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Delaware
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13-3818604
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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Large accelerated filer
o
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Accelerated filer
ý
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Page
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December 29, 2013
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September 28, 2014
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|||
Assets
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Current assets:
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Cash and cash equivalents
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$
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55.7
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$
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16.2
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Restricted cash
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5.0
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5.2
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Accounts receivable, net
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265.8
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255.1
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Inventoried costs
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74.6
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80.4
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Prepaid expenses
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10.4
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9.0
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Other current assets
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18.8
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10.8
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Total current assets
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430.3
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376.7
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Property, plant and equipment, net
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84.8
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82.6
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Goodwill
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596.4
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596.4
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Intangible assets, net
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69.9
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57.8
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Other assets
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35.2
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32.4
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Total assets
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$
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1,216.6
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$
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1,145.9
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Liabilities and Stockholders’ Equity
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Current liabilities:
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Accounts payable
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$
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61.9
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$
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49.2
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Accrued expenses
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46.2
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37.0
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Accrued compensation
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44.9
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37.1
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Accrued interest
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5.2
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16.7
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Billings in excess of costs and earnings on uncompleted contracts
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52.5
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47.2
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Deferred income tax liability
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28.4
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28.4
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Other current liabilities
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11.9
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11.6
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Total current liabilities
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251.0
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227.2
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Long-term debt principal, net of current portion
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628.8
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621.9
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Long-term debt premium
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14.5
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—
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Line of credit
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—
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41.0
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Other long-term liabilities
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26.5
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24.8
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Total liabilities
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920.8
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914.9
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Commitments and contingencies
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Stockholders’ equity:
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Preferred stock, $0.001 par value, 5,000,000 shares authorized, 0 shares outstanding at December 29, 2013 and September 28, 2014
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—
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—
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Common stock, $0.001 par value, 195,000,000 shares authorized; 57,056,892 and 57,795,095 shares issued and outstanding at December 29, 2013 and September 28, 2014, respectively
