0
Contracts and backlog	32.7		(30.3)		2.4		32.0		(28.4)		3.6
Developed technology and technical know-how	28.6		(25.1)		3.5		25.0		(23.8)		1.2
Trade names	2.0		(1.8)		0.2		1.9		(1.6)		0.3
In-process research and development	9.2		—		9.2		8.5		—		8.5

Total finite-lived intangible assets	147.5		(112.4)		35.1		139.7		(107.1)		32.6
Indefinite-lived trade names	6.9		—		6.9		6.9		—		6.9
Total intangible assets	$	154.4	$	(112.4)	$	42.0	$	146.6	$	(107.1)	$	39.5

Schedule of intangible assets (indefinite-lived)

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


	As of September 27, 2020						As of December 29, 2019
	Gross Value		Accumulated Amortization		Net Value		Gross Value		Accumulated Amortization		Net Value
Acquired finite-lived intangible assets:
Customer relationships	$	75.0	$	(55.2)	$	19.8	$	72.3	$	(53.3)	$	19.0
Contracts and backlog	32.7		(30.3)		2.4		32.0		(28.4)		3.6
Developed technology and technical know-how	28.6		(25.1)		3.5		25.0		(23.8)		1.2
Trade names	2.0		(1.8)		0.2		1.9		(1.6)		0.3
In-process research and development	9.2		—		9.2		8.5		—		8.5

Total finite-lived intangible assets	147.5		(112.4)		35.1		139.7		(107.1)		32.6
Indefinite-lived trade names	6.9		—		6.9		6.9		—		6.9
Total intangible assets	$	154.4	$	(112.4)	$	42.0	$	146.6	$	(107.1)	$	39.5

Inventoried Costs (Tables)

9 Months Ended

Sep. 27, 2020

Inventory Disclosure [Abstract]

Schedule of inventoried costs

Inventoried costs, consisted of the following components (in millions):


	September 27, 2020		December 29, 2019
Raw materials	$	46.5	$	39.1
Work in process	27.6		20.3
Finished goods	4.2		1.7



Total inventoried costs	$	78.3	$	61.1

Leases (Tables)

9 Months Ended

Sep. 27, 2020

Leases [Abstract]

Lease cost

The components of lease expense were as follows (in millions):


	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Amortization of right of use assets - finance leases	$	0.6	$	0.5	$	1.6	$	1.5
Interest on lease liabilities - finance leases	0.6		0.6		1.9		1.9
Operating lease cost	2.7		3.6		9.1		10.2
Short-term lease cost	0.2		0.1		0.6		0.5
Variable lease cost (cost excluded from lease payments)	—		—		0.1		0.1
Sublease income	(0.1)		(0.8)		(1.1)		(2.4)
Total lease cost	$	4.0	$	4.0	$	12.2	$	11.8

Cash paid for amounts included in the measurement of lease liabilities was as follows (in millions):



	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Finance lease - cash paid for interest	$	0.6	$	0.6	$	1.9	$	1.9
Finance lease - financing cash flows	$	0.2	$	0.1	$	0.5	$	0.4
Operating lease - operating cash flows (fixed payments)	$	2.9	$	3.6	$	10.2	$	10.9

Other supplemental noncash information (in millions):


	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020			September 29, 2019
Operating lease liabilities arising from obtaining right-of-use assets, including impact of ASC 842 adoption	$	3.8	$	4.3	$	4.8		$	60.1
Finance lease liabilities arising from obtaining right-of-use assets, including impact of ASC 842 adoption	$	0.8	$	—	$	1.2		$	39.6

Weighted-average remaining lease term (in years):
Operating leases					5.36			5.79
Finance leases					18.01			19.17

Weighted-average discount rate:
Operating leases					6.50		%	6.50		%
Finance leases					6.52		%	6.53		%

Balance sheet information

The components of leases on the balance sheet were as follows (in millions):


	September 27, 2020		December 29, 2019
Operating Leases:
Operating lease right-of-use assets	$	40.1	$	42.1
Current portion of operating lease liabilities	$	8.9	$	9.9
Operating lease liabilities, net of current portion	$	35.7	$	37.6
Finance leases:
Property, plant and equipment, net	$	37.0	$	38.1
Other current liabilities	$	0.8	$	0.6
Other long-term liabilities	$	38.9	$	38.4

Maturities of operating lease liabilities

The maturity of lease liabilities is (in millions):


	Operating Leases		Finance Leases
2020 (1)	$	2.8	$	0.8
2021	11.3		3.4
2022	9.9		3.4
2023	9.2		3.5
2024	7.1		3.5
Thereafter	12.7		54.9
Total lease payments	53.0		69.5
Less: imputed interest	(8.4)		(29.8)
Total present value of lease liabilities	$	44.6	$	39.7
(1) Excludes the nine months ended September 27, 2020.

