Sponsored by TCI International Inc.
01 Apr 22. Parker set to gain EU antitrust approval for $8.3bn Meggitt buy. Parker-Hannifin (PH.N) is set to gain EU antitrust clearance for its 6.3bn pound ($8.3bn) bid for Britain’s Meggitt (MGGT.L) after offering to sell a U.S. factory to address competition concerns, people familiar with the matter said. The U.S. engineering and aerospace group submitted its offer to the European Commission last month and the EU competition watchdog then sought feedback from rivals and customers. Britain is probing the transaction, the latest by a U.S. buyer of a British firm, over national security concerns as Meggitt’s customers include Boeing (BA.N), Airbus (AIR.PA), Britain’s Ministry of Defence (MoD) and Rolls-Royce (RR.L).
Meggitt also supplies wheel and brake systems for military fighter programmes.
The factory Parker is offering to sell is in Ohio in the United States and divesting it would resolve concerns about overlapping activities with Meggitt, one source told Reuters.
The European Commission, which is scheduled to decide on the deal by April 11, declined to comment.
“We have been engaging with relevant authorities to obtain regulatory approvals and can confirm that we are in discussions about potential remedies with the European Commission,” a Parker spokesperson said.
“We continue to expect that the transaction will close during Q3 2022. Otherwise, it’s not appropriate for us to comment further on the regulatory processes.” (Source: Google/Reuters)
31 Mar 22. Allison Transmission Completes Acquisition of AVTEC’s Off-Highway Transmission Portfolio and Component Machining Business. Allison Transmission today announced it has completed the acquisition of India-based AVTEC Ltd.’s off-highway transmission business and AVTEC’s Madras Export Processing Zone (MEPZ) off-highway component machining business. The deal, which was first announced on September 16, 2021, has officially closed as of yesterday.
“This acquisition will position Allison’s product portfolio for strategic growth in the off-highway segment in India and other global markets that demand purpose-built products that deliver unrivaled performance, durability, reliability and productivity,” said Todd Bradford, Vice President, Strategy, Business and Corporate Development at Allison Transmission.
Allison purchased AVTEC’s off-highway transmission portfolio and MEPZ off-highway component machining assets for $23m in cash. Headquartered in New Delhi and part of the CK Birla Group, AVTEC is one of India’s largest independent manufacturers of powertrain and precision-engineered products for automotive, off-highway, defense, agriculture and railway industries, in areas of both proprietary products and contract manufacturing.
With this acquisition, Allison will also integrate AVTEC’s off-highway component machining operations currently located at the MEPZ facility (Chennai) into Allison’s Chennai manufacturing plant to continue producing housings for Allison’s off-highway transmissions.
About Allison Transmission
Allison Transmission (NYSE: ALSN) is a leading designer and manufacturer of vehicle propulsion solutions for commercial and defense vehicles, the largest global manufacturer of medium- and heavy-duty fully automatic transmissions, and a leader in electrified propulsion systems that Improve the Way the World Works. Allison products are used in a wide variety of applications, including on-highway trucks (distribution, refuse, construction, fire and emergency), buses (school, transit and coach), motorhomes, off-highway vehicles and equipment (energy, mining and construction applications) and defense vehicles (tactical wheeled and tracked). Founded in 1915, the company is headquartered in Indianapolis, Indiana, USA. With a presence in more than 150 countries, Allison has regional headquarters in the Netherlands, China and Brazil, manufacturing facilities in the USA, Hungary and India, as well as global engineering resources, including electrification engineering centers in Indianapolis, Indiana, Auburn Hills, Michigan and London in the United Kingdom. Allison also has more than 1,400 independent distributor and dealer locations worldwide. For more information, visit allisontransmission.com.
AVTEC is one of the largest independent manufacturers of powertrain and precision-engineered products in India. It is a part of CK Birla Group – a leading global business house, with over 25,000 employees and a combined turnover of US $2.4bn. (Source: BUSINESS WIRE)
31 Mar 22. Servotronics Announces 2021 Financial Results Including EPS of $1.68, Record Operating Cash Flow, Lower Total Operating Costs and Expenses, and Enhanced Balance Sheet Strength. Servotronics, Inc. (NYSE American – SVT) a designer and manufacturer of servo-control components and other advanced technology products today reported financial results for the fourth quarter and twelve months ended December 31, 2021 including net income growth and record high levels of operating cash flow and year-end cash.
The company reported net income of $4.1m, or $1.68 per diluted share, in 2021, its highest level since 2015 and up from $100,000, or $0.04, in 2020.
Net income in 2021 reflected the impact of $1.9m in legal settlement expenses associated with the resolution of previously disclosed commercial litigation, which were offset by $9.6m in other income from Paycheck Protection Program (“PPP”) loan forgiveness and employee retention credits (“ERC”). The federal PPP and ERC stimulus programs supported successful efforts to prevent involuntary workforce reductions since the outset of the Covid-19 pandemic, as part of a strategy to recruit and retain the Servotronics advanced manufacturing employees who are essential to the company’s ability to meet and exceed commercial, government, defense, and other customers’ high standards for quality, reliability and on-time delivery.
“We attribute fourth quarter 2021 revenue stability and expected first quarter 2022 revenue growth to our commitment to use what we viewed as a temporary delay in Servotronics’ largest-customer orders over the last two years as an opportunity for improvement,” said Chief Operating Officer James C. Takacs. “We implemented a number of process-improvement initiatives, preserved inventories of essential material and components for our proprietary products, and maintained our production capabilities, including our advanced manufacturing and engineering workforce in Western New York. In 2021, we also reduced total operating costs and expenses, and enhanced the company’s cash position, positioning Servotronics to rapidly respond to a recovery in Advanced Technology Group orders, deliver on long-term contracts, and pursue new markets for our products in 2022 and beyond.”
As publicly announced in 2021, Servotronics Board of Directors commenced a national search for a new chief executive officer. The Board has also initiated the process of recruiting diverse, highly-qualified independent directors with experience relevant to its businesses and operations. Both of these important initiatives are well underway.
