Defense/Aerospace Industries

[DayNinja]

MNDP Undervalued with tremendous gain potential:

The Mundus Group:

MNDP (est. 1992) was trading at .08 a few months ago and is now .0002. I have had numerous conversations with investor’s relations and they made it absolutely clear they are not selling shares or diluting. There is no reason for MNDP to be this low.
Float 134,242,798 a/o Nov 09, 2011
OTC Pink Current

(see link: http://www.otcmarkets.com/stock/MNDP/company-info )

The Mundus Group also has the following divisions including owning a patented part the US military uses in their drone :

Roadable Aircraft Inc., and Goki Mfg. are fully owned subsidiaries of the Mundus Group Inc.;
Air Drone Inc., and Air Intelligence Systems are divisions of the Mundus Group, Inc.
________________________________________
www.airdroneinc.com
www.airintelligence.org
www.goki-mfg.com
www.mundusuav.com
www.roadableaircraftinc.com

(link: http://www.mundusgroupinc.com/index.html )


Mundus Group Strategy
Mundus Group has announced ambitious expansion plans in an effort to gain a market advantage with little competition in several UAV VTOL niches.
Mundus is developing its niche technologies preconfigured in a UAV (Unmanned Air Vehicle) form and will lease / sell its vehicles with complete packages for surveillance, aerial photography, special effects and an array of robotics packages ranging from air sampling and soil sampling to magnetic resonant imaging of infrastructure and bridges.
Mundus Group is expanding and designating several new Aerospace UAVTOL Sales and Service divisions to provide a focused and market driven environment to capitalize on each of Air Drone’s previously defined business areas.
Mundus Group is building upon Air Drone experience, which has demonstrated that each of these divisions could become lucrative untapped markets in a new industry.
Mundus Group believes that with smart marketing and proper funding Air Drone could become the first nation wide provider of UAV VTOL services with multiple sales, training and UAV technology applications that are without competition and unknown to most of the world.
Several of these VTOL UAV applications are untapped and without competition in lucrative markets that suggest that exponential growth potential is possible with a focused separation of target markets with specific innovative products.
Mundus Group will begin with business applications, which will be advertized, industry targeted and prospected for including:



Look at the chart and the volume. MNDP is seeing the highest volume for the year which indicates accumulation.

MNDP was trading at .08 in July of this year and is now .0003

Business Description
Mundus Group, Inc. is a diversified technology corporation with product services and sales within the Aerospace and Transportation industry sectors. Roadable Aircraft International (RAI), and Air Drone Inc. are fully owned subsidiaries of Mundus Group and are in the aerospace industry sectors since 1990. Recent acquisition, Goki Mfg is in metal manufacturing for over forty years serving the off-road sport and racing equipment sectors of the transportation industry. In 1991, RAI developed innovative technology for building VTOL vehicles that would take off and fly in the air like a helicopter but without any exposed propellers and due to its proprietary 8-foot ducted fan, it would be able to drive like a car on normal streets without any reconfiguration. Subsidiary RAI’s current focus is the completion of its prototype 4, the “VTOL Vortex Cruiser” and will be the flagship of the Mundus aerospace product line when completed. RAI’s ducted fan technology eliminates exposed propeller blades allowing vehicles to operate within close proximity to buildings, infrastructure and has the potential to revolutionize a new mode of inner space transportation with the greatest impact on humanity initially to the Search and Rescue sector as well as Law Enforcement and Public Safety industry sectors. RAI Patents, Highlights & Awards In 1993, RAIs first VTOL Ducted Fan prototype, “The Flyer” won First Place in Best Invention of the Year competition at the Discovery Channel Invention Convention. Since 1993 RAI has produced three (3) prototypes, the 3rd of which has proven to be capable of vertical take offs and landings and was awarded a US Patent in 2002. RAI and US Navy completed a 3 year (2001-2004) Cooperative Research & Development Agreement (CRADA) for VTOL Ducted fan technology culminating in a US Patent # 6,457,670 B1 Oct. 1, 2002 awarded to Roadable Aircraft Inc. November 16, 2010 Mundus Group has received a patent for the Telescoping Wing Locking System (Patent No.: US 7,832,690 B1). Subsidiary Air Drone, Inc. (ADI) has been a manufacturer of Unmanned Air Vehicles (UAV) and Remote Controlled (RC) VTOL technology in the aerospace industry since 2004. Air Drone founders worked with RAI and US Navy on UAV development of the first all electric ducted fan UAV for RAI where tethered test flights were conducted at the US Naval Air Research Operations Headquarters in Point Mugu, California between 2001 - 2004. Since 2004 Air Drone Inc has been in the design, engineering, development, production and sales of cutting edge RC UAVs for aerial cinematography for movies and commercials. Goki Manufacturing Group is a fully owned subsidiary of Mundus Group and brings a state of the art CNC prototyping facility to Mundus with over forty years in machining, fabrication and assembly providing production capabilities. Goki Manufacturing and its Storm Products brand have become well known in the Off Road Bike and All Terrain Vehicle world for their superior engineered parts and durability under the worse conditions imaginable. Storm Products provides custom engineered replacement parts for Honda, Kawasaki, Yamaha and Suzuki that are the professional’s choice among top motocross, off road racing and ATV high performance equipment. Goki Manufacturing holds World Land Speed Record set at Bonneville Nationals, Inc. with the Southern California Timing Association “Sponsors of the World’s Fastest Automotive Speed Trials”, Goki holds world speed records for September 25, 1980 94.074 and September 27, 1980 100.807 mph Class A-AB-125 Motorcycle. Goki Mfg grew with the film production industry and built the first 2 axis camera mounts made for Camera Car Industries Inc. in 1987. When Hollywood vehicle engineer Allan Padleford needed close up high speed race car action for the 1990 hit movie, Days of Thunder, he turned to Goki Manufacturing to build and configure the tools he would need to get that amazing camera car auto-racing footage. This was the first time that a camera car was driving at high speeds embedded in the race in order to capture the thrills through what was the cutting edge of cinematography at its inception. Serving the Mecca for the movie industry, custom vehicles, aerospace and high tech innovation in southern California, Goki Manufacturing Group grew in business because of exceptional experience in multiple technologies.

(Link: http://www.otcmarkets.com/stock/MNDP/company-info )

[DewDiligence]

Boeing Projects $4T Market for 33,500 New Airplanes During Next 20 Years:

#msg-64389033

[DewDiligence]

Barron’s profiles HXL: #msg-63889362. Comments?

[Biowatch]

"Boeing scraps short-haul Dreamliner plans"

Boeing will drop plans for a short-haul version of the 787 Dreamliner and will raise aircraft prices by about 5.2 per cent, the first increase in two years.

Higher costs for wages, goods and services are driving the boost, said Jim Proulx, a spokesman at Boeing's commercial headquarters in Seattle. He confirmed the changes made to the price list on Chicago-based Boeing's website today as well as the withdrawal of the 787-3 variant.

Boeing's last price increase, an average 2.6 per cent boost, was for 2008, Proulx said. Prices were raised 5.6 per cent in 2007. Most carriers and leasing companies get discounts...

http://www.smh.com.au/travel/travel-news/boeing-scraps-shorthaul-dreamliner-plans-20101214-18vxn.html

If they aren't careful, it might be called "Nothing but a dream."

[DewDiligence]

Boeing Revises Dreamliner Schedule for Seventh (!) Time

[With each additional delay in the delivery schedule, BA incurs financial penalties in certain customer accounts that the company does not break out for investors. I’m surprised the stock is doing as well as it is.]

http://www.bloomberg.com/news/2010-11-25/boeing-revises-dreamliner-schedule-grounds-test-fleet-after-on-board-fire.html

›By Susanna Ray and Andrea Rothman - Nov 25, 2010

Boeing Co. said it will revise the program schedule of the 787 Dreamliner as it alters some software and power-distribution panels following an on-board fire on the jet that is already almost three years behind plan.

The test fleet of six Dreamliners remains grounded after the fire on one aircraft two weeks ago. Boeing is working to return to flight tests and will present the plan to the U.S. Federal Aviation Administration “as soon as it is complete,” the company said yesterday. A revised schedule will come in several weeks, Boeing said, without providing details.

Boeing had aimed to deliver the Dreamliner in the first quarter, after plans for a handover in May 2008 were derailed by parts shortages, redesign work, challenges from new materials and a greater reliance on suppliers. A delay of as much as six months is already priced into Boeing stock, said Peter Arment, an analyst with Gleacher & Co. in Greenwich, Connecticut.

“The 787 team is now assessing the time required to complete the design changes and software updates that are being developed,” Boeing spokeswoman Loretta Gunter said by e-mail.

Any further delay may require a charge against earnings, said Kenneth Herbert, an analyst with Wedbush Securities in San Francisco. He said a further delay is “all but assured,” writing in a Nov. 22 note that he expects Boeing to deliver 14 Dreamliners in 2011, down from his previous estimate of 22.

Worst-Case Scenario

Morgan Stanley’s Heidi Wood pegged the second half of 2011 for likely delivery, with a worst-case scenario seeing first delivery in 2012.

Boeing rose as much as $1.98, or 3.1 percent, to $65.58 yesterday. The shares have dropped 6.8 percent since the day before the fire on Nov. 9, and are up 21 percent since the beginning of 2010. Airbus parent European Aeronautic, Defence & Space Co. has risen 24 percent so far this year.

Boeing has said the fire in its 787 was likely caused by “foreign debris” that led to a short circuit or electrical arc. A stray aluminum washer shorted out a power panel, causing the blaze during the Nov. 9 flight, said three people familiar with the matter, who asked not to be identified because Boeing hasn’t confirmed the details.

‘Minor’ Changes

The company will make “minor design changes” to the power panels to ensure stray materials cannot get inside, and will update the electrical system’s software to improve power distribution, it said. The 787 is the first all-electric airliner. About half the plane’s structure, including the fuselage, is made of carbon fiber composites.

The affected aircraft lost its primary power, and the crew had to evacuate on emergency slides after the plane landed in Laredo, Texas. Only a few flights were allowed afterward to get all of the planes back to Boeing’s Seattle hub.

The team Boeing sent to Laredo is “well along” in preparing to return the damaged plane to Seattle, Scott Fancher, the 787 program chief, said in the release. The test fleet is based in Seattle, and the planes fly around the world in search of various weather conditions to pass the FAA’s requirements.

With 847 advance orders, the 250-seat Dreamliner, which has an average list price of $178 million, is Boeing’s best-selling new aircraft. Even after the jets are flying again, and without a major redesign, they still need to complete more than 700 hours of testing for both engine types. One is made by General Electric Co. and the other by Rolls-Royce Group Plc.

Proving Capabilities

Boeing must prove the plane’s extended-operations capabilities, its fuel-mileage performance, and its function and reliability, among other tests required by the FAA before the jet is certified. Boeing originally targeted May 2008 for entry into service, with All Nippon Airways Co.

In the past week, Arment, the Gleacher analyst, and others have reduced their estimates for 2011 deliveries of the Dreamliner. Arment now expects Boeing to deliver 17 of the jets next year instead of the 42 he had projected.

Boeing is building about two Dreamliners a month now, storing them around its Everett factory prior to certification. The latest schedule called for production to ramp up starting next year and increase to 10 a month in 2013.

The company may use the opportunity to reassess the full program and incorporate extra time for other adjustments, including the faulty horizontal stabilizers that Boeing machinists are repairing, Herbert and other analysts said.

Boeing in June found gaps in the stabilizers, the small wings on the tail that were built by a Finmeccanica SpA unit in Italy. Boeing has had to fill those in with metal and composite materials.

“Now’s the perfect opportunity, if they know the margin was already tight because of the stabilizers, to just throw it all in and get that buffer back,” Herbert said.‹

[DewDiligence]

Security/Surveillance Deals Fetch Rich Premiums

http://sg.finance.yahoo.com/news/DEALTALK-Defence-M-A-deals-rsg-3074831289.html?x=0&.v=3

›Tuesday 21 September 2010, 17:11 SGT
By Soyoung Kim and Bijoy Koyitty

NEW YORK (Reuters) - Desire to find new growth amid looming cuts in defence spending has spurred major arms suppliers to pay top dollar to snap up smaller rivals in high-demand technologies such as cybersecurity and surveillance.

French defence conglomerate Safran SA announced a $1.1 billion deal on Monday to buy U.S. security firm L-1 Identity Solutions Inc, paying a 24 percent premium over L-1's closing price on Friday.

The deal valued the 4-year-old company at 17 times its forward EBITDA, or earnings before interest, tax, depreciation and amortisation -- above the average deal multiple of 7 to 9 times in the sector and 14 times what Boeing Co paid for security firm Argon ST earlier this year.

Top weapons suppliers will pay similar rich premiums as they rush to get deeper into cybersecurity and intelligence, surveillance and reconnaissance (ISR) -- rare bright spots in an industry bracing for the first spending cutbacks since the Sept. 11 hijacking attacks -- bankers and analysts said.

"I see valuations going up. These large companies have very strong cash flow and when they see their growth stagnating due to low defence spending and all, this is the right strategy for them to invest in key growth areas," said Brian Ruttenbur, an analyst at Morgan Keegan.

"And there is no return for the cash. So they can afford to pay more and still make it accretive."

Top executives of Boeing , Airbus parent EADS and L-3 Communications Holdings Inc told the Reuters Aerospace and Defence Summit in Washington this month they will use cash on hand to make acquisitions in high-growth areas.

While L-1's sale price zoomed past Street expectations, it provided Safran and BAE Systems Plc with strategic assets in the world's largest defence market and the competitive M&A scene could see more prime contractors flush with cash bid up small and mid-cap security firms, analysts said.

"ISR and cyber have been definitely on fire this year and we definitely expect that to continue into 2011," said Brian Coyle, analyst at GovIA, whose firm provides research government contracts and contractors.

"Companies in this space are all probably all under a billion dollars in terms of market value. It's not big money for them," Coyle said.

NAMES DOING ROUNDS

One name doing the rounds as a potential target is Applied Signal Technology Inc, a smaller rival of Boeing 's Argon and whose products are used by U.S. defence and homeland security agencies to intercept cellphone, microwave and military communication signals.

The company could draw interest from most companies that had bid for Argon, such as Raytheon Co, BAE Systems and Cobham Plc, people familiar with the matter said, while adding that Applied Signal has not put itself up for sale.

"Raytheon and BAE were interested in Argon and that kind of leaves open the idea for them still shopping around firms in the sector and Applied Signal fits the bill for what they might be looking for," Coyle said.

The Standard & Poor's Aerospace & Defence index has fallen 10 percent in the past six months on concerns about lower defence spending. Applied Signal Technology shares rose 24 percent during the same period.

Also on the radar are American Science & Engineering Inc, which makes X-ray systems that help organizations combat terrorism and drug and weapons smuggling, and Mercury Computer Systems Inc, which makes software that processes data in military reconnaissance and surveillance.

Other firms also likely to attract interest include telecommunications equipment maker ComTech Telecommunications Corp; Integral Systems Inc, which helps the military control ground systems and satellites; and drone maker AeroVironment Inc.

Meanwhile, the rich premium seen in the L-1 Identity auction could pressure diversified manufacturer 3M Co to raise its tender offer for L-1 rival Cogent Inc, analysts said.

3M's offer price of $10.50 per share implied 8.2 times Cogent's forward EBITDA, less than half of the multiple that Safran and BAE Systems paid for L-1. Since 3M announced the deal with Cogent on Aug. 30, more than 60 percent of Cogent's shares have changed hands, according to Thomson Reuters data.