Maturities of financing lease liabilities

The maturity of lease liabilities is (in millions):


	Operating Leases		Finance Leases
2020 (1)	$	2.8	$	0.8
2021	11.3		3.4
2022	9.9		3.4
2023	9.2		3.5
2024	7.1		3.5
Thereafter	12.7		54.9
Total lease payments	53.0		69.5
Less: imputed interest	(8.4)		(29.8)
Total present value of lease liabilities	$	44.6	$	39.7
(1) Excludes the nine months ended September 27, 2020.

Income Taxes (Tables)

9 Months Ended

Sep. 27, 2020

Income Tax Disclosure [Abstract]

Reconciliation of income tax benefit at statutory rate to income tax provision


	For the Three Months Ended				For the Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Income tax expense at federal statutory rate	$	1.6	$	1.1	$	0.8	$	2.4
State and foreign taxes, net of federal tax benefit and valuation allowance	1.9		1.3		1.2		2.5
Release of valuation allowance due to acquisitions	(0.1)		(1.3)		(1.0)		(4.7)

Nondeductible expenses and other	2.5		0.3		1.2		0.7
Impact of deferred tax liabilities for indefinite-lived assets	1.1		0.3		0.5		0.6
Increase in reserves for uncertain tax positions	2.2		2.5		1.2		5.4
Decrease in federal valuation allowance	(4.2)		(1.4)		(2.1)		(3.1)
Provision for income taxes from continuing operations	$	5.0	$	2.8	$	1.8	$	3.8

Debt (Tables)

9 Months Ended

Sep. 27, 2020

Debt Disclosure [Abstract]

Carrying amounts and estimated fair value of long-term debt


	As of September 27, 2020						As of December 29, 2019
$ in millions	Principal		Carrying Amount		Fair Value		Principal		Carrying Amount		Fair Value
Total long-term debt including current portion	$	304.8	$	300.5	$	318.3	$	300.0	$	295.1	$	322.1

Segment Information (Tables)

9 Months Ended

Sep. 27, 2020

Segment Reporting [Abstract]

Schedule of segment revenues, depreciation and amortization, and operating income (loss)


	Three Months Ended				Nine Months Ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Revenues:
Kratos Government Solutions
Service revenues	$	67.6	$	70.8	$	194.1	$	207.1
Product sales	80.9		67.6		209.7		202.2
Total Kratos Government Solutions	148.5		138.4		403.8		409.3







Unmanned Systems product sales	53.5		45.7		137.5		123.1
Total revenues	$	202.0	$	184.1	$	541.3	$	532.4
Depreciation & amortization:
Kratos Government Solutions	$	4.5	$	4.5	$	13.6	$	13.2

Unmanned Systems	1.7		1.2		4.9		3.6
Total depreciation and amortization	$	6.2	$	5.7	$	18.5	$	16.8
Operating income from continuing operations:
Kratos Government Solutions	$	14.1	$	11.1	$	31.1	$	33.2

Unmanned Systems	3.7		3.3		5.2		5.6

Corporate activities	(5.1)		(2.9)		(16.0)		(10.1)
Total operating income from continuing operations	$	12.7	$	11.5	$	20.3	$	28.7

Summary of Significant Accounting Policies (Details)	Sep. 27, 2020
FTT Inc
Business Acquisition [Line Items]
Subsidiary percent owned	80.10%
Noncontrolling interest owned	19.90%
FTT Core
Business Acquisition [Line Items]
Subsidiary percent owned	80.10%
Noncontrolling interest owned	19.90%