Consolidated annual revenues were $40.6m in 2021 compared to $49.8m the year prior, reflecting a reduction in units shipped by its Advanced Technology Group (ATG) and Consumer Products Group (CPG) segments, which primarily resulted from the impact of the pandemic on key customers.
Fourth quarter consolidated revenues remained relatively stable, at $10.6m in each of 2021 and 2020. Fourth quarter ATG revenues grew to $8.2 m in 2021, up 8.3% from 2020, reflecting a recovery in units shipped. This offset fourth quarter CPG revenue declining to $2.4m, down 22.0% from the last three months of 2020.
Servotronics expects to report first quarter 2022 consolidated revenue growth, over the first and fourth quarters of 2021, driven primarily by increases in ATG revenue and units shipped under long-term prime contracts and subcontracts. The company signed two new long-term contracts in 2021 and one in the first quarter of 2022 with ATG customers.
Consolidated gross margin was $6.0m or 14.8% of revenue in 2021, compared to $8.2m or 16.5% for 2020. ATG gross margin stability at 18.1% in 2021, up 10 basis points from the year prior, was offset by a CPG gross margin of 2.7% in 2021, down 720 basis points from the year prior.
For the fourth quarter, consolidated gross margin increased to $1.4 m or 12.8% of revenue in 2021, approximately doubling from the $673,000 or 6.4% reported in 2020.
The company believes that its production resources and maintenance of a highly skilled advance manufacturing workforce have positioned Servotronics well for recovering orders, which will be critical to reducing per-unit costs and sustainably enhancing gross margin. As the ATG revenue volume increases it is expected that the utilization of the production resources will improve and improve gross margin percentages similar to the first half of 2020. The company also expects to see improvement in the CPG gross margin percentages.
The company’s total annual operating costs and expenses declined on lower revenue to $45.9m in 2021, down 7.5% from $49.6 m the year prior to their lowest level since 2018. Fourth quarter total operating costs and expenses declined on lower revenue to $11.7m in 2021, down 0.7% from $11.8m in 2020.
Annual operating costs and expenses in 2021 declined in spite of the third quarter accrual of $1.9 m for legal settlements resolving two previously disclosed and unrelated commercial litigation matters. This included $1.8m to resolve litigation commenced in July 2013 with Aero, Inc. and $90,000 to resolve litigation commenced in March 2016 with an independent contractor for one of the company’s wholly-owned subsidiaries.
Annual operating costs and expenses in 2021 also reflected initiatives designed to recruit and retain advanced manufacturing and engineering employees in what has been widely recognized as one of the most competitive U.S. labor markets in generations. For example, 2021 wage enhancements included, but were not limited to, higher minimum starting pay for new hourly employees, higher second-shift hourly pay, safety certification compensation, and implementation of a pay raise across the entire workforce. In addition, benefits enhancements include expanded time off policies, hybrid scheduling, and flexibility including an optional four-day, 40-hour work week.
Servotronics generated all-time-high annual operating cash flow of $4.6m in 2021, up 455.8% from 2020. The company’s total cash balance grew by 60.8% in 2021 to a record year-end cash balance of $9.5m on December 31. Total working capital grew by 9.6% in 2021 to $34.1m on December 31, primarily due to the increase in our cash position.
The company believes its cash generating capability and financial condition, together with available credit facilities, will be adequate to meet future operating and investing needs. Its credit facilities include but are not limited to a $6.0m line of credit, of which $4.25m was outstanding at December 31, 2021.
During the fourth quarter of 2021 the company completed a previously disclosed remediation plan addressing internal controls over financial reporting related to inventory and post-retirement benefits. The company continues to implement a remediation plan to address internal control deficiencies related to the assessment and documentation of certain entity-level controls and the design and implementation of certain IT general controls including information technology policies, risk assessments, offsite backup, and monitoring that were identified as of December 31, 2021 and had no material impact on Servotronics’ financial position, results of operations or cash flows.
31 Mar 22. Aphelion Aerospace secures investment from The Mercury Group, Founder Advisors, and Richtr Financial Studio.
Aphelion CEO Miguel Ayala and CTO Matthew Travis indicate that these investments will help them continue pushing forward with the development of their suborbital launch vehicle technology demonstrator. They plan to conduct low-altitude suborbital demonstration launches by the end of the year to prove out their green non-toxic, non-cryogenic propulsion technology in flight.
Based on the caliber and background of their board advisors and investors, it is clear that the Aphelion team is positioning to become a strong player in the space industry. Last year, Aphelion announced that Edward Mango, former Program Manager of the NASA Commercial Crew Transportation Program had joined their board of advisors. Mr. Mango is one of the key NASA leaders behind the success of SpaceX. Aphelion also announced that Kevin Rice, former Director of Business Management at NASA Jet Propulsion Laboratory and Lockheed Martin Skunk Works had joined their board of advisors. Mr. Rice practically wrote the book on business management for NASA. In addition, Aphelion announced that Geoff Brim, former VP of Product Management at Deutsche Telekom had joined their board of advisors. Mr. Brim evangelized digital transformation, data science, artificial intelligence, and robotics at Deutsche Telekom.
Now come Aphelion’s visionary investors. Ben West of The Mercury Group is a US Air Force veteran. Before his years in finance, Ben was an F117A and F16 Crew Chief. He is well aware that military fighter jets use hydrazine in their emergency power units. He knows very well that hydrazine is extremely toxic and thus costly and slow to deal with. He is also aware that other uses of hydrazine include spacecraft propulsion. Hearing that Aphelion had developed a propulsion technology that could essentially replace anything hydrazine powered was music to his ears. Ben feels excited to back Aphelion with investment and plans to continue supporting Aphelion along its journey to bring this new technology to market.
Steven Williams, of Founder Advisors advises Aphelion on market strategy. Along with Steven, the Founder Advisors team provides corporate and business strategy advisory to Aphelion. They are composed of accomplished aerospace and tech entrepreneurs and executives like Steven. Some have spent years in launch vehicle development at companies such as Lockheed Martin. These guys truly understand and value the business model that Aphelion is structuring for bundled small satellite integration and launch services.