Cogent shares closed at $10.76 on Monday, above 3M's offer.‹

[DewDiligence]

Surprise! First Dreamliner Delivery Delayed Until 2011

http://online.wsj.com/article/SB10001424052748703959704575454582232255168.html

›AUGUST 27, 2010, 3:54 A.M. ET
By PETER SANDERS

SEATTLE—In a fresh setback for the beleaguered 787 Dreamliner program, Boeing Co. early Friday announced a new delay that will push first delivery of the plane into the middle of the first quarter of next year. The latest snafu involves British engine supplier Rolls-Royce PLC

Rolls is one of two firms selected by Boeing to provide engines on the new, carbon-fiber composite Dreamliner wide-body jet. According to a statement released by Boeing early Friday, the latest delay "follows an assessment of the availability of an engine needed for the final phases of flight test this fall."

Boeing has maintained all year that the first production Dreamliner would be delivered to launch customer All Nippon Airways Co. by the end of 2010, but in the past six weeks Boeing executives have been publicly bracing customers and investors for another delay [#msg-52379829].

Rolls-Royce said Friday it was working with Boeing to support its test-flight program.

"We have been informed by Boeing that the currently planned dates for Trent 1000 engine deliveries will now not support their latest flight test program requirements," said a spokesman for the U.K.-based engine maker.

"We are working closely with Boeing to expedite delivery in support of their program schedule," he added.

In a statement, ANA said the delay was regrettable but added, "However, we trust that the time will be used to deliver the best possible aircraft in the shortest possible time frame."

Boeing said the schedule revision won't affect its financial guidance [LOL].

Boeing has also been grappling since June with manufacturing flaws found in the plane's tail area. The problematic components are manufactured in Italy by Alenia Aeronautica SpA, a major Boeing supplier. Those flaws have required significant inspections on the fleet of six Dreamliner test planes, as well as a number of production airplanes that have already been built and sit outside Seattle awaiting their engines.

Compounding the Dreamliner's troubles was a major failure of a Rolls Royce test engine in England earlier this month. Rolls and General Electric Co. are providing the engines for the 787. Early customers, including ANA, have selected the Rolls engines for their aircraft.

On Aug. 2, a 787 engine being tested at a Rolls facility suffered a major "uncontained" failure, which did significant damage to the engine and the casing that houses it. The company has said it has detected the problem that caused the failure and will correct the issue before shipping early batches of the engines to Boeing's final assembly plant near Seattle.

Until now, both Rolls and Boeing have said the engine failure had not impacted the Dreamliner delivery timetable.

The Dreamliner is already nearly three years behind schedule and it has cost Boeing billions of dollars in penalties to its airline customers as well as damaging the company's credibility in the marketplace. Most customers, however, have chosen to stick with the Chicago-based plane-maker through the 787 difficulties. There are more than 850 of the twin-engine wide-body jets on order from 56 customers world-wide.‹

[DewDiligence]

ITT Sells Military-Engineering Subsidiary

http://online.wsj.com/article/SB10001424052748704388504575419032151079818.html

›AUGUST 9, 2010, 11:31 A.M. ET
By BOB TITA

CHICAGO—ITT Corp. agreed to sell its defense-engineering and technical-assistance firm to privately held Wyle Inc. for $235 million, as ITT continues to realign its military business.

The defense and industrial conglomerate revealed last month that it planned to sell CAS Inc., which is part of ITT's defense and information solutions segment, the company's largest business segment.

With cuts in U.S. defense spending expected in the coming years as military operations in the Middle East end, the White Plains, N.Y., company has been bulking up its other business segments and trying to replace military contracts that are ending or in jeopardy of being axed with defense and aerospace programs that are likely to be spared.

CAS was a particular target for divestment because the firm posed a potential conflict of interest with ITT's other military business units. CAS provides engineering and technical advice to the Pentagon on contracts and programs that other ITT defense units may bid on.

For Hunstville, Ala.-based Wyle, the addition of CAS will expand its military revenue.

"The Navy and the Army will now be our largest customers," Chairman and Chief Executive George Melton said in a written statement.

Wyle provides high-tech science, aerospace engineering and information technology services to the federal government. It also provides testing and evaluation services. Wyle plans to finance the deal with cash, $20 million of equity from its controlling shareholder, private-equity firm Court Square Capital Partners, and $200 million in debt.

The deal is expected to close by year's end.‹

[DewDiligence]

Boeing Hedges on End-2010 Dreamliner Delivery Date

http://online.wsj.com/article/SB10001424052748704682604575369033911439758.html

›JULY 16, 2010
By DOUG CAMERON And PETER SANDERS

Boeing Co. says delivery of its new 787 aircraft could slip into next year, though the company is still hoping it can send the jet to its first customer by year's end.

The cautious new guidance for delivery of the much-delayed Dreamliner stems from issues with testing rather than the aircraft, according to Scott Fancher, head of the 787 program, who spoke with reporters Thursday.

Boeing's first customer for the new jet, All Nippon Airways Co., has already waited 2 1/2 years for the plane after five separate technical delays.

"We are talking about flight-test monitoring systems," Mr. Fancher said Thursday, adding that Boeing was pleased with a fix to a problem with the plane's horizontal stabilizer that temporarily halted its test program.

The announcement came on the eve of the Farnborough Air Show in the U.K., and a little over a year after Boeing stumbled at last year's Paris Air Show by announcing the plane was ready to make its first flight on June 30, 2009. Days later, it announced another six-month delay.

It's the first time Boeing has acknowledged that problems encountered with production and quality issues could hurt the latest schedule laid out after the plane's first flight last December.

An All Nippon executive said in April that the new plane may not start passenger service until next March. Mr. Fancher said Thursday that Boeing remains in "constant contact" with the Japanese carrier.

Boeing has yet to reveal how much the delays will cost, but analysts estimate that it faces billions of dollars in payments to compensate airlines and to reimburse suppliers.

Mr. Fancher declined to comment on how much of a buffer Boeing had left to meet its existing year-end target.

Boeing will also halt deliveries of 787 components to its final assembly plant in Everett, Wash., for about six weeks later this year to give its network of global suppliers a chance to catch up on work and address continuing quality issues.

It's the second time this year that Boeing has halted deliveries along its supply chain as it struggles to smooth out a system that sees much of the work on the high-tech new jet completed by suppliers in Italy and Japan, as well as elsewhere in the U.S. The outsourcing model has bedeviled the 787 program for years. Parts shortages and shoddy manufacturing work at various suppliers has forced Boeing to slow the production process at various points and required the company to fix mistakes after some jets have been fully completed.

Boeing has also spent more than $1 billion purchasing the operations of struggling vendors in South Carolina and has sent hundreds of its own employees abroad to closely monitor its suppliers' work.

Company executives in the past have said they overreached on the new manufacturing method used with the 787, but they remain committed to the outsourcing model.

While details of 787 compensation remain undisclosed, the potential profit from the program will play a role in when and how it decides whether to revamp or replace its 737 and 777 models.

"A decision will be made by the end of the year," said Randy Tinseth, vice president marketing for Boeing's commercial aircraft division, on an earlier press call on Thursday.‹

[chunga1]

Taranis: The £143million unmanned stealth jet that will hit targets in another continent

By Daily Mail Reporter
Last updated at 3:30 PM on 12th July 2010




Looming ominously like a space ship from Star Wars, this is the future of unmanned flight.


Defence firm BAE Systems today officially unveiled its first ever high-tech unmanned stealth jet.


The Taranis, named after the Celtic god of thunder, is about the same size as a Hawk jet and is equipped with stealth equipment and an 'autonomous' artificial intelligence system.


The plane will test the possibility of developing the first ever autonomous stealthy Unmanned Combat Air Vehicle (UCAV) that would ultimately be capable of precisely striking targets at long range, even in another continent.


Taranis, the prototype of an unmanned combat aircraft of the future, which was unveiled today


The trial aircraft cost £143 million pounds to construct and spearheads BAE's drive to convince the Ministry of Defence to invest in the next generation of unmanned aircraft.

The plane began development in December 2006, and is intended to prove the UK's ability to produce a stealthy UAV.


Taranis will be stealthy, fast, able to carry out use a number of on-board weapons systems and be able to defend itself against manned and other unmanned enemy aircraft


Any future need hinges on the outcome of the Strategic Defence and Security Review, which will conclude around October.


Speaking at the unveiling ceremony at BAE Systems in Warton, Lancashire, Minister for International Security Strategy Gerald Howarth said: 'Taranis is a truly trailblazing project.


'The first of its kind in the UK, it reflects the best of our nation’s advanced design and technology skills and is a leading programme on the global stage.'


Taranis is an informal partnership of the UK MoD and industry British engineering firms including BAE Systems, Rolls Royce, QinetiQ and GE Aviation.



The concept demonstrator will test the possibility of developing the first ever autonomous stealthy Unmanned Combat Air Vehicle (UCAV) that would ultimately be capable of precisely striking targets at long range, even in another continent
Rolls-Royce will focus on the next generation propulsion system for the Taranis demonstrator.


Speaking on behalf of the industry team, Nigel Whitehead, Group managing director of BAE Systems' Programmes & Support business, said: 'Taranis has been three and a half years in the making and is the product of more than a million man-hours.


'It represents a significant step forward in this country's fast-jet capability. This technology is key to sustaining a strong industrial base and to maintain the UK's leading position as a centre for engineering excellence and innovation."


The Taranis prototype will provide the MOD with knowledge on the technical and manufacturing challenges and the potential capabilities of Unmanned Combat Air Systems.


Test flights for the Taranis plane are due to start in 2011.

http://www.dailymail.co.uk/sciencetech/article-1294037/Taranis-The-143million-unmanned-stealth-jet-hit-targets-continent.html#

[chunga1]

Another Damaging 787 Setback For Boeing
Posted: June 25, 2010 at 5:51 am

Print Email Subscribe Free Newsletter Follow us on Twitter 24/7 Wall St Real Time 500 Boeing (NYSE: BA) says it has found more problems with its 787 Dreamliner. The company said it would inspect the plane for “workmanship” issues. There is apparently a problem with the aircraft’s horizontal stabilizers.

Boeing said that the repairs would take over a week for each plane, but indicated that deliveries would begin by year-end, a forecast many people don’t believe because of the many glitches with the Dreamliner.Work began in earnest on the Dreamliner when it was given the 787 designation in January 2005. The process of designing and building the plane has been plagued by supplier problems and work stoppages. Many analysts believe that Boeing management should have given union members a better deal more quickly to keep the project on track. Instead, the slowing of the work has cost the company revenue. Some customers have canceled orders and other have indicated that they expect price concessions because of the delays.

The most remarkable thing about the Dreamliner is that all the problems with the project have occurred under the management of Boeing CEO James McNerney, who took over in July 2005. He made $19.4 million last year, a number that many shareholders believe is excessive given the company’s problems.

The question comes up, once again, about how the Boeing board in good conscience can retain McNerney.

Douglas A. McIntyre
http://247wallst.com/2010/06/25/another-damaging-787-set-back-for-boeing/

[DewDiligence]

European Countries Target Defense Budgets

http://online.wsj.com/article/SB10001424052748703900004575324400873066256.html

›JUNE 25, 2010
By STEPHEN FIDLER, ALISTAIR MACDONALD And PATRICK MCGROARTY

European governments' budget-slashing efforts are expected to cut deep into the Continent's defense spending, widening the gulf between U.S. and European military capabilities.

Governments in France, Germany, Spain and Italy, in rolling out recent austerity measures in response to Europe's sovereign debt crisis, have promised that their militaries won't be spared in coming spending cuts. Last week in the U.K.—which has Europe's biggest military budget—new defense minister Liam Fox said the government must act "ruthlessly and without sentiment" in determining the military's share of cuts needed to tackle the country's giant budget deficit.

In the short term, tight finances don't appear likely to affect European deployment to Afghanistan, where 40,000 troops, mainly from Europe, are on the ground with 78,000 Americans. "There has been no indication that any government has contemplated to reduce its commitment to Afghanistan for financial reasons," said Ivo Daalder, the U.S. ambassador to the North Atlantic Treaty Organization, which leads the Afghan effort.

But in the longer term, cuts in defense spending are seen as likely to reduce European appetite to send troops there. Falling European defense expenditures will also further increase the spending gap with the U.S., which spends more than twice as much on its military than all its European allies combined.

This week, Anders Fogh Rasmussen, head of the 28-nation NATO, called on European countries to "resist the temptation to use the economic crisis as an excuse for letting the transatlantic defense-spending gap widen any further."

Military spending in most European countries is already below 2008 levels. Spain's defense spending has fallen by almost 9% this year, or more than €600 million ($740 million), adding to last year's €400 million cut. Italy plans to slash defense spending, too, as part of an austerity package it announced last month.

Earlier this month, Germany announced more than €80 billion in overall spending cuts through 2014, about 10% of which is expected to come from its defense budget. A few days later, the French Defense Ministry also said it will seek to reduce its budget, which stood at €32 billion in 2010, by as much as €5 billion next year. That comes on top of a six-year plan France announced in 2008 to trim its army by 17%, or 54,000 jobs.

Europe could spend less but spend better, defense analysts say. At the end of 2008, the countries of the European Union had 1.8 million men and women under arms, compared with 1.4 million in the U.S., according to the European Defence Agency, an EU body. It spent more than the U.S. on personnel—€106 billion versus €93 billion—but deployed 80,000 troops on operations, compared with 210,000 for the U.S.

Most European military establishments are still structured as they were in the Cold War. "We should not continue to invest our scarce resources in fixed infrastructure and soldiers who are essentially stuck in their barracks. We should redirect our investments towards more flexible, mobile and modern armed forces—armed forces that we can actually use," Mr. Rasmussen said.

Analysts worry that while budget cuts haven't so far affected NATO operations in Afghanistan, the operation and the broader alliance could come unglued in the longer term.

If Europe fails to shape its militaries "into a realistic defense capability, then NATO will fail at its task and the main link between Europe and the U.S. will effectively cease to exist," said Chris Donnelly, an independent defense consultant and director of the U.K.'s Institute of Statecraft and Governance.

Most countries haven't specified where the ax will fall, but analysts say some prestigious, big-ticket programs are likely to be hit. Nick Witney, a former head of the European Defence Agency now at the European Council on Foreign Relations, said fighting forces "are going to have to make do with the [ship] hulls they have and the aircraft they have."

The U.K. government, which provides the largest contingent to Afghanistan after the U.S., has said it will spell out the cuts only after completing a thorough review of Britain's defense strategy. But the defense minister, Mr. Fox, a former Army doctor,, has promised "a clean break from the military and political mindset of Cold War politics."

Military analysts say this may be bad news for one or both of the new fast-jet programs in which the U.K. is involved—further tranches of the Eurofighter, a joint project of several European countries, or the F-35 Joint Strike Fighter, in which Britain is cooperating with the U.S. They also say the U.K. may scrap one of two planned aircraft carriers, and the army may be shrunk from its current size of 100,000 by up to 20,000.

With the British army heavily stretched by its deployments over the past decade in Iraq and Afghanistan, cutting troop numbers by that much would assume "a very limited appetite for further overseas adventures in the next decade or so," Mr. Witney said.

Since 1997, when the last Labour government came to power, the number of people in the U.K. armed forces has been cut around 20%. "Is there a lot of fat to trim? No," said Patrick Hennessy, who commanded a platoon of Grenadier Guards in Iraq and Afghanistan.

