COVER
COVER - shares | 6 Months Ended | |
Jun. 25, 2023 | Jul. 28, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 25, 2023 | |
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 | 1 Chisholm Trail | |
Entity Address, Address Line Two | Suite 300 | |
Entity Address, City or Town | Round Rock | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 78681 | |
City Area Code | 512 | |
Local Phone Number | 238-9840 | |
Title of 12(b) Security | Common Stock, $0.001 par value | |
Trading Symbol | KTOS | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 128,059,186 | |
Entity Central Index Key | 0001069258 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Jun. 25, 2023 | Dec. 25, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 48.2 | $ 81.3 |
Accounts receivable, net | 115.7 | 105.7 |
Unbilled receivables, net | 222 | 222.8 |
Inventoried costs | 145.9 | 125.5 |
Prepaid expenses | 12.8 | 11.9 |
Other current assets | 43.2 | 35.4 |
Total current assets | 587.8 | 582.6 |
Property, plant and equipment, net | 218.6 | 213.1 |
Operating lease right-of-use assets | 48.2 | 47.4 |
Goodwill | 558.2 | 558.2 |
Intangible assets, net | 52.2 | 55.2 |
Other assets | 97.8 | 95 |
Total assets | 1,562.8 | 1,551.5 |
Current liabilities: | ||
Accounts payable | 58.4 | 57.3 |
Accrued expenses | 41 | 33.8 |
Accrued compensation | 54 | 52.2 |
Accrued interest | 1.5 | 1.5 |
Billings in excess of costs and earnings on uncompleted contracts | 73.1 | 62.1 |
Current portion of operating lease liabilities | 11.6 | 10.8 |
Other current liabilities | 10.4 | 15.6 |
Current liabilities of discontinued operations | 0.9 | 0.9 |
Total current liabilities | 250.9 | 234.2 |
Long-term debt, net of current portion | 232.1 | 250.2 |
Operating lease liabilities, net of current portion | 41 | 40.8 |
Other long-term liabilities | 77.4 | 77.4 |
Long-term liabilities of discontinued operations | 1.1 | 1.4 |
Total liabilities | 602.5 | 604 |
Commitments and contingencies (Note 14) | ||
Redeemable noncontrolling interest | 14.7 | 11.2 |
Stockholders’ equity: | ||
Preferred stock, $0.001 par value, 5,000,000 shares authorized, 0 shares outstanding at June 25, 2023 and December 25, 2022 | 0 | 0 |
Common stock, $0.001 par value, 195,000,000 shares authorized; 127,641,905 and 125,985,306 shares issued and outstanding at June 25, 2023 and December 25, 2022, respectively | 0 | 0 |
Additional paid-in capital | 1,623.7 | 1,608.4 |
Accumulated other comprehensive income (loss) | 2.9 | (0.8) |
Accumulated deficit | (681) | (671.3) |
Total stockholders’ equity | 945.6 | 936.3 |
Total liabilities and stockholders’ equity | $ 1,562.8 | $ 1,551.5 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 25, 2023 | Dec. 25, 2022 |
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) | 127,641,905 | 125,985,306 |
Shares outstanding (in shares) | 127,641,905 | 125,985,306 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 25, 2023 | Jun. 26, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | |
Total revenues | $ 256.9 | $ 224.2 | $ 488.7 | $ 420.4 |
Total costs | 193 | 166.4 | 365.4 | 310.7 |
Gross profit | 63.9 | 57.8 | 123.3 | 109.7 |
Selling, general and administrative expenses | 47.3 | 44.5 | 95.1 | 87.8 |
Merger and acquisition expenses | 0 | 0.1 | 0 | 0.4 |
Research and development expenses | 9.9 | 9.2 | 20.1 | 18.4 |
Restructuring expenses and other | 0 | 5.9 | 0.9 | 6.2 |
Operating income (loss) | 6.7 | (1.9) | 7.2 | (3.1) |
Other expense: | ||||
Interest expense, net | (5.1) | (2.9) | (10.4) | (8.8) |
Loss on extinguishment of debt | 0 | 0 | 0 | (13) |
Other income (loss), net | 0.2 | 0 | (0.1) | 0.1 |
Total other expense, net | (4.9) | (2.9) | (10.5) | (21.7) |
Income (loss) from continuing operations before income taxes | 1.8 | (4.8) | (3.3) | (24.8) |
Provision (benefit) for income taxes from continuing operations | 2.4 | 0.5 | 3.1 | (3.8) |
Loss from continuing operations | (0.6) | (5.3) | (6.4) | (21) |
Discontinued operations: | ||||
Loss from discontinued operations before income taxes | 0 | 0 | 0 | (0.3) |
Income tax benefit | 0.2 | 0.9 | 0.2 | 1 |
Income from discontinued operations | 0.2 | 0.9 | 0.2 | 0.7 |
Net loss | (0.4) | (4.4) | (6.2) | (20.3) |
Less: Net income attributable to noncontrolling interest | 2.3 | 0.3 | 3.5 | 0.3 |
Net loss attributable to Kratos | $ (2.7) | $ (4.7) | $ (9.7) | $ (20.6) |
Basic and diluted loss per common share attributable to Kratos: | ||||
Loss from continuing operations (in dollars per share) | $ (0.02) | $ (0.04) | $ (0.08) | $ (0.17) |
Loss from continuing operations (in dollars per share) | (0.02) | (0.04) | (0.08) | (0.17) |
Income from discontinued operations (in dollars per share) | 0 | 0 | 0 | 0.01 |
Income from discontinued operations (in dollars per share) | 0 | 0 | 0 | 0.01 |
Loss per common share (in dollars per share) | (0.02) | (0.04) | (0.08) | (0.16) |
Loss per common share (in dollars per share) | $ (0.02) | $ (0.04) | $ (0.08) | $ (0.16) |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 129,100 | 126,400 | 128,900 | 126,200 |
Diluted (in shares) | 129,100 | 126,400 | 128,900 | 126,200 |
Service revenues | ||||
Total revenues | $ 103.7 | $ 78.8 | $ 195.3 | $ 146.7 |
Total costs | 80 | 56.2 | 148.2 | 106.1 |
Product sales | ||||
Total revenues | 153.2 | 145.4 | 293.4 | 273.7 |
Total costs | $ 113 | $ 110.2 | $ 217.2 | $ 204.6 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 25, 2023 | Jun. 26, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | |
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (0.4) | $ (4.4) | $ (6.2) | $ (20.3) |
Change in unrealized cash flow hedge (net of taxes of $0.6 million at June 25, 2023) | 1.8 | 0 | 1.8 | 0 |
Change in cumulative translation adjustment | 1.6 | (0.6) | 1.9 | (0.6) |
Comprehensive income (loss) | 3 | (5) | (2.5) | (20.9) |
Less: Comprehensive income attributable to noncontrolling interest | 2.3 | 0.3 | 3.5 | 0.3 |
Comprehensive income (loss) attributable to Kratos | $ 0.7 | $ (5.3) | $ (6) | $ (21.2) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended |
Jun. 25, 2023 | Jun. 25, 2023 | |
Statement of Comprehensive Income [Abstract] | ||
Tax effect of change in unrealized cash flow hedge | $ 0.6 | $ 0.6 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - USD ($) $ in Millions | Total | Redeemable Noncontrolling Interest | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit |
Balance, beginning of period at Dec. 26, 2021 | $ 15.2 | |||||
Redeemable Noncontrolling Interest | ||||||
Net Income (loss) | 0.3 | |||||
Balance, end of period at Jun. 26, 2022 | 7.8 | |||||
Balance, beginning of period (in shares) at Dec. 26, 2021 | 124,000,000 | |||||
Balance, beginning of period at Dec. 26, 2021 | $ 945.1 | $ 0 | $ 1,578.9 | $ 0.6 | $ (634.4) | |
Increase (Decrease) in Stockholders' Equity | ||||||
Stock-based compensation | 13.3 | 13.3 | ||||
Issuance of common stock for employee stock purchase plan and stock options (in shares) | 200,000 | |||||
Issuance of common stock for employee stock purchase plan and stock options | 2.9 | 2.9 | ||||
Restricted stock issued and related taxes (in shares) | 900,000 | |||||
Restricted stock issued and related taxes | (11.5) | (11.5) | ||||
Issuance of common stock for acquisitions (in shares) | 300,000 | |||||
Issuance of common stock for acquisitions | 5 | 5 | ||||
Net Income (loss) | (20.6) | (20.6) | ||||
Other comprehensive income (loss), net of tax | (0.6) | (0.6) | ||||
Changes in noncontrolling interest (in shares) | 200,000 | |||||
Changes in noncontrolling interest | 4.5 | (7.7) | ||||
Balance, end of period (in shares) at Jun. 26, 2022 | 125,600,000 | |||||
Balance, end of period at Jun. 26, 2022 | 938.1 | $ 0 | 1,593.1 | 0 | (655) | |
Balance, beginning of period at Mar. 27, 2022 | 15.2 | |||||
Redeemable Noncontrolling Interest | ||||||
Net Income (loss) | 0.3 | |||||
Balance, end of period at Jun. 26, 2022 | 7.8 | |||||
Balance, beginning of period (in shares) at Mar. 27, 2022 | 124,800,000 | |||||
Balance, beginning of period at Mar. 27, 2022 | 932.3 | $ 0 | 1,582 | 0.6 | (650.3) | |
Increase (Decrease) in Stockholders' Equity | ||||||
Stock-based compensation | 6.4 | 6.4 | ||||
Restricted stock issued and related taxes (in shares) | 300,000 | |||||
Restricted stock issued and related taxes | (4.8) | (4.8) | ||||
Issuance of common stock for acquisitions (in shares) | 300,000 | |||||
Issuance of common stock for acquisitions | 5 | 5 | ||||
Net Income (loss) | (4.7) | (4.7) | ||||
Other comprehensive income (loss), net of tax | (0.6) | (0.6) | ||||
Changes in noncontrolling interest (in shares) | 200,000 | |||||
Changes in noncontrolling interest | 4.5 | (7.7) | 4.5 | |||
Balance, end of period (in shares) at Jun. 26, 2022 | 125,600,000 | |||||
Balance, end of period at Jun. 26, 2022 | $ 938.1 | $ 0 | 1,593.1 | 0 | (655) | |
Balance, beginning of period at Dec. 25, 2022 | 11.2 | |||||
Redeemable Noncontrolling Interest | ||||||
Net Income (loss) | 3.5 | |||||
Balance, end of period at Jun. 25, 2023 | 14.7 | |||||
Balance, beginning of period (in shares) at Dec. 25, 2022 | 125,985,306 | 126,000,000 | ||||
Balance, beginning of period at Dec. 25, 2022 | $ 936.3 | $ 0 | 1,608.4 | (0.8) | (671.3) | |
Increase (Decrease) in Stockholders' Equity | ||||||
Stock-based compensation | 12.6 | 12.6 | ||||
Issuance of common stock for employee stock purchase plan and stock options (in shares) | 300,000 | |||||
Issuance of common stock for employee stock purchase plan and stock options | 2.9 | 2.9 | ||||
Restricted stock issued and related taxes (in shares) | 500,000 | |||||
Restricted stock issued and related taxes | (3.4) | (3.4) | ||||
Net Income (loss) | (9.7) | (9.7) | ||||
Other comprehensive income (loss), net of tax | 3.7 | 3.7 | ||||
Changes in noncontrolling interest (in shares) | 800,000 | |||||
Changes in noncontrolling interest | $ 3.2 | 3.2 | ||||
Balance, end of period (in shares) at Jun. 25, 2023 | 127,641,905 | 127,600,000 | ||||
Balance, end of period at Jun. 25, 2023 | $ 945.6 | $ 0 | 1,623.7 | 2.9 | (681) | |
Balance, beginning of period at Mar. 26, 2023 | 12.4 | |||||
Redeemable Noncontrolling Interest | ||||||
Net Income (loss) | 2.3 | |||||
Balance, end of period at Jun. 25, 2023 | $ 14.7 | |||||
Balance, beginning of period (in shares) at Mar. 26, 2023 | 126,700,000 | |||||
Balance, beginning of period at Mar. 26, 2023 | 931.2 | $ 0 | 1,610 | (0.5) | (678.3) | |
Increase (Decrease) in Stockholders' Equity | ||||||
Stock-based compensation | 6 | 6 | ||||
Restricted stock issued and related taxes (in shares) | 100,000 | |||||
Restricted stock issued and related taxes | (0.8) | (0.8) | ||||
Net Income (loss) | (2.7) | (2.7) | ||||
Other comprehensive income (loss), net of tax | 3.4 | 3.4 | ||||
Changes in noncontrolling interest (in shares) | 800,000 | |||||
Changes in noncontrolling interest | $ 8.5 | 8.5 | ||||
Balance, end of period (in shares) at Jun. 25, 2023 | 127,641,905 | 127,600,000 | ||||
Balance, end of period at Jun. 25, 2023 | $ 945.6 | $ 0 | $ 1,623.7 | $ 2.9 | $ (681) |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 25, 2023 | Jun. 26, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | Dec. 25, 2022 | |
Operating activities: | |||||
Net loss | $ (0.4) | $ (4.4) | $ (6.2) | $ (20.3) | |
Income from discontinued operations | 0.2 | 0.9 | 0.2 | 0.7 | |
Loss from continuing operations | (0.6) | (5.3) | (6.4) | (21) | |
Adjustments to reconcile loss from continuing operations to net cash used in operating activities from continuing operations: | |||||
Depreciation and amortization | 7.9 | 6.9 | 15.8 | 13.9 | |
Deferred income taxes | 0.1 | 0.4 | |||
Amortization of lease right-of-use assets | 5.5 | 5.3 | |||
Stock-based compensation | 12.6 | 13.3 | |||
Amortization of deferred financing costs | 0.3 | 0.4 | |||
Loss on extinguishment of debt | 0 | 0 | 0 | 13 | |
Provision for doubtful accounts | 0.9 | 0 | |||
Litigation related charges | 0 | 5.5 | |||
Changes in assets and liabilities, net of acquisitions: | |||||
Accounts receivable | (10.7) | 0.3 | |||
Unbilled receivables | (7.1) | (15.3) | |||
Inventoried costs | (20) | (25.8) | |||
Prepaid expenses and other assets | (9.7) | (13.2) | |||
Operating lease liabilities | (5.2) | (5.5) | |||
Accounts payable | 2.2 | 5.6 | |||
Accrued expenses | 7.2 | 7.7 | |||
Accrued compensation | 2 | (1.3) | |||
Accrued interest | (0.1) | (1.1) | |||
Billings in excess of costs and earnings on uncompleted contracts | 11.2 | 1.3 | |||
Income tax receivable and payable | 0.6 | (6.2) | |||
Other liabilities | (1.3) | (6.8) | |||
Net cash used in operating activities from continuing operations | (2.1) | (29.5) | |||
Investing activities: | |||||
