Industry Week in Review – April 15, 2016
Aerospace & Defense Update
The Pentagon reached a $1.4 billion agreement with Connecticut-based Pratt & Whitney for 66 F135 engines, the power plant of the F-35 joint strike fighter, under the ninth low rate initial production (“LRIP”) lot. The breakdown consists of 53 conventional takeoff and landing engines, used in the F-35A and F-35C models, and 13 short takeoff and vertical landing models used for the F-35B. Additionally, the agreement covers spares, extra parts, and support from the engine manufacturer. Engines from the lot will also be delivered to Italy, Norway, Israel, Japan, and the United Kingdom and are expected to ship before the end of the year. The latest agreement continues a reduction in costs associated with engine production and demonstrates the ability to provide affordable and reliable propulsion for the global F-35 program. The Company also noted it expects to be on contract for LRIP 10, which is anticipated by the end of this month.
Delta Air Lines announced it is finalizing a large order for a new Bombardier passenger jet. The U.S. airline plans to acquire as many as 125 CSeries jets, marking a major victory for the Canadian plane maker over industry giants Boeing and Airbus, both of which have fought for the Delta deal. Delta’s plans would enhance the credibility of Bombardier’s net-generation jetliner with big airlines and would mark the single largest deal so far this year by number of aircraft. If completed, the deal is estimated between $5.3 and $6.2 billion. Bombardier is expected to reach a final agreement with Delta for 75 firm orders and options for 50 more by the end of the month.
Government Technology Solutions Update
Both the House and Senate appropriations subcommittees backed bills to fund the Department of Veteran Affairs (“VA”) this week. The bills included approximately $4.2 billion in funding for IT operations, equal to the amount requested by the Obama administration, representing an increase of $145 million over the government fiscal year (“GFY”) 2016 figure. The request includes funding for cybersecurity and information systems modernization. While the budget request includes $260 million in funding to develop an improved Electronic Health Record (“EHR”) system, the House bill only appropriated $168 million given the CIO LaVerne Council’s request for a reduction in funding as the department rethinks its planned VistA modernization efforts. The bills passed this week include language explicitly restricting funding for VistA modernization efforts until the VA demonstrates its ability to increase EHR data sharing capabilities with both the Department of Defense (“DoD”) and the private sector.
On Wednesday, the Government Accountability Office (“GAO”) released its sixth annual report recommending improvements across the government. Several of the 92 specific recommendations in the report focused on IT issues, as agencies continue to struggle with modernization efforts focused on streamlining data collection and processing, sharing information more effectively, and reducing unnecessary costs. The Internal Revenue Service (“IRS”), Center for Medicare and Medicaid (“CMS”), and DoD were just a few of the agencies criticized for utilizing duplicative systems. Despite the fact that Congress and Federal agencies have fully addressed only 41% of the GAO’s recommendations since 2011, the corrective actions have generated $56 billion in financial benefits, according to the GAO.
Bombardier (Up 27.6%) – Shares were up this week in response to a potential CSeries deal with Delta Air Lines
Triumph Group (Up 11.4%) – Shares were up this week after the Company announced the restructuring of its business units to drive profits
Data Device Corporation to acquire the Microelectronics business of Maxwell Technologies, Inc., a provider of radiation-hardened single board computers and components. The deal is worth an estimated $21.0 million.
EnerSys acquired Enser Corporation, a provider of thermal batteries used in powering a multitude of electronics, guidance, and other electrical loads on may advance weapon systems. The terms of the deal were not disclosed.
Jacobs Engineering acquired The Van Dyke Technology Group, a provider of information-sharing solutions for the Federal government, focusing on cybersecurity. Terms of the deal were not disclosed.
OpenGov, Inc. acquired Ontodia, a provider of Analytics-as-a-Service solutions, including data analytics, integration, cleaning, and gathering services. Terms of the deal were not disclosed.
Teledyne LeCroy to acquire Quantum Data, Inc., a provider of video test generators for video display testing applications. The terms of the deal were not disclosed.