German Defense Minister Karl-Theodor zu Guttenberg wants to eliminate 40,000 troops from a current force of 250,000 professional and conscripted soldiers. He plans to present his vision for Germany's military, the Bundeswehr, in September.

Analysts say the Bundeswehr needs to be revamped to address the realities of shifting security threats beyond Germany's borders. The military remains too anchored to its network of bases in Germany, said Henning Riecke, an expert on transatlantic relations at the German Council on Foreign Relations in Berlin, and too reliant on large, aging tanks and artillery. "There's a lot of inertia to keep reform from happening," Mr. Riecke said.

A thriftier Bundeswehr might irk some NATO members. New members to NATO from eastern Europe are directed to spend 2% of their gross domestic product on defense, Mr. Riecke said, while German defense spending, currently around 1.5% of GDP, is moving closer to 1%.

German defense minister Mr. Guttenberg, a rising political star in Germany and a member of the Christian Social Union, the Bavarian sister party to Chancellor Angela Merkel's conservative Christian Democratic Union, caused an uproar earlier this month by suggesting conscription be eliminated altogether, bringing forth a defense from Ms. Merkel of Germany's place among five NATO countries with an active draft.

For some countries, cutting down on military personnel and expenditures will be tough. Italy's army, for example, is overloaded with noncommissioned officers, recruited for life two decades ago to run a conscript army. Now the conscripts are no longer there, but the NCOs are still in place. Moreover, in many countries, military pensions are paid out of the military budgets.

Mr. Witney says pressure on budgets might, in time, lead to more sharing of military assets among allies. He sees the possibility of saving money through joint military procurement projects, for example, between France and Britain. NATO is also encouraging more joint procurement on the lines of a program in which 12 NATO and non-NATO countries, including the Netherlands, Hungary and Sweden, share the use of three C-17 military transport planes.

Meanwhile, NATO's "footprint" in Europe is also likely to shrink. The alliance employs more than 11,000 people in its military headquarters and agencies. Earlier this month, NATO defense ministers discussed cutting an unspecified number of its 12 military headquarters around Europe.‹

[DewDiligence]

Boeing Finds Yet Another 787 Glitch

[Does it ever end?]

http://online.wsj.com/article/SB10001424052748704911704575327480901961078.html

›JUNE 24, 2010, 10:23 P.M. ET
By PETER SANDERS

Boeing Co. on Thursday said it would halt test flights to inspect the 23 completed models of its 787 Dreamliner jet after discovering a new manufacturing problem, the latest in a series of glitches that have dogged the widebody plane.

Chicago-based Boeing has struggled with ongoing problems across its vast global supply chain for the Dreamliner, which is running more than two and a half years behind schedule. The glitch involves the horizontal stabilizers manufactured in Italy by Alenia Aeronautica, a subsidiary of Finmeccanica SpA, a company that has caused Boeing supply headaches in the past.

The company said the problem involves improper installation of small, composite pieces called "shims" where the horizontal stabilizers, small wing-like structures that extend outward and help control the up-and-down pitch of the aircraft, meet the fuselage.

The "workmanship" problem, which Boeing said it discovered at its final assembly factory in Everett, Wash., within the past week, was first reported on the website of the Seattle Times. The company wouldn't say how the problem was discovered.

The company said it expects the manufacturing flaw won't alter its Dreamliner flight test schedule nor would it further delay the 787's first delivery to initial customer All Nippon Airways Co. Boeing also said the first plane is still on track to be delivered by the end of this year.

Boeing said that the five planes that have already flown and 18 others that have been built will be inspected and any affected parts will be repaired. If inspections turn up issues that require a fix on the completed jets, repairs could take up to eight days, the company said in its statement.

The company will not fly any of the planes again until they are inspected, a process that could take at least two days, it said.

"For those airplanes requiring rework, we expect it will take up to eight days for each airplane," the company said in a statement on its website. "It is not unusual for these issues to arise in the course of production programs—they are identified…and dealt with through our normal processes."

The temporary flight test suspension is the latest black eye for the long-delayed 787 aircraft, the twin-aisle widebody that boasts a cutting edge design and is made largely of carbon-fiber composite materials. Boeing has orders for 866 of the jets from 57 customers.

Since the plane was first delayed in September 2007, Boeing has often belatedly admitted to production or design problems and have missed a number of deadlines for key milestones. It has sought to downplay problems with the plane, saying that such stumbles are normal on any new airplane program.

Nor is it the first time Boeing has had issues with work done by Alenia. Last June, Boeing ordered work stopped at Alenia after weak points were discovered in two parts of the center fuselage barrels produced by the company at its factory in Grottaglie, Italy. Boeing didn't disclose that issue for two months, and only after an aviation industry blog reported the problem.

On May 17, a Boeing spokeswoman said that another design flaw discovered in late December was one of the factors that led to a five-week pause in shipments of 787 components to Washington for final assembly. But a few days later, at an industry conference, a top Boeing executive said that the design issue played no part in the delay, it was only a move to allow its suppliers to catch up with the production process.

Last June, Boeing officials abruptly delayed the Dreamliner's first flight after acknowledging they had discovered cracks in the area where composite-material wings join the body of the aircraft. The move came just a week before the plane was scheduled to make its maiden voyage and company officials were adamant at the industry's annual show that it was on track for the 787's first flight.

Boeing has also been dealing with problems at other suppliers, including a major production facility in South Carolina, which the company ended up buying from its former supplier, Vought Aircraft Industries, and is now running as its own.

In recent months, Boeing has sent out hundreds of its own engineers to help oversee operations at its suppliers and has begun bringing in-house some of the design and engineering work previously outsourced to other companies.

These issues have forced Boeing to pay hundreds of millions of dollars in delay penalties to its airline customers and has caused wariness among airline buyers who have been forced to buy planes from rival Airbus, a unit of European Aeronautic Defence & Space Co. or alter their fleet plans to account for the late arrival of the 787.‹

[crable]

• MAY 24, 2010, 6:04 P.M. ET
Aerospace-Defense Merger Deals Gather Strength
•
By Christopher Hinton
Mergers in the aerospace and military-contracting industries are gaining traction after a steep slump last year, with private equity stepping in to finance deals where post-recession credit markets fear to tread.

So far this year, the sectors have seen 35 mergers totaling $2.33 billion, according to FactSet Research, a provider of financial and economic data. That compares with 25 deals worth $96.2 million over the same period in 2009--the lowest level in a decade.

The value of the most recent transactions also surpassed the 2008 period, but was far below a 2007 peak of $11.76 billion.

"Market confidence has picked up, and though there will be substantial pressure on defense spending going forward, there's still a lot of faith in the overall global market," said Jon Kutler of the investment firm Admiralty Partners, in an interview.

Acquisition data for the latest quarter comes in at the high end of historical activity, according to a recent report from PricewaterhouseCoopers. But even though credit markets have thawed from the freeze last year brought on by the financial markets crisis, brokers are still scrambling for ways to finance mergers and acquisitions, leaving a gap increasingly closed by private equity.

During the first quarter, private equity raised 37.5% of the value for deals worth over $50 million, versus 11.5% in 2009 and 12.8% in 2008, the research firm said.

"With the capital markets still in repair-and-heal mode, buyers and sellers are likely seeking creative structures, including minority stake purchases and joint ventures, to complete deals," PricewaterhouseCoopers said. "We believe that participation in the [aerospace and defense] mergers and acquisitions market by financial investors will continue to increase."

Private equity has definitely stepped in, said Admiralty Partners' Kutler, and they are taking advantage of some real bargains.

"The high-priced larger deals are what's grabbing the deadlines, but below that is softer pricing," he said. "Aside from highly differentiated companies, middle-market companies that wanted to sell did not, and that got them worried and their pricing has come down."

Buyers have been focusing on companies that offer niche products, especially in the fields of intelligence, surveillance and reconnaissance, and cyber security, according to Kutler. They have all remained strong areas of growth despite a general decline in military spending.

Acquisitions are also being used to expand market access in foreign countries, particularly the U.S., which is by far the world's largest buyer of weapons and technology.

CGI Group Inc. (GIB) announced the sectors' largest deal this year, agreeing to buy Stanley Inc. (SXE) for $1.1 billion. The target company made a name for itself developing technology and software for the U.S. military that provide soldiers on the battlefield with intelligence and communications support.

That was followed by a $984 million deal for Vought Aircraft Industries Inc. The acquirer, aircraft parts and services provider Triumph Group Inc. (TGI), said the purchase would increase its business exposure to Boeing Co. (BA), which has said it's at the beginning of a strong aerospace cycle.

There have been four mid-range merger announcements this year worth between $35 million and $98 million, according to FactSet, including the U.K.-based Charming Group Plc agreement to buy Allied Defense Group Inc. (ADG) in Vienna, Va.

-Christopher Hinton; 415-439-6400; [e-mail]

[DewDiligence]

Boeing Discloses New Dreamliner Flaw

http://online.wsj.com/article/SB20001424052748704314904575250944040434162.html

›MAY 18, 2010
By PETER SANDERS

Boeing Co. said it encountered another design flaw on its overdue 787 Dreamliner jet, and that the problem had been one of the factors that forced an ongoing five-week delay in shipments of fuselage parts.

The Chicago company confirmed Monday that it had identified weakness in aluminum parts called shear ties during testing in December. The shear ties connect the plane's frame to its fuselage skin, which is made of composite materials. Boeing found during its analysis process that the shear ties could peel back from the fuselage skin after exposure to extreme hot and cold temperatures and could lead to structural failure.

Boeing said it will strengthen existing shear ties on planes that have already been built or are in construction at factories around the world. A fix that may involve the design of thicker ties will be implemented on new planes being built later this year.

In late April, the jet maker asked suppliers to suspend deliveries of 787 fuselage parts to its final assembly factory in Everett, Wash., until early June. At the time, the company said the delay was to give some of its far-flung suppliers a chance to catch up on necessary work and to deal with a shortage of certain spare parts [i.e. they lied]. But on Monday, after the issue was reported on FlightBlogger, an aviation-industry blog, Boeing said the problem with the shear ties was partly responsible for the slow down.

Monday's disclosure is the second time Boeing has been forced to disclose design flaws with the new jet that is already more than two and a half years behind schedule. The delays have cost Boeing billions of dollars in penalties and the cancellation of some orders.

Last year, the company was forced to postpone the start of its ambitious flight-test program by six months after ground tests revealed that the area where the plane's wings met the body had failed stress tests. Those areas have since been strengthened and Boeing says the Dreamliner passed subsequent tests.

Boeing said the ties problem will not affect its flight-test program or the planned delivery of the first 787 to launch customer All Nippon Airways Co., sometime before the end of this year.

Separately, Boeing said it would increase production in early 2012 of its best-selling narrowbody 737 to 34 planes a month from 31.5 now.‹

[DewDiligence]

Cubic Receives $370M Contract for Sydney's Electronic-Ticketing System

http://finance.yahoo.com/news/Cubic-Receives-370-Million-iw-3838610111.html?x=0&.v=1

›May 10, 2010, 6:00 am EDT

SYDNEY, AUSTRALIA, and SAN DIEGO, CA--(Marketwire - 05/10/10) - Cubic Corporation (NYSE:CUB) today announced it has signed a contract with the Public Transport Ticketing Corporation (PTTC) to provide greater Sydney's Electronic Ticketing System. The contract is valued at $370 million ($398 million Australian) for the design, development, implementation and fixed maintenance components.

Additional payments, called variable charges, will also be payable, based on the combination of the number of customers using smart cards, and the number and value of financial transactions per smart card. These variable charges support the usage of the system and could bring the entire contract value from $500 million ($538 million Australian) to more than $600 million ($646 million Australian) through to 2024.

"Cubic is proud to support the PTTC in providing a modern, convenient and reliable Electronic Ticketing System for greater Sydney," said Stephen Shewmaker, President of Cubic Transportation Systems. "PTTC wanted a proven system, and that is what Cubic and its Australian subcontractors will deliver. Our system will be based on time-tested technology, but will also have the capability to incorporate the latest payment innovations now under development."

Selected following an extensive assessment process, the Cubic-led Pearl Consortium team has formidable experience and success with complete ticketing solutions. Cubic Transportation Systems has successfully modernized automated fare collection systems involving multiple modes of transportation used by hundreds of millions of passengers in more than 40 major cities worldwide. Those cities include London, New York, Los Angeles, Atlanta, Chicago, Washington, D.C., San Francisco and Brisbane.

Principal subcontractors include one of Australia's biggest engineering companies -- Downer EDI, the country's largest bank -- the Commonwealth Bank of Australia, a leading provider of pre-paid products to retailers -- epay Australia, and a world leader in on-board bus equipment -- Parkeon.

Downer EDI, together with Parkeon, designed, installed and deployed the smart card ticketing system in Perth, and recently won the contract to install electronic ticketing on the Australian Capital Territory's bus fleet. Commonwealth Bank of Australia currently provides transaction banking services and top up card capacity for the Perth and South East Queensland electronic ticketing systems, and will provide transaction banking for the new ACT electronic ticketing system to be introduced next year. Parkeon will provide the on-bus driver console for the new Sydney system, and epay Australia will be involved in distributing and topping up the new smart card.

"Our combined talent and experience will support the full scope of this critically important project," said Matthew Cole, Managing Director for Cubic Transportation Systems (Australia) PTY Limited. "We intend to draw heavily on the comprehensive knowledge that we possess as a result of Cubic's experience with the successful Oyster Card® system in London and the highly acclaimed go-card system in Brisbane."

Cubic's role in the development and operation of the London system began in 1998 and continues today. Cubic is working with Transport for London (TfL) to explore potential initiatives to integrate credit/debit card and mobile phone technology into ticketing systems, and simplify travel for visitors during the 2012 Olympics. The new system will be based on the iconic London Oyster Card system, the world's biggest public transport smart card system.

"There are strong similarities between London and Sydney when it comes to ticketing," Cole observed. "London's Oyster system evolved from an existing magnetic-stripe ticketing system, and smart cards were introduced to commuters without disruption or inconvenience. A similar strategy is planned for Sydney," he said.

Cubic's phased and incremental approach for deployment of the smart card will commence with ferries, rail and then buses. Upon completion of the design, build and install phases, Cubic will operate the system for 10 years.

Commuters will be able to load money onto their smart card via:

• the Internet

• customer contact centres

• automatic deductions from a linked bank account or credit card by phone

• retail outlets throughout greater Sydney using the epay Australia network; and

• auto-load machines primarily at train, ferry and other public transport locations.

Commuters will present their smart card to a validator or reader and "tag-on" before boarding a train, government or private buses, or government ferries, and the price of the journey will be automatically deducted from their smart card account when they present their smart card again (and "tag-off") at the end of their journey.

Cubic-provided managed services will include:

• Customer website development and operation

• Interactive Voice Response (IVR) as part of a 24/7 Customer Contact Centre

• A 24/7 Contact Centre for handling service calls

• A Distribution Centre for ordering and mailing cards and processing replacements

• Reconciliation and reporting of transactions

• Revenue management for the multiple public transport operators and agencies supporting the system

• Retail outlet management services

• Repairs, maintenance and spares inventory

"Cubic is especially pleased to win the contract for Sydney's Electronic Ticketing System," Shewmaker said. "This prime contract award validates our business strategy to grow the scope and scale of our services business, and expand our presence in Australia and the greater Australasian region."

