A CVSU Joint Venture Corporation with Georgia Aerospace
CURRENT BOARD OF DIRECTORS
GENERAL JAMES KLUGH (U.S. ARMY, RETIRED), BOARD MEMBER. General Klugh is Vice President of Dimensions International, a computer systems company in Fairfax, Virginia. General Klugh served as Chief Operating Officer of ESET until 2000. Under his leadership, ESET achieved success across the spectrum of information technology, distance learning, syllogistics, and telecommunications. Before ESET, he served in the Pentagon as Deputy Undersecretary of Defense for Logistics. General Klugh is the Vice Chairman of the Veterans Development Board, where he serves alongside Donald Rumsfield, the current Secretary of Defense. General Klugh previously managed the Army’s Logistics Management College were he supervised the development of 120,000 civilian and military personnel.
DR. THOMAS MENSAH, PRESIDENT AND CEO. Dr. Mensah is a recognized leader in the development of advanced composite materials and "smart" structures. One of the original innovators of RTM technology for the F/R-22. Dr. Mensah led the team that was selected in the Mentor-Protege program by Lockheed Martin and the Pentagon. Dr. Mensah has held high-level engineering positions with Corning Glass Works, where he built the fastest fiber optics draw and coating process and AT&T Bell Laboratories, where he developed fiber optic reels used in guided missile systems. Dr. Mensah founded the Georgia firm, Supercond Technology, which assisted in the development of advanced structural materials for supersonic fighter aircraft. Dr. Mensah has worked on specialized projects for NASA (superconductors for space communications), the U.S. Army (smart munitions), and the U.S. Department of Energy (fiber optics sensors for highway traffic monitoring). Dr. Mensah holds 7 patents on fiber optics technology, including 3 on guided missile technology. Dr. Mensah has played a key role in the proliferation of cost-effective fiber optics technology in both civilian and military applications.
He has also served on the MIT advisory board in chemical engineering. Dr. Mensah holds degrees from Montpelier University and Massachusetts Institute of Technology."
"American International Smart Structure, Inc.
A CVSU Joint Venture Corporation with Georgia Aerospace
BUSINESS
American International Smart Structure ("American International Smart Structure" or the "Company") is a leader in the dynamic and rapidly growing area of advanced aerospace composites. Customers will include the military services of the United States and allied countries, as well as private-sector original equipment manufacturers (OEM) across the world. The Company's proprietary materials and manufacturing processes have both civilian and military applications, including: military aircraft and armaments; homeland security applications; commercial airliners and regional jets; satellites and launch vehicles; high-performance civilian automotive and naval applications. (See Business; Operations)
PRODUCTS
Modern composites are exceptionally strong, lightweight materials manufactured by mating a bulk material (e.g., resins, metal, and ceramics) with high-performance fibers (e.g., glass, carbon, silicon). By tailoring composition and processing conditions, American International Smart Structure engineers endow the resulting hybrids with properties superior to those of both the constituent components and conventional materials (e.g., steel and aluminum). Resistance to extreme temperatures, malleability during shaping, durability under structural stress, high strength-to-weight, and resistance to corrosion are factors especially critical to the Company's aerospace, defense, and automotive applications. (See Composites)
OPPORTUNITY
American International Smart Structure’s portfolio of proprietary blends and manufacturing processes equip it to exploit the relentless advances in the use of composites. The Company's goal is to become a leading, low-cost independent supplier of custom-designed composite materials and structures. Management intends to focus first on the unique requirements of the military, while filling its pipeline with products that address the broader aerospace and civilian markets.
Additionally, the Company is uniquely positioned to take advantage of the Department of Defense's 5 percent first-tier procurement goal for minority-owned companies (MBE) designated as small disadvantaged businesses (SDB). (See Market Opportunity)
PARTNERS
American International Smart Structure has forged a series of cooperative relationships to exploit flourishing opportunities in several key end-markets. The partnerships have reduced the Company’s technology risk, limited its capitol commitments, provided a deeper pool of human capital, lowered the barriers to entry in a mature market, and built critical mass in key niches.