James Graham, CEO of Richtr Financial Studio, is an ardent supporter of Aphelion’s possibilities. Richtr Financial Studio supports Aphelion with financial and accounting services. They are a powerhouse for startups that are poised for exponential growth. For more information about Aphelion Aerospace, please visit: https://aphelionaerospace.com (Source: PR Newswire)
30 Mar 22. Crane Co. Announces Intention to Separate into Two Independent, Publicly Traded Companies.
- Tax-Free Spin-Off Creates Two Optimized, Technology-Driven Companies with Strong Financial Profiles and Operating Metrics
- Payment and Merchandising Technologies Business to Become “Crane NXT”
- Aerospace & Electronics and Process Flow Technologies Businesses to Retain Crane. Co Name
- Separation Expected to be Completed Within Approximately 12 Months
Crane Co. (NYSE: CR), a diversified manufacturer of highly engineered industrial products, announced today that its Board of Directors has unanimously approved a plan to pursue a separation into two independent, publicly-traded companies to optimize investment and capital allocation, accelerate growth, and unlock shareholder value. Upon completion, Crane Co.’s shareholders will benefit from ownership in two focused and simplified businesses that are both leaders in their respective industries and well-positioned for continued success:
- Crane Co. will be a leading global provider of mission-critical, highly engineered products and solutions, with differentiated technology, respected brands, and leadership positions in its markets. After the separation, Crane Co. will include the Aerospace & Electronics and Process Flow Technologies businesses.
This year, these businesses are expected to generate approximately $1.9bn in annual sales with a pre-corporate Adjusted EBITDA margin of approximately 18.5%. The company will be well-positioned to accelerate organic growth in its large and attractive end markets, benefit from favorable secular trends, and apply its proven processes to drive growth through new product development and commercial excellence. Crane Co. is expected to have a strong, well-capitalized balance sheet underpinning a capital deployment strategy focused on supporting the company’s organic and inorganic strategic growth objectives, while providing a dividend in-line with peers.
Crane Co. will be led by Max Mitchell, who will continue to serve as President and Chief Executive Officer, with Rich Maue continuing to serve as Chief Financial Officer. The company intends to continue to be listed on the NYSE under its current ticker symbol, “CR”.
- Crane NXT will be a premier Industrial Technology business with substantial global scale, a best-in-class margin profile, and strong free cash flow generation. This year, the Payment and Merchandising Technologies (“PMT”) business that will become Crane NXT is expected to achieve approximately $1.4bn in sales with a pre-corporate Adjusted EBITDA margin of approximately 28%.
In addition to its market leading brands, Crane NXT will differentiate itself through its technology leadership, positioning it to leverage long-term secular drivers including automation, security and productivity, across several high-growth adjacent markets.
After the separation, Crane NXT will be positioned to drive earnings growth through continued investment in the business and value-enhancing bolt-on acquisitions. Its balance sheet and strong free cash flow will also allow it to support a robust and differentiated level of capital return to shareholders that is expected to include a competitive dividend.
Crane NXT’s shares are expected to be listed on the NYSE under the ticker symbol “CXT”. A process is currently underway to identify Crane NXT’s chief executive, including evaluation of both internal and external candidates. The executives currently leading Crane’s PMT business will continue to serve in senior positions with Crane NXT.
Compelling Rationale for a Separation
Crane’s Board of Directors and management believe that the creation of two pure-play companies with distinct product and service offerings will better position Crane’s businesses to deliver long-term growth and create value for customers, investors and our associates, with each company benefiting from:
- Deeper operational focus, accountability and flexibility to meet customer requirements;
- Increased operating and financial flexibility to pursue growth opportunities;
- Tailored capital allocation strategies aligned with each company’s distinct business strategies and industry specific dynamics;
- Enhanced ability to attract a shareholder base aligned with each company’s clear value proposition; and,
- Enhanced ability to pursue accretive M&A opportunities, with the benefit of an independent equity currency reflective of the strength of each company.
Mr. Mitchell, Crane Co. President and Chief Executive Officer, stated: “This announcement marks a major milestone in the evolution of Crane Co. For decades, we have delivered consistent and differentiated execution, strengthening our business through organic growth and value-creating acquisitions. Having achieved the scale to operate as two market-leading, separate companies, we believe this transaction will unlock substantial value for our shareholders, as each company attracts an investor base tailored to its respective financial and growth profile.”
“Importantly, after the separation, both companies will retain the key aspects of Crane’s strong culture and management approach, providing a strong foundation for both companies, representing what we are calling the ‘Power of Two.’ This includes our distinctive high-performance culture, our commitment to philanthropy, sustainability and equality, and the cadence and discipline of the Crane Business System.”
The separation is expected to occur through a tax-free distribution of the Aerospace & Electronics and Process Flow Technologies businesses to the Company’s shareholders. Payment & Merchandising Technologies will be renamed Crane NXT concurrent with the separation, and the Aerospace & Electronics and Process Flow Technologies businesses will retain the Crane Co. name. Upon completion of the separation, shareholders will own 100% of the equity in both of the publicly traded companies.
The separation is expected to be completed within approximately 12 months of this announcement, subject to the satisfaction of customary conditions and final approval of the separation by Crane Co.’s Board of Directors. Shareholder approval is not required.
Crane Co. will maintain its current capital deployment policies until the separation is completed.
Additional details of the separation are expected to be announced in the coming months and included in future filings with the SEC, including Board and leadership teams at both companies.
Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel and Goldman Sachs & Co. LLC is acting as the financial advisor for Crane Co. (Source: BUSINESS WIRE)
30 Mar 22. MD Helicopters Enters Into Asset Purchase Agreement with Group Led by Bardin Hill and MBIA Insurance Corporation.
MD Helicopters Continues to Serve Civil and Military Customers as Normal.
Creditor Consortium to Serve as “Stalking Horse Bidder” in Court-Supervised Sale Process and Provide New Capital to Support Operations.
