This week, the House on Friday passed a $642 billion defense bill that abandons the deficit-cutting agreement that President Obama and congressional Republicans backed last summer. After a 299-120 vote, lawmakers backed the spending blueprint that adds $8 billion for the military for next year. The bill calls for a missile defense site on the East Coast that the military opposes and restricts the ability of the President to reduce the arsenal of nuclear weapons under a 2010 treaty with Russia. It also preserves ships and aircraft that the Pentagon wanted to retire in a cost-cutting move. In addition, lawmakers rejected the military’s request for another round of domestic base closings.
The spending blueprint calls for money for aircraft, ships, weapons, $88.5 billion for the war in Afghanistan and a 1.7% pay raise for military personnel, billions of dollars more than Obama proposed. The bill snubs the Pentagon’s budget that was based on a new military strategy shifting focus from the Iraq and Afghanistan wars to future challenges in Asia, the Mideast and in cyberspace. The bill spares aircraft and ships slated for retirement, slows the reduction in the size of the Army and Marine Corps and calls for construction of a new missile defense site on the East Coast. The bill also includes new funding (opposed by Defense Secretary Leon Panetta) for certain tank upgrades, additional submarines, long-range bomber development and Air Force drones.
Under the terms of a deficit reduction deal reached last year by administration and congressional leaders, defense spending is set to be cut by roughly $450 billion over the next decade. The Pentagon could also be on the hook for about half of $1.2 trillion in additional savings over the next 10 years if Congress fails to come up with an alternative deficit reduction plan. The effort to stick to last year’s deficit-cutting pact and cut $8 billion from the bill failed on Friday after a 252-170 vote.
American Science and Engineering, Inc. (Down 27.7%) – Shares traded down this week after AS&E released results for the fourth quarter and fiscal year ended March 31, 2012. The Company reported revenues of $203.5 million as compared with record revenues of $278.6 million for the prior fiscal year; net income was $21.4 million as compared with record net income of $42.8 million for fiscal year 2011, representing a year-over-year decline of 50%.
Lakeland Industries, Inc. (Down 25.1%) – Shares traded down this week after the company announced that it received notice of an unfavorable arbitration award in the arbitration proceeding in Brazil involving the Company and two former officers of Lakeland Brasil. In the arbitration proceeding, the former officers sought a determination that they were terminated by the Company without cause and, therefore, entitled to be paid their portion of the Maximum SPP and the monthly remuneration that they would have been paid from the date of termination through the end of their contractual employment period on December 31, 2011. On May 8, 2012, the Company received the arbitration decision which accepted the former officers’ requests.
CAE announced that it has acquired Oxford Aviation Academy (“OAA”), a provider of aviation training and crew sourcing services for C$314 million. This acquisition is meant to strengthen CAE’s leadership and global reach in civil aviation training by increasing its training center footprint, growing its Ab-Initio flight training network, and extending its portfolio by adding OAA’s Parc Aviation, a global leader in pilot and maintenance crew sourcing for airlines and leasing companies. The Company had revenues of approximately C$280 million during CAE’s fiscal year 2012 and the purchase price represents approximately 9 times OAA’s EBITDA during the same period. The acquisition is expected to be accretive to CAE’s earnings in fiscal year 2014.
The Jordan Company, L.P. has agreed to acquire VT Services, Inc., the Babcock International Group U.S. defense business for $98.8 million. VT, Services Inc. is an engineering support and facilities management business. The business was acquired as part of Babcock’s acquisition of VT Group plc, which was completed in July 2010. The division’s last reported revenue was approximately $324.1 million. The disposal is expected to complete by the end of June 2012.