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—
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—
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Additional paid-in capital
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856.0
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867.2
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Accumulated other comprehensive loss
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(0.8
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)
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(1.0
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)
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Accumulated deficit
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(559.4
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)
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(635.2
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)
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Total stockholders' equity
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295.8
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231.0
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Total liabilities and stockholders’ equity
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$
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1,216.6
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$
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1,145.9
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Three Months Ended
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Nine Months Ended
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||||||||||||
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September 29, 2013
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September 28, 2014
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September 29, 2013
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September 28, 2014
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Service revenues
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$
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108.8
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$
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97.1
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$
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335.0
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$
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299.5
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Product sales
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117.6
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120.0
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379.9
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347.0
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Total revenues
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226.4
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217.1
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714.9
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646.5
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Cost of service revenues
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82.4
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77.7
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254.3
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229.7
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Cost of product sales
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91.7
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86.4
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282.1
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254.8
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Total costs
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174.1
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164.1
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536.4
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484.5
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Gross profit
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52.3
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53.0
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178.5
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162.0
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Selling, general and administrative expenses
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47.8
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45.8
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144.9
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134.1
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Merger and acquisition expenses
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0.2
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—
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(2.3
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)
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—
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Research and development expenses
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4.8
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5.9
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14.5
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17.0
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Unused office space and other restructuring
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(6.6
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0.1
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(5.0
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1.7
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Operating income from continuing operations
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6.1
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1.2
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26.4
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9.2
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Other income (expense):
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Interest expense, net
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(16.2
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(12.1
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(48.7
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(42.2
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)
