News & Events

Industry Week in Review – January 4, 2013

Over the past week, Congress passed legislation designed to avoid an immediate fiscal crisis and postpone sequestration until March 1 of this year.  The House voted 257 – 167, with 172 Democrats joining 85 Republicans in supporting the measure.  The delay adds to continued uncertainty around defense industry budgets as Congress seeks spending cuts or tax increases to fully eliminate the threat of sequestration. 

Also included in the legislation were tax hikes for individuals and couples with more than $400,000 or $450,000 in taxable income, respectively, from 35% in 2012 to 39.6% in 2013.  Taxes on long-term capital gains, dividends, and estates also would rise for wealthy taxpayers. 

The President also signed the 2013 National Defense Authorization Act which clears the Pentagon to spend $527.5 billion in base budget dollars, another $88.5 billion on overseas contingency operations, and $17.8 billion for national security programs in the Energy Department and Defense Nuclear Facilities Safety Board.

Representative John Boehner won a House vote on the first day of the 113th Congress to retain his position as Speaker of the House of Representatives.  Boehner received 220 votes, just 6 more than the necessary majority of 214 to be elected, while Nancy Pelosi received 192 votes.  Boehner’s win is seen by many as a benefit to the defense sector, given his past role in attempts to avoid sequestration.

Big Movers

Astronics Corporation (Up 15.4%) – Shares were up this week after the company announced that Embraer Defense and Security selected Luminescent Systems Inc., a wholly-owned subsidiary of Astronics, as a supplier for its KC-390 military transport and tanker program.  Astronics will provide a complete exterior lighting system, including navigation, anti-collision, landing, taxi, aerial refueling, and formation lights.  The KC-390 is expected to enter service in 2016.

Relevant Transactions

J.F. Lehman & Company acquired IMECO, Inc., a provider of turnkey marine electro-mechanical solutions for U.S Government and commercial customers.  IMECO’s integrated maritime solutions include the design, engineering, planning, procurement, and installation of HVAC, cargo handling, electric steering, propulsion, and fire suppression systems for government and commercial vessels.  J.F. Lehman noted the company fits well within its existing portfolio of maritime services investments.  Terms of the deal were not disclosed.

 PRV Aerospace acquired Astro Spar, Inc., a manufacturer of long, complex, precision-machined components and assemblies for commercial and military aerospace industries.  PRV Aerospace, a portfolio company of Court Square Capital Partners, noted the acquisition fits well within its existing business and strategic direction while adding a talented management team.  Terms of the deal were not disclosed.

 Moog acquired Broad Reach Engineering Company, a provider of spaceflight electronics and software for aerospace, scientific, commercial, and military missions for approximately $48 million.  The purchase price includes $37 million in cash, a $6 million note payable, and a $5 million potential earn out payment.  Broad Reach Engineering’s trailing twelve month revenues were approximately $27 million.  The acquisition adds a range of products to Moog’s space portfolio.

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