Acquisitions - Narrative (Details) - USD ($) $ in Thousands							3 Months Ended		9 Months Ended
Acquisitions - Narrative (Details) - USD ($) $ in Thousands	Oct. 06, 2020	Jun. 30, 2020	Jun. 15, 2020	Apr. 17, 2020	Feb. 24, 2020	Feb. 27, 2019	Sep. 27, 2020	Sep. 29, 2019	Sep. 27, 2020	Sep. 29, 2019
Business Acquisition [Line Items]
Shares issued						$ 27,000
Merger and acquisition expenses							$ 100	$ 100	$ 1,500	$ 1,900
FTT Inc
Business Acquisition [Line Items]
Percentage of voting interests acquired						80.10%
FTT Core
Business Acquisition [Line Items]
Percentage of voting interests acquired						80.10%
FTT
Business Acquisition [Line Items]
Percentage of voting interests acquired						80.10%
Aggregate purchase price						$ 60,000
Total cash paid						33,000
Payment to Acquire Business, At Closing						17,700
Amount to be paid						$ 15,300
Payment period						3 years
Current liabilities						$ 7,500
Deferred tax liabilities						7,000
Revenue								16,300		37,700
Operating income								700		1,000
Merger and acquisition expenses								$ 0		$ 1,300
Cash paid						$ 20,700
FTT \| Subsequent event
Business Acquisition [Line Items]
Working capital adjustments	$ 1,950
FTT \| Common Stock
Business Acquisition [Line Items]
Number of shares issued (in shares)						1,825,406				1,825,406
FTT \| Customer relationships
Business Acquisition [Line Items]
Intangible assets acquired						$ 19,700
Useful life						13 years
FTT \| In-process research and development
Business Acquisition [Line Items]
Intangible assets acquired						$ 8,500
FTT \| Contracts and backlog
Business Acquisition [Line Items]
Intangible assets acquired						$ 2,100
Useful life						2 years
FTT \| Trade names
Business Acquisition [Line Items]
Intangible assets acquired						$ 500
Useful life						2 years
Technical Directions, Inc.
Business Acquisition [Line Items]
Working capital adjustments							300
Cash paid					$ 10,500
Optimized Performance Machining, Inc. (OPM)
Business Acquisition [Line Items]
Working capital adjustments							30
Cash paid				$ 1,800
CPI ASC Signal Division, Inc.
Business Acquisition [Line Items]
Current liabilities		$ 9,100
Deferred tax liabilities		1,300
Revenue							10,200
Operating income							700
Merger and acquisition expenses							$ 100		$ 1,100
Cash paid		34,900	$ 35,000
Intangible assets		$ 4,300
CPI ASC Signal Division, Inc. \| Customer relationships
Business Acquisition [Line Items]
Useful life		5 years
Intangible assets		$ 2,000
CPI ASC Signal Division, Inc. \| Trade names
Business Acquisition [Line Items]
Useful life		1 year
Intangible assets		$ 100
CPI ASC Signal Division, Inc. \| Developed technology and technical know-how
Business Acquisition [Line Items]
Useful life		7 years
Intangible assets		$ 2,200

Acquisitions - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Millions	Sep. 27, 2020	Jun. 30, 2020	Dec. 29, 2019	Feb. 27, 2019
Business Acquisition [Line Items]
Goodwill	$ 475.3		$ 455.6
FTT
Business Acquisition [Line Items]
Accounts receivable				$ 8.1
Unbilled receivables				4.9
Inventoried costs				7.8
Other current assets				1.8
Property and equipment				5.7
Intangible assets				30.8
Goodwill				23.3
Total identifiable net assets acquired				82.4
Total identifiable net liabilities assumed				(7.5)
Net assets before noncontrolling interest				74.9
Noncontrolling interest				(14.9)
Net assets acquired, excluding cash				$ 60.0
CPI ASC Signal Division, Inc.
Business Acquisition [Line Items]
Accounts receivable		$ 5.6
Unbilled receivables		0.9
Inventoried costs		10.4
Other current assets		3.2
Property and equipment		10.0
Intangible assets		4.3
Goodwill		9.7
Total identifiable net assets acquired		44.1
Total identifiable net liabilities assumed		(11.2)
Net assets before noncontrolling interest		$ 32.9

Acquisitions - Consideration Paid (Details) - USD ($) $ in Millions				9 Months Ended
	Jun. 30, 2020	Jun. 15, 2020	Feb. 27, 2019	Sep. 27, 2020	Sep. 29, 2019
Business Acquisition [Line Items]
Total consideration				$ 43.9	$ 17.6
FTT
Business Acquisition [Line Items]
Cash paid			$ 20.7
Deferred purchase consideration			15.3
Common stock issued			27.0
Total			63.0
Less: Cash acquired			(3.0)
Total consideration			$ 60.0
CPI ASC Signal Division, Inc.
Business Acquisition [Line Items]
Cash paid	$ 34.9	$ 35.0
Less: Cash acquired	(2.0)
Total consideration	$ 32.9

Acquisitions - Pro Forma Financial Information (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 27, 2020	Sep. 29, 2019	Sep. 27, 2020	Sep. 29, 2019
Business Acquisition [Line Items]
Pro forma net income attributable to Kratos	$ 2.4	$ 2.5	$ 1.5	$ 9.5
FTT
Business Acquisition [Line Items]
Pro forma revenues				540.5
Pro forma net income before tax				10.6
Pro forma net income				11.8
Pro forma net income attributable to Kratos				$ 11.6
Basic pro forma income per share attributable to Kratos (USD per share)				$ 0.11
Diluted pro forma income per share attributable to Kratos (USD per share)				$ 0.11
CPI ASC Signal Division, Inc.
Business Acquisition [Line Items]
Pro forma revenues			559.1
Pro forma net income before tax			(0.7)
Pro forma net income			$ (3.4)
Basic pro forma income per share attributable to Kratos (USD per share)			$ (0.03)
Diluted pro forma income per share attributable to Kratos (USD per share)			$ (0.03)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 2: http://www.xbrl.org/2003/role/exampleRef
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-Name Accounting Standards Codification
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
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-Section S99
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-Subparagraph (SX 210.9-04(22))
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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-URI http://asc.fasb.org/extlink&oid=109222650&loc=SL51721683-107760