CUSTOMERS
American International Smart Structure deals with numerous U.S. Government agencies and entities, including all of the branches of the U.S. military, NASA, and the Departments of Energy, Homeland Security, State, and Transportation. Other important constituencies include prime contractors and private sector original equipment manufacturers.
MANAGEMENT
The Company's managers and advisors are a cross-section of distinguished leaders in aeronautics, academia, finance, industry, politics, and the armed services. American International Smart Structure’s board and management relationships, credentials, and qualifications have made tangible contributions in corporate development, marketing, research and development. The Company has a strong management team and a board of directors of spectacular accomplishments in Aerospace and Defense industries.
THESIS
Overall, specialty materials and components boasts high barriers to entry, long business cycles (e.g. the composites qualified on the 7E7 were first qualified for the 777 15 years ago), relatively low capital intensity, 40%-50% variable margins, strong cash generation, and solid secular long-term growth trends (increasing defense spending, growth in air passenger miles, increasing use of composite materials on newer aircraft, and aircraft obsolescence/replacement cycles). American International Smart Structure is uniquely positioned to quickly become a premier player in the industry. (See Industry)
BUSINESS INFORMATION
Founded in 2005, American International Smart Structure ("American International Smart Structure" or the "Company") (a Joint Venture Corporation with Georgia Aerospace) is an innovator in the design and fabrication of advanced aerospace composites. Customers will include the military services of the United States and allied countries, as well as private-sector original equipment manufacturers across the world.
The Company's proprietary materials and manufacturing processes have both civilian and military applications:
Military aircraft and armaments Homeland security applications Commercial airliners and regional jets Satellites and launch vehicles High-performance civilian automotive and naval applications (e.g., Formula One, yachts, luxury production automobiles)
Major programs in procurement and/or development include:
F/A-22 Raptor, with Lockheed Martin F-35 Joint-Strike Fighter, with Northrop Grumman and BAE Systems Intelligent highway sensors, with Oak Ridge-National Laboratories Radio Frequency (RF) tag sensors for airport security, with Coalescent Technologies Regional and business jets, with Gulf stream Aerospace
COMPOSITES
Modern composites are exceptionally strong, lightweight materials manufactured by integrating a bulk material (the "matrix", e.g., polymer-based resins, metal, ceramics) with high-performance fibers (e.g., glass, carbon, silicon). The resulting hybrids offer performance characteristics superior to the constituent components. A corollary can be found in nature, where similar processes produce bone (e.g., a combination of brittle calcium phosphate and jellylike collagen), shell, dentin, and tendon.
BENEFITS
By tailoring composition and processing conditions, American International Smart Structure engineers endow materials with properties superior to those of conventional materials like steel and aluminum. Resistance to extreme temperatures, malleability during shaping, durability under structural stress, high strength-to-weight, and resistance to corrosion are factors especially critical to the Company's aerospace, defense, and automotive applications. For instance:
High-altitude satellites and launch vehicles benefit from composite materials' inherent toughness, resistance to forming micro-cracks, and ability to withstand radiation damage. The materials' resistance to corrosive seawater and impact resistance characteristics also make it ideal for replacing metal components in recreational and military naval vessels. Some of the sophisticated capabilities of modern military aircraft would be impossible without today's advanced composites. The V-22 (Osprey) tilt-rotor craft can take off, land, and hover like a helicopter, as well as reorient its rotors in midair and fly like a turboprop airplane. Its versatility is due in part to the graphite-fiberglass rotors and other lightweight composite-based structures in the rotor system that are strong enough to tolerate high centrifugal forces yet remain flexible.
Similarly, the extreme aerial maneuverability of the F-18 fighter is partly due to composites used in the aircraft's wings, flaps, vertical and horizontal stabilizers. Military aircraft, in general, have been endowed with improved range, speed, payload capability, and stealth since the advent of composite structures during World War II. Even greater reliance on composite materials is predicted for future military aircraft.
