text:
Document and Entity Information (USD $)
In Millions, except Share data, unless otherwise specified
Entity Registrant Name KRATOS DEFENSE & SECURITY SOLUTIONS, INC.
Entity Filer Category Accelerated Filer
Document Period End Date Dec. 29, 2013
Entity Common Stock, Shares Outstanding 57,416,257
Entity Public Float $ 286.6
If the value is true, then the document is an amendment to previously-filed/accepted document.
This is focus fiscal period of the document report. For a first quarter 2006 quarterly report, which may also provide financial information from prior periods, the first fiscal quarter should be given as the fiscal period focus. Values: FY, Q1, Q2, Q3, Q4, H1, H2, M9, T1, T2, T3, M8, CY.
The type of document being provided (such as 10-K, 10-Q, 485BPOS, etc). The document type is limited to the same value as the supporting SEC submission type, or the word "Other".
-Section 12b
Indicate "Yes" or "No" whether registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. This information should be based on the registrant's current or most recent filing containing the related disclosure.
Indicate whether the registrant is one of the following: (1) Large Accelerated Filer, (2) Accelerated Filer, (3) Non-accelerated Filer, (4) Smaller Reporting Company (Non-accelerated) or (5) Smaller Reporting Accelerated Filer. Definitions of these categories are stated in Rule 12b-2 of the Exchange Act. This information should be based on the registrant's current or most recent filing containing the related disclosure.
State aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to price at which the common equity was last sold, or average bid and asked price of such common equity, as of the last business day of registrant's most recently completed second fiscal quarter. The public float should be reported on the cover page of the registrants form 10K.
Indicate "Yes" or "No" if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Indicate "Yes" or "No" if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Is used on Form Type: 10-K, 10-Q, 8-K, 20-F, 6-K, 10-K/A, 10-Q/A, 20-F/A, 6-K/A, N-CSR, N-Q, N-1A.
Name: ktos_DocumentAndEntityInformation
Namespace Prefix: ktos_
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Cash and cash equivalents $ 55.7 $ 49.0
Restricted cash 5.0 5.5
Accounts receivable, net 265.8 271.9
Inventoried costs 74.6 94.3
Income taxes receivable 2.1 3.7
Prepaid expenses 10.4 17.4
Other current assets 16.7 7.0
Other current assets of discontinued operations 0 6.6
Total current assets 430.3 455.4
Property, plant and equipment, net 84.8 85.6
Goodwill 596.4 596.4
Intangible assets, net 69.9 106.1
Other assets 35.2 39.6
Other assets of discontinued operations 0 0.8
Total assets 1,216.6 1,283.9
Accounts payable 61.9 83.6
Accrued expenses 46.2 46.4
Accrued compensation 44.9 47.8
Accrued interest 5.2 6.3
Billings in excess of costs and earnings on uncompleted contracts 52.5 43.7
Deferred income tax liability 28.4 28.9
Other current liabilities 8.1 15.7
Current portion of long-term debt 1.0 1.0
Current portion of capital lease obligations 0.3 0.5
Current liabilities of discontinued operations 2.5 4.9
Total current liabilities 251.0 278.8
Long-term debt principal, net of current portion 628.8 629.7
Long-term debt premium 14.5 18.7
Capital lease obligations, net of current portion 0.1 0.4
Deferred income tax liability 0.7 0
Other long-term liabilities 25.5 31.9
Long-term liabilities of discontinued operations 0.2 0.3
Total liabilities 920.8 959.8
Preferred stock, $0.001 par value, 5,000,000 authorized, 0 shares outstanding at December 30, 2012 and December 29, 2013 0 0
Common stock, $0.001 par value, 195,000,000 shares authorized; 56,613,024 and 57,056,892 shares issued and outstanding at December 30, 2012 and December 29, 2013, respectively 0 0
Additional paid-in capital 856.0 847.1
Accumulated other comprehensive loss (0.8) (0.8)
Accumulated deficit (559.4) (522.2)
Total stockholders' equity 295.8 324.1
Total liabilities and stockholders' equity $ 1,216.6 $ 1,283.9
Carrying value as of the balance sheet date of liabilities incurred (and for which invoices have typically been received) and payable to vendors for goods and services received that are used in an entity's business. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
-Subparagraph (SX 210.5-02.19(a))
Name: us-gaap_AccountsPayableCurrent
Amount due from customers or clients, within one year of the balance sheet date (or the normal operating cycle, whichever is longer), for goods or services (including trade receivables) that have been delivered or sold in the normal course of business, reduced to the estimated net realizable fair value by an allowance established by the entity of the amount it deems uncertain of collection.
-Subparagraph (SX 210.5-02.3-4)
-Subparagraph a(1)
Name: us-gaap_AccountsReceivableNetCurrent
Carrying value as of the balance sheet date of obligations incurred and payable, pertaining to costs that are statutory in nature, are incurred on contractual obligations, or accumulate over time and for which invoices have not yet been received or will not be rendered. Examples include taxes, interest, rent and utilities. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
Name: us-gaap_AccruedLiabilitiesCurrent
Accumulated change in equity from transactions and other events and circumstances from non-owner sources, net of tax effect, at period end. Excludes Net Income (Loss), and accumulated changes in equity from transactions resulting from investments by owners and distributions to owners. Includes foreign currency translation items, certain pension adjustments, unrealized gains and losses on certain investments in debt and equity securities, other than temporary impairment (OTTI) losses related to factors other than credit losses on available-for-sale and held-to-maturity debt securities that an entity does not intend to sell and it is not more likely than not that the entity will be required to sell before recovery of the amortized cost basis, as well as changes in the fair value of derivatives related to the effective portion of a designated cash flow hedge.
-Paragraph 14A
-URI http://asc.fasb.org/extlink&oid=28358780&loc=SL7669686-108580
Name: us-gaap_AccumulatedOtherComprehensiveIncomeLossNetOfTax
Value received from shareholders in common stock-related transactions that are in excess of par value or stated value and amounts received from other stock-related transactions. Includes only common stock transactions (excludes preferred stock transactions). May be called contributed capital, capital in excess of par, capital surplus, or paid-in capital.
-Subparagraph (SX 210.5-02.30(a)(1))
Name: us-gaap_AdditionalPaidInCapitalCommonStock
Sum of the carrying amounts as of the balance sheet date of all assets that are recognized. Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Name: us-gaap_Assets
Sum of the carrying amounts as of the balance sheet date of all assets that are expected to be realized in cash, sold, or consumed within one year (or the normal operating cycle, if longer). Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
-Subparagraph (SX 210.5-02.9)
-URI http://asc.fasb.org/extlink&oid=28358313&loc=d3e6801-107765
Name: us-gaap_AssetsCurrent
Name: us-gaap_AssetsCurrentAbstract
The aggregate value (measured at the lower of net carrying value or fair value less cost of disposal) for current assets (assets with expected useful life shorter than one year or one operating cycle, whichever is longer) of a disposal group, including a component of the entity (discontinued operation), to be sold or that has subsequently been disposed of through sale, as of the financial statement date.
Name: us-gaap_AssetsOfDisposalGroupIncludingDiscontinuedOperationCurrent
The aggregate value (measured at the lower of net carrying value or fair value less cost of disposal) for noncurrent assets (assets with expected useful life longer than one year or one operating cycle, whichever is longer) of a disposal group, including a component of the entity (discontinued operation), to be sold or that has subsequently been disposed of through sale, as of the financial statement date.
Name: us-gaap_AssetsOfDisposalGroupIncludingDiscontinuedOperationNoncurrent
Liability attributable to (i) billings in excess of costs under the percentage of completion contract accounting method representing the difference between contractually invoiced amounts (billings) and revenue recognized based, for example, on costs incurred to estimated total costs at period end or (ii) contractually invoiced amounts (billings) in excess of costs incurred and accumulated under the completed contract accounting method.
Name: us-gaap_BillingsInExcessOfCost
Amount of capital lease obligation due within one year or the normal operating cycle, if longer.
-Subparagraph (b)
Name: us-gaap_CapitalLeaseObligationsCurrent
Amount equal to the present value (the principal) at the beginning of the lease term of minimum lease payments during the lease term (excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, together with any profit thereon) net of payments or other amounts applied to the principal, through the balance sheet date and due to be paid more than one year (or one operating cycle, if longer) after the balance sheet date.
Name: us-gaap_CapitalLeaseObligationsNoncurrent
Amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Excludes cash and cash equivalents within disposal group and discontinued operation.
-Glossary Cash
-Glossary Cash Equivalents
-Subparagraph (a)
Name: us-gaap_CashAndCashEquivalentsAtCarryingValue
Represents the caption on the face of the balance sheet to indicate that the entity has entered into (1) purchase or supply arrangements that will require expending a portion of its resources to meet the terms thereof, and (2) is exposed to potential losses or, less frequently, gains, arising from (a) possible claims against a company's resources due to future performance under contract terms, and (b) possible losses or likely gains from uncertainties that will ultimately be resolved when one or more future events that are deemed likely to occur do occur or fail to occur.
-URI http://asc.fasb.org/extlink&oid=25496072&loc=d3e14326-108349
-Subparagraph (SX 210.7-03.(a),19)
Name: us-gaap_CommitmentsAndContingencies
Aggregate par or stated value of issued nonredeemable common stock (or common stock redeemable solely at the option of the issuer). This item includes treasury stock repurchased by the entity. Note: elements for number of nonredeemable common shares, par value and other disclosure concepts are in another section within stockholders' equity.
Name: us-gaap_CommonStockValue
The amount of debt premium that was originally recognized at the issuance of the instrument that has yet to be amortized.
-Paragraph 1A
Name: us-gaap_DebtInstrumentUnamortizedPremium
Amount of deferred tax liability attributable to taxable temporary differences, net of deferred tax asset attributable to deductible temporary differences and carryforwards net of valuation allowances expected to be realized or consumed within one year or operating cycle, if longer.
Name: us-gaap_DeferredTaxLiabilitiesCurrent
Amount of deferred tax liability attributable to taxable temporary differences, net of deferred tax asset attributable to deductible temporary differences and carryforwards net of valuation allowances expected to be realized or consumed after one year (or the normal operating cycle, if longer).
Name: us-gaap_DeferredTaxLiabilitiesNoncurrent
Total of the carrying values as of the balance sheet date of obligations incurred through that date and payable for obligations related to services received from employees, such as accrued salaries and bonuses, payroll taxes and fringe benefits. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
Name: us-gaap_EmployeeRelatedLiabilitiesCurrent
Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.
Name: us-gaap_Goodwill
Carrying amount due within one year of the balance sheet date (or one operating cycle, if longer) from tax authorities as of the balance sheet date representing refunds of overpayments or recoveries based on agreed-upon resolutions of disputes.