Cash paid for acquisitions, net of cash acquired | 0 | (131.9) | |||
Proceeds from sale of assets | 8.3 | 0.1 | |||
Capital expenditures | (18.9) | (21.9) | |||
Net cash used in investing activities from continuing operations | (10.6) | (153.7) | |||
Financing activities: | |||||
Proceeds from the issuance of long-term debt | 0 | 200 | |||
Borrowing under credit facility | 34 | 100 | |||
Redemption of Senior Secured Notes | 0 | (309.8) | |||
Repayment under credit facility and term loan | (53.5) | 0 | |||
Debt issuance costs | 0 | (3.2) | |||
Payments under finance leases | (0.4) | (0.3) | (0.8) | (0.6) | |
Payments of employee taxes withheld from share-based awards | (3.4) | (11.5) | |||
Proceeds from shares issued under equity plans | 2.9 | 2.9 | |||
Net cash used in financing activities from continuing operations | (20.8) | (22.2) | |||
Net cash used in continuing operations | (33.5) | (205.4) | |||
Net operating cash flows of discontinued operations | (0.1) | (0.4) | |||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 0.5 | (1.2) | |||
Net decrease in cash, cash equivalents and restricted cash | (33.1) | (207) | |||
Cash, cash equivalents and restricted cash at beginning of period | 81.3 | 349.4 | $ 349.4 | ||
Cash, cash equivalents and restricted cash at end of period | 48.2 | 142.4 | 48.2 | 142.4 | $ 81.3 |
Significant non-cash investing and financing activities: | |||||
Financing lease obligation incurred | $ 0.1 | $ 9.1 | 0.1 | 9.1 | |
Common stock issuance for purchase of noncontrolling interests | 10.7 | 2.7 | |||
Common stock issuance for acquisition | $ 0 | $ 5 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 25, 2023 | |
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 June 25, 2023 and for the three and six months ended June 25, 2023 and June 26, 2022 is unaudited. The condensed consolidated balance sheet as of December 25, 2022 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 25, 2022, included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 23, 2023 (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 subsidiary, KTT CORE, Inc., a Delaware corporation formerly known as KTT CORE, LLC (“KTT Core”), which is 90.05% owned by the Company. All inter-company transactions have been eliminated in consolidation. Noncontrolling interest consists of the remaining 9.95% interest in KTT 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 June 25, 2023 and June 26, 2022 consisted of 13-week periods. The six month periods ended June 25, 2023 and June 26, 2022 consisted of 26-week periods. There are 53 calendar weeks in the fiscal year ending on December 31, 2023 and 52 calendar weeks in the fiscal year ending December 25, 2022. (d) Accounting Estimates There have been no significant changes in the Company’s accounting estimates for the six months ended June 25, 2023 as compared to the accounting estimates described in the Annual Report on Form 10-K. (e) Fair Value of Financial Instruments The Company uses forward exchange contracts to manage foreign currency risks associated with certain transactions, specifically forecasted materials and salaries paid in foreign currencies. The Company also has entered into an interest rate swap contract in order to mitigate the exposure to interest rate movements associated with the Company’s Term Loan A. These derivative instruments are measured at fair value using observable market inputs such as interest rates. Based on these inputs, the derivative instruments are classified within Level 2 of the valuation hierarchy. At June 25, 2023, the derivative instruments were included in other current assets and other current liabilities on the Company's Condensed Consolidated Balance Sheets. The carrying amounts and the related fair values of the Company’s derivative instruments measured at fair value on a recurring basis at June 25, 2023, are presented in Note 15. |
Acquisitions
Acquisitions | 6 Months Ended |
Jun. 25, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
Acquisitions | Acquisitions Cosmic Advanced Engineered Solutions, Inc. On December 27, 2021, Kratos Integral Holdings, LLC entered into a Stock Purchase Agreement to acquire Cosmic Advanced Engineered Solutions, Inc. (“Cosmic”) from the Carol L. Zanmiller Living Trust and the John G. Hutchens Living Trust for $37.9 million in cash (including a $0.4 million holdback which was subsequently settled). Cosmic focuses on radio frequency (“RF”), terrestrial, and space-based communication solutions, including digital signals processing and geolocation analysis. In addition, Cosmic provides overhead persistent infrared for missile defense systems and embedded cyber solutions to U.S. government agencies. On December 27, 2021, the acquisition was completed following the satisfaction of all closing conditions, including receipt of regulatory approval from all required government authorities. The operating results of the acquisition have been included in the Company’s results of operations from the effective acquisition date. Cosmic is included in the 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 integrating Cosmic’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 identifiable 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 allocation of the purchase price over the estimated fair values of the major assets acquired and liabilities assumed (in millions): Accounts receivable $ 3.8 Unbilled receivables 4.1 Other current assets 0.1 Property and equipment 1.3 Intangible assets 8.5 Total identifiable net assets acquired 17.8 Total identifiable net liabilities assumed (9.1) Goodwill 29.2 Net assets acquired, excluding cash $ 37.9 Based on the Company’s estimate of fair value, as of December 27, 2021, net liabilities included $6.7 million of current liabilities. The identifiable intangible assets include trade names of $0.6 million with a remaining useful life of 5 years, backlog of $1.7 million with an estimated useful life of 1 year, customer relationships of $4.4 million with a remaining useful life of 10 years, and developed technology of $1.8 million with a remaining useful life of 5 years. The Company also established a deferred tax liability of $2.4 million for the difference between the financial statement basis and tax basis of the acquired assets of Cosmic and a corresponding increase in goodwill. The goodwill recorded in this transaction is not expected to be tax-deductible. The value of customer relationships was estimated using the multi-period excess earnings method (“MPEEM”), an income approach (Level 3), which converts projected revenues and costs into cash flows. To reflect the fact that certain other assets contribute to the cash flows generated, the returns for these contributory assets were removed to arrive at estimated cash flows solely attributable to the acquired customer relationships, which were discounted at a rate of 11% to determine the fair value. The value of backlog was also valued using MPEEM. The value of developed technology was estimated using the relief-from-royalty method, an income approach (Level 3), which estimates the cost savings that accrue to the owner of the intangible asset that would otherwise be payable as royalties or license fees on revenues earned through the use of the asset. A royalty rate of 11% was applied to the projected revenues associated with the intangible asset to determine the amount of savings in order to determine the fair value. A summary of the consideration paid for the acquired ownership in Cosmic is as follows (in millions): Cash paid $ 39.4 Less: Cash acquired (1.5) Total consideration $ 37.9 Southern Research Engineering Division On March 9, 2022, the Company executed an Asset Purchase Agreement to acquire the assets of the Engineering Division of Southern Research Institute (“SRI”), an Alabama non-profit corporation, for a purchase price of approximately $79.4 million, comprised of $74.4 million in cash, subject to adjustments for working capital, potential earn-out consideration tied to revenue from certain in-development products, indebtedness and transaction expenses, and $5.0 million in Kratos common stock. SRI’s Engineering Division (“SRE”) is the market leader in assisting customers in the development, modeling, and deployment of advanced materials for extreme environments, including hypersonic, space, missile, missile defense, strategic deterrence, propulsion systems, and energy applications. SRE also specializes in Intelligence Surveillance and Reconnaissance (“ISR”) sensor development, electromechanical systems design and integration, aerospace engineering, materials engineering, artificial intelligence and machine learning, directed energy, RF systems design and integration, advanced manufacturing, and computational sciences. The acquisition established Kratos SRE, Inc., a new business within Kratos’ Defense and Rocket Support Services Division. On May 23, 2022, the acquisition was completed following the satisfaction of all closing conditions, including receipt of necessary approval from all required government authorities. The operating results of the acquisition have been included in the Company’s results of operations from the effective acquisition date. 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 SRE’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 identifiable 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 $ 2.9 Unbilled receivables 11.1 Inventory 0.5 Other current assets 0.2 Property and equipment 22.8 Other assets 0.2 Intangible assets 10.8 Total identifiable net assets acquired 48.5 Total identifiable net liabilities assumed (3.4) Goodwill 34.3 Net assets acquired, excluding cash $ 79.4 Based on the Company’s estimate of fair value, as of May 23, 2022, net liabilities included $2.5 million of current liabilities. The identifiable intangible assets include trade names of $0.5 million with a remaining useful life of 5 years, contracts and backlog of $2.5 million with an estimated useful life of 3 years, in-process research and development of $7.3 million that will commence amortization at the completion of the development and developed technology of $0.5 million with a remaining useful life of 3 years. The Company also established a deferred tax asset of $0.2 million for the difference between the financial statement basis and tax basis of the acquired assets of SRE and a corresponding decrease in goodwill. The goodwill recorded in this transaction is expected to be tax-deductible. The value of backlog was estimated using MPEEM, an income approach (Level 3), which converts projected revenues and costs into cash flows. To reflect the fact that certain other assets contribute to the cash flows generated, the returns for these contributory assets were removed to arrive at estimated cash flows solely attributable to the acquired backlog, which were discounted at a rate of 6.4% to determine the fair value. The value of developed technology was estimated using the relief-from-royalty method, an income approach (Level 3), which estimates the cost savings that accrue to the owner of the intangible asset that would otherwise be payable as royalties or license fees on revenues earned through the use of the asset. A royalty rate was applied to the projected revenues associated with the intangible asset to determine the amount of savings, which was at a rate of 11% to determine the fair value. The value of in-process research and development was also estimated using the relief-from-royalty method. A royalty rate of 12% was applied to the projected revenues associated with the intangible asset to determine the amount of savings in order to determine the fair value. The amounts of revenue and operating income of SRE included in the Company’s condensed consolidated statements of operations were $13.1 million and $0.7 million for the three months ended June 25, 2023, respectively, and $25.1 million and $1.3 million for the six months ended June 25, 2023, respectively. The amounts of revenue and operating loss of SRE included in the Company’s condensed consolidated statements of operations were $4.1 million and $0.5 million for the three months ended June 26, 2022, respectively. A summary of the consideration paid for the acquired assets is as follows (in millions): Cash paid $ 74.4 Common stock issued 5.0 Total consideration $ 79.4 Pro Forma Financial Information (Unaudited) The following tables summarize the supplemental condensed consolidated statements of operations information on an unaudited pro forma basis as if the acquisition of SRE occurred on December 26, 2021 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 income (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 three and six month periods ended June 26, 2022 (all amounts, except per share amounts, are in millions): Three Months Ended Six Months Ended June 26, 2022 June 26, 2022 Pro forma revenues $ 230.9 $ 437.4 Pro forma net loss before tax $ (4.5) $ (23.7) Pro forma net loss $ (4.4) $ (19.5) Basic pro forma loss per share $ (0.04) $ (0.15) Diluted pro forma loss per share $ (0.04) $ (0.15) |
