As the Department of Defense (“DoD”) aims to move beyond the recent government shutdown and focus on its future budget, Defense Secretary Chuck Hagel stated this week that the Pentagon needs to make significant changes “across every aspect.” He subsequently identified six focus areas that will ultimately drive a major DoD reform effort:
- Institutional reform
- Re-evaluating the military’s force planning construct
- Preparing for a prolonged military readiness challenge
- Protecting investment in emerging military capabilities
- Balanced mix between capacity and capability
- Personnel and compensation policy
Among the priorities to “help determine the shape of our defense institutions to come”, Secretary Hagel indicated that the DoD must prepare for a future in which non-deployed troops may not be trained to their present-day levels. However, despite the budget cuts, the DoD will look to protect investments in emerging military capabilities, especially space, cyber, special operations forces, and intelligence, surveillance, and reconnaissance.
The Executive Office of the President released a report this month quantifying the financial impacts and costs of the October 2013 Federal Government Shutdown. During the 16-day shutdown, Federal government employees were furloughed for a combined total of 6.6 million days, more than during any previous Federal government shutdown. The Executive Office estimates that the total cost of pay for furloughed Federal employees during the period of the shutdown is roughly $2.0 billion and total compensation costs, including benefits, are about 30% larger, in the range of $2.5 billion. Furthermore, independent forecasters estimate that the shutdown will lower fourth quarter real GDP growth by 0.2 – 0.6 percentage points or more, or $2.0 – $6.0 billion in lost output.
CPI Aerostructures, Inc. (Up 13.2%) – Shares were up this week after the Company announced a strong third quarter. The Company reported earnings and revenues above consensus analyst estimates.
Federal Signal Corp. (Up 9.2%) – Shares were up this week after the Company announced positive third quarter performance with revenue and operating income up 13% and 52%, respectively, versus the same period last year.
Audax Group’s Winchester Electronics acquired SRC Cables Inc., a manufacturer of flexible and semi-rigid cable assemblies for defense, aerospace, medical imaging, and wireless communications companies worldwide. Terms of the deal were not disclosed.
Astronics Corporation to acquire PGA Electronic S.A., a manufacturer of seat motion and lighting systems for business and first-class aircraft seats. The deal is valued at approximately $28.5 million.
Veritas Capital to acquire Anaren, Inc., a provider of components, assemblies, and subsystems for wireless communications, satellite communications, and space and defense electronics. The deal is valued at approximately $381 million.