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
-Topic 220
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-Subparagraph (a)
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8736-108599

Reference 11: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 220
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-04(18))
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Reference 12: http://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
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-SubTopic 10
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-Subparagraph (SX 210.5-03(20))
-URI http://asc.fasb.org/extlink&oid=120395209&loc=SL114868664-224227

Reference 13: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 230
-SubTopic 10
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-Paragraph 28
-URI http://asc.fasb.org/extlink&oid=121586364&loc=d3e3602-108585

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 15: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 17: http://www.xbrl.org/2003/role/disclosureRef
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Reference 18: http://www.xbrl.org/2003/role/disclosureRef
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Reference 19: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 20: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Revenue Recognition - Remaining Performance Obligations (Details) $ in Millions	9 Months Ended
	Sep. 27, 2020 USD ($)
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 873.1
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-09-28
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected timing of satisfaction, percentage	22.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected timing of satisfaction, percentage	35.00%

Revenue Recognition - Contract Assets and Liabilities (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 27, 2020	Dec. 29, 2019
Revenue from Contract with Customer [Abstract]
Contract assets	$ 192.7	$ 179.4
Contract assets, net change	13.3
Contract liabilities	36.3	34.3
Contract liabilities, net change	2.0
Net contract assets	156.4	$ 145.1
Net contract assets, net change	$ 11.3

Revenue Recognition - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 27, 2020	Sep. 29, 2019	Sep. 27, 2020	Sep. 29, 2019	Dec. 29, 2019
Revenue from Contract with Customer [Abstract]
Revenue recognized	$ 3.5	$ 5.3	$ 23.5	$ 26.6
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
Contract assets, net change			13.3
Contract liabilities, net change			2.0
Contract assets	192.7		192.7		$ 179.4
Unbilled Revenues \| T for C
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
Contract assets	11.5		11.5		11.5
Unbilled Revenues \| International Customer
Revenue Recognition, Multiple-deliverable Arrangements [Line Items]
Contract assets	$ 10.0		$ 10.0		$ 10.0

Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 27, 2020	Sep. 29, 2019	Sep. 27, 2020	Sep. 29, 2019
Disaggregation of Revenue [Line Items]
Total Revenues	$ 202.0	$ 184.1	$ 541.3	$ 532.4
Kratos Government Solutions
Disaggregation of Revenue [Line Items]
Total Revenues	148.5	138.4	403.8	409.3
Kratos Government Solutions \| U.S. Government
Disaggregation of Revenue [Line Items]
Total Revenues	98.7	89.1	273.4	272.2
Kratos Government Solutions \| International
Disaggregation of Revenue [Line Items]
Total Revenues	34.5	29.6	87.4	82.9
Kratos Government Solutions \| U.S. Commercial and other customers
Disaggregation of Revenue [Line Items]
Total Revenues	15.3	19.7	43.0	54.2
Kratos Government Solutions \| Fixed price
Disaggregation of Revenue [Line Items]
Total Revenues	113.3	114.6	315.9	346.2
Kratos Government Solutions \| Cost plus fee
Disaggregation of Revenue [Line Items]
Total Revenues	27.7	15.6	62.9	39.1
Kratos Government Solutions \| Time and materials
Disaggregation of Revenue [Line Items]
Total Revenues	7.5	8.2	25.0	24.0
Unmanned Systems
Disaggregation of Revenue [Line Items]
Total Revenues	53.5	45.7	137.5	123.1
Unmanned Systems \| U.S. Government
Disaggregation of Revenue [Line Items]
Total Revenues	46.6	37.1	125.4	104.8
Unmanned Systems \| International
Disaggregation of Revenue [Line Items]
Total Revenues	6.5	8.3	11.4	17.3
Unmanned Systems \| U.S. Commercial and other customers
Disaggregation of Revenue [Line Items]
Total Revenues	0.4	0.3	0.7	1.0
Unmanned Systems \| Fixed price
Disaggregation of Revenue [Line Items]
Total Revenues	39.6	38.9	95.5	100.1
Unmanned Systems \| Cost plus fee
Disaggregation of Revenue [Line Items]
Total Revenues	12.9	6.6	39.8	22.1
Unmanned Systems \| Time and materials
Disaggregation of Revenue [Line Items]
Total Revenues	$ 1.0	$ 0.2	$ 2.2	$ 0.9

