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(Mark One)
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ý
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
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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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Title of Each Class
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Name of each exchange on which registered
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Common Stock, par value $0.001
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The NASDAQ Global Select Market
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Large accelerated filer
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Accelerated filer
o
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Non-accelerated filer
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Smaller reporting company
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(Do not check if a smaller reporting company)
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Emerging growth company
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Page
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1.
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spending limits created by the BCA will be increased by approximately $300 billion over the next two years;
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2.
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defense spending will be increased by $80 billion in the current FY and by $85 billion next year, to approximately $700 billion and $705 billion, respectively;
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domestic spending will be increased by $63 billion this year and by $68 billion next year; and
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4.
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Congress will suspend the debt limit through March 2019, putting the next debt limit vote past the 2018 midterm elections.
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Unmanned aerial drone, unmanned ground and unmanned seaborne systems
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Satellite communications and radio frequency interference detection location and mitigation
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Microwave electronics supporting warfare, missile, radar and communication systems
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Electronic warfare, attack, missile, and radar systems
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Intelligence, surveillance and reconnaissance
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Ballistic missile defense systems
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Command, control and combat systems
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Cybersecurity and information assurance
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Specialized training systems and operational readiness
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In 2016, we were awarded two of the four Gremlins Phase I UAS contracts awarded by DARPA, the government’s leader in breakthrough technologies for national security. For one contract we are a prime or lead contractor, and for the other contract we are teamed with a lead partner company.
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In 2017, we successfully advanced to Phase II of the Gremlin’s program, teamed with our partner company.
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In 2016 we were awarded the AFRL Low Cost Attritable Strike Demonstration (“LCASD”) UCAS single-award cost share contract. The LCASD is an approximately 30 foot by 22 foot unmanned strike aerial drone system. We expect the initial flight of this leading technology UAS to occur in 2018.
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In 2016 we were awarded a contract by the DIUx related to our UTAP-22 Mako UCAS.
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We have redeveloped our Air Force Subscale Aerial Target BQM-167 into what we believe to be the highest performance unmanned aircraft in the world, the U.S. Navy Sub-Sonic Aerial Target (“SSAT”) Drone BQM-177A, with low rate initial production awarded to Kratos in June 2017. We expect the SSAT program to become one of the largest and most important to Kratos in the near term.
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We recently received a single award of $93 million from the U.S. Army Contract Command for advanced subscale aerial drone systems, an unmanned target aircraft with launchers and associated ground equipment and spares, with an estimated completion date of December 17, 2022.
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We recently received an approximately $23 million sole source initial production award for a new high performance, jet powered UADS which has been under development, with an expected execution period through 2018.
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We invested in internally funded research, development and capital expenditures to build our own UTAP-22 (Mako) UAS from 2012 to 2015, and demonstrated the capabilities of the UTAP-22 Mako in a flight demonstration in the fall of 2015. As a result, we were awarded an initial $12.6 million prime contract from the DIUx for sensor integration and flight demonstration of our UTAP-22 Mako unmanned aerial system the following year. Under this effort, we integrated certain sensors into our UTAP-22 Mako and participated in a large, complex flight exercise in 2017. We are currently working under a funded contract on Kratos’ UTAP-22 Mako.
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We received a $40.8 million single award, cost-share contract from the AFRL for the LCASD. Under the LCASD contract award, we are designing, developing, and will deliver, demonstrate and test a technical baseline for a high-speed long-range, low-cost limited life-strike UAS. For our investment, we will retain hard (including two LCASD aircraft) and other assets, and important intellectual property, software, data, platform and system rights, which we believe will be critically important and valuable over the expected long-term life of this platform, including with respect to future production opportunities.
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We were awarded one of four prime contract awards from the DARPA for the Gremlins program. Under the Gremlins program, DARPA envisions a swarm of approximately 20 high performance unmanned aerial vehicles that are deployed by an inflight aircraft, and are later recovered, inflight, by an aircraft. The approximate $3.9 million Phase I contracts were awarded to four competing companies, with the intent to ultimately down select to one finalist company over a period of approximately 36 months. In 2017, we successfully advanced to Phase II of the Gremlin’s program, teamed with our partner company.
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the Federal Acquisition Regulations and supplemental agency regulations, which comprehensively regulate the formation, administration, and performance under government contracts;
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the Truth in Negotiations Act, which requires certification and disclosure of all cost and pricing data in connection with contract negotiations;
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the Cost Accounting Standards, which impose accounting requirements that govern our right to reimbursement under cost-based government contracts;
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the Foreign Corrupt Practices Act, which prohibits U.S. companies from providing anything of value to a foreign official to help obtain, retain or direct business, or obtain any unfair advantages;
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the False Claims Act and the False Statements Act, which, respectively, impose penalties for payments made on the basis of false facts provided to the government and impose penalties on the basis of false statements, even if they do not result in a payment; and
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laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.
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divert sales from us by winning very large‑scale government contracts, a risk that is enhanced by the recent trend in government procurement practices to bundle services into larger contracts and the recent trend of making award determinations on a lowest price, technically acceptable basis;
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divert sales from us by the award of government contracts to our competitors who may be willing to bid at substantially lower prices;
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force us to charge lower prices; or
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adversely affect our relationships with current customers, including our ability to continue to win competitively awarded engagements in which we are the incumbent.
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customer satisfaction with these types of systems as solutions;
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the cost, performance and reliability of our products and products offered by our competitors;
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customer perceptions regarding the effectiveness and value of these types of systems;
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limitations on our ability to market our US products and services outside the U.S. due to U.S.
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marketing efforts and publicity regarding these types of systems.
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terminate our existing contracts;
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reduce potential future income from our existing contracts;
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modify some of the terms and conditions in our existing contracts;
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suspend or permanently prohibit us from doing business with the U.S. Government or with any specific government agency;
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impose fines and penalties;
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subject us to criminal prosecution;
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suspend work under existing multiple year contracts and related task orders if the necessary funds are not appropriated by Congress;
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decline to exercise an option to extend an existing multiple year contract; and
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claim rights in technologies and systems invented, developed or produced by us.
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lose revenue due to adverse customer reaction;
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be required to provide additional services to a customer at no charge;
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cause customers to postpone, cancel or fail to renew contracts;
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receive negative publicity, which could damage our reputation and adversely affect our ability to attract or retain customers; and
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suffer claims for substantial damages.
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the terms of customer contracts that affect the timing of revenue recognition;
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variability in demand for our services and solutions;
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commencement, completion or termination of contracts during any particular quarter;
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timing of shipments and product deliveries;
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timing of award or performance incentive fee notices;
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timing of significant bid and proposal costs;
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the costs of remediating unknown defects, errors or performance problems of our product offerings;
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variable purchasing patterns under GSA contracts, GWACs, blanket purchase agreements and other IDIQ contracts;
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restrictions on and delays related to the export of defense articles and services;
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costs related to government inquiries;
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strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs and joint ventures;
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strategic investments or changes in business strategy;
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changes in the extent to which we use subcontractors;
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seasonal fluctuations in our staff utilization rates;
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changes in our effective tax rate, including changes in our judgment as to the necessity of the valuation allowance recorded against our deferred tax assets; and
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the length of sales cycles.
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our inability to achieve the operating synergies anticipated in the acquisitions;
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diversion of management attention from ongoing business concerns to integration matters;
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difficulties in consolidating and rationalizing IT platforms and administrative infrastructures;
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complexities associated with managing the geographic separation of the combined businesses and consolidating multiple physical locations where management may determine consolidation is desirable;
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difficulties in integrating personnel from different corporate cultures while maintaining focus on providing consistent, high quality customer service;
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difficulties or delays in transitioning U.S. Government contracts pursuant to federal acquisition regulations;
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challenges in demonstrating to customers of Kratos and to customers of acquired businesses that the acquisition will not result in adverse changes in customer service standards or business focus;
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possible cash flow interruption or loss of revenue as a result of change of ownership transitional matters; and
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inability to generate sufficient revenue to offset acquisition costs.
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foreign currency exchange rate fluctuations, potentially reducing the U.S. dollars we receive for sales denominated in foreign currency;
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the possibility that unfriendly nations or groups could boycott our solutions;
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political conditions in the markets in which we operate;
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potential increased costs associated with overlapping tax structures;
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import-export control;
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more limited protection for intellectual property rights in some countries;
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difficulties and costs associated with staffing and managing foreign operations;
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unexpected changes in regulatory requirements;
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the difficulties of compliance with a wide variety of foreign laws and regulations;
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longer accounts receivable cycles in certain foreign countries, whether due to cultural differences, exchange rate fluctuation or other factors;
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technology transfer restrictions;
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changes to our distribution networks; and
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our employees.
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it may limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate;
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it may require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;
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it may restrict us from making strategic acquisitions or exploiting business opportunities;
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it may place us at a competitive disadvantage compared to our competitors that have less debt;
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it may limit our ability to borrow additional funds;
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it may prevent us from raising the funds necessary to repurchase our outstanding 6.5% Notes (as defined below) tendered to us if there is a change of control, which would constitute a default under the Indenture (as defined below) governing our 6.5% Notes and under our Credit Agreement; and
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it may decrease our ability to compete effectively or operate successfully under adverse economic and industry conditions.
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Square feet (in thousands)
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Owned
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Leased
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Total
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Kratos Government Solutions
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417
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724
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1,141
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Unmanned Systems
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20
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204
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224
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Public Safety and Security
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—
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153
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153
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Corporate (includes San Diego operations of KGS, US and PSS segments)
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—
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34
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34
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Total
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437
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1,115
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1,552
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High
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Low
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Year Ended December 31, 2017:
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Fourth Quarter
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$
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13.75
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$
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9.71
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Third Quarter
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$
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13.93
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$
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10.64
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Second Quarter
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$
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11.63
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$
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7.37
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First Quarter
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$
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9.19
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$
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6.83
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Year Ended December 25, 2016:
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Fourth Quarter
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$
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8.22
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$
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5.23
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Third Quarter
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$
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7.58
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$
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3.75
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Second Quarter
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$
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5.58
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$
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3.87
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First Quarter
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$
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4.70
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$
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2.80
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COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
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Among Kratos Defense & Security Solutions, Inc. the Russell 2000 Index,
Old Peer Group (1), and New Peer Group (2)
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*$100 invested on 12/31/12 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31. |
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(1)
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The companies included in the Company’s Old Peer Group are: AAR Corp., AeroVironment Inc., Arotech Corp., Comtech Telecommunications Corp., CPI Aerostructures Inc., Ducommun Inc., Frequency Electronics Inc., and Sparton Corp. IRobot Corp., which was included in the peer group used in preparing the Performance Graph contained in the Company’s 2016 annual report on Form 10-K, has been excluded because full year standalone performance is not available for such company through 2017.
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(2)
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The companies included in the Company’s New Peer Group are: AAR Corp., Aerojet Rocketdyne Holdings Inc., AeroVironment Inc., Arotech Corp., Comtech Telecommunications Corp., CPI Aerostructures Inc., Ducommun Inc., Frequency Electronics Inc. and Sparton Corp.
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spending limits created by the BCA will be increased by approximately $300 billion over the next two years;
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defense spending will be increased by $80 billion in the current FY and by $85 billion next year, to approximately $700 billion and $705 billion, respectively;
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domestic spending will be increased by $63 billion this year and by $68 billion next year; and
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Congress will suspend the debt limit through March 2019, putting the next debt limit vote past the 2018 midterm elections.
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2017
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2016
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$ Change
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% Change
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|||||||
Kratos Government Solutions
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Service revenues
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$
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196.5
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$
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221.0
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$
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(24.5
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)
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(11.1
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)%
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Product sales
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283.8
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244.8
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39.0
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15.9
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%
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Total Kratos Government Solutions
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480.3
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465.8
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14.5
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3.1
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%
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Public Safety & Security - service revenues
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149.9
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127.1
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22.8
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17.9
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%
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Unmanned Systems - product sales
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121.7
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75.8
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45.9
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60.6
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%
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Total revenues
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$
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751.9
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$
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668.7
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$
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83.2
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12.4
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%
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|||||||
Total service revenues
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$
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346.4
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$
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348.1
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$
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(1.7
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)
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(0.5
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)%
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Total product sales
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405.5
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320.6
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84.9
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26.5
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%
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Total revenues
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$
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751.9
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$
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668.7
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$
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83.2
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12.4
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%
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2016
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2015
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$ Change
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% Change
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||||||||
Kratos Government Solutions
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||||||||
Service revenues
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$
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221.0
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$
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209.5
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$
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11.5
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5.5
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%
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Product sales
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244.8
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236.6
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8.2
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3.5
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%
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||||
Total Kratos Government Solutions
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465.8
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446.1
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19.7
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4.4
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%
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||||
Public Safety & Security - service revenues
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127.1
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144.7
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—
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(17.6
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)
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(12.2
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)%
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Unmanned Systems - product sales
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75.8
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66.3
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9.5
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14.3
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%
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||||
Total revenues
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$
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668.7
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$
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657.1
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$
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11.6
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1.8
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%
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|
|
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||||||||
Total service revenues
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$
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348.1
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$
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354.2
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$
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(6.1
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)
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(1.7
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)%
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Total product sales
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320.6
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302.9
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17.7
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5.8
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%
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||||
Total revenues
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$
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668.7
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$
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657.1
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$
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11.6
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1.8
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%
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Year Ended
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||||||||||
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December 31, 2017
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December 25, 2016
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December 27, 2015
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||||||
Net cash used in operating activities from continuing operations
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$
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(27.0
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)
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$
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(12.4
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)
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|
$
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(29.7
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)
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Year Ended
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||||||||||
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December 31, 2017
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|
December 25, 2016
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December 27, 2015
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||||||
Investing activities:
|
|
|
|
|
|
|
|
||||
Cash paid for acquisitions, net of cash acquired
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$
|
—
|
|
|
$
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(5.1
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)
|
|
$
|
—
|
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Proceeds from sale of assets
|
0.7
|
|
|
0.1
|
|
|
0.9
|
|
|||
Change in restricted cash
|
—
|
|
|
0.3
|
|
|
4.7
|
|
|||
Capital expenditures
|
(26.5
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)
|
|
(9.2
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)
|
|
(11.3
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)
|
|||
Net cash used in investing activities from continuing operations
|
$
|
(25.8
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)
|
|
$
|
(13.9
|
)
|
|
$
|
(5.7
|
)
|
|
Year Ended
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||||||||||
|
December 31, 2017
|
|
December 25, 2016
|
|
December 27, 2015
|
||||||
Financing activities:
|
|
|
|
|
|
||||||
Proceeds from the issuance of long-term debt
|
$
|
300.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Extinguishment of long-term debt
|
(448.8
|
)
|
|
(14.1
|
)
|
|
(175.0
|
)
|
|||
Proceeds from the issuance of common stock
|
269.1
|
|
|
76.2
|
|
|
—
|
|
|||
Cash paid for contingent acquisition consideration
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
|||
Repayment under credit facility
|
(1.0
|
)
|
|
(1.0
|
)
|
|
(42.0
|
)
|
|||
Debt issuance costs
|
(6.6
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from the exercise of restricted stock units, employee stock options, and employee stock purchase plan
|
1.5
|
|
|
2.0
|
|
|
3.4
|
|
|||
Other
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(0.8
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)
|
|
—
|
|
|
—
|
|
|||
Net cash provided by (used in) financing activities from continuing operations
|
$
|
113.4
|
|
|
$
|
63.1
|
|
|
$
|
(214.7
|
)
|
|
Year Ended
|
||||||||||
|
December 31, 2017
|
|
December 25, 2016
|
|
December 27, 2015
|
|
|||||
Net operating cash flows provided by discontinued operations
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
2.8
|
|
Net investing cash flows provided by (used in) discontinued operations
|
(0.6
|
)
|
|
4.0
|
|
|
242.5
|
|
|
Payments due/forecast by Period
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||||||||||||||||||
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Total
|
|
2018
|
|
2019 - 2020
|
|
2021 - 2022
|
|
2023 and After
|
||||||||||
Debt, net of interest(1)
|
$
|
300.8
|
|
|
$
|
0.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
300.0
|
|
Estimated interest on debt(2)
|
156.0
|
|
|
19.5
|
|
|
39.0
|
|
|
39.0
|
|
|
58.5
|
|
|||||
Purchase orders(3)
|
138.2
|
|
|
92.6
|
|
|
45.6
|
|
|
—
|
|
|
—
|
|
|||||
Operating leases(4)
|
127.8
|
|
|
18.0
|
|
|
33.8
|
|
|
20.7
|
|
|
55.3
|
|
|||||
Unrecognized tax benefits, including interest and penalties(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total commitments and recorded liabilities
|
$
|
722.8
|
|
|
$
|
130.9
|
|
|
$
|
118.4
|
|
|
$
|
59.7
|
|
|
$
|
413.8
|
|
(1)
|
The 6.5% Notes in the aggregate outstanding principal amount of
$300.0 million
are due November 30, 2025. See Note 4 in the Notes to Consolidated Financial Statements contained within this Annual Report for further details.