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Loss on extinguishment of debt
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—
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—
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—
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(39.1
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)
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||||
Other income (expense), net
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0.8
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(0.4
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0.2
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—
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Total other expense, net
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(15.4
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)
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(12.5
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(48.5
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(81.3
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Loss from continuing operations before income taxes
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(9.3
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(11.3
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(22.1
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(72.1
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)
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Provision (benefit) for income taxes from continuing operations
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0.2
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(0.2
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)
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2.9
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3.7
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Loss from continuing operations
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(9.5
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)
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(11.1
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)
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(25.0
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)
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(75.8
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)
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||||
Income (loss) from discontinued operations
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(0.4
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)
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0.2
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(4.8
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)
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—
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Net loss
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$
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(9.9
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)
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$
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(10.9
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)
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$
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(29.8
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)
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$
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(75.8
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)
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Basic and diluted loss per common share:
|
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Net loss from continuing operations
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$
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(0.17
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)
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$
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(0.19
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)
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$
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(0.44
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)
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$
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(1.32
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)
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Net loss from discontinued operations
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0.00
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0.00
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(0.08
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)
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0.00
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Net loss per common share
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$
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(0.17
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)
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$
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(0.19
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)
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$
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(0.52
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)
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$
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(1.32
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)
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Basic and diluted weighted average shares outstanding
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57.1
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57.8
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56.7
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57.6
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|
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Comprehensive Loss
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Net loss from above
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$
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(9.9
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)
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$
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(10.9
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)
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$
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(29.8
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)
