| Kratos Defense & Security Solutions, Inc. | |||||||||||||||||
| Unaudited Non-GAAP Measures | |||||||||||||||||
| Computation of Adjusted Earnings Per Share | |||||||||||||||||
| (in millions, except per share data) | |||||||||||||||||
| Adjusted income from continuing operations and adjusted income from continuing operations per diluted common share (Adjusted EPS) are non-GAAP measures for reporting financial performance and exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP. Management believes that exclusion of these items assists in providing a more complete understanding of the Company's underlying continuing operations results and trends and allows for comparability with our peer company index and industry. The Company uses these measures along with the corresponding GAAP financial measures to manage the Company's business and to evaluate its performance compared to prior periods and the marketplace. The Company defines adjusted income from continuing operations before amortization of intangible assets, depreciation, stock-based compensation, foreign transaction gain/loss, and acquisition and restructuring related items and other. The estimated impact to income taxes includes the impact to the effective tax rate, current tax provision and deferred tax provision, and excludes the impact of discrete items, including transaction related expenses and release of valuation allowance, or benefit related to the add-backs.* | |||||||||||||||||
| Adjusted EPS reflects adjusted income on a per share basis using weighted average diluted shares outstanding. | |||||||||||||||||
| The following table reconciles the most directly comparable GAAP financial measures to the non-GAAP financial measures. | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| September 26, | September 27, | September 26, | September 27, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||
| Net income (loss) attributable to Kratos | $ | (2.4 | ) | $ | 2.4 | $ | 0.6 | $ | 1.5 | ||||||||
| Less: GAAP provision (benefit) for income taxes | 5.7 | 5.0 | (0.6 | ) | 1.8 | ||||||||||||
| Less: Net income (loss) attributable to noncontrolling interest | 0.5 | - | 0.3 | (0.1 | ) | ||||||||||||
| Less: Loss from discontinued operations, net of income taxes | 0.8 | 0.2 | 1.1 | 0.8 | |||||||||||||
| Income from continuing operations before taxes | 4.6 | 7.6 | $ | - | 1.4 | 4.0 | |||||||||||
| Add: Amortization of intangible assets | 1.1 | 1.7 | - | 3.7 | 5.4 | ||||||||||||
| Add: Amortization of capitalized contract and development costs | 0.3 | 0.2 | 0.8 | 0.7 | |||||||||||||
| Add: Depreciation | 5.0 | 4.5 | 15.7 | 13.1 | |||||||||||||
| Add: Stock-based compensation | 6.4 | 5.0 | 19.2 | 14.5 | |||||||||||||
| Add: Foreign transaction (gain) loss | 0.2 | (0.7 | ) | 0.4 | (0.4 | ) | |||||||||||
| Add: Acquisition and restructuring related items and other | 0.3 | 0.4 | 0.8 | 2.0 | |||||||||||||
| Non-GAAP Adjusted income from continuing operations before income taxes | 17.9 | 18.7 | 42.0 | 39.3 | |||||||||||||
| Income taxes on Non-GAAP measure Adjusted income from continuing operations* | 6.5 | 7.2 | 15.3 | 15.4 | |||||||||||||
| Non-GAAP Adjusted net income | $ | 11.4 | $ | 11.5 | $ | 26.7 | $ | 23.9 | |||||||||
| Diluted earnings per common share | $ | (0.02 | ) | $ | 0.02 | $ | - | $ | 0.01 | ||||||||
| Less: GAAP provision (benefit) for income taxes | 0.05 | 0.04 | - | 0.01 | |||||||||||||
| Less: Net income (loss) attributable to noncontrolling interest | - | - | - | - | |||||||||||||
| Less: Loss from discontinued operations, net of income taxes | 0.01 | - | 0.01 | 0.01 | |||||||||||||
| Add: Amortization of intangible assets | 0.01 | 0.01 | 0.03 | 0.05 | |||||||||||||
| Add: Amortization of capitalized contract and development costs | - | - | 0.01 | 0.01 | |||||||||||||
| Add: Depreciation | 0.04 | 0.04 | 0.12 | 0.11 | |||||||||||||
| Add: Stock-based compensation | 0.05 | 0.04 | 0.15 | 0.12 | |||||||||||||
| Add: Foreign transaction (gain) loss | - | (0.01 | ) | - | - | ||||||||||||
| Add: Acquisition and restructuring related items and other | - | 0.01 | 0.01 | 0.02 | |||||||||||||
| Income taxes on Non-GAAP measure Adjusted income from continuing operations* | (0.05 | ) | (0.06 | ) | (0.12 | ) | (0.13 | ) | |||||||||
| Adjusted income from continuing operations per diluted common share | $ | 0.09 | $ | 0.09 | $ | 0.21 | $ | 0.21 | |||||||||
| Weighted average diluted common shares outstanding | 124.9 | 126.4 | 127.9 | 115.9 | |||||||||||||
| *The impact to income taxes is calculated by recasting income before income taxes to include the add-backs involved in determining Adjusted income from continuing operations before income taxes and recalculating the income tax provision (benefit), including current and deferred income taxes, using the Adjusted income from continuing operations before income taxes. The recalculation also adjusts for any discrete tax expense, including transaction related expenses and the release of valuation allowance, or benefit related to the add-backs. | |||||||||||||||||