Advanced composites have also become critical to commercial aircraft performance. The greater efficiency and thrust-to-weight characteristics deliver lower life-cycle maintenance costs, fuel expenditures, emissions, amortization costs (due to longer useful lives), and metal fatigue (the wear in-flight that typically retires aircraft). Furthermore, nearly all of the composite materials purchased are used in the final aircraft; with aluminum, 90 to 95% of the purchased material has to be scrapped.
The ability to mold composites into complex three-dimensional shapes enables auto manufacturers to form a single composite based part that takes the place of several. For instance, as many as 20 metal parts (e.g., fasteners, pins, and bolts) would be required to do the job of the Dodge Viper's 6-part composite fender support.
MARKET ACCEPTANCE
The benefits of advanced composites have been well known for 50 years. However the high cost of raw materials, inefficient designs, labor-intensive operations, and expensive fabrication equipment have inhibited widespread use. Researchers have explored ways to improve materials' properties and performance, while simultaneously reducing costs. The resulting maturation in both materials and process technologies has rendered significant use of composites economical in both military and civilian applications. Composite content on civil and military aircraft in the 1980s was no more than 3% by weight. In contrast, today's Airbus A380 is 25% composed of composite materials, the F/A-22 is 70% composite and titanium, and the F-35 approaches 45% by weight. Advanced composites are now used in both primary aircraft structures (e.g., wing, tail, fuselage and rudder components; engine housings) and secondary structures (e.g., fairings, sidewall, ceiling and floor panels, cargo bins). In sum, advanced composites are a robust, mature material system that has demonstrated its capabilities over more than 50 years of in-service experience and exhaustive testing.
ADDITIONAL APPLICATIONS
The outlook for the composites industry remains strong over the long-term, future and emerging applications include: Boat Building - offering cost and labor savings over wood, aluminum and fiberglass hull and superstructures.
CORROSION RESISTANT APPLICATIONS - the direct cost of metallic corrosion in the US alone is a staggering $276 billion per year, or 3% of the gross domestic product (US Federal Highway Administration - 2002). Future composite applications include: water and sewer piping systems, marine applications, highways and bridges, electrical utilities, and industrial plants.
CONSTRUCTION - composites are playing an increasing role in construction, primarily housing, in application such as thermoplastic lumber, siding, fencing, and window and door frames.
CIVIL INFRASTRUCTURE - an aging urban infrastructure, such as bridges and parking garages con benefit from composite applications such as column wrapping for seismic and structural upgrading.
OIL AND GAS - A vast network of composite piping and other components already exists on platforms and rigs, for firewater, gratings, and topside facilities. Additional applications are in various stages of development.
SPORTS AND RECREATION - Composites ore now found in seven of the ten most popular outdoor sports and recreational activities, including tennis, water sports, hockey sticks, kites, and bicycles.
WIND AND POWER- wind turbine power is one of the world's fastest growing energy sources and one of the composite industries fastest growing applications.
FUEL CELLS - while other products can be used, composites are a likely candidate as the likely material of choice for this growing area due to their conductivity, corrosion resistance, dimensional stability and flame retardancy.
OTHER APPLICATIONS- the possible utilization of composite materials in products is almost endless, and includes: satellites, consumer electronics and computers, medical products, armor systems, bulletproof vests, and cargo containers.
