Industry Week in Review – March 22, 2013
On Thursday, the House of Representatives passed a $982 billion Continuing Resolution (“CR”), which the Senate had passed just eighteen hours earlier, on Wednesday afternoon. Following comments earlier in the month from the Administration that it would accept a CR that resembles 2012 spending, the President is expected to sign the bill before the current CR expires on Wednesday, averting a potential government shutdown. In response to the legislation’s passage, the Department of Defense announced that it will be delaying roughly 800,000 furlough notices that it had planned on issuing over the next week. Acting undersecretary of Defense for personnel and readiness, Jessica Wright, noted in an email that despite still facing sequestration, the added flexibility under the CR may have an effect on the overall number of furlough days. Thus, the Pentagon plans to use the delay to further analyze the impact of the CR and the roughly $10.4 billion in additional Operations & Maintenance funds that it affords the department.
Big Movers
Kratos Defense & Security Solutions (Up 12.5%) – shares were up for the week after the Company’s subsidiary SAT Corporation was awarded a multi-million dollar contract to provide satellite interference detection and quality of service monitoring solutions. As part of the contract, SAT will deploy its proprietary satellite monitoring product, Monics®. Additionally, the Company announced the launch of a new precision channel simulation product, the satID® GeoSim Geolocation Simulator, which is a geolocation training and test system that enables commercial and military satellite operators to protect the performance and function of critical SATCOM links.
Federal Signal Corp. (Up 10.6%) – shares were up for the week following the Company’s announcement of fourth quarter 2012 results. Net income for the quarter was $4.8 million or $0.08 a share, compared to a loss of $15.2 million or $0.25 a share in 4Q11. Revenue grew 12% to $217.7 million for the year.
Relevant Transactions
Resilience Capital Partners acquired a majority interest in Aerospace Products International, a provider of aviation parts, equipment, and supply chain management services that increase product availability, minimize time-to-delivery, and reduce process and working capital costs. The acquisition expands RCP’s presence in the aviation services industry, and will enable API to offer its services to a wider range of commercial and government customers.
Greenbriar Equity Group to acquire EDAC Technologies Corp., a designer, manufacturer, and servicer of precision components for aerospace and industrial applications, for $17.75 a share. The implied enterprise value of $141.1 million represents an LTM revenue multiple of 1.33x and an LTM EBITDA multiple 10.3x. EDAC expects the transaction, which is subject to shareholder and regulatory approval, to close in the second quarter of 2013.
