Industry Week in Review – July 22, 2011

A debt ceiling agreement remained elusive this week, with the Senate rejecting the House’s “Cut, Cap and Balance” Plan on Friday. Nevertheless, President Obama and House Speaker Boehner seemed to be moving closer toward a deficit reduction deal cutting as much as $3 trillion in spending coupled with revenues of $1 trillion from tax code overhauls. The potential programs to see cuts remain unclear as the deadline for a deal draws closer, creating further uncertainty in the market. Other proposals on the table include Senators Harry Reid and Mitch McConnell’s incremental raise plan and the Gang of Six plan to cut the deficit by $3.7 trillion including $1 trillion in revenue increases.

Notes on some big movers:

Textron (Up 13.5%) – Shares were up for the week following strong second quarter earnings that exceeded Wall Street expectations.  Net income rose to $90 million, or $0.29 per share, beating analyst expectations of $0.24 per share. Revenue rose 12.2% to $2.48 billion, falling short of Wall Street revenue estimate of $2.83 billion.

Orbital Sciences Corp (Up 8.7%) – Shares rose as the company reported strong second quarter earnings. The company earned $0.36 per share, surpassing analyst expectations $0.22 per share, on $354.3 million of revenue, versus expectations of $328 million.

Notes on some relevant transactions:

Boeing announced Thursday that it will acquire Solutions Made Simple Inc., an information services provider for the IC and U.S. government. The terms of the deal, which is expected to close in 3Q11, were not disclosed. The transaction will further expand Boeing’s capabilities in C4ISR and cybersecurity.

SAIC announced Thursday that it will acquire Vitalize Consulting Solutions Inc., a provider of clinical, business, and IT services for healthcare enterprises. The terms of the deal, which is expected to close in early August 2011, were not disclosed. The transaction will strengthen SAIC’s existing government health solutions business and provide a dynamic channel into the commercial health provider market.

Stratos BV, a global provider of advanced mobile and fixed-site remote communications solutions, announced Thursday that it has acquired Blue

Ocean Wireless Ltd., a provider of shipboard GSM services that enables crewmembers to use personal GSM phones to communicate via voice and SMS, for an undisclosed amount. The transaction will improve Stratos’ GSM services to its global customer base.

General Dynamics announced Monday that it has acquired Network Connectivity Solutions Corp., a provider of enterprise services and cloud computing to the DoD, for an undisclosed amount. The cash transaction brings GD a prime position on the DISA Encore II vehicle and bolsters its enterprise IT solutions for DoD customers.

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Industry Week in Review – July 15, 2011

White House Chief of Staff Bill Daley announced Monday that the U.S. will delay $800 Million in Pakistan Aid, citing a “low point” in the relationship following the May 2nd raid that killed Osama bin Laden. Daley cited concerns over recent actions taken by Islamabad, such as arresting an army general accused of aiding the CIA in the operation and expelling more than 100 U.S. military personnel.

Additionally, President Barack Obama noted during a televised press conference his belief that the proposed cuts by the Simpson-Bowles Commission of $1 Trillion over the next decade are too deep for a country still at war, reiterating his recommendation of a $400 Billion cut target. Despite his lower goal, the Pentagon seems to be preparing for an even leaner budget, with General James Cartwright, Vice Chairman of the Joint Chiefs of Staff, revealing that he is preparing budget drills well over the President’s request.

Notes on some big movers:

AeroVironment, Inc. (Down 13.0%): Shares fell for the week as Raymond James and Lazard Capital downgraded the Company’s shares from “outperform” and “buy” ratings to “market perform” and “neutral” ratings, respectively

FLIR Systems, Inc. (Down 15.5%): Shares fell for the week as the Company announced that it projects 2Q 2011 revenue and EPS to be approximately $390 million and $0.18; Results for the Company’s Commercial Systems division remained strong, while continued weak demand in the Government Systems division negatively impacted results for the quarter

Notes on some relevant transactions:

Moelis Capital Partners announced Monday that it will acquire CyberCore Technologies LLC, a provider of cyber security, systems integration and secure supply chain management services for an undisclosed amount. Moelis Capital lauded CyberCore’s impressive management team and growth prospects furnished by strong customer relationships.

Precision Castparts Corp. announced Monday that it will acquire Primus International, a provider of complex components and assemblies, including swaged rods, advanced composites, and machined components to the global aerospace industry, for $900 million in cash. The transaction expands Precision Castparts’ overall product and service offerings, particularly in its aerostructures business which has complimentary but no overlapping capabilities.

Ayelet Investments LLC announced Tuesday that it has agreed to acquire Conmed Healthcare Management Inc., a provider of correctional healthcare services to county and municipal detention centers in the United States for $57.2 million, representing LTM Revenue and EBITDA multiples of 0.92x and 15.5x, respectively.

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Industry Week in Review – July 8, 2011

The Department of Defense (“DoD”) announced on Thursday that Deputy Secretary of Defense William Lynn will resign his post after completing the current budget review.  Having worked in defense strategy since 1982, his accomplishments as Deputy Secretary included leading the DoD’s budget process, playing a key role in developing a new cyber strategy, and developing a new operational energy strategy.  Many believe his departure will mark significant changes in the DoD staff, with a number of top officials retiring in the near future. 

