Week in Review

Industry Week in Review – January 27, 2012

This week, Defense Secretary Leon Panetta held a news conference on defense budget cuts at the Pentagon. “The military will be smaller and leaner, but it will be agile, flexible, ready and technologically advanced; it will be cutting edge,” he told reporters. The U.S. Army will be reduced from 547,000 active-duty soldiers to 490,000, while the U.S. Marine Corps will be cut to 182,000. The Army also plans to remove at least eight brigade combat teams from its existing force structure. To reduce projected spending by $487 billion over the next 10 years, the Pentagon is eliminating what it describes as “poorly performing programs” and has identified an additional $60 billion in efficiencies. The first tranche of those spending cuts — $259 billion — will come over the next five years. These cuts do not take into consideration the possibility of sequestration which could initiate an additional $500 billion cut in January 2013 if Congress does not find an alternative way to reduce the country’s deficit. In 2013, the Pentagon is requesting $525 billion for its base budget, with an additional $88.4 billion for overseas contingency operations. Today’s five-year spending plan projects the Defense Department will need $567 billion for its base budget in 2017.

Big Movers

Textron Inc. (Up 17.3%) – Shares are up this week after the Company announced that it expects revenues of approximately $12.5 billion and earnings per share (“EPS”) from continuing operations to be in the range of $1.80 to $2.00. According to estimates, analysts were expecting the Company to report revenues of $11.9 million and EPS of $1.66 for fiscal 2012.

CIBER, Inc. (Up 13.6%) – Shares are up this week after the Company announced that it entered into a purchase agreement to sell its Federal Division and related assets to CRGT Inc.

Wesco Aircraft Holdings, Inc. (Up 9.3%) – Shares are up this week after the company announced results for its fiscal first quarter ended December 31, 2011. Revenue for the first fiscal quarter was $192.6 million, another quarterly record and an increase of 11.0% compared to $173.5 million in the prior year period. Wesco demonstrated strong international growth during the quarter with revenues in the Rest of World segment increasing by 29.7% compared to the prior year.

Relevant Transactions

CRGT, Inc. acquires Federal Division of CIBER, a provider of emerging technology solutions for the U.S. federal government for $40 million. CRGT is a portfolio company of Veritas Capital. The acquisition furthers CRTG’s strategic growth plan, positions the Company to better serve a broader spectrum of the Federal marketplace, and adds unique capabilities that are provided to a diverse customer base.

Sun Capital Partners to acquire Pacific Safety Products, Inc., a manufacturer of advanced armor and personal protection solutions. The acquisition allows Sun Capital Partners to enter into the person protection equipment market. Terms of the deal were not disclosed.

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Industry Week in Review – January 13, 2012

This week, Defense Secretary Leon Panetta announced that the U.S. will withdraw two combat brigades from Europe. In a press release from the Department of Defense, Panetta declared two permanently stationed Army combat brigades will be replaced with rotational units in order to retain a strong presence in the region. Currently, 40 thousand troops and over 100 thousand dependents are stationed in Europe. The adaptation to rotational units is a cost saving plan with the overall goal of meeting the new 10-year defense strategy announced last week.

President Obama unveiled a plan to consolidate six government agencies into one, effectively eliminating the Commerce Department and saving up to $3 billion in the next decade. The six departments and agencies – Commerce’s core business and trade functions, the Small Business Administration, the Office of the U.S. Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation, and the U.S. Trade and Development Agency – would cut up to 2,000 jobs through attrition and consolidate into one department with the mission of job creation and economy expansion.

Big Movers

Textron (Up 10.8%) – Shares are up this week after Reuters reported the aircraft maker was considering options including spinning off pieces of its business.

KBR, Inc. (Up 10.7%) – Shares are up this week after the company settled a lawsuit brought by an injured convoy driver who claimed the company sent civilians into a battle zone in Iraq in 2004 knowing they would be attacked and possibly killed, according to a court filing. Reginald Cecil Lane, the driver, reached a “confidential settlement” with KBR and its former parent, Halliburton Co. Lane and the defendants asked the court to dismiss the lawsuit, according to the filing.

Relevant Transactions

ManTech International Corp. acquired Evolvent Technologies, Inc., a provider of healthcare information technology services to the federal government. The acquisition will enable ManTech to deliver information technology solutions through Evolvent’s existing relationships with DoD Health organizations, the Veterans Administration and the Department of Health and Human Services. Terms of the deal were not disclosed.

BE Aerospace Inc. to acquire UFC Aerospace Corp., a provider of aerospace logistics and supply chain management services for $400 million. The acquisition expands BE’s capability to offer supply chain solutions, value-added inventory logistics services and customized kitting solutions, as well as further expanding its consumables product offering.

Gridiron Capital, LLC acquired Nex-Tech Aerospace, a manufacturer of components, structures, and assemblies for fixed wing and rotary aircraft for the aerospace industry globally. The acquisition will allow both companies to better serve a diversified customer base through additional resources, increased high-speed machining capacity and an enhanced product and service offering. Terms of the deal were not disclosed.

ASI Government acquired Frontline Solutions Corporation, a provider of Systems Engineering and Technical Assistance (SETA) and mission support services to the Intelligence Community and Department of Defense. The acquisition will allow ASI to fortify its acquisition, program management, and strategy and organizational performance capabilities, while adding additional expertise to address the unique needs of the Intelligence Community. Terms of the deal were not disclosed.

RTI International Metals to acquire Remmele Engineering, a global supplier of advanced titanium mill products and fabricated components for $182.5 million. The acquisition is expected to provide entrance to new contract manufacturing end markets, such as the fast-growing medical device market.

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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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