Cubic Corporation is the parent company of three major business segments: Defense Systems, Mission Support Services and Transportation Systems. Cubic Defense Systems is a leading provider of realistic combat training systems and defense electronics. Mission Support Services is a leading provider of training, operations, maintenance, technical and other support services. Cubic Transportation Systems is the world's leading provider of automated fare collection systems and services for public transit authorities. For more information about Cubic, see the company's Web site at www.cubic.com.‹

[DewDiligence]

Cubic Reports F2Q10 Results

[CUB does not hold quarterly CC’s. Please see actual PR for financial tables.]

http://finance.yahoo.com/news/Cubic-Corp-NYSE-CUB-Reports-iw-1017142928.html?x=0&.v=1

›Thursday May 6, 2010, 6:00 am EDT

SAN DIEGO, CA--(Marketwire) - Cubic Corporation (NYSE: CUB) today reported higher earnings on higher sales for the quarter ended March 31, 2010. Sales for the second fiscal quarter were $264.5 million compared to $242.8 million last year, and net income increased by 22 percent to $17.4 million or 65 cents per share this year from $14.2 million or 53 cents per share last year.

Operating income increased in the second quarter to $26.1 million this year from $21.8 million last year. Cash flow from operations was $34.9 million in the quarter.

Six-month Results

For the six months ended March 31, 2010, sales increased to $515.2 million from $487.7 million last year. Net income increased to $31.1 million for the six-month period, or $1.16 per share, compared to last year's net income of $28.4 million, or $1.06 per share. Operating income for the first six months increased to $46.5 million this year from $42.9 million in 2009. Cash flow from operations was $46.2 million in the six-month period.

Transportation Systems Segment

Cubic Transportation Systems (CTS) sales increased 33 percent from $68.6 million in the second quarter last year to $91.2 million this year. Sales increased from contracts in North America and from the PRESTIGE contract in London. Nearly $5 million of the sales increase also came from the consolidation, for the first time, of the company's 50 percent owned subsidiary in the United Kingdom, called TranSys, due to the repayment of private finance debt by the customer and a restructuring of the subsidiary's ownership that made Cubic the primary beneficiary of the venture.

Operating income from CTS increased in the second quarter from $12.5 million last year to $15.1 million this year. Higher profits resulted from higher sales on contracts in North America, spare parts sales and a favorable contract modification on a European contract that resolved an uncertainty, adding $1.6 million. The consolidation of TranSys had no impact on operating income.

For the first half of the year, CTS sales increased from $143.0 million last year to $165.5 million this year, and operating income improved from $22.5 million to $26.1 million. In addition to the second quarter results described above, the completion of a contract in Florida during the first quarter added to operating income for the six-month period.

Defense Systems Segment

Sales from Cubic Defense Systems (CDS) decreased to $63.4 million from $68.9 million in last year's second quarter. Sales were higher from the communications business while sales were lower from training systems. Operating income from CDS was $5.3 million compared to $5.0 million last year. Lower operating income on lower training systems sales was more than offset by a partial recovery this year of a bad debt which was expensed in last year's second quarter.

For the first half of the year CDS sales increased from $134.9 million to $139.0 million due to increased sales from the communications business. Operating income increased from $10.2 million last year to $12.0 million in the first six months of this year due to the bad debt recovery mentioned above.

Mission Support Services Segment

Mission Support Services (MSS) sales increased to $109.4 million from $104.8 million in last year's second quarter. Sales were higher from live combat training support and other training support contracts. Operating income from MSS also increased to $7.1 million compared to $6.3 million last year, due primarily to higher sales.

For the first half of the year, MSS sales increased from $208.6 million to $209.6 million. Operating income decreased from $13.8 million last year to $11.1 million in the first six months of this year, due primarily to a provision in the first quarter of $2.0 million for a dispute with a customer over contract terms.

Backlog

Total backlog was $2.182 billion at March 31, 2010 compared to $2.183 billion at September 30, 2009 [i.e. backlog was flat].

Financial Condition

The company continues to maintain a strong liquidity position, ending the period with $328.0 million in cash and short-term investments, and total debt of only $20.6 million.

Cubic Corporation is the parent company of three major business segments: defense systems, mission support services and transportation systems. Cubic Defense Systems is a leading provider of realistic combat training systems and defense electronics. Mission Support Services is a leading provider of training, operations, maintenance, technical and other support services. Cubic Transportation Systems is the world's leading provider of automated fare collection systems and services for public transit authorities. For more information about Cubic, see the company's Web site at www.cubic.com.‹

[DewDiligence]

BAE Ranks First in (2008) Global Arms Sales

http://online.wsj.com/article/SB10001424052702303828304575179430423088548.html

›APRIL 12, 2010, 6:06 A.M. ET

STOCKHOLM (AP) —Britain's BAE Systems PLC has become the first non-U.S. company to top global arms sales, a Swedish defense think-tank said Monday.

The Stockholm International Peace Research Institute said BAE sold $32.4 billion of weapons in 2008, placing it ahead of U.S. companies Lockheed Martin Corp. and Boeing Co.—the previous No. 1.

BAE boosted its sales partly through U.S. orders of mine-resistant vehicles for use in Afghanistan and Iraq, SIPRI said. "The company is based in the U.K., but does more than half of its business in the USA," said SIPRI arms-industry expert Susan Jackson. "BAE really shows the increasing internationalization of the arms industry and the attractiveness of the U.S. market."

Air-defense-systems maker Almaz-Antei was the first Russian company to enter the top 20, with arms sales of $4.3 billion in 2008.

"The continued upswing in many Russian arms-producing companies is the combined effect of longer term increases in exports and the more recent increases in domestic arms procurement," said Ms. Jackson.

SIPRI said the world's top 100 arms vendors had total sales of $385 billion in 2008, up nearly $40 billion from a year earlier.‹

[DewDiligence]

Cubic Receives $10M Contract to Provide Fare-Collection Technology for NYC Buses

http://finance.yahoo.com/news/Cubic-Receives-10-Million-iw-1751831530.html?x=0&.v=1

›Wednesday April 7, 2010, 7:00 am EDT

NEW YORK, NY--(Marketwire - 04/07/10) - The MetroCard® system that Cubic designed and delivered to New York City Transit 17 years ago remains one of the top-performing fare collection systems in the world, processing more than 8 million transactions a day. By September, the system's reach will expand further when Cubic Transportation Systems, Inc., transportation subsidiary of Cubic Corporation (NYSE: CUB), delivers 200 new advance-pay fare machines for Select Bus Service routes.

Under a $10 million contract signed last year, Cubic will provide more than 200 MetroCard Fare Collectors to NYCT in an effort to speed bus service to handle increased ridership. Studies show that NYCT buses spend more than 20 percent of their time stopped waiting for passengers to board, transit officials say. With fewer stops, and dedicated traffic lanes and stoplights that change in the buses' favor, Select Bus Service routes are a cost-effective alternative to building new subways.

Cubic's MetroCard Fare Collectors will let people use their MetroCard to pay before the bus arrives. They are new, weatherized versions of the MetroCard Express Machines currently used in NYCT's subway system to accept credit or debit card payments.

Cubic installed modified MetroCard Express Machines on the first Select Bus Service route in the Bronx in 2008 as part of a pilot project to test the idea of prepaying bus fares.

"The pilot was hugely successful, and speeds things up quite a bit," said Steve Brunner, Cubic's Northeast regional director. "Transit officials and riders were extremely happy with it."

The new MetroCard Fare Collectors will be installed at stops on three Select Bus Service routes. The new machines have also been designed to withstand exposure to snow and rain and include user-friendly menus and screens, as well as a wireless network that connects to a central maintenance facility. Passengers insert their MetroCards into the devices and receive a receipt to show to an inspector on request.

The contract with New York City Transit includes a 2011 option for an additional 64 machines for a fourth Select Bus Service route.

About MetroCard®

MetroCard® is a registered trademark of the Metropolitan Transportation Authority ("MTA"). The MTA and New York City Transit have neither approved nor endorsed this article or any of its contents.

About Cubic

Cubic Transportation Systems, Inc. is part of Cubic Corporation. Cubic Corporation is the parent company of three major business segments: Defense Systems, Mission Support Services and Transportation Systems. Cubic Defense Systems is a leading provider of realistic combat training systems and defense electronics. Mission Support Services is a leading provider of training, operations, maintenance, technical and other support services.

Transportation Systems is the world's leading turnkey solution provider of automated fare collection systems for public transport including bus, bus rapid transit, light rail, commuter rail, heavy rail, ferry and parking. Cubic's solutions and services include system design, central computer systems, equipment design and manufacturing, device-level software, integration, test, installation, warranty, maintenance, computer hosting services, call centre services, card management and distribution services, financial clearing and settlement, multi-application support and outsourcing services.

Every year, nearly 10 billion rides are taken worldwide using Cubic fare collection systems. Cubic has delivered over 400 projects in 40 major markets on five continents. Active projects include London; New York / New Jersey region; Washington, D.C. / Baltimore / Virginia region; Los Angeles region; San Diego region; San Francisco Bay Area; Minneapolis/St. Paul; Chicago; Atlanta; Miami; Vancouver and Edmonton, Canada; Brisbane, Australia; Scandinavia, Germany and India.‹

[DewDiligence]

Boeing’s Commercial Deliveries Nosedive in 1Q10

http://online.wsj.com/article/SB10001424052702304198004575171993743175612.html

›By JOHN KELL
APRIL 9, 2010

Boeing Co. said it delivered 108 commercial aircraft during the first quarter, fewer than what it delivered in the fourth quarter and a year earlier.

The aircraft maker and defense contractor was finally able to get the long-delayed 787 Dreamliner aloft in December, but the company's flight-test program for the new jetliner is still running behind schedule. Chicago-based Boeing said it will deliver the first of the planes by year end.

Boeing's latest results were under the 122 deliveries it had in the fourth quarter and the 121 a year earlier.

The bulk of deliveries in the latest quarter—86—were 737 next-generation planes. Boeing also delivered four Apache helicopters and several other defense-systems machines, including other helicopters and fighter jets.

Boeing is scheduled to release its full first-quarter results on April 21.

Meanwhile, rival Airbus said Thursday that it has delivered 122 aircraft since the start of the year. Airbus, part of European Aeronautic Defence & Space Co., received 60 new orders in the first quarter.‹

[DewDiligence]

More on ITT, especially the water side of the business:

#msg-48575781

[DewDiligence]

Dreamliner Still Lags Testing Schedule

[Am I the only one who found BA’s assurances vis-à-vis the “ultimate-load” test to be less than reassuring?]

http://online.wsj.com/article/SB20001424052702303410404575152123922009294.html

›Months-Long FAA Certification Process Still Needs to Begin, Posing Risk for Expected Year-End Delivery of First Planes

MARCH 30, 2010
By PETER SANDERS

Boeing Co.'s flight-test program for its new 787 Dreamliner jetliner is running behind schedule, though the company insists it will still deliver the first of the planes by year end.

The company was finally able to get the long-delayed Dreamliner aloft last December, but it has yet to begin a crucial in-flight certification process with the Federal Aviation Administration. That process is expected to take months, and major glitches could again knock back Boeing's ability to deliver the first Dreamliners as promised.

Top Boeing executives have acknowledged minor delays and unexpected issues, which they say is normal for a test program of this complexity and magnitude. They insist that launch customer All Nippon Airways Co. will have its first jet by Dec. 31. The plane is already two and a half years behind schedule and has cost Boeing billions of dollars in penalties. Any further delay would result in additional financial consequences.

"Some people said that when the first plane actually flew we could breathe a sigh of relief because we had retired the technical risk," Jim Albaugh, chief executive of Boeing's commercial-airplanes unit, said in an interview earlier this month. "Nothing could be further from the truth."

Mr. Albaugh said the company had built in some cushion to its test-flight certification schedule, but that some early snags have eaten into some of that buffer.

He said that some issues, including an in-flight engine shutdown that happened in late February on one of the test planes, have required extra time to resolve. Most of the tests have been conducted in Washington state, though one plane flew to northern Montana on Monday and another jet spent a few weeks undergoing tests in Southern California.

The planes are expected to test conditions at high-elevation airports, as well as in extreme temperatures and high winds. Four of the six test planes are now flying and have flown for just under 400 hours. Boeing expects the fleet will need more than 2,000 flight hours before certification is complete.

Boeing had hoped the FAA's portion of the certification testing on board the aircraft would have started in mid-February, but then revised the date to the end of March. A spokeswoman for Boeing said Monday there was no "firm date yet, but we are getting close." The FAA has been expecting to start the process in April, according to people familiar with the matter.

The FAA's onboard-testing program typically begins after a plane completes its initial airworthiness tests. Boeing put one of the planes through its paces to test its altitude-ceiling and maximum-speed characteristics. In the successful tests, one of the jets climbed above 43,000 feet and reached nearly the speed of sound during a dive.

On Sunday, Boeing said it completed a milestone after a test Dreamliner was subjected to the so-called ultimate-load test. During the test, the plane's wings were flexed upward about 25 feet and the air frame was subjected to 150% of the forces it would encounter during even the most severe conditions.

Officials said the initial results were positive but that "more extensive analysis and review are required before the test can be deemed a success." The wide-body Dreamliner is made of about 50% composite material and boasts a variety of technical innovations never before used on a commercial jet.

Issues have also cropped up with Boeing's other test program, the revamp of its iconic 747 jumbo jet. Three new 747-8's, configured as cargo planes, have been test flown since the first jet flew in late February.

Last week, Boeing said the landing-gear doors and wing flaps were causing an aerodynamic problem during landing. Boeing has yet to disclose a solution to the problem and a redesign could further delay that program, which is running more than a year behind schedule.‹

[DewDiligence]

Upstarts Are Creating Headwinds for Boeing, Airbus

http://online.wsj.com/article/SB10001424052748704734304575120821506239764.html

›March 15, 2010
By PETER SANDERS And DANIEL MICHAELS

When it shops for a new fleet of single-aisle airliners later this year, UAL Corp.'s United Airlines won't just be choosing between Boeing Co. and Airbus. It will also look at planes from Canada's Bombardier Inc. and Brazil's Embraer.

For years, Airbus and Boeing have split the market for big passenger jets. But a series of shifts in the sector could start to erode that dominance, leading to big changes in the commercial aircraft industry.

"I've got to think the duopoly we've enjoyed for the past 20 or 30 years is not going to last forever," Jim Albaugh, chief executive of Boeing's commercial airplane unit, said in an interview this month.

The prospect of increased competition is already forcing the two giants to consider making costly changes to their most popular models. At an industry conference in Orlando Monday, Airbus Chief Operating Officer John Leahy said senior Airbus executives were expected to meet Tuesday to discuss upgrade options for the top-selling A320 family, though he said a decision wasn't expected to be made right away.

Boeing will decide in the next few months whether to embark on a revamp of its 737 single-aisle jetliner line.

Neither company had wanted to launch such an expensive undertaking for years. But their customers have started clamoring for more fuel-efficient planes just as upstart manufacturers have begun producing rival jets.

Bombardier has historically built smaller planes and so was never in the crosshairs of Boeing or Airbus. But the Montreal-based company now pledges that the new 150-seat jetliner it is developing, the CSeries, will deliver a 15% improvement in fuel consumption over current 737s or A320s.

"We have an advantage with our all-new technology," said Gary Scott, president of Bombardier's commercial aircraft unit.