|
(2)
|
Includes interest payments based on current interest rates for variable rate debt and the 6.5% Notes. See Note 4 in the Notes to Consolidated Financial Statements contained within in this Annual Report for further details.
|
(3)
|
Purchase orders include commitments in which a written purchase order has been issued to a vendor, but the goods have not been received or services have not been performed.
|
(4)
|
We have entered into or acquired various non-cancelable operating lease agreements that expire on various dates through 2033. The amounts include
$3.3 million
in excess facility costs and exclude expected sublease income. See Note 5 in the Notes to Consolidated Financial Statements contained within this Annual Report for further details.
|
(5)
|
As of
December 31, 2017
, we have a $6.8 million noncurrent liability for uncertain tax positions and a $3.8 million guarantor liability, all of which may result in cash payments. The future payments related to uncertain tax positions have not been presented in the table above due to the uncertainty of the amounts and timing of cash settlements with the taxing authorities.
|
(1)
|
whether we act as a principal in the transaction;
|
(2)
|
whether we take title to the products;
|
(3)
|
whether we assume risks and rewards of ownership, such as risk of loss for collection, delivery or returns;
|
(4)
|
whether we serve as an agent or broker, with compensation on a commission or fee basis; and
|
(5)
|
whether we assume the credit risk for the amount billed to the customer subsequent to delivery.
|
•
|
significant underperformance relative to expected historical or projected future operating results;
|
•
|
significant changes in the manner of our use of the acquired assets or the strategy for our overall business;
|
•
|
significant negative industry or economic trends;
|
•
|
significant decline in our stock price for a sustained period; and
|
•
|
our market capitalization relative to net book value.
|
•
|
The timing of future cash flows within our DCF analysis is based on our most recent forecasts and other estimates. Our historical growth rates and operating results are not indicative of our projected growth rates and operating results as a consequence of our acquisitions and divestitures.
|
•
|
The terminal growth rate is used to calculate the value of cash flows beyond the last projected period in our DCF analysis and reflects our best estimates for stable, perpetual growth of our reporting units.
|
•
|
We use estimates of market participant weighted average cost of capital (“WACC”) as a basis for determining the discount rates to apply to our reporting units’ future expected cash flows. The significant assumptions within our WACC are: (a) equity risk premium, (b) beta, (c) size premium adjustments, (d) cost of debt and (e) capital structure assumptions. In addition, we use a company specific risk adjustment which is a subjective adjustment that, by its very nature does not include market related data, but instead examines the prospects of the reporting unit relative to the broader industry to determine if there are specific factors, which may make it more “risky” relative to the industry.
|
•
|
Recent historical market multiples are used to estimate future market pricing.
|
•
|
We use an estimated control premium in reconciling the aggregate value of our reporting units to our market capitalization. As discussed in
Topic 350
, control premiums may effectively cause a company’s aggregate fair value of its reporting unit(s) to exceed its current market capitalization due to the ability of a controlling shareholder to benefit from synergies and other intangible assets that arise from such control. As a result, the measurement of fair value of an entity with a collection of assets and liabilities that operate together to produce cash flows is different from the fair value measurement of that entity’s individual securities, hence, the reason a control premium is paid.
|
•
|
a decline in our stock price and resulting market capitalization, if we determine the decline is sustained and is indicative of a reduction in the fair value below the carrying value of our reporting units;
|
•
|
a decrease in available government funding, including budgetary constraints affecting U.S. Government spending generally, or specific departments or agencies;
|
•
|
changes in U.S. Government programs or requirements, including the increased use of small business providers;
|
•
|
our failure to reach our internal forecasts could impact our ability to achieve our forecasted levels of cash flows and reduce the estimated discounted value of our reporting units;
|
•
|
volatility in equity and debt markets resulting in higher discount rates; and
|
•
|
market and political factors that could impact the success of new products, especially related to new unmanned systems platforms.
|
(a)(1)
|
Financial Statements
|
(a)(2)
|
Financial Statement Schedules
|
|
|
|
|
Incorporated by
Reference
|
|
|
||||
Exhibit
Number
|
|
Exhibit Description
|
|
Form
|
|
Filing Date (File No.)
|
|
Exhibit
|
|
Filed-
Furnished
Herewith
|
2.1+*
|
|
|
10-Q
|
|
08/06/2015
(001-34460)
|
|
2.4
|
|
|
|
3.1
|
|
|
10-K
|
|
2/27/2017
(001-34460)
|
|
3.1
|
|
|
|
3.2
|
|
|
10-K
|
|
2/27/2017
(001-34460)
|
|
3.2
|
|
|
|
4.1
|
|
|
10-K
|
|
2/27/2017
(001-34460)
|
|
4.1
|
|
|
|
4.2
|
|
|
8-K
|
|
05/15/2014
(001-34460)
|
|
4.1
|
|
|
4.3
|
|
|
8-K
|
|
05/15/2014
(001-34460)
|
|
10.1
|
|
|
|
4.4
|
|
|
8-K
|
|
11/21/2017
(001-34460)
|
|
4.1
|
|
|
|
4.5
|
|
|
|
|
|
|
|
|
*
|
|
10.1#
|
|
|
10-Q
|
|
08/04/2011
(001-34460)
|
|
10.8
|
|
|
|
10.2#
|
|
|
S-8
|
|
07/31/2017
(001-34460)
|
|
99.1
|
|
|
|
10.3#
|
|
|
10-Q
|
|
11/14/2000
(000-27231)
|
|
10.2
|
|
|
|
10.4#
|
|
|
10-Q
|
|
11/14/2000
(000-27231)
|
|
10.3
|
|
|
|
10.5#
|
|
|
S-8
|
|
08/01/2005
(333-127060)
|
|
99.2
|
|
|
|
10.6#
|
|
|
S-8
|
|
08/01/2005
(333-127060)
|
|
99.1
|
|
|
|
10.7#
|
|
|
8-K
|
|
01/17/2007
(000-27231)
|
|
99.3
|
|
|
|
10.8#
|
|
|
S-8
|
|
04/08/2011
(333-173383)
|
|
4.11
|
|
|
|
10.9#
|
|
|
S-8
|
|
04/08/2011
(333-173383)
|
|
4.13
|
|
|
|
10.10#
|
|
|
S-8
|
|
04/08/2011
(333-173383)
|
|
4.14
|
|
|
|
10.11#
|
|
|
S-8
|
|
04/08/2011
(333-173383)
|
|
4.15
|
|
|
|
10.12#
|
|
|
DEF 14A
|
|
04/15/2011
(001-34460)
|
|
n/a
|
|
|
|
10.13#
|
|
|
8-K
|
|
11/18/2011
(001-34460)
|
|
10.2
|
|
|
|
10.14#
|
|
|
S-8
|
|
07/31/2017
(001-34460)
|
|
99.2
|
|
|
|
10.15#
|
|
|
10-Q
|
|
11/07/2014
(001-34460)
|
|
10.1
|
|
|
|
10.16#
|
|
|
10-Q
|
|
08/04/2011
(001-34460)
|
|
10.3
|
|
|
10.17#
|
|
|
10-Q
|
|
08/04/2011
(001-34460)
|
|
10.4
|
|
|
|
10.18
|
|
|
10-K
|
|
03/11/2010
(001-34460)
|
|
10.26
|
|
|
|
10.19#
|
|
|
S-8
|
|
03/08/2012
(333-179977)
|
|
4.10
|
|
|
|
10.20#
|
|
|
S-8
|
|
03/08/2012
(333-179977)
|
|
4.11
|
|
|
|
10.21
|
|
|
8-K
|
|
05/15/2012
(001-34460)
|
|
10.1
|
|
|
|
10.22#
|
|
|
S-8
|
|
07/27/2012
(333-182910)
|
|
4.12
|
|
|
|
10.23#
|
|
|
8-K
|
|
03/12/2015
(001-34460)
|
|
10.1
|
|
|
|
10.24#
|
|
|
8-K
|
|
06/02/2015
(001-34460)
|
|
10.1
|
|
|
|
10.25#
|
|
|
8-K
|
|
08/09/2016
(001-34460)
|
|
10.1
|
|
|
|
10.26#
|
|
|
8-K
|
|
12/08/2016
(001-34460)
|
|
10.1
|
|
|
|
10.27
|
|
|
8-K
|
|
05/15/2014
(001-34460)
|
|
10.2
|
|
|
|
10.28
|
|
|
10-Q
|
|
08/06/2015
(001-34460)
|
|
10.1
|
|
|
10.29
|
|
|
8-K
|
|
08/24/2015
(001-34460)
|
|
10.1
|
|
|
|
10.30
|
|
|
8-K
|
|
11/21/2017
(001-34460)
|
|
10.1
|
|
|
|
10.31
|
|
|
10-Q
|
|
5/04/2017
(001-34460)
|
|
10.2
|
|
|
|
10.32
|
|
|
10-Q
|
|
07/27/2017
(001-34460)
|
|
10.2
|
|
|
|
10.33
|
|
|
10-Q
|
|
07/27/2017
(001-34460)
|
|
10.3
|
|
|
|
10.34
|
|
|
|
|
|
|
|
|
*
|
|
21.1
|
|
|
|
|
|
|
|
|
*
|
|
23.1
|
|
|
|
|
|
|
|
|
*
|
|
31.1
|
|
|
|
|
|
|
|
|
*
|
|
31.2
|
|
|
|
|
|
|
|
|
*
|
|
32.1
|
|
|
|
|
|
|
|
|
*
|
|
32.2
|
|
|
|
|
|
|
|
|
*
|
|
101
|
|
Financial statements from the Annual Report on Form 10-K of Kratos Defense & Security Solutions, Inc. for the year ended December 31, 2017, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Loss, (iii) the Consolidated Statements of Cash Flows, (iv) the Notes to the Consolidated Financial Statements.
|
|
|
|
|
|
|
|
*
|
|
|
Kratos Defense & Security Solutions, Inc.