Revenue Recognition
Revenue Recognition | 6 Months Ended |
Jun. 25, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | Revenue Recognition The Company has adopted the FASB ASU 2014-09, Revenue from Contracts with Customers, and the related amendments, which are codified into Accounting Standards Codification (“ASC”) 606 (“ASC 606”). 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 each 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, 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. For the majority of contracts, the Company satisfies the underlying performance obligations over time as the customer obtains control or receives benefits as work is performed on the contract. The Company generally recognizes revenue over time as work is performed on long-term contracts because of the continuous transfer of control to the customer. For U.S. government contracts, this continuous transfer of control to the customer is supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay for costs incurred plus a reasonable profit and take control of any work in process. Similarly, for non-U.S. government contracts, the customer typically controls the work in process as evidenced either by contractual termination clauses or by our rights to payment of the transaction price associated with work performed to date on products or services that do not have an alternative use to the Company. As a result, under ASC 606, revenue is recognized over time using the cost-to-cost method (cost incurred relative to total estimated cost at completion). Remaining Performance Obligations The Company calculates revenues from remaining performance obligations as the dollar value of the remaining performance obligations on executed contracts. On June 25, 2023, the Company had approximately $1,157.3 million of remaining performance obligations. The Company expects to recognize approximately 39% of the remaining performance obligations as revenue in fiscal year 2023, an additional 32% in fiscal year 2024, 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 the 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 six-month periods ended June 25, 2023, and June 26, 2022. Likewise, total cumulative catch-up adjustments were not material for the three and six-month periods ended June 25, 2023, and June 26, 2022. 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): June 25, 2023 December 25, 2022 Net Change Contract assets $ 222.0 $ 222.8 $ (0.8) Contract liabilities $ 73.1 $ 62.1 $ 11.0 Net contract assets $ 148.9 $ 160.7 $ (11.8) Contract assets decreased $0.8 million during the six months ended June 25, 2023, primarily due to lower unbilled receivables, net during the six months ended June 25, 2023. There were no significant impairment losses related to any receivables or contract assets arising from the Company’s contracts with customers during the six months ended June 25, 2023. Contract liabilities increased $11.0 million during the six months ended June 25, 2023, primarily due to payments received in excess of revenue recognized on these performance obligations. For the three and six months ended June 25, 2023, the Company recognized revenue of $12.4 million and $33.6 million that was previously included in the contract liabilities that existed at December 25, 2022. For the three and six months ended June 26, 2022 the Company recognized revenue of $14.8 million and $36.0 million that was previously included in the contract liabilities that existed at December 26, 2021. 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 June 25, 2023, approximately $4.8 million in unbilled receivables remained outstanding on this project. In March 2022, the Company and the customer agreed to a settlement of $6.0 million for a portion of the amounts outstanding on this project, which was collected in July 2022. The remaining unbilled receivable balance of $4.8 million is subject to negotiation and settlement with the customer. The Company was also in dispute with an international customer in the Unmanned Systems (“US”) segment concerning the completion of certain system requirements and certain contractual milestones related to a contract the Company acquired with the acquisition of Composite Engineering Inc. in 2012. On June 30, 2022, the parties entered into a settlement agreement to resolve their dispute and to settle all claims and counterclaims, and are currently in the process of implementing the terms of the settlement agreement. The Company recorded a $5.5 million litigation settlement charge which is included in restructuring expenses and other in the year ended December 25, 2022. Disaggregation of Revenue The following series of tables presents the Company’s revenue disaggregated by several categories. For the majority of contracts, revenue is recognized over time as work is performed on the contract. Revenue by contract type was as follows (in millions): Three Months Ended Six Months Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 Kratos Government Solutions Fixed price $ 132.5 $ 119.9 $ 259.5 $ 221.2 Cost plus fee 59.9 37.1 105.6 69.4 Time and materials 12.4 10.8 23.5 20.8 Total Kratos Government Solutions 204.8 167.8 388.6 311.4 Unmanned Systems Fixed price 39.0 40.7 75.9 72.2 Cost plus fee 10.5 15.3 18.6 35.7 Time and materials 2.6 0.4 5.6 1.1 Total Unmanned Systems 52.1 56.4 100.1 109.0 Total Revenues $ 256.9 $ 224.2 $ 488.7 $ 420.4 Revenue by customer was as follows (in millions): Three Months Ended Six Months Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 Kratos Government Solutions U.S. Government (1) $ 129.5 $ 104.2 $ 244.0 $ 193.7 International (2) 47.9 36.1 92.9 70.8 U.S. Commercial and other customers 27.4 27.5 51.7 46.9 Total Kratos Government Solutions 204.8 167.8 388.6 311.4 Unmanned Systems U.S. Government (1) 49.1 51.9 94.9 102.0 International (2) 2.4 3.6 4.3 5.4 U.S. Commercial and other customers 0.6 0.9 0.9 1.6 Total Unmanned Systems 52.1 56.4 100.1 109.0 Total Revenues $ 256.9 $ 224.2 $ 488.7 $ 420.4 (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
Discontinued Operations | 6 Months Ended |
Jun. 25, 2023 | |
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”). To date, the Company has received approximately $68.7 million of aggregate net cash proceeds from the Transaction, after taking into account amounts that were paid by the Company pursuant to a negotiated transaction services agreement between the Company and the Buyer, receipt of approximately $7.3 million in net working capital retained by the Company, and associated transaction fees and expenses, including the impact of the final settlement and determination of the closing net working capital adjustment and litigation which was settled with the Buyer in the fourth quarter of 2021 and first quarter of 2022, respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 6 Months Ended |
Jun. 25, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Goodwill and Intangible Assets (a) Goodwill The carrying amounts of goodwill as of June 25, 2023 and December 25, 2022 by reportable segment are as follows (in millions): KGS US Total Gross value $ 683.6 $ 127.9 $ 811.5 Less accumulated impairment 239.5 13.8 253.3 Net $ 444.1 $ 114.1 $ 558.2 (b) Purchased Intangible Assets The following table sets forth information for finite-lived and indefinite-lived intangible assets (in millions): As of June 25, 2023 As of December 25, 2022 Gross Accumulated Net Gross Accumulated Net Acquired finite-lived intangible assets: Customer relationships $ 80.9 $ (61.5) $ 19.4 $ 80.9 $ (60.1) $ 20.8 Contracts and backlog 39.1 (37.1) 2.0 39.1 (36.3) 2.8 Developed technology and technical know-how 33.7 (27.6) 6.1 33.7 (27.0) 6.7 Trade names 3.8 (2.5) 1.3 3.8 (2.3) 1.5 In-process research and development 16.8 (0.3) 16.5 16.8 (0.3) 16.5 Total finite-lived intangible assets 174.3 (129.0) 45.3 174.3 (126.0) 48.3 Indefinite-lived trade names 6.9 — 6.9 6.9 — 6.9 Total intangible assets $ 181.2 $ (129.0) $ 52.2 $ 181.2 $ (126.0) $ 55.2 Consolidated amortization expense related to intangible assets subject to amortization was $1.4 million and $1.6 million for the three months ended June 25, 2023 and June 26, 2022, respectively, and $3.0 million and $3.3 million for the six months ended June 25, 2023 and June 26, 2022, respectively. |
Inventoried Costs
Inventoried Costs | 6 Months Ended |
Jun. 25, 2023 | |
Inventory Disclosure [Abstract] | |
Inventoried Costs | Inventoried Costs Inventoried costs, consisted of the following components (in millions): June 25, 2023 December 25, 2022 Raw materials $ 76.6 $ 73.6 Work in process 62.7 50.8 Finished goods 6.6 1.1 Total inventoried costs $ 145.9 $ 125.5 |
Net Income (Loss) per Common Sh
Net Income (Loss) per Common Share | 6 Months Ended |
Jun. 25, 2023 | |
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 ASC 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 reflects the effects of potentially dilutive securities. Shares from stock options and awards, excluded from the calculation of diluted net loss per share because their inclusion would have been anti-dilutive, were 1.0 million and 1.2 million for the three and six months ended June 25, 2023, respectively, and 1.8 million and 1.4 million for the three and six months ended June 26, 2022, respectively. |
Leases
Leases | 6 Months Ended |
Jun. 25, 2023 | |
Leases [Abstract] | |
Leases | LeasesThe 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 Six Months Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 Amortization of right of use assets - finance leases $ 0.7 $ 0.6 $ 1.5 $ 1.3 Interest on lease liabilities - finance leases 0.8 0.7 1.5 1.4 Operating lease cost 3.4 3.3 6.7 6.6 Short-term lease cost 0.3 0.2 0.5 0.4 Variable lease cost (cost excluded from lease payments) 0.1 0.1 0.1 0.1 Sublease income — — — — Total lease cost $ 5.3 $ 4.9 $ 10.3 $ 9.8 The components of leases on the balance sheet were as follows (in millions): June 25, 2023 December 25, 2022 Operating leases: Operating lease right-of-use assets $ 48.2 $ 47.4 Current portion of operating lease liabilities $ 11.6 $ 10.8 Operating lease liabilities, net of current portion $ 41.0 $ 40.8 Finance leases: Property, plant and equipment, net $ 44.1 $ 45.8 Other current liabilities $ 1.4 $ 1.7 Other long-term liabilities $ 49.8 $ 49.9 Cash paid for amounts included in the measurement of lease liabilities was as follows (in millions): Three Months Ended Six Months Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 Finance lease - cash paid for interest $ 0.8 $ 0.7 $ 1.5 $ 1.4 Finance lease - financing cash flows $ 0.4 $ 0.3 $ 0.8 $ 0.6 Operating lease - operating cash flows (fixed payments) $ 3.6 $ 3.4 $ 6.6 $ 6.8 Other supplemental noncash information (in millions): Three Months Ended Six Months Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 Operating lease liabilities arising from obtaining right-of-use assets $ 4.5 $ 1.3 $ 6.4 $ 5.0 Finance lease liabilities arising from obtaining right-of-use assets $ 0.1 $ 9.1 $ 0.1 $ 9.1 June 25, 2023 June 26, 2022 Weighted-average remaining lease term (in years): Operating leases 4.76 4.32 Finance leases 15.08 15.56 Weighted-average discount rate: Operating leases 4.95 % 6.44 % Finance leases 6.41 % 6.03 % The maturity of lease liabilities is (in millions): Operating Leases Finance Leases 2023 (1) $ 7.3 $ 2.3 2024 13.2 4.8 2025 11.6 4.9 2026 10.1 5.0 2027 8.9 5.1 Thereafter 7.6 59.5 Total lease payments 58.7 81.6 Less: imputed interest (6.1) (30.4) Total present value of lease liabilities $ 52.6 $ 51.2 (1) Excludes the six months ended June 25, 2023. |