-Subparagraph (SX 210.5-02.3(a)(4))
-Subparagraph c
-Subparagraph (SX 210.7-03.5(c))
Name: us-gaap_IncomeTaxesReceivable
Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.
-Subparagraph ((a)(1),(b))
Name: us-gaap_IntangibleAssetsNetExcludingGoodwill
Carrying value as of the balance sheet date of [accrued] interest payable on all forms of debt, including trade payables, that has been incurred and is unpaid. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
-Glossary Current Liabilities
Name: us-gaap_InterestPayableCurrent
Carrying amount (lower of cost or market) of inventories less all valuation, other allowances, and progress payments or customer advances received on long-term contracts or programs. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer).
Name: us-gaap_InventoryNetOfAllowancesCustomerAdvancesAndProgressBillings
Sum of the carrying amounts as of the balance sheet date of all liabilities that are recognized. Liabilities are probable future sacrifices of economic benefits arising from present obligations of an entity to transfer assets or provide services to other entities in the future.
-Subparagraph (SX 210.5-02.19-26)
Name: us-gaap_Liabilities
Amount of liabilities and equity items, including the portion of equity attributable to noncontrolling interests, if any.
Name: us-gaap_LiabilitiesAndStockholdersEquity
Total obligations incurred as part of normal operations that are expected to be paid during the following twelve months or within one business cycle, if longer.
Name: us-gaap_LiabilitiesCurrent
Name: us-gaap_LiabilitiesCurrentAbstract
Carrying value as of the balance sheet date of current obligations (due less than one year or one operating cycle, if longer) arising from the sale, disposal or planned sale in the near future (generally within one year) of a disposal group, including a component of the entity (discontinued operation).
Name: us-gaap_LiabilitiesOfDisposalGroupIncludingDiscontinuedOperationCurrent
Carrying value of noncurrent obligations (due more than one year or one operating cycle, whichever is longer) relating to the sale, disposal or planned sale in the near future (generally within one year) of a disposal group, including a component of the entity (discontinued operation), as of the balance sheet date.
Name: us-gaap_LiabilitiesOfDisposalGroupIncludingDiscontinuedOperationNoncurrent
Amount of long-term debt, after unamortized discount or premium, scheduled to be repaid within one year or the normal operating cycle, if longer. Includes, but not limited to, notes payable, bonds payable, debentures, mortgage loans and commercial paper. Excludes capital lease obligations.
-Subparagraph (SX 210.5-02.19,20)
Name: us-gaap_LongTermDebtCurrent
Carrying amount of long-term debt, net of unamortized discount or premium, excluding amounts to be repaid within one year or the normal operating cycle, if longer (current maturities). Includes, but not limited to, notes payable, bonds payable, debentures, mortgage loans and commercial paper. Excludes capital lease obligations.
Name: us-gaap_LongTermDebtNoncurrent
Aggregate carrying amount, as of the balance sheet date, of current assets not separately disclosed in the balance sheet. Current assets are expected to be realized or consumed within one year (or the normal operating cycle, if longer).
Name: us-gaap_OtherAssetsCurrent
Aggregate carrying amount, as of the balance sheet date, of noncurrent assets not separately disclosed in the balance sheet. Noncurrent assets are expected to be realized or consumed after one year (or the normal operating cycle, if longer).
Name: us-gaap_OtherAssetsNoncurrent
Aggregate carrying amount of current liabilities (due within one year or within the normal operating cycle if longer) not separately disclosed in the balance sheet. Includes costs that are statutory in nature, are incurred on contractual obligations, or accumulate over time and for which invoices have not yet been received or will not be rendered and of liabilities not separately disclosed.
Name: us-gaap_OtherLiabilitiesCurrent
Aggregate carrying amount, as of the balance sheet date, of noncurrent obligations not separately disclosed in the balance sheet. Noncurrent liabilities are expected to be paid after one year (or the normal operating cycle, if longer).
Name: us-gaap_OtherLiabilitiesNoncurrent
Aggregate par or stated value of issued nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer). This item includes treasury stock repurchased by the entity. Note: elements for number of nonredeemable preferred shares, par value and other disclosure concepts are in another section within stockholders' equity.
-Subparagraph (SX 210.3-04)
-URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187085-122770
Name: us-gaap_PreferredStockValue
Amount of asset related to consideration paid in advance for costs that provide economic benefits within a future period of one year or the normal operating cycle, if longer.
-Glossary Current Assets
-Subparagraph (g)
Name: us-gaap_PrepaidExpenseCurrent
Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.
Name: us-gaap_PropertyPlantAndEquipmentNet
The carrying amounts of cash and cash equivalent items which are restricted as to withdrawal or usage. Restrictions may include legally restricted deposits held as compensating balances against short-term borrowing arrangements, contracts entered into with others, or entity statements of intention with regard to particular deposits; however, time deposits and short-term certificates of deposit are not generally included in legally restricted deposits. Excludes compensating balance arrangements that are not agreements which legally restrict the use of cash amounts shown on the balance sheet. For a classified balance sheet represents the current portion only (the noncurrent portion has a separate concept); there is a separate and distinct element for unclassified presentations.
Name: us-gaap_RestrictedCashAndCashEquivalentsAtCarryingValue
The cumulative amount of the reporting entity's undistributed earnings or deficit.
Name: us-gaap_RetainedEarningsAccumulatedDeficit
Name: us-gaap_StockholdersEquityAbstract
Amount of stockholders' equity (deficit), net of receivables from officers, directors, owners, and affiliates of the entity, attributable to both the parent and noncontrolling interests. Amount excludes temporary equity. Alternate caption for the concept is permanent equity.
-URI http://asc.fasb.org/extlink&oid=7656940&loc=SL4568447-111683
-Paragraph 4I
Name: us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Preferred Stock:
Par value $ 0.001 $ 0.001
Shares authorized 5,000,000 5,000,000
Shares outstanding 0 0
Common Stock:
Par value (in dollars per share) $ 0.001 $ 0.001
Shares authorized 195,000,000 195,000,000
Shares issued 57,056,892 56,613,024
Shares outstanding 57,056,892 56,613,024
Name: us-gaap_CommonStockNumberOfSharesParValueAndOtherDisclosuresAbstract
Face amount or stated value per share of common stock.
Name: us-gaap_CommonStockParOrStatedValuePerShare
Data Type: num:perShareItemType
The maximum number of common shares permitted to be issued by an entity's charter and bylaws.
Name: us-gaap_CommonStockSharesAuthorized
Total number of common shares of an entity that have been sold or granted to shareholders (includes common shares that were issued, repurchased and remain in the treasury). These shares represent capital invested by the firm's shareholders and owners, and may be all or only a portion of the number of shares authorized. Shares issued include shares outstanding and shares held in the treasury.
Name: us-gaap_CommonStockSharesIssued
Number of shares of common stock outstanding. Common stock represent the ownership interest in a corporation.
Name: us-gaap_CommonStockSharesOutstanding
Name: us-gaap_PreferredStockNumberOfSharesParValueAndOtherDisclosuresAbstract
Face amount or stated value per share of preferred stock nonredeemable or redeemable solely at the option of the issuer.
Name: us-gaap_PreferredStockParOrStatedValuePerShare
The maximum number of nonredeemable preferred shares (or preferred stock redeemable solely at the option of the issuer) permitted to be issued by an entity's charter and bylaws.
Name: us-gaap_PreferredStockSharesAuthorized
Aggregate share number for all nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer) held by stockholders. Does not include preferred shares that have been repurchased.
Name: us-gaap_PreferredStockSharesOutstanding
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (USD $)
In Millions, except Per Share data, unless otherwise specified
Income Statement [Abstract]
Service revenues $ 443.6 $ 450.0 $ 351.0
Product sales 507.0 519.2 362.9
Total revenues 950.6 969.2 713.9
Cost of service revenues 335.2 350.8 260.7
Cost of product sales 375.4 361.2 262.0
Total costs 710.6 712.0 522.7
Gross profit 240.0 257.2 191.2
Selling, general and administrative expenses 193.0 193.1 140.6
Merger and acquisition related items (3.8) (2.7) 12.5
Research and development expenses 21.4 17.8 8.6
Impairment of goodwill and intangible assets 0 96.6 0
Unused office space and other (2.4) 2.1 0
Operating income (loss) from continuing operations 31.8 (49.7) 29.5
Other income (expense):
Interest expense, net (63.7) (66.1) (51.1)
Other income, net 0 1.3 0
Total other expense, net (63.7) (64.8) (51.1)
Loss from continuing operations before income taxes (31.9) (114.5) (21.6)
Provision (benefit) for income taxes from continuing operations 0 (1.6) 1.9
Loss from continuing operations (31.9) (112.9) (23.5)
Loss from discontinued operations (5.3) (1.5) (0.7)
Net loss (37.2) (114.4) (24.2)
Basic and diluted loss per common share:
Net loss from continuing operations (in dollars per share) $ (0.56) $ (2.41) $ (0.86)
Net loss from discontinued operations (in dollars per share) $ (0.09) $ (0.03) $ (0.02)
Net loss per common share (in dollars per share) $ (0.65) $ (2.44) $ (0.88)
Basic and diluted (in shares) 56.8 46.9 27.4
Comprehensive Loss
Net loss from above (37.2) (114.4) (24.2)
Other comprehensive loss:
Change in cumulative translation adjustment 0 (0.4) 0.1
Post retirement benefit reserve adjustment net of tax expense 0 (0.2) (0.3)
Other comprehensive loss, net of tax 0 (0.6) (0.2)
Comprehensive loss $ (37.2) $ (115.0) $ (24.4)
Impairment Charges And Adjustments To Unused Office Space Liability
Name: ktos_ImpairmentChargesAndAdjustmentsToUnusedOfficeSpaceLiability
This element represents acquisition-related costs incurred to effect a business combination which costs have been expensed during the period. Such costs include finder's fees; advisory, legal, accounting, valuation, and other professional or consulting fees; general administrative costs, including the costs of maintaining an internal acquisitions department; and may include costs of registering and issuing debt and equity securities.
Name: us-gaap_BusinessCombinationAcquisitionRelatedCosts
Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income and other comprehensive income, attributable to parent entity. Excludes changes in equity resulting from investments by owners and distributions to owners.
-Glossary Comprehensive Income
-URI http://asc.fasb.org/extlink&oid=16317811
Name: us-gaap_ComprehensiveIncomeNetOfTax
Name: us-gaap_ComprehensiveIncomeNetOfTaxAbstract
Total costs related to goods produced and sold during the reporting period.
-Subparagraph (SX 210.5-03.2(a))
Name: us-gaap_CostOfGoodsSold
The aggregate cost of goods produced and sold and services rendered during the reporting period.
