Defense Contracting Opportunities in Military Vehicle Refurbishment
Defense Stocks Covered: Raytheon (NYSE:RTN), Northrop Grumman (NYSE:NOC), Lockheed Martin (NYSE:LMT), Boeing (NYSE:BA), AeroVironment (NASDAQ:AVAV), General Dynamics (NYSE:GD), Optex Systems (OTCBB: OPXS)
POINT ROBERTS, Wash., DELTA, B.C. –August 17, 2009 – www.HomelandDefenseStocks.com, a leading global investor and industry portal for the defense and security sector, within Investorideas.com, presents, a defense industry overview, ‘Defense Contracting Opportunities in Military Vehicle Refurbishment’, by Lisa Springer, CFA.
Defense Contracting Opportunities in Military Vehicle Refurbishment
Defense Stocks Covered : Raytheon (NYSE:RTN), Northrop Grumman (NYSE:NOC), Lockheed Martin (NYSE:LMT), Boeing (NYSE:BA), AeroVironment (NASDAQ:AVAV), General Dynamics (NYSE:GD), Optex Systems (OTCBB: OPXS)
Defense Contracting Opportunities in Military Vehicle Refurbishment
Consistent with the changes signaled in the 2010 defense budget back in April, the Pentagon has begun cancelling contracts on a number of big ticket programs covering untested technologies. A case in point is the Kinetic Energy Interceptor program. Work contracts on the KEI laser, a technology for shooting down missiles in mid-flight, have been canceled by the Pentagon. Raytheon (NYSE:RTN), a contractor on the KEI program, lost $2.4 billion from backlog because of the cancellation while backlog for lead contractor Northrop Grumman (NYSE:NOC) fell by $5.1 billion as a result.
Lockheed Martin (NYSE:LMT) experienced a $2.6 billion reduction in backlog because of the cancellation of its contracts for high-tech helicopters and Transformational Satellite Communications systems. Boeing (NYSE:BA) received a partial termination order covering the manned ground vehicle component of the Future Combat Systems (FCS) program and subsequently reduced its FCS program workforce by 30%. FCS program cuts were cited as a reason Standard and Poor’s downgraded Boeing’s debt rating in July.
Massive spending cuts in the Army’s $200 billion FCS program were a major change in the 2010 defense budget but came as a surprise to few defense industry insiders. The intent of the FCS program, with its eight ground vehicles, was to design, test and produce the next-generation of tanks, cannons and infantry carriers to augment the U.S. military’s existing fleet of Abrams tanks and Bradley and Stryker ground vehicles. Proponents argued that FCS high-tech combat vehicles would be lighter, more maneuverable and better-suited to 21st century warfare than their predecessors. When the new vehicles were tested under actual combat conditions, however, the results were disappointing. The new vehicles were indeed faster and more maneuverable, but their light armor made them too fragile. Many were quickly destroyed or severely damaged by road-side bombs. Some pieces of the FSC program, such as ground robots and unmanned drones, did perform well in combat and continue to be funded. This was good news for AeroVironment (NASDAQ:AVAV), a supplier of unmanned military drones, which was able to beat analyst estimates in fiscal 2009 and projects at least 18% revenue growth in fiscal 2010.
General Dynamics (NYSE:GD) and a few other defense contractors that support existing military vehicle platforms are emerging as winners from the 2010 defense budget.. With the development of new platforms on-hold, Abrams tanks and Bradley and Stryker ground vehicles are likely to remain in use by the U.S. military for many more years. General Dynamics designed the Abrams tank and has produced more than 8,800 M1 and M1A1 Abrams tanks since the program’s inception in the early 1980s. General Dynamics also supplies Stryker combat vehicles and to-date has delivered 2,852 of these vehicles to seven separate Army Stryker brigades. British defense contractor BAE Systems developed the Bradley ground vehicle and has supplied more than 6,700 Bradley vehicles to the U.S. military since the early 1980s.