MARKET OPPORTUNITY
American International Smart Structure’s portfolio of proprietary blends and manufacturing processes equip it to exploit the relentless advance in the use of composites. The Company's goal is to become a leading, low-cost supplier of custom-designed composite materials and structures. Management has focused its sights on those markets where (1) the demand for composite materials and structures is relatively well defined; (2) high-performance end-use applications justify higher materials and fabrication costs; (3) and where contractors are able to charge much of their capital equipment expenses to the client. Management's initial commercial success has come in the defense segment, where the planning horizons are longer and where government's status as a customer of both outsourced R6D and finished-products has reduced market uncertainties for advanced materials suppliers. Meanwhile, the Company continues to fill its pipeline with products that address the broader aerospace and civilian markets. (See Primary Markets; Other Key Markets
PARTNERSHIPS AND ALLIANCES
American International Smart Structure has forged a series of cooperative relationships to exploit flourishing opportunities in several key end markets. The partnerships have served to reduce the Company's technology risk, limit its capital commitments, provide a deeper pool of human capital, lower the barriers to entry in a mature market, and build critical mass in key niches.
KEY COLLABORATORS
Collaborators include major defense contractors, national research centers, federal agencies, and vendors along the supply chain: Boeing, Coalescent Technologies, Concurrent Technology Corporation, Dimensions International, Diversified Machining Services, EDS Corporation, General Dynamics, Ingersoll Milling Machines, MSC Software, Northrop Grumman, Oak Ridge National Laboratories, Sikorsky, and SSAI. (See Primary Market; Other Key Markets)
LOCKHEED MARTIN: MENTOR-PROTÉGÉ
Lockheed Martin and Georgia Aerospace (Co-founding Corporation) have a long-standing relationship under the Department of Defense's Mentor-Protégé Program. The program was established by Washington's National Defense Authorization Act as a mechanism for assisting small businesses in qualifying for Pentagon contracts. Lockheed Martin, the nation's largest defense contractor, chose a subsidiary of Georgia Aerospace as its protégé in 1992. Under those auspices, Georgia Aerospace, Lockheed Martin, Boeing, and Pratt 6 Whitney have worked closely on the world's most technologically-advanced fighter during the Engineering and Manufacturing (EMD) phase. Lockheed Martin has provided invaluable technical training and management support to American International Smart Structure threw its relationship with Georgia Aerospace. As such, the relationship has been an enduring source of knowledge, competencies, and insights that form the basis of existing products and constitute a competitive advantage for American International Smart Structure. (See Preferred Access; Board of Directors).
OPERATIONS
American International Smart Structure has identified two facilities to house its administrative, technology, engineering and manufacturing activities - F/A-22 (Georgia) and F-35 (Texas). The Warner Robins, Georgia facility is a former Boeing operation located in close proximity to Lockheed Aeronautical F/A-22 assembly line. The area has a highly-motivated pool of non-union workers with specialized engineering, information technology, technical skills and security clearances within the aerospace, defense, and information technology industries. Many area workers have been previously employed by Boeing, Northrop Grumman, Raytheon, or the Warner-Robins Air Force Base. The nearby Middle Georgia College trains and certifies workers in aircraft technology and laboratory operations. The business is headquartered in Atlanta, Georgia.
PRIMARY MARKET: MILITARY AEROSPACE AND ARMAMENTS
Military demand is expected to remain buoyant (over the next 5-10 years) due to heavy spending on (1) force transformation, (2) modernization, and (3) wartime missions necessitated by post-Cold War instability. American International Smart Structure expects to benefit from this trend, along with the secular shift towards composite materials, and market share gains in ancillary markets over the forecast period. Below are anticipated spending levels and compound annual growth rates for the investment accounts - procurement and RDT&E (Research, Development, Testing, and Evaluation).
Advanced composites and structural materials are suitable for unmanned aerial vehicles; stealth aircraft and naval vessels; ground support equipment (e.g., command and control, communications, intelligence, surveillance and reconnaissance); land, sea, air and space-based guided missile structures and casings; armored tanks; satellite dishes and space-based satellite components; non-magnetic mine warfare systems; and robots for underwater remote sensing.
PROGRAM PORTFOLIO
American International Smart Structure (Georgia Aerospace) and its alliance partners have specific RDT&E/procurement programs underway for the following Defense Department weapons systems. In terms of size and near-term impact, the F/A-22 and the F-35 are two of the Company's most significant revenue-producing opportunities.