MD Helicopters, Inc. (“MD” or “the Company”) today announced that it has entered into an Asset Purchase Agreement with a creditor consortium led by Bardin Hill and MBIA Insurance Corporation (the “Creditor Consortium”). The Creditor Consortium will acquire nearly all of the Company’s assets and provide new capital to strengthen MD’s financial position and support the Company’s continued ability to manufacture and service its high-performance helicopters. The Company expects to continue its regular course of operations throughout the sale process and remains focused on serving its civil and military customers and working with suppliers as normal.
As part of the transaction process, the Company today filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in Wilmington, Delaware. Doing so provides a forum that will allow for a quick and orderly sale of the Company, with the Creditor Consortium serving as the “stalking horse bidder” in a court-supervised sale process. Accordingly, the proposed transaction with the Creditor Consortium is subject to higher or otherwise better offers, court approval and other customary conditions.
“Since last year, we have been exploring a potential sale of the Company that would enable us to move forward with new ownership to support MD’s continued manufacturing operations and maintenance services long into the future, as well as deleverage our capital structure,” said Alan Carr, Sole Director and Chairman of the Board of MD Helicopters. “After a thorough review of the options available to us, we believe this transaction and court-supervised process will help achieve our objective and create the best path forward for MD and all of our stakeholders. We are as dedicated as ever to meeting our customers’ high expectations no matter the mission, and we appreciate the hard work of our employees as we take this important step to position MD for the future.”
“MD has a storied history in the aerospace industry and a track record of delivering exceptional performance, value and support to its operators,” said Jason Dillow, Chief Executive Officer and Chief Investment Officer of Bardin Hill. “We believe MD is on an exciting growth trajectory, led by a strong management team, state-of-the-art technology, and an established brand. We look forward to working with the MD team in this new chapter for the Company.”
In connection with the proposed sale transaction, the Company has received a commitment of approximately $60 million in debtor-in-possession (“DIP”) financing from accounts managed by Bardin Hill and MB Global Partners. Upon court approval, this new financing, together with cash generated from MD’s ongoing operations, is expected to support the business throughout the sale process.
In conjunction with the Chapter 11 filing, the Company has filed a number of customary motions with the court seeking authorization to continue to support its operations during the court-supervised sale process, including authority to continue, without interruption, paying employee wages and benefits and honoring customer commitments and programs, and authority to pay the existing (i.e. as of the date the cases were commenced) claims of several categories of key vendors consistent with historical practices. (Source: BUSINESS WIRE)
29 Mar 22. L3Harris and Shield Capital Form Strategic Partnership to Accelerate Defense, Commercial Technology Solutions.
- Prioritizes rapid development and fielding of key capabilities to deter near-peer threats
- Accelerates innovation by offering timely funding for disruptive technology
- Expands integration of emerging technology solutions in high customer demand
L3Harris Technologies (NYSE:LHX) and venture capital firm Shield Capital formed a strategic partnership to foster emerging defense and commercial technologies that address customers’ growing requirements for innovative, agile solutions that can be rapidly fielded.
The agreement provides L3Harris access to disruptive innovators for technology transfer, teaming arrangements, direct investments or potential acquisitions and partnered contracts. Working with Shield Capital is part of the company’s strategy to leverage third-party capabilities and make calculated investments to address customers’ most urgent and difficult national security challenges.
“This is in direct response to our customer demands: rapidly deliver game-changing technology that can adapt to stay ahead of global threats,” said Christopher E. Kubasik, Vice Chair and CEO, L3Harris. “Through internal and partnered efforts, we are assessing and pursuing the most meaningful solutions that will impact across domains and deliver compounding effects.”
Kubasik also noted Shield Capital’s National Security Board has unique experience working in the national security space, and their insights will offer significant impact.
“Successfully delivering technology that will offer urgent operational advantages now – and deter enemy aggression in years to come – means you have to work with people who understand evolving threats,” Kubasik said. “The Shield Capital team is steeped in knowledge in these complex matters.”
The partnership further expands L3Harris’ position as a trusted disruptor; a non-traditional prime at the nexus of agile, rapid solution development and proven delivery for complex government programs. In partnership with Shield, L3Harris will quickly identify, fund and then guide technology development and solutions that will solve urgent national security needs.
For Shield Capital, the partnership will accelerate innovation by funneling advanced technology through proven testing, procurement, and delivery processes. It will enable Shield Capital portfolio companies to more quickly develop and deploy new technologies in its core cyber security, artificial intelligence, space sensing and autonomy markets.
“Enabling the U.S. and partner nations to deter conflict requires a convergence of commercial and national security technologies,” said Raj M. Shah, Managing Partner of Shield Capital. “L3Harris is uniquely designed to accomplish this without the typical bureaucracy that inhibits innovation and, ultimately, superiority capabilities. Our collaboration will help us to collectively create new, high-value opportunities and quickly get them into the hands of customers.”
About L3Harris Technologies
L3Harris Technologies is an agile global aerospace and defense technology innovator, delivering end-to-end solutions that meet customers’ mission-critical needs. The company provides advanced defense and commercial technologies across space, air, land, sea, and cyber domains. L3Harris has more than $17bn in annual revenue and 47,000 employees, with customers in more than 100 countries. L3Harris.com.
About Shield Capital
Shield Capital is a Silicon Valley headquartered venture capital firm that supports innovators building solutions for commercial and government customers to secure our future. Shield Capital invests in frontier technologies including cybersecurity, artificial intelligence, autonomy, and space. At SHIELD, the mission matters. Shieldcap.com. (Source: BUSINESS WIRE)
30 Mar 22. Rafael concludes FY 2021 with a high in sales of $3.1bn, a high in orders of $4.7m and a net profit of $133m. Rafael Advanced Defense Systems Ltd. has released its financial results for the 2021 fiscal year as was approved by the company’s Board of Directors, with a total of $3.075bn in sales, and a net profit of $133m. In 2021, Rafael registered over 4.7bn dollars in orders, and its order backlog was 7.1bn dollars, equivalent to 2.5 years of sales activity. For the first time, Rafael incorporated the financial reports of its subsidiaries Aeronautics and Controp.