Instead of new vehicles, the U.S. Army is investing in upgrades and refurbishments to its aging military vehicle fleet. In July, the U.S. Army Tank Automotive Command (TACOM) awarded General Dynamics a contract potentially valued at $55.2 million to refurbish 330 Stryker infantry combat vehicles. Under the terms of the contract, General Dynamics will service, repair and upgrade Stryker vehicles returning from Iraq, restore them to like-new condition and prepare them in advance of their next deployment. This refurbishment work is long overdue; the Army’s fleet of Stryker vehicles has accumulated more than six million miles of use since 2003. The July refurbishment contract covers less than 15% of the Stryker fleet, suggesting more refurbishment contacts are likely to be awarded in the future.
Defense contractor Optex Systems (OTCBB: OPXS) should also benefit from refurbishment contract awards since it supplies General Dynamics with weapon optical sighting systems. The company provides optical sighting systems for Abrams tanks and Bradley fighting vehicles and its optical systems have been selected for installation on Stryker vehicles. In July, a General Dynamics business unit awarded Optex a $3.4 million contract to supply high-tech ICWS (Improved Commander’s Weapon Station) periscopes for Abrams tanks. Optex will begin delivering the periscopes in 2011 with delivery continuing through 2012.
Its strong relationships with major defense contractors such as General Dynamics provides Optex with high visibility in the defense contracting market, as evidenced by the company’s recent invitation to participate in the 2nd Annual Heavy Vehicle Summit this September. This event is the leading forum for developers of new technologies for heavy military vehicles such as the Abrams and Bradley. New contracts such as the one awarded in July improve Optex’s order flow and backlog and helped support a greater than 50% year-over-year improvement in revenues during the fiscal nine-month period that ended this June.
Lisa Springer Bio/ Disclaimer: http://www.investorideas.com/About/Lisa-Springer-CFA/
Additional Defense articles by Lisa Springer:
Defense Budget Winners and Losers:
How Defense Companies Boeing (NYSE:BA), Northrop Grumman (NYSE:NOC), General Dynamics (NYSE:GD), Optex Systems Holdings, Inc. (OTCBB:OPXS) and others are Impacted
Optex Systems Holdings, Inc. (OTCBB: OPXS) is a featured defense stock and showcase company on Investor Ideas defense investor portals, Homelandefensestocks.com, BorderandPortsecurity.com and http://www.nationalhomelandsecurityknowledgebase.com
Visit Optex Systems Holdings, Inc. (OTCBB: OPXS) Company Profile: http://www.investorideas.com/CO/OPTEX/
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Source: HomelandDefenseStocks.com, Investor Ideas, Optex Systems Holdings Inc. (OTCBB: OPXS)
Monday, August 17, 2009
Thursday, August 13, 2009
Defense Stocks News -Optex Systems (OTCBB:OOXS) Reports Improved Fiscal Third Quarter Financial Results
Defense Stocks News -Optex Systems (OTCBB:OOXS) Reports Improved Fiscal Third Quarter Financial Results
RICHARDSON, Texas, Aug. 13, 2009 -- Optex Systems Holdings, Inc. (OTCBB: OPXS.OB), a leading manufacturer of optical sighting systems and assemblies primarily for Department of Defense applications, today announced strong financial results for the Company's fiscal third quarter ended June 28, 2009.
For this period, the Company recorded increased revenues of $6.9 million as compared to revenues during the same period one year ago of $3.9 million, representing an increase of approximately 77%. During the nine months ended June 28, 2009, we recorded revenues of $21.0 million, as compared to revenue for the nine months ended June 28, 2008 of $13.9 million, an increase of $7.1 million or 51%. Revenues were up significantly across all product lines in the three months ended June 2009 as compared to the comparable period in 2008. Sales of the Company's periscope product lines increased significantly due to higher demand from General Dynamics.