Leases | LeasesThe 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 Six Months Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 Amortization of right of use assets - finance leases $ 0.7 $ 0.6 $ 1.5 $ 1.3 Interest on lease liabilities - finance leases 0.8 0.7 1.5 1.4 Operating lease cost 3.4 3.3 6.7 6.6 Short-term lease cost 0.3 0.2 0.5 0.4 Variable lease cost (cost excluded from lease payments) 0.1 0.1 0.1 0.1 Sublease income — — — — Total lease cost $ 5.3 $ 4.9 $ 10.3 $ 9.8 The components of leases on the balance sheet were as follows (in millions): June 25, 2023 December 25, 2022 Operating leases: Operating lease right-of-use assets $ 48.2 $ 47.4 Current portion of operating lease liabilities $ 11.6 $ 10.8 Operating lease liabilities, net of current portion $ 41.0 $ 40.8 Finance leases: Property, plant and equipment, net $ 44.1 $ 45.8 Other current liabilities $ 1.4 $ 1.7 Other long-term liabilities $ 49.8 $ 49.9 Cash paid for amounts included in the measurement of lease liabilities was as follows (in millions): Three Months Ended Six Months Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 Finance lease - cash paid for interest $ 0.8 $ 0.7 $ 1.5 $ 1.4 Finance lease - financing cash flows $ 0.4 $ 0.3 $ 0.8 $ 0.6 Operating lease - operating cash flows (fixed payments) $ 3.6 $ 3.4 $ 6.6 $ 6.8 Other supplemental noncash information (in millions): Three Months Ended Six Months Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 Operating lease liabilities arising from obtaining right-of-use assets $ 4.5 $ 1.3 $ 6.4 $ 5.0 Finance lease liabilities arising from obtaining right-of-use assets $ 0.1 $ 9.1 $ 0.1 $ 9.1 June 25, 2023 June 26, 2022 Weighted-average remaining lease term (in years): Operating leases 4.76 4.32 Finance leases 15.08 15.56 Weighted-average discount rate: Operating leases 4.95 % 6.44 % Finance leases 6.41 % 6.03 % The maturity of lease liabilities is (in millions): Operating Leases Finance Leases 2023 (1) $ 7.3 $ 2.3 2024 13.2 4.8 2025 11.6 4.9 2026 10.1 5.0 2027 8.9 5.1 Thereafter 7.6 59.5 Total lease payments 58.7 81.6 Less: imputed interest (6.1) (30.4) Total present value of lease liabilities $ 52.6 $ 51.2 (1) Excludes the six months ended June 25, 2023. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 25, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes A reconciliation of the total income tax provision (benefit) to the amount computed by applying the statutory federal income tax rate of 21% to income (loss) from continuing operations before income taxes for the three and six months ended June 25, 2023 and June 26, 2022 is as follows (in millions): For the Three Months Ended For the Six Months Ended June 25, June 26, June 25, June 26, Income tax expense (benefit) at federal statutory rate $ 0.4 $ (1.0) $ (0.7) $ (5.2) Nondeductible expenses and other 1.9 1.5 3.5 2.5 Stock compensation - excess tax shortfalls (benefits) 0.3 0.3 0.7 (0.6) Federal impact of research & development tax credits (0.2) (0.3) (0.4) (0.5) Provision (benefit) for income taxes from continuing operations $ 2.4 $ 0.5 $ 3.1 $ (3.8) The Company calculates its interim income tax provision in accordance with ASC Topic 270, “ Interim Reporting ,” and ASC Topic 740, “ Accounting for Income Taxes. ” Prior to 2022, the Company calculated the provision for income taxes during the interim reporting periods by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. The Company determined that since small changes in estimated “ordinary” income would result in significant changes in the estimated annual effective tax rate, the historical method used prior to 2022 would not provide a reliable estimate for the six months ended June 25, 2023 and June 26, 2022. Therefore, a discrete effective tax rate method was used to calculate taxes for the six months ended June 25, 2023 and June 26, 2022. As of June 25, 2023, the Company had $25.1 million of unrecognized tax benefits. Included in the balance of unrecognized tax benefits at June 25, 2023 are $22.6 million that, if recognized, would impact the Company’s effective income tax rate. The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. For the six months ended June 25, 2023 and June 26, 2022, the Company recorded an expense for interest and penalties of $0.1 million and $0.2 million, respectively. For the six months ended June 25, 2023 and June 26, 2022, 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 $0.1 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. |
Debt
Debt | 6 Months Ended |
Jun. 25, 2023 | |
Debt Disclosure [Abstract] | |
Debt | Debt (a) New Credit Facility On February 18, 2022, the Company completed the refinancing of its outstanding $90 million revolving credit facility and $300 million 6.5% Senior Secured Notes (the “Senior Secured Notes”), with a new 5-year $200 million Revolving Credit Facility and 5-year $200 million Term Loan A (collectively, the “New Credit Facility”). The Company incurred debt issuance costs of $3.3 million associated with the New Credit Facility. As of June 25, 2023, the Company made $5.0 million in principal payments on Term Loan A, and has net amounts outstanding of approximately $43.0 million under the new Revolving Credit Facility, with approximately $157.0 million remaining in borrowing capacity, less approximately $13.6 million of letters of credit outstanding. On February 18, 2022, the proceeds of $300 million from the New Credit Facility, along with cash funded by the Company for the 3.25% call premium to redeem the Company’s outstanding Senior Secured Notes, plus accrued interest, was distributed to the trustee for redemption of the Senior Secured Notes. The redemption of the Company’s outstanding $300 million 6.5% Senior Secured Notes due November 2025 closed on March 14, 2022, for an amount of cash equal to 103.25% of the principal amount thereof plus accrued and unpaid interest thereon. The Company incurred a loss on the extinguishment of debt of $9.8 million related to the call premium on the Senior Secured Notes and the write-off of $3.2 million of unamortized debt issuance costs, resulting in a total loss on extinguishment of debt of $13.0 million. The New Credit Facility is governed by a Credit Agreement (the “Credit Agreement”), which establishes the 5-year senior secured credit facility which is comprised of the $200 million Revolving Credit Facility (which includes sub-facilities for the incurrence of up to $10.0 million of swingline loans and the issuance of up to $50.0 million of Letters of Credit) and the $200 million Term Loan A. The Credit Agreement contemplates uncommitted incremental credit facilities of up to $200 million (which amount would be reduced by the aggregate amount of any and all incremental credit facilities actually established under the Credit Agreement) plus additional uncommitted incremental capacity subject to a limitation based on the Company’s pro forma total net leverage ratio (including any such additional uncommitted incremental capacity). Borrowings under the revolving credit facility and the term loan credit facility may take the form of base rate loans or Secured Overnight Financing Rate (“SOFR”) loans. Base rate loans under the Credit Agreement 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 (as defined in the Credit Agreement) prime lending rate, as in effect at such time, (ii) the Federal Funds Rate (as defined in the Credit Agreement), as in effect at such time, plus 0.50%, (iii) the Adjusted Term SOFR (as defined in the Credit Agreement) for a one-month tenor in effect on such day, plus 1.00% and (iv) 1.00%. SOFR 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 Term SOFR for an Interest Period (as defined in the Credit Agreement) selected by the Company of one, three or six months. The Applicable Margin varies between 1.25% and 2.25% per annum for SOFR loans and between 0.25% and 1.25% per annum for base rate loans, and is based on the Company’s total net leverage ratio from time to time. Mandatory amortization on the Term Loan A is 2.5% in each of the first and second years and 5.0% in each of the third, fourth and fifth years, with the remaining outstanding balance due at maturity. The Credit Agreement contains certain covenants, which include, but are not limited to, restrictions on indebtedness, liens, fundamental changes, restricted payments, asset sales, and investments, and places limits on various other payments. The Company was in compliance with the covenants contained in the Credit Agreement as of June 25, 2023. On April 28, 2023, the Company entered into an interest rate swap contract to hedge U.S. dollar-one month Term SOFR in order to fix the interest rate movements associated with the Company’s Term Loan A. The initial hedge amount was $195.0 million and amortizes in accordance with Term Loan A. The swap is at a fixed rate of one-month term SOFR of 3.721% and settles monthly on the last day of each calendar month. The swap has an effective date of May 1, 2023 and terminates on May 1, 2026. Refer to Note 15 for further discussion of the accounting treatment of the swap arrangement. Term Loan and Revolving Credit Debt Term loan and revolving credit debt and the current period interest rates are as follows (in millions): June 25, 2023 December 25, 2022 Term Loan A $ 195.0 $ 197.5 Revolving credit facility 43.0 60.0 Total debt 238.0 257.5 Less current portion 5.0 6.3 Total long-term debt, less current portion 233.0 251.2 Less long-term unamortized debt issuance costs - term loans 0.9 1.0 Total long-term debt, net of unamortized debt issuance costs - term loans $ 232.1 $ 250.2 Unamortized debt issuance costs - revolving credit facility $ 0.9 $ 1.0 Current period interest rate 7.5 % 6.4 % Future long-term debt principal payments at June 25, 2023 were as follows (in millions): 2023 $ 3.8 2024 8.7 2025 10.0 2026 10.0 2027 205.5 $ 238.0 (b) 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 “Senior Secured 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 Senior Secured Notes. The Senior Secured Notes were redeemed on March 14, 2022. (c) Other Indebtedness Credit and Security Agreement On November 20, 2017, the Company entered into an amended and restated credit and security agreement (the “Credit and Security Agreement”), which established a five-year senior secured revolving credit facility in the aggregate principal amount of $90.0 million 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 Credit and Security Agreement was replaced by the New Credit Facility on February 18, 2022. |
Segment Information
Segment Information | 6 Months Ended |
Jun. 25, 2023 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information The Company operates in two reportable segments. The KGS reportable segment is comprised of an aggregation of KGS operating business units, including the Company’s microwave electronics products, space, satellite and cyber, training solutions, C5ISR/modular systems, turbine technologies and defense and rocket support systems operating segments. The US reportable segment consists of the Company’s unmanned aerial, unmanned ground, unmanned seaborne and command, control and communications system business. The KGS and US segments provide products, solutions and services for mission critical national security programs. KGS and US customers primarily include national security related agencies, the U.S. Department of Defense (the “DoD”), intelligence agencies and classified agencies, and to a lesser degree, international government agencies and domestic and international commercial customers. The Company organizes its reportable segments based on the nature of the products, solutions and services offered. Transactions between segments are generally negotiated and accounted for under terms and conditions similar to other government and commercial contracts. In the following table, total operating income from continuing operations of the reportable business segments is reconciled to the corresponding consolidated amount. The reconciling item Corporate activities includes costs for certain stock-based compensation programs (including stock-based compensation costs for stock options, the employee stock purchase plan and restricted stock units), the effects of items not considered part of management’s evaluation of segment operating performance, merger and acquisition expenses, corporate costs not allocated to the segments, and other miscellaneous corporate activities. Revenues, depreciation and amortization, and operating income (loss) generated by the Company’s reportable segments for the three and six month periods ended June 25, 2023 and June 26, 2022 are as follows (in millions): Three Months Ended Six Months Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 Revenues: Kratos Government Solutions Service revenues $ 102.2 $ 77.2 $ 192.4 $ 144.0 Product sales 102.6 90.6 196.2 167.4 Total Kratos Government Solutions $ 204.8 $ 167.8 $ 388.6 $ 311.4 Unmanned Systems Service revenues 1.5 1.6 2.9 2.7 Product sales 50.6 54.8 97.2 106.3 Total Unmanned Systems 52.1 56.4 100.1 109.0 Total revenues $ 256.9 $ 224.2 $ 488.7 $ 420.4 Depreciation and amortization: Kratos Government Solutions $ 5.9 $ 5.0 $ 11.8 $ 10.1 Unmanned Systems 2.0 1.9 4.0 3.8 Total depreciation and amortization $ 7.9 $ 6.9 $ 15.8 $ 13.9 Operating income (loss): Kratos Government Solutions $ 11.6 $ 9.5 $ 19.3 $ 15.1 Unmanned Systems 1.2 (5.0) 0.6 (4.5) Corporate activities (6.1) (6.4) (12.7) (13.7) Total operating income (loss) $ 6.7 $ (1.9) $ 7.2 $ (3.1) The Unmanned Systems operating loss for the three and six months ended June 26, 2022 includes a $5.5 million litigation settlement charge related to the resolution of a dispute with an international customer, for which the contractual arrangement was entered into in March 2011, prior to Kratos’ acquisition of Composite Engineering Inc. (“CEi”). |
