* Revenues of $90.6 million increase 30.4% over previous year
   second quarter
 * Sequential Organic Revenue Growth of 9.7% over first quarter of
   2009
 * Pro forma EBITDA increases 66% over previous year second quarter
 * Second quarter cash flow generated from operations $6.2 million

SAN DIEGO, Aug. 6, 2009 (GLOBE NEWSWIRE) -- Kratos Defense & Security Solutions, Inc. (Nasdaq:KTOS), a leading national defense, IT and security solutions provider, today reported second quarter 2009 revenues of $90.6 million, a 30.4 percent increase over second quarter 2008 revenues. Second quarter sequential organic revenue growth was 9.7 percent, as compared to first quarter of 2009 revenues. Second quarter 2009 pro forma EBITDA of $6.3 million or 7 percent, increased 66 percent over the previous year's second quarter pro forma EBITDA. Kratos' Government Solutions business segment, where Kratos performs its Department of Defense and National Security work, generated second quarter pro forma EBITDA of 7.8 percent. Kratos second quarter 2009 EBITDA increased 5 percent sequentially over the first quarter of 2009, and in the second quarter of 2009, the Company reported its sixth consecutive quarterly EBITDA improvement.

Second quarter cash flow generated from operations was $6.2 million, and the Company has generated total cash flow from operations of $13.3 million for the first 6 months of 2009. Kratos has approximately $200 million of Net Operating Loss Carry Forwards which have no limitation, expire through 2027, and which virtually eliminate cash income taxes being paid by the Company. The Company reported total backlog of approximately $640 million at June 30, 2009, and a qualified bid and proposal pipeline of over $1.8 billion.

The Company generated pro forma EBITDA from operations in the second quarter of $6.3 million, or 7.0 percent of revenues, compared to $3.8 million, or 5.5 percent of revenues in the second quarter of 2008.

Second quarter revenues include internal growth in the Company's Rocket Support Services and Targets business, certain Command, Control, Communications, Computing, Intelligence, Surveillance and Reconnaissance programs, certain Information Technology, Information Assurance and Networking programs, and certain Engineering and Technical support programs. Second quarter revenues also included contributions from the Digital Fusion, Inc. (DFI) and SYS Technologies (SYS) acquisitions, which were completed in December and June 2008, respectively. Revenue increases were offset somewhat by reductions in the Company's commercial and public safety & security system integration business, which were negatively impacted by the current adverse economic environment, as well as the planned reductions of acquired small business set aside contract work, pass through work and other contract work in the Company's Government Solutions segment. The Company continues to expect certain weapon systems sustainment programs, including follow on work, to be awarded later in 2009, which are included in the Company's business plan and projections.

During the second quarter, the Company made the decision to sell a certain minor segment of its Public Safety and Security business, which has been accounted for as a discontinued operation, and which financial results are accordingly excluded from all of the operational and financial results reported today for 2009 and the comparative 2008 periods. This discontinued business has not been profitable in the recent past and generated revenues of approximately $11 million in 2008. Included in the loss from discontinued operations of $2.8 million is a $2.0 million non-cash impairment charge to write-down the carrying value to estimated fair value.

Eric DeMarco, President and Chief Executive Officer, said, "During the second quarter, the Company continued to make progress against our previously stated business plan, generating increased EBITDA profitability, positive cash flow from operations and solid quarter over quarter organic growth. We remain focused on building our business development capability, organization and team, which we hope to have substantially completed by the end of the year."

Kratos' operational highlights during the quarter included:

 * Increased military equipment contract  PRE-SET and RESET work on
   various systems and platforms at numerous locations throughout
   the United States
 * Contract support work for the Armed Scout Helicopter Project
   Office
 * 100% success rate in all Range and Targets operations firings,
   including SLAMRAAM related missile firings
 * Continued development of the NLOS-T unmanned system, where Kratos
   is the sole source provider
 * Contract award related to Advanced Hypersonic Weapons
 * Increased contract work with Rocket Support Services and Kratos
   Oriole Rocket Target System
 * Kratos Dahlgren Team recognized by our customer for superior
   performance

DeMarco concluded, "The vast majority of our DoD and federal government business remains on track and we continue to have good visibility for the balance of 2009. Additionally, the planned integration of the acquired businesses is proceeding on schedule, and we have and are continuing to aggressively reduce costs and improve operating efficiencies. With the impact of the discontinued businesses revenues now excluded from our continuing results of operations for all of 2009, coupled with the continued impact of the current negative economic environment on our remaining PSS business, and with the anticipation of the weapons systems contract to occur in the fourth quarter, our revenue target is now approximately $350 - $360 million."

Reverse Stock Split

The Company also announced today that its Board of Directors has approved a 1-for-10 reverse split of its common stock and preferred stock, following approval by the Company's stockholders on June 4, 2009. The record date established for the reverse stock split is September 10, 2009, and the reverse stock split will be effective at 11:59 p.m., Eastern Time, on September 10, 2009. Kratos' common stock will begin trading on The NASDAQ Global Market on a split adjusted basis when the market opens on September 11, 2009, under the temporary trading symbol "KTOSD." The trading symbol will revert to "KTOS" after approximately twenty trading days.

The reverse split will reduce the number of shares of Kratos' common stock outstanding from approximately 130.3 million to 13.0 million. Proportional adjustments will be made to Kratos' stock options and other equity incentive awards, equity compensation plans, outstanding warrants and convertible notes. The total number of authorized shares of the Company's capital stock will not be affected by the reverse stock split.

Information for Stockholders

Upon effectiveness of the reverse stock split, Kratos' stockholders will receive one new share of Kratos common stock for every ten shares held.