During the quarter ended June 28, 2009, the Company recorded cost of goods sold of $6.4 million as opposed to $2.9 million during the quarter ended June 29, 2008, an increase of $3.5 million or 82.6%. This increase in cost of goods sold was primarily associated with increased revenue on certain of Company's lines in support of higher backlog and accelerated delivery schedules, in addition to increased non-cash intangible amortization charges resulting from the acquisition of Optex - Texas assets from Irvine Sensors Corporation on October 14, 2008.
The gross margin during the quarter ended June 28, 2009 was 8.6% of revenues as compared to a gross margin of 25.6% for the quarter ended June 29, 2008. Product margins decreased substantially to 15.7% for the quarter ended June 28, 2009 versus 25.6% for the quarter ended June 29, 2008 due to a shift in third quarter revenue mix toward less profitable contracts combined with increased labor costs related to the reallocation of labor from general and administrative expenses to manufacturing overhead in 2009. Margins were further impacted by higher non-cash intangible amortization charges allocable to cost of goods sold of $0.4 million, and increased reserves for valuations and warranties of $0.1 million, for a total of 7.1% of revenues in the quarter ended June 28, 2009, resulting in an overall increase in cost of goods sold of 7.1% in the quarter ended June 28, 2009.
During the three months ended June 28, 2009, the Company recorded a loss of $0.3 million, versus a $0.2 million loss during the three months ended June 29, 2008. The loss from operations includes a $0.4 million increase in non-cash amortization of intangible assets as a result of the October 14, 2008 acquisition of the Company from Irvine Sensors Corporation.
Danny Schoening, COO of the Company, commented, "We have experienced substantial improvement in our EBITDA over our prior year performance. Compared to 2008, Optex has increased its EBITDA by $2.4 million in the nine months ended June 28, 2009. This increase in EBITDA is primarily due to increased revenue and lower general and administrative costs. It is our goal and expectation that this trend will continue over the next 12 months as our product mix shifts towards more profitable programs, our non-cash amortization of intangible expenses decreases and we continue to pursue cost reductions."
During the three and nine months ended June 28, 2009, Optex revenues on legacy periscope programs increased significantly over the prior year while margins decreased. The legacy periscope contracts were awarded January 2003, and due to significant material price increases subsequent to the contract award date, the company is experiencing a loss on these contracts. It is expected that product margins on the Company's periscopes will increase over the next 12 months as some of the unprofitable legacy programs are completed and are replaced with potentially profitable new awards. Optex expects that the revenue on the legacy periscope programs will decrease in the last quarter of 2009, at which point it is anticipated that operating margins will increase significantly.
Optex is aggressively pursuing additional, potentially higher margin periscope business, including the May 2009 award of a multi-year Indefinite Delivery/Indefinite Quantity (IDIQ) type contract followed by the first delivery order from the U.S. Army's Tank-Automotive and Armaments Command (TACOM) division. If all government forecasted delivery orders against this IDIQ contract are awarded and if the Company were to share equally with the other supplier in the awarded releases, the total value of the contract to Optex could be valued at approximately $7.5 million over the next three years.
The complete third quarter report, including management's discussion and analysis, financial statements, and notes can be found on the Securities Exchange Commission's website at http://www.sec.gov/.
ABOUT OPTEX SYSTEMS
Optex, which was founded in 1987, is a Richardson, Texas-based ISO 9001:2008 certified concern, which manufactures optical sighting systems and assemblies primarily for Department of Defense (DOD) applications. Its products are installed on a majority of types of U.S. military land vehicles, such as the Abrams and Bradley fighting vehicles, Light Armored and Advanced Security Vehicles and have been selected for installation on the Stryker family of vehicles. Optex also manufactures and delivers numerous periscope configurations, rifle and surveillance sights and night vision optical assemblies. Optex delivers its products both directly to the military services and to prime contractors. For additional information, please visit the Company's website at http://www.optexsys.com/.