Rafael’s Chairman, Dr. Uzi Landau: “Rafael succeeded also in the challenging and complex year to continue serving as a key pillar in the country’s security, with a crucial contribution to the IDF and the entire defense establishment. Our investment in R&D and our coveted human resources – our employees – is what allows us to achieve the technological, operational breakthroughs alongside the marketing and business related achievements around the world; For all of the aforementioned, we are grateful and appreciate the work of our employees and partners in Israel and around the world. On behalf of the board of directors, I would like to thank the company’s employees and their families for this successful year.”
Rafael’s President & CEO, Maj. Gen. (Ret.) Yoav Har-Even: “2021 was a very successful year in all industry related aspects which was well demonstrated in the financial achievements recorded even in light of the challenging circumstances; whether it be the impact of the ongoing COVID-19 pandemic on the global economy, the disruption of the global supply chain, or the erosion of the Shekel-to-Dollar exchange rates. Continued investment in restoration and improvements, in the support and recruitment of manpower, the investment in research and development together with the right approach to the marketing and operational issues, allowed us to realize our goals and face the global and national challenges set before us, and will certainly better our ability to operate in light of the security and political situation we are currently experiencing. But more than all else, Rafael is the central anchor of the State of Israel’s national security and a significant contributor to the economy, the society and to employment, especially in the country’s north.
Also this year, we continued to ensure and enable the technical-operational superiority of the IDF and the defense establishment as a whole; which was further reflected in the fact that during Operation Guardian of the Walls, we once again saw the extraordinary commitment, dedication and professionalism of Rafael’s employees. Our employees have been and will continue to be the driving force powering the machine that is the spirit and energy of Rafael.”
29 Mar 22. Elbit Systems Ltd. (“Elbit Systems” or the “Company”) (NASDAQ and TASE: ESLT), the international high technology company, reported today its consolidated results for the fourth quarter and full year ended December 31, 2021.
Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented: “2021 was a solid year for Elbit Systems, and the financial results indicate the sustained demand for our products and systems from customers around the world. Revenues increased by 13% year over year to $5.3bn, and a record backlog of $13.7bn provides us with good visibility.
Elbit Systems’ 2021 results are an outcome of the significant investments we have made in recent years to develop leading technological capabilities and expand our positions in key global defense markets to sustain through cycle growth.
I believe that Elbit Systems is well positioned to benefit from the growth in the defense sector around the world.“
Fourth quarter 2021 results:
Revenues in the fourth quarter of 2021 were $1,494.3m, as compared to $1,377.7m in the fourth quarter of 2020.
Non-GAAP(*) gross profit amounted to $381.1m (25.5% of revenues) in the fourth quarter of 2021, as compared to $363.0m (26.3% of revenues) in the fourth quarter of 2020. GAAP gross profit in the fourth quarter of 2021 was $374.3 m (25.1% of revenues), as compared to $357.8 m (26.0% of revenues) in the fourth quarter of 2020.
Research and development expenses, net were $114.0m (7.6% of revenues) in the fourth quarter of 2021, as compared to $109.1m (7.9% of revenues) in the fourth quarter of 2020.
Marketing and selling expenses, net were $80.8m (5.4% of revenues) in the fourth quarter of 2021, as compared to $81.2m (5.9% of revenues) in the fourth quarter of 2020.
General and administrative expenses, net were $72.4m (4.8% of revenues) in the fourth quarter of 2021, as compared to $62.9m (4.6% of revenues) in the fourth quarter of 2020. The higher level of general and administrative expenses in the fourth quarter of 2021 included the expenses of Sparton Corporation (“Sparton”) which was acquired and consolidated commencing the second quarter of 2021.
Non-GAAP(*) operating income was $120.1m (8.0% of revenues) in the fourth quarter of 2021, as compared to $113.8m (8.3% of revenues) in the fourth quarter of 2020. GAAP operating income in the fourth quarter of 2021 was $107.3m (7.2% of revenues), as compared to $104.6m (7.6% of revenues) in the fourth quarter of 2020.
Financial expenses, net were $19.6m in the fourth quarter of 2021, as compared to $32.5m in the fourth quarter of 2020. The lower level of financial expenses in the fourth quarter of 2021 was mainly a result of exchange rate differences related to the revaluation of lease liabilities.
Other income, net was $9.7m in the fourth quarter of 2021, as compared to other expenses, net of $7.3m in the fourth quarter of 2020.
Taxes on income were $92.2m in the fourth quarter of 2021, as compared to $1.9m in the fourth quarter of 2020. Tax expenses in the fourth quarter of 2021 included a one-time expense of approximately $80.0 m related to the amendment of legislation regarding exempt earnings from “Approved Enterprises” and “Privileged Enterprises” in Israel (“Exempt Earnings”).
Equity in net earnings of affiliated companies and partnerships was $3.1m in the fourth quarter of 2021, as compared to $5.0 m the fourth quarter of 2020.
Non-GAAP(*) net income attributable to the Company’s shareholders in the fourth quarter of 2021 was $94.9m (6.4% of revenues), as compared to $105.0m (7.6% of revenues) in the fourth quarter of 2020. GAAP net income attributable to the Company’s shareholders in the fourth quarter of 2021 was $8.2m (0.5% of revenues), as compared to $67.8m (4.9% of revenues) in the fourth quarter of 2020. The decrease in the fourth quarter of 2021 mainly was a result of the tax expense mentioned in “Taxes on income” above.
Non GAAP(*) diluted net earnings per share attributable to the Company’s shareholders were $2.14 for the fourth quarter of 2021, as compared to $2.38 for the fourth quarter of 2020. GAAP diluted earnings per share attributable to the Company’s shareholders in the fourth quarter of 2021 were $0.18, as compared to $1.53 in the fourth quarter of 2020.
