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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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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, $0.001 par value
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KTOS
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The NASDAQ Global Select Market
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Large accelerated filer
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ý
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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Page
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March 29, 2020
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||||
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(Unaudited)
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December 29, 2019
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||||
Assets
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|
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|
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Current assets:
|
|
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|
||
Cash and cash equivalents
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$
|
158.6
|
|
|
$
|
172.6
|
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Accounts receivable, net
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78.3
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85.0
|
|
||
Unbilled receivables, net
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181.0
|
|
|
179.4
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|
||
Inventoried costs
|
62.7
|
|
|
61.1
|
|
||
Prepaid expenses
|
14.0
|
|
|
9.4
|
|
||
Other current assets
|
14.5
|
|
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11.4
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|
||
Current assets of discontinued operations
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1.2
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3.3
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Total current assets
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510.3
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|
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522.2
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|
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Property, plant and equipment, net
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119.6
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116.9
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Operating lease right-of-use assets
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39.8
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42.1
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|
||
Goodwill
|
463.3
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|
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455.6
|
|
||
Intangible assets, net
|
41.0
|
|
|
39.5
|
|
||
Other assets
|
9.3
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|
|
9.7
|
|
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Total assets
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$
|
1,183.3
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|
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$
|
1,186.0
|
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Liabilities and Stockholders’ Equity
|
|
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Current liabilities:
|
|
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|
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|
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Accounts payable
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$
|
44.3
|
|
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$
|
53.8
|
|
Accrued expenses
|
28.4
|
|
|
32.7
|
|
||
Accrued compensation
|
40.9
|
|
|
37.1
|
|
||
Accrued interest
|
6.4
|
|
|
1.6
|
|
||
Billings in excess of costs and earnings on uncompleted contracts
|
38.3
|
|
|
34.3
|
|
||
Current portion of operating lease liabilities
|
8.7
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9.9
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|
||
Other current liabilities
|
10.1
|
|