Safe Harbor Statement
This Press Release and other written reports and oral statements made from time to time by the Company may contain so-called "forward-looking statements," all of which are subject to risks and uncertainties. You can identify these forward-looking statements by their use of words such as "expects," "plans," "will," "estimates," "forecasts," "projects" and other words of similar meaning. You can identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address the Company's growth strategy, financial results and product and development programs. You must carefully consider any such statement and should understand that many factors could cause actual results to differ from the Company's forward-looking statements. These factors include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially.
The Company does not assume the obligation to update any forward-looking statement. You should carefully evaluate such statements in light of factors described in the Company's filings with the SEC, especially on Forms 10-K, 10-Q and 8-K. In various filings the Company has identified important factors that could cause actual results to differ from expected or historic results. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete list of all potential risks or uncertainties.
Contact:
ZA Consulting Inc.
David Zazoff
212.505.5976
116 West 23rd St.
Suite 500
New York, NY 10011
Source: Optex Systems Holdings, Inc.
Optex Systems Holdings Inc. (OTCBB:OPXS) is a featured defense stock and showcase company on Investor Ideas defense investor portals, Homelandefensestocks.com, BorderandPortsecurity.com and http://www.nationalhomelandsecurityknowledgebase.com/
Disclaimer/Discloscure: click here
Research Global Defense stocks with the defense stocks directory: click here
Visit Optex Systems Holdings Inc. (OTCBB:OPXS) Company Profile click here
Research defense stocks with the global defense stocks directory at Investorideas.com
click here:
http://www.investorideas.com/Companies/HomelandDefense/Stock_List.asp
RICHARDSON, Texas, Aug. 13, 2009 -- Optex Systems Holdings, Inc. (OTCBB: OPXS.OB), a leading manufacturer of optical sighting systems and assemblies primarily for Department of Defense applications, today announced strong financial results for the Company's fiscal third quarter ended June 28, 2009.
For this period, the Company recorded increased revenues of $6.9 million as compared to revenues during the same period one year ago of $3.9 million, representing an increase of approximately 77%. During the nine months ended June 28, 2009, we recorded revenues of $21.0 million, as compared to revenue for the nine months ended June 28, 2008 of $13.9 million, an increase of $7.1 million or 51%. Revenues were up significantly across all product lines in the three months ended June 2009 as compared to the comparable period in 2008. Sales of the Company's periscope product lines increased significantly due to higher demand from General Dynamics.
During the quarter ended June 28, 2009, the Company recorded cost of goods sold of $6.4 million as opposed to $2.9 million during the quarter ended June 29, 2008, an increase of $3.5 million or 82.6%. This increase in cost of goods sold was primarily associated with increased revenue on certain of Company's lines in support of higher backlog and accelerated delivery schedules, in addition to increased non-cash intangible amortization charges resulting from the acquisition of Optex - Texas assets from Irvine Sensors Corporation on October 14, 2008.
The gross margin during the quarter ended June 28, 2009 was 8.6% of revenues as compared to a gross margin of 25.6% for the quarter ended June 29, 2008. Product margins decreased substantially to 15.7% for the quarter ended June 28, 2009 versus 25.6% for the quarter ended June 29, 2008 due to a shift in third quarter revenue mix toward less profitable contracts combined with increased labor costs related to the reallocation of labor from general and administrative expenses to manufacturing overhead in 2009. Margins were further impacted by higher non-cash intangible amortization charges allocable to cost of goods sold of $0.4 million, and increased reserves for valuations and warranties of $0.1 million, for a total of 7.1% of revenues in the quarter ended June 28, 2009, resulting in an overall increase in cost of goods sold of 7.1% in the quarter ended June 28, 2009.
During the three months ended June 28, 2009, the Company recorded a loss of $0.3 million, versus a $0.2 million loss during the three months ended June 29, 2008. The loss from operations includes a $0.4 million increase in non-cash amortization of intangible assets as a result of the October 14, 2008 acquisition of the Company from Irvine Sensors Corporation.
