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Goodwill and Other Intangible Assets | 12 Months Ended
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Dec. 26, 2021
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets (a) Goodwill The Company performs its annual impairment test for goodwill in accordance with Topic 350 as of the last day of its fiscal October or when evidence of potential impairment exists. The Company assesses goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. The Company determines its reporting units by first identifying its operating segments, and then assessing whether any components of these segments constitute a business for which discrete financial information is available and where segment management regularly reviews the operating results of that component. The Company aggregates components within an operating segment that have similar economic characteristics. The KGS reportable segment has five operating businesses: Defense Rocket Support Services (“DRSS”), Microwave Electronics (“ME”), Space, Training and Cybersecurity Solutions (ST&C), C5ISR/Modular Systems (“MS”), and Kratos Turbine Technologies (“KTT”). All of the KGS operating segments provide technology based defense solutions, involving products and services, primarily for mission critical U.S. national security priorities, with the primary focus relating to the nation’s Command, Control, Communications, Computing, Combat Systems, Intelligence, Surveillance and Reconnaissance requirements. The US reportable segment consists of its unmanned aerial system, unmanned ground, and unmanned seaborne system products. The Company identified its reporting units to be the DRSS, ME, ST&C, MS, KTT and US operating segments. The Company tests goodwill for impairment by first performing a qualitative assessment. If, based on its qualitative assessment management determines it is not more likely than not that the fair value of the reporting unit exceeds its carrying value, a quantitative assessment is then performed. For operations where a quantitative assessment is performed, the identification and measurement of impairment involves the estimation of the fair value of reporting units. If the fair value is determined to be less than the carrying value, a charge to operations is recorded for the amount that the carrying value exceeds fair value. As part of its quantitative assessment, the Company estimates the fair value of each of the reporting units based on a comparison and weighting of the income approach, specifically the discounted cash flow method and the market approach, which estimates the fair value of the reporting units based upon comparable market prices and recent transactions and also validates the reasonableness of the implied multiples from the income approach. In determining the fair value for the reporting units, where a quantitative assessment is performed, there are key assumptions relating to future expected cash flows, terminal growth rates, appropriate discount rates, market multiples, and the control premium a controlling shareholder could be expected to pay. The carrying amounts of goodwill as of December 26, 2021 and December 27, 2020 by reportable segment are as follows (in millions):
|  |  | As of December 26, 2021
|  |  | US |  | KGS |  | Total
Gross value |  |  | $ | 127.9 |  |  | $ | 619.3 |  |  | $ | 747.2 |
Less accumulated impairment |  |  | 13.8 |  |  | 239.5 |  |  | 253.3 |
Net |  |  | $ | 114.1 |  |  | $ | 379.8 |  |  | $ | 493.9 |
|  |  | As of December 27, 2020
|  |  | US |  | KGS |  | Total
Gross value |  |  | $ | 127.6 |  |  | $ | 609.6 |  |  | $ | 737.2 |
Less accumulated impairment |  |  | 13.8 |  |  | 239.5 |  |  | 253.3 |
Net |  |  | $ | 113.8 |  |  | $ | 370.1 |  |  | $ | 483.9 |
(b) Purchased Intangible Assets The following table sets forth information for acquired finite-lived and indefinite-lived intangible assets (in millions):
| As of December 26, 2021 |  | As of December 27, 2020
| Gross Value |  | Accumulated Amortization |  | Net Value |  | Gross Value |  | Accumulated Amortization |  | Net Value
Acquired finite-lived intangible assets: |  |  |  |  |  |  |  |  |  |  |
Customer relationships | $ | 76.5 |  |  | $ | (57.6) |  |  | $ | 18.9 |  |  | $ | 75.3 |  |  | $ | (55.7) |  |  | $ | 19.6 |
Contracts and backlog | 34.9 |  |  | (33.1) |  |  | 1.8 |  |  | 33.4 |  |  | (31.0) |  |  | 2.4 |
Developed technology and technical know-how | 31.4 |  |  | (25.8) |  |  | 5.6 |  |  | 29.9 |  |  | (25.3) |  |  | 4.6 |
Trade names | 2.7 |  |  | (2.0) |  |  | 0.7 |  |  | 2.0 |  |  | (1.9) |  |  | 0.1 |
In-process research and development | 9.5 |  |  | (0.2) |  |  | 9.3 |  |  | 9.4 |  |  | — |  |  | 9.4 |
Total finite-lived intangible assets | 155.0 |  |  | (118.7) |  |  | 36.3 |  |  | 150.0 |  |  | (113.9) |  |  | 36.1 |
Indefinite-lived trade names | 6.9 |  |  | — |  |  | 6.9 |  |  | 6.9 |  |  | — |  |  | 6.9 |
Total intangible assets | $ | 161.9 |  |  | $ | (118.7) |  |  | $ | 43.2 |  |  | $ | 156.9 |  |  | $ | (113.9) |  |  | $ | 43.0 |
The aggregate amortization expense for finite-lived intangible assets was $4.7 million, $6.8 million and $7.4 million, for the years ended December 26, 2021, December 27, 2020, and December 29, 2019, respectively. The Company records all amortization expense in selling, general and administrative expenses. The estimated future amortization expense of acquired intangible assets with finite lives as of December 26, 2021 is as follows (in millions):
Fiscal Year | Amount
2022 | 5.0 |
2023 | 4.7 |
2024 | 3.9 |
2025 | 3.7 |
2026 | 3.5 |
Thereafter | 15.5 |
Total | $ | 36.3 |
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- Definition The entire disclosure for goodwill and intangible assets. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -URI http://asc.fasb.org/topic&trid=2144416 + Details
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