Redeemable Noncontrolling Inter
Redeemable Noncontrolling Interest | 6 Months Ended |
Jun. 25, 2023 | |
Noncontrolling Interest [Abstract] | |
Redeemable Noncontrolling Interest | Redeemable Noncontrolling Interest 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 KTT Core, a Delaware limited liability company, for an aggregate purchase price of approximately $60 million. On February 18, 2022, the capital stock of FTT Inc. was conveyed to KTT Core for organizational purposes such that FTT Inc. is now a wholly owned subsidiary of KTT Core. In connection with the Company’s acquisition of FTT Inc., and KTT Core, (i) beginning in January 2024, the holders (the “Holders”) of the minority interests in KTT Core (the “Minority Interests”) will have an annual right (the “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 KTT Core and its subsidiaries (the “Acquired Companies”), subject to adjustment as set forth in the Exchange Agreement entered into by and among the Company, the Acquired Companies and the Holders, as amended on February 18, 2022 (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 (as defined in the Exchange Agreement) will be a specified increased multiple of the trailing 12 months EBITDA of the Acquired Companies); 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. On June 13, 2022, the Company entered into an Equity Purchase Agreement (the “Equity Purchase Agreement”) to acquire an additional 9.95% (the “Purchased Shares”) of the issued and outstanding shares of capital stock of KTT Core (together with its wholly-owned subsidiaries including FTT Inc.), a majority owned subsidiary of the Company, for an aggregate estimated purchase price of approximately $6.4 million, to be paid in shares of Kratos common stock. Pursuant to the Equity Purchase Agreement, the Company paid consideration of $2.7 million, paid in 190,258 shares of its common stock, based upon Kratos’ trading price on the date of distribution. Following the closing of the transactions contemplated by the Equity Purchase Agreement, the Company owned 90.05% of KTT Core. On April 7, 2023, the final aggregate purchase price, as updated to reflect the actual 2022 operating results and to reflect the market price of Kratos common stock on the day of issuance, was determined and 828,128 shares of Kratos common stock were issued to the Holders of the minority interest with a value of $10.7 million. The Put Right and annual purchase right of the Holders and the Company, respectively, remain available under the Exchange Agreement as to the remaining 9.95% minority interest in KTT Core. |
Significant Customers
Significant Customers | 6 Months Ended |
Jun. 25, 2023 | |
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 $178.6 million and $156.1 million, or 70% and 70% of total Kratos revenue, for the three months ended June 25, 2023 and June 26, 2022, respectively, and $338.9 million and $295.7 million, or 69% and 70% of total Kratos revenue, for the six months ended June 25, 2023 and June 26, 2022, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 25, 2023 | |
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 scrutinize 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 yet been completed by the DCAA, the Company cannot reasonably estimate the range of loss, if any, that may result 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 mergers, 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. |
Derivative Financial Instrument
Derivative Financial Instruments | 6 Months Ended |
Jun. 25, 2023 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Financial Instruments | Derivative Financial Instruments The Company’s derivative portfolio consists of forward exchange contracts used to manage foreign currency risks and an interest rate swap contract to hedge U.S. dollar-one month Term SOFR in order to mitigate the exposure to interest rate movements associated with the Company’s Term Loan A. Derivative financial instruments are recognized on the Condensed Consolidated Balance Sheets as either assets or liabilities and are measured at fair value. Forward Contracts Changes in the fair values of the foreign currency exchange contracts are recorded each period in earnings. As of June 25, 2023, the Company did not use hedge accounting for its foreign currency exchange contracts. The notional value of the Company’s foreign currency exchange contracts at June 25, 2023, was $3.2 million. At June 25, 2023, the fair value amounts of the foreign currency exchange contracts were a $0.5 million asset and a $1.3 million liability. The net loss from these forward exchange contracts was $0.5 million and $0.7 million for the three and six months ended June 25, 2023, respectively, and is included in other income (expense). The notional value of the Company’s foreign currency exchange contracts at December 25, 2022, was $10.2 million. At December 25, 2022, the fair value amounts of the foreign currency exchange contracts were a $0.1 million asset and a $0.3 million liability. Cash Flow Hedge On April 28, 2023, the Company entered into an interest rate swap contract with an initial notional amount of $195.0 million to manage the variability of cash flows associated with the Term Loan A. The interest rate swap contract matures on May 1, 2026 and requires periodic interest rate settlements. The swap is at a fixed SOFR of 3.721% and settles monthly on the last day of each calendar month. The Company has designated the interest rate swap contract as a cash flow hedge and assesses the hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative. Changes in fair value (gains and losses) related to derivative financial instruments that qualify as cash flow hedges are deferred in Accumulated Other Comprehensive Income (Loss) (“AOCI”) until the underlying transaction is reflected in earnings. The net gain reclassed from AOCI from the interest rate swap reflected in earnings was $0.4 million for the three months ended June 25, 2023 and is recorded as an offset to interest expense. The Company did not have any interest rate swap contracts on December 25, 2022. The fair value of this derivative represents the discounted value of the expected future discounted cash flows for the interest rate swap, based on the amortization schedule and the current forward curve for the remaining term of the contract, as of the date of each reporting period (in millions): June 25, 2023 December 25, 2022 Notional Value Fair Value Notional Value Fair Value Interest rate swap contract designated as a cash flow hedge, net of taxes $ 195.0 $ 1.8 $ — $ — |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 25, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The information as of June 25, 2023 and for the three and six months ended June 25, 2023 and June 26, 2022 is unaudited. The condensed consolidated balance sheet as of December 25, 2022 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 25, 2022, included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 23, 2023 (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 subsidiary, KTT CORE, Inc., a Delaware corporation formerly known as KTT CORE, LLC (“KTT Core”), which is 90.05% owned by the Company. All inter-company transactions have been eliminated in consolidation. Noncontrolling interest consists of the remaining 9.95% interest in KTT 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 June 25, 2023 and June 26, 2022 consisted of 13-week periods. The six month periods ended June 25, 2023 and June 26, 2022 consisted of 26-week periods. There are 53 calendar weeks in the fiscal year ending on December 31, 2023 and 52 calendar weeks in the fiscal year ending December 25, 2022. |
Accounting Estimates | Accounting EstimatesThere have been no significant changes in the Company’s accounting estimates for the six months ended June 25, 2023 as compared to the accounting estimates described in the Annual Report on Form 10-K. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company uses forward exchange contracts to manage foreign currency risks associated with certain transactions, specifically forecasted materials and salaries paid in foreign currencies. The Company also has entered into an interest rate swap contract in order to mitigate the exposure to interest rate movements associated with the Company’s Term Loan A. These derivative instruments are measured at fair value using observable market inputs such as interest rates. Based on these inputs, the derivative instruments are classified within Level 2 of the valuation hierarchy. At June 25, 2023, the derivative instruments were included in other current assets and other current liabilities on the Company's Condensed Consolidated Balance Sheets. The carrying amounts and the related fair values of the Company’s derivative instruments measured at fair value on a recurring basis at June 25, 2023, are presented in Note 15. |
Net Income (Loss) per Common Share | Net Income (Loss) per Common Share The Company calculates net income (loss) per share in accordance with FASB ASC 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 reflects the effects of potentially dilutive securities. |
Acquisitions (Tables)
Acquisitions (Tables) | 6 Months Ended |
Jun. 25, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
Schedule of Recognized Identified 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 and liabilities assumed (in millions): Accounts receivable $ 3.8 Unbilled receivables 4.1 Other current assets 0.1 Property and equipment 1.3 Intangible assets 8.5 Total identifiable net assets acquired 17.8 Total identifiable net liabilities assumed (9.1) Goodwill 29.2 Net assets acquired, excluding cash $ 37.9 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 $ 2.9 Unbilled receivables 11.1 Inventory 0.5 Other current assets 0.2 Property and equipment 22.8 Other assets 0.2 Intangible assets 10.8 Total identifiable net assets acquired 48.5 Total identifiable net liabilities assumed (3.4) Goodwill 34.3 Net assets acquired, excluding cash $ 79.4 |
Schedule of Business Acquisitions by Acquisition, Contingent Consideration | A summary of the consideration paid for the acquired ownership in Cosmic is as follows (in millions): Cash paid $ 39.4 Less: Cash acquired (1.5) Total consideration $ 37.9 A summary of the consideration paid for the acquired assets is as follows (in millions): Cash paid $ 74.4 Common stock issued 5.0 Total consideration $ 79.4 |
Schedule of Business Acquisition, Pro Forma Information | For the three and six month periods ended June 26, 2022 (all amounts, except per share amounts, are in millions): Three Months Ended Six Months Ended June 26, 2022 June 26, 2022 Pro forma revenues $ 230.9 $ 437.4 Pro forma net loss before tax $ (4.5) $ (23.7) Pro forma net loss $ (4.4) $ (19.5) Basic pro forma loss per share $ (0.04) $ (0.15) Diluted pro forma loss per share $ (0.04) $ (0.15) |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 6 Months Ended |
Jun. 25, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Net Contract Assets (Liabilities) | Net contract assets and liabilities are as follows (in millions): June 25, 2023 December 25, 2022 Net Change Contract assets $ 222.0 $ 222.8 $ (0.8) Contract liabilities $ 73.1 $ 62.1 $ 11.0 Net contract assets $ 148.9 $ 160.7 $ (11.8) |