Discontinued Operations - Additional Information (Details) - Public Safety & Security - Disposed of by Sale - USD ($) $ in Millions		28 Months Ended
	Jun. 11, 2018	Sep. 27, 2020
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Purchase price, in cash	$ 69.0
Working capital adjustment	$ 8.0
Working capital retained		$ 6.8

Discontinued Operations - Results of Discontinued Operations (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 27, 2020	Sep. 29, 2019	Sep. 27, 2020	Sep. 29, 2019
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Income tax benefit	$ 0.0	$ 0.0	$ 0.2	$ 0.0
Income (loss) from discontinued operations	(0.2)	0.0	(0.8)	2.4
Public Safety & Security \| Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Revenue	0.0	0.2	0.0	0.3
Cost of sales	0.0	0.0	0.1	0.7
Selling, general and administrative expenses	0.2	0.1	0.9	0.7
Other (income) expense		(0.1)
Other (income) expense	0.0		0.0	(3.5)
Income (loss) from discontinued operations before income taxes	(0.2)	0.0	(1.0)	2.4
Income tax benefit	0.0	0.0	0.2	0.0
Income (loss) from discontinued operations	$ (0.2)	$ 0.0	$ (0.8)	$ 2.4

Discontinued Operations - Assets and Liabilities (Details) - USD ($) $ in Millions	Sep. 27, 2020	Dec. 29, 2019
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Current assets of discontinued operations	$ 0.0	$ 3.3
Current liabilities of discontinued operations	3.0	3.3
Long-term liabilities of discontinued operations	2.6	2.8
Public Safety & Security \| Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Accounts receivable, net	0.0	3.3
Current assets of discontinued operations	0.0	3.3
Accounts payable	0.2	0.2
Accrued expenses	0.1	0.3
Other current liabilities	2.7	2.8
Current liabilities of discontinued operations	3.0	3.3
Long-term liabilities of discontinued operations	$ 2.6	$ 2.8

Goodwill and Intangible Assets - Goodwill (Details) - USD ($) $ in Millions	Sep. 27, 2020	Dec. 29, 2019
Goodwill [Line Items]
Gross value	$ 728.6	$ 708.9
Less accumulated impairment	253.3	253.3
Net	475.3	455.6
Kratos Government Solutions
Goodwill [Line Items]
Gross value	607.9	597.8
Less accumulated impairment	239.5	239.5
Net	368.4	358.3
Unmanned Systems
Goodwill [Line Items]
Gross value	120.7	111.1
Less accumulated impairment	13.8	13.8
Net	$ 106.9	$ 97.3

Goodwill and Intangible Assets - Purchased Intangible Assets (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 27, 2020	Sep. 29, 2019	Sep. 27, 2020	Sep. 29, 2019	Dec. 29, 2019
Acquired finite-lived intangible assets:
Gross Value	$ 147.5		$ 147.5		$ 139.7
Accumulated Amortization	(112.4)		(112.4)		(107.1)
Net Value	35.1		35.1		32.6
Total intangible assets: gross value	154.4		154.4		146.6
Total intangible assets: net value	42.0		42.0		39.5
Aggregate amortization expense for finite-lived intangible assets	1.7	$ 1.7	5.4	$ 5.2
Trade names
Acquired finite-lived intangible assets:
Indefinite-lived trade names	6.9		6.9		6.9
Customer relationships
Acquired finite-lived intangible assets:
Gross Value	75.0		75.0		72.3
Accumulated Amortization	(55.2)		(55.2)		(53.3)
Net Value	19.8		19.8		19.0
Contracts and backlog
Acquired finite-lived intangible assets:
Gross Value	32.7		32.7		32.0
Accumulated Amortization	(30.3)		(30.3)		(28.4)
Net Value	2.4		2.4		3.6
Developed technology and technical know-how
Acquired finite-lived intangible assets:
Gross Value	28.6		28.6		25.0
Accumulated Amortization	(25.1)		(25.1)		(23.8)
Net Value	3.5		3.5		1.2
Trade names
Acquired finite-lived intangible assets:
Gross Value	2.0		2.0		1.9
Accumulated Amortization	(1.8)		(1.8)		(1.6)
Net Value	0.2		0.2		0.3
In-process research and development
Acquired finite-lived intangible assets:
Gross Value	9.2		9.2		8.5
Accumulated Amortization	0.0		0.0		0.0
Net Value	$ 9.2		$ 9.2		$ 8.5

Inventoried Costs (Details) - USD ($) $ in Millions	Sep. 27, 2020	Dec. 29, 2019
Inventory Disclosure [Abstract]
Raw materials	$ 46.5	$ 39.1
Work in process	27.6	20.3
Finished goods	4.2	1.7
Inventoried costs	$ 78.3	$ 61.1