Name: us-gaap_CostOfRevenue
Total costs related to services rendered by an entity during the reporting period.
-Subparagraph (SX 210.5-03.2(d))
Name: us-gaap_CostOfServices
The amount of net income or loss for the period per each share in instances when basic and diluted earnings per share are the same amount and reported as a single line item on the face of the financial statements. Basic earnings per share is the amount of net income or loss for the period per each share of common stock or unit outstanding during the reporting period. Diluted earnings per share includes the amount of net income or loss for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.
Name: us-gaap_EarningsPerShareBasicAndDiluted
Name: us-gaap_EarningsPerShareBasicAndDilutedAbstract
Total loss recognized during the period from the impairment of goodwill plus the loss recognized in the period resulting from the impairment of the carrying amount of intangible assets, other than goodwill.
Name: us-gaap_GoodwillAndIntangibleAssetImpairment
Aggregate revenue less cost of goods and services sold or operating expenses directly attributable to the revenue generation activity.
-Subparagraph (SX 210.5-03.1,2)
Name: us-gaap_GrossProfit
Sum of operating profit and nonoperating income or expense before Income or Loss from equity method investments, income taxes, extraordinary items, and noncontrolling interest.
-Subparagraph (SX 210.4-08.(h)(1)(i))
Name: us-gaap_IncomeLossFromContinuingOperationsBeforeIncomeTaxesMinorityInterestAndIncomeLossFromEquityMethodInvestments
This element represents the income or loss from continuing operations attributable to the economic entity which may also be defined as revenue less expenses and taxes from ongoing operations before extraordinary items, and noncontrolling interest.
Name: us-gaap_IncomeLossFromContinuingOperationsIncludingPortionAttributableToNoncontrollingInterest
The amount of net income (loss) from continuing operations per each basic and diluted share of common stock or unit when the per share amount is the same for both basic and diluted shares.
Name: us-gaap_IncomeLossFromContinuingOperationsPerBasicAndDilutedShare
Amount of income (loss) from a disposal group, net of income tax before extraordinary items allocable to noncontrolling interests. Includes, net of tax, income (loss) from operations during the phase-out period, gain (loss) on disposal, provision (or any reversals of earlier provisions) for loss on disposal, and adjustments of a prior period gain (loss) on disposal.
-URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e957-107759
-Subparagraph (c)
Name: us-gaap_IncomeLossFromDiscontinuedOperationsNetOfTax
Per basic and diluted share amount, after tax, of income (loss) from the day-to-day business activities of the discontinued operation and gain (loss) from the disposal of the discontinued operation, when the per share amount is the same.
Name: us-gaap_IncomeLossFromDiscontinuedOperationsNetOfTaxPerBasicAndDilutedShare
Name: us-gaap_IncomeStatementAbstract
Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.
-Subparagraph (SX 210.4-08.(h))
-Paragraph h
-Glossary Income Tax Expense (or Benefit)
-Subparagraph (a),(b)
Name: us-gaap_IncomeTaxExpenseBenefit
The net amount of nonoperating interest income (expense).
Name: us-gaap_InterestIncomeExpenseNonoperatingNet
The aggregate amount of income or expense from ancillary business-related activities (that is to say, excluding major activities considered part of the normal operations of the business).
Name: us-gaap_NonoperatingIncomeExpense
The net result for the period of deducting operating expenses from operating revenues.
Name: us-gaap_OperatingIncomeLoss
Amount after tax and reclassification adjustments, of (increase) decrease in accumulated other comprehensive (income) loss related to pension and other postretirement defined benefit plans, attributable to parent entity.
-Subparagraph (c)(3)
Name: us-gaap_OtherComprehensiveIncomeDefinedBenefitPlansAdjustmentNetOfTaxPortionAttributableToParent
Amount after tax and reclassification adjustments of gain (loss) on foreign currency translation adjustments, foreign currency transactions designated and effective as economic hedges of a net investment in a foreign entity and intra-entity foreign currency transactions that are of a long-term-investment nature, attributable to parent entity.
Name: us-gaap_OtherComprehensiveIncomeForeignCurrencyTransactionAndTranslationAdjustmentNetOfTaxPortionAttributableToParent
Name: us-gaap_OtherComprehensiveIncomeLossNetOfTaxPeriodIncreaseDecreaseAbstract
Amount after tax of other comprehensive income (loss) attributable to parent entity.
Name: us-gaap_OtherComprehensiveIncomeLossNetOfTaxPortionAttributableToParent
The net amount of other income and expense amounts, the components of which are not separately disclosed on the income statement, resulting from ancillary business-related activities (that is, excluding major activities considered part of the normal operations of the business) also known as other nonoperating income (expense) recognized for the period. Such amounts may include: (a) dividends, (b) interest on securities, (c) net gains or losses on securities, (d) unusual costs, (e) gains or losses on foreign exchange transactions, and (f) miscellaneous other income and expense items.
Name: us-gaap_OtherNonoperatingIncomeExpense
Name: us-gaap_OtherNonoperatingIncomeExpenseAbstract
The aggregate costs incurred (1) in a planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service, a new process or technique, or in bringing about a significant improvement to an existing product or process; or (2) to translate research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process whether intended for sale or the entity's use, during the reporting period charged to research and development projects, including the costs of developing computer software up to the point in time of achieving technological feasibility, and costs allocated in accounting for a business combination to in-process projects deemed to have no alternative future use.
Name: us-gaap_ResearchAndDevelopmentExpense
Aggregate revenue during the period from the sale of goods in the normal course of business, after deducting returns, allowances and discounts.
Name: us-gaap_SalesRevenueGoodsNet
Total revenue from sale of goods and services rendered during the reporting period, in the normal course of business, reduced by sales returns and allowances, and sales discounts.
Name: us-gaap_SalesRevenueNet
Aggregate revenue during the period from services rendered in the normal course of business, after deducting allowances and discounts.
Name: us-gaap_SalesRevenueServicesNet
The aggregate total costs related to selling a firm's product and services, as well as all other general and administrative expenses. Direct selling expenses (for example, credit, warranty, and advertising) are expenses that can be directly linked to the sale of specific products. Indirect selling expenses are expenses that cannot be directly linked to the sale of specific products, for example telephone expenses, Internet, and postal charges. General and administrative expenses include salaries of non-sales personnel, rent, utilities, communication, etc.
Name: us-gaap_SellingGeneralAndAdministrativeExpense
Average number of shares or units issued and outstanding that are used in calculating basic and diluted earnings per share (EPS).
Name: us-gaap_WeightedAverageNumberOfShareOutstandingBasicAndDiluted
Name: us-gaap_WeightedAverageNumberOfSharesOutstandingAbstract
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (USD $)
Balance at Dec. 26, 2010 $ 169.9 $ 0 $ 553.5 $ 0 $ (383.6)
Balance (in shares) at Dec. 26, 2010 18,600,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock for employee stock purchase plan, options and warrants (shares) 400,000
Issuance of common stock for employee stock purchase plan, options and warrants 2.0 2.0
Issuance of common stock for cash (in shares) 4,900,000
Issuance of common stock for cash 61.1 61.1
Issuance of common stock for acquisitions (in shares) 10,400,000
Stock-based compensation 109.7 109.7
Fair value of options assumed for acquisitions 1.9 1.9
Stock-based compensation 3.3 3.3
Conversion of convertible notes (in shares) 100,000
Conversion of convertible notes 0
Common stock repurchased (in shares) (2,000,000)
Net loss (10.9) (10.9)
Other comprehensive loss, net of tax (0.2) (0.2)
Balance at Dec. 25, 2011 312.6 0 720.6 (0.2) (407.8)
Issuance of common stock for employee stock purchase plan, options and warrants 0
Issuance of common stock for cash (in shares) 20,000,000
Issuance of common stock for acquisitions (in shares) 4,000,000
Stock-based compensation 23.8 23.8
Common stock repurchased for employee stock purchase plan (0.7) (0.7)
Restricted stock units traded for taxes (0.2) (0.2)
Net loss (114.4) (114.4)
Balance (in shares) at Dec. 30, 2012 56,613,024 56,600,000
Restricted stock units traded for taxes (in shares) 100,000
Other comprehensive loss, net of tax 0
Balance at Dec. 29, 2013 $ 295.8 $ 0 $ 856.0 $ (0.8) $ (559.4)
Adjustments to Additional Paid in Capital, Share-based Compensation, Employee Stock Purchase Plan and Restricted Stock Traded for Tax
Name: ktos_AdjustmentsToAdditionalPaidInCapitalShareBasedCompensationEmployeeStockPurchasePlanAndTaxEffectOfRestrictedStock
Adjustment to additional paid-in-capital resulting from fair value of options assumed for acquisition.
Name: ktos_AdjustmentsToAdditionalPaidInCapitalStockOptionsAssumedForAcquisition
This element represents the amount of recognized equity-based compensation during the period, that is, the amount recognized as expense in the income statement (or as asset if compensation is capitalized). Alternate captions include the words "stock-based compensation".
Name: us-gaap_AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValue
Amount of increase (decrease) in additional paid in capital (APIC) resulting from a tax benefit (deficiency) associated with an share-based compensation plan other than an employee stock ownership plan (ESOP).
Name: us-gaap_AdjustmentToAdditionalPaidInCapitalIncomeTaxEffectFromShareBasedCompensationNet
Name: us-gaap_IncreaseDecreaseInStockholdersEquityRollForward
Amount after tax and reclassification adjustments of other comprehensive income (loss).
Name: us-gaap_OtherComprehensiveIncomeLossNetOfTax
The number of restricted shares issued as compensation, net of shares for the payment of withholding taxes. This element is to be used only if shares are used in lieu of cash to satisfy all or a portion of withholding taxes.
Name: us-gaap_RestrictedStockSharesIssuedNetOfSharesForTaxWithholdings
Number of shares of stock issued during the period pursuant to acquisitions.
Name: us-gaap_StockIssuedDuringPeriodSharesAcquisitions
Number of shares issued during the period as a result of the conversion of convertible securities.
Name: us-gaap_StockIssuedDuringPeriodSharesConversionOfConvertibleSecurities
Number of new stock issued during the period.
Name: us-gaap_StockIssuedDuringPeriodSharesNewIssues
Number of shares (or other type of equity) issued during the period as a result of any equity-based compensation plan other than an employee stock ownership plan (ESOP), net of any shares forfeited. Shares issued could result from the issuance of restricted stock, the exercise of stock options, stock issued under employee stock purchase plans, and/or other employee benefit plans.
Name: us-gaap_StockIssuedDuringPeriodSharesShareBasedCompensation
Value of stock issued pursuant to acquisitions during the period.
Name: us-gaap_StockIssuedDuringPeriodValueAcquisitions
The gross value of stock issued during the period upon the conversion of convertible securities.