|
|
|
|
|
|
|
/s/ Eric M. DeMarco
|
|
By:
|
Eric M. DeMarco
President and Chief Executive Officer (Principal
Executive Officer)
|
Signature
|
Title
|
Date
|
|||||||||||
|
|
|
|||||||||||
/s/ Eric M. DeMarco
Eric M. DeMarco
|
President, Chief Executive Officer and Director (Principal Executive Officer)
|
February 28, 2018
|
|||||||||||
|
|
|
|||||||||||
/s/ Deanna H. Lund
Deanna H. Lund
|
Executive Vice President, Chief Financial Officer (Principal Financial Officer)
|
February 28, 2018
|
|||||||||||
|
|
|
|||||||||||
/s/ Maria Cervantes de Burgreen
Maria Cervantes de Burgreen
|
Vice President and Corporate Controller
(Principal Accounting Officer)
|
February 28, 2018
|
|||||||||||
|
|
|
|||||||||||
/s/ Scott Anderson
Scott Anderson
|
Director
|
February 28, 2018
|
|||||||||||
|
|
|
|||||||||||
/s/ Bandel Carano
Bandel Carano
|
Director
|
February 28, 2018
|
|||||||||||
|
|
|
|||||||||||
/s/ William Hoglund
William Hoglund
|
Director
|
February 28, 2018
|
|||||||||||
|
|
|
|||||||||||
/s/ Scot Jarvis
Scot Jarvis
|
Director
|
February 28, 2018
|
|||||||||||
|
|
|
|||||||||||
/s/ Jane E. Judd
Jane E. Judd
|
Director
|
February 28, 2018
|
|||||||||||
|
|
|
|||||||||||
/s/ Sam Liberatore
Sam Liberatore
|
Director
|
February 28, 2018
|
|||||||||||
|
|
|
|||||||||||
/s/ Amy Zegart
Amy Zegart
|
Director
|
February 28, 2018
|
|
||
|
||
|
||
|
||
|
||
|
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
129.6
|
|
|
$
|
69.1
|
|
Restricted cash
|
0.4
|
|
|
0.5
|
|
||
Accounts receivable, net
|
268.4
|
|
|
229.4
|
|
||
Inventoried costs
|
50.4
|
|
|
55.4
|
|
||
Income taxes receivable
|
2.4
|
|
|
4.6
|
|
||
Prepaid expenses
|
12.9
|
|
|
8.9
|
|
||
Other current assets
|
7.2
|
|
|
5.2
|
|
||
Total current assets
|
471.3
|
|
|
373.1
|
|
||
Property, plant and equipment, net
|
61.2
|
|
|
49.8
|
|
||
Goodwill
|
461.2
|
|
|
485.4
|
|
||
Intangible assets, net
|
22.0
|
|
|
32.6
|
|
||
Other assets
|
8.3
|
|
|
7.7
|
|
||
Total assets
|
$
|
1,024.0
|
|
|
$
|
948.6
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
48.8
|
|
|
$
|
52.7
|
|
Accrued expenses
|
45.6
|
|
|
50.0
|
|
||
Accrued compensation
|
34.8
|
|
|
39.1
|
|
||
Accrued interest
|
1.7
|
|
|
3.6
|
|
||
Billings in excess of costs and earnings on uncompleted contracts
|
47.2
|
|
|
41.8
|
|
||
Other current liabilities
|
8.9
|
|
|
6.7
|
|
||
Current portion of long-term debt
|
0.8
|
|
|
1.0
|
|
||
Current liabilities of discontinued operations
|
1.1
|
|
|
1.6
|
|
||
Total current liabilities
|
188.9
|
|
|
196.5
|
|
||
Long-term debt principal, net of current portion
|
293.5
|
|
|
431.0
|
|
||
Deferred income tax liability
|
7.0
|
|
|
17.3
|
|
||
Other long-term liabilities
|
19.3
|
|
|
23.7
|
|
||
Long-term liabilities of discontinued operations
|
3.8
|
|
|
3.7
|
|
||
Total liabilities
|
512.5
|
|
|
672.2
|
|
||
Commitments and contingencies
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
|
|
||
Preferred stock, $0.001 par value, 5,000,000 authorized, 0 shares outstanding at December 31, 2017 and December 25, 2016
|
—
|
|
|
—
|
|
||
Common stock, $0.001 par value, 195,000,000 shares authorized; 103,297,525 and 73,945,533 shares issued and outstanding at December 31, 2017 and December 25, 2016, respectively
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
1,233.7
|
|
|
956.2
|
|
||
Accumulated other comprehensive loss
|
(1.4
|
)
|
|
(1.7
|
)
|
||
Accumulated deficit
|
(720.8
|
)
|
|
(678.1
|
)
|
||
Total stockholders’ equity
|
511.5
|
|
|
276.4
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,024.0
|
|
|
$
|
948.6
|
|
|
|
|
|
|
|
||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Service revenues
|
$
|
346.4
|
|
|
$
|
348.1
|
|
|
$
|
354.2
|
|
Product sales
|
405.5
|
|
|
320.6
|
|
|
302.9
|
|
|||
Total revenues
|
751.9
|
|
|
668.7
|
|
|
657.1
|
|
|||
Cost of service revenues
|
247.5
|
|
|
255.8
|
|
|
266.5
|
|
|||
Cost of product sales
|
307.1
|
|
|
259.3
|
|
|
228.8
|
|
|||
Total costs
|
554.6
|
|
|
515.1
|
|
|
495.3
|
|
|||
Gross profit
|
197.3
|
|
|
153.6
|
|
|
161.8
|
|
|||
Selling, general and administrative expenses
|
160.6
|
|
|
146.3
|
|
|
150.7
|
|
|||
Merger and acquisition related items
|
—
|
|
|
1.9
|
|
|
0.1
|
|
|||
Research and development expenses
|
17.8
|
|
|
13.9
|
|
|
16.2
|
|
|||
Impairment of goodwill
|
24.2
|
|
|
—
|
|
|
—
|
|
|||
Unused office space and other restructuring
|
0.5
|
|
|
10.1
|
|
|
(0.7
|
)
|
|||
Operating loss from continuing operations
|
(5.8
|
)
|
|
(18.6
|
)
|
|
(4.5
|
)
|
|||
Other income (expense):
|
|
|
|
|
|
||||||
Interest expense, net
|
(28.6
|
)
|
|
(34.7
|
)
|
|
(36.0
|
)
|
|||
Gain (loss) on extinguishment of debt
|
(17.3
|
)
|
|
0.2
|
|
|
(3.4
|
)
|
|||
Other income (expense), net
|
0.9
|
|
|
0.8
|
|
|
(0.7
|
)
|
|||
Total other expense, net
|
(45.0
|
)
|
|
(33.7
|
)
|
|
(40.1
|
)
|
|||
Loss from continuing operations before income taxes
|
(50.8
|
)
|
|
(52.3
|
)
|
|
(44.6
|
)
|
|||
Provision (benefit) for income taxes from continuing operations
|
(8.2
|
)
|
|
8.1
|
|
|
(11.4
|
)
|
|||
Loss from continuing operations
|
(42.6
|
)
|
|
(60.4
|
)
|
|
(33.2
|
)
|
|||
Discontinued operations (Note 8)
|
|
|
|
|
|
||||||
Income (loss) from operations of discontinued component (including gain on disposal of $80.8 million for the year ended December 27, 2015)
|
—
|
|
|
(0.1
|
)
|
|
75.5
|
|
|||
Income tax expense
|
0.1
|
|
|
—
|
|
|
22.5
|
|
|||
Income (loss) from discontinued operations
|
(0.1
|
)
|
|
(0.1
|
)
|
|
53.0
|
|
|||
Net income (loss)
|
$
|
(42.7
|
)
|
|
$
|
(60.5
|
)
|
|
$
|
19.8
|
|
Basic income and loss per common share:
|
|
|
|
|
|
||||||
Loss from continuing operations
|
$
|
(0.48
|
)
|
|
$
|
(0.99
|
)
|
|
$
|
(0.56
|
)
|
Income from discontinued operations
|
—
|
|
|
—
|
|
|
0.90
|
|
|||
Net income (loss) per common share
|
$
|
(0.48
|
)
|
|
$
|
(0.99
|
)
|
|
$
|
0.34
|
|
Diluted income and loss per common share:
|
|
|
|
|
|
||||||
Loss from continuing operations
|
$
|
(0.48
|
)
|
|
$
|
(0.99
|
)
|
|
$
|
(0.56
|
)
|
Income from discontinued operations
|
—
|
|
|
—
|
|
|
0.90
|
|
|||
Net income (loss) per common share
|
$
|
(0.48
|
)
|
|
$
|
(0.99
|
)
|
|
$
|
0.34
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
||||||
Basic
|
89.5
|
|
|
61.3
|
|
|
58.7
|
|
|||
Diluted
|
89.5
|
|
|
61.3
|
|
|
58.7
|
|
|||
Comprehensive Income (Loss)
|
|
|
|
|
|
||||||
Net income (loss) from above
|
$
|
(42.7
|
)
|
|
$
|
(60.5
|
)
|
|
$
|
19.8
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
||||||
Change in cumulative translation adjustment
|
0.1
|
|
|
(0.5
|
)
|
|
0.1
|
|
|||
Postretirement benefit reserve adjustment net of tax expense
|
0.2
|
|
|
0.2
|
|
|
0.2
|
|
|||
Other comprehensive income (loss), net of tax
|
0.3
|
|
|
(0.3
|
)
|
|
0.3
|
|
|||
Comprehensive income (loss)
|
$
|
(42.4
|
)
|
|
$
|
(60.8
|
)
|
|
$
|
20.1
|
|
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Accumulated Deficit
|
|
Total Stockholders’ Equity
|
|||||||||||||
|
|
Shares
|
|
Amounts
|
|
|
|
|
|||||||||||||||
Balance, December 28, 2014
|
|
57.8
|
|
|
$
|
—
|
|
|
$
|
863.4
|
|
|
$
|
(1.7
|
)
|
|
$
|
(637.4
|
)
|
|
$
|
224.3
|
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
6.4
|
|
|
—
|
|
|
—
|
|
|
6.4
|
|
|||||
Issuance of common stock for employee stock purchase plan, options and warrants
|
|
0.9
|
|
|
—
|
|
|
4.0
|
|
|
—
|
|
|
—
|
|
|
4.0
|
|
|||||
Restricted stock issued and related taxes
|
|
0.4
|
|
|
—
|
|
|
(0.6
|
)
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19.8
|
|
|
19.8
|
|
|||||
Other comprehensive income, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
|||||
Balance, December 27, 2015
|
|
59.1
|
|
|
—
|
|
|
873.2
|
|
|
(1.4
|
)
|
|
(617.6
|
)
|
|
254.2
|
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
5.1
|
|
|
—
|
|
|
—
|
|
|
5.1
|
|
|||||
Issuance of common stock for cash
|
|
13.4
|
|
|
—
|
|
|
75.8
|
|
|
—
|
|
|
—
|
|
|
75.8
|
|
|||||
Issuance of common stock for employee stock purchase plan, options and warrants
|
|
0.8
|
|
|
—
|
|
|
2.6
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
|||||
Restricted stock issued and related taxes
|
|
0.6
|
|
|
—
|
|
|
(0.5
|
)
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(60.5
|
)
|
|
(60.5
|
)
|
|||||
Other comprehensive loss, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
|||||
Balance, December 25, 2016
|
|
73.9
|
|
|
—
|
|
|
956.2
|
|
|
(1.7
|
)
|
|
(678.1
|
)
|
|
276.4
|
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
7.8
|
|
|
—
|
|
|
—
|
|
|
7.8
|
|
|||||
Issuance of common stock for cash
|
|
28.0
|
|
|
—
|
|
|
268.2
|
|
|
—
|
|
|
—
|
|
|
268.2
|
|
|||||
Issuance of common stock for employee stock purchase plan, options and warrants
|
|
0.7
|
|
|
—
|
|
|
3.5
|
|
|
—
|
|
|
—
|
|
|
3.5
|
|
|||||
Restricted stock issued and related taxes
|
|
0.7
|
|
|
—
|
|
|
(2.0
|
)
|
|
—
|
|
|
—
|
|
|
(2.0
|
)
|
|||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42.7
|
)
|
|
(42.7
|
)
|
|||||
Other comprehensive income, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
|||||
Balance, December 31, 2017
|
|
103.3
|
|
|
$
|
—
|
|
|
$
|
1,233.7
|
|
|
$
|
(1.4
|
)
|
|
$
|
(720.8
|
)
|
|
$
|
511.5
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
Operating activities:
|
|
|
|
|
|
|
|
||||
Net income (loss)
|
$
|
(42.7
|
)
|
|
$
|
(60.5
|
)
|
|
$
|
19.8
|
|
Income (loss) from discontinued operations
|
(0.1
|
)
|
|
(0.1
|
)
|
|
53.0
|
|
|||
Loss from continuing operations
|
(42.6
|
)
|
|
(60.4
|
)
|
|
(33.2
|
)
|
|||
Adjustments to reconcile loss from continuing operations to net cash used in operating activities from continuing operations:
|
|
|
|
|
|
|
|
||||
Depreciation and amortization
|
22.5
|
|
|
22.8
|
|
|
25.5
|
|
|||
Deferred income taxes
|
(10.2
|
)
|
|
4.7
|
|
|
0.9
|
|
|||
Stock-based compensation
|
7.8
|
|
|
5.1
|
|
|
6.1
|
|
|||
Goodwill impairment charge
|
24.2
|
|
|
—
|
|
|
—
|
|
|||
Loss (gain) on extinguishment of debt
|
17.3
|
|
|
(0.2
|
)
|
|
3.4
|
|
|||
Non-cash income tax benefit
|
—
|
|
|
—
|
|
|
(18.7
|
)
|
|||
Amortization of deferred financing costs
|
1.3
|
|
|
1.5
|
|
|
1.9
|
|
|||
Amortization of premium and discount on Senior Secured Notes
|
0.7
|
|
|
0.9
|
|
|
1.1
|
|
|||
Provision for doubtful accounts
|
0.1
|
|
|
0.3
|
|
|
0.4
|
|
|||
Litigation related charges
|
—
|
|
|
1.7
|
|
|
—
|
|
|||
Provision for non-cash restructuring charges
|
—
|
|
|
9.1
|
|
|
—
|
|
|||
Change in accrual for excess facilities
|
—
|
|
|
—
|
|
|
(2.3
|
)
|
|||
|
|
|
|
|
|
||||||
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
||||
Accounts receivable
|
(39.1
|
)
|
|
(24.7
|
)
|
|
10.3
|
|
|||
Inventoried costs
|
7.1
|
|
|
(2.7
|
)
|
|
(8.2
|
)
|
|||
Prepaid expenses
|
(4.0
|
)
|
|
1.8
|
|
|
(3.5
|
)
|
|||
Other assets
|
(2.6
|
)
|
|
3.2
|
|
|
(3.2
|
)
|
|||
Accounts payable
|
(3.4
|
)
|
|
2.9
|
|
|
2.9
|
|
|||
Accrued expenses
|
(5.4
|
)
|
|
16.5
|
|
|
0.6
|
|
|||
Accrued compensation
|
(4.4
|
)
|
|
2.3
|
|
|
(4.4
|
)
|
|||
Accrued interest
|
(1.9
|
)
|
|
(0.3
|
)
|
|
1.5
|
|
|||
Billings in excess of costs and earnings on uncompleted contracts
|
5.4
|
|
|
(0.4
|
)
|
|
(7.3
|
)
|
|||
Income tax receivable and payable
|
1.7
|
|
|
1.2
|
|
|
(3.1
|
)
|
|||
Other liabilities
|
(1.5
|
)
|
|
2.3
|
|
|
(0.4
|
)
|
|||
Net cash used in operating activities from continuing operations
|
(27.0
|
)
|
|
(12.4
|
)
|
|
(29.7
|
)
|
|||
Investing activities:
|
|
|
|
|
|
|
|
||||
Cash paid for acquisitions, net of cash acquired
|
—
|
|
|
(5.1
|
)
|
|
—
|
|
|||
Proceeds from sale of assets
|
0.7
|
|
|
0.1
|
|
|
0.9
|
|
|||
Change in restricted cash
|
—
|
|
|
0.3
|
|
|
4.7
|
|
|||
Capital expenditures
|
(26.5
|
)
|
|
(9.2
|
)
|
|
(11.3
|
)
|
|||
Net cash used in investing activities from continuing operations
|
(25.8
|
)
|
|
(13.9
|
)
|
|
(5.7
|
)
|
|||
Financing activities:
|
|
|
|
|
|
|
|
||||
Proceeds from the issuance of long-term debt
|
300.0
|
|
|
—
|
|
|
—
|
|
|||
Extinguishment of long-term debt
|
(448.8
|
)
|
|
(14.1
|
)
|
|
(175.0
|
)
|
|||
Proceeds from the issuance of common stock
|
269.1
|
|
|
76.2
|
|
|
—
|
|
|||
Repayments under credit facility
|
(1.0
|
)
|
|
(1.0
|
)
|
|
(42.0
|
)
|
|||
Cash paid for contingent acquisition consideration
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
|||
Debt issuance costs
|
(6.6
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from exercise of restricted stock units, employee stock options, and employee stock purchase plan
|
1.5
|
|
|
2.0
|
|
|
3.4
|
|
|||
Other
|
(0.8
|
)
|
|
—
|
|
|
—
|
|
|||
Net cash provided by (used in) financing activities from continuing operations
|
113.4
|
|
|
63.1
|
|
|
(214.7
|
)
|
|||
Net cash flows of continuing operations
|
60.6
|
|
|
36.8
|
|
|
(250.1
|
)
|
|||
Net operating cash flows of discontinued operations
|
—
|
|
|
0.1
|
|
|
2.8
|
|
|||
Net investing cash flows of discontinued operations
|
(0.6
|
)
|
|
4.0
|
|
|
242.5
|
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
0.5
|
|
|
(0.3
|
)
|
|
(0.2
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
60.5
|
|
|
40.6
|
|
|
(5.0
|
)
|
|||
Cash and cash equivalents at beginning of year
|
69.1
|
|
|
28.5
|
|
|
33.5
|
|
|||
Cash and cash equivalents at end of year
|
$
|
129.6
|
|
|
$
|
69.1
|
|
|
$
|
28.5
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
||||||
Cash paid during the year for interest
|
$
|
28.3
|
|
|
$
|
32.4
|
|
|
$
|
43.8
|
|
Net cash paid during the year for income taxes
|
$
|
(0.9
|
)
|
|
$
|
—
|
|
|
$
|
8.8
|
|
Non-cash financing and investing activities:
|
|
|
|
|
|
||||||
Capital expenditures included in accounts payable and accrued expenses
|
$
|
1.6
|
|
|
$
|
2.1
|
|
|
$
|
—
|
|
Liability for contingent consideration and goodwill related to acquisition
|
$
|
—
|
|
|
$
|
5.1
|
|
|
$
|
—
|
|
(a)
|
Description of Business
|
(b)
|
Principles of Consolidation and Basis of Presentation
|
(d)
|
Use of Estimates
|
(e)
|
Revenue Recognition
|
(1)
|
whether the Company acts as a principal in the transaction;
|
(2)
|
whether the Company takes title to the products;
|
(3)
|
whether the Company assumes risks and rewards of ownership, such as risk of loss for collection, delivery or returns;
|
(4)
|
whether the Company serves as an agent or broker, with compensation on a commission or fee basis; and
|
(5)
|
whether the Company assumes the credit risk for the amount billed to the customer subsequent to delivery.