Stealth fighters F-35 and F-22 Lockheed Martin $9.2bn $460mm
Stealth bombers FAST program to SSRI $341mm $17mm
repair/upgrade
B-2 fleet
Unmanned aerial Global Hawk Boeing, Northrop $696mm $34.8mm
vehicles
Grumman
U. S. Army tanks Stryker General Dynamics $957mm $47.9mm
and untracked
vehicles
U.S. Navy high-ships, DDX Destroyer, General Dynamics. $1.8bn $90mm
Speed boats. Littoral Combat Northrop Grumman
ships, System
submarines
Non-fixed wing Apache Longbow, Sikorsky, Boeing $1.0bn $50mm
aircraft, MH-60R
helicopters
PROCUREMENT PHASE: F/A-22 RAPTOR
.
The Air Force's F/A-22, the world's most advanced fighter, is the launch platform for composite structures and processes developed by American International Smart Structure. The supersonic tactical fighter represents a breakthrough in maneuverability, stealth, and sensor fusion - key parameters expected to ensure U.S. air combat supremacy for the next several decades. Composites are in use in all three sections of the fighter: including some 400 parts in the skin, engines, fuselage, fuel tanks, and wings. The F/A-22, designed to replace the aging F-15, transitions into full-rate production in 2006 for deliveries in 2008 through 2012. The full 10-year program currently calls for 271 units to be delivered at an aggregate cost of $70 billion. The immediate opportunity for American International Smart Structure is $20 million on 10 planes to be delivered in 2007. Management expects to procure up to $100 million from the F/A-22 over the forecast period.
The Joint-Strike Fighter, ordered in October, 2001, could reach $244 billion in contract value, including research, development and procurement of 3,150 jets. The stealthy, supersonic aircraft offers improved lethality, survivability, supportability, and affordability (e.g., in procurement and support) over most existing multi-role aircraft. Expectations are for low-rate production to commence in 2007 and for first production deliveries in 2008. Initial operating capability is expected in 2012 for the Marines and in 2013 for the Air Force, the Navy, and the U.K. The Air Force envisions buying 1,763 aircraft to replace the F-16 and A-l0 and to complement the F/A-22. The Navy plans to buy 680 to complement their F/A-18E/F fleet and replace the Marines' AV-8B and F/A-18C/D. The U.K. is looking to buy 150 as a replacement for its Sea Harrier and GR-7 aircraft. In fact significant international demand is anticipated, given the number of governments (the United Kingdom, Israel, Netherlands, Italy, Canada, Denmark, Norway, Turkey, and Australia) participating in the System Development and Demonstration (SD6D) phase, the program is currently in the third year of a $19 billion SD6D contract. Upon first delivery, sales likely will begin to grow from the current $3.3-$3.5 billion annual expenditure toward projected $7-$8 billion levels. American International Smart Structure expects to capture up to $500 million over the forecast period.
OTHER KEY MARKETS
Management has programs underway for commercial aviation, homeland security, and automotive applications.
Intelligent highway sensors for traffic management l Oak Ridge National laboratories Radio Frequency tag sensors for airport security I Coalescent Technologies Fuel cells and fuel-efficient vehicles I NVCA, DARPA, Solectria Web-based training on fabrication processes I Concurrent Technology Corporation Regional and business jets I Gulf stream Aerospace 7E7 commercial jetliner I Boeing
HOMELAND SECURITY
The Future Year Defense Plan (FYDP) submitted with the President's Department of Defense budget for fiscal year 2005 projects sustained growth in both the procurement and research and development budgets for homeland security through fiscal year 2009. Incremental spending is expected on various ISR (intelligence, surveillance, and reconnaissance) systems already under development by the Pentagon. Those that represent a market opportunity for American International Smart Structure include: unmanned aerial vehicles, aquatic mine hunting equipment and other undersea platforms; surveillance systems for aviation, port, and border applications; telemetry, instrumentation, space, and navigation products; microwave components in radar communication satellites, wireless communication, electronic surveillance, and countermeasure systems; antennas. And ground-based radomes; and space vehicles that facilitate terrestrial telecommunications and Internet communications.