The 150-seat CSeries can't compete with all 737 or A320 models, which can carry up to 200 passengers and fly further. But the Bombardier plane could eat into the lower-end of their market.

Last month, Indianapolis-based Republic Airways Holdings Inc., which operates Frontier and Midwest Airlines, said it was buying 40 CSeries planes, making it Bombardier's first U.S. customer for the model. Germany's giant Deutsche Lufthansa AG last year ordered 30 CSeries planes for its Swiss International subsidiary. Both orders were replacements for regional jets, and the airlines' decision to forego smaller 737s or A320s in favor of the CSeries boosted the Bombardier plane's credibility.

Embraer, the marketing name of Brazil's Empresa Brasileira de Aeronautica SA, is considering launching a bigger version of its biggest regional jet, which would rival the CSeries.

"The main reason Boeing and Airbus are considering" revamping is because of the CSeries and the new engines it will use, said Henri Courpron, President of the aerospace division at aviation investment bank and consultantcy Seabury Group.

For Boeing and Airbus, which is a unit of European Aeronautic Defence & Space Co., the prospect of making changes to the workhorses of their product lines comes at a difficult time.

Boeing has spent billions of dollars developing its new long-range 787 Dreamliner, considered the most sophisticated commercial airplane ever built. But the project is three years late and far over budget. It's also behind on its revamped 747 widebody jet, long its most iconic product.

Airbus is in a similar predicament: Its A380 superjumbo and A400M military airlifter are in the red and behind schedule.

Both had hoped to hold off at least a decade before replacing their single-aisle models with entirely new planes. Drafting new blueprints would yield planes that gulp less fuel and fly longer between expensive maintenance overhauls. But it would take several years and cost billions of dollars more.

Neither company can afford that now—and the breakthroughs necessary for dramatic fuel savings aren't ready.

"Game-changing technology comes out in the middle of the next decade," said Mr. Leahy in an interview earlier this month. "If we were to bring out a new aircraft this decade, it would basically look a lot like what we have now."

In addition, Airbus and Boeing have recently begun to churn out their small jetliners faster than ever, boosting profitability at a crucial moment. Both have order backlogs equivalent to around six years of output. Demand remains strong for newly built 737s and A320s, largely because carriers want to replace older, less-efficient models.

Airbus announced on March 9 it will increase production of A320-family planes in December to 36 per month from 34 currently. Boeing's Mr. Albaugh said this month that the company will decide whether or not to increase the 737 production rates by summer.

Making any changes to those planes would disrupt the companies' hard-won manufacturing efficiency and could slow demand as airlines hold out for newer versions.

But at the same time, they can't ignore the demands of their core customers. Instead of redesigning the planes entirely, Airbus and Boeing are likely to put new, more fuel-efficient engines on their existing planes, an option known as re-engining.

Louis Gallois, chief executive of Airbus parent EADS, said last week he thinks there is "a strong probability" that the company will decide to re-engine.

Mr. Leahy said Monday that if Airbus decides to add a new engine to the A320, it will require minimal changes to the current design and only two hours of self-instruction by pilots to gain proficiency on the "new" jet. The plane would be ready for service by late 2015, he said.

Earlier this month, Boeing officials told analysts that it would be able to install new engines on its 737 model but they would likely be bigger and heavier than the current version. That would require updating a number of key structural components on the planes, as well as adding new instrumentation to the cockpit.

What the two plane makers decide will affect upcoming competitions to sell new planes to customers.

United Airlines, for example, wants to replace older A320-family planes. It is looking at Bombardier's CSeries and a possible Embraer entrant, but also believes putting new engines on current Airbus and Boeing models could give an "attractive fuel-consumption improvement," Chairman and Chief Executive Glenn Tilton said last month.‹

[Entangled Proton]

I've been reading your other boards and I like them. I was checking out you favorite stocks and just thought the Ibox's of those stocks would be a good way to give highlight and information for the new comer to read. I never new CUB was into defense sensors till I read your board.

I myself would like to get more people looking at Big Board stocks. I keep getting drawn into the drama of the pinkies then find myself with not enough time to work on what I really want to work on.

[DewDiligence]

Cubic Security Training Institute Opening Draws Large Crowd From Military, Law Enforcement and Security Organizations

[This PR gives some flavor as to how CUB is a company that is well positioned for fighting a "new war" in contrast to defense companies who sell conventional big-ticket hardware intended for fighting an "old war."]

http://finance.yahoo.com/news/Cubic-Security-Training-iw-3571584828.html?x=0&.v=1

›February 17, 2010, 3:30 pm EST

ORLANDO, FL--(Marketwire - 02/17/10) - An Orlando-based defense unit of Cubic Corporation (NYSE: CUB ) has opened a new instrumented training facility and live-fire range for military, law enforcement and security personnel. Cubic's Simulation Systems Division today officially launched the Cubic Security & Enforcement Training Institute, or CSENTRI, with a dramatic tactical scenario starring the Orange County Sheriff's SWAT team.

The action scenario -- featuring SWAT team members taking down a fugitive in a barricaded apartment -- was repeated hourly during grand opening festivities at the CSENTRI facility. Located on Oak Ridge Road, the multi-building facility may be rented by law enforcement, military and security organizations to practice tactical scenarios and marksmanship.

"Cubic wants to extend to law enforcement and security teams the superior training capability we currently provide the military," said Brooks Davis, sales and marketing manager for Cubic Simulation Systems Division in Orlando. "Cubic's live and virtual training systems allow personnel to practice tactical scenarios without live ammunition, and receive objective electronic assessments of how they performed. Law enforcement and security officers who utilize CSENTRI can also train with live ammunition, and Simunitions or UTM training ammunition. We want CSENTRI to be the most comprehensive private tactical training facility in the country."

Invited to the opening of CSENTRI were representatives from the State of Florida and Federal law enforcement, the U.S. Army Program Executive Office for Simulation and Training Instrumentation (PEO STRI), the Naval Air Systems Command (NAVAIR), security management professionals and gun club members.

Features of the CSENTRI facility include:

• an indoor live-fire pistol range

• a "Hogan's Alley" area for live judgmental "shoot-don't shoot"
training

• a Defensive Tactics training room with padded floors and walls for
practicing the physical self-defense skills required in tactical
situations

• two classrooms equipped with audiovisual systems

• Cubic's Engagement Skills Trainer (EST), which allows soldiers, law
enforcement officers and security teams to hone their skills in
marksmanship, collective and judgmental training

The facility also features an instrumented urban operations training area consisting of a multistory building with a rappelling tower. The U.S. Army uses the Reconfigurable Armored Tactical Personnel And Collective (RATPAC) training system to train soldiers for urban warfare. UXB International, Inc., headquartered in Blacksburg, Va., developed RATPAC and Cubic provided video cameras and microphones, a public address system, power outlets, equipment for generating artificial smoke and smells, pop-up targets for shoot-don't shoot drills, and software and computer systems for after-action reviews. All the Cubic systems are controlled from a single computer station. Cubic's complete package of urban training instrumentation is branded ASAULT, which stands for Advanced Systems Architecture for Urban Live Training.

Cubic is evaluating adding an indoor rifle range and additional areas for urban and maritime security training as it continues to leverage its technology growth plans in the Urban Operations Training domain.

Cubic is teaming with international business partners to offer classes at the facility, and may eventually teach classes of its own for specialized markets. The businesses that are working with Cubic on CSENTRI include specialists in ammunition, armament safety, explosives and ordnance disposal, self-defense training, and tactical training gear, weapons and vehicles.

Cubic Simulation Systems, Inc. is part of the Defense Systems business of Cubic Corporation. Cubic Corporation is the parent company of three major business segments: Defense Systems, Mission Support Services and Transportation Systems. Cubic Defense Systems is a leading provider of realistic combat training systems and defense electronics. Mission Support Services is a leading provider of training, operations, maintenance, technical and other support services. Cubic Transportation Systems is the world's leading provider of automated fare collection systems and services for public transit authorities. For more information about Cubic, see the company's Web site at www.cubic.com.‹

[DewDiligence]

Why can't I find a board for CUB?

Because no one has gone to the trouble of starting one :- )

Seriously, the premise of this board (and conceptually similar boards such as #board-1418, #board-15427, and #board-15787) is that aggregating the discussion about companies within the same industry or economic sector leads to a higher quantity and quality of posting. Regards, Dew

[Entangled Proton]

Why can't I find a board for CUB ? Defence and Aerospace are hot topics on other websites and Ihub is loosing out.

[DewDiligence]

CUB Reports FY1Q10 Results

[CUB was hammered last week after reporting fiscal Q1 earnings that fell slightly short of analysts’ expectations. The selloff was so pronounced I figured there had to be a smoking gun, so I read through the 10Q filing to try to find one. All I found was a $2M charge due to a contract dispute with one of CUB’s defense customers, but this charge was disclosed in the PR below and would seem to be too small to be consequential. Moreover, contract disputes in the defense business are commonplace. Bottom line: I think the selloff was a major overreaction. If anyone here disagrees, please post!]

http://finance.yahoo.com/news/Cubic-Corp-NYSE-CUB-Reports-iw-68200143.html?x=0&.v=1

›Monday February 8, 2010, 3:19 pm EST

SAN DIEGO, CA--(Marketwire - 02/08/10) - Cubic Corporation (NYSE:CUB) today reported earnings and sales for the quarter ended December 31, 2009. Sales for the first fiscal quarter were $250.7 million compared to $244.9 million last year, and net income was $13.7 million or 51 cents per share this year compared to $14.2 million or 53 cents per share last year.

Operating income in the first quarter this year was $20.9 million, compared to $21.1 million last year, because of a provision of $2.0 million made during the quarter for a contract dispute. The company is continuing to pursue alternatives for resolution of the dispute that could lead to recovery of the full amount, but the amount or likelihood of recovery cannot be determined at this time. Cash flows from operations were $11.3 million for the quarter.

Transportation Systems Segment

Cubic Transportation Systems (CTS) sales were virtually the same in the first quarter of fiscal 2010 and 2009, at $74.3 million compared to $74.4 million in the prior year.

Operating income from CTS increased 10 percent in the first quarter this year to $11.0 million compared to $10.0 million in the prior year. The prior year results had included two contract restructurings and a dispute resolution, which added $1.6 million to first quarter operating income last year.

Defense Systems Segment

Cubic Defense Systems (CDS) sales increased 15 percent to $75.6 million from $66.0 million in last year's first quarter. Sales increased in both the Training Systems and Communications businesses.

Operating income from CDS improved to $6.7 million from $5.2 million in last year's first quarter. Higher operating income on higher sales of electro-optic training systems and personnel locator systems contributed to the increase.

Mission Support Services Segment

Sales at Mission Support Services (MSS) decreased 3 percent to $100.2 million from $103.8 million in the first quarter of last year. A contributing factor to the decrease was the completion of a contract in Iraq that had added approximately $5.7 million to sales to the first quarter of the prior year.

Operating income from MSS was $4.0 million compared to $7.5 million in the prior year's first quarter. The contract in Iraq mentioned above had contributed approximately $2.0 million to the prior year results in addition to a $1.2 million contract settlement received in last year's first quarter. This year's first quarter included a provision of $2.0 million for a dispute with a customer over contract terms.

Backlog

Total backlog was $2.175 billion at December 31, 2009 compared to $2.183 billion at September 30, 2009.

Financial Condition

The company continues to maintain a strong liquidity position, ending the period with $258.2 million in cash and short-term investments, and total debt of only $21.0 million.

Cubic Corporation is the parent company of three major business segments: defense systems, mission support services and transportation systems. Cubic Defense Systems is a leading provider of realistic combat training systems and defense electronics. Mission Support Services is a leading provider of training, operations, maintenance, technical and other support services. Cubic Transportation Systems is the world's leading provider of automated fare collection systems and services for public transit authorities. For more information about Cubic, see the company's Web site at www.cubic.com.

CUBIC CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(amounts in thousands, except per share data)
Three Months Ended
December 31,
2009 2008
----------- -----------

Net sales
Products $ 132,785 $ 123,077
Services 117,899 121,774
----------- -----------
250,684 244,851

Cost and expenses
Products 94,855 94,984
Services 103,337 100,231
Selling, general and administrative 28,683 25,206
Research and development 1,737 1,860
Amortization of purchased intangibles 1,698 1,440
----------- -----------
230,310 223,721
----------- -----------

Operating income 20,374 21,130

Other income (expenses):
Interest and dividends 346 570
Interest expense (450) (532)
Other income (expense) 593 (85)
----------- -----------

Income before income taxes 20,863 21,083

Income taxes 7,200 6,900
----------- -----------

Net income $ 13,663 $ 14,183
=========== ===========

Basic and diluted net income per common share $ 0.51 $ 0.53
=========== ===========

Average number of common shares outstanding 26,732 26,727
=========== ===========

CUBIC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
September 30,
December 31, 2009
2009 (See note
(Unaudited) below)
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 234,132 $ 244,074
Short-term investments 24,070 8,127
Accounts receivable - net 206,333 231,461
Inventories - net 54,510 49,107
Deferred income taxes and other current
assets 46,569 52,089
------------ ------------
Total current assets 565,614 584,858
------------ ------------

Long-term contract receivables 9,300 13,400
Property, plant and equipment - net 48,327 48,895
Goodwill 59,529 59,433
Purchased intangibles 26,952 28,618
Other assets 20,680 21,111
------------ ------------
$ 730,402 $ 756,315
============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 19,476 $ 28,626
Customer advances 121,197 123,458
Other current liabilities 84,423 109,536
Income taxes payable 3,053 3,491
Current portion of long-term debt 4,561 4,554
------------ ------------
Total current liabilities 232,710 269,665
------------ ------------

Long-term debt 16,409 20,570
Other long-term liabilities 46,048 45,235

Shareholders' equity:
Common stock 12,530 12,530
Retained earnings 469,406 455,743
Accumulated other comprehensive income
(loss) (10,630) (11,357)
Treasury stock at cost (36,071) (36,071)
------------ ------------
435,235 420,845
------------ ------------
$ 730,402 $ 756,315
============ ============

Note: The balance sheet at September 30, 2009 has been derived from the
audited financial statements at that date.

CUBIC CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(amounts in thousands, except per share data)
Three Months Ended
December 31,
2009 2008
--------- ---------

Operating Activities:
Net income $ 13,663 $ 14,183
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,562 3,460
Changes in operating assets and liabilities (5,881) (13,151)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 11,344 4,492
--------- ---------

Investing Activities:
Acquisitions net of cash acquired (850) (6,100)
Net additions to property, plant and equipment (1,171) (1,448)
Proceeds from sales of short-term investments 76 -
Purchases of short-term investments (16,019) -
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (17,964) (7,548)
--------- ---------

Financing Activities:
Principal payments on long-term borrowings (4,214) (5,568)
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (4,214) (5,568)
--------- ---------

Effect of exchange rates on cash 892 (12,796)
--------- ---------

NET DECREASE IN CASH AND CASH EQUIVALENTS (9,942) (21,420)

Cash and cash equivalents at the beginning of the
period 244,074 112,696
--------- ---------

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 234,132 $ 91,276
========= =========‹

[DewDiligence]

Small Defense Firms Are M&A Targets

[Among the target companies mentioned here, the only one I follow is CUB.]

http://www.reuters.com/article/idCNSGE60C0IX20100201

›By Bijoy Koyitty and Bhaswati Mukhopadhyay

BANGALORE, Feb 1 (Reuters) - Smaller U.S. defense firms are back on the acquisition radar, helped by a renewed interest in surveillance and intelligence -- two key areas that have been attracting federal interest lately.