|
(f)
|
Inventoried costs
|
(h)
|
Income Taxes
|
(i)
|
Stock-Based Compensation
|
|
2017
|
|
2016
|
|
2015
|
||||||
Selling, general and administrative expenses
|
$
|
7.8
|
|
|
$
|
5.1
|
|
|
$
|
6.1
|
|
Total cost of employee stock-based compensation included in operating loss from continuing operations
|
7.8
|
|
|
5.1
|
|
|
6.1
|
|
|||
Impact on net loss per common share:
|
|
|
|
|
|
||||||
Basic and diluted
|
$
|
(0.09
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.10
|
)
|
(j)
|
Allowance for Doubtful Accounts
|
Allowance for Doubtful Accounts
|
Balance at Beginning of Year
|
|
Provisions
|
|
Write-offs/Recoveries
|
|
Balance at End of Year
|
||||||||
Year ended December 27, 2015
|
$
|
1.9
|
|
|
$
|
0.4
|
|
|
$
|
(0.5
|
)
|
|
$
|
1.8
|
|
Year ended December 25, 2016
|
$
|
1.8
|
|
|
$
|
0.3
|
|
|
$
|
(0.4
|
)
|
|
$
|
1.7
|
|
Year ended December 31, 2017
|
$
|
1.7
|
|
|
$
|
0.1
|
|
|
$
|
(1.2
|
)
|
|
$
|
0.6
|
|
(k)
|
Cash and Cash Equivalents
|
(l)
|
Property and Equipment, Net
|
|
Years
|
Buildings and improvements
|
15 – 39
|
Machinery and equipment
|
3 – 10
|
Computer equipment and software
|
1 – 10
|
Vehicles, furniture, and office equipment
|
5
|
Leasehold improvements
|
Shorter of useful life or length of lease
|
(m)
|
Leases
|
(n)
|
Goodwill and Other Intangible Assets, Net
|
(p)
|
Fair Value of Financial Instruments
|
(q)
|
Concentrations and Uncertainties
|
(s)
|
Interest Expense, Net
|
|
2017
|
|
2016
|
|
2015
|
||||||
Interest expense incurred primarily on the Company’s Senior Secured Notes
|
$
|
(29.1
|
)
|
|
$
|
(34.7
|
)
|
|
$
|
(36.0
|
)
|
Miscellaneous interest income
|
0.5
|
|
|
—
|
|
|
—
|
|
|||
Interest expense, net
|
$
|
(28.6
|
)
|
|
$
|
(34.7
|
)
|
|
$
|
(36.0
|
)
|
(t)
|
Foreign Currency
|
(a)
|
Goodwill
|
|
As of December 31, 2017
|
||||||||||||||
|
PSS
|
|
US
|
|
KGS
|
|
Total
|
||||||||
Gross value
|
$
|
53.9
|
|
|
$
|
111.1
|
|
|
$
|
567.8
|
|
|
$
|
732.8
|
|
Less accumulated impairment
|
18.3
|
|
|
13.8
|
|
|
239.5
|
|
|
271.6
|
|
||||
Net
|
$
|
35.6
|
|
|
$
|
97.3
|
|
|
$
|
328.3
|
|
|
$
|
461.2
|
|
|
As of December 25, 2016
|
||||||||||||||
|
PSS
|
|
US
|
|
KGS
|
|
Total
|
||||||||
Gross value
|
$
|
53.9
|
|
|
$
|
111.1
|
|
|
$
|
567.8
|
|
|
$
|
732.8
|
|
Less accumulated impairment
|
18.3
|
|
|
13.8
|
|
|
215.3
|
|
|
247.4
|
|
||||
Net
|
$
|
35.6
|
|
|
$
|
97.3
|
|
|
$
|
352.5
|
|
|
$
|
485.4
|
|
(b)
|
Purchased Intangible Assets
|
|
As of December 31, 2017
|
|
As of December 25, 2016
|
||||||||||||||||||||
|
Gross
Value
|
|
Accumulated
Amortization
|
|
Net
Value
|
|
Gross
Value
|
|
Accumulated
Amortization
|
|
Net
Value
|
||||||||||||
Acquired finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Customer relationships
|
$
|
53.7
|
|
|
$
|
(50.2
|
)
|
|
$
|
3.5
|
|
|
$
|
53.7
|
|
|
$
|
(44.9
|
)
|
|
$
|
8.8
|
|
Contracts and backlog
|
30.8
|
|
|
(25.7
|
)
|
|
5.1
|
|
|
30.8
|
|
|
(23.7
|
)
|
|
7.1
|
|
||||||
Developed technology and technical know-how
|
25.0
|
|
|
(18.6
|
)
|
|
6.4
|
|
|
25.2
|
|
|
(15.7
|
)
|
|
9.5
|
|
||||||
Trade names
|
1.4
|
|
|
(1.3
|
)
|
|
0.1
|
|
|
1.4
|
|
|
(1.1
|
)
|
|
0.3
|
|
||||||
Total finite-lived intangible assets
|
110.9
|
|
|
(95.8
|
)
|
|
15.1
|
|
|
111.1
|
|
|
(85.4
|
)
|
|
25.7
|
|
||||||
Indefinite-lived trade names
|
6.9
|
|
|
—
|
|
|
6.9
|
|
|
6.9
|
|
|
—
|
|
|
6.9
|
|
||||||
Total intangible assets
|
$
|
117.8
|
|
|
$
|
(95.8
|
)
|
|
$
|
22.0
|
|
|
$
|
118.0
|
|
|
$
|
(85.4
|
)
|
|
$
|
32.6
|
|
Fiscal Year
|
Amount
|
||
2018
|
$
|
5.9
|
|
2019
|
5.1
|
|
|
2020
|
3.0
|
|
|
2021
|
1.1
|
|
|
Total
|
$
|
15.1
|
|
|
December 31, 2017
|
|
December 25, 2016
|
||||
Billed, current
|
$
|
101.5
|
|
|
$
|
102.8
|
|
Unbilled, current
|
167.5
|
|
|
128.3
|
|
||
Total current accounts receivable
|
269.0
|
|
|
231.1
|
|
||
Allowance for doubtful accounts
|
(0.6
|
)
|
|
(1.7
|
)
|
||
Total accounts receivable, net
|
$
|
268.4
|
|
|
$
|
229.4
|
|
|
December 31, 2017
|
|
December 25, 2016
|
||||
Billed
|
$
|
17.3
|
|
|
$
|
15.6
|
|
Unbilled
|
55.3
|
|
|
39.3
|
|
||
Total U.S. Government contract receivables
|
$
|
72.6
|
|
|
$
|
54.9
|
|
|
December 31,
2017 |
|
December 25,
2016 |
||||
Raw materials
|
$
|
35.4
|
|
|
$
|
31.9
|
|
Work in process
|
11.4
|
|
|
22.1
|
|
||
Finished goods
|
2.3
|
|
|
1.4
|
|
||
Supplies and other
|
1.9
|
|
|
1.8
|
|
||
Subtotal inventoried costs
|
51.0
|
|
|
57.2
|
|
||
Less customer advances and progress payments
|
(0.6
|
)
|
|
(1.8
|
)
|
||
Total inventoried costs
|
$
|
50.4
|
|
|
$
|
55.4
|
|
|
December 31, 2017
|
|
December 25, 2016
|
||||
Land and buildings
|
$
|
12.1
|
|
|
$
|
12.2
|
|
Computer equipment and software
|
30.1
|
|
|
26.9
|
|
||
Machinery and equipment
|
49.9
|
|
|
47.2
|
|
||
Furniture and office equipment
|
5.7
|
|
|
5.3
|
|
||
Leasehold improvements
|
11.2
|
|
|
9.9
|
|
||
Construction in progress
|
19.8
|
|
|
6.1
|
|
||
Property and equipment
|
128.8
|
|
|
107.6
|
|
||
Accumulated depreciation and amortization
|
(67.6
|
)
|
|
(57.8
|
)
|
||
Total property and equipment, net
|
$
|
61.2
|
|
|
$
|
49.8
|
|
(b)
|
Issuance of
7.00%
Senior Secured Notes due 2019
|
|
As of December 31, 2017
|
|
As of December 25, 2016
|
||||||||||||||||||||
$ in millions
|
Principal
|
|
Carrying
Amount
|
|
Fair Value
|
|
Principal
|
|
Carrying
Amount
|
|
Fair Value
|
||||||||||||
Long-term debt
|
$
|
300.8
|
|
|
$
|
294.3
|
|
|
$
|
312.7
|
|
|
$
|
437.3
|
|
|
$
|
432.0
|
|
|
$
|
423.6
|
|
Year
|
Operating Leases
|
||
2018
|
$
|
18.0
|
|
2019
|
19.5
|
|
|
2020
|
14.3
|
|
|
2021
|
11.4
|
|
|
2022
|
9.3
|
|
|
Thereafter
|
55.3
|
|
|
Total future minimum lease payments
|
$
|
127.8
|
|
|
Excess Facilities
|
||
Balance as of December 27, 2015
|
$
|
5.5
|
|
Adjustment of excess facility accrual
|
—
|
|
|
Cash payments
|
(1.5
|
)
|
|
Balance as of December 25, 2016
|
4.0
|
|
|
Adjustments of excess facility accruals
|
—
|
|
|
Cash payments
|
(0.7
|
)
|
|
Balance as of December 31, 2017
|
$
|
3.3
|
|
|
December 31, 2017
|
|
December 25, 2016
|
|
December 27, 2015
|
|||
Shares from stock options and awards
|
0.1
|
|
|
1.4
|
|
|
1.9
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
Domestic
|
$
|
(54.2
|
)
|
|
$
|
(61.8
|
)
|
|
$
|
(54.2
|
)
|
Foreign
|
3.4
|
|
|
9.5
|
|
|
9.6
|
|
|||
Total
|
$
|
(50.8
|
)
|
|
$
|
(52.3
|
)
|
|
$
|
(44.6
|
)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Federal income taxes:
|
|
|
|
|
|
||||||
Current
|
$
|
(0.7
|
)
|
|
$
|
(0.5
|
)
|
|
$
|
(15.7
|
)
|
Deferred
|
(9.0
|
)
|
|
4.0
|
|
|
1.4
|
|
|||
Total Federal
|
(9.7
|
)
|
|
3.5
|
|
|
(14.3
|
)
|
|||
State and local income taxes
|
|
|
|
|
|
||||||
Current
|
0.7
|
|
|
2.3
|
|
|
0.8
|
|
|||
Deferred
|
(0.7
|
)
|
|
0.7
|
|
|
—
|
|
|||
Total State and local
|
—
|
|
|
3.0
|
|
|
0.8
|
|
|||
Foreign income taxes:
|
|
|
|
|
|
||||||
Current
|
2.0
|
|
|
1.5
|
|
|
1.2
|
|
|||
Deferred
|
(0.5
|
)
|
|
0.1
|
|
|
0.9
|
|
|||
Total Foreign
|
1.5
|
|
|
1.6
|
|
|
2.1
|
|
|||
Total
|
$
|
(8.2
|
)
|
|
$
|
8.1
|
|
|
$
|
(11.4
|
)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Income tax (benefit) at federal statutory rate
|
$
|
(17.8
|
)
|
|
$
|
(18.3
|
)
|
|
$
|
(15.6
|
)
|
State taxes, net of federal tax benefit and valuation allowance
|
0.7
|
|
|
0.2
|
|
|
(0.2
|
)
|
|||
Difference in tax rates between U.S. and foreign
|
—
|
|
|
0.1
|
|
|
(0.7
|
)
|
|||
Increase (decrease) in valuation allowance
|
(45.6
|
)
|
|
19.1
|
|
|
—
|
|
|||
Nondeductible expense
|
1.1
|
|
|
0.7
|
|
|
0.8
|
|
|||
Increase in reserve for uncertain tax positions
|
1.3
|
|
|
2.2
|
|
|
0.9
|
|
|||
Changes to indefinite life items and separate state deferred taxes
|
(2.2
|
)
|
|
4.1
|
|
|
3.4
|
|
|||
One-time transition tax on previously undistributed foreign earnings
|
6.2
|
|
|
—
|
|
|
—
|
|
|||
Goodwill impairment
|
8.1
|
|
|
—
|
|
|
—
|
|
|||
Impact related to the 2017 Tax Act
|
40.0
|
|
|
—
|
|
|
—
|
|
|||
Total
|
$
|
(8.2
|
)
|
|
$
|
8.1
|
|
|
$
|
(11.4
|
)
|
|
2017
|
|
2016
|
||||
Deferred tax assets:
|
|
|
|
||||
Allowance for doubtful accounts
|
$
|
0.2
|
|
|
$
|
0.4
|
|
Sundry accruals
|
1.5
|
|
|
2.2
|
|
||
Vacation accrual
|
3.2
|
|
|
4.7
|
|
||
Stock-based compensation
|
3.1
|
|
|
5.2
|
|
||
Payroll related accruals
|
2.1
|
|
|
2.9
|
|
||
Lease accruals
|
2.5
|
|
|
4.5
|
|
||
Investments
|
1.3
|
|
|
2.0
|
|
||
Net operating loss carryforwards
|
95.7
|
|
|
124.8
|
|
||
Tax credit carryforwards
|
9.5
|
|
|
9.4
|
|
||
Deferred revenue
|
1.9
|
|
|
2.5
|
|
||
Reserves and other
|
6.1
|
|
|
11.9
|
|
||
|
127.1
|
|
|
170.5
|
|
||
Valuation allowance
|
(87.5
|
)
|
|
(133.1
|
)
|
||
Total deferred tax assets, net of valuation allowance
|
39.6
|
|
|
37.4
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Unearned revenue
|
(38.8
|
)
|
|
(43.0
|
)
|
||
Other intangibles
|
(5.4
|
)
|
|
(7.0
|
)
|
||
Property and equipment, principally due to differences in depreciation
|
(0.7
|
)
|
|
(2.0
|
)
|
||
Other
|
(1.7
|
)
|
|
(2.7
|
)
|
||
Total deferred tax liabilities
|
(46.6
|
)
|
|
(54.7
|
)
|
||
Net deferred tax liability
|
$
|
(7.0
|
)
|
|
$
|
(17.3
|
)
|
Balance as of December 28, 2014
|
$
|
16.4
|
|
Increases related to prior periods (acquired entities)
|
0.4
|
|
|
Increases related to current year tax positions
|
0.9
|
|
|
Decreases related to disposition
|
(0.5
|
)
|
|
Balance as of December 27, 2015
|
17.2
|
|
|
Increases related to prior periods (acquired entities)
|
1.4
|
|
|
Increases related to current year tax positions
|
0.2
|
|
|
Expiration of applicable statutes of limitations
|
(0.2
|
)
|
|
Balance as of December 25, 2016
|
18.6
|
|
|
Increases related to prior periods
|
0.4
|
|
|
Increases related to current year tax positions
|
1.1
|
|
|
Expiration of applicable statutes of limitations
|
(0.6
|
)
|
|
Decrease in federal tax rate
|
(3.9
|
)
|
|
Balance as of December 31, 2017
|
$
|
15.6
|
|
|