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10.0
|
|
||
Current liabilities of discontinued operations
|
3.0
|
|
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3.3
|
|
||
Total current liabilities
|
180.1
|
|
|
182.7
|
|
||
Long-term debt
|
295.3
|
|
|
295.1
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|
||
Operating lease liabilities, net of current portion
|
36.0
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37.6
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|
||
Other long-term liabilities
|
73.9
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78.7
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|
||
Long-term liabilities of discontinued operations
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2.8
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2.8
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|
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Total liabilities
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588.1
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|
596.9
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|
||
Commitments and contingencies (Note 14)
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|
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|
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Redeemable noncontrolling interest
|
15.0
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|
15.0
|
|
||
Stockholders’ equity:
|
|
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|
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Preferred stock, $0.001 par value, 5,000,000 shares authorized, 0 shares outstanding at March 29, 2020 and December 29, 2019
|
—
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—
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|
||
Common stock, $0.001 par value, 195,000,000 shares authorized; 106,960,828 and 106,635,508 shares issued and outstanding at March 29, 2020 and December 29, 2019, respectively
|
—
|
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—
|
|
||
Additional paid-in capital
|
1,292.6
|
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1,286.5
|
|
||
Accumulated other comprehensive loss
|
(0.2
|
)
|
|
(0.4
|
)
|
||
Accumulated deficit
|
(712.2
|
)
|
|
(712.0
|
)
|
||
Total stockholders’ equity
|
580.2
|
|
|
574.1
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,183.3
|
|
|
$
|
1,186.0
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|
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Three Months Ended
|
||||||
|
March 29, 2020
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|
March 31, 2019
|
||||
Service revenues
|
$
|
63.6
|
|
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$
|
62.6
|
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Product sales
|
105.3
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|
|
97.8
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|
||
Total revenues
|
168.9
|
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|
160.4
|
|
||
Cost of service revenues
|
45.2
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42.0
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|
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Cost of product sales
|
77.9
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73.5
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Total costs
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123.1
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115.5
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Gross profit
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45.8
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44.9
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|
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Selling, general and administrative expenses
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34.9
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31.5
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|
||
Merger and acquisition expenses
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0.4
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|
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1.2
|
|
||
Research and development expenses