|
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$
|
(75.8
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)
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Change in cumulative translation adjustment
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(0.1
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)
|
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(0.1
|
)
|
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—
|
|
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(0.2
|
)
|
||||
Comprehensive loss
|
$
|
(10.0
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)
|
|
$
|
(11.0
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)
|
|
$
|
(29.8
|
)
|
|
$
|
(76.0
|
)
|
|
Nine Months Ended
|
||||||
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September 29, 2013
|
|
September 28, 2014
|
||||
Operating activities:
|
|
|
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|
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Net loss
|
$
|
(29.8
|
)
|
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$
|
(75.8
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)
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Less: Loss from discontinued operations
|
(4.8
|
)
|
|
—
|
|
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Loss from continuing operations
|
(25.0
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)
|
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(75.8
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)
|
||
Adjustments to reconcile loss from continuing operations to net cash provided by (used in) operating activities from continuing operations:
|
|
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|
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Depreciation and amortization
|
40.7
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29.2
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|
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Stock-based compensation
|
6.0
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7.6
|
|
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Amortization of deferred financing costs
|
3.9
|
|
|
2.5
|
|
||
Amortization of premium and discount on Senior Secured Notes
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(3.1
|
)
|
|
(1.1
|
)
|
||
Loss on extinguishment of debt
|
—
|
|
|
39.1
|
|
||
Provision for doubtful accounts
|
0.8
|
|
|
1.2
|
|
||
Changes in unused office space accrual
|
(6.8
|
)
|
|
0.2
|
|
||
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
||
Accounts receivable
|
2.1
|
|
|
9.6
|
|
||
Inventoried costs
|
10.9
|
|
|
(6.0
|
)
|
||
Prepaid expenses and other assets
|
0.3
|
|
|
0.8
|
|
||
Accounts payable
|
(26.1
|
)
|
|
(12.7
|
)
|
||
Accrued compensation
|
(10.8
|
)
|
|
(7.8
|
)
|
||
Accrued expenses
|
(1.5
|
)
|
|
(9.2
|
)
|
||
Accrued interest payable
|
15.6
|
|
|
11.5
|
|
||
Billings in excess of costs and earnings on uncompleted contracts
|
7.5
|
|
|
(7.4
|
)
|
||
Income tax receivable and payable
|
3.9
|
|
|
2.1
|
|
||
Other liabilities
|
(7.4
|
)
|
|
(2.0
|
)
|
||
Net cash provided by (used in) operating activities from continuing operations
|
11.0
|
|
|
(18.2
|
)
|
||
Investing activities:
|
|
|
|
|
|
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Cash paid for acquisitions, net of cash acquired
|
2.2
|
|
|
(2.6
|
)
|
||
Proceeds from the sale of discontinued operations
|
0.4
|
|
|
—
|
|
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Increase (decrease) in restricted cash
|
0.5
|
|
|
(0.1
|
)
|
||
Capital expenditures
|
(12.2
|
)
|
|
(9.4
|
)
|
||
Net cash used in investing activities from continuing operations
|
(9.1
|
)
|
|
(12.1
|
)
|
||
Financing activities:
|
|
|
|
|
|
||
Proceeds from issuance of long-term debt
|
—
|
|
|
618.5
|
|
||
Extinguishment of long-term debt
|
—
|
|
|
(661.5
|
)
|
||
Debt issuance costs
|
—
|
|
|
(8.5
|
)
|
||
Credit agreement borrowings
|
—
|
|
|
41.0
|
|
||
Cash paid for contingent acquisition consideration
|
(2.1
|
)
|
|
—
|
|
||
Repayment of debt
|
(0.8
|
)
|
|
(0.7
|
)
|
||
Other
|
1.2
|
|
|
3.3
|
|
||
Net cash used in financing activities from continuing operations
|
(1.7
|
)
|
|
(7.9
|
)
|
||
Net cash flows of continuing operations
|
0.2
|
|
|
(38.2
|
)
|
||
Net operating cash flows of discontinued operations
|
0.5
|
|
|
(1.2
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
0.1
|
|
|
(0.1
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
0.8
|
|
|
(39.5
|
)
|
||
Cash and cash equivalents at beginning of period
|
49.0
|
|
|
55.7
|
|
||
Cash and cash equivalents at end of period
|
$
|
49.8
|
|
|
$
|
16.2
|
|
(a)
|
Basis of Presentation
|
(b)
|
Principles of Consolidation
|
(c)
|
Fiscal Year
|
(f)
|
Fair Value of Financial Instruments
|
(a)
|
Goodwill
|
|
Public Safety & Security
|
|
Kratos Government Solutions
|
|
Total
|
||||||
|
|
|
|
|
|
||||||
Gross value
|
$
|
53.9
|
|
|
$
|
789.9
|
|
|
$
|
843.8
|
|
Less accumulated impairment
|
18.3
|
|
|
229.1
|
|
|
247.4
|
|
|||
Net
|
$
|
35.6
|
|
|
$
|
560.8
|
|
|
$
|
596.4
|
|
|
As of December 29, 2013
|
|
As of September 28, 2014
|
||||||||||||||||||||
|
Gross
Value
|
|
Accumulated
Amortization
|
|
Net
Value
|
|
Gross
Value
|
|
Accumulated
Amortization
|
|
Net
Value
|
||||||||||||
Acquired finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Customer relationships
|
$
|
97.7
|
|
|
$
|
(53.7
|
)
|
|
$
|
44.0
|
|
|
$
|
99.0
|
|
|
$
|
(66.5
|
)
|
|
$
|
32.5
|
|
Contracts and backlog
|
80.0
|
|
|
(78.7
|
)
|
|
1.3
|
|
|
82.7
|
|
|
(79.7
|
)
|
|
3.0
|
|
||||||
Developed technology and technical know-how
|
22.1
|
|
|
(8.6
|
)
|
|
13.5
|
|
|
23.1
|
|
|
(10.3
|
)
|
|
12.8
|
|
||||||
Trade names
|
6.1
|
|
|
(3.1
|
)
|
|
3.0
|
|
|
6.1
|
|
|
(4.6
|
)
|
|
1.5
|
|
||||||
Favorable operating lease
|
1.8
|
|
|
(0.6
|
)
|
|
1.2
|
|
|
1.8
|
|
|
(0.7
|
)
|
|
1.1
|
|
||||||
Total finite-lived intangible assets
|
207.7
|
|
|
(144.7
|
)
|
|
63.0
|
|
|
212.7
|
|
|
(161.8
|
)
|
|
50.9
|
|
||||||
Acquired indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trade names
|
6.9
|
|
|
—
|
|
|
6.9
|
|
|
6.9
|
|
|
—
|
|
|
6.9
|
|
||||||
Total intangible assets
|
$
|
214.6
|
|
|
$
|
(144.7
|
)
|
|
$
|
69.9
|
|
|
$
|
219.6
|
|
|
$
|
(161.8
|
)
|
|
$
|
57.8
|
|
|
December 29,
2013 |
|
September 28,
2014 |
||||
Raw materials
|
$
|
44.5
|
|
|
$
|
43.4
|
|
Work in process
|
24.3
|
|
|
32.1
|
|
||
Finished goods
|
4.6
|
|
|
4.4
|
|
||
Supplies and other
|
1.9
|
|
|
2.4
|
|
||
Subtotal inventoried costs
|
75.3
|
|
|
82.3
|
|
||
Less: Customer advances and progress payments
|
(0.7