Full year 2021 results:
Revenues for the year ended December 31, 2021 were $5,278.5m, as compared to $4,662.6m in the year ended December 31, 2020. The majority of the revenues in 2021 were in the Airborne systems and C4ISR systems areas of operation. The increase in revenues in the area of Airborne systems was mainly a result of sales of airborne precision guided munitions in Asia-Pacific. The growth in revenues in the C4ISR systems area was mainly due to Sparton, a U.S. subsidiary acquired and consolidated in the Company’s results from the second quarter of 2021. On a geographic basis, the increase in North America was mainly a result of higher sales of airborne systems and Sparton’s products, as well as growth in sales of medical instrumentation. The increase in Asia-Pacific was due to sales of airborne precision guided munitions.
Cost of revenues for the year ended December 31, 2021 was $3,920.5m (74.3% of revenues), as compared to $3,497.5m (75.0% of revenues) in the year ended December 31, 2020. Cost of revenues in 2020 included non-cash expenses of approximately $60.0m, related to impairment of assets and inventory write-offs due to the impact of COVID-19.
Non-GAAP(*) gross profit for the year ended December 31, 2021 was $1,384.7m (26.2% of revenues), as compared to $1,247.2m (26.7% of revenues) in the year ended December 31, 2020. GAAP gross profit in 2021 was $1,358.0m (25.7% of revenues), as compared to $1,165.1m (25.0% of revenues) in 2020.
Research and development expenses, net for the year ended December 31, 2021 were $395.1m (7.5% of revenues), as compared to $359.7m (7.7% of revenues) in the year ended December 31, 2020.
Marketing and selling expenses, net for the year ended December 31, 2021 were $291.8m (5.5% of revenues), as compared to $290.7m (6.2% of revenues) in the year ended December 31, 2020.
General and administrative expenses, net for the year ended December 31, 2021 were $267.4m (5.1% of revenues), as compared to $223.9m (4.8% of revenues) in the year ended December 31, 2020. The increase in general administrative expenses in 2021 was mainly as a result of general and administrative expenses related to the acquisition and consolidation of Sparton in the Company’s results as of the second quarter of 2021.
Other operating income, net for the year ended December 31, 2021 amounted to $14.7m, as compared to $35.0m for the year ended December 31, 2020. Other operating income in 2021 resulted mainly from capital gain related to the sale of a building by a subsidiary in Israel. Other operating income in 2020 was mainly a result of capital gain related to the sale and lease back of buildings by a subsidiary in the U.S.
Non-GAAP(*) operating income for the year ended December 31, 2021 was $450.8m (8.5% of revenues), as compared to $390.1m (8.4% of revenues) in the year ended December 31, 2020. GAAP operating income in 2021 was $418.5m (7.9% of revenues), as compared to $325.7 m (7.0% of revenues) in 2020, which included non-cash expenses of approximately $60 m related to impairment of assets and inventory write-offs due to the impact of Covid-19.
Financial expenses, net for the year ended December 31, 2021 were $40.4m, as compared to $71.3m in the year ended December 31, 2020. Financial expenses, net in 2021 included a gain from changes in fair value of financial assets of approximately $18.8m. Financial expenses, net in 2021 and 2020 included expenses of approximately $10.2 and $33.4m, respectively, related to revaluation of lease liabilities and exchange rate differences.
Other income, net was $5.3m in 2021, as compared to other income, net of $7.4m in 2020. Other income, net in 2021 and 2020, resulted mainly from revaluation of holdings in affiliated companies, net of expenses related to non-service costs of pension plans.
Taxes on income for the year ended December 31, 2021 were $131.4m (effective tax rate of 34.3%), as compared to $36.4 m (effective tax rate of 13.9%) in the year ended December 31, 2020. Taxes on income in 2021 included a one-time expense of approximately $80.0m related to the “release” of Exempt Earnings. Taxes on income in 2020 were reduced by a tax benefit related to adjustments for prior years following a tax settlements of the Company and some of its subsidiaries in Israel with the Israeli tax authorities.
Equity in net earnings of affiliated companies and partnerships for the year ended December 31, 2021 was $22.6m, which included a gain of approximately $10.9 m related to the sale of affiliated company, as compared to $12.6m in the year ended December 31, 2020.
Non-GAAP(*) net income attributable to the Company’s shareholders for the year ended December 31, 2021 was $367.6m (7.0% of revenues), as compared to $318.5m (6.8% of revenues) in the year ended December 31, 2020. GAAP net income attributable to the Company’s shareholders in the year ended December 31, 2021 was $274.4m (5.2% of revenues), as compared to $237.7m (5.1% of revenues) in the year ended December 31, 2020.
Non-GAAP(*) diluted net earnings per share attributable to the Company’s shareholders for the year ended December 31, 2021 were $8.30, as compared to $7.20 for the year ended December 31, 2020. GAAP diluted net earnings per share attributable to the Company’s shareholders in the year ended December 31, 2021 were $6.20, as compared to $5.38 in the year ended December 31, 2020.
Backlog of orders for the year ended December 31, 2021 totaled $13,661m, as compared to $11,024m as of December 31, 2020. Approximately 72% of the current backlog is attributable to orders from outside Israel. Approximately 60% of the current backlog is scheduled to be performed during 2022 and 2023.
Net cash provided by operating activities in the year ended December 31, 2021 was $416.9m, as compared to $278.8m in the year ended December 31, 2020. The higher level of operating cash flow in 2021 was mainly a result of payment of outstanding debts by customers, mainly the Israeli Ministry of Defense, as well as higher advances received from customers, mainly in Israel and Europe.
Impact of the Covid-19 Pandemic on the Company:
The Coronavirus disease 2019 (Covid-19) was declared a pandemic by the World Health Organization in March 2020. Covid-19 has had significant negative impacts on the worldwide economy, resulting in disruptions to supply chains and financial markets, significant travel restrictions, facility closures and shelter-in place orders in various locations. Such disruptions also led to global shortages of electronics and other components, increased costs and extended lead times. Elbit Systems is closely monitoring the evolution of the Covid-19 pandemic and its impacts on the Company’s employees, customers and suppliers, as well as on the global economy.