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5.7
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|
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3.9
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|
||
Restructuring expenses and other
|
0.1
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|
|
0.1
|
|
||
Operating income from continuing operations
|
4.7
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|
|
8.2
|
|
||
Other expense:
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|
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|
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Interest expense, net
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(5.4
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)
|
|
(5.5
|
)
|
||
Other expense, net
|
(0.5
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)
|
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(0.5
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)
|
||
Total other expense, net
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(5.9
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)
|
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(6.0
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)
|
||
Income (loss) from continuing operations before income taxes
|
(1.2
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)
|
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2.2
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|
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Benefit for income taxes from continuing operations
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(1.4
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)
|
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(1.5
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)
|
||
Income from continuing operations
|
0.2
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|
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3.7
|
|
||
Discontinued operations:
|
|
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|
||||
Loss from operations of discontinued component
|
(0.4
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)
|
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(0.5
|
)
|
||
Income tax expense
|
—
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|
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(0.1
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)
|
||
Loss from discontinued operations
|
(0.4
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)
|
|
(0.6
|
)
|
||
Net income (loss)
|
(0.2
|
)
|
|
3.1
|
|
||
Less: Net income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
||
Net income (loss) attributable to Kratos
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$
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(0.2
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)
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$
|
3.1
|
|
Basic income (loss) per common share attributable to Kratos:
|
|
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|
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Income from continuing operations
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$
|
—
|
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$
|
0.04
|
|
Loss from discontinued operations
|
—
|
|
|
(0.01
|
)
|
||
Net income per common share
|
$
|
—
|
|
|
$
|
0.03
|
|
Diluted income (loss) per common share attributable to Kratos:
|
|
|
|
||||
Income from continuing operations
|
$
|
—
|
|
|
$
|
0.03
|
|
Loss from discontinued operations
|
—
|
|
|
—
|
|
||
Net income per common share
|
$
|
—
|
|
|
$
|
0.03
|
|
|
|
|
|
||||
Weighted average common shares outstanding:
|
|
|
|
||||
Basic
|
107.2
|
|
|
104.9
|
|
||
Diluted
|
110.1
|
|
|
107.8
|
|
||
Comprehensive Income
|
|
|
|
||||
Net income (loss) (from above)
|
$
|
(0.2
|
)
|
|
$
|
3.1
|
|
Change in cumulative translation adjustment
|
0.2
|
|
|
—
|
|
||
Comprehensive income
|
—
|
|
|
3.1
|
|
||
Less: Comprehensive income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
||
Comprehensive income attributable to Kratos
|
$
|
—
|
|
|
$
|
3.1
|
|
|
|
Redeemable Noncontrolling Interest
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Accumulated Other Comprehensive Loss