Year ended December 31, 2017
|
|
Year ended December 25, 2016
|
|
Year ended December 27, 2015
|
||||||
Revenue
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
59.7
|
|
Cost of sales
|
—
|
|
|
—
|
|
|
40.6
|
|
|||
Selling, general and administrative expenses
|
—
|
|
|
0.1
|
|
|
15.2
|
|
|||
Interest expense, net
|
—
|
|
|
—
|
|
|
9.1
|
|
|||
Other net income (expense) items that are not major
|
—
|
|
|
—
|
|
|
0.1
|
|
|||
Loss from discontinued operations before income taxes
|
—
|
|
|
(0.1
|
)
|
|
(5.3
|
)
|
|||
Gain on disposal of discontinued operations before income taxes
|
—
|
|
|
—
|
|
|
80.8
|
|
|||
Total gain (loss) of discontinued operations before income taxes
|
—
|
|
|
(0.1
|
)
|
|
75.5
|
|
|||
Income tax expense
|
0.1
|
|
|
—
|
|
|
22.5
|
|
|||
Income (loss) from discontinued operations
|
$
|
(0.1
|
)
|
|
$
|
(0.1
|
)
|
|
$
|
53.0
|
|
|
December 31, 2017
|
|
December 25, 2016
|
||||
Accrued compensation
|
$
|
—
|
|
|
$
|
0.6
|
|
Other current liabilities
|
1.1
|
|
|
1.0
|
|
||
Current liabilities of discontinued operations
|
$
|
1.1
|
|
|
$
|
1.6
|
|
Other long-term liabilities of discontinued operations
|
$
|
3.8
|
|
|
$
|
3.7
|
|
|
2017
|
|
2016
|
|
2015
|
Stock Options
|
|
|
|
|
|
Expected life
|
10.0
|
|
10.0
|
|
10.0
|
Risk-free interest rate(1)
|
2.2% - 2.5%
|
|
1.8% - 2.4%
|
|
2.1% - 2.3%
|
Volatility(2)
|
53.8% - 55.0%
|
|
55.2% - 55.8%
|
|
54.4% - 54.7%
|
Forfeiture rate(3)
|
5.0%
|
|
5.0%
|
|
5.0%
|
Dividend yield(4)
|
—%
|
|
—%
|
|
—%
|
|
|
Number of
Shares Under Option
|
|
Weighted-Average Exercise Price per Share
|
|
Weighted-
Average
Remaining
Contractual
Term
(in years)
|
|
Aggregate Intrinsic Value
|
|||||
|
|
(000’s)
|
|
|
|
|
|
(000’s)
|
|||||
Options outstanding at December 25, 2016
|
|
963
|
|
|
$
|
8.05
|
|
|
5.2
|
|
$
|
1,924.1
|
|
Granted
|
|
7
|
|
|
$
|
9.78
|
|
|
|
|
|
||
Exercised
|
|
(49
|
)
|
|
$
|
8.85
|
|
|
|
|
|
||
Forfeited or expired
|
|
(22
|
)
|
|
$
|
16.40
|
|
|
|
|
|
||
Options outstanding at December 31, 2017
|
|
899
|
|
|
$
|
7.82
|
|
|
4.4
|
|
4,224.8
|
|
|
Options exercisable at December 31, 2017
|
|
322
|
|
|
$
|
12.91
|
|
|
3.4
|
|
$
|
965.6
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
Weighted average grant date fair value of options granted
|
$
|
6.39
|
|
|
$
|
3.36
|
|
|
$
|
3.31
|
|
Total intrinsic value of options exercised (in thousands)
|
$
|
67.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Restricted
Stock Units (000’s) |
|
Weighted-Average Grant Date Fair Value
|
|||
Nonvested balance at December 25, 2016
|
|
2,246
|
|
|
$
|
6.81
|
|
Grants
|
|
1,180
|
|
|
$
|
7.45
|
|
Vested
|
|
(841
|
)
|
|
$
|
7.48
|
|
Forfeitures
|
|
(20
|
)
|
|
$
|
7.28
|
|
Vested but not released
|
|
(307
|
)
|
|
$
|
7.24
|
|
Nonvested balance at December 31, 2017
|
|
2,258
|
|
|
$
|
6.83
|
|
(c)
|
Amended and Restated Employee Stock Purchase Plan
|
|
Offering
Periods
January 1 to
December 31
2017
|
|
Offering
Periods
January 1 to
December 31,
2016
|
|
Offering
Periods
January 1 to
December 31,
2015
|
Expected term (in years)(1)
|
0.5
|
|
0.5
|
|
0.5
|
Risk-free interest rate(2)
|
.62% - 1.14%
|
|
0.36% - 0.49%
|
|
0.11% - 0.12%
|
Expected volatility(3)
|
44.38% - 53.70%
|
|
53.00% - 55.55%
|
|
39.63% - 40.91%
|
Expected dividend yield(4)
|
—%
|
|
—%
|
|
—%
|
Weighted average grant-date fair value per share
|
$2.51
|
|
$1.23
|
|
$1.43
|
(1)
|
The expected term is equivalent to the offering period.
|
(2)
|
The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant with a term equal to the expected term.
|
|
2017
|
|
2016
|
|
2015
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Kratos Government Solutions
|
|
|
|
|
|
||||||
Service revenues
|
$
|
196.5
|
|
|
$
|
221.0
|
|
|
$
|
209.5
|
|
Product sales
|
283.8
|
|
|
244.8
|
|
|
236.6
|
|
|||
Total Kratos Government Solutions
|
480.3
|
|
|
465.8
|
|
|
446.1
|
|
|||
Public Safety & Security
|
|
|
|
|
|
||||||
Service revenues
|
149.9
|
|
|
127.1
|
|
|
144.7
|
|
|||
Product sales
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total Public Safety & Security
|
149.9
|
|
|
127.1
|
|
|
144.7
|
|
|||
Unmanned Systems
|
|
|
|
|
|
||||||
Service revenues
|
—
|
|
|
—
|
|
|
—
|
|
|||
Product sales
|
121.7
|
|
|
75.8
|
|
|
66.3
|
|
|||
Total Unmanned Systems
|
121.7
|
|
|
75.8
|
|
|
66.3
|
|
|||
Total revenues
|
$
|
751.9
|
|
|
$
|
668.7
|
|
|
$
|
657.1
|
|
Depreciation and amortization:
|
|
|
|
|
|
||||||
Kratos Government Solutions
|
$
|
14.3
|
|
|
$
|
14.9
|
|
|
$
|
18.2
|
|
Public Safety & Security
|
0.4
|
|
|
0.5
|
|
|
0.6
|
|
|||
Unmanned Systems
|
7.8
|
|
|
7.4
|
|
|
6.7
|
|
|||
Total depreciation and amortization
|
$
|
22.5
|
|
|
$
|
22.8
|
|
|
$
|
25.5
|
|
Operating income (loss) from continuing operations:
|
|
|
|
|
|
||||||
Kratos Government Solutions
|
$
|
1.7
|
|
|
$
|
17.3
|
|
|
$
|
16.1
|
|
Public Safety & Security
|
3.8
|
|
|
(3.0
|
)
|
|
2.6
|
|
|||
Unmanned Systems
|
(3.0
|
)
|
|
(27.7
|
)
|
|
(16.2
|
)
|
|||
Corporate activities
|
(8.3
|
)
|
|
(5.2
|
)
|
|
(7.0
|
)
|
|||
Total operating loss from continuing operations
|
$
|
(5.8
|
)
|
|
$
|
(18.6
|
)
|
|
$
|
(4.5
|
)
|
|
December 31, 2017
|
|
December 25, 2016
|
|
December 27, 2015
|
||||||
Assets:
|
|
|
|
|
|
||||||
Kratos Government Solutions
|
$
|
597.9
|
|
|
$
|
609.8
|
|
|
$
|
606.8
|
|
Unmanned Systems
|
201.9
|
|
|
172.1
|
|
|
162.0
|
|
|||
Public Safety & Security
|
97.4
|
|
|
92.0
|
|
|
96.8
|
|
|||
Corporate activities
|
126.8
|
|
|
74.7
|
|
|
37.7
|
|
|||
Total assets
|
$
|
1,024.0
|
|
|
$
|
948.6
|
|
|
$
|
903.3
|
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||||||
Fiscal year 2017
|
|
|
|
|
|
|
|
||||||||
Revenues
|
$
|
167.8
|
|
|
$
|
185.7
|
|
|
$
|
196.2
|
|
|
$
|
202.2
|
|
Gross profit
|
45.1
|
|
|
47.4
|
|
|
48.1
|
|
|
56.7
|
|
||||
Operating income (loss) from continuing operations
|
1.7
|
|
|
2.6
|
|
|
3.1
|
|
|
(13.2
|
)
|
||||
Provision (benefit) for income taxes
|
1.5
|
|
|
1.8
|
|
|
0.2
|
|
|
(11.7
|
)
|
||||
Loss from continuing operations
|
(9.9
|
)
|
|
(6.2
|
)
|
|
(4.2
|
)
|
|
(22.3
|
)
|
||||
Income (loss) from discontinued operations
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
0.1
|
|
||||
Net loss
|
$
|
(10.0
|
)
|
|
$
|
(6.2
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(22.2
|
)
|
Basic loss per common share:
|
|
|
|
|
|
|
|
||||||||
Loss from continuing operations
|
$
|
(0.13
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.21
|
)
|
Income (loss) from discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net loss per common share
|
$
|
(0.13
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.21
|
)
|
Diluted loss per common share:
|
|
|
|
|
|
|
|
||||||||
Loss from continuing operations
|
$
|
(0.13
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.21
|
)
|
Income (loss) from discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net loss per common share
|
$
|
(0.13
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.21
|
)
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||||||
Fiscal year 2016
|
|
|
|
|
|
|
|
||||||||
Revenues
|
$
|
153.0
|
|
|
$
|
168.2
|
|
|
$
|
165.4
|
|
|
$
|
182.1
|
|
Gross profit
|
35.9
|
|
|
45.2
|
|
|
25.9
|
|
|
46.6
|
|
||||
Operating income (loss) from continuing operations
|
(10.2
|
)
|
|
—
|
|
|
(13.0
|
)
|
|
4.6
|
|
||||
Provision for income taxes
|
3.6
|
|
|
1.8
|
|
|
1.9
|
|
|
0.8
|
|
||||
Loss from continuing operations
|
(22.2
|
)
|
|
(10.3
|
)
|
|
(23.5
|
)
|
|
(4.4
|
)
|
||||
Income (loss) from discontinued operations
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
0.1
|
|
||||
Net loss
|
$
|
(22.2
|
)
|
|
$
|
(10.4
|
)
|
|
$
|
(23.6
|
)
|
|
$
|
(4.3
|
)
|
Basic loss per common share:
|
|
|
|
|
|
|
|
||||||||
Loss from continuing operations
|
$
|
(0.37
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.07
|
)
|
Income (loss) from discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net loss per common share
|
$
|
(0.37
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.07
|
)
|
Diluted loss per common share:
|
|
|
|
|
|
|
|
||||||||
Loss from continuing operations
|
$
|
(0.37
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.07
|
)
|
Income (loss) from discontinued operations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net loss per common share
|
$
|
(0.37
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.07
|
)
|
Condensed Consolidating Balance Sheet
December 31, 2017
(in millions)
|
|||||||||||||||||||
|
Parent Company
|
|
Subsidiary Guarantors on a Combined Basis
|
|
Non-Guarantors on a Combined Basis
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Current Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
121.1
|
|
|
$
|
(2.2
|
)
|
|
$
|
10.7
|
|
|
$
|
—
|
|
|
$
|
129.6
|
|
Accounts receivable, net
|
—
|
|
|
239.9
|
|
|
28.5
|
|
|
—
|
|
|
268.4
|
|
|||||
Amounts due from affiliated companies
|
238.1
|
|
|
—
|
|
|
—
|
|
|
(238.1
|
)
|
|
—
|
|
|||||
Inventoried costs
|
—
|
|
|
32.2
|
|
|
18.2
|
|
|
—
|
|
|
50.4
|
|
|||||
Other current assets
|
3.9
|
|
|
15.6
|
|
|
3.4
|
|
|
—
|
|
|
22.9
|
|
|||||
Total current assets
|
363.1
|
|
|
285.5
|
|
|
60.8
|
|
|
(238.1
|
)
|
|
471.3
|
|
|||||
Property, plant and equipment, net
|
1.9
|
|
|
52.5
|
|
|
6.8
|
|
|
—
|
|
|
61.2
|
|
|||||
Goodwill
|
—
|
|
|
418.3
|
|
|
42.9
|
|
|
—
|
|
|
461.2
|
|
|||||
Intangible assets, net
|
—
|
|
|
15.8
|
|
|
6.2
|
|
|
—
|
|
|
22.0
|
|
|||||
Investment in subsidiaries
|
471.1
|
|
|
70.0
|
|
|
—
|
|
|
(541.1
|
)
|
|
—
|
|
|||||
Other assets
|
0.8
|
|
|
7.5
|
|
|
—
|
|
|
—
|
|
|
8.3
|
|
|||||
Total assets
|
$
|
836.9
|
|
|
$
|
849.6
|
|
|
$
|
116.7
|
|
|
$
|
(779.2
|
)
|
|
$
|
1,024.0
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts payable
|
$
|
2.3
|
|
|
$
|
42.0
|
|
|
$
|
4.5
|
|
|
$
|
—
|
|
|
$
|
48.8
|
|
Accrued expenses
|
5.7
|
|
|
38.3
|
|