CIVILIAN AEROSPACE
American International Smart Structure is poised to benefit from a multi-year up cycle in commercial aerospace demand. Sharply increased passenger numbers and recent statements from aircraft manufacturers give support to the view that the recovery will commence during calendar year 2005. In July, for the first time, U.S. air traffic finally rose above its pre 9/11 level. Even though legacy U.S. airlines are struggling, the remaining 75% of the global airline industry is seeing better recovery. Asian traffic has shown 40% growth year-to-date, is 17% above its 2001 level and 170% above its pre-SARS level from 2003. European air traffic has shown 10% growth year-to-date and is 3% ahead of its 2001 level. International air traffic has been particularly strong, with passenger traffic up 20% year-to-date and cargo demand up 14%.
In order for airlines to generate net growth in capacity (to cope with traffic growth), either aircraft will have to be brought out of storage or new aircraft deliveries will be required from the OEMs. Efforts to increase organic fleet capacity through higher aircraft utilization rates is expected to do little more than counterbalance retirement of old aircraft. Although total parked aircraft numbers remain high, much of this excess capacity is obsolete and uneconomic. High oil prices and pressure on airline yields is likely to keep much of this parked fleet in the desert. Estimates are that the useable-parked fleet is less than 500 aircraft, representing just 3% of world fleet. Any required capacity increase above 3% will, therefore, have to be met by new aircraft deliveries.
The industry forecasts the total jetliner airplane fleet will increase to a level nearing 26,000 in 2017. Roughly 70% of the fleet in operation by 2018 is projected to be new airplanes. New commercial airplanes designs, such as the A380 and the Boeing 7E7, use dramatically more composite material (by volume, if not as much by value). Integral with this trend is a move by aircraft prime contractors and systems integrators to outsource structural and component production and focus more tightly on their core activities. Industry forecasters expect the outsourcing trend to continue and as approximately 80% of structures production is still carried out by the prime contractors there is still considerable growth potential available to companies able to capitalize on the outsourcing opportunity.
AUTOMOTIVE
The automotive industry is faced with severe price competition. Rising fuel costs and emissions regulation has sparked renewed interest in greater fuel economy and potential cost savings from the use of advanced structural materials (e.g., part consolidation and reduced tooling costs). Typically, automotive manufacturers require extensive static and fleet testing of new components and a minimum lead-time of 3 to 5 years to introduce product innovations. However, the increased pace of adoption of advanced materials evidences a change in attitude. For example, in Japan, the use of ceramic fiber-reinforced pistons for small diesel engines progressed in only 3 years from limited production of a specialized Toyota vehicle to use in all diesel engines of that size. Additionally, all of the domestic auto manufactures are utilizing some form of components in their vehicles.
Composites will undoubtedly continue to become the material of choice for the automotive industry for a variety of reasons, including:
Composites typically reduce weight by 35% thus increasing fuel efficiency and reducing auto emissions. Tooling cost savings versus steal can be up to 50%. Composites speed time to production, thus reducing costs. Composites are ideal for niche vehicles and applications because they can be moved into production quickly and offer extraordinary design freedom. Composites can combine numerous complex metal components into a single module creating significant cost and assembly savings.
INDUSTRY
Defense and defense-related stocks continue to outperform the major indices in CY'04. While the S&P 500 is essentially flat, smaller cap defense-related stocks as well as the stocks of the major prime contractors are up over 16% year-to date. Even before 9/11, the group was outperforming the overall market due to the increased U.S. Department of Defense ("DOD" or the "Pentagon") budgets, active merger and acquisition activity in the area, relative growth rates in excess of the overall market, and increasing relative price-earnings multiples.