|
)
|
|
(1.9
|
)
|
||
Total inventoried costs
|
$
|
74.6
|
|
|
$
|
80.4
|
|
|
For the Nine Months Ended
|
||||||
|
September 29, 2013
|
|
September 28, 2014
|
||||
Stockholders’ equity at beginning of period
|
$
|
324.1
|
|
|
$
|
295.8
|
|
Comprehensive loss:
|
|
|
|
|
|
||
Net loss
|
(29.8
|
)
|
|
(75.8
|
)
|
||
Foreign currency translation
|
—
|
|
|
(0.2
|
)
|
||
Total comprehensive loss
|
(29.8
|
)
|
|
(76.0
|
)
|
||
Exercise of stock options and warrants
|
—
|
|
|
(0.1
|
)
|
||
Stock-based compensation
|
6.0
|
|
|
7.6
|
|
||
Employee stock purchase plan and restricted stock units settled in cash
|
1.6
|
|
|
3.9
|
|
||
Restricted stock units traded for taxes
|
(0.2
|
)
|
|
(0.2
|
)
|
||
Stockholders’ equity at end of period
|
$
|
301.7
|
|
|
$
|
231.0
|
|
|
September 29, 2013
|
|
September 28, 2014
|
||||
Cumulative translation adjustment
|
$
|
(0.3
|
)
|
|
$
|
(0.5
|
)
|
Post retirement benefit reserve adjustment net of tax expense
|
(0.5
|
)
|
|
(0.5
|
)
|
||
Total accumulated other comprehensive loss
|
$
|
(0.8
|
)
|
|
$
|
(1.0
|
)
|
|
For the Nine Months Ended
|
||||
|
September 29, 2013
|
|
September 28, 2014
|
||
Shares outstanding at beginning of the period
|
56.6
|
|
|
57.1
|
|
Stock issued for employee stock purchase plan, stock options and restricted stock units exercised
|
0.4
|
|
|
0.7
|
|
Shares outstanding at end of the period
|
57.0
|
|
|
57.8
|
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
||||||||||||
|
September 29,
2013 |
|
September 28,
2014 |
|
September 29,
2013 |
|
September 28,
2014 |
||||||||
Income tax benefit at federal statutory rate
|
$
|
(3.3
|
)
|
|
$
|
(3.9
|
)
|
|
$
|
(7.7
|
)
|
|
$
|
(25.2
|
)
|
State and foreign taxes, net of federal tax benefit and valuation allowance
|
—
|
|
|
(0.7
|
)
|
|
1.6
|
|
|
0.1
|
|
||||
Nondeductible expenses and other
|
—
|
|
|
0.5
|
|
|
0.4
|
|
|
1.3
|
|
||||
Impact of deferred tax liabilities for indefinite-lived assets
|
0.2
|
|
|
(0.2
|
)
|
|
2.9
|
|
|
2.9
|
|
||||
Decrease in reserves for uncertain tax positions
|
(0.1
|
)
|
|
(3.2
|
)
|
|
(1.7
|
)
|
|
(0.1
|
)
|
||||
Increase in federal valuation allowance
|
3.4
|
|
|
7.3
|
|
|
7.4
|
|
|
24.7
|
|
||||
Total income tax provision (benefit)
|
$
|
0.2
|
|
|
$
|
(0.2
|
)
|
|
$
|
2.9
|
|
|
$
|
3.7
|
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
||||||||||||
|
September 29, 2013
|
|
September 28, 2014
|
|
September 29, 2013
|
|
September 28, 2014
|
||||||||
Revenue
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3.6
|
|
|
$
|
—
|
|
Net income (loss) before taxes
|
$
|
(0.4
|
)
|
|
$
|
0.2
|
|
|
$
|
(4.8
|
)
|
|
$
|
—
|
|
|
December 29,
2013 |
|
September 28,
2014 |
||||
Accounts payable and accrued expenses
|
$
|
1.1
|
|
|
$
|
0.8
|
|
Other current liabilities
|
1.4
|
|
|
0.8
|
|
||
Current liabilities of discontinued operations
|
$
|
2.5
|
|
|
$
|
1.6
|
|
Other long-term liabilities
|
$
|
0.2
|
|
|
$
|
—
|
|
(a)
|
Issuance of
7.00%
Senior Secured Notes due 2019
|
|
|
As of December 29, 2013
|
|
As of September 28, 2014
|
||||||||||||||||||||
$ in millions
|
|
Principal
|
|
Carrying
Amount
|
|
Fair Value
|
|
Principal
|
|
Carrying
Amount
|
|
Fair Value
|
||||||||||||
Total Long-term debt including current portion
|
|
$
|
629.8
|
|
|
$
|
644.3
|
|
|
$
|
679.7
|
|
|
$
|
670.0
|
|
|
$
|
663.9
|
|
|
$
|
671.0
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 29, 2013
|
|
September 28, 2014
|
|
September 29, 2013
|
|
September 28, 2014
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Kratos Government Solutions
|
|
|
|
|
|
|
|
||||||||
Service revenues
|
$
|
57.0
|
|
|
$
|
54.3
|
|
|
$
|
180.9
|
|
|
$
|
157.2
|
|
Product sales
|
117.6
|
|
|
120.0
|
|
|
379.9
|
|
|
334.0
|
|
||||
Total Kratos Government Solutions
|
174.6
|
|
|
174.3
|
|
|
560.8
|
|
|
491.2
|
|
||||
Public Safety & Security
|
|
|
|
|
|
|
|
||||||||
Service revenues
|
51.8
|
|
|
42.8
|
|
|
154.1
|
|
|
142.3
|
|
||||
Product sales
|
—
|
|
|
—
|
|
|
—
|
|
|
13.0
|
|
||||
Total Public Safety & Security
|
51.8
|
|
|
42.8
|
|
|
154.1
|
|
|
155.3
|
|
||||
Total revenues
|
$
|
226.4
|
|
|
$
|
217.1
|
|
|
$
|
714.9
|
|
|
$
|
646.5
|
|
Depreciation & amortization:
|
|
|
|
|
|
|
|
||||||||
Kratos Government Solutions
|
$
|
12.1
|
|
|
$
|
9.4
|
|
|
$
|
38.0
|
|
|
$
|
27.7
|
|
Public Safety & Security
|
0.8
|
|
|
0.5
|
|
|
2.7
|
|
|
1.5
|
|
||||
Total depreciation and amortization
|
$
|
12.9
|
|
|
$
|
9.9
|
|
|
$
|
40.7
|
|
|
$
|
29.2
|
|
Operating income:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Kratos Government Solutions
|
$
|
6.4
|
|
|
$
|
8.2
|
|
|
$
|
23.8
|
|
|
$
|
17.6
|
|
Public Safety & Security
|
1.8
|
|
|
(4.1
|
)
|
|
5.7
|
|
|
(0.1
|
)
|
||||
Unallocated corporate expense, net
|
(2.1
|
)
|
|
(2.9
|
)
|
|
(3.1
|
)
|
|
(8.3
|
)
|
||||
Total operating income
|
$
|
6.1
|
|
|
$
|
1.2
|
|
|
$
|
26.4
|
|
|
$
|
9.2
|
|
(a)
|
Legal Matters
|
(b)
|
Warranty
|
|
Nine Months Ended
|
||||||
|
September 29,
2013 |
|
September 28,
2014 |
||||
Balance at beginning of the period
|
$
|
5.2
|
|
|
$
|
5.4
|
|
Costs accrued and revenues deferred
|
0.3
|
|
|
0.6
|
|
||
Settlements made (in cash or kind) and revenues recognized and other
|
(0.6
|
)
|
|
(0.5
|
)
|
||
Balance at end of period
|
4.9
|
|
|
5.5
|
|
||
Less: Current portion
|
(4.6
|
)
|
|
(5.1
|
)
|
||
Non-current accrued product warranty and deferred warranty revenue
|
$
|
0.3
|
|
|
$
|
0.4
|
|
Condensed Consolidating Balance Sheet
December 29, 2013
(Unaudited)
(in millions)
|
|||||||||||||||||||
|
Parent Company
|
|
Guarantors on a Combined Basis
|
|
Non-Guarantors on a Combined Basis
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Current Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
42.7
|
|
|
$
|
(3.0
|
)
|
|
$
|
16.0
|
|
|
$
|
—
|
|
|
$
|
55.7
|
|
Accounts receivable, net
|
—
|
|
|
238.6
|
|
|
27.2
|
|
|
—
|
|
|
265.8
|
|
|||||
Amounts due from affiliated companies
|
410.2
|
|
|
—
|
|
|
—
|
|
|
(410.2
|
)
|
|
—
|
|
|||||
Inventoried costs
|
—
|
|
|
59.1
|
|
|
15.5
|
|
|
—
|
|
|
74.6
|
|
|||||
Other current assets
|
10.7
|
|
|
19.4
|
|
|
4.1
|
|
|
—
|
|
|
34.2
|
|
|||||
Total current assets
|
463.6
|
|
|
314.1
|
|
|
62.8
|
|
|
(410.2
|
)
|
|
430.3
|
|
|||||
Property, plant and equipment, net
|
2.1
|
|
|
71.9
|
|
|
10.8
|
|
|
—
|
|
|
84.8
|
|
|||||
Goodwill
|
—
|
|
|
574.8
|
|
|
21.6
|
|
|
—
|
|
|
596.4
|
|
|||||
Intangible assets, net
|
—
|
|
|
68.5
|
|
|
1.4
|
|
|
—
|
|
|
69.9
|
|
|||||
Investment in subsidiaries
|
474.2
|
|
|
36.7
|
|
|
—
|
|
|
(510.9
|
)
|
|
—
|
|
|||||
Amounts due from affiliated companies
|
—
|
|
|
24.0
|
|
|
—
|
|
|
(24.0
|
)
|
|
—
|