|
3.3
|
|
|
—
|
|
|
47.3
|
|
|||||
Accrued compensation
|
5.6
|
|
|
25.3
|
|
|
3.9
|
|
|
—
|
|
|
34.8
|
|
|||||
Billings in excess of costs and earnings on uncompleted contracts
|
—
|
|
|
42.6
|
|
|
4.6
|
|
|
—
|
|
|
47.2
|
|
|||||
Amounts due to affiliated companies
|
—
|
|
|
206.4
|
|
|
31.7
|
|
|
(238.1
|
)
|
|
—
|
|
|||||
Other current liabilities
|
1.4
|
|
|
4.6
|
|
|
3.7
|
|
|
—
|
|
|
9.7
|
|
|||||
Current liabilities of discontinued operations
|
1.0
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
1.1
|
|
|||||
Total current liabilities
|
16.0
|
|
|
359.2
|
|
|
51.8
|
|
|
(238.1
|
)
|
|
188.9
|
|
|||||
Long-term debt, net of current portion
|
293.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
293.5
|
|
|||||
Other long-term liabilities
|
12.1
|
|
|
7.3
|
|
|
6.9
|
|
|
—
|
|
|
26.3
|
|
|||||
Non-current liabilities of discontinued operations
|
3.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.8
|
|
|||||
Total liabilities
|
325.4
|
|
|
366.5
|
|
|
58.7
|
|
|
(238.1
|
)
|
|
512.5
|
|
|||||
Total stockholders’ equity
|
511.5
|
|
|
483.1
|
|
|
58.0
|
|
|
(541.1
|
)
|
|
511.5
|
|
|||||
Total liabilities and stockholders’ equity
|
$
|
836.9
|
|
|
$
|
849.6
|
|
|
$
|
116.7
|
|
|
$
|
(779.2
|
)
|
|
$
|
1,024.0
|
|
Condensed Consolidating Balance Sheet
December 25, 2016
(in millions)
|
|||||||||||||||||||
|
Parent Company
|
|
Subsidiary Guarantors on a Combined Basis
|
|
Non-Guarantors on a Combined Basis
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Current Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
67.2
|
|
|
$
|
(3.3
|
)
|
|
$
|
5.2
|
|
|
$
|
—
|
|
|
$
|
69.1
|
|
Accounts receivable, net
|
—
|
|
|
197.9
|
|
|
31.5
|
|
|
—
|
|
|
229.4
|
|
|||||
Amounts due from affiliated companies
|
204.6
|
|
|
—
|
|
|
—
|
|
|
(204.6
|
)
|
|
—
|
|
|||||
Inventoried costs
|
—
|
|
|
37.2
|
|
|
18.2
|
|
|
—
|
|
|
55.4
|
|
|||||
Other current assets
|
6.3
|
|
|
11.6
|
|
|
1.3
|
|
|
—
|
|
|
19.2
|
|
|||||
Total current assets
|
278.1
|
|
|
243.4
|
|
|
56.2
|
|
|
(204.6
|
)
|
|
373.1
|
|
|||||
Property, plant and equipment, net
|
1.6
|
|
|
41.7
|
|
|
6.5
|
|
|
—
|
|
|
49.8
|
|
|||||
Goodwill
|
—
|
|
|
442.5
|
|
|
42.9
|
|
|
—
|
|
|
485.4
|
|
|||||
Intangible assets, net
|
—
|
|
|
24.5
|
|
|
8.1
|
|
|
—
|
|
|
32.6
|
|
|||||
Investment in subsidiaries
|
458.0
|
|
|
67.5
|
|
|
—
|
|
|
(525.5
|
)
|
|
—
|
|
|||||
Other assets
|
0.4
|
|
|
7.3
|
|
|
—
|
|
|
—
|
|
|
7.7
|
|
|||||
Total assets
|
$
|
738.1
|
|
|
$
|
826.9
|
|
|
$
|
113.7
|
|
|
$
|
(730.1
|
)
|
|
$
|
948.6
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts payable
|
$
|
4.5
|
|
|
$
|
43.7
|
|
|
$
|
4.5
|
|
|
$
|
—
|
|
|
$
|
52.7
|
|
Accrued expenses
|
5.6
|
|
|
44.5
|
|
|
3.5
|
|
|
—
|
|
|
53.6
|
|
|||||
Accrued compensation
|
4.0
|
|
|
31.2
|
|
|
3.9
|
|
|
—
|
|
|
39.1
|
|
|||||
Billings in excess of costs and earnings on uncompleted contracts
|
—
|
|
|
38.9
|
|
|
2.9
|
|
|
—
|
|
|
41.8
|
|
|||||
Amounts due to affiliated companies
|
—
|
|
|
174.6
|
|
|
30.0
|
|
|
(204.6
|
)
|
|
—
|
|
|||||
Other current liabilities
|
1.4
|
|
|
4.1
|
|
|
2.2
|
|
|
—
|
|
|
7.7
|
|
|||||
Current liabilities of discontinued operations
|
1.5
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
1.6
|
|
|||||
Total current liabilities
|
17.0
|
|
|
337.0
|
|
|
47.1
|
|
|
(204.6
|
)
|
|
196.5
|
|
|||||
Long-term debt, net of current portion
|
430.2
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
|
431.0
|
|
|||||
Other long-term liabilities
|
10.8
|
|
|
19.9
|
|
|
10.3
|
|
|
—
|
|
|
41.0
|
|
|||||
Non-current liabilities of discontinued operations
|
3.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.7
|
|
|||||
Total liabilities
|
461.7
|
|
|
356.9
|
|
|
58.2
|
|
|
(204.6
|
)
|
|
672.2
|
|
|||||
Total stockholders’ equity
|
276.4
|
|
|
470.0
|
|
|
55.5
|
|
|
(525.5
|
)
|
|
276.4
|
|
|||||
Total liabilities and stockholders’ equity
|
$
|
738.1
|
|
|
$
|
826.9
|
|
|
$
|
113.7
|
|
|
$
|
(730.1
|
)
|
|
$
|
948.6
|
|
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Year Ended December 31, 2017
(in millions)
|
|||||||||||||||||||
|
Parent Company
|
|
Subsidiary Guarantors on a Combined Basis
|
|
Non-Guarantors on a Combined Basis
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Service revenues
|
$
|
—
|
|
|
$
|
334.3
|
|
|
$
|
12.1
|
|
|
$
|
—
|
|
|
$
|
346.4
|
|
Product sales
|
—
|
|
|
360.2
|
|
|
60.0
|
|
|
(14.7
|
)
|
|
405.5
|
|
|||||
Total revenues
|
—
|
|
|
694.5
|
|
|
72.1
|
|
|
(14.7
|
)
|
|
751.9
|
|
|||||
Cost of service revenues
|
—
|
|
|
238.6
|
|
|
8.9
|
|
|
—
|
|
|
247.5
|
|
|||||
Cost of product sales
|
—
|
|
|
274.4
|
|
|
47.4
|
|
|
(14.7
|
)
|
|
307.1
|
|
|||||
Total costs
|
—
|
|
|
513.0
|
|
|
56.3
|
|
|
(14.7
|
)
|
|
554.6
|
|
|||||
Gross profit
|
—
|
|
|
181.5
|
|
|
15.8
|
|
|
—
|
|
|
197.3
|
|
|||||
Selling, general and administrative expenses
|
9.1
|
|
|
163.6
|
|
|
12.6
|
|
|
—
|
|
|
185.3
|
|
|||||
Research and development expenses
|
—
|
|
|
16.6
|
|
|
1.2
|
|
|
—
|
|
|
17.8
|
|
|||||
Operating income (loss) from continuing operations
|
(9.1
|
)
|
|
1.3
|
|
|
2.0
|
|
|
—
|
|
|
(5.8
|
)
|
|||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest income (expense), net
|
(28.9
|
)
|
|
0.2
|
|
|
0.1
|
|
|
—
|
|
|
(28.6
|
)
|
|||||
Loss on extinguishment of debt
|
(17.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17.3
|
)
|
|||||
Other income (expense), net
|
—
|
|
|
0.2
|
|
|
0.7
|
|
|
—
|
|
|
0.9
|
|
|||||
Total other income (expense), net
|
(46.2
|
)
|
|
0.4
|
|
|
0.8
|
|
|
—
|
|
|
(45.0
|
)
|
|||||
Income (loss) from continuing operations before income taxes
|
(55.3
|
)
|
|
1.7
|
|
|
2.8
|
|
|
—
|
|
|
(50.8
|
)
|
|||||
Provision (benefit) for income taxes from continuing operations
|
0.4
|
|
|
(8.9
|
)
|
|
0.3
|
|
|
—
|
|
|
(8.2
|
)
|
|||||
Income (loss) from continuing operations
|
(55.7
|
)
|
|
10.6
|
|
|
2.5
|
|
|
—
|
|
|
(42.6
|
)
|
|||||
Loss from discontinued operations
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|||||
Equity in net income (loss) of subsidiaries
|
13.1
|
|
|
2.5
|
|
|
—
|
|
|
(15.6
|
)
|
|
—
|
|
|||||
Net income (loss)
|
$
|
(42.7
|
)
|
|
$
|
13.1
|
|
|
$
|
2.5
|
|
|
$
|
(15.6
|
)
|
|
$
|
(42.7
|
)
|
Comprehensive income (loss)
|
$
|
(42.4
|
)
|
|
$
|
13.1
|
|
|
$
|
2.8
|
|
|
$
|
(15.9
|
)
|
|
$
|
(42.4
|
)
|
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Year Ended December 25, 2016
(in millions)
|
|||||||||||||||||||
|
Parent Company
|
|
Subsidiary Guarantors on a Combined Basis
|
|
Non-Guarantors on a Combined Basis
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Service revenues
|
$
|
—
|
|
|
$
|
330.9
|
|
|
$
|
17.2
|
|
|
$
|
—
|
|
|
$
|
348.1
|
|
Product sales
|
—
|
|
|
273.8
|
|
|
54.6
|
|
|
(7.8
|
)
|
|
320.6
|
|
|||||
Total revenues
|
—
|
|
|
604.7
|
|
|
71.8
|
|
|
(7.8
|
)
|
|
668.7
|
|
|||||
Cost of service revenues
|
—
|
|
|
244.0
|
|
|
11.8
|
|
|
—
|
|
|
255.8
|
|
|||||
Cost of product sales
|
—
|
|
|
225.0
|
|
|
42.1
|
|
|
(7.8
|
)
|
|
259.3
|
|
|||||
Total costs
|
—
|
|
|
469.0
|
|
|
53.9
|
|
|
(7.8
|
)
|
|
515.1
|
|
|||||
Gross profit
|
—
|
|
|
135.7
|
|
|
17.9
|
|
|
—
|
|
|
153.6
|
|
|||||
Selling, general and administrative expenses
|
6.3
|
|
|
142.3
|
|
|
9.7
|
|
|
—
|
|
|
158.3
|
|
|||||
Research and development expenses
|
—
|
|
|
13.5
|
|
|
0.4
|
|
|
—
|
|
|
13.9
|
|
|||||
Operating income (loss) from continuing operations
|
(6.3
|
)
|
|
(20.1
|
)
|
|
7.8
|
|
|
—
|
|
|
(18.6
|
)
|
|||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense, net
|
(34.6
|
)
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
(34.7
|
)
|
|||||
Gain on extinguishment of debt
|
0.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|||||
Other income (expense), net
|
—
|
|
|
0.2
|
|
|
0.6
|
|
|
—
|
|
|
0.8
|
|
|||||
Total other income (expense), net
|
(34.4
|
)
|
|
0.1
|
|
|
0.6
|
|
|
—
|
|
|
(33.7
|
)
|
|||||
Income (loss) from continuing operations before income taxes
|
(40.7
|
)
|
|
(20.0
|
)
|
|
8.4
|
|
|
—
|
|
|
(52.3
|
)
|
|||||
Provision (benefit) for income taxes from continuing operations
|
(0.1
|
)
|
|
7.0
|
|
|
1.2
|
|
|
—
|
|
|
8.1
|
|
|||||
Income (loss) from continuing operations
|
(40.6
|
)
|
|
(27.0
|
)
|
|
7.2
|
|
|
—
|
|
|
(60.4
|
)
|
|||||
Loss from discontinued operations
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|||||
Equity in net income (loss) of subsidiaries
|
(19.8
|
)
|
|
7.2
|
|
|
—
|
|
|
12.6
|
|
|
—
|
|
|||||
Net income (loss)
|
$
|
(60.5
|
)
|
|
$
|
(19.8
|
)
|
|
$
|
7.2
|
|
|
$
|
12.6
|
|
|
$
|
(60.5
|
)
|
Comprehensive income (loss)
|
$
|
(60.8
|
)
|
|
$
|
(19.8
|
)
|
|
$
|
6.9
|
|
|
$
|
12.9
|
|
|
$
|
(60.8
|
)
|
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Year Ended December 27, 2015
(in millions)
|
|||||||||||||||||||
|
Parent Company
|
|
Subsidiary Guarantors on a Combined Basis
|
|
Non-Guarantors on a Combined Basis
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Service revenues
|
$
|
—
|
|
|
$
|
339.0
|
|
|
$
|
15.2
|
|
|
$
|
—
|
|
|
$
|
354.2
|
|
Product sales
|
—
|
|
|
262.3
|
|
|
56.3
|
|
|
(15.7
|
)
|
|
302.9
|
|
|||||
Total revenues
|
—
|
|
|
601.3
|
|
|
71.5
|
|
|
(15.7
|
)
|
|
657.1
|
|
|||||
Cost of service revenues
|
—
|
|
|
255.5
|
|
|
11.0
|
|
|
—
|
|
|
266.5
|
|
|||||
Cost of product sales
|
—
|
|
|
203.1
|
|
|
41.4
|
|
|
(15.7
|
)
|
|
228.8
|
|
|||||
Total costs
|
—
|
|
|
458.6
|
|
|
52.4
|
|
|
(15.7
|
)
|
|
495.3
|
|
|||||
Gross profit
|
—
|
|
|
142.7
|
|
|
19.1
|
|
|
—
|
|
|
161.8
|
|
|||||
Selling, general and administrative expenses
|
10.1
|
|
|
130.8
|
|
|
9.2
|
|
|
—
|
|
|
150.1
|
|
|||||
Research and development expenses
|
—
|
|
|
15.7
|
|
|
0.5
|
|
|
—
|
|
|
16.2
|
|
|||||
Operating income (loss) from continuing operations
|
(10.1
|
)
|
|
(3.8
|
)
|
|
9.4
|
|
|
—
|
|
|
(4.5
|
)
|
|||||
Other income (expense):
|
|
|
|
|
.