As we last reported on November 23, 2021, we have been taking a number of actions to protect the safety of our employees as well as maintain business continuity and secure our supply chain. We also reported on a number of activities where we are leveraging our technological capabilities to assist hospital staffs and other first responders protecting our communities from the impact of the pandemic. All of these actions remain ongoing.
We have implemented a series of cost control measures to help limit the financial impact of the pandemic on the Company, in parallel to the measures we are taking to maintain business continuity and deliveries to our customers. We also are working on efficiency initiatives with a number of our suppliers. We continue to evaluate our operations on an ongoing basis in order to adapt to the evolving business environment.
During 2020 and 2021 our defense activities, which account for most of our business, were not materially impacted by the pandemic, although some of our businesses experienced certain disruptions due to government directed safety measures, travel restrictions and supply chain delays.
We believe that as of December 31, 2021, Elbit Systems had a healthy balance sheet, adequate levels of cash and access to credit facilities that provide liquidity when necessary. We have given high priority to cash management and adequate cash reserves to run the business.
The extent of the impact of Covid-19 on the Company’s performance depends on future developments including the duration and spread of the pandemic, the measures adopted by governments to limit the spread of the pandemic, including implementation of vaccinations, and resulting actions that may be taken by our customers and our suppliers, all of which contain uncertainties. As will be noted in our annual report on Form 20-F for 2021 that will be filed in April 2022, the preparation of financial reports requires us to make judgments, assumptions and estimates that affect the amounts reported. For our financial results for the quarter and the year ended December 31, 2021, we considered the economic impact of the Covid-19 pandemic on our critical and significant accounting estimates. The expected impact of the Covid-19 pandemic did not have a material effect on our judgments, assumptions and estimates reflected in the results. However, our future results may differ materially from our estimates. As events continue to evolve in connection with the Covid-19 pandemic, the estimates we use in future periods may change materially.
Potential Impact of Increase in Company’s Share Price on Employee Compensation Plan Costs:
Over the last several weeks, there has been a significant increase in the price of the Company’s shares. Should such share price levels continue, or further increase, there would be a significant impact on the costs to the Company under its various stock price linked compensation plans for employees.
29 Mar 22. Defence stocks rally to continue as ESG issues fade, says Citigroup. Defence activities look “unlikely to be excluded” from the EU Social Taxonomy. Defence stocks look set to rally further as environmental, social, and governance (ESG) concerns take a back seat.
Investment bank Citigroup said there has been “a material shift in ESG consensus,” with the outbreak of war alerting European governments and investors to the important role defence companies play in “protecting liberal democracies and their values.”
Additionally, defence activities look ‘”unlikely to be excluded” from the EU Social Taxonomy, except for the manufacturing of some controversial weapon types.
The Taxonomy is a classification system that establishes social activities, determining whether an activity or company is viewed as ‘social’.
Citigroup said that it expects the “realisation of the social value of the defence industry to crystallise and become increasingly recognised” moving forward.
Shares in UK sector leader BAE Systems PLC (LSE:BA.) have risen by about 15% since the invasion of Ukraine.
28 Mar 22. SAIC Announces Fourth Quarter and Full Fiscal Year 2022 Results.
- Q4 revenues of $1.8bn, 4% growth; FY22 revenues of $7.4 bn, 5% growth
- Q4 adjusted EBITDA(1) as a % of revenues of 8.2%; 9.3% for fiscal year 2022
- Q4 diluted earnings per share: $0.76; adjusted diluted earnings per share(1): $1.50
- Book to bill of 1.2 for the fourth quarter; 1.3 for fiscal year 2022; backlog strong at $24.1bn
- Repurchased $211m of shares in FY22, representing 4% of diluted shares
Science Applications International Corporation (NYSE: SAIC), a premier Fortune 500® technology integrator driving our nation’s digital transformation across the defense, space, civilian, and intelligence markets, today announced results for the fourth quarter and full fiscal year ended January 28, 2022.
“I am proud of the team’s performance in fiscal year 2022 with financial results reflecting our commitment to the mission while delivering value to shareholders,” said Nazzic Keene, SAIC Chief Executive Officer. “Our focus to begin fiscal year 2023 is on positioning our portfolio to maximize value for all stakeholders. The outlook we are providing demonstrates our ability to increase free cash flow and capital returns.
Fourth Quarter Summary Results
Revenues for the quarter increased $65m compared to the prior year quarter primarily due to ramp up on new and existing contracts and the acquisition of Halfaker and Associates (Halfaker), partially offset by contract completions. Excluding acquired revenues, revenues increased by 1.4% primarily due to new business supporting the U.S. Army.
Operating income as a percentage of revenues decreased to 4.8% for the three months ended January 28, 2022 as compared to 5.9% in the comparable prior year period primarily due to higher acquisition and integration costs related to Halfaker and less favorable net contract adjustments, partially offset by benefit from a net favorable settlement of prior indirect rate years.
Adjusted EBITDA(1) as a percentage of revenues for the quarter was 8.2%, compared to 9.3% for the prior year quarter due to less favorable net contract adjustments and higher indirect costs in the current year, partially offset by a benefit from a net favorable settlement of prior indirect rate years.
Diluted earnings per share for the quarter was $0.76 compared to $1.05 in the prior year quarter. Adjusted diluted earnings per share(1) was $1.50 for the quarter compared to $1.67 in the prior year quarter. The weighted-average diluted shares outstanding during the quarter decreased to 57.4 m shares from 59.0m during the prior year quarter.
Fiscal Year 2022 Summary Results
Revenues for the fiscal year increased $338m compared to the prior year, due to ramp up on new and existing contracts, the acquisitions of Unisys Federal (which occurred in the first quarter of the prior year period) and Halfaker, net favorable changes in contract estimates, and the accelerated amortization on certain off-market liability contracts, partially offset by contract completions. Adjusting for the impact of acquired revenues and divested revenues, revenues grew 2.5% primarily due to new awards and net increases in program volume.