|
|||||
Other assets
|
12.9
|
|
|
23.0
|
|
|
(0.7
|
)
|
|
—
|
|
|
35.2
|
|
|||||
Total assets
|
$
|
952.8
|
|
|
$
|
1,113.0
|
|
|
$
|
95.9
|
|
|
$
|
(945.1
|
)
|
|
$
|
1,216.6
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts payable
|
$
|
2.8
|
|
|
$
|
54.1
|
|
|
$
|
5.0
|
|
|
$
|
—
|
|
|
$
|
61.9
|
|
Accrued expenses
|
6.6
|
|
|
40.9
|
|
|
3.9
|
|
|
—
|
|
|
51.4
|
|
|||||
Accrued compensation
|
4.0
|
|
|
36.9
|
|
|
4.0
|
|
|
—
|
|
|
44.9
|
|
|||||
Billings in excess of costs and earnings on uncompleted contracts
|
—
|
|
|
45.4
|
|
|
7.1
|
|
|
—
|
|
|
52.5
|
|
|||||
Deferred income tax liability
|
—
|
|
|
28.4
|
|
|
—
|
|
|
—
|
|
|
28.4
|
|
|||||
Amounts due to affiliated companies
|
—
|
|
|
390.2
|
|
|
20.0
|
|
|
(410.2
|
)
|
|
—
|
|
|||||
Other current liabilities
|
1.3
|
|
|
9.5
|
|
|
1.1
|
|
|
—
|
|
|
11.9
|
|
|||||
Total current liabilities
|
14.7
|
|
|
605.4
|
|
|
41.1
|
|
|
(410.2
|
)
|
|
251.0
|
|
|||||
Long-term debt, net of current portion
|
639.5
|
|
|
|
|
3.8
|
|
|
—
|
|
|
643.3
|
|
||||||
Amounts due to affiliated companies
|
—
|
|
|
—
|
|
|
24.0
|
|
|
(24.0
|
)
|
|
—
|
|
|||||
Other long-term liabilities
|
2.8
|
|
|
21.4
|
|
|
2.3
|
|
|
—
|
|
|
26.5
|
|
|||||
Total liabilities
|
657.0
|
|
|
626.8
|
|
|
71.2
|
|
|
(434.2
|
)
|
|
920.8
|
|
|||||
Total stockholders' equity
|
295.8
|
|
|
486.2
|
|
|
24.7
|
|
|
(510.9
|
)
|
|
295.8
|
|
|||||
Total liabilities and stockholders' equity
|
$
|
952.8
|
|
|
$
|
1,113.0
|
|
|
$
|
95.9
|
|
|
$
|
(945.1
|
)
|
|
$
|
1,216.6
|
|
Condensed Consolidating Balance Sheet
September 28, 2014
(Unaudited)
(in millions)
|
|||||||||||||||||||
|
Parent Company
|
|
Guarantors on a Combined Basis
|
|
Non-Guarantors on a Combined Basis
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Current Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
13.7
|
|
|
$
|
(5.9
|
)
|
|
$
|
8.4
|
|
|
$
|
—
|
|
|
$
|
16.2
|
|
Accounts receivable, net
|
—
|
|
|
223.7
|
|
|
31.4
|
|
|
—
|
|
|
255.1
|
|
|||||
Amounts due from affiliated companies
|
398.1
|
|
|
—
|
|
|
—
|
|
|
(398.1
|
)
|
|
—
|
|
|||||
Inventoried costs
|
—
|
|
|
61.7
|
|
|
18.7
|
|
|
—
|
|
|
80.4
|
|
|||||
Other current assets
|
5.0
|
|
|
16.1
|
|
|
3.9
|
|
|
—
|
|
|
25.0
|
|
|||||
Total current assets
|
416.8
|
|
|
295.6
|
|
|
62.4
|
|
|
(398.1
|
)
|
|
376.7
|
|
|||||
Amounts due from affiliated companies, long-term
|
—
|
|
|
24.0
|
|
|
—
|
|
|
(24.0
|
)
|
|
—
|
|
|||||
Property, plant and equipment, net
|
2.0
|
|
|
70.3
|
|
|
10.3
|
|
|
—
|
|
|
82.6
|
|
|||||
Goodwill
|
—
|
|
|
572.4
|
|
|
24.0
|
|
|
—
|
|
|
596.4
|
|
|||||
Intangible assets, net
|
—
|
|
|
57.4
|
|
|
0.4
|
|
|
—
|
|
|
57.8
|
|
|||||
Investment in subsidiaries
|
492.2
|
|
|
41.9
|
|
|
—
|
|
|
(534.1
|
)
|
|
—
|
|
|||||
Other assets
|
7.9
|
|
|
24.5
|
|
|
—
|
|
|
—
|
|
|
32.4
|
|
|||||
Total assets
|
$
|
918.9
|
|
|
$
|
1,086.1
|
|
|
$
|
97.1
|
|
|
$
|
(956.2
|
)
|
|
$
|
1,145.9
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts payable
|
$
|
3.2
|
|
|
$
|
41.9
|
|
|
$
|
4.1
|
|
|
$
|
—
|
|
|
$
|
49.2
|
|
Accrued expenses
|
17.4
|
|
|
32.2
|
|
|
4.1
|
|
|
—
|
|
|
53.7
|
|
|||||
Accrued compensation
|
4.1
|
|
|
29.4
|
|
|
3.6
|
|
|
—
|
|
|
37.1
|
|
|||||
Billings in excess of costs and earnings on uncompleted contracts
|
—
|
|
|
40.9
|
|
|
6.3
|
|
|
—
|
|
|
47.2
|
|
|||||
Deferred income tax liability
|
(0.8
|
)
|
|
29.2
|
|
|
—
|
|
|
—
|
|
|
28.4
|
|
|||||
Amounts due to affiliated companies
|
—
|
|
|
379.2
|
|
|
18.9
|
|
|
(398.1
|
)
|
|
—
|
|
|||||
Other current liabilities
|
1.0
|
|
|
9.6
|
|
|
1.0
|
|
|
—
|
|
|
11.6
|
|
|||||
Total current liabilities
|
24.9
|
|
|
562.4
|
|
|
38.0
|
|
|
(398.1
|
)
|
|
227.2
|
|
|||||
Long-term debt, net of current portion
|
659.9
|
|
|
—
|
|
|
3.0
|
|
|
—
|
|
|
662.9
|
|
|||||
Amounts due to affiliated companies
|
—
|
|
|
—
|
|
|
24.0
|
|
|
(24.0
|
)
|
|
—
|
|
|||||
Other long-term liabilities
|
3.1
|
|
|
19.5
|
|
|
2.2
|
|
|
—
|
|
|
24.8
|
|
|||||
Total liabilities
|
687.9
|
|
|
581.9
|
|
|
67.2
|
|
|
(422.1
|
)
|
|
914.9
|
|
|||||
Total stockholders' equity
|
231.0
|
|
|
504.2
|
|
|
29.9
|
|
|
(534.1
|
)
|
|
231.0
|
|
|||||
Total liabilities and stockholders' equity
|
$
|
918.9
|
|
|
$
|
1,086.1
|
|
|
$
|
97.1
|
|
|
$
|
(956.2
|
)
|
|
$
|
1,145.9
|
|
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 29, 2013
(Unaudited)
(in millions)
|
|||||||||||||||||||
|
Parent Company
|
|
Guarantors on a Combined Basis
|
|
Non-Guarantors on a Combined Basis
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net cash provided by (used in) operating activities
|
$
|
(33.4
|
)
|
|
$
|
40.7
|
|
|
$
|
3.7
|
|
|
$
|
—
|
|
|
$
|
11.0
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash paid for acquisitions, net of cash acquired
|
—
|
|
|
2.2
|
|
|
—
|
|
|
—
|
|
|
2.2
|
|
|||||
Investment in affiliated companies
|
—
|
|
|
(32.4
|
)
|
|
—
|
|
|
32.4
|
|
|
—
|
|
|||||
(Increase) decrease in restricted cash
|
—
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
|||||
Capital expenditures
|
(1.0
|
)
|
|
(9.3
|
)
|
|
(1.9
|
)
|
|
—
|
|
|
(12.2
|
)
|
|||||
Proceeds from sale of discontinued operations
|
—
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|||||
Net cash provided by (used in) investing activities from continuing operations
|
(1.0
|
)
|
|
(38.6
|
)
|
|
(1.9
|
)
|
|
32.4
|
|
|
(9.1
|
)
|
|||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Repayment of debt
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
|
—
|
|
|
(0.8
|
)
|
|||||
Cash paid for contingent acquisition consideration
|
—
|
|
|
(2.1
|
)
|
|
—
|
|
|
—
|
|
|
(2.1
|
)
|
|||||
Financing from affiliated companies
|
29.6
|
|
|
—
|
|
|
2.8
|
|
|
(32.4
|
)
|
|
—
|
|
|||||
Other, net
|
1.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.2
|
|
|||||
Net cash provided by (used in) financing activities from continuing operations
|
30.8
|
|
|
(2.1
|
)
|
|
2.0
|
|
|
(32.4
|
)
|
|
(1.7
|
)
|
|||||
Net cash flows of continuing operations
|
(3.6
|
)
|
|
—
|
|
|
3.8
|
|
|
—
|
|
|
0.2
|
|
|||||
Net operating cash flows from discontinued operations
|
—
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|||||
Net increase (decrease) in cash and cash equivalents
|
$
|
(3.6
|
)
|
|
$
|
0.5
|
|
|
$
|
3.9
|
|
|
$
|
—
|
|
|
$
|
0.8
|
|
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 28, 2014
(Unaudited)
(in millions)
|
|||||||||||||||||||
|
Parent Company
|
|
Guarantors on a Combined Basis
|
|
Non-Guarantors on a Combined Basis
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net cash provided by (used in) operating activities
|
$
|
(33.4
|
)
|
|
$
|
21.1
|
|
|