|
|
Accumulated Deficit
|
|
Total Stockholders’ Equity
|
|||||||||||||||
|
|
|
Shares
|
|
Amounts
|
|
|
|
|
||||||||||||||||||
Balance, December 30, 2018
|
|
$
|
—
|
|
|
103.8
|
|
|
$
|
—
|
|
|
$
|
1,244.5
|
|
|
$
|
(0.7
|
)
|
|
$
|
(724.5
|
)
|
|
$
|
519.3
|
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
||||||
Issuance of common stock for employee stock purchase plan, options and warrants
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
1.7
|
|
|
—
|
|
|
—
|
|
|
1.7
|
|
||||||
Restricted stock issued and related taxes
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
(0.8
|
)
|
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
||||||
Issuance of common stock for acquisitions
|
|
—
|
|
|
1.8
|
|
|
—
|
|
|
27.0
|
|
|
—
|
|
|
—
|
|
|
27.0
|
|
||||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.1
|
|
|
3.1
|
|
||||||
Changes in noncontrolling interest
|
|
15.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Balance, March 31, 2019
|
|
$
|
15.0
|
|
|
105.9
|
|
|
$
|
—
|
|
|
$
|
1,275.0
|
|
|
$
|
(0.7
|
)
|
|
$
|
(721.4
|
)
|
|
$
|
552.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Noncontrolling Interest
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Accumulated Other Comprehensive Loss
|
|
Accumulated Deficit
|
|
Total Stockholders’ Equity
|
|||||||||||||||
|
|
|
Shares
|
|
Amounts
|
|
|
|
|
||||||||||||||||||
Balance, December 29, 2019
|
|
$
|
15.0
|
|
|
106.6
|
|
|
$
|
—
|
|
|
$
|
1,286.5
|
|
|
$
|
(0.4
|
)
|
|
$
|
(712.0
|
)
|
|
$
|
574.1
|
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.7
|
|
|
—
|
|
|
—
|
|
|
4.7
|
|
||||||
Issuance of common stock for employee stock purchase plan, options and warrants
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
2.6
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
||||||
Restricted stock issued and related taxes
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
(1.2
|
)
|
|
—
|
|
|
—
|
|
|
(1.2
|
)
|
||||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
(0.2
|
)
|
||||||
Other comprehensive income, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
||||||
Balance, March 29, 2020
|
|
$
|
15.0
|
|
|
107.0
|
|
|
$
|
—
|
|
|
$
|
1,292.6
|
|
|
$
|
(0.2
|
)
|
|
$
|
(712.2
|
)
|
|
$
|
580.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
||||||
|
March 29, 2020
|
|
March 31, 2019
|
||||
Operating activities:
|
|
|
|
|
|||
Net income (loss)
|
$
|
(0.2
|
)
|
|
$
|
3.1
|
|
Loss from discontinued operations
|
(0.4
|
)
|
|
(0.6
|
)
|
||
Income from continuing operations
|
0.2
|
|
|
3.7
|
|
||
Adjustments to reconcile income from continuing operations to net cash provided by operating activities from continuing operations:
|
|
|
|
|
|
||
Depreciation and amortization
|
6.3
|
|
|
5.1
|
|
||
Amortization of lease right-of-use assets
|
2.9
|
|
|
3.7
|
|
||
Stock-based compensation
|
4.7
|
|
|
2.6
|
|
||
Deferred income taxes
|
(1.0
|
)
|
|
(3.4
|
)
|
||
Amortization of deferred financing costs
|
0.2
|
|
|
0.2
|
|
||
Provision for doubtful accounts
|
0.3
|
|
|
—
|
|
||
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
||
Accounts receivable
|
6.6
|
|
|
(9.0
|
)
|
||
Unbilled receivables
|
(1.5
|
)
|
|
19.7
|
|
||
Inventoried costs
|
(1.5
|
)
|
|
(10.8
|
)
|
||
Prepaid expenses and other assets
|
(6.8
|
)
|
|
(1.1
|
)
|
||
Operating lease liabilities
|
(3.4
|
)
|
|
2.8
|
|
||
Accounts payable
|
(9.6
|
)
|
|
(0.8
|
)
|
||
Accrued expenses
|
(4.4
|
)
|
|
(2.7
|
)
|
||
Accrued compensation
|
3.7
|
|
|
3.1
|
|
||
Advance payments received on contracts
|
—
|
|
|
0.1
|
|
||
Accrued interest
|
4.9
|
|
|
4.9
|
|
||
Billings in excess of costs and earnings on uncompleted contracts
|
3.4
|
|
|
3.0
|
|
||
Income tax receivable and payable
|
(0.9
|
)
|
|
1.4
|
|
||
Other liabilities
|
(0.1
|
)
|
|
(6.5
|
)
|
||
Net cash provided by operating activities from continuing operations
|
4.0
|
|
|
16.0
|
|
||
Investing activities:
|
|
|
|
|
|
||
Cash paid for acquisitions, net of cash acquired
|
(14.2
|
)
|
|
(17.6
|
)
|
||
Capital expenditures
|
(6.4
|
)
|
|
(4.0
|
)
|
||
Net cash used in investing activities from continuing operations
|
(20.6
|
)
|
|
(21.6
|
)
|
||
Financing activities:
|
|
|
|
|
|||
Payments under finance leases
|
(0.1
|
)
|
|
(0.1
|
)
|
||