Operating income as a percentage of revenues for the fiscal year was 6.2%, an increase from 5.5% of revenues in the prior fiscal year. The increase in operating margin was primarily due to improved profitability across our contract portfolio, net favorable changes in contract estimates, benefit from a net favorable settlement of prior indirect rate years, and the accelerated amortization on certain off-market liability contracts, partially offset by higher indirect costs in the current year and gains related to the resolution of certain legal and other program contract matters in the prior year.
Adjusted EBITDA(1) as a percentage of revenues for the fiscal year increased to 9.3%, compared to 8.9% in the prior fiscal year. The increase was driven by profitability across our existing contract portfolio, net favorable changes in contract estimates, benefit from a net favorable settlement of prior indirect rate years, and revenue resulting from the accelerated amortization on certain off-market liability contracts, partially offset by higher indirect costs in the current year and gains related to the resolution of certain legal and other program contract matters in the prior year.
Diluted earnings per share for the year was $4.77 compared to $3.56 in the prior year. Adjusted diluted earnings per share(1) was $7.27 for the year compared to $6.27 in the prior year. The weighted-average diluted shares outstanding during the year decreased to 58.1m shares from 58.7m shares during the prior year.
(1)Non-GAAP measure, see Schedule 5 for information about this measure
Cash Generation and Capital Deployment
Total cash flows provided by operating activities for the fourth quarter were $103m. The $50m increase in cash provided by operating activities compared to the prior year period was primarily due to a net decrease in working capital.
Total cash flows provided by operating activities for the year were $518m, a decrease of $237 m from the prior year, primarily due to higher cash provided by the MARPA Facility in the prior year ($170m), when we initially entered into the facility, and working capital impact related to the deferred payroll taxes associated with the CARES Act, partially offset by lower cash paid for income taxes and higher net earnings.
During the quarter, SAIC deployed $102m of capital, consisting of $72m of plan share repurchases, $21m in cash dividends, and $9 m of capital expenditures. In addition, SAIC made $35m of voluntary term loan repayment in the fourth quarter. For the year, SAIC deployed $333m of capital, consisting of plan share repurchases of $211m (approximately 2.4m shares), cash dividends of $86m, and $36m of capital expenditures.
(Source: BUSINESS WIRE)
25 Mar 22. G.S. Precision, a Portfolio Company of AE Industrial Partners, Acquires SMC Aerospace. G.S. Precision, Inc. (“GSP”), a leading manufacturer of complex, high-precision components and specialty hardware used primarily in aerospace engines and defense systems, announced today that it acquired SMC Aerospace (“SMC” or “the Company”), a provider of highly engineered tubes and machined components for the aerospace and defense industries. Terms of the transaction were not disclosed.
GSP is a portfolio company of AE Industrial Partners (“AEI”), a U.S.-based private equity firm specializing in aerospace, defense & government services, space, power & utility services, and specialty industrial markets. SMC represents GSP’s first add-on acquisition since being acquired by AEI. For more than 50 years, SMC has served as a critical supplier of highly engineered hydraulic and fuel tubes, utilizing state-of-the-art machinery and processes to manufacture flight-critical components primarily for the aircraft engine market. SMC operates out of two New Hampshire-based facilities in Laconia. SMC’s CEO Mark McCarthy will remain with the company and help integrate the business into GSP.
“SMC Aerospace is a perfect fit with G.S. Precision, both in terms of corporate culture and its complex tube manufacturing capabilities,” said Matt O’Connell, CEO of GSP. “The acquisition of SMC extends our reach within the aerospace industry at a time when demand for these capabilities is only going to increase, enabling us to better serve our customers’ needs. We welcome Mark and the SMC team.”
“As a family-owned company for more than 50 years, we were committed to finding a partner who understood our business and culture, which we found in both GSP and AEI,” said Mr. McCarthy. “Joining forces with GSP is a win-win for both companies’ customers by bringing more high-end capabilities, depth of experience, and entrenched knowhow to meet their needs. We are eager to work together to further build our business.”
About G.S. Precision
Based in Brattleboro, VT, G.S. Precision is a leading manufacturer of complex, high precision components and specialty hardware used in a variety of mission critical aerospace and defense applications. For more than 60 years, the Company has utilized state of the art, proprietary manufacturing processes and technologies to deliver a diverse set of components, used in both new production and the aftermarket. For more information, please visit www.gsprecision.com.
About AE Industrial Partners
AE Industrial Partners is a private equity firm specializing in aerospace, defense & government services, space, power & utility services, and specialty industrial markets. AE Industrial Partners invests in market-leading companies that can benefit from its deep industry knowledge, operating experience, and relationships throughout its target markets. AE Industrial Partners is a signatory to the United Nations Principles for Responsible Investment and the ILPA Diversity in Action initiative. Learn more at www.aeroequity.com. (Source: PR Newswire)
24 Mar 22. UK CMA finishes reviewing Parker Hannifin’s bid for Meggitt. The UK Competition and Markets Authority (CMA) has completed its assessment of whether Parker Hannifin Corporation’s proposed acquisition of Meggitt raises national security concerns, according to the government. UK Secretary of State for Business, Energy, and Industrial Strategy Kwasi Kwarteng, who requested the review in October 2021, will consider the CMA’s findings before deciding on next steps, including whether the acquisition should receive further scrutiny or be approved with conditions, a government spokesperson said on 22 March. While Kwarteng has not indicated what national security concerns might exist, Parker is headquartered in the United States and Meggitt is based in the United Kingdom. Parker has proposed paying GBP6.3bn (USD8.3bn) for Meggitt, saying the two aerospace suppliers could better serve their customers by combining their complementary portfolios. Both companies make motion and control systems. In January 2022, the CMA completed a similar Kwarteng-requested review of Cobham Group’s proposed acquisition of Ultra Electronics. Kwarteng is weighing those findings as well. (Source: Janes)
TCI International, Inc., is a wholly-owned subsidiary of SPX Corporation. TCI provides turn-key solutions for spectrum management and monitoring, direction finding, geolocation and communications intelligence to civilian, government, military and intelligence agencies as well as antennas for communications and high-power radio broadcasting. TCI is headquartered in Fremont, California, USA. For more information, visit www.tcibr.com.