The sector is expected to see more deals in the near term than it has in the past three years, as large players, grappling with cutbacks in major defense programs, look to sustain growth by buying smaller rivals in niche areas.

"The industry has consolidated considerably in the last 10 to 15 years and it will continue to do so. Most acquisition targets probably will be in the area of smaller firms," said Tian Qiu, an analyst at Templeton Global Equities Group.

The renewed chatter follows a move by Argon ST <STST.O> to put itself on the block recently -- almost a year after Axys Technologies put itself up for sale, triggering the first round of deal talk. Argon makes sensors for intelligence, surveillance and reconnaissance systems.

"There is a shift in strategy as the government moves away from fighting a large war. Now the requirement is for mission critical technologies and these smaller firms are filling that gap," Broadpoint Amtech analyst Peter Arment said.

Possible targets include X-ray detection system maker American Science and Engineering Inc <ASEI.O>, communications firms Comtech Telecommunications <CMTL.O> and Applied Signal Technology <APSG.O>, and biometric identification systems firm Cogent Systems <COGT.O>, according to analysts.

The rising importance of unmanned war systems puts drone maker AeroVironment Inc <AVAV.O> in focus, while defense training firm Cubic Corp <CUB> is a potential target given the infusion of more U.S. troops in Afghanistan.

The possible acquirers include Lockheed Martin Corp <LMT.N>, Boeing Co <BA.N>, Northrop Grumman <NOC.N>, General Dynamics <GD.N>, Goodrich Corp <GR.N>, BAE Systems Plc <BAES.L>, EADS <EAD.PA> and Science Applications International <SAI.N>.

According to a recent Reuters Insider report, Boeing could be the frontrunner for Argon ST, given the logic of synergies with the planemaker's 2008 purchase of Digital Receiver Technology, which develops wireless surveillance products for government customers.

Science Applications International is best poised to make a sizable acquisition with $1 billion on balance sheet, and the possible targets could be American Science & Engineering and Cogent Systems, the report said.

AVERTING ANOTHER 9/11

Companies with a focus on homeland security and cyber security have a clear edge in the M&A market, with the U.S. government prioritizing these segments in the wake of the recent security threats.

Homeland security was pushed to the top of Obama's 2010 agenda after a passenger tried to blow up a Detroit-bound flight with a bomb concealed in his underwear on Christmas Day.

"Homeland security is very similar to defense -- you have government as customer," said Philip Finnegan, director, corporate analysis at research firm Teal Group.

"It has the potential to grow even if defense comes under pressure."

L-3 Communications Holdings <LLL.N> has said it plans to buy assets in the intelligence surveillance business this year. Goodrich is interested in areas such as precision-guided weapons, intelligence surveillance and helicopter components.

REASONABLE VALUATIONS

Valuations are becoming cheaper as sellers tend to be more reasonable on their expectations now, analysts said. "We have seen that most of the defense group in general was out of favor last year, the multiples have compressed," Broadpoint Amtech's Arment said.

Deal valuations in the sector now range from 7 to 11 times forward EBITDA (earnings before interest, taxes, depreciation and amortization), depending on the company.

Companies that have proprietary technologies, are in high-growth areas or have access to customers in the intelligence arena stand on the upper range of the multiples.

For example, Argon ST and American Science & Engineering trade at 11 times forward EBITDA.

Shares of most of these small defense companies, which crashed during slowdown, are beginning to stabilize now. On an average, they have gained 13 percent of their value in the last three months.

Executives at the Reuters Aerospace and Defense Summit in Washington in December said lower valuations will drive mergers in the aerospace and defense sector this year with larger companies spending up to $1 billion each.

"The small to mid-cap defense companies, specifically those with an emphasis on technology, will offer investors the highest probability of upside under the DoD's new philosophy," analyst Michael Ciarmoli of Boenning & Scattergood wrote in a January note.‹

[Entangled Proton]

I have updated the Boeing Ibox, If you'd like the message it in your Ibox I'd be happy to put it there for you. i don't know witch companies you favor, but I'll be finishig ORB soon. There will be a number of Aerospace companies delivering public messages over the next couple months.

[Entangled Proton]

Actually the Boeing message should be in your Ibox.

[Entangled Proton]

While locating the Boeing board I stumbled across this board. You're lost amung the user groups and I don't think anyone knows you're here.
I would like to invite you to our new user group "Health and Sciences".
We will be getting some exsposure in the near future and would love to have you.

All you have to do is request Admin to move the board to Health and Sciences". All links should change with the move.

There's a lot of construction going on there and I think you'll enjoy it. Most of it deals with Aerospace.

JB

[crable]

House panel: Defense review lacks priorities
The 2010 Quadrennial Defense Review received a chilly reception Thursday from the House Armed
Services Committee, with members from both parties complaining that it lacks clear priorities and calls
for too few forces to meet the future threats and missions envisioned.
House Armed Services Committee Chairman Ike Skelton, D-Mo., called the QDR "superior" to previous
documents updating national defense strategy, military force structure and modernization plans and
praised its focus on a force able to counter more than one threat at a time.
But Skelton complained that it seemed to require a force "capable of being all things in all
contingencies," which makes it hard for the committee to determine what the priorities are and which
of the many possible risks are the most important.
"This makes our task much more difficult, because although the QDR should not be budget-constrained,
the plain fact is that resources are not unlimited" and the QDR "comes up short" on giving Congress any
guidance on how to make the essential tradeoffs, he said.
Armed Services Committee ranking member Howard (Buck) McKeon, R-Calif., echoed those concerns,
repeating his protest that the QDR's focus on winning the current conflicts in Iraq and Afghanistan shortchanged
the forces needed for the future.
Michele Flournoy, undersecretary of defense for policy, and Vice Adm. Stephen Stanley, director for
force structure and resources for the Joint Chiefs of Staff, insisted that the QDR did set priorities. But
they acknowledged that the forces had to be flexible and adaptable to respond to the wide range of
possible threats.
Skelton said the scope of missions described appeared to require a larger Army and Marine Corps, and
McKeon asked how the current force would handle a major contingency, such as North Korea, while
involved in those conflicts.
Flournoy said that because Iraq and Afghanistan involved mainly the Army and Marines, the Navy and
Air Force would be able to respond to a threat from North Korea.
But McKeon replied that the QDR and the fiscal 2011 budget cut the size of the Air Force and did not
enlarge the Navy.
15
Seapower Subcommittee Chairman Gene Taylor, D-Miss., also complained that the QDR did not allow
the Navy to reach the 313-ship fleet it wanted, and asked why it called for retiring the Perry-class
frigates when they could fill missions such as the antipiracy patrols off Somalia.
Taylor warned the defense officials to expect "a shot across the bow" from his panel in legislation that
would require them to propose building two new ships for every ship they planned to retire.
Virginia lawmakers demanded to know if the officials regarded anticipated funding shortfalls for ships
and aircraft as less important than spending as much as $1 billion to move an aircraft carrier from its
home port in Norfolk, Va., to Mayport, Fla. Flournoy could not provide an immediate answer.
In response to a question about the Marine leaders' concerns over their fading amphibious capabilities,
Stanley said the QDR supported amphibious operations to ensure that U.S. forces can enter hostile areas
to neutralize a threat. And he said the expeditionary fighting vehicle, which has been repeatedly
delayed, will be a part of that capability.

[crable]

DoD 30-Year Ship Plan Needs $16B a Year; Aviation Plan Puts Off New Bomber
The U.S. Navy's new 30-year fleet plan demotes the previous goal of a 313-ship fleet to a mere "point of
departure" for developing a new fleet. The service estimates it can buy the ships in the plan for an
average of "no more than $15.9 billion per year" in 2010 dollars.
And for the first time, the Pentagon submitted to Congress a 30-year aviation plan for the Air Force and
Navy.
The Navy is required by Congress to annually prepare a 30-year shipbuilding plan. Last year's plan was
held in abeyance at the direction of Defense Secretary Bob Gates - a move that angered some
lawmakers. The new plan was sent to the Hill on Feb. 1 to accompany the president's fiscal 2011 budget.
In the updated plan's near-term period, the Navy plans to "significantly ramp up" production of ships
such as the Littoral Combat Ship (LCS) and the Joint High Speed Vessel (JHSV) to "support persistent
presence, maritime security, irregular warfare, joint sealift, humanitarian assistance, disaster relief, and
partnership building missions." A total of 66 LCS ships is now forecast to be bought over the 30-year
period, including 17 replacements for ships reaching the end of their service life.
Highlights of the plan include:
¦ Increasing the number of Navy-operated Joint High Speed Vessel ships to 23 and expanding their
mission range.
¦ Canceling plans to build two new joint command ships and instead extend the two 1970s-era ships
through 2029.
9
¦ Standardizing the combat logistics force to two basic auxiliary ship types: T-AKE dry cargo ammunition
ships and new T-AO(X) double-hulled fleet oilers.
¦ Replacing the Maritime Prepositioning Force (Future) (MPFF) squadron to support high-end, forcibleentry
operations with three enhanced Maritime Prepositioning Squadrons, each consisting of a T-AKE, a
new Mobile Landing Platform (MLP) and a Large Medium-Speed Roll-on/Roll-off (LMSR) ship transferred
from the Army.
The plan, as expected, holds the number of aircraft carriers to 11 ships until dropping to 10 after 2040;
reaffirms the 2008 decision to end the DDG 1000 destroyer program at three ships and last fall's choice
to select a single design for the Littoral Combat Ship program; confirms the plan to continue
development of a new Advanced Missile Defense Radar (AMDR) to install on DDG 51-class destroyers
(scheduled with the ships to be ordered in 2016); and maintain an amphibious landing force of
"approximately 33 ships."
The plan is divided into thirds: a near-term from 2011 to 2020 "based on a very good understanding of
requirements, costs and capabilities"; a mid-term from 2021 to 2030 featuring ships "yet to be informed
by either concrete threat analyses of formal analysts of alternatives"; and a far-term from 2031 to 2040
based on decisions and assumptions "certain to change over the next two decades."
The new plan does not plan for a replacement for the four SSGN cruise-missile and special-mission
submarines converted from the ballistic missile mission. A 12-ship replacement program for the Ohioclass
ballistic missile submarines is to be funded from 2019 through 2033, but the requirement for the
new sub is expected in the forthcoming Nuclear Posture Review expected to be sent to Congress in early
March.
The Navy acknowledges that the 33-ship amphibious fleet "represents the limit of acceptable risk" in
meeting the requirement to deliver two Marine Expeditionary Brigades in a forcible entry operation,
despite the Corps' desire for 38 ships.
And while the total number of LCS ships to be bought jumps to 66, the rate of construction significantly
drops. Gone are previous years where six or five ships were to be purchased; instead, the new plan buys
four per year from 2013 to 2015, three a year from 2016 to 2019, and two or one per year thereafter
through 2040.

[Entangled Proton]

Good evening DD. Boing is asking for some help from the forums, So I'm going to do a quick update in the Ibox.

[DewDiligence]

Boeing Faces Fresh Test With Delayed 747-8

http://online.wsj.com/article/SB20001424052748703615904575053630261059908.html

›Latest Redesign of 40-Year-Old Jumbo Jet, Plagued by Delays and Mounting Costs, Has Been Slow to Win Orders

By PETER SANDERS
FEBRUARY 9, 2010

Boeing Co.'s revamped 747 took off on its maiden flight Monday. But the new jetliner still has been slow to attract orders as the company again redesigns a successor to a plane that has been flying for 40 years.

Known as the 747-8, the plane is the largest commercial jet Boeing has ever built. But throughout its development the aircraft has been mostly overshadowed by the 787 Dreamliner, the company's new cutting-edge plane that is designed to be lighter and more fuel efficient than other commercial aircraft in its class.

Boeing has struggled as it developed both aircraft; the Dreamliner is more than two years behind schedule, while the 747-8 is about a year late.

The first test flight, which was delayed slightly by fog at Paine Field, north of Seattle, marks the beginning of a rigorous testing regimen the aircraft now must undergo to receive certification from the Federal Aviation Administration.

The Chicago-based company hopes to deliver the first 747-8 by year-end. But the company has had a hard time lining up customers, with its passenger version caught between Airbus's A380 and Boeing's own 777.

Boeing has 76 orders for the jet configured as a cargo hauler, the first of which is expected to be delivered in the fourth quarter to Luxembourg's Cargolux Airlines International SA.

A passenger version, which can carry up to 467 people in three classes, will begin deliveries at the end of next year. But Boeing has only 32 orders for that version, from just two airlines and a handful of unidentified VIP customers. By contrast, the Dreamliner has more than 850 orders, despite its numerous delays.

The planes carry a list price of more than $300 million, though airlines typically negotiate discounts.

Rising costs for the 747-8 have weighed on Boeing's balance sheet. Early last year, Boeing said the program was unprofitable, and the company in October took a $1 billion write-down on the jet. [That’s one thing Boeing is really good at, LOL.]

It is unclear when or if the company will make money on the aircraft. For a time, senior company executives questioned whether the program would continue.

Nevertheless, Boeing executives say they are optimistic about the 747-8's viability. [What would one expect them to say?] "It's sort of a full-court press on all elements of the business equation," Jim McNerney, Boeing's chairman and chief executive, said on an earnings conference call last month. Many airlines that fly the older 747-400 are "going to be turning over their technology in the next decade," he said.

The 747, with its humped upper deck, is Boeing's most recognizable plane. When Boeing began looking at another update of the 747, which first began service 40 years ago, it considered building a big new version to compete directly against the A380 double-decker plane built by the Airbus unit of European Aeronautic Defence & Space Co. But Boeing was unable to gain traction with airline customers for that concept.

By 2005, Boeing decided on the 747-8, which would boast a slightly longer fuselage than the 747-400, as well as greater fuel efficiency, a new wing design and use the same engines and cockpit set-up as the Dreamliner.

But as Boeing began to redesign its jumbo jet, the price tag began to soar. Updating the 747 airframe with new technology, working off blueprints from the 1960s, took longer than expected, adding to costs [LOL].

The company also was delayed by a two-month machinists' strike in 2008, as well as the need for Boeing to transfer engineers from the 747-8 program to help fix the Dreamliner.

Once deliveries of the 747-8 begin this year, Boeing still will face headwinds.

The air-cargo market has recently showed nascent signs of recovery after a steep drop off during the global recession. But scores older cargo planes sit parked around the world, waiting to be put back in service if demand recovers.

In addition, airlines can also convert older passenger 747s into cargo planes, making it harder for airlines and leasing companies to justify buying a new ones.‹

[DewDiligence]

Boeing’s CFO Dumps Shares

http://online.barrons.com/article/SB126532958436640925.html

›The financial chief and two others sold 30,000 shares of the aerospace firm

FEBRUARY 5, 2010
By AVI SALZMAN

Aerospace and defense contractor Boeing (Ticker: BA) posted very encouraging earnings late last month, handily beating expectations. With the stock up significantly on the news, three insiders, including the chief financial officer, sold a total of $1.8 million in Boeing shares this week.

The largest sale came from Chief Financial Officer James Bell, who sold 20,000 shares on Monday for $1.2 million, or about $61.52 per share on average. It was Bell's first sale since 2005.

Director John Biggs, the former president, chairman and chief executive of TIAA-CREF, sold 2,400 shares after exercising options on Tuesday for $147,000, or about $61.32 per share.