Proceeds from exercise of restricted stock units, employee stock options, and employee stock purchase plan
|
1.4
|
|
|
0.9
|
|
||
Net cash provided by financing activities from continuing operations
|
1.3
|
|
|
0.8
|
|
||
Net cash flows of continuing operations
|
(15.3
|
)
|
|
(4.8
|
)
|
||
Net operating cash flows of discontinued operations
|
1.3
|
|
|
0.3
|
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
—
|
|
|
(0.1
|
)
|
||
Net decrease in cash, cash equivalents and restricted cash
|
(14.0
|
)
|
|
(4.6
|
)
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
172.6
|
|
|
183.0
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
158.6
|
|
|
$
|
178.4
|
|
(a)
|
Basis of Presentation
|
(b)
|
Principles of Consolidation
|
(c)
|
Fiscal Year
|
(f)
|
Fair Value of Financial Instruments
|
Accounts receivable
|
|
$
|
8.1
|
|
Unbilled receivables
|
|
4.9
|
|
|
Inventoried costs
|
|
7.8
|
|
|
Other current assets
|
|
2.1
|
|
|
Property and equipment
|
|
5.7
|
|
|
Intangible assets
|
|
30.8
|
|
|
Goodwill
|
|
23.0
|
|
|
Total identifiable net assets acquired
|
|
82.4
|
|
|
Total identifiable net liabilities assumed
|
|
(7.5
|
)
|
|
Net assets before noncontrolling interest
|
|
74.9
|
|
|
Noncontrolling interest
|
|
(14.9
|
)
|
|
Net assets acquired, excluding cash
|
|
$
|
60.0
|
|
|
|
|
Cash paid
|
|
$
|
20.7
|
|
Deferred purchase consideration
|
|
15.3
|
|
|
Common stock issued
|
|
27.0
|
|
|
|
|
63.0
|
|
|
Less: Cash acquired
|
|
(3.0
|
)
|
|
Total consideration
|
|
$
|
60.0
|
|
|
|
|
Pro forma revenues
|
$
|
168.5
|
|
Pro forma net income before tax
|
$
|
1.3
|
|
Pro forma net income
|
$
|
2.2
|
|
Pro forma net income attributable to Kratos
|
$
|
2.4
|
|
|
|
||
Basic pro forma income per share attributable to Kratos
|
$
|
0.02
|
|
Diluted pro forma income per share attributable to Kratos
|
$
|
0.02
|
|
|
|
|
March 29, 2020
|
|
December 29, 2019
|
|
Net Change
|
||||||
Contract assets
|
$
|
181.0
|
|
|
$
|
179.4
|
|
|
$
|
1.6
|
|
Contract liabilities
|
$
|
38.3
|
|
|
$
|
34.3
|
|
|
$
|
4.0
|
|
Net contract assets
|
$
|
142.7
|
|
|
$
|
145.1
|
|
|
$
|
(2.4
|
)
|
|
Three Months Ended
|
||||||
|
March 29, 2020
|
|
March 31, 2019
|
||||
Kratos Government Solutions
|
|
|
|
||||
Fixed price
|
$
|
104.4
|
|
|
$
|
109.1
|
|
Cost plus fee
|
14.4
|
|
|
9.2
|
|
||
Time and materials
|
8.1
|
|
|
7.2
|
|
||
Total Kratos Government Solutions
|
126.9
|
|
|
125.5
|
|
||
Unmanned Systems
|
|
|
|
||||
Fixed price
|
27.3
|
|
|
27.2
|
|
||
Cost plus fee
|
14.1
|
|
|
7.4
|
|
||
Time and materials
|
0.6
|
|
|
0.3
|
|
||
Total Unmanned Systems
|
42.0
|
|
|
34.9
|
|
||
Total Revenues
|
$
|
168.9
|
|
|
$
|
160.4
|
|
|
Three Months Ended
|
||||||
|
March 29, 2020
|
|
March 31, 2019
|
||||
Kratos Government Solutions
|
|
|
|
||||
U.S. Government (1)
|
$
|
84.7
|
|
|
$
|
86.8
|
|
International (2)
|
28.0
|
|
|
24.9
|
|
||
U.S. Commercial and other customers
|
14.2
|
|
|
13.8
|
|
||
Total Kratos Government Solutions
|
126.9
|
|
|
125.5
|
|
||
Unmanned Systems
|
|
|
|
||||
U.S. Government (1)
|
39.4
|
|
|
30.1
|
|
||
International (2)
|
2.4
|
|
|
4.5
|
|
||
U.S. Commercial and other customers
|
0.2
|
|
|
0.3
|
|
||
Total Unmanned Systems
|
42.0
|
|
|
34.9
|
|
||
Total Revenues
|
$
|
168.9
|
|
|
$
|
160.4
|
|
|
Three Months Ended
|
||||||
|
March 29, 2020
|
|
March 31, 2019
|
||||
Revenue
|
$
|
—
|
|
|
$
|
0.1
|
|
Cost of sales
|
0.1
|
|
|
0.5
|
|
||
Selling, general and administrative expenses
|
0.3
|
|
|
0.1
|
|
||
Loss from discontinued operations before income taxes
|
(0.4
|
)
|
|
(0.5
|
)
|
||
Income tax expense
|
—
|
|
|
(0.1
|
)
|
||
Loss from discontinued operations
|
$
|
(0.4
|
)
|
|
$
|
(0.6
|
)
|
|
March 29, 2020
|
|
December 29, 2019
|
||||
Accounts receivable, net
|
$
|
1.2
|
|
|
$
|
3.3
|
|
Current assets of discontinued operations
|
$
|
1.2
|
|
|
$
|
3.3
|
|
|
|
|
|
||||
Accounts payable
|
$
|
0.2
|
|
|
$
|
0.2
|
|
Accrued expenses
|
0.1
|
|
|
0.3
|
|
||
Other current liabilities
|
2.7
|
|
|
2.8
|
|
||
Current liabilities of discontinued operations
|
$
|
3.0
|
|
|
$
|
3.3
|
|
Other long-term liabilities of discontinued operations
|
$
|
2.8
|
|
|
$
|
2.8
|
|
(a)
|
Goodwill
|
|
As of March 29, 2020
|
||||||||||
|
Kratos Government Solutions
|
|
Unmanned Systems
|
|
Total
|
||||||
Gross value
|
$
|
597.8
