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  "documentTitle": "Kratos Defense & Security Solutions (KTOS)",
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  "authorName": "Ben Axler",
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  "presentationDate": "2018-03-16 00:00:00",
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      "kind": "callout",
      "text": "Warning: Kratos just started disclosing accruals for contract losses deep in its financial footnotes, and it rose 500% YoY...",
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      "kind": "callout",
      "text": "Warning: Kratos just started disclosing accruals for contract losses deep in its financial footnotes, and it rose 500% YoY.",
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      "text": "Loss Accrual: 500%",
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      "text": "The quality of Kratos business has declined in recent years. We observe it just reported its highest quarter of fixed-price contract revenue. These contracts carry the highest risk of reduced profit and financial loss. Meanwhile, backlog continues to decline while the book to bill ratio hit a low of 0.8x in 2017.",
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      "text": "On a portion of the fixed price-completion contracts, revenue is recognized in accordance with Topic 605 using the percentage-of-completion method based on the ratio of total costs incurred to date compared to estimated total costs to complete the contract. Estimates of costs to complete include material, direct labor, overhead, and allowable indirect expenses for government contracts. These cost estimates are reviewed and, if necessary, revised on a contract-by-contract basis. If, as a result of this review, management determines that a loss on a contract is probable, then the full amount of estimated loss is charged to operations in the period. As of December 25, 2016 and December 27, 2015, accrued expenses included the accrual for losses on contracts of $17.7 million and $3.5 million, respectively. — 10-K, F-8",
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      "text": "Backlog and Revenue Mix Deterioration; New Disclosure On Loss Accruals",
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