Danny Schoening, COO of the Company, commented, "We have experienced substantial improvement in our EBITDA over our prior year performance. Compared to 2008, Optex has increased its EBITDA by $2.4 million in the nine months ended June 28, 2009. This increase in EBITDA is primarily due to increased revenue and lower general and administrative costs. It is our goal and expectation that this trend will continue over the next 12 months as our product mix shifts towards more profitable programs, our non-cash amortization of intangible expenses decreases and we continue to pursue cost reductions."
During the three and nine months ended June 28, 2009, Optex revenues on legacy periscope programs increased significantly over the prior year while margins decreased. The legacy periscope contracts were awarded January 2003, and due to significant material price increases subsequent to the contract award date, the company is experiencing a loss on these contracts. It is expected that product margins on the Company's periscopes will increase over the next 12 months as some of the unprofitable legacy programs are completed and are replaced with potentially profitable new awards. Optex expects that the revenue on the legacy periscope programs will decrease in the last quarter of 2009, at which point it is anticipated that operating margins will increase significantly.
Optex is aggressively pursuing additional, potentially higher margin periscope business, including the May 2009 award of a multi-year Indefinite Delivery/Indefinite Quantity (IDIQ) type contract followed by the first delivery order from the U.S. Army's Tank-Automotive and Armaments Command (TACOM) division. If all government forecasted delivery orders against this IDIQ contract are awarded and if the Company were to share equally with the other supplier in the awarded releases, the total value of the contract to Optex could be valued at approximately $7.5 million over the next three years.
The complete third quarter report, including management's discussion and analysis, financial statements, and notes can be found on the Securities Exchange Commission's website at http://www.sec.gov/.
ABOUT OPTEX SYSTEMS
Optex, which was founded in 1987, is a Richardson, Texas-based ISO 9001:2008 certified concern, which manufactures optical sighting systems and assemblies primarily for Department of Defense (DOD) applications. Its products are installed on a majority of types of U.S. military land vehicles, such as the Abrams and Bradley fighting vehicles, Light Armored and Advanced Security Vehicles and have been selected for installation on the Stryker family of vehicles. Optex also manufactures and delivers numerous periscope configurations, rifle and surveillance sights and night vision optical assemblies. Optex delivers its products both directly to the military services and to prime contractors. For additional information, please visit the Company's website at http://www.optexsys.com/.
Safe Harbor Statement
This Press Release and other written reports and oral statements made from time to time by the Company may contain so-called "forward-looking statements," all of which are subject to risks and uncertainties. You can identify these forward-looking statements by their use of words such as "expects," "plans," "will," "estimates," "forecasts," "projects" and other words of similar meaning. You can identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address the Company's growth strategy, financial results and product and development programs. You must carefully consider any such statement and should understand that many factors could cause actual results to differ from the Company's forward-looking statements. These factors include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially.
The Company does not assume the obligation to update any forward-looking statement. You should carefully evaluate such statements in light of factors described in the Company's filings with the SEC, especially on Forms 10-K, 10-Q and 8-K. In various filings the Company has identified important factors that could cause actual results to differ from expected or historic results. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete list of all potential risks or uncertainties.
Contact:
ZA Consulting Inc.
David Zazoff
212.505.5976
116 West 23rd St.
Suite 500
New York, NY 10011
Source: Optex Systems Holdings, Inc.
Optex Systems Holdings Inc. (OTCBB:OPXS) is a featured defense stock and showcase company on Investor Ideas defense investor portals, Homelandefensestocks.com, BorderandPortsecurity.com and http://www.nationalhomelandsecurityknowledgebase.com/
Disclaimer/Discloscure: click here
Research Global Defense stocks with the defense stocks directory: click here
Visit Optex Systems Holdings Inc. (OTCBB:OPXS) Company Profile click here
Research defense stocks with the global defense stocks directory at Investorideas.com
click here:
http://www.investorideas.com/Companies/HomelandDefense/Stock_List.asp
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