|
|
|
$
|
118.8
|
|
|
$
|
716.6
|
|
Less accumulated impairment
|
239.5
|
|
|
13.8
|
|
|
253.3
|
|
|||
Net
|
$
|
358.3
|
|
|
$
|
105.0
|
|
|
$
|
463.3
|
|
|
|
|
|
|
|
|
As of December 29, 2019
|
||||||||||
|
Kratos Government Solutions
|
|
Unmanned Systems
|
|
Total
|
||||||
Gross value
|
$
|
597.8
|
|
|
$
|
111.1
|
|
|
$
|
708.9
|
|
Less accumulated impairment
|
239.5
|
|
|
13.8
|
|
|
253.3
|
|
|||
Net
|
$
|
358.3
|
|
|
$
|
97.3
|
|
|
$
|
455.6
|
|
|
|
|
|
|
|
|
As of March 29, 2020
|
|
As of December 29, 2019
|
||||||||||||||||||||
|
Gross
Value |
|
Accumulated
Amortization |
|
Net
Value |
|
Gross
Value |
|
Accumulated
Amortization |
|
Net
Value |
||||||||||||
Acquired finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Customer relationships
|
$
|
73.0
|
|
|
$
|
(54.0
|
)
|
|
$
|
19.0
|
|
|
$
|
72.3
|
|
|
$
|
(53.3
|
)
|
|
$
|
19.0
|
|
Contracts and backlog
|
32.7
|
|
|
(29.0
|
)
|
|
3.7
|
|
|
32.0
|
|
|
(28.4
|
)
|
|
3.6
|
|
||||||
Developed technology and technical know-how
|
26.4
|
|
|
(24.4
|
)
|
|
2.0
|
|
|
25.0
|
|
|
(23.8
|
)
|
|
1.2
|
|
||||||
Trade names
|
1.9
|
|
|
(1.7
|
)
|
|
0.2
|
|
|
1.9
|
|
|
(1.6
|
)
|
|
0.3
|
|
||||||
In-process research and development
|
9.2
|
|
|
—
|
|
|
9.2
|
|
|
8.5
|
|
|
—
|
|
|
8.5
|
|
||||||
Total finite-lived intangible assets
|
143.2
|
|
|
(109.1
|
)
|
|
34.1
|
|
|
139.7
|
|
|
(107.1
|
)
|
|
32.6
|
|
||||||
Indefinite-lived trade names
|
6.9
|
|
|
—
|
|
|
6.9
|
|
|
6.9
|
|
|
—
|
|
|
6.9
|
|
||||||
Total intangible assets
|
$
|
150.1
|
|
|
$
|
(109.1
|
)
|
|
$
|
41.0
|
|
|
$
|
146.6
|
|
|
$
|
(107.1
|
)
|
|
$
|
39.5
|
|
|
March 29, 2020
|
|
December 29, 2019
|
||||
Raw materials
|
$
|
43.5
|
|
|
$
|
39.1
|
|
Work in process
|
17.4
|
|
|
20.3
|
|
||
Finished goods
|
1.8
|
|
|
1.7
|
|
||
Total inventoried costs
|
$
|
62.7
|
|
|
$
|
61.1
|
|
|
Three Months Ended
|
||||||
|
March 29, 2020
|
|
March 31, 2019
|
||||
Amortization of right of use assets - finance leases
|
$
|
0.5
|
|
|
$
|
0.5
|
|
Interest on lease liabilities - finance leases
|
0.6
|
|
|
0.6
|
|
||
Operating lease cost (cost resulting from lease payments)
|
3.5
|
|
|
3.0
|
|
||
Short-term lease cost
|
0.2
|
|
|
0.1
|
|
||
Variable lease cost (cost excluded from lease payments)
|
—
|
|
|
—
|
|
||
Sublease income
|
(0.8
|
)
|
|
(0.8
|
)
|
||
Total lease cost
|
$
|
4.0
|
|
|
$
|
3.4
|
|
|
|
|
|
|
March 29, 2020
|
|
December 29, 2019
|
||||
Operating Leases:
|
|
|
|
||||
Operating lease right-of-use assets
|
$
|
39.8
|
|
|
$
|
42.1
|
|
Current portion of operating lease liabilities
|
$
|
8.7
|
|
|
$
|
9.9
|
|
Operating lease liabilities, net of current portion
|
$
|
36.0
|
|
|
$
|
37.6
|
|
Finance leases:
|
|
|
|
||||
Property, plant and equipment, net
|
$
|
37.9
|
|
|
$
|
38.1
|
|
Other current liabilities
|
$
|
0.7
|
|
|
$
|
0.6
|
|
Other long-term liabilities
|
$
|
38.6
|
|
|
$
|
38.4
|
|
|
Three Months Ended
|
||||||
|
March 29, 2020
|
|
March 31, 2019
|
||||
Finance lease - cash paid for interest
|
$
|
0.6
|
|
|
$
|
0.6
|
|
Finance lease - financing cash flows
|
$
|
0.1
|
|
|
$
|
0.1
|
|
Operating lease - operating cash flows (fixed payments)
|
$
|
4.1
|
|
|
$
|
3.3
|
|
|
Three Months Ended
|
||||||
|
March 29, 2020
|
|
March 31, 2019
|
||||
Operating lease liabilities arising from obtaining right-of-use assets, including impact of ASC 842 adoption
|
$
|
0.5
|
|
|
$
|
41.2
|
|
Finance lease liabilities arising from obtaining right-of-use assets, including impact of ASC 842 adoption
|
$
|
0.4
|
|
|
$
|
39.6
|
|
|
|
|
|
||||
Weighted-average remaining lease term (in years):
|
|
|
|
||||
Operating leases
|
5.74
|
|
|
5.10
|
|
||
Finance leases
|
18.67
|
|
|
19.60
|
|
||
|
|
|
|
||||
Weighted-average discount rate:
|
|
|
|
||||
Operating leases
|
6.50
|
%
|
|
6.50
|
%
|
||
Finance leases
|
6.52
|
%
|
|
6.53
|
%
|
|
Operating Leases
|
|
Finance Leases
|
||||
2020 (1)
|
$
|
8.6
|
|
|
$
|
2.4
|
|
2021
|
10.1
|
|
|
3.2
|
|
||
2022
|
8.7
|
|
|
3.3
|
|
||
2023
|
8.3
|
|
|
3.4
|
|
||
2024
|
6.3
|
|
|
3.3
|
|
||
Thereafter
|
11.6
|
|
|
54.5
|
|
||
Total lease payments
|
53.6
|
|
|
70.1
|
|
||
Less: imputed interest
|
(8.9
|
)
|
|
(30.8
|
)
|
||
Total present value of lease liabilities
|
$
|
44.7
|
|
|
$
|
39.3
|
|
(1) Excludes the three months ended March 29, 2020.