$
|
(5.9
|
)
|
|
$
|
—
|
|
|
$
|
(18.2
|
)
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash paid for acquisitions, net of cash acquired
|
—
|
|
|
(2.6
|
)
|
|
—
|
|
|
—
|
|
|
(2.6
|
)
|
|||||
Investment in affiliated companies
|
—
|
|
|
(12.2
|
)
|
|
—
|
|
|
12.2
|
|
|
—
|
|
|||||
(Increase) decrease in restricted cash
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|||||
Capital expenditures
|
(0.6
|
)
|
|
(8.0
|
)
|
|
(0.8
|
)
|
|
—
|
|
|
(9.4
|
)
|
|||||
Net cash used in investing activities from continuing operations
|
(0.6
|
)
|
|
(22.9
|
)
|
|
(0.8
|
)
|
|
12.2
|
|
|
(12.1
|
)
|
|||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from issuance of long-term debt
|
618.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
618.5
|
|
|||||
Extinguishment of long-term debt
|
(661.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(661.5
|
)
|
|||||
Debt issuance costs
|
(8.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8.5
|
)
|
|||||
Credit agreement borrowings
|
41.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41.0
|
|
|||||
Repayment of debt
|
—
|
|
|
—
|
|
|
(0.7
|
)
|
|
—
|
|
|
(0.7
|
)
|
|||||
Financings from affiliated companies
|
12.2
|
|
|
—
|
|
|
—
|
|
|
(12.2
|
)
|
|
—
|
|
|||||
Other, net
|
3.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.3
|
|
|||||
Net cash provided by (used in) financing activities from continuing operations
|
5.0
|
|
|
—
|
|
|
(0.7
|
)
|
|
(12.2
|
)
|
|
(7.9
|
)
|
|||||
Net cash flows of continuing operations
|
(29.0
|
)
|
|
(1.8
|
)
|
|
(7.4
|
)
|
|
—
|
|
|
(38.2
|
)
|
|||||
Net operating cash flows from discontinued operations
|
—
|
|
|
(1.2
|
)
|
|
—
|
|
|
—
|
|
|
(1.2
|
)
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
0.1
|
|
|
(0.2
|
)
|
|
—
|
|
|
(0.1
|
)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
$
|
(29.0
|
)
|
|
$
|
(2.9
|
)
|
|
$
|
(7.6
|
)
|
|
$
|
—
|
|
|
$
|
(39.5
|
)
|
|
September 29, 2013
|
|
September 28, 2014
|
|
$ change
|
|
% change
|
|||||||
Kratos Government Solutions
|
|
|
|
|
|
|
|
|||||||
Service revenues
|
$
|
57.0
|
|
|
$
|
54.3
|
|
|
$
|
(2.7
|
)
|
|
(4.7
|
)%
|
Product sales
|
117.6
|
|
|
120.0
|
|
|
2.4
|
|
|
2.0
|
%
|
|||
Total Kratos Government Solutions
|
174.6
|
|
|
174.3
|
|
|
(0.3
|
)
|
|
(0.2
|
)%
|
|||
Public Safety & Security
|
|
|
|
|
|
|
|
|||||||
Service revenues
|
51.8
|
|
|
42.8
|
|
|
(9.0
|
)
|
|
(17.4
|
)%
|
|||
Product sales
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
|
|||
Total Public Safety & Security
|
51.8
|
|
|
42.8
|
|
|
(9.0
|
)
|
|
(17.4
|
)%
|
|||
Total revenues
|
$
|
226.4
|
|
|
$
|
217.1
|
|
|
$
|
(9.3
|
)
|
|
(4.1
|
)%
|
|
September 29, 2013
|
|
September 28, 2014
|
|
$ change
|
|
% change
|
|||||||
Kratos Government Solutions
|
|
|
|
|
|
|
|
|||||||
Service revenues
|
$
|
180.9
|
|
|
$
|
157.2
|
|
|
$
|
(23.7
|
)
|
|
(13.1
|
)%
|
Product sales
|
379.9
|
|
|
334.0
|
|
|
(45.9
|
)
|
|
(12.1
|
)%
|
|||
Total Kratos Government Solutions
|
560.8
|
|
|
491.2
|
|
|
(69.6
|
)
|
|
(12.4
|
)%
|
|||
Public Safety & Security
|
|
|
|
|
|
|
|
|||||||
Service revenues
|
154.1
|
|
|
142.3
|
|
|
(11.8
|
)
|
|
(7.7
|
)%
|
|||
Product sales
|
—
|
|
|
13.0
|
|
|
13.0
|
|
|
N/A
|
|
|||
Total Public Safety & Security
|
154.1
|
|
|
155.3
|
|
|
1.2
|
|
|
0.8
|
%
|
|||
Total revenues
|
$
|
714.9
|
|
|
$
|
646.5
|
|
|
$
|
(68.4
|
)
|
|
(9.6
|
)%
|
|
Nine Months Ended
|
||||||
|
September 29, 2013
|
|
September 28, 2014
|
||||
Net cash provided by (used in) operating activities from continuing operations
|
$
|
11.0
|
|
|
$
|
(18.2
|
)
|
Net cash used in investing activities
|
(9.1
|
)
|
|
(12.1
|
)
|
||
Net cash used in financing activities from continuing operations
|
(1.7
|
)
|
|
(7.9
|
)
|
||
Net cash flows provided by (used in) discontinued operations
|
0.5
|
|
|
(1.2
|
)
|
|
|
|
|
Incorporated by
Reference
|
|
|
||||
Exhibit
Number
|
|
Exhibit Description
|
|
Form
|
|
Filing Date/
Period End
Date
|
|
Exhibit
|
|
Filed-
Furnished
Herewith
|
2.1#
|
|
Stock Purchase Agreement, dated May 8, 2012, by and among Kratos Defense & Security Solutions, Inc., Composite Engineering, Inc., and Amy Fournier, the stockholders representative
|
|
8-K
|
|
05/08/2012
|
|
2.1
|
|
|
2.2#
|
|
Agreement and Plan of Merger, dated May 15, 2011, by and among Kratos Defense & Security Solutions, Inc., Integral Systems, Inc., IRIS Merger Sub Inc., and IRIS Acquisition Sub LLC.
|
|
8-K
|
|
05/18/2011
|
|
2.1
|
|
|
2.3#
|
|
Agreement and Plan of Merger, dated February 7, 2011, by and among Kratos Defense & Security Solutions, Inc., Lanza Acquisition, Co. and Herley Industries, Inc. (incorporated by reference to Annex A to the Prospectus Supplement dated February 8, 2011, pursuant to the Registration Statement on Form S-3 of Kratos Defense & Security Solutions, Inc.)
|
|
424
|
|
02/08/2011
|
|
n/a
|
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation of Kratos Defense & Security Solutions, Inc.
|
|
10-Q
|
|
9/30/2001(000-27231)
|
|
4.1
|
|
|
3.2
|
|
Certificate of Ownership and Merger of Kratos Defense & Security Solutions, Inc. into Wireless Facilities, Inc.
|
|
8-K
|
|
9/14/2007(000-27231)
|
|
3.1
|
|
|
3.3
|
|
Certificate of Amendment to Amended and Restated Certificate of Incorporation of Kratos Defense & Security Solutions, Inc.
|
|
10-Q
|
|
09/27/2009
|
|
3.1
|
|
|
3.4
|
|
Certificate of Designations, Preferences and Rights of Series A Preferred Stock.
|
|
10-Q
|
|
9/30/2001(000-27231)
|
|
4.2
|
|
|
3.5
|
|
Certificate of Designations, Preferences and Rights of Series B Preferred Stock (included as Exhibit A to the Preferred Stock Purchase Agreement dated as of May 16, 2002 among the Company, Meritech Capital Partners II L.P., Meritech Capital Affiliates II L.P., MCB Entrepreneur Partners II L.P., Oak Investment Partners X, Limited Partnership, Oak X Affiliates Fund, Limited Partnership, Oak Investment Partners IX, L.P, Oak Affiliates Fund, L.P, Oak IX Affiliates Fund-A, L.P, and the KLS Trust dated July 14, 1999).
|
|
8-K/A
|
|
6/5/2002(000-27231)
|
|
4.1
|
|
|
3.6
|
|
Certificate of Designation of Series C Preferred Stock.
|
|
8-K
|
|
12/17/2004(000-27231)
|
|
3.1
|
|
|
3.7
|
|
Second Amended and Restated Bylaws of Kratos Defense & Security Solutions, Inc.
|
|
8-K
|
|
03/15/2011
|
|
3.1
|
|
|
3.8
|
|
Amendment to Second Amended and Restated Bylaws of Kratos Defense & Security Solutions, Inc.
|
|
|
|
|
|
|
|
*
|
4.1
|
|
Specimen Stock Certificate.
|
|
10-K
|
|
12/26/2010
|
|
4.1
|
|
|
4.2
|
|
Rights Agreement, dated as of December 16, 2004, between Kratos Defense & Security Solutions, Inc. and Wells Fargo, N.A.