Schedule of Disaggregation of Revenue | The following series of tables presents the Company’s revenue disaggregated by several categories. For the majority of contracts, revenue is recognized over time as work is performed on the contract. Revenue by contract type was as follows (in millions): Three Months Ended Six Months Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 Kratos Government Solutions Fixed price $ 132.5 $ 119.9 $ 259.5 $ 221.2 Cost plus fee 59.9 37.1 105.6 69.4 Time and materials 12.4 10.8 23.5 20.8 Total Kratos Government Solutions 204.8 167.8 388.6 311.4 Unmanned Systems Fixed price 39.0 40.7 75.9 72.2 Cost plus fee 10.5 15.3 18.6 35.7 Time and materials 2.6 0.4 5.6 1.1 Total Unmanned Systems 52.1 56.4 100.1 109.0 Total Revenues $ 256.9 $ 224.2 $ 488.7 $ 420.4 Revenue by customer was as follows (in millions): Three Months Ended Six Months Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 Kratos Government Solutions U.S. Government (1) $ 129.5 $ 104.2 $ 244.0 $ 193.7 International (2) 47.9 36.1 92.9 70.8 U.S. Commercial and other customers 27.4 27.5 51.7 46.9 Total Kratos Government Solutions 204.8 167.8 388.6 311.4 Unmanned Systems U.S. Government (1) 49.1 51.9 94.9 102.0 International (2) 2.4 3.6 4.3 5.4 U.S. Commercial and other customers 0.6 0.9 0.9 1.6 Total Unmanned Systems 52.1 56.4 100.1 109.0 Total Revenues $ 256.9 $ 224.2 $ 488.7 $ 420.4 (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. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 6 Months Ended |
Jun. 25, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | The carrying amounts of goodwill as of June 25, 2023 and December 25, 2022 by reportable segment are as follows (in millions): KGS US Total Gross value $ 683.6 $ 127.9 $ 811.5 Less accumulated impairment 239.5 13.8 253.3 Net $ 444.1 $ 114.1 $ 558.2 |
Schedule of Intangible Assets (Finite-Lived) | The following table sets forth information for finite-lived and indefinite-lived intangible assets (in millions): As of June 25, 2023 As of December 25, 2022 Gross Accumulated Net Gross Accumulated Net Acquired finite-lived intangible assets: Customer relationships $ 80.9 $ (61.5) $ 19.4 $ 80.9 $ (60.1) $ 20.8 Contracts and backlog 39.1 (37.1) 2.0 39.1 (36.3) 2.8 Developed technology and technical know-how 33.7 (27.6) 6.1 33.7 (27.0) 6.7 Trade names 3.8 (2.5) 1.3 3.8 (2.3) 1.5 In-process research and development 16.8 (0.3) 16.5 16.8 (0.3) 16.5 Total finite-lived intangible assets 174.3 (129.0) 45.3 174.3 (126.0) 48.3 Indefinite-lived trade names 6.9 — 6.9 6.9 — 6.9 Total intangible assets $ 181.2 $ (129.0) $ 52.2 $ 181.2 $ (126.0) $ 55.2 |
Schedule of Intangible Assets (Indefinite-Lived) | The following table sets forth information for finite-lived and indefinite-lived intangible assets (in millions): As of June 25, 2023 As of December 25, 2022 Gross Accumulated Net Gross Accumulated Net Acquired finite-lived intangible assets: Customer relationships $ 80.9 $ (61.5) $ 19.4 $ 80.9 $ (60.1) $ 20.8 Contracts and backlog 39.1 (37.1) 2.0 39.1 (36.3) 2.8 Developed technology and technical know-how 33.7 (27.6) 6.1 33.7 (27.0) 6.7 Trade names 3.8 (2.5) 1.3 3.8 (2.3) 1.5 In-process research and development 16.8 (0.3) 16.5 16.8 (0.3) 16.5 Total finite-lived intangible assets 174.3 (129.0) 45.3 174.3 (126.0) 48.3 Indefinite-lived trade names 6.9 — 6.9 6.9 — 6.9 Total intangible assets $ 181.2 $ (129.0) $ 52.2 $ 181.2 $ (126.0) $ 55.2 |
Inventoried Costs (Tables)
Inventoried Costs (Tables) | 6 Months Ended |
Jun. 25, 2023 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventoried Costs | Inventoried costs, consisted of the following components (in millions): June 25, 2023 December 25, 2022 Raw materials $ 76.6 $ 73.6 Work in process 62.7 50.8 Finished goods 6.6 1.1 Total inventoried costs $ 145.9 $ 125.5 |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 25, 2023 | |
Leases [Abstract] | |
Schedule of Lease Cost | The components of lease expense were as follows (in millions): Three Months Ended Six Months Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 Amortization of right of use assets - finance leases $ 0.7 $ 0.6 $ 1.5 $ 1.3 Interest on lease liabilities - finance leases 0.8 0.7 1.5 1.4 Operating lease cost 3.4 3.3 6.7 6.6 Short-term lease cost 0.3 0.2 0.5 0.4 Variable lease cost (cost excluded from lease payments) 0.1 0.1 0.1 0.1 Sublease income — — — — Total lease cost $ 5.3 $ 4.9 $ 10.3 $ 9.8 Cash paid for amounts included in the measurement of lease liabilities was as follows (in millions): Three Months Ended Six Months Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 Finance lease - cash paid for interest $ 0.8 $ 0.7 $ 1.5 $ 1.4 Finance lease - financing cash flows $ 0.4 $ 0.3 $ 0.8 $ 0.6 Operating lease - operating cash flows (fixed payments) $ 3.6 $ 3.4 $ 6.6 $ 6.8 Other supplemental noncash information (in millions): Three Months Ended Six Months Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 Operating lease liabilities arising from obtaining right-of-use assets $ 4.5 $ 1.3 $ 6.4 $ 5.0 Finance lease liabilities arising from obtaining right-of-use assets $ 0.1 $ 9.1 $ 0.1 $ 9.1 June 25, 2023 June 26, 2022 Weighted-average remaining lease term (in years): Operating leases 4.76 4.32 Finance leases 15.08 15.56 Weighted-average discount rate: Operating leases 4.95 % 6.44 % Finance leases 6.41 % 6.03 % |
Schedule of Balance Sheet Information | The components of leases on the balance sheet were as follows (in millions): June 25, 2023 December 25, 2022 Operating leases: Operating lease right-of-use assets $ 48.2 $ 47.4 Current portion of operating lease liabilities $ 11.6 $ 10.8 Operating lease liabilities, net of current portion $ 41.0 $ 40.8 Finance leases: Property, plant and equipment, net $ 44.1 $ 45.8 Other current liabilities $ 1.4 $ 1.7 Other long-term liabilities $ 49.8 $ 49.9 |
Schedule of Maturities of Operating Lease Liabilities | The maturity of lease liabilities is (in millions): Operating Leases Finance Leases 2023 (1) $ 7.3 $ 2.3 2024 13.2 4.8 2025 11.6 4.9 2026 10.1 5.0 2027 8.9 5.1 Thereafter 7.6 59.5 Total lease payments 58.7 81.6 Less: imputed interest (6.1) (30.4) Total present value of lease liabilities $ 52.6 $ 51.2 (1) Excludes the six months ended June 25, 2023. |
Schedule of Maturities of Financing Lease Liabilities | The maturity of lease liabilities is (in millions): Operating Leases Finance Leases 2023 (1) $ 7.3 $ 2.3 2024 13.2 4.8 2025 11.6 4.9 2026 10.1 5.0 2027 8.9 5.1 Thereafter 7.6 59.5 Total lease payments 58.7 81.6 Less: imputed interest (6.1) (30.4) Total present value of lease liabilities $ 52.6 $ 51.2 (1) Excludes the six months ended June 25, 2023. |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jun. 25, 2023 | |
Income Tax Disclosure [Abstract] | |
Schedule of Reconciliation of Income Tax Benefit at Statutory Rate to Income Tax Provision | A reconciliation of the total income tax provision (benefit) to the amount computed by applying the statutory federal income tax rate of 21% to income (loss) from continuing operations before income taxes for the three and six months ended June 25, 2023 and June 26, 2022 is as follows (in millions): For the Three Months Ended For the Six Months Ended June 25, June 26, June 25, June 26, Income tax expense (benefit) at federal statutory rate $ 0.4 $ (1.0) $ (0.7) $ (5.2) Nondeductible expenses and other 1.9 1.5 3.5 2.5 Stock compensation - excess tax shortfalls (benefits) 0.3 0.3 0.7 (0.6) Federal impact of research & development tax credits (0.2) (0.3) (0.4) (0.5) Provision (benefit) for income taxes from continuing operations $ 2.4 $ 0.5 $ 3.1 $ (3.8) |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jun. 25, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Long-Term Debt and the Current Period Interest Rates | Term loan and revolving credit debt and the current period interest rates are as follows (in millions): June 25, 2023 December 25, 2022 Term Loan A $ 195.0 $ 197.5 Revolving credit facility 43.0 60.0 Total debt 238.0 257.5 Less current portion 5.0 6.3 Total long-term debt, less current portion 233.0 251.2 Less long-term unamortized debt issuance costs - term loans 0.9 1.0 Total long-term debt, net of unamortized debt issuance costs - term loans $ 232.1 $ 250.2 Unamortized debt issuance costs - revolving credit facility $ 0.9 $ 1.0 Current period interest rate 7.5 % 6.4 % |
Schedule of Future Long-Term Debt Principal Payments | Future long-term debt principal payments at June 25, 2023 were as follows (in millions): 2023 $ 3.8 2024 8.7 2025 10.0 2026 10.0 2027 205.5 $ 238.0 |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jun. 25, 2023 | |
Segment Reporting [Abstract] | |
Schedule of Segment Revenues, Depreciation and Amortization, and Operating Income (Loss) | Revenues, depreciation and amortization, and operating income (loss) generated by the Company’s reportable segments for the three and six month periods ended June 25, 2023 and June 26, 2022 are as follows (in millions): Three Months Ended Six Months Ended June 25, 2023 June 26, 2022 June 25, 2023 June 26, 2022 Revenues: Kratos Government Solutions Service revenues $ 102.2 $ 77.2 $ 192.4 $ 144.0 Product sales 102.6 90.6 196.2 167.4 Total Kratos Government Solutions $ 204.8 $ 167.8 $ 388.6 $ 311.4 Unmanned Systems Service revenues 1.5 1.6 2.9 2.7 Product sales 50.6 54.8 97.2 106.3 Total Unmanned Systems 52.1 56.4 100.1 109.0 Total revenues $ 256.9 $ 224.2 $ 488.7 $ 420.4 Depreciation and amortization: Kratos Government Solutions $ 5.9 $ 5.0 $ 11.8 $ 10.1 Unmanned Systems 2.0 1.9 4.0 3.8 Total depreciation and amortization $ 7.9 $ 6.9 $ 15.8 $ 13.9 Operating income (loss): Kratos Government Solutions $ 11.6 $ 9.5 $ 19.3 $ 15.1 Unmanned Systems 1.2 (5.0) 0.6 (4.5) Corporate activities (6.1) (6.4) (12.7) (13.7) Total operating income (loss) $ 6.7 $ (1.9) $ 7.2 $ (3.1) |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 6 Months Ended |
Jun. 25, 2023 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Instruments | The fair value of this derivative represents the discounted value of the expected future discounted cash flows for the interest rate swap, based on the amortization schedule and the current forward curve for the remaining term of the contract, as of the date of each reporting period (in millions): June 25, 2023 December 25, 2022 Notional Value Fair Value Notional Value Fair Value Interest rate swap contract designated as a cash flow hedge, net of taxes $ 195.0 $ 1.8 $ — $ — |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) - KTT CORE, LLC | Jun. 25, 2023 |
Business Acquisition [Line Items] | |
Subsidiary percent owned (as a percent) | 90.05% |
Noncontrolling interest owned (as a percent) | 9.95% |
Acquisitions - Narrative (Detai
Acquisitions - Narrative (Details) $ in Millions | 3 Months Ended | 6 Months Ended | ||||
May 23, 2022 USD ($) | Mar. 09, 2022 USD ($) | Dec. 27, 2021 USD ($) | Jun. 25, 2023 USD ($) | Jun. 26, 2022 USD ($) | Jun. 25, 2023 USD ($) | |
Fair Value, Inputs, Level 3 | Valuation, Income Approach | Measurement Input, Discount Rate | ||||||
Business Acquisition [Line Items] | ||||||
Discount rate | 0.064 | 0.11 | ||||
Fair Value, Inputs, Level 3 | Valuation, Income Approach | Measurement Input, Royalty Rate | ||||||
Business Acquisition [Line Items] | ||||||
Discount rate | 0.11 | |||||
Fair Value, Inputs, Level 3 | Valuation, Income Approach | Measurement Input, Royalty Rate | Minimum | ||||||
Business Acquisition [Line Items] | ||||||
Discount rate | 0.11 | |||||
Fair Value, Inputs, Level 3 | Valuation, Income Approach | Measurement Input, Royalty Rate | Maximum | ||||||
Business Acquisition [Line Items] | ||||||
Discount rate | 0.12 | |||||
Cosmic Advanced Engineering Solutions, Inc. | ||||||
Business Acquisition [Line Items] | ||||||
Payments to acquire business, subject to adjustments | $ 37.9 | |||||
Payments to acquire businesses, amount not included holdback paid at later | 0.4 | |||||
Current liabilities | $ 2.5 | 6.7 | ||||
Deferred tax liabilities | 2.4 | |||||
Aggregate purchase price | 79.4 | 37.9 | ||||
Cash paid | 74.4 | 39.4 | ||||
Common stock issued | 5 | |||||
Deferred tax assets, net | 0.2 | |||||
Cosmic Advanced Engineering Solutions, Inc. | Trade names | ||||||
Business Acquisition [Line Items] | ||||||
Intangible assets acquired | $ 0.5 | $ 0.6 | ||||
Useful life | 5 years | 5 years | ||||
Cosmic Advanced Engineering Solutions, Inc. | Contracts and backlog | ||||||
Business Acquisition [Line Items] | ||||||
Intangible assets acquired | $ 2.5 | $ 1.7 | ||||
Useful life | 3 years | 1 year | ||||
Cosmic Advanced Engineering Solutions, Inc. | In-process research and development | ||||||
Business Acquisition [Line Items] | ||||||
Intangible assets acquired | $ 7.3 | |||||
Cosmic Advanced Engineering Solutions, Inc. | Customer relationships | ||||||
Business Acquisition [Line Items] | ||||||
Intangible assets acquired | $ 4.4 | |||||
Useful life | 10 years | |||||
Cosmic Advanced Engineering Solutions, Inc. | Developed technology | ||||||
Business Acquisition [Line Items] | ||||||
Intangible assets acquired | $ 0.5 | $ 1.8 | ||||
Useful life | 3 years | 5 years | ||||
Southern Research Engineering Division | ||||||
Business Acquisition [Line Items] | ||||||
Revenue | $ 13.1 | $ 4.1 | $ 25.1 | |||
Operating income | $ 0.7 | $ 0.5 | $ 1.3 | |||
Aggregate purchase price | $ 79.4 | |||||