|
|
|
|
|
For the Three Months Ended
|
||||||
|
March 29,
2020 |
|
March 31,
2019 |
||||
Income tax expense (benefit) at federal statutory rate
|
$
|
(0.3
|
)
|
|
$
|
0.5
|
|
State and foreign taxes, net of federal tax benefit and valuation allowance
|
(0.3
|
)
|
|
0.2
|
|
||
Release of valuation allowance due to acquisitions
|
(0.9
|
)
|
|
(3.4
|
)
|
||
Nondeductible expenses and other
|
(0.1
|
)
|
|
0.1
|
|
||
Impact of deferred tax liabilities for indefinite-lived assets
|
—
|
|
|
0.1
|
|
||
Increase (decrease) in reserves for uncertain tax positions
|
(0.2
|
)
|
|
1.6
|
|
||
Increase (decrease) in federal valuation allowance
|
0.4
|
|
|
(0.6
|
)
|
||
Benefit for income taxes from continuing operations
|
$
|
(1.4
|
)
|
|
$
|
(1.5
|
)
|
|
|
|
|
|
|
As of March 29, 2020
|
|
As of December 29, 2019
|
||||||||||||||||||||
$ in millions
|
|
Principal
|
|
Carrying
Amount |
|
Fair Value
|
|
Principal
|
|
Carrying
Amount |
|
Fair Value
|
||||||||||||
Total long-term debt including current portion
|
|
$
|
300.0
|
|
|
$
|
295.3
|
|
|
$
|
264.0
|
|
|
$
|
300.0
|
|
|
$
|
295.1
|
|
|
$
|
322.1
|
|
|
Three Months Ended
|
||||||
|
March 29, 2020
|
|
March 31, 2019
|
||||
Revenues:
|
|
|
|
|
|||
Kratos Government Solutions
|
|
|
|
||||
Service revenues
|
$
|
63.6
|
|
|
$
|
62.6
|
|
Product sales
|
63.3
|
|
|
62.9
|
|
||
Total Kratos Government Solutions
|
126.9
|
|
|
125.5
|
|
||
Unmanned Systems product sales
|
42.0
|
|
|
34.9
|
|
||
Total revenues
|
$
|
168.9
|
|
|
$
|
160.4
|
|
Depreciation & amortization:
|
|
|
|
||||
Kratos Government Solutions
|
$
|
4.7
|
|
|
$
|
3.9
|
|
Unmanned Systems
|
1.6
|
|
|
1.2
|
|
||
Total depreciation and amortization
|
$
|
6.3
|
|
|
$
|
5.1
|
|
Operating income from continuing operations:
|
|
|
|
|
|
||
Kratos Government Solutions
|
$
|
9.3
|
|
|
$
|
11.4
|
|
Unmanned Systems
|
0.5
|
|
|
0.6
|
|
||
Corporate activities
|
(5.1
|
)
|
|
(3.8
|
)
|
||
Total operating income from continuing operations
|
$
|
4.7
|
|
|
$
|
8.2
|
|
|
March 29, 2020
|
|
March 31, 2019
|
|
$ change
|
|
% change
|
|||||||
Kratos Government Solutions
|
|
|
|
|
|
|
|
|||||||
Service revenues
|
$
|
63.6
|
|
|
$
|
62.6
|
|
|
$
|
1.0
|
|
|
1.6
|
%
|
Product sales
|
63.3
|
|
|
62.9
|
|
|
0.4
|
|
|
0.6
|
%
|
|||
Total Kratos Government Solutions
|
126.9
|
|
|
125.5
|
|
|
1.4
|
|
|
1.1
|
%
|
|||
Unmanned Systems product sales
|
42.0
|
|
|
34.9
|
|
|
7.1
|
|
|
20.3
|
%
|
|||
Total revenues
|
$
|
168.9
|
|
|
$
|
160.4
|
|
|
$
|
8.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total service revenues
|
$
|
63.6
|
|
|
$
|
62.6
|
|
|
$
|
1.0
|
|
|
1.6
|
%
|
Total product sales
|
105.3
|
|
|
97.8
|
|
|
7.5
|
|
|