The U.S. aerospace industry is highly consolidated (the top 5 companies account for 75.7% of total market revenue) and highly sensitive to changes in US government budgets. Also characteristic are the complexity of designs and the difficulty of forecasting costs and schedules when bidding on developmental and highly sophisticated technical work. Though the defense industry is subject to changes in public opinion, politics, and world events, defense companies offer investors several benefits over companies in other sectors.
Less exposure to higher oil prices than commercial airlines and other commercial transports
Minimal foreign competition from low-cost countries. In part, due to National security concerns, the vast majority of the defense budget is spent in the United States, and is not addressable by lower-cost foreign providers, such as China and India
A different kind of cyclicality. The revenue of the defense industry is cyclical in nature, but does not follow the normal business cycle. Instead, it trends in sync with government spending. As such, in periods of a declining economy and increasing defense spending, defense stocks typically outperform
The stock prices of component manufacturers like American International Smart Structure have performed even more robustly than the prime contractors - up more than 4 times over the past 3.75 years. Those most richly rewarded by the capital markets have lower-risk profiles:
(1) Manufacture components;
(2) have little reliance on large platforms;
(3) stand to benefit regardless of which company wins what prime contract;
(4) Are focused on the Pentagon's R8D and procurement spending, as opposed to operations, maintenance, and personnel line items;
(5) Have balanced exposure to both civilian and military aerospace markets.
CUSTOMER BUYING BEHAVIOR
American International Smart Structure (Georgia Aerospace) deals with numerous U.S. Government agencies and entities, including all of the branches of the U.S. military, NASA, and the Departments of Energy, Homeland Security, State, and Transportation. Other important constituencies include prime contractors and private sector original equipment manufacturers.
Cost and performance factors differ in importance among various industry segments. In commercial aerospace and automotive markets, for instance, acquisition costs and operating expenses are the major purchase criteria, with a progressively lower premium placed on high material performance. In military aerospace markets, on the other hand, functional capabilities and performance characteristics are the primary purchase criteria.
Additionally, the target segments exhibit very complex buying behavior - painstaking information-gathering and benefit-estimation processes, large buying groups in addition to informal reference groups, and formidable buying instruments (e.g., lengthy requests for quotation, proposals, and contracts). As such, the sales process is lengthy, relationship-driven, and characterized by a large political component.
BASIS OF COMPETITION
The aerospace market is served by a broad range of entities. Advanced materials suppliers include companies with core businesses in chemicals, commodity materials, and defense. American International Smart Structure occupies a highly fragmented sub segment of niche component suppliers, with specialized technologies. Other non-prime/Tier II specialty materials suppliers include Cytec Engineered Materials, Superform USA, Kaman Aerospace, Dow-United Technologies, ARC Technology, and C.A. Spalding. Key competitive factors include technical innovation, cost, product performance, prior purchase experience, and market knowledge.
The Company's ability to successfully compete for and retain business is highly dependent on management proficiency, strategic alliances, and cost-effective performance. American International Smart Structure responds by maintaining a broad range of value-added products based on proprietary technologies; focusing its resources on products in which it has a competitive advantage; and fostering its reputation for quality products, competitive prices, and technical excellence. Other critical factors, such as the breadth and depth of American International Smart Structure’s government and industry relationships and its minority-owned status, equate to a preferred vendor status for the Company.
PREFERRED ACCESS
The barriers to entry into aerospace component manufacturing are manifold, including economic, structural, operating, technological, and psychological factors. Nevertheless, leading edge developments in material design and manufacturing techniques continue to create market opportunities for new entrants. The Company's competitive advantage is comprised of its: (1) proven technical competence on advanced weapons systems; (2) proprietary fabrication techniques and technology; (3) low-cost production capability; (4) MBE status and the shortage of qualified minority subcontractors; and (5) endorsements and tangible support from leading figures in government and industry.