Vice president and corporate controller Robert Pasterick sold 7,064 shares on Monday for $434,000, or about $61.49 per share. None of the insiders owns more than 1% of the company's stock.

It was the largest cluster of sales at Boeing in at least a year.

A company spokesman says the sales were for "personal financial reasons" and should not be construed to indicate any loss of confidence in Boeing's prospects. Top insiders, he added, have few windows during the year to sell stock.

But a note published at InsiderScore.com published prior to Biggs' sales were announced says the two other sales raise "significant red flags." Bell and Pasterick are the top two financial officers at the company; the sale came after a run-up in Boeing shares to levels not seen in more than a year; and they were the first non-options-related sales since July/August 2007, according to InsiderScore.com.

"With Boeing's earnings and, more importantly, guidance news baked into the stock now, we think the sales by Bell and Pasterick represent a near-term valuation call," the InsiderScore.com note said. "Our concern will grow if other insiders step up and take advantage of the stock's recent strength."

Certainly Boeing shares were on a run shortly before the sales. After the company reported fourth-quarter earnings well ahead of analyst expectations ($1.75 per share versus expectations of $1.36) on Jan. 27, shares soared 7.3% that day. The company also indicated that it didn't expect to reduce its 737 deliveries this year, which had been a significant concern for investors.‹

[DewDiligence]

Small defense firms Reuters thinks are well positioned
(and have buyout vig):

APSG
ASEI
CMTL
COGT
CUB
STST

http://www.reuters.com/article/idCNSGE60S0M220100201

CUB is the only one of these I’m familiar with.

[DewDiligence]

FY2011 Budget Seeks $700B for Defense

http://online.wsj.com/article/SB20001424052748704107204575039223181876584.html

›FEBRUARY 2, 2010
By AUGUST COLE

The Obama administration is seeking a record $708 billion for the Defense Department in fiscal 2011, as the U.S. military continues to wrestle with a mounting bill for operations in Iraq and Afghanistan while trying to better equip itself for small-scale conflicts.

The budget request released on Monday reflects Defense Secretary Robert Gates' drive to bolster the Pentagon's unconventional-warfare capabilities needed in today's operations. That means increasing funding for programs such as unmanned aerial vehicles, which are used currently for targeting enemies in Afghanistan and Pakistan. At the same time, Mr. Gates is seeking to reduce or eliminate more ambitious high-tech weapons systems that he feels drain financial resources.

"Making these tough decisions and trade-offs is especially important in the constrained budget environment we face today, and almost certainly will face in the future," Mr. Gates said.

To achieve that, the White House is trying again to kill off two programs that survived last year with the help of Congress: alternate engines for Lockheed Martin Corp.'s F-35 fighter and Boeing Co.'s C-17 transport plane.

Mr. Gates said it was time to "take a final stand" against Congress's repeated funding of the F-35 alternate engine design and said he would go so far as to recommend that Mr. Obama veto a defense bill that includes money for it.

The Obama administration's first budget, for fiscal-year 2010, succeeded in canceling or curtailing some of the defense industry's most prized weapons programs.

The Defense Department's base budget request is $548.9 billion. That request is 3.4% above 2010's level. The Obama administration also wants an additional $159.3 billion in war costs for fiscal 2011, in part to cover intensified operations in Afghanistan. The White House is also seeking $33 billion in additional war costs for 2010.

Efforts to train and equip Afghan security forces, a cornerstone of the U.S counterinsurgency strategy there, will require $11.6 billion.

The largest spending increase is in the department's operations and maintenance account, which could rise about 8.5% to $200.2 billion if the administration gets its way. Such funding is used for everything from civilian pay to fuel to spare parts.

The proposed weapons plans would save some $3.1 billion, according to the administration.

Overall, the funding put aside to buy military hardware is set to rise by 7.7%, to $112.9 billion. A significant portion of this funding will be spent on battle-ready weapons like helicopters from Boeing and United Technologies Corp.'s Sikorsky unit that see heavy use in current military operations.

Mr. Gates said the Pentagon is buying as many of General Atomics Aeronautical Systems Inc.'s armed Reaper drones as it possibly could, which reflects the military's growing appetite for better battlefield intelligence.

The biggest single weapons program is the F-35 or Joint Strike Fighter, which will receive about $10.9 billion in the base budget. Despite the strong funding, Mr. Gates said he was unhappy with development issues, and that Lockheed would forfeit $614 million in fees.

The administration will press ahead with developing a new long-range bomber with $200 million set aside in 2011 for early efforts.‹

[DewDiligence]

Boeing Returns to Profitability, Gives Cautious Outlook

[Sometimes I wonder if BA has its own proprietary definition of profitability.]

http://online.wsj.com/article/SB10001424052748704094304575028821023765514.html

›By JOAN E. SOLSMAN
JANUARY 27, 2010, 7:52 A.M. ET

Boeing Co. swung to a fourth-quarter profit on effects from a machinists' strike last year while the aircraft maker and defense contractor's 2010 guidance fell short of analysts' estimates.

The company projects it will earn $3.70 to $4 a share this year, compared with analysts' average prediction of $4.26, because of output declines in 777 airliner and the reduced scope of Army modernization and missile-defense programs. [Blah, blah, blah.]

Shares fell 1.2% premarket to $57.

Boeing, which is the country's No. 2 government defense contractor behind Lockheed Martin Corp., has leaned on strength in that business to offset weakness from commercial airlines, which have been putting new purchases on hold as they reduce capacity. Commercial-aircraft earnings have also been weighed down by charges from the oft-delayed 787 and 747-8 programs, although the 787 Dreamliner finally made its first flight in December.

But its full-year outlook reflected how belt tightening at the Pentagon means it can't rely of defense-unit strength perpetually. Chairman and Chief Executive Jim McNerney said the company plans to "further reposition our defense, space and security business."

Boeing posted a profit of $1.27 billion, or $1.75 a share, compared with a year-earlier loss of $86 million, or 12 cents a share. The previous period included 70 cents in charges mostly related to a machinists' strike.

Revenue increased 42% to $17.94 billion, as the year-earlier figure was also hampered by the strike.

A survey of analysts by Thomson Reuters predicted a $1.36 profit on $17.57 billion in revenue.‹

[DewDiligence]

Cubic Corp: Under The Radar?

[There are many things to like about this company from an investment standpoint. The mass transit segment, which comprises 30% of sales and 40% of profits, figures to benefit from the Obama administration’s proclivity to fund transit projects and from The Global Demographic Tailwind (#board-15787). Defense comprises the other 70% of sales and 60% of profits; half of total sales come from annuity-like service contracts. The balance sheet is rock solid, and the number of shares outstanding never increases; the executive officers are old, and hence one might expect that a sale of the company is the cards at some point in the not too distant future.]

http://www.thestreet.com/print/story/10665038.html

›By Jake Lynch
01/22/10

BOSTON (TheStreet) -- Cubic Corp. (CUB) is a defense company with a twist.

The San Diego-based company divides its operations into three units: transportation systems, defense systems and mission-support services. Transportation systems, which posted $303 million in annual sales and is a leading global provider of automated fare collection systems, provides necessary diversification from military contracts.

The transportation business also enjoys the highest operating margin of the three units. In 2009, it amassed $44 million of operating profit, which translates to a profit spread of 16%. Defense systems and mission-support systems notched operating margins around 7%. Management projects a doubling of revenue over the next 10 years and expects new contracts with municipal transit authorities, which will feel pressure to outsource services to more-efficient vendors as state budget deficits soar.

Cubic's fiscal fourth-quarter profit [the FY ends Sep 30] soared 54% to $12 million, or 46 cents a share, as revenue climbed 19% to $281 million. Its net margin, unchanged at 4%, lags behind those of large-cap peers like United Technologies (UTX) and Lockheed Martin (LMT). But Cubic has redeeming features, namely its balance sheet. The company holds $253 million of cash and just $25 million of debt.

The cash balance more than doubled since the year-earlier quarter as the company's debt load lessened by 21%. In addition, Cubic is a comparatively cheap stock. The shares are cheaper than the aerospace and defense peer group based on trailing earnings, projected earnings, book value and cash flow per share. However, its PEG ratio, a measure of value relative to growth expectations, is high at 1.4. By comparison, the industry average is 0.9. On that basis, the stock is expensive when considering analysts' expectations.

But the company's growth rates offer a differing perspective. During the past three years, Cubic has grown revenue 7% annually, on average, and boosted net income 32% a year. In addition to its promising transportation-systems business, one area of defense systems offers compelling growth prospects. Cubic is a leader in tactical-engagement simulation systems. In other words, it designs advanced computer systems for military training. For example, recently developed CombatRedi projects three-dimensional virtual-combat scenarios for troops.

The U.S. military is always going to need guns and bullets, but in the future, the most profitable areas will be high-tech. Based on this reasoning, companies like Cubic Corp. and recurring Under-the-Radar pick ManTech International (MANT) are investments worth considering.‹

[DewDiligence]

ITT Expects Modest Growth in 2010

[According to the company, the 2010 prospects for ITT’s defense segment are better than those of its industrial segments.]

http://www.reuters.com/article/idCNN1719795520091218

›ATLANTA, Dec 18 (Reuters) - ITT Corp <ITT> raised the low end of its 2009 earnings forecast on Friday and said it expected higher profit in 2010 on stronger defense sales.

The maker of military gear and water pumps said it now expected profit of $3.72 to $3.74 a share for 2009. In late October, it had forecast $3.70 to $3.74 a share, excluding one-time items.

For 2010, ITT forecast earnings of $3.85 to $4.05 a share and said revenue would rise 2 percent to 3 percent, excluding acquisitions, divestitures and foreign exchange.

ITT, based in White Plains, New York, has three business segments: defense electronics, which provides night-vision goggles and other military equipment; fluid technology, which supplies wastewater pumps; and motion and flow control, which serves auto and commercial aerospace markets.

Revenue in defense electronics and services, the company's largest segment, is expected to rise 3 percent to 4 percent in 2010, excluding acquisitions. ITT said growth in international and non-armed services and core defense products would more than offset declines in Middle East services and lower volumes from U.S. tactical radios.

The company forecast flat 2010 revenue, excluding acquisitions, for its motion and flow control unit and said fluid technology organic revenue would rise about 1 percent, aided by municipal business and emerging markets.‹

[crable]

FYI – they’ll be streaming the first flight of the 787, allegedly starting in 5 minutes:

http://787firstflight.newairplane.com/ffindex.html

[DewDiligence]

Ex-Im Bank Flies to Boeing’s Aid

http://online.wsj.com/article/SB126031187195082573.html

›DECEMBER 9, 2009
By DANIEL MICHAELS

Airlines are struggling amid the global recession. Boeing Co., meanwhile, is churning out jetliners at its fastest clip in years.

Executives at the aerospace giant say their factories are so busy due in large part to one man: Bob Morin, a federal employee who stumps the globe to rally sales for America's biggest exporter. More than one in four airliners Boeing delivers this year will be funded thanks to Mr. Morin's efforts.

Mr. Morin is vice president of transportation at the U.S. Export-Import Bank, created in 1934 to help fight the Great Depression. The bank's long history and recent experience suggest how government programs thrown together to battle the current economic crisis may alter the fabric of commerce for years to come. Ex-Im Bank is developing new funding tools and signing deals at a dizzying pace to fulfill its mandate of supporting American employment.

"This is Ex-Im Bank's time to step up to bat," says Mr. Morin, a 52-year-old New Yorker.

Ex-Im is an unusual bank: It mainly provides U.S. Treasury guarantees to banks to make them comfortable lending to buyers of American exports. If the buyer defaults, Ex-Im repays the bank loan and then goes after the defaulter.

No company has deeper relations with Ex-Im Bank than Chicago-based Boeing. Without Ex-Im, aviation officials say, Boeing this year could have been forced to slash production, endangering hundreds of U.S. suppliers, thousands of skilled American jobs and billions of dollars in export contracts.

At the same time, the relationship may be warping a market that some say is oversupplied with planes. A major beneficiary of the program is the state-owned airline of Dubai, the Arabian city-state engulfed in a financial crunch after a long borrowing binge.

Some economists say that Ex-Im Bank channels financial resources to specific companies, such as Boeing, which means that money isn't being directed by the market. "All Ex-Im has been able to do is steer some money to Boeing and away from small exporters -- it's a zero-sum game," says Dan Griswold, director of the Center for Trade Policy at the libertarian Cato Institute in Washington. [I do not see why it’s a zero-sum game for US employment if BA gets orders thanks to the Ex-Im’s participation that would otherwise have gone to Airbus.]

Mr. Morin is Ex-Im Bank's rainmaker. His Boeing deals accounted for almost 40% of the bank's $21 billion in business last year. To help Boeing through the credit crunch, his team has spent the past year developing government-backed bonds that promise to raise billions.

To boosters, Ex-Im is a paradigm of efficient government help to industry. Ex-Im covers all its costs through fees charged to foreign borrowers and has handed billions of dollars to taxpayers. It has helped Boeing compete with rival Airbus, which was created in 1970 by European governments. Ex-Im works against economic cycles, expanding in tough times and receding when private lenders are flush.

"Of course it's government intervention, but it's government intervention that works extremely well," says Klaus Heinemann, chief executive of Dutch airplane lessor AerCap Holdings NV, which has used Ex-Im Bank and also financed Airbus orders using Ex-Im Bank's European counterparts.

To critics, Ex-Im shows how subsidy programs entrench themselves and distort markets. Executives at German carrier Deutsche Lufthansa AG say export financing pumps more than 10% excess jetliner capacity into the market. Some aviation financiers say Ex-Im Bank's current efforts to maintain Boeing's production are simply pushing plane makers' and airlines' problems into the future. And some economists say Ex-Im's assumption of risk on sales of Boeing planes amounts to a subsidy for the aerospace giant.

"Boeing's been getting a sort of pre-emptive bailout for years, largely under the radar," says Donald Boudreaux, a professor of economics at George Mason University in Fairfax, Va. He notes that while Ex-Im doesn't draw money from the federal budget, U.S. taxpayers are ultimately liable for almost $70 billion in loans on its books.

Boeing officials reject the idea that the Ex-Im Bank's support constitutes a bailout or subsidies. Chairman and Chief Executive Jim McNerney says Ex-Im "is critical to this country's competitiveness right now," supports thousands of jobs and is "very important to the recovery." Since other countries support exports, he says, eliminating Ex-Im "would leave you very uncompetitive today."

Boeing's jetliner sales through September were $24.9 billion, up 5% on the year.

Ex-Im officials say the bank is more rigorous and demands more collateral than do other agencies that back loans with government guarantees -- particularly mortgage titans Fannie and Freddie, which nearly collapsed when the housing market crashed. [LMAO—that’s not saying much!]

Mr. Morin says he's simply bridging a gap between demand for planes and paralyzed financial markets. The bank's volume of guarantees, loans and other commitments for jetliners has doubled since 2007. European export agencies are offering Airbus similar support. [I would say that, all told, Airbus gets more explicit and implicit government support than BA.]

"Nothing would make us happier than if our level of business went down," says Mr. Morin. "It's just not healthy for so much of the financing to come from export-credit agencies."

Still, when credit markets froze last fall, Mr. Morin led the search for new funding. To push Ex-Im Bank into the global bond market, his eight-person team sweated over details ranging from debt-payment technicalities to whether offering documents could carry Ex-Im Bank's official seal. The project illustrates how the bank -- like much of the federal government -- is simultaneously spurring private business and expanding the state's role in the economy.