Name: us-gaap_StockIssuedDuringPeriodValueConversionOfConvertibleSecurities
Equity impact of the value of new stock issued during the period. Includes shares issued in an initial public offering or a secondary public offering.
Name: us-gaap_StockIssuedDuringPeriodValueNewIssues
Value of stock (or other type of equity) issued during the period as a result of any equity-based compensation plan other than an employee stock ownership plan (ESOP), net of stock value of such awards forfeited. Stock issued could result from the issuance of restricted stock, the exercise of stock options, stock issued under employee stock purchase plans, and/or other employee benefit plans.
-Subparagraph (d)(1)
Name: us-gaap_StockIssuedDuringPeriodValueShareBasedCompensation
Number of shares that have been repurchased during the period and have not been retired and are not held in treasury. Some state laws may govern the circumstances under which an entity may acquire its own stock and prescribe the accounting treatment therefore. This element is used when state law does not recognize treasury stock.
Name: us-gaap_StockRepurchasedDuringPeriodShares
Equity impact of the value of stock that has been repurchased during the period and has not been retired and is not held in treasury. Some state laws may mandate the circumstances under which an entity may acquire its own stock and prescribe the accounting treatment therefore. This element is used when state law does not recognize treasury stock.
Name: us-gaap_StockRepurchasedDuringPeriodValue
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
Net loss $ (37.2) $ (114.4) $ (24.2)
Adjustments to reconcile net loss from continuing operations to net cash provided by operating activities from continuing operations:
Depreciation and amortization 53.4 58.0 48.0
Deferred income taxes (0.4) (2.5) (0.1)
Stock-based compensation 7.4 6.6 3.3
Mark to market on swaps 0 0 (0.3)
Goodwill and intangible assets impairment charge 0 96.6 0
Amortization of deferred financing costs 5.1 5.1 3.8
Amortization of premium on Senior Secured Notes (4.2) (4.2) (2.8)
Provision for doubtful accounts 1.0 0.4 1.8
Change in accrual for excess facilities (4.7) 1.8 0
Changes in assets and liabilities, net of acquisitions:
Accounts receivable 4.9 2.8 (14.4)
Inventoried costs 20.0 (5.2) 4.3
Prepaid expenses 1.9 (1.7) 1.4
Other assets (7.0) (0.2) 1.3
Accounts payable (22.0) 25.6 (15.8)
Accrued expenses (0.7) (10.3) 1.0
Accrued compensation (3.0) 4.3 (3.8)
Accrued interest (1.1) 1.2 3.1
Billings in excess of costs and earnings on uncompleted contracts 8.8 (5.0) (1.8)
Income tax receivable and payable 1.6 (0.7) (0.2)
Other liabilities (6.5) (7.4) (0.1)
Net cash provided by operating activities from continuing operations 22.6 52.3 5.2
Cash paid for acquisitions, net of cash acquired 2.2 (149.4) (391.1)
Proceeds from the disposition of discontinued operations 1.3 0.3 0
Cash transferred from restricted cash 0.4 0.6 3.0
Capital expenditures (16.6) (16.6) (7.5)
Net cash used in investing activities from continuing operations (12.7) (165.1) (395.6)
Proceeds from the issuance of long-term debt, net of issuance costs 0 0 425.7
Proceeds from the issuance of common stock, net of issuance costs 0 97.0 61.1
Borrowing under credit facility 0 50.0 0
Repayments under credit facility (1.0) (51.0) (2.7)
Purchase of treasury stock 0 0 (10.9)
Cash paid for contingent acquisition consideration (2.1) (2.5) 0
Debt issuance costs 0 (1.2) (22.1)
Proceeds from exercise of restricted stock units, employee stock options, and employee stock purchase plan 1.5 0 2.0
Other (0.4) (1.4) (0.7)
Net cash provided by (used in) financing activities from continuing operations (2.0) 90.9 452.4
Net cash flows of continuing operations 7.9 (21.9) 62.0
Net operating cash flows of discontinued operations (1.3) 1.3 (2.7)
Effect of exchange rate changes on cash and cash equivalents 0.1 0 (0.5)
Net increase (decrease) in cash and cash equivalents 6.7 (20.6) 58.8
Cash and cash equivalents at beginning of year 49.0 69.6 10.8
Cash and cash equivalents at end of year 55.7 49.0 69.6
Supplemental disclosure of cash flow information:
Cash paid during the year for interest 63.8 64.0 46.2
Net cash paid during the year for income taxes 0.2 2.7 1.5
Non-cash investing and financing activities:
Common stock and stock options issued for acquisitions 0 23.8 111.6
Liability for contingent cash consideration 0 2.1 1.8
Supplemental disclosures of non-cash investing and financing transactions:
Fair value of assets acquired in acquisitions 0 218.3 731.3
Liabilities assumed in acquisitions $ 0 $ 35.2 $ 197.2
Noncash Investing and Financing Activities, Contingent Acquisition Consideration, Liabilities
Name: ktos_NoncashInvestingAndFinancingActivitiesContingentAcquisitionConsiderationLiabilities
Noncash or Part Noncash Acquisition, Noncash Financial or Equity Instrument Consideration, Common Stock and Stock Options Issued, Value
Name: ktos_NoncashOrPartNoncashAcquisitionNoncashFinancialOrEquityInstrumentConsiderationCommonStockAndStockOptionsIssuedValue
The amount of any adjustments made during the period to the amount of a previously accrued liability for unused office space.
Name: ktos_UnusedOfficeSpaceAccrualAdjustment
Name: us-gaap_AdjustmentsToReconcileNetIncomeLossToCashProvidedByUsedInOperatingActivitiesAbstract
Amount of noncash expense included in interest expense to amortize debt discount and premium associated with the related debt instruments. Excludes amortization of financing costs. Alternate captions include noncash interest expense.
Name: us-gaap_AmortizationOfDebtDiscountPremium
The amount of amortization of deferred charges applied against earnings during the period.
Name: us-gaap_AmortizationOfDeferredCharges
Amount of increase (decrease) in cash and cash equivalents. Cash and cash equivalents are the amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Includes effect from exchange rate changes.
Name: us-gaap_CashAndCashEquivalentsPeriodIncreaseDecrease
Name: us-gaap_CashFlowNoncashInvestingAndFinancingActivitiesDisclosureAbstract
Amount of cash inflow (outflow) of investing activities of discontinued operations. Investing activity cash flows include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment and other productive assets.
Name: us-gaap_CashProvidedByUsedInInvestingActivitiesDiscontinuedOperations
Amount of cash inflow (outflow) of operating activities of discontinued operations. Operating activity cash flows include transactions, adjustments, and changes in value not defined as investing or financing activities.
Name: us-gaap_CashProvidedByUsedInOperatingActivitiesDiscontinuedOperations
Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.
-Subparagraph (SAB TOPIC 6.I.7)
-Number Topic 6
-Section I
-Glossary Deferred Tax Expense (or Benefit)
Name: us-gaap_DeferredIncomeTaxExpenseBenefit
The aggregate expense recognized in the current period that allocates the cost of tangible assets, intangible assets, or depleting assets to periods that benefit from use of the assets.
Name: us-gaap_DepreciationDepletionAndAmortization
The effect of exchange rate changes on cash balances in continuing operations held in foreign currencies.
Name: us-gaap_EffectOfExchangeRateOnCashAndCashEquivalentsContinuingOperations
The fair value of assets acquired in noncash investing or financing activities.
Name: us-gaap_FairValueOfAssetsAcquired
The amount of cash paid during the current period to foreign, federal, state, and local authorities as taxes on income, net of any cash received during the current period as refunds for the overpayment of taxes.
Name: us-gaap_IncomeTaxesPaidNet
The increase (decrease) during the reporting period in the aggregate amount of liabilities incurred (and for which invoices have typically been received) and payable to vendors for goods and services received that are used in an entity's business.
Name: us-gaap_IncreaseDecreaseInAccountsPayable
The increase (decrease) during the reporting period in amount due within one year (or one business cycle) from customers for the credit sale of goods and services.
Name: us-gaap_IncreaseDecreaseInAccountsReceivable
The increase (decrease) during the reporting period in the liability reflecting cash payments received before the related costs have been incurred.
Name: us-gaap_IncreaseDecreaseInBillingInExcessOfCostOfEarnings
The increase (decrease) during the reporting period in the aggregate amount of obligations related to services received from employees, such as accrued salaries and bonuses, payroll taxes and fringe benefits.
Name: us-gaap_IncreaseDecreaseInEmployeeRelatedLiabilities
The increase (decrease) during the reporting period in the amounts payable to taxing authorities for taxes that are based on the reporting entity's earnings, net of amounts receivable from taxing authorities for refunds of overpayments or recoveries of income taxes.
Name: us-gaap_IncreaseDecreaseInIncomeTaxesPayableNetOfIncomeTaxesReceivable
The increase (decrease) during the reporting period in interest payable, which represents the amount owed to note holders, bond holders, and other parties for interest earned on loans or credit extended to the reporting entity.
Name: us-gaap_IncreaseDecreaseInInterestPayableNet
The increase (decrease) during the reporting period in the aggregate value of all inventory held by the reporting entity, associated with underlying transactions that are classified as operating activities.
Name: us-gaap_IncreaseDecreaseInInventories
Name: us-gaap_IncreaseDecreaseInOperatingCapitalAbstract
The increase (decrease) during the reporting period in other expenses incurred but not yet paid.
Name: us-gaap_IncreaseDecreaseInOtherAccruedLiabilities
The increase (decrease) during the reporting period in other assets used in operating activities not separately disclosed in the statement of cash flows. May include changes in other current assets, other noncurrent assets, or a combination of other current and noncurrent assets.
Name: us-gaap_IncreaseDecreaseInOtherOperatingAssets
The increase (decrease) during the reporting period in other liabilities used in operating activities not separately disclosed in the statement of cash flows. May include changes in other current liabilities, other noncurrent liabilities, or a combination of other current and noncurrent liabilities.
Name: us-gaap_IncreaseDecreaseInOtherOperatingLiabilities
The increase (decrease) during the reporting period in the amount of outstanding money paid in advance for goods or services that bring economic benefits for future periods.
Name: us-gaap_IncreaseDecreaseInPrepaidExpense
The net cash inflow or outflow for the increase (decrease) associated with funds that are not available for withdrawal or use (such as funds held in escrow) and are associated with underlying transactions that are classified as investing activities.
-Glossary Investing Activities
Name: us-gaap_IncreaseDecreaseInRestrictedCash
The amount of cash paid for interest during the period.
-Subparagraph (e)
Name: us-gaap_InterestPaid
The fair value of liabilities assumed in noncash investing or financing activities.