Net Income (Loss) per Common Share (Details) - shares shares in Millions	3 Months Ended	9 Months Ended
	Sep. 27, 2020	Sep. 27, 2020
Stock options and awards
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of EPS (in shares)	0.0	0.6

Leases - Lease Expense (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
Leases - Lease Expense (Details) - USD ($) $ in Millions	Sep. 27, 2020	Sep. 29, 2019	Sep. 27, 2020	Sep. 29, 2019
Leases [Abstract]
Amortization of right of use assets - finance leases	$ 0.6	$ 0.5	$ 1.6	$ 1.5
Interest on lease liabilities - finance leases	0.6	0.6	1.9	1.9
Operating lease cost	2.7	3.6	9.1	10.2
Short-term lease cost	0.2	0.1	0.6	0.5
Variable lease cost (cost excluded from lease payments)	0.0	0.0	0.1	0.1
Sublease income	(0.1)	(0.8)	(1.1)	(2.4)
Total lease cost	$ 4.0	$ 4.0	$ 12.2	$ 11.8

Leases - Supplemental Balance Sheet (Details) - USD ($) $ in Millions	Sep. 27, 2020	Dec. 29, 2019
Operating Leases:
Operating lease right-of-use assets	$ 40.1	$ 42.1
Current portion of operating lease liabilities	8.9	9.9
Operating lease liabilities, net of current portion	35.7	37.6
Finance leases:
Property, plant and equipment, net	37.0	38.1
Other current liabilities	0.8	0.6
Other long-term liabilities	$ 38.9	$ 38.4
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List]	us-gaap:OtherLiabilitiesCurrent	us-gaap:OtherLiabilitiesCurrent
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	us-gaap:OtherLiabilitiesNoncurrent	us-gaap:OtherLiabilitiesNoncurrent
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	us-gaap:PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortization	us-gaap:PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortization

Leases - Cash Paid (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
Leases - Cash Paid (Details) - USD ($) $ in Millions	Sep. 27, 2020	Sep. 29, 2019	Sep. 27, 2020	Sep. 29, 2019
Leases [Abstract]
Finance lease - cash paid for interest	$ 0.6	$ 0.6	$ 1.9	$ 1.9
Finance lease - financing cash flows	0.2	0.1	0.5	0.4
Operating lease - operating cash flows (fixed payments)	$ 2.9	$ 3.6	$ 10.2	$ 10.9

Leases - Weighted Average (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
Leases - Weighted Average (Details) - USD ($) $ in Millions	Sep. 27, 2020	Sep. 29, 2019	Sep. 27, 2020	Sep. 29, 2019
Leases [Abstract]
Operating lease liabilities arising from obtaining right-of-use assets, including impact of ASC 842 adoption	$ 3.8	$ 4.3	$ 4.8	$ 60.1
Finance lease liabilities arising from obtaining right-of-use assets, including impact of ASC 842 adoption	$ 0.8	$ 0.0	$ 1.2	$ 39.6
Weighted-average remaining lease term (in years):
Operating leases	5 years 4 months 9 days	5 years 9 months 14 days	5 years 4 months 9 days	5 years 9 months 14 days
Finance leases	18 years 3 days	19 years 2 months 1 day	18 years 3 days	19 years 2 months 1 day
Weighted-average discount rate:
Operating leases	6.50%	6.50%	6.50%	6.50%
Finance leases	6.52%	6.53%	6.52%	6.53%

Leases - Maturities of Operating and Financing Lease Liabilities (Details) $ in Millions	Sep. 27, 2020 USD ($)
Operating Leases
2020	$ 2.8
2021	11.3
2022	9.9
2023	9.2
2024	7.1
Thereafter	12.7
Total lease payments	53.0
Less: imputed interest	(8.4)
Total present value of lease liabilities	44.6
Finance Leases
2020	0.8
2021	3.4
2022	3.4
2023	3.5
2024	3.5
Thereafter	54.9
Total lease payments	69.5
Less: imputed interest	(29.8)
Total present value of lease liabilities	$ 39.7

Income Taxes - Income Tax Provision Reconciliation (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 27, 2020	Sep. 29, 2019	Sep. 27, 2020	Sep. 29, 2019
Income Tax Disclosure [Abstract]
Income tax expense at federal statutory rate	$ 1.6	$ 1.1	$ 0.8	$ 2.4
State and foreign taxes, net of federal tax benefit and valuation allowance	1.9	1.3	1.2	2.5
Release of valuation allowance due to acquisitions	(0.1)	(1.3)	(1.0)	(4.7)
Nondeductible expenses and other	2.5	0.3	1.2	0.7
Impact of deferred tax liabilities for indefinite-lived assets	1.1	0.3	0.5	0.6
Increase in reserves for uncertain tax positions	2.2	2.5	1.2	5.4
Decrease in federal valuation allowance	(4.2)	(1.4)	(2.1)	(3.1)
Provision for income taxes from continuing operations	$ 5.0	$ 2.8	$ 1.8	$ 3.8