|
|
|
|
|
||||||||||
Interest expense, net
|
(35.8
|
)
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
—
|
|
|
(36.0
|
)
|
|||||
Loss on extinguishment of debt
|
(3.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.4
|
)
|
|||||
Other income (expense), net
|
—
|
|
|
(3.3
|
)
|
|
2.6
|
|
|
—
|
|
|
(0.7
|
)
|
|||||
Total other income (expense), net
|
(39.2
|
)
|
|
(3.4
|
)
|
|
2.5
|
|
|
—
|
|
|
(40.1
|
)
|
|||||
Income (loss) from continuing operations before income taxes
|
(49.3
|
)
|
|
(7.2
|
)
|
|
11.9
|
|
|
—
|
|
|
(44.6
|
)
|
|||||
Provision (benefit) for income taxes from continuing operations
|
(17.8
|
)
|
|
4.4
|
|
|
2.0
|
|
|
—
|
|
|
(11.4
|
)
|
|||||
Income (loss) from continuing operations
|
(31.5
|
)
|
|
(11.6
|
)
|
|
9.9
|
|
|
—
|
|
|
(33.2
|
)
|
|||||
Income (loss) from discontinued operations
|
71.8
|
|
|
(21.1
|
)
|
|
2.3
|
|
|
—
|
|
|
53.0
|
|
|||||
Equity in net income (loss) of subsidiaries
|
(20.5
|
)
|
|
12.2
|
|
|
—
|
|
|
8.3
|
|
|
—
|
|
|||||
Net income (loss)
|
$
|
19.8
|
|
|
$
|
(20.5
|
)
|
|
$
|
12.2
|
|
|
$
|
8.3
|
|
|
$
|
19.8
|
|
Comprehensive income (loss)
|
$
|
20.1
|
|
|
$
|
(20.5
|
)
|
|
$
|
12.3
|
|
|
$
|
8.2
|
|
|
$
|
20.1
|
|
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2017
(in million)
|
|||||||||||||||||||
|
Parent Company
|
|
Subsidiary Guarantors on a Combined Basis
|
|
Non-Guarantors on a Combined Basis
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net cash provided by (used in) operating activities from continuing operations
|
$
|
(25.9
|
)
|
|
$
|
(8.8
|
)
|
|
$
|
7.7
|
|
|
$
|
—
|
|
|
$
|
(27.0
|
)
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Investment in affiliated companies
|
(33.2
|
)
|
|
—
|
|
|
—
|
|
|
33.2
|
|
|
—
|
|
|||||
Capital expenditures
|
(0.8
|
)
|
|
(23.9
|
)
|
|
(1.8
|
)
|
|
—
|
|
|
(26.5
|
)
|
|||||
Proceeds from sale of assets
|
—
|
|
|
0.7
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
|||||
Net cash provided by (used in) investing activities from continuing operations
|
(34.0
|
)
|
|
(23.2
|
)
|
|
(1.8
|
)
|
|
33.2
|
|
|
(25.8
|
)
|
|||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from the issuance of long-term debt
|
300.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
300.0
|
|
|||||
Extinguishment of long-term debt
|
(448.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(448.8
|
)
|
|||||
Repayments under credit facility
|
—
|
|
|
—
|
|
|
(1.0
|
)
|
|
—
|
|
|
(1.0
|
)
|
|||||
Debt issuance costs
|
(6.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6.6
|
)
|
|||||
Proceeds from the issuance of common stock
|
269.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
269.1
|
|
|||||
Proceeds from exercise of restricted stock units, employee stock options, employee stock purchase plan, and other
|
0.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
|||||
Financings from affiliated companies
|
—
|
|
|
33.2
|
|
|
—
|
|
|
(33.2
|
)
|
|
—
|
|
|||||
Net cash provided by (used in) financing activities from continuing operations
|
114.4
|
|
|
33.2
|
|
|
(1.0
|
)
|
|
(33.2
|
)
|
|
113.4
|
|
|||||
Net cash flows of continuing operations
|
54.5
|
|
|
1.2
|
|
|
4.9
|
|
|
—
|
|
|
60.6
|
|
|||||
Net investing cash flows from discontinued operations
|
(0.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
0.5
|
|
|||||
Net increase in cash and cash equivalents
|
$
|
53.9
|
|
|
$
|
1.2
|
|
|
$
|
5.4
|
|
|
$
|
—
|
|
|
$
|
60.5
|
|
Condensed Consolidating Statement of Cash Flows
Year Ended December 25, 2016
(in millions)
|
|||||||||||||||||||
|
Parent Company
|
|
Subsidiary Guarantors on a Combined Basis
|
|
Non-Guarantors on a Combined Basis
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net cash provided by (used in) operating activities from continuing operations
|
$
|
(26.3
|
)
|
|
$
|
16.6
|
|
|
$
|
(2.7
|
)
|
|
$
|
—
|
|
|
$
|
(12.4
|
)
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash paid for acquisitions, net of cash acquired
|
—
|
|
|
(5.1
|
)
|
|
—
|
|
|
—
|
|
|
(5.1
|
)
|
|||||
Change in restricted cash
|
—
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|||||
Investment in affiliated companies
|
—
|
|
|
(3.0
|
)
|
|
—
|
|
|
3.0
|
|
|
—
|
|
|||||
Capital expenditures
|
(0.5
|
)
|
|
(7.1
|
)
|
|
(1.6
|
)
|
|
—
|
|
|
(9.2
|
)
|
|||||
Proceeds from the sale of assets
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|||||
Net cash provided by (used in) investing activities from continuing operations
|
(0.5
|
)
|
|
(14.8
|
)
|
|
(1.6
|
)
|
|
3.0
|
|
|
(13.9
|
)
|
|||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Extinguishment of long-term debt
|
(14.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.1
|
)
|
|||||
Repayments under credit facility
|
—
|
|
|
—
|
|
|
(1.0
|
)
|
|
—
|
|
|
(1.0
|
)
|
|||||
Proceeds from the issuance of common stock
|
76.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
76.2
|
|
|||||
Proceeds from exercise of restricted stock units, employee stock options, and employee stock purchase plan
|
2.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.0
|
|
|||||
Financings from affiliated companies
|
3.0
|
|
|
—
|
|
|
—
|
|
|
(3.0
|
)
|
|
—
|
|
|||||
Net cash provided by (used in) financing activities from continuing operations
|
67.1
|
|
|
—
|
|
|
(1.0
|
)
|
|
(3.0
|
)
|
|
63.1
|
|
|||||
Net cash flows of continuing operations
|
40.3
|
|
|
1.8
|
|
|
(5.3
|
)
|
|
—
|
|
|
36.8
|
|
|||||
Net operating cash flows from discontinued operations
|
0.4
|
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|||||
Net investing cash flows from discontinued operations
|
4.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.0
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
$
|
44.7
|
|
|
$
|
1.5
|
|
|
$
|
(5.6
|
)
|
|
$
|
—
|
|
|
$
|
40.6
|
|
Condensed Consolidating Statement of Cash Flows
Year Ended December 27, 2015
(in millions)
|
|||||||||||||||||||
|
Parent Company
|
|
Subsidiary Guarantors on a Combined Basis
|
|
Non-Guarantors on a Combined Basis
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net cash provided by (used in) operating activities from continuing operations
|
$
|
(2.0
|
)
|
|
$
|
(30.8
|
)
|
|
$
|
3.1
|
|
|
$
|
—
|
|
|
$
|
(29.7
|
)
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Change in restricted cash
|
—
|
|
|
4.7
|
|
|
—
|
|
|
—
|
|
|
4.7
|
|
|||||
Investment in affiliated companies
|
(33.8
|
)
|
|
—
|
|
|
—
|
|
|
33.8
|
|
|
—
|
|
|||||
Capital expenditures
|
(1.0
|
)
|
|
(9.5
|
)
|
|
(0.8
|
)
|
|
—
|
|
|
(11.3
|
)
|
|||||
Proceeds from the sale of assets
|
—
|
|
|
0.9
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
|||||
Net cash provided by (used in) investing activities from continuing operations
|
(34.8
|
)
|
|
(3.9
|
)
|
|
(0.8
|
)
|
|
33.8
|
|
|
(5.7
|
)
|
|||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Extinguishment of long-term debt
|
(175.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(175.0
|
)
|
|||||
Repayments under credit facility
|
(41.0
|
)
|
|
—
|
|
|
(1.0
|
)
|
|
—
|
|
|
(42.0
|
)
|
|||||
Proceeds from exercise of restricted stock units, employee stock options, and employee stock purchase plan
|
3.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.4
|
|
|||||
Financing from affiliated companies
|
—
|
|
|
33.8
|
|
|
—
|
|
|
(33.8
|
)
|
|
—
|
|
|||||
Other, net
|
—
|
|
|
(1.1
|
)
|
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
|||||
Net cash provided by (used in) financing activities from continuing operations
|
(212.6
|
)
|
|
32.7
|
|
|
(1.0
|
)
|
|
(33.8
|
)
|
|
(214.7
|
)
|
|||||
Net cash flows of continuing operations
|
(249.4
|
)
|
|
(2.0
|
)
|
|
1.3
|
|
|
—
|
|
|
(250.1
|
)
|
|||||
Net operating cash flows from discontinued operations
|
—
|
|
|
3.1
|
|
|
(0.3
|
)
|
|
—
|
|
|
2.8
|
|
|||||
Net investing cash flows from discontinued operations
|
243.2
|
|
|
(0.4
|
)
|
|
(0.3
|
)
|
|
—
|
|
|
242.5
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|
(0.2
|
)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
$
|
(6.2
|
)
|
|
$
|
0.7
|
|
|
$
|
0.5
|
|
|
$
|
—
|
|
|
$
|
(5.0
|
)
|
/s/ Deanna H. Lund
|
|
Name:
|
Deanna H. Lund
|
Title:
|
Executive Vice President & Chief
|
|
Financial Officer
|
/s/ Jane Schweiger
|
|
Name:
|
Jane Schweiger
|
Title:
|
Vice President
|
By:
|
/s/ Deanna H. Lund
|
|
|
Name:
|
Deanna H. Lund
|
|
Title:
|
Executive Vice President & Chief
|
|
|
Financial Officer
|
[Kratos] Fifth Amendment
#46502663 |
|
|
[Kratos] Fifth Amendment
#46502663
|
2
|
|
3.
|
Covenants of the Credit Parties
.
|
[Kratos] Fifth Amendment
#46502663
|
3
|
|
6.
|
Miscellaneous
.
|
[Kratos] Fifth Amendment
#46502663
|
4
|
|
[Kratos] Fifth Amendment
#46502663
|
5
|
|
SUNTRUST BANK,
|
|
as Administrative Agent and a Lender
|
|
|
|
|
|
By:
|
/s/ Brian O'Fallon
|
Name:
|
Brian O'Fallon
|
Title:
|
Director
|
PNC BANK, NATIONAL ASSOCIATION,
|
|
a Lender
|
|
|
|
|
|
By:
|
/s/ Daniela Jurado
|
Name:
|
Daniela Jurado
|
Title:
|
Officer
|
CATHAY BANK,
|
|
A Lender
|
|
|
|
|
|
By:
|
/s/ Humberto Campos
|
Name:
|
HUMBERTO CAMPOS
|
Title:
|
VICE PRESIDENT
|
Agreed to and Accepted:
|
BORROWER:
|
|
|
|
KRATOS DEFENSE & SECURITY SOLUTIONS, INC.
|
|
|
|
By:
/s/ Maria Cervantes de Burgreen
|
|
Name: Maria Cervantes de Burgreen
|
|
Title: Vice President & Corporate Controller
|
|
|
|
OTHER CREDIT PARTIES:
|
|
|
|
AVTEC SYSTEMS, INC.
|
|
BSC PARTNERS, LLC CARLSBAD ISI, INC.
|
|
COMPOSITE ENGINEERING, INC.
|
|
DEFENSE SYSTEMS, INCORPORATED
|
|
HAVERSTICK CONSULTING, INC.
|
|
HGS HOLDINGS, INC.
|
|
DTI ASSOCIATES, INC.
|
|
HAVERSTICK GOVERNMENT SOLUTIONS, INC.
|
|
ROCKET SUPPORT SERVICES, LLC JMA ASSOCIATES, INC.
|
|
MADISON RESEARCH CORPORATlON
|
|
GICHNER SYSTEMS GROUP, INC.
|
|
GICHNER SYSTEMS INTERNATIONAL, INC.
|
|
CHARLESTON MARINE CONTAINERS INC.
|
|
DALLASTOWN REA LTY I, LLC
|
|
DALLASTOWN REA LTY II, LLC
|
|
DEI SERVICES CORPORATlON
|
|
SCT ACQUISITION, LLC
|
|
SCT REAL ESTATE, LLC
|
|
KPSS GOVERNMENT SOLUTIONS, INC.
|
|
KRATOS INTEGRAL HOLDINGS, LLC
|
|
KRATOS INTEGRAL SYSTEMS
|
|
INTERNATIONAL, INC.
|
|
KRATOS NETWORKS, INC.
|
|
KRATOS SYSTEMS AND SOLUTIONS, INC.
|
|
KRATOS DEFENSE & ROCKET SUPPORT SERVICES, INC.
|
|
KRATOS PUBLIC SAFETY & SECURITY SOLUTIONS, INC.
|
|
KRATOS SOUTHEAST, INC.
|
|
KRATOS TEXAS, INC.
|
|
WFI NMC CORP.
|
|
KRATOS TECHNOLOGY & TRAINING SOLUTIONS, INC.
|
|
KRATOS UNMANNED SYSTEMS SOLUTIONS, INC.
|
|
DFI REALTY, LLC
|
|
|
|
By:
/s/ Maria Cervantes de Burgreen
|
|
Maria Cervantes de Burgreen
|
|
Corporate Controller
|
|
|
|
|
|
REALITY BASED IT SERVICES, LTD.
|
|
SHADOW I, INC.
|
|
SHADOW II, INC.
|
|
DIG ITAL FUSION, INC.
|
|
DIGITAL FUSION SOLUTIONS, INC.
|
|
SUMMIT RESEARCH CORPORATION
|
|
HENRY BROS. ELECTRONICS, INC.,
|
|
a Delaware corporation
|
|
HENRY BROS. ELECTRONICS, INC.,
|
|
a Colorado corporation
|
|
HENRY BROS. ELECTRONICS, INC.,
|
|
a New Jersey corporation
|
|
HENRY BROS. ELECTRONICS, INC.,
|
|
a California corporation
|
|
DIVERSIFIED SECURITY SOLUTIONS, INC.
|
|
HENRY BROS. ELECTRONICS, L.L.C.
|
|
NATIONAL SAFE OF CALIFORNIA
|
|
LVDM, INC.
|
|
AIRORLITE COMMUNICATIONS, INC.
|
|
GENERAL MICROWAVE CORPORATION
|
|
GENERAL MICROWAVE ISRAEL CORPORATION
|
|
MSI ACQUISITION CORP.
|
|
MICRO SYSTEMS, INC.
|
|
KRATOS-RSS, INC.
|
|
REAL TIME LOGIC, INC.
|
|
SAT CORPORATION
|
|
SECUREINFO CORPORATION
|
|
Al METRIX, INC.
|
|
POLEXIS, INC.
|
|
|
|
By:
/s/ Maria Cervantes de Burgreen
|
|
Maria Cervantes de Burgreen
|
|
Corporate Controller
|
|
|
|
|
|
KRATOS SOUTHWEST L.P.,
|
|
by Kratos Texas, Inc., its General Partner
|
|
|
|
By:
/s/ Maria Cervantes de Burgreen
|
|
Maria Cervantes de Burgreen
|
|
Corporate Controller
|
Purchase Order No.