7.7
|
%
|
|||
Total revenues
|
$
|
168.9
|
|
|
$
|
160.4
|
|
|
$
|
8.5
|
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
||||||
|
March 29, 2020
|
|
March 31, 2019
|
||||
Net cash provided by operating activities from continuing operations
|
$
|
4.0
|
|
|
$
|
16.0
|
|
Net cash used in investing activities from continuing operations
|
(20.6
|
)
|
|
(21.6
|
)
|
||
Net cash provided by financing activities from continuing operations
|
1.3
|
|
|
0.8
|
|
||
Net operating cash flows of discontinued operations
|
1.3
|
|
|
0.3
|
|
||
|
|
|
|
|
|
|
|
Incorporated by
Reference
|
|
|
||||
Exhibit
Number
|
|
Exhibit Description
|
|
Form
|
|
Filing Date/
Period End
Date
|
|
Exhibit
|
|
Filed-
Furnished
Herewith
|
2.1#*
|
|
|
10-Q
|
|
05/08/2019
(001-34460)
|
|
2.3
|
|
|
|
3.1
|
|
|
10-K
|
|
02/27/2017
(001-34460)
|
|
3.1
|
|
|
|
3.2
|
|
|
10-K
|
|
02/27/2017
(001-34460)
|
|
3.2
|
|
|
|
4.1
|
|
|
10-K
|
|
02/27/2017
(001-34460)
|
|
4.1
|
|
|
|
4.2
|
|
|
8-K
|
|
11/21/2017
(001-34460)
|
|
4.1
|
|
|
|
4.3
|
|
|
10-K
|
|
02/28/2018
(001-34460)
|
|
4.5
|
|
|
|
10.1
|
|
|
|
|
|
|
|
|
*
|
|
10.2
|
|
|
|
|
|
|
|
|
*
|
|
31.1
|
|
|
|
|
|
|
|
|
*
|
|
31.2
|
|
|
|
|
|
|
|
|
*
|
|
32.1
|
|
|
|
|
|
|
|
|
*
|
|
32.2
|
|
|
|
|
|
|
|
|
*
|
|
101.INS
|
|
|
|
|
|
|
|
|
*
|
|
101.SCH
|
|
|
|
|
|
|
|
|
*
|
|
|
|
|
Incorporated by
Reference
|
|
|
||||
Exhibit
Number
|
|
Exhibit Description
|
|
Form
|
|
Filing Date/
Period End
Date
|
|
Exhibit
|
|
Filed-
Furnished
Herewith
|
101.CAL
|
|
|
|
|
|
|
|
|
*
|
|
101.DEF
|
|
|
|
|
|
|
|
|
*
|
|
101.LAB
|
|
|
|
|
|
|
|
|
*
|
|
101.PRE
|
|
|
|
|
|
|
|
|
*
|
|
104
|
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
|
|
|
|
|
|
|
|
*
|
|
|
|
KRATOS DEFENSE & SECURITY SOLUTIONS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ ERIC M. DEMARCO
|
|
|
|
Eric M. DeMarco
|
|
|
|
Chief Executive Officer, President
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ DEANNA H. LUND, CPA
|
|
|
|
Deanna H. Lund
|
|
|
|
Executive Vice President, Chief Financial Officer
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ MARIA CERVANTES DE BURGREEN, CPA
|
|
|
|
Maria Cervantes de Burgreen
|
|
|
|
Vice President and Corporate Controller
|
|
|
|
(Principal Accounting Officer)
|
Date:
|
May 7, 2020
|
|
|
4820 Eastgate Mall
|
Cedar Park, TX 78613
|
Attn:
|
President and CEO
|
1.
|
I have reviewed this quarterly report on Form 10-Q 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 quarterly report on Form 10-Q 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 and Acting Principal Accounting 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 and Acting Principal Accounting Officer)
|
|