Name: us-gaap_LiabilitiesAssumed1
The increase (decrease) in cash associated with the entity's continuing operating, investing, and financing activities. While for technical reasons this element has no balance attribute, the default assumption is a debit balance consistent with its label.
Name: us-gaap_NetCashProvidedByUsedInContinuingOperations
Amount of cash inflow (outflow) of financing activities, excluding discontinued operations. Financing activity cash flows include obtaining resources from owners and providing them with a return on, and a return of, their investment; borrowing money and repaying amounts borrowed, or settling the obligation; and obtaining and paying for other resources obtained from creditors on long-term credit.
Name: us-gaap_NetCashProvidedByUsedInFinancingActivitiesContinuingOperations
Name: us-gaap_NetCashProvidedByUsedInFinancingActivitiesContinuingOperationsAbstract
Amount of cash inflow (outflow) of investing activities, excluding discontinued operations. Investing activity cash flows include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment and other productive assets.
Name: us-gaap_NetCashProvidedByUsedInInvestingActivitiesContinuingOperations
Name: us-gaap_NetCashProvidedByUsedInInvestingActivitiesContinuingOperationsAbstract
Amount of cash inflow (outflow) from operating activities, excluding discontinued operations. Operating activity cash flows include transactions, adjustments, and changes in value not defined as investing or financing activities.
Name: us-gaap_NetCashProvidedByUsedInOperatingActivitiesContinuingOperations
Name: us-gaap_NetCashProvidedByUsedInOperatingActivitiesContinuingOperationsAbstract
Name: us-gaap_NoncashInvestingAndFinancingItemsAbstract
The net cash inflow or outflow associated with the aggregate amount of adjustment to the purchase price of a previous acquisition.
Name: us-gaap_PaymentsForProceedsFromPreviousAcquisition
The net cash outflow or inflow from purchases, sales and disposals of property, plant and equipment and other productive assets, including intangibles.
Name: us-gaap_PaymentsForProceedsFromProductiveAssets
The cash outflow to reacquire common stock during the period.
-Glossary Financing Activities
Name: us-gaap_PaymentsForRepurchaseOfCommonStock
The cash outflow paid to third parties in connection with debt origination, which will be amortized over the remaining maturity period of the associated long-term debt.
Name: us-gaap_PaymentsOfDebtIssuanceCosts
The cash outflow associated with the acquisition of a business, net of the cash acquired from the purchase.
Name: us-gaap_PaymentsToAcquireBusinessesNetOfCashAcquired
The cash inflow from the additional capital contribution to the entity.
Name: us-gaap_ProceedsFromIssuanceOfCommonStock
The cash inflow from a borrowing with the highest claim on the assets of the entity in case of bankruptcy or liquidation (with maturities initially due after one year or beyond the operating cycle, if longer).
Name: us-gaap_ProceedsFromIssuanceOfSeniorLongTermDebt
The total cash inflow associated with the amount received from holders to acquire the entity's shares under incentive and share awards, including stock option exercises. This item inherently excludes any excess tax benefit, which the entity may have realized and reported separately.
Name: us-gaap_ProceedsFromIssuanceOfSharesUnderIncentiveAndShareBasedCompensationPlansIncludingStockOptions
The cash inflow from a contractual arrangement with the lender, including letter of credit, standby letter of credit and revolving credit arrangements, under which borrowings can be made up to a specific amount at any point in time with maturities due beyond one year or the operating cycle, if longer.
Name: us-gaap_ProceedsFromLongTermLinesOfCredit
The net cash inflow or outflow from other financing activities. This element is used when there is not a more specific and appropriate element in the taxonomy.
Name: us-gaap_ProceedsFromPaymentsForOtherFinancingActivities
Amount of expense related to write-down of receivables to the amount expected to be collected. Includes, but is not limited to, accounts receivable and notes receivable.
Name: us-gaap_ProvisionForDoubtfulAccounts
The cash outflow for the settlement of obligation drawn from a contractual arrangement with the lender, including letter of credit, standby letter of credit and revolving credit arrangements, under which borrowings can be made up to a specific amount at any point in time with maturities due beyond one year or the operating cycle, if longer.
Name: us-gaap_RepaymentsOfLongTermLinesOfCredit
The aggregate amount of noncash, equity-based employee remuneration. This may include the value of stock or unit options, amortization of restricted stock or units, and adjustment for officers' compensation. As noncash, this element is an add back when calculating net cash generated by operating activities using the indirect method.
Name: us-gaap_ShareBasedCompensation
Name: us-gaap_SupplementalCashFlowInformationAbstract
The net change in the difference between the fair value and the carrying value, or in the comparative fair values, of derivative instruments, including options, swaps, futures, and forward contracts, held at each balance sheet date, that was included in earnings for the period.
Name: us-gaap_UnrealizedGainLossOnDerivatives
Organization and Summary of Significant Accounting Policies
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Kratos Defense & Security Solutions, Inc. ("Kratos" or the "Company") is a specialized security technology business providing mission critical products, solutions and services for domestic and international customers, with its principal customers being agencies of the U.S. Government. Kratos' core capabilities are sophisticated engineering, manufacturing, technology development, and system integration, and test and evaluation offerings for national security platforms and programs. Its principal products and solutions are related to Command, Control, Communications, Computing, Combat Systems, Intelligence, Surveillance and Reconnaissance ("C5ISR"); design, engineer and manufacture specialized electronic components, subsystems and systems for electronic attack, electronic warfare, radar, and missile system platforms; integrated technology solutions for satellite communications; products and solutions for unmanned systems; products and services related to cybersecurity and cyberwarfare; products and solutions for ballistic missile defense; weapons systems trainers; advanced network engineering and information technology services; weapons systems lifecycle support and sustainment; military weapon range operations and technical services; and public safety, critical infrastructure security and surveillance systems.
The Company conducts most of its business with the U.S. Government (which includes foreign military sales) and performs work as the prime contractor, subcontractor, or preferred supplier. The Company also conducts business with local, state, and foreign governments and domestic and international commercial customers.
The Company operates in two principal business segments: Kratos Government Solutions ("KGS") and Public Safety & Security ("PSS"). The Company organizes its business segments based on the nature of the services offered. Transactions between segments are generally negotiated and accounted for under terms and conditions similar to other government and commercial contracts, and these intercompany transactions are eliminated in consolidation. The financial statements in this Annual Report on Form 10-K (this "Annual Report") are presented in a manner consistent with the Company's operating structure. For additional information regarding the Company's operating segments, see Note 14 of the Notes to the Consolidated Financial Statements.
Principles of Consolidation and Basis of Presentation
The Consolidated Financial Statements include the accounts of Kratos and its wholly-owned subsidiaries, for which all intercompany transactions have been eliminated in consolidation.
In June 2012, the Company committed to a plan to sell certain lines of business associated with antennas, satellite-cased products and fly-away terminals of the non-core businesses acquired in the Integral acquisition. In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 205, Presentation of Financial Statements ("Topic 205"), these businesses have been classified as held for sale and reported in discontinued operations in the accompanying Consolidated Financial Statements. See Note 9.
(c) Fiscal Year
The Company has a 52/53 week fiscal year ending on the last Sunday of the calendar year, with interim fiscal periods ending on the last Sunday of each calendar quarter. There were 52 calendar weeks in the fiscal years ended on December 25, 2011 and December 29, 2013. There were 53 calendar weeks in the fiscal year ended on
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include revenue recognition, allowance for doubtful accounts, warranties, inventory valuation, valuation of long-lived assets including identifiable intangibles and goodwill, accounting for income taxes including the related valuation allowance on the deferred tax asset and uncertain tax positions, contingencies and litigation, contingent acquisition consideration, stock-based compensation, losses on unused office space, and business combination purchase price allocations. In the future, the Company may realize actual results that differ from the current reported estimates and if the estimates that the Company has used change in the future, such changes could have a material impact on the Company's consolidated financial position, results of operations and cash flows.
The Company generates its revenue from three different types of contractual arrangements: cost-plus-fee contracts, time-and-materials contracts, and fixed-price contracts. Revenue on cost-plus-fee contracts is recognized to the extent of allowable costs incurred plus an estimate of the applicable fees earned. The Company considers fees under cost-plus-fee contracts to be earned in proportion to the allowable costs incurred in performance of the contract and recognizes the relevant portion of the expected fee to be awarded by the customer at the time such fee can be reasonably estimated, based on factors such as its prior award experience and communications with the customer regarding performance, including any interim performance evaluations rendered by the customer. Revenue on time-and-materials contracts is recognized to the extent of billable rates times hours delivered for services provided, to the extent of material cost for products delivered to customers, and to the extent of expenses incurred on behalf of the customers.
The Company has three basic categories of fixed-price contracts: fixed unit price, fixed-price-level of effort, and fixed-price-completion. Revenue recognition methods on fixed-price contracts will vary depending on the nature of the work and the contract terms. Revenues on fixed-price service contracts are recorded as work is performed in accordance with ASC Topic 605, Revenue Recognition ("Topic 605"), specifically Topic 605-10-S99, which generally requires revenue to be deferred until all of the following have occurred: (1) there is a contract in place; (2) delivery has occurred or services have been provided; (3) the price is fixed or determinable; and, (4) collectability is reasonably assured. Revenues on fixed-price contracts that require delivery of specific items may be recorded based on a price per unit as units are delivered. Revenue for fixed-price contracts in which the Company is paid a specific amount to provide services for a stated period of time is recognized ratably over the service period.
On a portion of the fixed price-completion contracts, revenue is recognized in accordance with Topic 605 using the percentage-of-completion method based on the ratio of total costs incurred to date compared to estimated total costs to complete the contract. Estimates of costs to complete include material, direct labor, overhead, and allowable indirect expenses for government contracts. These cost estimates are reviewed and, if necessary, revised on a contract-by-contract basis. If, as a result of this review, management determines that a loss on a contract is evident, then the full amount of estimated loss is charged to operations in the period. As of December 30, 2012 and December 29, 2013, the provisions for losses on contracts were $4.2 million and $4.8 million, respectively.
In certain instances, when the Company's customers have requested that it commence work prior to receipt of the contract award and funding and it has incurred costs related to that specific anticipated contract, and the Company believes recoverability of the costs is probable, it may defer those costs incurred until the associated contract has been awarded and funded by the customer.
In accounting for the Company's long-term contracts for production of products provided to the U.S. Government, the Company utilizes both cost-to-cost and units delivered measures under the percentage-of-completion method of accounting under the provisions of Topic 605. Under the units delivered measure of the percentage-of-completion method of accounting, sales are recognized as the units are accepted by the customer generally using sales values for units in accordance with the contract terms. The Company estimates profit as the difference between total estimated revenue and total estimated cost of a contract and recognizes that profit over the life of the contract based on units delivered or as computed on the basis of the estimated final average unit costs plus profit. The Company classifies contract revenues as product sales or service revenues depending upon the predominant attributes of the relevant underlying contracts.