Cash paid | 74.4 | |||||
Common stock issued | $ 5 |
Acquisitions - Assets Acquired
Acquisitions - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Millions | Jun. 25, 2023 | Dec. 25, 2022 | May 23, 2022 | Dec. 27, 2021 |
Business Acquisition [Line Items] | ||||
Goodwill | $ 558.2 | $ 558.2 | ||
Cosmic Advanced Engineering Solutions, Inc. | ||||
Business Acquisition [Line Items] | ||||
Accounts receivable | $ 2.9 | $ 3.8 | ||
Unbilled receivables | 11.1 | 4.1 | ||
Inventory | 0.5 | |||
Other current assets | 0.2 | 0.1 | ||
Property and equipment | 22.8 | 1.3 | ||
Other assets | 0.2 | |||
Intangible assets | 10.8 | 8.5 | ||
Total identifiable net assets acquired | 48.5 | 17.8 | ||
Total identifiable net liabilities assumed | (3.4) | (9.1) | ||
Goodwill | 34.3 | 29.2 | ||
Net assets acquired, excluding cash | $ 79.4 | $ 37.9 |
Acquisitions - Consideration Pa
Acquisitions - Consideration Paid (Details) - Cosmic Advanced Engineering Solutions, Inc. - USD ($) $ in Millions | May 23, 2022 | Dec. 27, 2021 |
Business Acquisition [Line Items] | ||
Cash paid | $ 74.4 | $ 39.4 |
Less: Cash acquired | (1.5) | |
Total consideration | 79.4 | $ 37.9 |
Common stock issued | $ 5 |
Acquisitions - Pro Forma Financ
Acquisitions - Pro Forma Financial Information (Details) - CPI ASC Signal Division, Inc. - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended |
Jun. 26, 2022 | Jun. 26, 2022 | |
Business Acquisition [Line Items] | ||
Pro forma revenues | $ 230.9 | $ 437.4 |
Pro forma net loss before tax | (4.5) | (23.7) |
Pro forma net loss | $ (4.4) | $ (19.5) |
Basic pro forma loss per share (in dollars per share) | $ (0.04) | $ (0.15) |
Diluted pro forma loss per share (in dollars per share) | $ (0.04) | $ (0.15) |
Revenue Recognition - Remaining
Revenue Recognition - Remaining Performance Obligations (Details) $ in Millions | Jun. 25, 2023 USD ($) |
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligation | $ 1,157.3 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-06-26 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Expected timing of satisfaction, percentage | 39% |
Expected timing of satisfaction, period | 6 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-12-23 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Expected timing of satisfaction, percentage | 32% |
Expected timing of satisfaction, period | 1 year |
Revenue Recognition - Contract
Revenue Recognition - Contract Assets and Liabilities (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 25, 2023 | Dec. 25, 2022 | |
Revenue from Contract with Customer [Abstract] | ||
Contract assets | $ 222 | $ 222.8 |
Contract assets, net change | (0.8) | |
Contract liabilities | 73.1 | 62.1 |
Contract liabilities, net change | 11 | |
Net contract assets | 148.9 | $ 160.7 |
Net contract assets, net change | $ (11.8) |
Revenue Recognition - Narrative
Revenue Recognition - Narrative (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | Dec. 25, 2022 | |
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | ||||||
Contract assets, net change | $ (0.8) | |||||
Contract liabilities, net change | 11 | |||||
Revenue recognized | $ 12.4 | $ 14.8 | 33.6 | $ 36 | ||
Contract assets | 222 | 222 | $ 222.8 | |||
Litigation settlement charges | 0 | 5.5 | ||||
Unmanned Systems | ||||||
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | ||||||
Litigation settlement charges | $ 5.5 | $ 5.5 | $ 5.5 | |||
T for C | Unbilled Revenues | ||||||
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | ||||||
Contract assets | $ 4.8 | 4.8 | ||||
Amount agreed to settlement | $ 6 | |||||
Negotiation and settlement with the customer | $ 4.8 |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 25, 2023 | Jun. 26, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | |
Disaggregation of Revenue [Line Items] | ||||
Total Revenues | $ 256.9 | $ 224.2 | $ 488.7 | $ 420.4 |
Kratos Government Solutions | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenues | 204.8 | 167.8 | 388.6 | 311.4 |
Kratos Government Solutions | U.S. Government | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenues | 129.5 | 104.2 | 244 | 193.7 |
Kratos Government Solutions | International | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenues | 47.9 | 36.1 | 92.9 | 70.8 |
Kratos Government Solutions | U.S. Commercial and other customers | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenues | 27.4 | 27.5 | 51.7 | 46.9 |
Unmanned Systems | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenues | 52.1 | 56.4 | 100.1 | 109 |
Unmanned Systems | U.S. Government | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenues | 49.1 | 51.9 | 94.9 | 102 |
Unmanned Systems | International | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenues | 2.4 | 3.6 | 4.3 | 5.4 |
Unmanned Systems | U.S. Commercial and other customers | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenues | 0.6 | 0.9 | 0.9 | 1.6 |
Fixed price | Kratos Government Solutions | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenues | 132.5 | 119.9 | 259.5 | 221.2 |
Fixed price | Unmanned Systems | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenues | 39 | 40.7 | 75.9 | 72.2 |
Cost plus fee | Kratos Government Solutions | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenues | 59.9 | 37.1 | 105.6 | 69.4 |
Cost plus fee | Unmanned Systems | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenues | 10.5 | 15.3 | 18.6 | 35.7 |
Time and materials | Kratos Government Solutions | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenues | 12.4 | 10.8 | 23.5 | 20.8 |
Time and materials | Unmanned Systems | ||||
Disaggregation of Revenue [Line Items] | ||||
Total Revenues | $ 2.6 | $ 0.4 | $ 5.6 | $ 1.1 |
Discontinued Operations (Detail
Discontinued Operations (Details) - Disposed of by Sale - Public Safety & Security - USD ($) $ in Millions | 6 Months Ended | 58 Months Ended | |
Jun. 25, 2023 | Mar. 26, 2023 | Jun. 11, 2018 | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Purchase price, in cash | $ 69 | ||
Sale of discontinued operations | $ 68.7 | ||
Working capital adjustment | $ 7.3 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Goodwill (Details) - USD ($) $ in Millions | Jun. 25, 2023 | Dec. 25, 2022 |
Goodwill [Line Items] | ||
Gross value | $ 811.5 | $ 811.5 |
Less accumulated impairment | 253.3 | 253.3 |
Net | 558.2 | 558.2 |
KGS | ||
Goodwill [Line Items] | ||
Gross value | 683.6 | 683.6 |
Less accumulated impairment | 239.5 | 239.5 |
Net | 444.1 | 444.1 |
US | ||
Goodwill [Line Items] | ||
Gross value | 127.9 | 127.9 |
Less accumulated impairment | 13.8 | 13.8 |
Net | $ 114.1 | $ 114.1 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Purchased Intangible Assets (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 25, 2023 | Jun. 26, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | Dec. 25, 2022 | |
Acquired finite-lived intangible assets: | |||||
Gross Value | $ 174.3 | $ 174.3 | $ 174.3 | ||
Accumulated Amortization | (129) | (129) | (126) | ||
Net Value | 45.3 | 45.3 | 48.3 | ||
Total intangible assets, Gross value | 181.2 | 181.2 | 181.2 | ||
Total intangible assets, Net value | 52.2 | 52.2 | 55.2 | ||
Aggregate amortization expense for finite-lived intangible assets | 1.4 | $ 1.6 | 3 | $ 3.3 | |
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 | 80.9 | 80.9 | 80.9 | ||
Accumulated Amortization | (61.5) | (61.5) | (60.1) | ||
Net Value | 19.4 | 19.4 | 20.8 | ||
Contracts and backlog | |||||
Acquired finite-lived intangible assets: | |||||
Gross Value | 39.1 | 39.1 | 39.1 | ||
Accumulated Amortization | (37.1) | (37.1) | (36.3) | ||
Net Value | 2 | 2 | 2.8 | ||
Developed technology and technical know-how | |||||
Acquired finite-lived intangible assets: | |||||
Gross Value | 33.7 | 33.7 | 33.7 | ||
Accumulated Amortization | (27.6) | (27.6) | (27) | ||
Net Value | 6.1 | 6.1 | 6.7 | ||
Trade names | |||||
Acquired finite-lived intangible assets: | |||||
Gross Value | 3.8 | 3.8 | 3.8 | ||
Accumulated Amortization | (2.5) | (2.5) | (2.3) | ||
Net Value | 1.3 | 1.3 | 1.5 | ||
In-process research and development | |||||
Acquired finite-lived intangible assets: | |||||
Gross Value | 16.8 | 16.8 | 16.8 | ||
Accumulated Amortization | (0.3) | (0.3) | (0.3) | ||
Net Value | $ 16.5 | $ 16.5 | $ 16.5 |
Inventoried Costs (Details)
Inventoried Costs (Details) - USD ($) $ in Millions | Jun. 25, 2023 | Dec. 25, 2022 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 76.6 | $ 73.6 |
Work in process | 62.7 | 50.8 |
Finished goods | 6.6 | 1.1 |
Total inventoried costs | $ 145.9 | $ 125.5 |
Net Income (Loss) per Common _2
Net Income (Loss) per Common Share (Details) - shares shares in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 25, 2023 | Jun. 26, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | |
Stock Options and Awards | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of EPS (in shares) | 1 | 1.8 | 1.2 | 1.4 |
Leases - Lease Expense (Details
Leases - Lease Expense (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 25, 2023 | Jun. 26, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | |
Leases [Abstract] | ||||
Amortization of right of use assets - finance leases | $ 0.7 | $ 0.6 | $ 1.5 | $ 1.3 |
Interest on lease liabilities - finance leases | 0.8 | 0.7 | 1.5 | 1.4 |
Operating lease cost | 3.4 | 3.3 | 6.7 | 6.6 |
Short-term lease cost | 0.3 | 0.2 | 0.5 | 0.4 |
Variable lease cost (cost excluded from lease payments) | 0.1 | 0.1 | 0.1 | 0.1 |
Sublease income | 0 | 0 | 0 | 0 |
Total lease cost | $ 5.3 | $ 4.9 | $ 10.3 | $ 9.8 |
Leases - Supplemental Balance S
Leases - Supplemental Balance Sheet (Details) - USD ($) $ in Millions | Jun. 25, 2023 | Dec. 25, 2022 |
Operating leases: | ||
Operating lease right-of-use assets | $ 48.2 | $ 47.4 |
Current portion of operating lease liabilities | 11.6 | 10.8 |
Operating lease liabilities, net of current portion | 41 | 40.8 |
Finance leases: | ||
Property, plant and equipment, net | 44.1 | 45.8 |
Other current liabilities | 1.4 | 1.7 |
Other long-term liabilities | $ 49.8 | $ 49.9 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Property, plant and equipment, net | Property, plant and equipment, net |
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List] | Other current liabilities | Other current liabilities |
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | Other long-term liabilities | Other long-term liabilities |
Leases - Cash Paid (Details)
Leases - Cash Paid (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 25, 2023 | Jun. 26, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | |
Leases [Abstract] | ||||
Finance lease - cash paid for interest | $ 0.8 | $ 0.7 | $ 1.5 | $ 1.4 |
Finance lease - financing cash flows | 0.4 | 0.3 | 0.8 | 0.6 |
Operating lease - operating cash flows (fixed payments) | $ 3.6 | $ 3.4 | $ 6.6 | $ 6.8 |
Leases - Weighted Average (Deta
Leases - Weighted Average (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 25, 2023 | Jun. 26, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | |
Leases [Abstract] | ||||
Operating lease liabilities arising from obtaining right-of-use assets | $ 4.5 | $ 1.3 | $ 6.4 | $ 5 |
Finance lease liabilities arising from obtaining right-of-use assets | $ 0.1 | $ 9.1 | $ 0.1 | $ 9.1 |
Weighted-average remaining lease term (in years): | ||||
Operating leases | 4 years 9 months 3 days | 4 years 3 months 25 days | 4 years 9 months 3 days | 4 years 3 months 25 days |
Finance leases | 15 years 29 days | 15 years 6 months 21 days | 15 years 29 days | 15 years 6 months 21 days |
Weighted-average discount rate: | ||||
Operating leases | 4.95% | 6.44% | 4.95% | 6.44% |
Finance leases | 6.41% | 6.03% | 6.41% | 6.03% |
Leases - Maturities of Operatin
Leases - Maturities of Operating and Financing Lease Liabilities (Details) $ in Millions | Jun. 25, 2023 USD ($) |
Operating Leases | |
2023 | $ 7.3 |
2024 | 13.2 |
2025 | 11.6 |
2026 | 10.1 |
2027 | 8.9 |
Thereafter | 7.6 |
Total lease payments | 58.7 |
Less: imputed interest | (6.1) |
Total present value of lease liabilities | 52.6 |
Finance Leases | |
2023 | 2.3 |
2024 | 4.8 |
2025 | 4.9 |
2026 | 5 |
2027 | 5.1 |
Thereafter | 59.5 |
Total lease payments | 81.6 |
Less: imputed interest | (30.4) |
Total present value of lease liabilities | $ 51.2 |
Income Taxes - Income Tax Provi
Income Taxes - Income Tax Provision Reconciliation (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 25, 2023 | Jun. 26, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | |
Income Tax Disclosure [Abstract] | ||||
Income tax expense (benefit) at federal statutory rate | $ 0.4 | $ (1) | $ (0.7) | $ (5.2) |
