Industry Week in Review – August 8, 2014

Aerospace & Defense Update

Boeing and United Technologies have continued to amass reserves of titanium parts from a Russian producer to hedge against uncertainty surrounding international economic tensions as a result of conflict between Russian-backed separatists and the Ukrainian government.  As a whole, the aerospace and defense sector is the largest consumer of titanium, using the metal for various customized parts including components in landing gear and jet engines.  The two U.S. based aerospace companies purchase a significant portion of their titanium from VSMPO-Avisma, the world’s leading producer of the metal, as well as a subsidiary of a Russian government-owned company.  Boeing and United Technologies have built six month supply stockpiles of highly specialized parts.  Previously, Boeing had accumulated a three-year titanium stockpile, much of which has dried up since the company accelerated production of its 787 Dreamliner.  Ultimately, the stockpiles will provide Boeing and United Technologies the titanium necessary to keep up with production demand should trade sanctions with Russia cut off access to a large supply of the metal.

President Obama, on Thursday, authorized an open-ended military and humanitarianism mission in response to a request for assistance from the Iraqi government.  An air drop that provided an estimated 40,000 Iraqis with food, water, and other supplies kicked of the humanitarian mission earlier this week.  Following the air drop, two Navy F/A 18 Super Hornets dropped bombs on Islamic militants outside Irbil.  Although the President assured the U.S. would not reintroduce combat troops on the ground in Iraq, both air strikes and humanitarian drops will continue.

Government Technology Solutions Update

For the first time in eight years, the Federal Government has achieved the Small Business Administration’s (“SBA”) small business procurement goal of awarding 23.0% of eligible contracting dollars to small businesses.  According to the SBA, the Federal Government awarded $83.1 billion, or 23.4% of total Federal contracts, to small businesses in GFY2013.  Though the government reached its overall goal, results in subcategories were varied.  The government fell 0.7% short of its Women-Owned Small Business (“WOSB”) goal, but it exceeded the Small Disadvantaged Business (“SDB”) goal by 3.6%.

The General Services Administration (“GSA”) announced this week that it will give priority to open source software solutions for all new IT projects.  The change in policy was prompted by the GSA’s vision of using and providing Innovative, Integrated, and Intuitive (“I3”) technology solutions, not only within the agency, but across the Federal Government.  The new policy is just one part of a series of requirements that the GSA has implemented to drive innovation while reducing costs and time to development and deployment.

Big Movers

NIC, Inc. (Up 10.5%) – Shares were up this week after the Company announced a strong fiscal second quarter.  The Company reported $0.17 EPS exceeding analyst expectations of $0.15 EPS.

Rheinmetall AG (Down 11.1%) – Shares were down this week after the Company cut its sales and earnings forecast due to the cancellation of an export license tied to a deal that Rheinmetall AG had in Russia.

Relevant Transactions

Reliance Steel & Aluminum Co. acquired Aluminum Services UK Limited, a provider of aluminum castings manufactured for the aerospace, defense, domestic, automotive, and engineering industries.  Terms of the deal were not disclosed.

Vance Street Capital acquired Eirtech Aviation Ltd., a provider of aircraft maintenance services including refurbishment, painting, and engineering services. Terms of the deal were not disclosed.

HumanTouch acquired CorasWorks, a provider of applications and business software on the Microsoft SharePoint and social platform.  Terms of the deal were not disclosed.

Haystax Technology acquired NetCentrics, a provider of information technology consulting, software development, and process management firm.  Terms of the deal were not disclosed.

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