Significant management judgments and estimates, including but not limited to the estimated costs to complete projects, must be made and used in connection with the revenue recognized in any accounting period. A cancellation, schedule delay, or modification of a fixed-price contract which is accounted for using the percentage-of-completion method may adversely affect the Company's gross margins for the period in which the contract is modified or canceled. Under certain circumstances, a cancellation or negative modification could result in the Company having to reverse revenue that was recognized in a prior period, thus significantly reducing the amount of revenues recognized for the period in which the adjustment is made. Correspondingly, a positive modification may positively affect gross margins. In addition, a schedule delay or modifications can result in an increase in estimated cost to complete the project, which would also result in an impact to gross margins. Material differences may result in the amount and timing of the Company's revenue for any period if management made different judgments or utilized different estimates.
It is the Company's policy to review any arrangement containing software or software deliverables and services against the criteria contained in ASC Topic 985, Software ("Topic 985"). Under the provisions of Topic 985, the Company reviews the contract value of software deliverables and services and determines allocations of the contract value based on vendor-specific objective evidence ("VSOE") of fair value for each of the software elements. All software arrangements requiring significant production, modification, or customization of the software are accounted for in conformity with Topic 605.
The Company's contracts may include the provision of more than one of its services ("multiple element arrangements"). In these situations, the Company applies the guidance of Topic 605. Accordingly, for applicable arrangements, revenue recognition includes the proper identification of separate units of accounting and the allocation of revenue across all elements based on relative fair values.
For multiple element arrangements that include hardware products containing software essential to the hardware products' functionality, the Company allocates revenue to all deliverables based on their relative selling prices. In such circumstances, the Company uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) VSOE, (ii) third-party evidence of selling price ("TPE"), and (iii) best estimate of the selling price ("ESP").
VSOE generally exists only when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable. TPE is determined based on competitor prices for similar deliverables when sold separately. Generally, the Company's offerings contain significant differentiation such that comparable pricing of products with similar functionality cannot be obtained. Furthermore, the Company is unable to reliably determine what similar competitor products' selling prices are on a stand-alone basis. Therefore, the Company typically is unable to obtain TPE of selling price. ESP reflects the Company's best estimates of what the selling prices of elements would be if they were sold regularly on a stand-alone basis. The Company determines ESP for a product or service by considering multiple factors including, but not limited to major product groupings, geographies, market conditions, competitive landscape, internal costs, gross margin objectives and pricing practices. The determination of ESP is made through consultation with management, taking into consideration the Company's marketing strategy.
The Company accounts for multiple element arrangements that consist only of software or software-related products, including the sale of upgrades to previously sold software, in accordance with industry specific software accounting guidance. For such transactions, revenue on arrangements that include multiple elements is allocated to each element based on the relative fair value of each element, and fair value is determined by VSOE. If the Company cannot objectively determine the fair value of any undelivered element included in such multiple element arrangements, the Company defers revenue until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements. Under certain of the Company's contractual arrangements, the Company may also recognize revenue for out-of-pocket expenses in accordance with Topic 605. Depending on the contractual arrangement, these expenses may be reimbursed with or without a fee.
Under certain of its contracts, the Company provides supplier procurement services and materials for its customers. The Company records revenue on these arrangements on a gross or net basis in accordance with Topic 605, depending on the specific circumstances of the arrangement. The Company considers the following criteria, among others, for recording revenue on a gross or net basis:
Whether the Company acts as a principal in the transaction;
Whether the Company takes title to the products;
Whether the Company assumes risks and rewards of ownership, such as risk of loss for collection, delivery or returns;
Whether the Company serves as an agent or broker, with compensation on a commission or fee basis; and,
Whether the Company assumes the credit risk for the amount billed to the customer subsequent to delivery.
For federal contracts, the Company follows U.S. Government procurement and accounting standards in assessing the allowability and the allocability of costs to contracts. Due to the significance of the judgments and estimation processes, it is likely that materially different amounts could be recorded if different assumptions were used or if the underlying circumstances were to change. The Company closely monitors the consistent application of its critical accounting policies and compliance with contract accounting. Business operations personnel conduct periodic contract status and performance reviews. When adjustments in estimated contract revenues or costs are required, any significant changes from prior estimates are included in earnings in the current period. Also, regular and recurring evaluations of contract cost, scheduling and technical matters are performed by management personnel who are independent from the business operations personnel performing work under the contract. Costs incurred and allocated to contracts with the U.S. Government are scrutinized for compliance with regulatory standards by the Company's personnel, and are subject to audit by the Defense Contract Audit Agency.
From time to time, the Company may proceed with work based on customer direction prior to the completion and signing of formal contract documents. The Company has a formal review process for approving any such work. Revenue associated with such work is recognized only when it can be reliably estimated and realization is probable. The Company bases its estimates on previous experiences with the customer, communications with the customer regarding funding status, and its knowledge of available funding for the contract or program. As of December 30, 2012 and December 29, 2013, approximately $3.7 million and $3.7 million, respectively, of the Company's unbilled accounts receivable balance were under an authorization to proceed or work order from its customers where a formal purchase order had not yet been received.
Costs incurred for shipping and handling are included in cost of product sales at the time the related revenue is recognized. Amounts billed to a customer for shipping and handling are reported as revenue.
Inventoried costs
Inventoried costs are stated at the lower of cost or market. Cost is determined using the average cost or first-in, first-out methods and the applicable method is applied consistently within an operating entity. Inventoried costs primarily relate to work under fixed-price contracts using the percentage-of-completion under the units of delivery method of revenue recognition. These costs represent accumulated contract costs less the portion of such costs allocated to delivered items. Accumulated contract costs include direct production costs, factory and engineering overhead and production tooling costs. Pursuant to contract provisions of U.S. Government contracts, such customers may have title to, or a security interest in inventories related to such contracts as a result of advances, performance-based payments, and progress payments. The Company reflects those advances and payments as an offset against the related inventory balances.
The Company regularly reviews inventory quantities on hand, future purchase commitments with its suppliers, and the estimated utility of its inventory. If the Company's review indicates a reduction in utility below carrying value, it reduces its inventory to a new cost basis.
Costs incurred in research and development activities are expensed as incurred in accordance with FASB ASC Topic 730, Research and Development.
The Company records deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company maintains a valuation allowance on the deferred tax assets for which it is more likely than not that the Company will not realize the benefits of these tax assets in future tax periods. The valuation allowance is based on estimates of future taxable income by tax jurisdiction in which the Company operates, the number of years over which the deferred tax assets will be recoverable, and scheduled reversals of deferred tax liabilities.
In accordance with the recognition standards established by ASC Topic 740, Income Taxes ("Topic 740"), the Company makes a comprehensive review of its portfolio of uncertain tax positions regularly. In this regard, an uncertain tax position represents the Company's expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return or claim, which has not been reflected in measuring income tax expense for financial reporting purposes. Until these positions are sustained by the taxing authorities, the Company has not recognized the tax benefits resulting from such positions and reports the tax effects as a liability for uncertain tax positions in its Consolidated Balance Sheets.
The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation-Stock Compensation ("Topic 718"). All of the Company's stock-based compensation plans are considered equity plans under Topic 718, and compensation expense recognized is net of estimated forfeitures over the vesting period. The Company issues stock options and stock awards under its existing plans. The fair value of stock options is estimated on the date of grant using a Black-Scholes option-pricing model or a trinomial lattice options pricing model and is expensed on a straight-line basis over the remaining vesting period of the options, which is generally six or less years. The fair value of stock awards is determined based on the closing market price of the Company's common stock on the grant date and is adjusted at each reporting date based on the amount of shares ultimately expected to vest. Compensation expense for stock awards is expensed over the vesting period, usually five to ten years. Compensation expense for stock issued under the Company's employee stock purchase plan is estimated at the beginning date of the offering period using a Black-Scholes option-pricing model and is expensed on a straight-line basis over the period of the offering, which is generally six months.
For the years ended December 25, 2011, December 30, 2012 and December 29, 2013, there was no incremental tax benefit from stock options exercised in the periods. The Company recorded cash received from the exercise of stock options and awards of $1.3 million in 2011, and $0.0 million in 2012 and in 2013. The following table shows the amounts recognized in the Consolidated Financial Statements for 2011, 2012 and 2013 for stock-based compensation expense related to stock options, stock awards and to stock offered under the Company's employee stock purchase plan (in millions).
Selling, general and administrative expenses
Total cost of employee stock-based compensation included in operating income (loss) from continuing operations, before income tax
Total charged against operations
Impact on net income (loss) per common share:
Basic and diluted
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments, which results in bad debt expense. Management periodically determines the adequacy of this allowance by evaluating the comprehensive risk profiles of all individual customer receivable balances including, but not limited to, the customer's financial condition, credit agency reports, financial statements and overall current economic conditions. Additionally, on certain contracts whereby the Company performs services for a prime/general contractor, a specified percentage of the invoiced trade accounts receivable may be retained by the customer until the project is completed. The Company periodically reviews all retainages for collectability and records allowances for doubtful accounts when deemed appropriate, based on its assessment of the associated credit risks. Changes to estimates of contract value are recorded as adjustments to revenue and not as a component of the allowance for doubtful accounts. Individual accounts receivable are written off to the allowance for doubtful accounts when the Company becomes aware of a specific customer's inability to meet its financial obligation, and all collection efforts are exhausted.
The following table outlines the balance of the Company's Allowance for Doubtful Accounts for 2011, 2012 and 2013. The table identifies the additional provisions each year as well as the write-offs that utilized the allowance (in millions).
Balance at Beginning of Year
Write-offs/Recoveries
Balance at End of Year
Year ended December 25, 2011
(0.5
The Company's cash equivalents consist of its highly liquid investments with an original maturity of three months or less when purchased by the Company.
The Company has restricted cash accounts of approximately $5.5 million at December 30, 2012 and $5.0 million at December 29, 2013. As of December 30, 2012 and December 29, 2013, restricted cash consists primarily of a deposit securing foreign letters of credit related to payment and performance bonds on international contracts.
Property and Equipment, Net
Property and equipment, net owned by the Company is depreciated over the estimated useful lives of individual assets. Equipment and facilities acquired under capital leases are amortized over the shorter of the lease term or the estimated useful life of the asset. Improvements, which significantly improve and extend the useful life of an asset, are capitalized and depreciated over the shorter of the lease period or the estimated useful life. Expenditures for maintenance and repairs are charged to operations as incurred.