Nondeductible expenses and other | 1.9 | 1.5 | 3.5 | 2.5 |
Stock compensation - excess tax shortfalls (benefits) | 0.3 | 0.3 | 0.7 | (0.6) |
Federal impact of research & development tax credits | (0.2) | (0.3) | (0.4) | (0.5) |
Provision (benefit) for income taxes from continuing operations | $ 2.4 | $ 0.5 | $ 3.1 | $ (3.8) |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Millions | 6 Months Ended | ||
Jun. 25, 2023 | Jun. 26, 2022 | Dec. 25, 2022 | |
Income Tax Disclosure [Abstract] | |||
Unrecognized tax benefits | $ 25.1 | ||
Unrecognized tax benefits that if recognized would impact the effective tax rate for continuing operations | $ 22.6 | ||
Expense for interest and penalties | 0.1 | $ 0.2 | |
Liabilities for uncertain tax positions believed to be reasonably possible to expire within twelve months | $ 0.1 |
Debt - New Credit Facility (Det
Debt - New Credit Facility (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||||||
Mar. 14, 2022 | Feb. 18, 2022 | Nov. 20, 2017 | Jun. 25, 2023 | Jun. 26, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | Apr. 28, 2023 | Nov. 30, 2017 | |
Debt Instrument [Line Items] | |||||||||
Borrowing under credit facility | $ 34,000,000 | $ 100,000,000 | |||||||
Loss on extinguishment of debt | $ 0 | $ 0 | 0 | $ (13,000,000) | |||||
Interest Rate Swap | |||||||||
Debt Instrument [Line Items] | |||||||||
Fixed interest rate | 3.721% | ||||||||
SOFR | |||||||||
Debt Instrument [Line Items] | |||||||||
Basis spread on variable rate percentage | 1% | ||||||||
SOFR | Minimum | |||||||||
Debt Instrument [Line Items] | |||||||||
Basis spread on variable rate percentage | 1.25% | ||||||||
SOFR | Maximum | |||||||||
Debt Instrument [Line Items] | |||||||||
Basis spread on variable rate percentage | 2.25% | ||||||||
Base Rate | Minimum | |||||||||
Debt Instrument [Line Items] | |||||||||
Basis spread on variable rate percentage | 0.25% | ||||||||
Base Rate | Maximum | |||||||||
Debt Instrument [Line Items] | |||||||||
Basis spread on variable rate percentage | 1.25% | ||||||||
Senior Notes | |||||||||
Debt Instrument [Line Items] | |||||||||
Premium | $ 9,800,000 | ||||||||
Write-off | 3,200,000 | ||||||||
Loss on extinguishment of debt | $ 13,000,000 | ||||||||
6.5% Notes | Senior Notes | |||||||||
Debt Instrument [Line Items] | |||||||||
Long-term debt | $ 300,000,000 | ||||||||
Current period interest rate | 6.50% | 6.50% | 6.50% | ||||||
Principal | $ 300,000,000 | ||||||||
Debt issuance costs | $ 6,600,000 | ||||||||
Repayments of secured debt | $ 300,000,000 | ||||||||
Redemption percentage | 103.25% | ||||||||
Term Loan A | Interest Rate Swap | |||||||||
Debt Instrument [Line Items] | |||||||||
Initial hedge amount | $ 195,000,000 | ||||||||
Revolving Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Outstanding borrowings | $ 90,000,000 | ||||||||
Debt instrument, term (in years) | 5 years | ||||||||
Revolving credit facility | $ 200,000,000 | $ 90,000,000 | |||||||
Basis spread on variable rate percentage | 0.50% | ||||||||
Revolving Credit Facility | New Revolving Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, term (in years) | 5 years | ||||||||
Principal | $ 200,000,000 | 43,000,000 | 43,000,000 | ||||||
Debt issuance costs | 3,300,000 | ||||||||
Remaining borrowing capacity | $ 157,000,000 | 157,000,000 | |||||||
Letters of credit outstanding | 13,600,000 | ||||||||
Revolving Credit Facility | Term Loan Payment on June 30, 2022 | |||||||||
Debt Instrument [Line Items] | |||||||||
Repayments of lines of credit | $ 5,000,000 | ||||||||
Revolving Credit Facility | New Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Borrowing under credit facility | $ 300,000,000 | ||||||||
Premium redemption price percentage | 3.25% | ||||||||
Secured debt | Term Loan A | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, term (in years) | 5 years | ||||||||
Principal | $ 200,000,000 | ||||||||
Secured debt | Term Loan A | First And Second Year | |||||||||
Debt Instrument [Line Items] | |||||||||
Line of credit amortization percentage | 2.50% | ||||||||
Secured debt | Term Loan A | Third, Fourth and Fifth Year | |||||||||
Debt Instrument [Line Items] | |||||||||
Line of credit amortization percentage | 5% | ||||||||
Swing Line Loan | |||||||||
Debt Instrument [Line Items] | |||||||||
Revolving credit facility | 10,000,000 | ||||||||
Swing Line Loan | New Revolving Credit Facility | |||||||||
Debt Instrument [Line Items] | |||||||||
Revolving credit facility | $ 10,000,000 | ||||||||
Letter of Credit | |||||||||
Debt Instrument [Line Items] | |||||||||
Revolving credit facility | $ 50,000,000 | $ 50,000,000 |
Debt - Long-Term Debt and the C
Debt - Long-Term Debt and the Current Period Interest Rates (Details) - Line of Credit - USD ($) $ in Millions | Jun. 25, 2023 | Dec. 25, 2022 |
Line of Credit Facility [Line Items] | ||
Total debt | $ 238 | $ 257.5 |
Less current portion | 5 | 6.3 |
Total long-term debt, less current portion | $ 233 | $ 251.2 |
Current period interest rate | 7.50% | 6.40% |
Secured debt | ||
Line of Credit Facility [Line Items] | ||
Total debt | $ 195 | $ 197.5 |
Unamortized debt issuance costs | 0.9 | 1 |
Total long-term debt, net of unamortized debt issuance costs - term loans | 232.1 | 250.2 |
Revolving Credit Facility | ||
Line of Credit Facility [Line Items] | ||
Total debt | 43 | 60 |
Unamortized debt issuance costs | $ 0.9 | $ 1 |
Debt - Future Long-Term Debt Pr
Debt - Future Long-Term Debt Principal Payments (Details) - Line of Credit - Secured debt $ in Millions | Jun. 25, 2023 USD ($) |
Debt Instrument [Line Items] | |
2023 | $ 3.8 |
2024 | 8.7 |
2025 | 10 |
2026 | 10 |
2027 | 205.5 |
Total debt | $ 238 |
Debt - Issuance of 6.5% Senior
Debt - Issuance of 6.5% Senior Secured Notes due 2025 (Details) - 6.5% Notes - Senior Notes - USD ($) | Mar. 14, 2022 | Feb. 18, 2022 | Nov. 30, 2017 |
Debt Instrument [Line Items] | |||
Current period interest rate | 6.50% | 6.50% | 6.50% |
Principal | $ 300,000,000 | ||
Debt issuance costs | $ 6,600,000 |
Debt - Other Indebtedness (Deta
Debt - Other Indebtedness (Details) - USD ($) | Nov. 20, 2017 | Feb. 18, 2022 |
Revolving Credit Facility | ||
Line of Credit Facility [Line Items] | ||
Maturity period | 5 years | |
Revolving credit facility | $ 90,000,000 | $ 200,000,000 |
Letter of Credit | ||
Line of Credit Facility [Line Items] | ||
Revolving credit facility | 50,000,000 | $ 50,000,000 |
Swing Line Loan | ||
Line of Credit Facility [Line Items] | ||
Revolving credit facility | $ 10,000,000 |
Segment Information - Narrative
Segment Information - Narrative (Details) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |
Jun. 26, 2022 USD ($) | Jun. 25, 2023 USD ($) segment | Jun. 26, 2022 USD ($) | Dec. 25, 2022 USD ($) | |
Segment Reporting Information [Line Items] | ||||
Number of reportable segments | segment | 2 | |||
Litigation related charges | $ 0 | $ 5.5 | ||
Unmanned Systems | ||||
Segment Reporting Information [Line Items] | ||||
Litigation related charges | $ 5.5 | $ 5.5 | $ 5.5 |
Segment Information - Schedule
Segment Information - Schedule of Segment Revenues, Depreciation and Amortization, and Operating (Loss) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 25, 2023 | Jun. 26, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | |
Segment Reporting Information [Line Items] | ||||
Total revenues | $ 256.9 | $ 224.2 | $ 488.7 | $ 420.4 |
Depreciation and amortization: | ||||
Total depreciation and amortization | 7.9 | 6.9 | 15.8 | 13.9 |
Operating income (loss): | ||||
Total operating income (loss) | 6.7 | (1.9) | 7.2 | (3.1) |
Corporate activities | ||||
Operating income (loss): | ||||
Total operating income (loss) | (6.1) | (6.4) | (12.7) | (13.7) |
Kratos Government Solutions | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 204.8 | 167.8 | 388.6 | 311.4 |
Depreciation and amortization: | ||||
Total depreciation and amortization | 5.9 | 5 | 11.8 | 10.1 |
Kratos Government Solutions | Reportable Segments | ||||
Operating income (loss): | ||||
Total operating income (loss) | 11.6 | 9.5 | 19.3 | 15.1 |
Unmanned Systems | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 52.1 | 56.4 | 100.1 | 109 |
Depreciation and amortization: | ||||
Total depreciation and amortization | 2 | 1.9 | 4 | 3.8 |
Unmanned Systems | Reportable Segments | ||||
Operating income (loss): | ||||
Total operating income (loss) | 1.2 | (5) | 0.6 | (4.5) |
Service revenues | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 103.7 | 78.8 | 195.3 | 146.7 |
Service revenues | Kratos Government Solutions | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 102.2 | 77.2 | 192.4 | 144 |
Service revenues | Unmanned Systems | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 1.5 | 1.6 | 2.9 | 2.7 |
Product sales | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 153.2 | 145.4 | 293.4 | 273.7 |
Product sales | Kratos Government Solutions | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 102.6 | 90.6 | 196.2 | 167.4 |
Product sales | Unmanned Systems | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | $ 50.6 | $ 54.8 | $ 97.2 | $ 106.3 |
Redeemable Noncontrolling Int_2
Redeemable Noncontrolling Interest (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||||||
Apr. 07, 2023 | Jun. 13, 2022 | Feb. 27, 2019 | Jun. 25, 2023 | Jun. 26, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | Dec. 25, 2022 | |
Noncontrolling Interest [Line Items] | ||||||||
Redeemable noncontrolling interest | $ 14,700,000 | $ 14,700,000 | $ 11,200,000 | |||||
Noncontrolling interest, change in redemption value | $ 2,000,000 | $ 0 | $ 2,900,000 | $ 0 | ||||
KTT CORE, LLC | ||||||||
Noncontrolling Interest [Line Items] | ||||||||
Subsidiary percent owned (as a percent) | 90.05% | 90.05% | ||||||
Noncontrolling interest owned (as a percent) | 9.95% | 9.95% | ||||||
FTT Inc | ||||||||
Noncontrolling Interest [Line Items] | ||||||||
Percentage of voting interests acquired | 80.10% | |||||||
Aggregate purchase price | $ 6,400,000 | |||||||
KTT CORE, LLC | ||||||||
Noncontrolling Interest [Line Items] | ||||||||
Percentage of voting interests acquired | 9.95% | 80.10% | ||||||
Aggregate purchase price | $ 60,000,000 | |||||||
Common stock issued | $ (2,700,000) | |||||||
KTT CORE, LLC | KTT CORE, LLC | ||||||||
Noncontrolling Interest [Line Items] | ||||||||
Common stock issued | $ (10,700,000) | |||||||
Subsidiary percent owned (as a percent) | 90.05% | |||||||
Noncontrolling interest owned (as a percent) | 9.95% | |||||||
KTT CORE, LLC | Common Stock | ||||||||
Noncontrolling Interest [Line Items] | ||||||||
Number of shares issued (in shares) | 190,258 | |||||||
KTT CORE, LLC | Common Stock | KTT CORE, LLC | ||||||||
Noncontrolling Interest [Line Items] | ||||||||
Number of shares issued (in shares) | 828,128 |
Significant Customers (Details)
Significant Customers (Details) - U.S. Government - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 25, 2023 | Jun. 26, 2022 | Jun. 25, 2023 | Jun. 26, 2022 | |
Revenue, Major Customer [Line Items] | ||||
Sales to the U.S. Government, amount | $ 178.6 | $ 156.1 | $ 338.9 | $ 295.7 |
Revenue | Government Contracts | ||||
Revenue, Major Customer [Line Items] | ||||
Sales to the U.S. Government, percentage of total revenue (as percent) | 70% | 70% | 69% | 70% |
Derivative Financial Instrume_3
Derivative Financial Instruments - Narrative (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Apr. 28, 2023 | Feb. 18, 2022 | Jun. 25, 2023 | Jun. 25, 2023 | Dec. 25, 2022 | |
SOFR | |||||
Derivatives, Fair Value [Line Items] | |||||
Interest rate of derivatives | 1% | ||||
Foreign Exchange Contract | Designated as Hedging Instrument | |||||
Derivatives, Fair Value [Line Items] | |||||
Derivative notional amount | $ 3,200,000 | $ 3,200,000 | $ 10,200,000 | ||
Derivative asset | 500,000 | 500,000 | 100,000 | ||
Derivative liability | 1,300,000 | 1,300,000 | 300,000 | ||
Derivative, net gain (loss) | $ (500,000) | 700,000 | |||
Interest Rate Swap | Designated as Hedging Instrument | |||||
Derivatives, Fair Value [Line Items] | |||||
Derivative notional amount | $ 195,000,000 | $ 0 | |||
Derivative, net gain (loss) | $ 400,000 | ||||
Interest Rate Swap | Designated as Hedging Instrument | SOFR | |||||
Derivatives, Fair Value [Line Items] | |||||
Interest rate of derivatives | 3.721% |
Derivative Financial Instrume_4
Derivative Financial Instruments - Interest Rate Swap Contracts Designated as Cash Flow Hedge (Details) - Interest Rate Swap - Designated as Hedging Instrument - USD ($) $ in Millions | Jun. 25, 2023 | Dec. 25, 2022 |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Notional Value | $ 195 | $ 0 |
Fair Value | $ 1.8 | $ 0 |