Additionally, the Pentagon has asked Congress to shift $5 Billion in its budget request. Funds would be shifted away from Ground Combat Vehicle and Air-to-Ground missile development in order to replenish about $375 million worth of artillery inventory used in Operation Odyssey Dawn in Libya.  Other areas of augmentation include funds for unemployment compensation, increasing price of fuel, and UAV development.

Notes on some big movers:

Aeroflex Holding Corp (Down 17.2%):  Shares fell after Aeroflex revised its fourth quarter 2011 guidance, expecting revenue and adjusted EBITDA of $200 million to $59 million, respectively, missing analyst expectations of $219 million in revenue and $65 million EBITDA.

AAR Corporation (Up 10.1%):  Shares rose as the company announced that it has been awarded a five-year contract to provide lightweight, multi-purpose shelters for the U.S. Army valued up to $14 million.

No relevant transactions in the past week.

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Industry Week in Review – July 1, 2011

Thursday marked former Defense Secretary Robert Gates’s last day as head of the Department of Defense. His accomplishments include directing the troop surges in Iraq and Afghanistan, realigning budget priorities, and identifying $100 billion in savings over 5 years even before President Obama’s recent request, instilling a “culture of savings and restraint” in the military. He has also voiced concerns regarding NATO, suggesting that constituent countries should pool their resources more effectively and rely less on the United States. Gates expressed support for incoming secretary Leon Panetta, citing the value of his unique perspective on U.S. national security challenges as a former CIA Director.

Notes on some big movers:

Astronics Corporation (Up 12.9%): Shares rose for the week as the Company reported earnings for 1Q11. EPS was $0.45, 45% over the same quarter in 2010, beating analysts’ projections and marking the company’s 7th consecutive positive earnings surprise. Sales rose 17.5% YoY to $55.13 million and the gross margin expanded from 24.6% to 26.3%.

QinetiQ Group PLC (Up 12.5%): Shares rose for the week as the Company announced Thursday that it will be one of 33 prime contractors on the TIPSS-4 IDIQ suite of contracts, which serves as the primary procurement vehicle for technology-related services within the IRS and other Treasury Department bureaus.

Oshkosh Corporation (Up 18.7%): Shares rose for the week as the Company announced Thursday that billionaire investor Carl Icahn filed a Schedule 13D with the SEC reporting that he has acquired beneficial ownership of 9.5% of the Company’s common stock, consisting of a combination of shares and call options.

Notes on relevant transactions:

Kaseman, LLC, a portfolio company of DC Capital Partners, announced Wednesday that it has made a strategic investment in Sallyport Global Holdings, Inc., a provider of engineering and professional services including fire protection, power generation, base operations, and logistics services for an undisclosed amount. The transaction expands Kaseman’s capabilities and enables them to offer more comprehensive solutions to customers.

Saab AB announced Wednesday a definitive agreement to acquire Sensis Corporation, a provider of air traffic management (“ATM”) solutions and surveillance technologies for about $155 million with an additional potential earn-out payment of about $40 million by 2014. The acquisition strengthens Saab’s offerings in radar, sensors, ATM, and defense solutions, establishing a stronger position in the U.S. market.

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Industry Week in Review – June 24, 2011

On Wednesday, President Obama announced plans for the reduction of troops in Afghanistan, with 10,000 U.S. troops scheduled to return home by year-end, and a total of 33,000 troops by the end of next summer. Savings are expected to be significant as each soldier in Afghanistan costs the U.S. approximately $1.0 to $1.2 million dollars per year. Combined with planned spending cuts, the U.S. expects to spend $118 billion for overseas operations in FY12 compared to $158 billion in FY11, with even lower spending anticipated in FY13.

Notes on some big movers:

AeroVironment, Inc. (Up 27.2%): Shares rose as the company reported unaudited consolidated earnings for 4Q11 and FY11.  Q4 EPS was $0.79 versus $0.71 a year ago, beating analyst expectations of $0.69.   EPS for the year was $1.17 versus $0.94 in FY10.

Breeze-Eastern Corporation (Up 17.4%): Shares rose for the week following Tinicum Capital Partners’ $6.82M purchase of 791,706 shares ($8.62 a share), bringing its stake in the company to 34.8%.

Notes on some relevant transactions:

GMA Cover Corporation announced Wednesday that it has been acquired by Admiralty Partners Inc., a private investment firm that invests exclusively within the global A&D and federal IT industries, for an undisclosed amount. GMA Cover Corporation provides engineered systems including concealment, aerial delivery, flexible fuel and water storage, vehicle soft-top systems, and tactical soft shelters for the DoD.

CACI announced Monday that it will acquire Pangia Technologies LLC, a software engineering company that provides technical solutions in the areas of computer network operations, information assurance, and software and systems engineering for the IC, DHS, U.S. Air Force, and U.S. Navy.  The terms of the transaction, which is expected to close by July 1, 2011, were not disclosed. This acquisition expands CACI’s cybersecurity solutions and increases its already strong presence in the IC.

Citi Venture Capital International announced last Friday that it will acquire Ness Technologies Inc., an Israeli IT services company, for $7.75 per share, or $307 million in cash. The transaction is expected to be completed in the next three to six months subject to shareholder approval and other requirements.

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