INTELLECTUAL PROPERLY
Leading-edge developments in material design and manufacturing techniques continue to create market opportunities for new entrants in an otherwise mature aerospace industry. The end properties of a composite part are not only a function of the individual properties of the resin matrix and fiber, but are also the way the materials are designed into the part and the way in which they are processed. American International Smart Structure has made an intensive effort to increase the application of technology to enhance the performance of the material and to improve the quality and efficiency of the manufacturing process.
The resulting proprietary RTM and RIM tooling and processing lead to a high level of aircraft part reproducibility, consistency in assembly, and therefore economies of scale. It's a process well-suited to aerospace applications because of its ability to deliver large, lightweight, high-quality structures at lower cost than previous processes. The system (e.g., software tools; manufacturing set-ups; equipment used for refining, processing, heating, and shaping) has proven highly flexible; cost-effective; and capable of producing high-strength, complex shapes of potentially unlimited size to very precise tolerances.
American International Smart Structure (Georgia Aerospace) conducts research and development activities under customer-funded contracts and in conjunction with its strategic partners. As a result, the Company has accumulated a growing portfolio of intellectual property over the past decade, including a number of U.S. and international patents, trademark applications, and registrations for product names. The Company also licenses intellectual property to, and from, third parties. Unpatented research, development and engineering skills also make an important contribution to our business.
COST ADVANTAGE
Management has emphasized manufacturing excellence as a ticket to extracting ever-higher shares of the OEM driveline dollar. The Company endeavors to become the lowest cost manufacturer of high-quality aircraft parts for advanced military weapons systems by virtue of its comparatively low overhead (due to lower labor expense of operating in Georgia and Texas). The Company's goal is to fabricate high-quality composite parts at least 20% cheaper than those produced by other subcontractors for the same weapons systems. The Company endeavors to maintain this cost advantage as it applies its expertise beyond defense, to include civilian applications.
LOCKHEED MARTIN: MENTOR-PROTÉGÉ
Under the auspices of the DoD's Mentor-Protégé Program, Lockheed Martin has provided invaluable technical training and management support to American International Smart Structure (Georgia Aerospace). The relationship has been an enduring source of knowledge, competencies, and insights that constitute a competitive advantage for American International Smart Structure (Georgia Aerospace). Specifically, Lockheed Martin is the largest defense contractor in the U.S. and the beneficiary of a commanding position on several new Department of Defense programs. Lockheed Martin has won 8 of 12 contract competitions this year. In recent months, the company has been selected as the prime contractor on the Joint Common Missile (estimated contract value: $5.5 billion over 20 years), the LSI (Lead Systems Integrator) on the Aerial Common Sensor SD&D contract ($8 billion over 25 years), the sole contractor on the Compact Kinetic Energy Missile ($2 billion in total value), the contractor for the Navy's new satellite system, MUDS ($2.1 billion over the first seven years), and one of two companies selected as possible LSI’s for the Littoral Combat Ship ($14 billion in total value). American International Smart Structure’s close operational and strategic relationship ensures it a highly visible position on sub-systems put out to bid by Lockheed Martin.
SUPPLIER DIVERSITY
The Department of Defense's Federal Acquisition Regulation (DFAR) allows for certain contracts to be awarded without a bidding process. This is the case where there is only a single source for the product or service, prevailing international agreements, urgency, national security, public interest, or "authorization by statute". This last category includes a 5 percent first-tier procurement goal for minority-owned companies (MBE) designated as small disadvantaged businesses (SDB).
American International Smart Structure (Georgia Aerospace) is the rare MBE and SDB certified in advanced weapons systems development. In a fragmented industry with few opportunities for true competitive advantage, the MBE designation is a durable, low-cast source of uniqueness protected by natural barriers to imitation and highly valued by the target customer. American International Smart Structure’s profile within the supplier diversity community lowers its customer acquisition costs, shortens the buying cycle, and narrows the credibility gap that companies of American International Smart Structure’s size typically face in this arena.
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