|
|
8-K
|
|
12/17/2004(000-27231)
|
|
4.1
|
|
|
|
|
|
|
Incorporated by
Reference
|
|
|
||||
Exhibit
Number
|
|
Exhibit Description
|
|
Form
|
|
Filing Date/
Period End
Date
|
|
Exhibit
|
|
Filed-
Furnished
Herewith
|
4.3
|
|
Amendment No. 1 to Rights Agreement, dated as of May 14, 2012, between Kratos Defense & Security Solutions, Inc. and Wells Fargo, N.A.
|
|
8-K
|
|
05/15/2012
|
|
4.1
|
|
|
4.4
|
|
Form of 10% Senior Secured Note due 2017 (issuable in connection with the October 2011 exchange offer).
|
|
S-4
|
|
10/25/2011
|
|
4.2
|
|
|
4.5
|
|
Indenture, dated March 25, 2011, by and among Acquisition Co. Lanza Parent, the Guarantors named therein and a party thereto, and Wilmington Trust FSB, as Trustee and Collateral Agent (including the Form of 10% Senior Secured Notes).
|
|
8-K
|
|
03/29/2011
|
|
4.1
|
|
|
4.6
|
|
First Supplemental Indenture, date April 4, 2011, by and among Kratos Defense & Security Solutions, Inc., Herley Industries, Inc. and Wilmington Trust FSB, as Trustee and Collateral Agent, to the Indenture, dated as of March 25, 2011, among Kratos Defense & Security Solutions, Inc., the Guarantor party thereto and Wilmington Trust FSB, as Trustee and Collateral Agent.
|
|
8-K
|
|
04/04/2011
|
|
4.2
|
|
|
4.7
|
|
Registration Rights Agreement, dated March 25, 2011, by and among Kratos Defense & Security Solutions, Inc., Acquisition Co. Lanza Parent, Lanza Acquisition Co., the Guarantors named therein, Jefferies & Company, Inc., KeyBanc Capital Markets Inc. and Oppenheimer & Co. Inc.
|
|
8-K
|
|
03/29/2011
|
|
4.2
|
|
|
4.8
|
|
Registration Rights Agreement, dated July 27, 2011, by and among Kratos Defense & Security Solutions, Inc., the guarantors named therein, Jefferies & Company, Inc., KeyBanc Capital Markets Inc. and B. Riley & Co., LLC.
|
|
8-K
|
|
07/29/2011
|
|
4.2
|
|
|
4.9
|
|
Indenture, dated May 14, 2014, among Kratos Defense & Security Solutions, Inc., as Issuer, the Guarantors party thereto, and Wilmington Trust, National Association, as Trustee and Collateral Agent.
|
|
8-K
|
|
05/15/2014
|
|
4.1
|
|
|
4.10
|
|
Registration Rights Agreement dated May 14, 2014 among Kratos Defense & Security Solutions, Inc., as Issuer, the Guarantors party thereto, and SunTrust Robinson Humphrey, Inc., as Representative of the Initial Purchasers.
|
|
8-K
|
|
05/15/2014
|
|
10.1
|
|
|
10.1+
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Form of Restricted Stock Unit Grant & Award Agreement
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*
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31.1
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
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*
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31.2
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
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*
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32.1
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Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Eric M. DeMarco.
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*
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Incorporated by
Reference
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Exhibit
Number
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Exhibit Description
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Form
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Filing Date/
Period End
Date
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Exhibit
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Filed-
Furnished
Herewith
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32.2
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Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Deanna Lund.
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*
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101
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Financial statements from the Quarterly Report on Form 10-Q of Kratos Defense & Security Solutions, Inc. for the quarter ended September 28, 2014 formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations and Comprehensive Income, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Notes to the Condensed Consolidated Financial Statements.
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*
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KRATOS DEFENSE & SECURITY SOLUTIONS, INC.
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By:
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/s/ ERIC M. DEMARCO
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Eric M. DeMarco
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Chief Executive Officer, President
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(Principal Executive Officer)
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By:
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/s/ DEANNA H. LUND, CPA
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Deanna H. Lund
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Executive Vice President, Chief Financial Officer
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(Principal Financial Officer)
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By:
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/s/ DEBORAH BUTERA
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Deborah Butera
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Senior Vice President, General Counsel, Chief Compliance Officer and
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Secretary/Registered In-House Counsel
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By:
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/s/ RICHARD DUCKWORTH
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Richard Duckworth
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Vice President and Corporate Controller
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(Principal Accounting Officer)
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Date:
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November 7, 2014
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KRATOS DEFENSE & SECURITY SOLUTIONS, INC.,
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a Delaware corporation
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/s/ Deborah Butera
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Deborah Butera, Secretary
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Vesting Schedule:
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Your Award will vest one hundred percent (100%) on the __________________ (the “
Vesting Date
”) of the Grant Date, provided that you continue to provide service as an Employee to the Company on the Vesting Date.
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Issuance Schedule:
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Subject to any change on a Capitalization Adjustment, one share of Common Stock will be issued for each Restricted Stock Unit that vests at the time set forth in Section 6 of the Award Agreement.
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KRATOS DEFENSE & SECURITY SOLUTIONS, INC.
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PARTICIPANT:
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By:
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By:
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Name:
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Title:
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1.
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I have reviewed this quarterly report on Form 10-Q of Kratos Defense & Security Solutions, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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KRATOS DEFENSE & SECURITY SOLUTIONS, INC.
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/s/ ERIC M. DEMARCO
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Eric M. DeMarco
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Chief Executive Officer, President
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(Principal Executive Officer)
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1.
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I have reviewed this quarterly report on Form 10-Q of Kratos Defense & Security Solutions, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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KRATOS DEFENSE & SECURITY SOLUTIONS, INC.
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/s/ DEANNA H. LUND
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Deanna H. Lund
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Executive Vice President, Chief Financial Officer
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(Principal Financial Officer and Acting Principal Accounting Officer)
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ ERIC M. DEMARCO
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Eric M. DeMarco
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Chief Executive Officer, President
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(Principal Executive Officer)
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ DEANNA H. LUND
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Deanna H. Lund
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Executive Vice President, Chief Financial Officer
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(Principal Financial Officer and Acting Principal Accounting Officer)
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