Assets are depreciated predominately using the straight-line method, with the following lives:
Buildings and improvements
Computer equipment and software
Vehicles, furniture, and office equipment
Leasehold improvements
Shorter of useful life or length of lease
The Company uses its incremental borrowing rate in the assessment of lease classification as capital or operating and defines the initial lease term to include renewal options determined to be reasonably assured. The Company conducts operations primarily under operating leases.
Most lease agreements for real property contain incentives for tenant improvements, rent holidays, or rent escalation clauses. For incentives for tenant improvements, the Company capitalizes the leasehold improvements which are depreciated over the shorter of the lease term or their estimated useful life and records a deferred rent liability which is amortized over the term of the lease as a reduction to rent expense. For rent holidays and rent escalation clauses during the lease term, the Company records minimum rental expenses on a straight-line basis over the term of the lease. For purposes of recognizing lease incentives, the Company uses the date of initial possession as the commencement date, which is generally when the Company is given the right of access to the space and begins to make improvements in preparation for intended use.
The Company accounts for business combinations using the acquisition method of accounting as prescribed by ASC Topic 805, Business Combinations ("Topic 805"). The Company allocates the purchase price of its acquisitions to the tangible and intangible assets, and liabilities including certain contingent liabilities acquired based upon their estimated fair values. The excess of purchase price over those fair values is recorded as goodwill. Acquisition-related expenses and restructuring costs are recognized separately from the business combination and are expensed as incurred.
Goodwill and Other Intangible Assets, Net
In accordance with the provisions of ASC Topic 350, Intangibles-Goodwill and Other ("Topic 350"), the Company performs impairment tests for goodwill as of the last day of each fiscal year, or when evidence of potential impairment exists. When it is determined that impairment has occurred, a charge to operations is recorded. Goodwill and other purchased intangible asset balances are included in the identifiable assets of the operating segment to which they have been assigned. Any goodwill impairment, as well as the amortization of other purchased intangible assets, is charged against the respective segments' operating income.
In accordance with Topic 350, the Company classifies intangible assets into three categories: (1) intangible assets with finite lives subject to amortization, (2) intangible assets with indefinite lives not subject to amortization, and (3) goodwill. The Company tests intangible assets with finite lives for impairment if conditions exist that indicate the carrying value may not be recoverable. Such conditions may include an economic downturn in a geographic market or a change in the assessment of future operations. The Company records an impairment charge when the carrying value of the finite lived intangible asset is not recoverable by the cash flows generated from the use of the asset.
The Company determines the useful lives of identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors considered when determining useful lives include the contractual term of any agreement, the history of the asset, the Company's long-term strategy for the use of the asset, any laws or other local regulations which could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. Intangible assets that are deemed to have finite lives are amortized, generally on a straight-line basis, over their useful lives, ranging from one to 15 years.
(p) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
Long-lived assets and certain identifiable intangibles are reviewed for impairment in accordance with ASC Topic 360, Property, Plant, and Equipment, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net cash flows (undiscounted and without interest) expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Fair Value of Financial Instruments
ASC Topic 825, Financial Instruments, requires that fair values be disclosed for the Company's financial instruments. The carrying amounts of cash equivalents, accounts receivable, accounts payable, accrued expenses, billings in excess of costs and earnings on uncompleted contracts, and income taxes payable, approximate fair value due to the short-term nature of these instruments. The fair value of the Company's long-term debt is based upon actual trading activity. The fair value of capital lease obligations is estimated based on quoted market prices for the same or similar obligations with the same remaining maturities.
Concentrations and Uncertainties
The Company maintains cash balances at various financial institutions and such balances commonly exceed the $250,000 insured amount by the Federal Deposit Insurance Corporation. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to any significant credit risk with respect to such cash and cash equivalents.
Financial instruments, which subject the Company to potential concentrations of credit risk, consist principally of the Company's billed and unbilled accounts receivable. The Company's accounts receivable result from sales to customers within the U.S. Government, state and local agencies and with commercial customers in various industries. The Company performs ongoing credit evaluations of its commercial customers. Credit is extended based on evaluation of the customer's financial condition and collateral is not required. Accounts receivable are recorded at the invoiced amount and do not bear interest. See Note 13 for a discussion of the Company's significant customers.
(s) Debt Issuance Costs
Fees paid to obtain debt financing or amendments under such debt financing are treated as debt issuance costs and are capitalized and amortized over the expected term of the related debt. These payments are shown as a financing activity in the Consolidated Statements of Cash Flows and are included in other current assets and other assets in the Consolidated Balance Sheets.
Interest expense, net in the Consolidated Statements of Operations and Comprehensive Loss is summarized in the following table (in millions):
Interest expense incurred primarily on the
Company's Senior Secured Notes
(51.2
Miscellaneous interest income
For operations outside the U.S. that prepare financial statements in currencies other than the U.S. dollar, results of operations and cash flows are translated at average exchange rates during the period, and assets and liabilities are generally translated at end-of-period exchange rates. Translation adjustments are included as a separate component of accumulated other comprehensive loss in the Consolidated Statements Of Stockholders' Equity.
The Company transacts with foreign customers in currencies other than the U.S. dollar. It experiences realized and unrealized foreign currency gains or losses on foreign denominated receivables. In addition, certain intercompany transactions give rise to realized and unrealized foreign currency gains or losses. Also, any other transactions between the Company or its subsidiaries and a third-party, denominated in a currency different from the functional currency, are foreign currency transactions.
The aggregate foreign currency transaction loss included in determining net loss for the years ended December 25, 2011, December 30, 2012, and December 29, 2013 was approximately $0.5 million, $0.6 million, and $0.0 million, respectively, which is included in other income (expense), net on the accompanying Consolidated Statements of Operations and Comprehensive Loss.
Certain of the Company's products and services are covered by a warranty to be free from defects in material and workmanship for periods ranging from one to ten years. Optional extended warranty contracts can also be purchased with the revenue deferred and amortized over the extended warranty period. The Company accrues a warranty liability for estimated costs to provide products, parts or services to repair or replace products in satisfaction of warranty obligations. Warranty revenues related to extended warranty contracts are amortized to income, over the life of the contract, using the straight-line method. Costs under extended warranty contracts are expensed as incurred.
The Company's estimate of costs to service its warranty obligations is based upon historical experience and expectations of future conditions. To the extent that the Company experiences any changes in warranty claim activity or costs associated with servicing those claims, its warranty liability is adjusted accordingly.
(x) Recent Accounting Pronouncements
In July 2013, the FASB issued Accounting Standards Update 2013-11 ("ASU 2013-11") "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists," which states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company does not believe that the adoption of this guidance will have a material impact on its consolidated financial statements.
In February 2013, the FASB issued ASU 2013-02 "Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income," which requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures required under GAAP that provide additional detail on these amounts. This standard is effective prospectively for reporting periods beginning after December 15, 2012. The Company adopted this standard in the quarter ended March 31, 2013, which did not have a material impact on its consolidated financial statements.
Name: us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsAbstract
The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements.
Name: us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureAndSignificantAccountingPoliciesTextBlock
Data Type: nonnum:textBlockItemType
Goodwill and Other Intangible Assets
Goodwill and Intangible Assets Disclosure [Abstract]
The Company performs its annual impairment test for goodwill in accordance with Topic 350 as of the last day of each fiscal year or when evidence of potential impairment exists.
The Company assesses goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. The Company determines its reporting units by first identifying its operating segments, and then assessing whether any components of these segments constitute a business for which discrete financial information is available and where segment management regularly reviews the operating results of that component. The Company aggregates components within an operating segment that have similar economic characteristics. For its annual assessments in 2011 and 2012, the Company identified its reporting units to be its KGS and PSS operating segments.
As a result of an internal organizational realignment in August 2013 the Company reorganized its KGS operating segment. As a result of this reorganization, the Company has six divisions comprised of Unmanned Combat Aerial Systems (UCAS) Division, Advanced Drones & Target Systems (ADTS) Division, Modular Systems (MS) Division, Defense and Rocket Support Services (DRSS) Division, Technical and Training Solutions (TTS) Division, and Electronic Products (EP) Division. The Company has identified its reporting units to be the ADTS, DRSS, EP, MS, TTS and UCAS divisions within its KGS reportable segment, and the PSS operating segment to be tested for potential impairment in its fiscal year 2013 annual test.
In order to test for potential impairment, the Company estimates the fair value of each of its reporting units based on a comparison and weighting of the income approach, specifically the discounted cash flow method and the market approach, which estimates the fair value of the Company's reporting units based upon comparable market prices and recent transactions and also validates the reasonableness of the implied multiples from the income approach. The Company reconciles the fair value of its reporting units to its market capitalization by calculating its market capitalization based upon an average of its stock price prior to and subsequent to the date the Company performs its analysis and assuming a control premium. The Company uses these methodologies to determine the fair value of its reporting units for comparison to their corresponding book values because there are no observable inputs available, a Level 3 measurement (See note 10). If the book value exceeds the estimated fair value for a reporting unit a potential impairment is indicated, and Topic 350 prescribes the approach for determining the impairment amount, if any.
As a result of the Company's decision in June 2012 to dispose of certain non-core businesses acquired in the Integral acquisition in July 2011, the Company allocated $1.5 million of goodwill to discontinued operations, which resulted in an impairment charge (see Note 9). The Company then tested the goodwill remaining in the KGS reporting unit. The fair value of the KGS reporting unit exceeded its carrying value by 7.4% at that time.
During the fourth quarter of 2012, the KGS reporting unit was impacted by continued declining market valuations and the economic uncertainty in the U.S. defense industry. Congress was unable to agree on a budget that conformed with the Budget Control Act of 2011 requirements, which called for additional substantial defense spending reductions through sequestration. Congress and the President could not agree on budgetary, tax and spending issues, and as a result a FY 2013 budget was not passed and a six-month continuing resolution that funded the U.S. Government through March 27, 2013 was passed. These events significantly increased the likelihood of the sequester occurring which had negative consequences for the defense industry. In addition, as Congress and the Administration could not come to an agreement on terms of a possible national fiscal approach, they also failed to address other fiscal matters such as the debt ceiling. These events negatively impacted the Company's 2012 annual estimate of the fair value of the KGS reporting unit resulting in the book value of KGS exceeding its fair value in step one of the impairment test.
The Company performed the second step of the goodwill impairment test to measure the amount of the impairment loss, if any, of the KGS reporting unit. The second step of the test requires the allocation of the reporting unit's fair value to its assets and liabilities, including any unrecognized intangible assets, in a hypothetical analysis that calculates the implied fair value of goodwill as if the reporting unit was being acquired in a business combination. If the implied fair value of goodwill is less than the carrying value, the difference is recorded as an impairment loss. Based on the results of the step two analysis, the Company recorded an $82.0 million goodwill impairment in 2012.
As of December 29, 2013, the goodwill of the PSS and KGS reportable segments were $35.6 million and $560.8 million, respectively.
