Week in Review

Industry Week in Review – January 20, 2012

This week, U.S. Defense Secretary Leon Panetta removed the F-35B short take-off-and-vertical-landing (“STOVL) from probation. The F-35B had been placed on probation last year after it was troubled by schedule delays and cost overruns. Though there may not be significant production ramp-ups, the F-35B variant has caught up with the Air Force and Navy versions of the aircraft.

The Pentagon released a list of 30 priority capabilities it needs in order to conduct war anywhere on the globe in the future. The document, officially called the Joint Operational Access Concept (JOAC), outlines a more flexible integration of space and cyberspace operations into the traditional air-sea-land battle space. The 30 capabilities listed in the document are focused on command and control, intelligence, fires, movement and maneuver, protection, protection, sustainment, information and engagement. The document calls for more integration between the services at lower levels

Big Movers

Finmeccanica SpA (Up 16.8%) – Shares rose this week as subsidiaries of the company received positive news. Avions de Transport Regional (turbo props) announced its highest order intake in its 30-year history of 157 planes last year; AgustaWestland (helicopters) signed a EUR90 million (roughly $117 million) deal to supply 5 helicopters and 14 upgrades to the polish defense Ministry; and DRS Technologies announced award of a one year $48.4 million option.

OSI Systems Inc. (Up 11.1%) – Shares rose this week after the company announced that its security division, Rapiscan Systems, was awarded a six year authorization to provide inspection services throughout Mexico. The company is the sole provider for this agreement valued at approximately $400 million.

NCI, Inc. (Down 30.7%) – Shares fell this week after the company reported poor FY2012 guidance. NCI’s current expected revenue range for FY2012 is $340 million – $360 million, compared to the company’s previous guidance for FY2011 of $556 million – $564 million.

Relevant Transactions

Symantec Corp. to acquire LiveOffice LLC, a provider of cloud-based email archiving, compliance, discovery, and continuity solutions for Fortune 500 companies in the U.S. for $115 million. The acquisition will allow Symantec to help organizations store, manage, and discover unstructured information including on-premise and cloud-based information sources such as email, instant message, social media and file sharing.

Lockheed Martin acquires Procerus Technologies, a company specializing in autopilot and other avionics for micro unmanned aerial systems. The acquisition expands Lockheed Martin’s capabilities into the small unmanned aerial vehicle market and helps the Company meet its customers’ strategic priorities. Terms of the deal were not disclosed.

Vishay Intertechnology to acquire HiRel Systems LLC, a provider of high reliability transformers, inductors, coils, and power conversion products for approximately $85 million. The acquisition further enhances Vishay’s inductor portfolio, particularly in the field of custom magnetics for medical, military, aerospace and aviation.

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Industry Week in Review – December 16, 2011

This week, U.S. Representative Buck McKeon, a California Republican and chairman of the House Armed Services Committee, proposed a new legislation that reduces the federal workforce in order to offset one year of sequestration. The bill calls for a ten percent reduction in the federal workforce, including civilian employees and bases across the country, over the next ten years through the process of attrition.

The reduction would generate $127 billion, of which $55 billion would pay for the first year of defense cut under sequestration, another $55 billion could cover the nondefense cuts required and the remaining $17 billion would be available for the deficit reduction. The plan gives the Pentagon more time to plan for sequestration cuts, which are scheduled to begin in January 2013.

After nearly nine years of war, U.S. forces formally finalized their mission in Iraq. Just over 4,000 U.S. soldiers are currently stationed in Iraq and scheduled to depart in the upcoming days. After tens of thousands of Iraqi deaths, over 4,500 U.S. deaths, and many more wounded, the U.S. made what Defense Secretary Leon Panetta called “one of the most complex logistical undertakings in U.S. military history” by pulling out of Iraq. As an end result, Iraq now has a parliament and regular elections, and is ruled by a Shiite-led government that replaced Saddam’s Sunni-dominated regime.

Relevant Transactions

ICF International to acquire Ironworks Consulting, LLC, a provider of technology and interactive solutions for $100 million. The acquisition expands ICF’s range of implementation service offerings and adds complementary capabilities. Ironworks is expected to have revenues of $57 million in FY2011, representing a deal multiple of 1.35x revenue.

L-3 Communications to acquire Kollmorgen Electro-Optical (KEO), a manufacturer of specialized equipment, including submarine photonics systems and periscopes, ship fire control systems, visual landing aids, ground electro-optical and sensor-cueing systems for $210 million. The acquisition expands and broadens L-3’s base in the EO/IR market, a key strategic growth area for the company. KEO is expected to have FY2012 sales of $160-170 million and EBITDA of $26-30 million, representing a deal multiple of up to 1.24x revenue and 7.0x EBITDA.

Hobson PLC acquired Intelliworks, Inc., a provider of relationship management and marketing software for higher education for $13 million. The acquisition will help Hobson deliver more value to the clients by blending the expertise and product knowledge of two proven industry leaders. Intelliworks is expected to have FY2011 revenues of $5 million, representing a deal multiple of 2.60x revenue.

Big Movers

GeoEye, Inc. (Up 23.6%) – Shares are up this week after the filing of a Form 4 with the SEC late Thursday which disclosed a notable insider buyer. Cerberus Capital Management founder Stephen Feinberg, GeoEye’s third-largest shareholder, bought 432,500 shares of GeoEye common stock.

Finmeccanica SpA (Down 15.3%) – Shares are down this week after the company’s chief executive of the Selex Sistemi Integrati unit, Marina Grossi, resigned in the wake of a long-running corruption probe.

Innovative Solutions Support, Inc. (Down 12.0%) – Shares are down this week after the company reported fourth-quarter earnings of $12,000 as compared to earnings of $1.3 million in the same period last year. Revenues were $6.5 million as compared to $7.5 million in the comparable quarter a year ago.

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