While industry has applauded the effort, some analysts say it has a downside: "Any time you find a new way to increase exposure, you increase the risk to taxpayers," says Marcus Peacock, director of Subsidyscope, a project of the Pew Charitable Trusts in Washington, D.C.

Britain created the world's first export-financing office in 1919. Ex-Im was the second. The agencies proved so successful that most countries started one. International trade rules [i.e. the WTO] now limit how aggressively export-credit agencies can support exports.

Today, Ex-Im Bank's blessing means that investors deem a loan to Ghana for buying rural electrification equipment to be almost as secure as U.S. Treasury bonds, generally considered the world's safest investment. Ex-Im says it carefully vets borrowers before backing them, and its default rate is less than 1.5% over its 76 years.

For its backstop, Ex-Im charges a borrower an up-front fee. The rate for jetliners is at least 4% of the value of the loan. The fees add up. Between 1992 and 2007, Ex-Im paid $5 billion more to the Treasury than it received.

"We don't cost the taxpayer anything," says Chairman Fred Hochberg.

That financial cushion prompted Congress in 2007 to make Ex-Im Bank a self-funding federal agency. In its fiscal year ended Sept. 30, Ex-Im Bank deposited $135 million in the public coffers.

While most exporters can use Ex-Im Bank, critics say it focuses excessively on corporate giants. Entrepreneurs are often unaware of Ex-Im Bank or daunted by exporting. Congress in 2006 required Ex-Im Bank to devote at least 20% of its funding to small businesses, and the Government Accountability Office has pressed it to work harder in the sector.

Mr. Morin faces an easier task finding deals because Boeing refers customers to him.

Before he joined Ex-Im Bank in 1998 as a lawyer, Mr. Morin was a senior associate at Milbank, Tweed, Hadley & McCloy LLP, in New York, and had financed many more Airbus planes than Boeing deals. He promised his wife that the government job, and its accompanying pay cut, would only last two years, he recalls.

For much of the decade, low interest rates meant most airlines could easily borrow on their own. So Mr. Morin and his team hopped the globe, traveling in economy class, to meet carriers and introduce Ex-Im Bank.

European aviation financiers say Mr. Morin's support for Boeing pushed export-credit agencies in Britain, France and Germany to work more efficiently in backing Airbus [as one would expect in a market that is essentially a duopoly].

"Ex-Im Bank is much more aggressive in the market in terms of selling its services," says Airbus Chief Operating Officer John Leahy, the company's top airplane salesman. "To a very large degree, it's Bob Morin and the team he built who put a commercial perspective on what otherwise would be a staid government agency."

That reputation was tested last fall when credit markets seized up. Suddenly, banks that had previously financed loans backed by Ex-Im guarantees at the lowest prevailing rates stopped lending or were tacking on several percentage points in interest.

Higher interest costs would burden borrowers, increasing the chance of default. That would endanger taxpayers' money, Mr. Morin worried. He started to seek alternatives to expensive bank funding.

Industry officials, meanwhile, warned of a $20 billion "funding gap." Boeing and Airbus, a unit of European Aeronautic Defense & Space Co., faced the threat of building planes for customers that wanted them but couldn't get purchase financing.

Last fall, Walt Skowronski, president of Boeing's jetliner-finance arm, summoned investment bankers to his office. He says he wanted to bypass commercial lenders and go straight to investors such as pension managers and sovereign wealth funds.

Bankers at Goldman Sachs Group Inc. -- who had just helped the Federal Deposit Insurance Corp. issue bonds to bail out banks -- proposed issuing bonds backed by Ex-Im Bank, recalls Gregory Lee, a Goldman managing director.

Mr. Skowronski liked the idea but flagged some worries. Ex-Im had never guaranteed bonds, which are much more complex than bank loans.

On Feb. 20, with global financial markets seemingly in free fall, Goldman and Boeing officials flew to Ex-Im Bank's Washington headquarters to sell their plan. Mr. Morin told them any bond they devised would have to be identical to bonds that competing banks were racing to develop for Boeing and Ex-Im. He wanted investors to think of them all as a single class of assets, so they would trade easily.

"By keeping it simple, we were able to get to market quickly," Mr. Morin says.

These would be the first bonds backed by Ex-Im. The debt would be sold to investors who had never financed airplanes or even heard of Ex-Im Bank, so nobody knew what they would pay for the bonds. Success could open a vast new source of funding in the huge bond market, everyone involved believed. A slip-up could derail the whole effort to keep Boeing sales aloft.

The next question: What would be the test case? Boeing executives and the bankers wanted a plane buyer willing to take risks on the new investment vehicle, but one established enough to comfort Mr. Morin and potential investors. On March 7, Mr. Lee pitched the idea to officials from a large carrier due to take several Boeing planes -- Dubai's state-owned Emirates Airline.

"We were a bit skeptical" about how much people would pay for the bonds, recalls Brian Jeffery, senior vice president of corporate treasury at Emirates. The approach was so new that Mr. Jeffery had to check with Mr. Morin that he had approved it.

Then, the Saturday before the bonds were to be sold, Mr. Lee, the banker, got an urgent call. Newly appointed Ex-Im managers were asking why Ex-Im's official seal should adorn offering documents for a private financing.

The bankers were startled. They jumped on the phone to explain that investors would question the government's commitment if its seal wasn't alongside Boeing's.

Ex-Im officials relented; the agency's seal appeared on the documents. "Those little things were huge," says Mr. Lee.

On Oct. 8, Emirates' 12-year issue raised $414 million for three Boeing 777s, at an interest rate significantly below what banks were charging. Because of Ex-Im's guarantee, the bonds have been largely unaffected by the Dubai crisis, bankers say. Mr. Morin says he isn't worried about repayment because the deal and Emirates' business are fundamentally sound.

Two similar bond deals followed. The new source of money is pressing bankers to trim rates on loans, airplane financiers say.

The deal has forced Airbus and European export-credit agencies to react, says Gordon Welsh, head of Aviation Finance at Britain's Export Credits Guarantee Department. Seated next to Mr. Morin at an industry conference days after the Emirates' issue, Mr. Welsh said his agency is scrambling to replicate the new American model.‹

[DewDiligence]

Has the WSJ been tipped off that the Dreamliner will fly next
week? Perhaps. Alternatively, the WSJ could simply be betting
that BA won’t squander the publicity enveloping this event
by scheduling it close to the holidays.

http://online.wsj.com/article/SB10001424052748704825504574579940848189448.html

›Long Overdue, Boeing Dreamliner Taxis Toward Its First Test Flight

By PETER SANDERS
DECEMBER 6, 2009, 6:05 P.M. ET

SEATTLE—After more than two years of delays, Boeing Co.'s 787 Dreamliner could make its first test flight as early as next week.

But once the jet takes off from its factory in Everett, Wash., the company faces another high-stakes test: From the moment the Dreamliner is airborne through roughly the next 12 months, Boeing will race the clock to test the new aircraft in high altitudes, subzero temperatures, desert heat and emergency scenarios.

Even a small slip risks further delaying the certification the Dreamliner needs from the Federal Aviation Administration before Boeing can deliver the long-overdue aircraft to customers.

Boeing plans to deliver the first Dreamliner to All Nippon Airways Co. in the fourth quarter of next year. Originally, Boeing hoped to deliver the first jet in May of last year.

To keep the testing on track, Boeing has converted a warren of cubicles on the fifth floor of an office building into a command center where the company will monitor what essentially will be a miniairline of test-flight planes.

With a sweeping view of the tarmac at Boeing Field, in south Seattle, the Test Operations Center will be the heart of an effort that eventually will have six Dreamliners in testing around the globe. The 25 to 50 people at the center, depending on need, will coordinate the jets' schedules and deal with logistical or maintenance problems that might crop up during test flights.

The testing is especially thorny because of the Dreamliner's cutting-edge design. Built mostly from composite materials instead of the typical aluminum, the jet has been advertised as lighter and more fuel-efficient than its predecessors.

But there is still much that isn't known about composites and how they react to the extreme stresses that come in flight. Engineers in May discovered unexpected damage to the composite material where the wing meets the body, one in a series of setbacks to the Dreamliner.

As Boeing engineers spent the subsequent six months repairing the problem, they also dealt with other, smaller issues that cropped up, which Boeing officials have described as routine for aircraft development.

Problems elsewhere in Boeing's commercial-aircraft division have increased pressure on the Test Operations Center. The first test flight of Boeing's 747-8, a revamped version of its iconic 747 jumbo that primarily will be used as a freighter, also has been delayed, likely until mid-January. The Seattle operations center will coordinate the Dreamliner and 747-8 programs simultaneously.

The test programs come as Boeing is culling its test-flight staff by as many as 300 people through layoffs, part of a plan announced in January to reduce the number of jobs at the commercial-aircraft division by 4,500. The Chicago-based company posted a $1.56 billion third-quarter loss, socked in large measure by setbacks in commercial-aircraft operations.

A Boeing spokeswoman said the test-flight programs will be unaffected by the layoffs.

Boeing officials visited operations centers at Southwest Airlines Co., AMR Corp.'s American Airlines and McChord Air Force base in Tacoma, Wash., to see how other operations centers are structured, says John Fennell, a Boeing official. The idea, he says, is not only to fix problems that test flight crews might encounter from the Arctic Circle to the Southern California desert, but also to enable quick fixes to bureaucratic snafus.

The new center marks an effort to streamline what sometimes had been scattered management of test-flight operations for Boeing's various models in development. Even seemingly simple matters like getting deicing trucks or placing safety screens around jet engines used to be a complicated process involving layers of approval.

"In the past," says Janet Muel ler, a Boeing engineer who oversees development and management of the center, "whoever shouted the loudest got things done first."

Now those issues can be solved with a phone call from the operations center or a face-to-face conversation between technicians sitting side-by-side.

"We have an operations center that is a central point of contact for information, problem resolution and communication," Ms. Mueller says.‹

[DewDiligence]

Taking Stock of ITT's Valuation

http://online.wsj.com/article/SB20001424052748704533904574548093969870898.html

›NOVEMBER 23, 2009
By LIAM DENNING

If ITT didn't exist, you wouldn't invent it: Synergies between battlefield radios and water pumps aren't obvious. Yet this defense-and-industrial conglomerate has tripled its stock price since 1999 while the market has suffered a lost decade.

Just recently, ITT seems to have missed its stride. It went into a prolonged quiet period ahead of third-quarter results, stoking expectations of a strategic announcement. Instead, the "material" event necessitating such quiescence turned out to be a newly calculated asbestos reserve with negligible impact on cash flow.

Chief Executive Steven Loranger followed up this week by selling almost a fifth of his shares in the company. [This was especially notable insofar as it was Loranger’s first sale since being named CEO.]

All this feeds into concerns about ITT's defense business, which generated almost 58% of revenue over the last four quarters. Aerospace and defense stocks have slumped this year, as soaring budget deficits and expected troop cuts portend lower U.S. defense spending. Three-quarters of ITT's defense revenue comes from the U.S. armed forces.

This weighs on valuation. At its Friday close of $50.84 a share, this "industrial" stock trades at 13.5 times 2009 earnings, on a par with the aerospace and defense sector. True industrial stocks average almost 18 times.

Assume consensus earnings segment along similar lines to revenue. If defense earns $2.14 a share this year, a sector multiple values the business at almost $29 a share. That leaves $21 and change for the industrial businesses, implying a multiple of just 13.5 times. Rate it in line with the industrial sector, and ITT ought to trade north of $57 a share.

That gap looks unjustified. Almost three-quarters of ITT's industrial revenue, or 33% of group sales, pertain to a sector with high growth prospects: fluid technology. The Environmental Protection Agency says U.S. drinking-water infrastructure needs $335 billion of investment over the next two decades. And better management of scarce water resources is a global issue.

Moreover, ITT's defense business warrants closer scrutiny. Defense-budget growth is being reined in, but priorities also are shifting. The sort of equipment ITT produces and services, such as jammers disabling the improvised explosive devices that have wrought havoc in Iraq and Afghanistan, is likely to remain a priority. Cyber-warfare capabilities and upgrading the air-traffic-control system also represent growth areas. ITT also can point to a strong balance sheet, with net debt to equity of less than 10% and strong free-cash-flow generation.

Splitting the defense and industrial businesses, an idea put forward by analysts during the pre-results communication blackout, makes sense. The defense arm, in particular, would benefit from coverage from suitable analysts and possibly make a good takeover target for rivals with a better understanding of its businesses.

Mr. Loranger's stock sale suggests no such move is likely in the near term. But ITT's valuation deserves a second look from investors nonetheless.‹

[Biowatch]

Rolls-Royce in $2bn engine orders
08:59 GMT, Sunday, 15 November 2009

"UK engineering firm Rolls-Royce says it has won orders to make $2bn(£1.2bn) of aircraft engines to power Airbus planes for Air China and Ethiopian Airlines.

"The orders were announced on the first day of the Dubai Airshow on Sunday...

"Best-selling engines

"Airlines have been hit hard during the recession, so the order for engines is welcome news for Rolls-Royce, which has factories in Derby and Bristol making engines, and one in Sunderland making areo-engine components.

"The Ethiopian order means Rolls-Royce has sold more than 1,000 of its best-selling XWB engines.

"The firm has said the XWB is the most fuel efficient and environmentally sensitive large engine design on the market, with fuel efficiency ratings 28% higher than pre-Trent generation engines..."

http://news.bbc.co.uk/2/hi/business/8361064.stm

[Biowatch]

AIRBUS has strengthened its foothold in Australasia after wining an order for 14 A320s to replace 15 Air New Zealand Boeing 737-300s.

The order continues a march by the European manufacturer that has seen it go from a handful of aircraft at Ansett at the beginning to decade, to winning significant orders at Qantas, Jetstar and Air New Zealand.

The latest jets, destined for Air NZ’s domestic routes, join 12 A320s already deployed on short-haul international routes. Air NZ also has purchase rights for another 11 planes, including the possibility of moving to the bigger A321.

The 14 aircraft list at more than $US1 billion ($1bn), but the airline said today it had bought them at a discount “that reflects the current market conditions”.

“This is a very good time to buy aircraft,” said Bruce Parton, Air NZ’s group general manager (short haul airline).

“The industry is at the bottom of a deep cycle, so demand for aircraft is limited, creating favourable conditions for buyers with strong balance sheets like Air New Zealand.”

The airline expects the first aircraft to arrive in January, 2011, with the remainder progressively introduced through to 2016.

It said the fuel-efficiency of the A320s would be driven by an advanced IAE engine with improved fuel-burn - the A320 also boasts 171 seats, compared to 133 on the B737-300, which would allow Air NZ to both increase capacity in the domestic market and reduce carbon emissions.

The bigger aircraft would also allow the carrier it to overcome capacity constraints at some New Zealand airports, Air NZ said.

Airbus said the A320 had won the Air New Zealand contract after an intensive and robust evaluation, and the carrier would reap the benefits from a common brand of aircraft across its domestic and short-haul fleet.

Cut & paste. Original source unknown.

[Biowatch]

Cute GE engine ad:

Pop-up advertisers must think I like planes.

[medchal]

Thanks for remembering my warning. As I said, one new serious temporary problem per quarter is the rule at Boeing. It's amazing, and I doubt that the $20 per hour janitorial services have been "outsourced", since it's a union company.