The changes in the carrying amount of goodwill for the years ended December 30, 2012 and December 29, 2013 are as follows (in millions):
Kratos Government
Balance as of December 25, 2011
Additions due to business combinations
Impairments
Retrospective adjustments
Balance as of December 30, 2012 after retrospective adjustments
The accumulated impairment losses as of December 29, 2013 were $247.4 million, of which $229.1 million was associated with the KGS reportable segment and $18.3 million was associated with the PSS reportable segment.
Purchased Intangible Assets
The following table sets forth information for acquired finite-lived and indefinite-lived intangible assets (in millions):
Accumulated
Acquired finite-lived intangible assets:
Contracts and backlog
Developed technology and technical know-how
Favorable operating lease
Total finite-lived intangible assets
(108.5
Acquired indefinite-lived intangible assets
Total indefinite-lived intangible assets
Total intangible assets
The Company reviews intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Impairment losses, where identified, are determined as the excess of the carrying value over the estimated fair value of the long-lived asset. The recoverability of the carrying value of assets held for use is assessed based on a review of projected undiscounted cash flows. Prior to conducting step one of the 2012 goodwill impairment test, certain of the long-lived assets were assessed for recoverability. During 2012 the Company made the decision to minimize the use of the CMCI and HBE trade names as part of its overall branding strategy which resulted in a revised fair value of $6.9 million for such trade names, with a remaining useful life of two years. This resulted in an impairment of $14.6 million in 2012. The impairment related to the KGS and PSS reportable segments were $1.7 million and $12.9 million, respectively.
The aggregate amortization expense for finite-lived intangible assets was $38.0 million, $43.9 million and $36.2 million for the years ended December 25, 2011, December 30, 2012, and December 29, 2013, respectively. The Company records all amortization expense in selling, general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss.
The estimated future amortization expense of acquired intangible assets with finite lives as of December 29, 2013 is as follows (in millions):
Thereafter
Name: us-gaap_GoodwillAndIntangibleAssetsDisclosureAbstract
The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.
Name: us-gaap_GoodwillAndIntangibleAssetsDisclosureTextBlock
Business Combinations [Abstract]
(a) Summary of Recent Acquisitions
Composite Engineering, Inc.
On July 2, 2012, the Company acquired Composite Engineering, Inc. ("CEI") for approximately $164.2 million. The purchase price included consideration of $135.0 million in cash and 4.0 million shares of the Company's common stock, valued at $5.94 per share on July 2, 2012, or $23.8 million. As security for CEI's indemnification obligations, $10.7 million of the cash paid was placed into an escrow account. The Company was paid $1.0 million from the escrow account for working capital adjustments in July 2013, at which time the remaining escrow was released to the sellers. Also included in the purchase consideration was $5.5 million paid to retire certain pre-existing CEI debt and settle pre-existing accounts receivable from CEI. There was no contingent purchase consideration associated with the acquisition of CEI.
The Company made an election under Section 338(h)(10) of the Internal Revenue Code, which resulted in tax deductible goodwill related to this transaction. The Company estimated that the tax deductible goodwill and intangibles resulting from the election will approximate $136.3 million, to be available for deduction against Federal and California state income taxes over a 15-year period.
Certain CEI personnel entered into long-term employment agreements with the Company and on July 2, 2012, the Company granted restricted stock units ("RSUs") for an aggregate 2.0 million shares of common stock as long-term retention inducement grants. The RSUs had an estimated value of $11.9 million on the grant date, vest on the fourth anniversary of the closing of the CEI acquisition, or earlier upon the occurrence of certain events, and are being accounted for as compensation expense over such four-year period.
To fund the acquisition of CEI, on May 14, 2012, the Company sold 20.0 million shares of its common stock at a purchase price of $5.00 per share in an underwritten public offering. The Company received gross proceeds of approximately $100.0 million and net proceeds of approximately $97.0 million after deducting underwriting fees and other offering expenses. The Company used the net proceeds from this offering to fund a portion of the purchase price for the acquisition of CEI. In addition, the Company used borrowings of $40.0 million from its revolving line of credit to partially fund the purchase price of CEI.
CEI is a vertically integrated manufacturer and developer of unmanned aerial target systems and composite structures used for national security programs. Its drones are designed to replicate some of the most lethal aerial threats facing warfighters and strategic assets. CEI's customers include U.S. agencies and foreign governments. CEI is a part of the KGS reportable segment.
The excess of the purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in the acquisition was allocated to goodwill. The value of the goodwill represents the value the Company expects to be created by enabling it to strategically expand its strengths in the areas of design, engineering, development, manufacturing and production of unmanned aerial targets, and by enabling the Company to realize significant cross selling opportunities.
The transaction was accounted for using the acquisition method of accounting, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following table summarizes the fair values of the major assets acquired and liabilities assumed as of the acquisition date (in millions):
Property and equipment
Net assets acquired
The amounts of revenue and operating income of CEI included in the Company's Consolidated Statement of Operations and Comprehensive Income (Loss) for the year ended December 30, 2012 was $68.2 million and $1.6 million, respectively.
Critical Infrastructure Business
On December 30, 2011, the Company acquired selected assets of a critical infrastructure security and public safety system integration business (the "Critical Infrastructure Business") for approximately $18.8 million.
The Critical Infrastructure Business designs, engineers, deploys, manages and maintains specialty security systems at some of the most strategic asset and critical infrastructure locations in the U.S. Additionally, these security systems are typically integrated into command and control system infrastructure or command centers. Approximately 15% of the revenues of the Critical Infrastructure Business are recurring in nature due to the operation, maintenance or sustainment of the security systems once deployed. The Critical Infrastructure Business is part of the Company's PSS reportable segment.
The excess of the purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in the acquisition was allocated to goodwill. The value of the goodwill represents the value the Company expects to be created by enabling it to strategically expand its strengths in the areas of homeland security solutions and will also enable the Company to realize significant cross selling opportunities and increase its sales of higher margin, fixed-price products.
The goodwill recorded in this transaction is tax deductible.
SecureInfo Corporation
On November 15, 2011, the Company acquired SecureInfo Corporation ("SecureInfo") for $20.3 million in cash, which included a $1.5 million earn-out that was paid in March 2012.
Based in northern Virginia, SecureInfo is a cybersecurity company specializing in assisting defense, intelligence, civilian government and commercial customers to identify, understand, document, manage, mitigate and protect against cybersecurity risks while reducing information security costs and achieving compliance with applicable regulations, standards and guidance. SecureInfo offers strategic advisory, operational cybersecurity and cybersecurity risk management services and is a recognized leader in the rapidly evolving fields of cloud security, continuous monitoring and cybersecurity training. Customers include the Department of Defense, the Department of Homeland Security and large commercial customers, including market leading cloud computing service providers. SecureInfo is part of the KGS reportable segment.
The excess of the purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in the acquisition was allocated to goodwill. The value of the goodwill represents the value the Company expects to be created by SecureInfo's nationally recognized expertise in operational cybersecurity, cybersecurity risk management and cybersecurity training programs.
The SecureInfo transaction has been accounted for using the acquisition method of accounting, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following table summarizes the estimated fair values of the major assets acquired and liabilities assumed (in millions):
The goodwill recorded in this transaction is not tax deductible.
The amounts of revenue and operating income of SecureInfo included in the Company's Consolidated Statement of Operations and Comprehensive Income (Loss) for the year ended December 25, 2011 was $1.9 million and $0.1 million, respectively.
Integral Systems, Inc.
On July 27, 2011, the Company acquired Integral Systems, Inc. ("Integral") in a cash and stock transaction valued at $241.1 million. Upon completion of the acquisition, the Company paid an aggregate of $131.4 million in cash, issued approximately 10.4 million shares of the Company's common stock valued at $108.7 million and issued replacement stock options with a fair value of $1.0 million.
To fund the cash portion of the acquisition, on July 27, 2011, the Company issued $115.0 million aggregate principal amount of 10% Senior Secured Notes due 2017 (the "Notes"). The Notes were issued at a premium of 105% for an effective interest rate of approximately 8.9%. The gross proceeds of approximately $120.8 million, which included an approximate $5.8 million issuance premium and excluded accrued interest received of $1.8 million, were used to finance, in part, the cash portion of the purchase price for the acquisition of Integral, to refinance existing indebtedness of Integral and its subsidiaries, to pay certain severance payments in connection with the acquisition and to pay related fees and expenses.
As consideration for the acquisition of Integral, each Integral stockholder received (i) $5.00 in cash, without interest, and (ii) 0.588 shares of the Company's common stock for each share of Integral common stock. In addition, upon completion of the acquisition (i) each outstanding Integral stock option with an exercise price less than $13.00 per share was, if the holder thereof had so elected in writing, canceled in exchange for an amount in cash equal to the product of the total number of shares of Integral common stock subject to such in-the-money option, multiplied by the aggregate value of the excess, if any, of $13.00 over the exercise price per share applicable to such option, less the amount of any tax withholding, (ii) each outstanding Integral stock option with an exercise price equal to or greater than $13.00 per share and each Integral in-the-money option the holder of which had not made the election described in (i) above was converted into an option to purchase Company common stock, with the number of shares subject to such option adjusted to equal the number of shares of Integral common stock subject to such out-of-the-money option multiplied by 0.9559, rounded up to the nearest whole share, and the per share exercise price under each such option adjusted by dividing the per share exercise price applicable to such option by 0.9559, rounded up to the nearest whole cent, and (iii) each outstanding share of restricted stock granted under an Integral equity plan or otherwise, whether vested or unvested, was canceled and converted into the right to receive $13.00, less the amount of any tax withholding.
Integral is a global provider of products, systems and services for satellite command and control, telemetry and digital signal processing, data communications, enterprise network management and communications information assurance. Integral specializes in developing, managing and operating secure communications networks, both satellite and terrestrial, as well as systems and services to detect, characterize and geolocate sources of radio frequency or RF interference. Integral's customers include U.S. and foreign commercial, government, military and intelligence organizations. For almost 30 years, customers have relied on Integral to design and deliver innovative commercial-based products, solutions and services that are cost-effective and reduce delivery schedules and risk. Integral is part of the Company's KGS reportable segment.
The excess of the purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in the acquisition was allocated to goodwill. The value of the goodwill represents the value the Company expects to be created by Integral's significant expertise with satellite operations, ground systems, signal processing and other areas of satellite command and control, as well as advanced technologies for Unmanned Aerial Vehicles, situational awareness, remote management and numerous established electronic attack and electronic warfare platforms, tactical missile systems, and strategic deterrence systems. The Integral transaction has been accounted for using the acquisition method of accounting which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the merger date. The following table summarizes the fair values of the major assets acquired and liabilities assumed as of July 27, 2011 (in millions):