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Income Taxes - Additional Information (Details) - USD ($) $ in Millions	1 Months Ended	9 Months Ended
	Mar. 31, 2010	Sep. 27, 2020	Sep. 29, 2019	Dec. 29, 2019
Income Tax Disclosure [Abstract]
Federal annual utilization of NOL carryforwards limit, next five years	$ 27.0
Threshold period for change in allowed annual amount of NOL to be recognized	5 years
Federal annual utilization of NOL carryforwards limit, after year five	$ 11.6
Unrecognized tax benefits that if recognized would impact the effective tax rate for continuing operations				$ 24.0
Decrease resulting from current period tax positions		$ 1.1
Expense for interest and penalties		0.3	$ 1.1
Liabilities for uncertain tax positions believed to be reasonably possible to expire within twelve months		$ 0.2

Debt - Issuance of 6.5% Senior Secured Notes due 2025 (Details) - USD ($)	1 Months Ended
	Nov. 30, 2017	Sep. 27, 2020	Dec. 29, 2019
Debt Instrument [Line Items]
Principal		$ 304,800,000	$ 300,000,000.0
Debt outstanding		$ 300,500,000	$ 295,100,000
Senior notes \| 6.5% Notes
Debt Instrument [Line Items]
Stated interest rate	6.50%	6.50%
Principal	$ 300,000,000
Debt issuance costs	$ 6,600,000
Debt outstanding		$ 300,000,000.0
Senior notes \| 6.5% Notes \| On or after November 30, 2020
Debt Instrument [Line Items]
Redemption percentage	40.00%
Percentage of principal amount	100.00%
Senior notes \| 6.5% Notes \| On or prior to November 30, 2020
Debt Instrument [Line Items]
Redemption percentage	10.00%
Percentage of principal amount	103.00%
Senior notes \| 7% Senior Notes due 2019
Debt Instrument [Line Items]
Stated interest rate	7.00%
Reacquisition price	$ 385,200,000
Premium	12,000,000.0
Accrued interest	$ 300,000

Debt - Other Indebtedness (Details)		1 Months Ended	9 Months Ended
Debt - Other Indebtedness (Details)	Nov. 20, 2017 USD ($)	Aug. 31, 2020 USD ($) loan bank	Sep. 27, 2020 USD ($)	Dec. 29, 2019 USD ($)	Nov. 30, 2017 USD ($)
Line of Credit Facility [Line Items]
Principal			$ 304,800,000	$ 300,000,000.0
Debt outstanding			300,500,000	295,100,000
Unamortized debt issuance costs			$ 4,300,000	$ 4,900,000
Senior notes \| 6.5% Notes
Line of Credit Facility [Line Items]
Stated interest rate			6.50%		6.50%
Principal					$ 300,000,000
Debt outstanding			$ 300,000,000.0
Term Loan \| Israel Debt
Line of Credit Facility [Line Items]
Number of loans \| loan		2
Debt instrument, term		5 years
Number of banks \| bank		2
Principal		$ 4,800,000
Term Loan \| Israel Debt \| Israeli NIS Prime Interest
Line of Credit Facility [Line Items]
Basis spread on variable rate		1.50%
Revolving Credit Facility
Line of Credit Facility [Line Items]
Maturity period	5 years
Maximum borrowing capacity	$ 90,000,000.0
Potential maximum borrowing capacity, subject to lender approval	$ 115,000,000.0
Fixed charge coverage ratio	0.50
Outstanding borrowings			0
Remaining borrowing capacity			$ 69,100,000
Revolving Credit Facility \| Federal Funds Rate
Line of Credit Facility [Line Items]
Basis spread on variable rate			0.50%
Revolving Credit Facility \| LIBOR rate
Line of Credit Facility [Line Items]
Basis spread on variable rate			1.00%
Revolving Credit Facility \| Base Rate \| Minimum
Line of Credit Facility [Line Items]
Basis spread on variable rate			1.00%
Revolving Credit Facility \| Base Rate \| Maximum
Line of Credit Facility [Line Items]
Basis spread on variable rate			1.50%
Revolving Credit Facility \| Eurodollar Rate \| Minimum
Line of Credit Facility [Line Items]
Basis spread on variable rate			2.00%
Revolving Credit Facility \| Eurodollar Rate \| Maximum
Line of Credit Facility [Line Items]
Basis spread on variable rate			2.50%
Letter of Credit
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 50,000,000.0
Outstanding borrowings			$ 6,100,000
Swing Line Loan
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 10,000,000.0