|
Program Name
|
Payment Type
|
Business Unit
|
4200762386
|
Zumwalt EME
|
Progress
|
IDS
|
4200889192
|
Patriot – Saudi (SNAP)
|
Progress
|
IDS
|
4200854810
|
Patriot – Qatar
|
Progress
|
IDS
|
4200616362-001
|
TPY-2/EEU Float 2 (FY 2014 Float)
|
Performance-based
|
IDS
|
4201259789
|
Patriot
|
Progress
|
IDS
|
4201293084
|
Jaguar
|
Milestone
|
SAS
|
4201319806
|
SIC FT
|
Progress
|
IDS
|
[Kratos] Fifth Amendment
#46502663 |
|
|
[Kratos] Fifth Amendment
#46502663 |
|
|
A.
|
Debtor and Secured Party entered into that certain Security Agreement, dated June 25, 2014, as amended by the First Amendment (the “First Amendment”) on November 10, 2014 (as so amended, and as the same may be further amended from time to time, the “
Security Agreement
”).
|
B.
|
Debtor and Secured Party now desire to amend the Security Agreement to (a) expand the definition of Progress Payments (b) clarify the name and change address of the Secured Party to as follows: Raytheon Company, 870 Winter Street, Waltham, MA 02451, operating through two of its business units, Integrated Defense Systems (IDS), 350 Lowell Street, Andover, MA 01810, and Space and Airborne Systems (SAS), 410I East Plano Parkway, Plano, TX 75074 and (c) replace Attachment A with Attachment A attached hereto, all on the terms and conditions set forth herein.
|
I.
|
Amendments
.
|
a.
|
The first sentence of Section 2 of the Security Agreement is hereby amended in its entirety to read as follows: “This Agreement evidences certain agreements relating to progress, milestone, advance or performance based payments (collectively, ‘Progress Payments’) made or to be made by the Secured Party to the Debtor in order to assist the Debtor to perform the purchase orders referenced in Attachment A in accordance with the terms and conditions contained therein or appended thereto (collectively, the ‘Purchase Orders’).”
|
SECOND AMENDMENT
|
Page 1 of 4
|
|
b.
|
Section 3 of the Security Agreement is hereby amended by replacing the name and address of the Secured Party as follows: Raytheon Company, 870 Winter Street, Waltham, MA 02451, operating through its Integrated Defense Systems (IDS), 350 Lowell Street, Andover, MA 01810, and Space and Airborne Systems (SAS), 4101 East Plano Parkway, Plano, TX 75074, business units.
|
c.
|
Attachment A of the Security Agreement is hereby amended and restated in its entirety with the Attachment A attached hereto which describes the Collateral and which is incorporated into this Agreement and attached hereto.
|
2.
|
Reaffirmation
. Debtor ratifies and reaffirms its prior grant to Secured Party of a first lien security interest in the Col lateral described in the Security Agreement.
|
3.
|
No Other Modifications
. Except as otherwise provided herein, all terms and provisions of the Security Agreement shall remain in full force and effect, unmodified by this Second Amendment.
|
4.
|
Authority
. Each of the parties hereto represents and warrants to the other that it has the authority to sign this Second Amendment.
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SECOND AMENDMENT
|
Page 2 of 4
|
|
Raytheon Company
|
Gichner Systems Group, Inc.
|
|
|
|
|
/s/ Janet Groebe
|
/s/ Marie Mendoza
|
Name:
Janet Groebe
|
Name:
Marie Mendoza
|
Title:
SR. Director, Procurement and Subcontracts
|
Title:
Secretary
|
Date:
July 21, 2016
|
Date:
July 20, 2016
|
SECOND AMENDMENT
|
Page 3 of 4
|
|
Purchase Order No.
|
Program Name
|
Payment Type
|
Business Unit
|
4200762386
|
Zumwalt EME
|
Progress
|
IDS
|
4200889192
|
Patriot - Saudi (SNAP)
|
Progress
|
IDS
|
4200854810
|
Patriot - Qatar
|
Progress
|
IDS
|
4200616362-001
|
TPY-2/EEU Float 2 (FY 2014 Float)
|
Performance-based
|
IDS
|
4201259789
|
Patriot
|
Progress
|
IDS
|
4201293084
|
Jaguar
|
Milestone
|
SAS
|
4201319806
|
SIC FT
|
Progress
|
IDS
|
SECOND AMENDMENT
|
Page 4 of 4
|
|
[Kratos] Fifth Amendment
#46502663 |
|
|
1.
|
STIPULATIONS OF THE PARTIES
|
A.
|
Gichner Systems Group Inc., (d/b/a Gichner Shelter Systems) (hereinafter “Debtor”) is a debtor of the Secured Party. The Secured Party has one or more security agreements with Debtor and one or more UCC-1 Financing Statements on file with the Secretary of State in Dover, Delaware. Those security agreements prohibit or may prohibit Debtor from financing the acquisition of goods.
|
B.
|
Debtor now desires that Raytheon make progress, milestone, advance, and/or performance based payments to Debtor (collectively, “Progress Payments”), pursuant to the purchase orders between Debtor and Raytheon listed in Attachment A (as such attachment may be amended and/or replaced from time to time by written agreement between Raytheon and Secured Party, the “Purchase Orders”) and the terms and conditions contained therein or appended thereto. The Progress Payments will enable Debtor to acquire specific parts and materials and perform labor on such parts and materials, as required to perform the Purchase Orders.
|
C.
|
Raytheon requires that Debtor grant it a first priority security interest in the property acquired with the Progress Payments, as described in Attachment A hereto (as such attachment may be amended and/or replaced from time to time by written agreement between Raytheon and Secured Party, the “Raytheon Collateral”), and Secured Party consents to the same.
|
D.
|
The parties hereto previously entered into that certain Subordination Agreement, dated June 24, 2014 {as amended prior to the date hereof, the “Existing Subordination Agreement”), and the parties desire to amend and restate the Existing Subordination Agreement as hereinafter set forth.
|
2.
|
AGREEMENT OF THE PARTIES
|
A.
|
Debtor may grant Raytheon a first lien security interest in the Raytheon Collateral to secure Debtor’s obligations under the Purchase Orders to purchase parts and materials and perform labor on such parts and materials as required by the Purchase Orders, up to the aggregate amount of the Progress Payments actually received by Debtor from Raytheon that have not been liquidated pursuant to the applicable Purchase Order.
|
B.
|
Secured Party’s interest in the Raytheon Collateral as authorized herein is subordinate to the security interest therein of Raytheon to the extent of the Progress Payments that have not been liquidated pursuant to the applicable Purchase Order unless and until Debtor has fully performed the Purchase Orders.
|
C.
|
Raytheon will not enforce any rights against the Raytheon Collateral as long as Debtor has fully performed its obligations under the Purchase Orders. Raytheon agrees to deliver to Secured Party written notice of any default of Debtor under the Purchase Orders. Until Debtor has fully performed the Purchase Orders, but nonetheless only to the extent the Progress Payments have not been liquidated pursuant to the relevant Purchase Order, Secured Party shall segregate and, upon Raytheon’ s written demand, tum over to Raytheon for application to Debtor’s obligations under the Purchase Orders, any proceeds of the Raytheon Collateral that Secured Party may receive from time to time.
|
D.
|
In the event any proceeding is instituted affecting Debtor under .any bankruptcy or insolvency laws, Secured Party agrees the terms of this Agreement shall remain in effect.
|
E.
|
Secured Party agrees Raytheon may file a financing statement (or financing statement amendment) describing the Raytheon Collateral, and Raytheon shall have the rights of a secured creditor with respect to the Raytheon Collateral under the Uniform Commercial Code.
|
F.
|
as follows: SunTrust Bank, 3333 Peachtree Road, 9
th
Floor, Atlanta, GA 30326, Attention: Asset Manager - Kratos, Telecopy: 404-926-5646The persons signing below Telecopy: 404-926-5646.
|
G.
|
The persons signing below have authority to bind the parties. Executed in duplicate originals by their duly authorized representatives and effective upon execution by both parties.
|
H.
|
Raytheon acknowledges and agrees that the following purchase orders between Raytheon (or one of its Affiliates) have been satisfied in full and all liens and security interests held by Raytheon and such purchase orders are hereby terminated, released and forever discharged:
|
Purchase Order No.
|
Program Name
|
Payment Type
|
Business Unit
|
4400449313
|
Patriot - Taiwan
|
Performance-based
|
IDS
|
LARYFA4210
|
Patriot - Taiwan
|
Performance-based
|
IDS
|
4200570030
|
Patriot - Kuwait
|
Performance-based
|
IDS
|
4200616362
|
TPY-2/EEU Option
|
Performance-based
|
IDS
|
4200616401
|
TPY-2/EEU Radar 11
|
Performance-based
|
IDS
|
Raytheon Company (as successor
|
SunTrust Bank, as Agent
|
in interest to Raytheon Defense Systems
|
|
Company)
|
|
|
|
By:
/s/ Janet Groebe
|
By:
/s/ Brian O’Fallon
|
|
|
Title:
SR. Director, Procurement and Subcontracts
|
Title:
Director
|
|
|
Date:
July 21, 2016
|
Date:
July 19, 2016
|
|
|
|
|
Reviewed and Approved by:
|
|
|
|
Gichner Systems Group Inc.
|
|
|
|
|
|
By:
/s/ Marie Mendoza
|
|
|
|
Title:
Secretary
|
|
|
|
Date:
July 20, 2016
|
|
Purchase Order No.
|
Program Name
|
Payment Type
|
Business Unit
|
4200762386
|
Zumwalt EME
|
Progress
|
IDS
|
4200889192
|
Patriot - Saudi (SNAP)
|
Progress
|
IDS
|
4200854810
|
Patriot - Qatar
|
Progress
|
IDS
|
4200616362-001
|
TPY-2/EEU Float 2 (FY 2014 Float)
|
Performance-based
|
IDS
|
4201259789
|
Patriot
|
Progress
|
IDS
|
4201293084
|
Jaguar
|
Milestone
|
SAS
|
4201319806
|
SIC FT
|
Progress
|
IDS
|
Ai Metrix, Inc.
|
Delaware
|
Airorlite Communications, Inc.
|
New Jersey
|
Avtec Systems, Inc.
|
Virginia
|
BSC Partners, LLC
|
New York
|
Charleston Marine Containers, Inc.
|
Delaware
|
Kratos Unmanned Aerial Systems, Inc.
|
California
|
Kratos Systems and Solutions, Inc.
|
Virginia
|
Dallastown Realty I, LLC
|
Delaware
|
Dallastown Realty II, LLC
|
Delaware
|
Defense Systems, Incorporated
|
Virginia
|
DEI Services Corporation
|
Florida
|
DFI Realty, LLC
|
Florida
|
Digital Fusion Solutions, Inc.
|
Florida
|
Digital Fusion, Inc.
|
Delaware
|
Diversified Security Solutions, Inc.
|
New York
|
DTI Associates, Inc.
|
Virginia
|
General Microwave Israel (1987) Ltd.
|
Israel
|
General Microwave Israel Corporation
|
Delaware
|
General Microwave Corporation
|
New York
|
Gichner Europe Limited
|
United Kingdom
|
Gichner Systems Group, Inc.
|
Delaware
|
Gichner Systems International, Inc.
|
Delaware
|
Haverstick Consulting, Inc.
|
Indiana
|
Haverstick Government Solutions, Inc.
|
Ohio
|
Henry Bros. Electronics, Inc.
|
Delaware
|
Henry Bros. Electronics, Inc.
|
New Jersey
|
Henry Bros. Electronics, LLC
|
Arizona
|
GMI Eyal Ltd.
|
Israel
|
HGS Holdings, Inc.
|
Indiana
|
Kratos Holdings UK Ltd.
|
United Kingdom
|
Kratos Communications Ltd.
|
United Kingdom
|
Kratos Integral Systems Europe S.A.S.
|
France
|
JMA Associates, Inc.
|
Delaware
|
KPSS Government Solutions, Inc.
|
Delaware
|
Kratos Defense (Australia) Pty Limited
|
Australia
|
Kratos Defense & Rocket Support Services, Inc.
|
Delaware
|
Kratos Integral Holdings, LLC
|
Maryland
|
Kratos Integral Systems International, Inc.
|
California
|
Kratos Communications, Inc.
|
Delaware
|
Kratos Norway AS
|
Norway
|
Kratos Public Safety & Security Solutions, Inc.
|
Delaware
|
Kratos Saudi Arabia, Ltd.
|
Saudi Arabia
|
Kratos Southeast, Inc.
|
Georgia
|
Kratos Southwest L.P.
|
Texas
|
Kratos Technology & Training Solutions, Inc.
|
California
|
Kratos Texas, Inc.
|
Texas
|
Kratos Unmanned Systems Solutions, Inc.
|
Delaware
|
Kratos Space & Missile Defense Systems, Inc.
|
Delaware
|
Carlsbad ISI, Inc.
|
Maryland
|
LVDM, Inc.
|
Nevada
|
Madison Research Corporation
|
Alabama
|
Micro Systems, Inc.
|
Florida
|
MSI Acquisition Corp.
|
Delaware
|
National Safe of California, Inc.
|
California
|
Polexis, Inc.
|
California
|
Reality Based IT Services Ltd.
|
Maryland
|
RealTime Logic, Inc.
|
Colorado
|
Rocket Support Services, LLC
|
Indiana
|
SAT Corporation
|
California
|
Satguard AS
|
Norway
|
SCT Acquisition, LLC
|
Delaware
|
SCT Real Estate, LLC
|
Delaware
|
SecureInfo Corporation
|
Delaware
|
Shadow I, Inc.
|
California
|
Shadow II, Inc.
|
California
|
Summit Research Corporation
|
Alabama
|
WFI NMC Corp.
|
Delaware
|
1.
|
I have reviewed this Annual report on Form 10-K of Kratos Defense & Security Solutions, Inc.;
|
2.
|
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;
|
3.
|
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;
|
4.
|
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:
|
(a)
|
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;
|
(b)
|
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;
|
(c)
|
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
|
(d)
|
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
|
5.
|
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):
|
(a)
|
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
|
(b)
|
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.
|
KRATOS DEFENSE & SECURITY SOLUTIONS, INC.
|
|
|
|
/s/ ERIC M. DEMARCO
|
|
Eric M. DeMarco
|
|
Chief Executive Officer, President
|
|
(Principal Executive Officer)
|
|
1.
|
I have reviewed this Annual report on Form 10-K of Kratos Defense & Security Solutions, Inc.;
|
2.
|
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;
|
3.
|
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;
|
4.
|
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:
|
(a)
|
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;
|
(b)
|
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;
|
(c)
|
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
|
(d)
|
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
|
5.
|
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):
|
(a)
|
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
|
(b)
|
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.
|
KRATOS DEFENSE & SECURITY SOLUTIONS, INC.
|
|
|
|
/s/ DEANNA H. LUND
|
|
Deanna H. Lund
|
|
Executive Vice President, Chief Financial Officer
|
|
(Principal Financial Officer)
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ ERIC M. DEMARCO
|
|
Eric M. DeMarco
|
|
Chief Executive Officer, President
|
|
(Principal Executive Officer)
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ DEANNA H. LUND
|
|
Deanna H. Lund
|
|
Executive Vice President, Chief Financial Officer
|
|
(Principal Financial Officer)
|
|