Debt - Fair Value of Long-term Debt (Details) - USD ($)	Sep. 27, 2020	Dec. 29, 2019
Debt Disclosure [Abstract]
Principal	$ 304,800,000	$ 300,000,000.0
Carrying Amount	300,500,000	295,100,000
Fair Value	$ 318,300,000	$ 322,100,000

Segment Information - Additional Information (Details) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 27, 2020 USD ($)	Sep. 29, 2019 USD ($)	Sep. 27, 2020 USD ($) segment	Sep. 29, 2019 USD ($)
Segment Reporting [Abstract]
Number of reportable segments \| segment			2
Business Acquisition [Line Items]
Merger and acquisition expenses	$ 0.1	$ 0.1	$ 1.5	$ 1.9
CPI ASC Signal Division, Inc.
Business Acquisition [Line Items]
Merger and acquisition expenses	$ 0.1		$ 1.1
FTT
Business Acquisition [Line Items]
Merger and acquisition expenses		$ 0.0		$ 1.3

Segment Information - Schedule of Segment Revenues, Depreciation and Amortization, and Operating (Loss) (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 27, 2020	Sep. 29, 2019	Sep. 27, 2020	Sep. 29, 2019
Segment Reporting Information [Line Items]
Total revenues	$ 202.0	$ 184.1	$ 541.3	$ 532.4
Depreciation & amortization:
Total depreciation and amortization	6.2	5.7	18.5	16.8
Operating income from continuing operations:
Total operating income from continuing operations	12.7	11.5	20.3	28.7
Corporate activities
Operating income from continuing operations:
Total operating income from continuing operations	(5.1)	(2.9)	(16.0)	(10.1)
Kratos Government Solutions
Segment Reporting Information [Line Items]
Total revenues	148.5	138.4	403.8	409.3
Depreciation & amortization:
Total depreciation and amortization	4.5	4.5	13.6	13.2
Kratos Government Solutions \| Reportable Segments
Operating income from continuing operations:
Total operating income from continuing operations	14.1	11.1	31.1	33.2
Unmanned Systems
Segment Reporting Information [Line Items]
Total revenues	53.5	45.7	137.5	123.1
Depreciation & amortization:
Total depreciation and amortization	1.7	1.2	4.9	3.6
Unmanned Systems \| Reportable Segments
Operating income from continuing operations:
Total operating income from continuing operations	3.7	3.3	5.2	5.6
Service revenues
Segment Reporting Information [Line Items]
Total revenues	67.6	70.8	194.1	207.1
Service revenues \| Kratos Government Solutions
Segment Reporting Information [Line Items]
Total revenues	67.6	70.8	194.1	207.1
Product sales
Segment Reporting Information [Line Items]
Total revenues	134.4	113.3	347.2	325.3
Product sales \| Kratos Government Solutions
Segment Reporting Information [Line Items]
Total revenues	$ 80.9	$ 67.6	$ 209.7	$ 202.2

Stockholders’ Equity – Common Stock (Details) - USD ($) $ / shares in Units, $ in Millions		9 Months Ended
	Jun. 23, 2020	Sep. 27, 2020	Sep. 29, 2019
Equity [Abstract]
Number of shares issued in transaction (in shares)	15,525,000
Price per share (in dollars per share)	$ 16.25
Consideration received on transaction	$ 252.3
Proceeds from the issuance of common stock, net of issuance costs	$ 240.4	$ 240.4	$ 0.0

Significant Customers (Details) - U.S. Government - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 27, 2020	Sep. 29, 2019	Sep. 27, 2020	Sep. 29, 2019
Revenue, Major Customer [Line Items]
Sales to the U.S. Government, amount	$ 145.3	$ 126.2	$ 398.8	$ 377.0
Government contracts \| Revenue
Revenue, Major Customer [Line Items]
Sales to the U.S. Government, percentage of total revenue (percent)	72.00%	69.00%	74.00%	71.00%

- Definition

Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-Subparagraph (a)
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 323
-SubTopic 10
-Section 50
-Paragraph 3
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=114001798&loc=d3e33918-111571

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 28
-Subparagraph (f)
-URI http://asc.fasb.org/extlink&oid=75031198&loc=d3e14064-108612

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 10
-Section 50
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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-Publisher FASB
-Name Accounting Standards Codification
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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-Name Accounting Standards Codification
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Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Subparagraph (SX 210.9-05(b)(2))
-URI http://asc.fasb.org/extlink&oid=120399901&loc=d3e537907-122884

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
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-Section S99
-Paragraph 2
-Subparagraph (SX 210.5-03(1))
-URI http://asc.fasb.org/extlink&oid=120395209&loc=SL114868664-224227

+ Details