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Technology Stocks : KVHI -Mobile Satellite Communications and GPS
KVHI 13.53-0.7%5:20 PM EDTNews

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From: hedgeclipper3/23/2011 12:51:54 PM
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Big news on the CROWS front. Most of this was commented on here when the 1300 Crows extension was announced in mid February but the Kongsberg conf. call gives the report more context and color.

From the Kongsberg Q4 2010 Conference call on 2/14/2011---
So to the third business areas, Kongsberg Protech Systems, which also has had a very good year. The quarter ended NOK1.3b with NOK333m in EBITA, a huge improvement. Still a healthy backlog. Didn't book too much in the fourth quarter, but as you have seen, we announced recently another bridge contract extension. So, as we speak, this number is in fact more than double what you see here.

So for the year as a whole, this business area has grown to NOK5.6b in revenues and almost a NOK1b in EBITA. Of course, the changes from last year with a growth like this are significant percentages, 37% in revenue, 25% on EBITA and we are ending the year with 17.5% EBITA margin for this business area.

And again this is a -- Kongsberg Protech Systems is a business which is composed of many, many contracts. Although we tend to talk much about one of them, namely the CROWS II contract for the US Army, but there are many, many contracts. And the mix between these contracts is varying and this is influencing also the margin booking for a given period of time. So these margins are produced because of the volume effect of course, we have had a significant scaling of the business. And this is also significant productivity initiatives that have been run in this business throughout 2010, which is delivered, and as you can see, very good margins.

New orders, backlog orders, gone down somewhat, NOK5.5b, approximately in terms of backlog. And the order intake in the fourth quarter is, as I mentioned, not very big compared to last year fourth quarter. But this is not in any case worrying us. We see a lot of potentials going forward here.
So a high level of activity. We delivered 4,300 RWS, Remote Weapons Station Units in 2010. We had a number of new contracts and modifications to existing contracts.

[From a later Q&A—] First. Is it possible to give a split on your sales in RWS between the US and other countries that you're selling to?
WALTER QVAM: To the first question, maybe Jan Erik can help me with this bit between US and non-US RWS stations, just [think on that].
JAN ERIK HOFF: For 2010?
WALTER QVAM: Yes.
JAN ERIK HOFF: That is approximately 3,500 US.
WALTER QVAM: 3,500 US, the rest outside the US.
JAN ERIK HOFF: Yes.

[back to the main discussion]
The Stryker program, NOK109m as it says here. And the second here, extension on the scope of CROWS II is the one I mentioned, which is a frame contract where we increased the scope now from 10,349 to 11,690 systems. And we have had the first call of this additional frame, and we will negotiate the final pricing structure throughout the first half year with our customer.

Highlighted also here is some key words showing the quite intense activity that we have in terms of widening and developing the product range within Kongsberg Protech Systems.
………………….
And also we have integrated a so called 360-degrees camera on top of the RWS station which is enabling the operator to have a 360-degree view of what is happening around the vehicle when he or she is sitting inside the vehicle.

We have developed and launched in the market place RWS Superlite. We have had live firings with the Javelin mounted on the CROWS station. And we have also, as you can see on this picture, mounted and developed a special RWS version for the ABRAMS tank.
………………….
As regard Kongsberg Protech Systems, also here we see that 2011 will be a busy year. We have many new opportunities that we are pursuing. We are involved in 17 countries and with a number of vehicle programs internationally. And our involvement with these vehicle programs has increased significantly throughout 2010. This is promising for new orders acquiring in 2011 we feel.

And of course, the CROWS program, the next phase of the CROWS program is also one of these, a very big one. But we are also well-positioned and working very well with our preparations for that competition when it comes.

So finally, our positions are healthy, we are optimistic for 2011. We will not see a margin in 2011 compared to the fourth quarter margin we had in 2010, but still a positive outlook for the year to come.

Q&A
And secondly on the CROWS II and CROWS III, just extending the CROWS II contract by 1,300 systems or something like that, what implications does it have for the CROWS III program? Would that likely be extended in time or does it not change the situation at all? Thanks.

Kongsberg-- whenever we are reviewing or negotiating a new bridge contract, we are locking the cost stack and the margins with our customer. Then the improvements that we are able to achieve from that point in time onwards reflects directly on our own profitability.

So this is the way that our contracting regime is certainly with our biggest customer, the US Army. And that is also why I said when we now receive the bridge contract, and as I just mentioned in January and February, I said that we will now negotiate the pricing structure for that particular contract, and this negotiation will last for a few months, first half of 2011 I guess. We can expect that the margins or the profitability for that contract will be somewhat lower than the one that we just left.

Then our job is from then on, to continue our productivity work, negotiate better agreements with our suppliers and increase our margin.

our information is that we do not expect that the CROWS III competition will be delayed because of this bridge contract. The bridge contracts that we receive are motivated through so-called urgent needs. The customer has urgent needs for new weapons stations. So this means that when we get the bridge contract, we immediately take that into production, or at least if not immediately, it won't take long before we take it into production.

Whereas the CROWS III contract is another huge frame contract that will be setting the stage for the next few years to come. So we don't expect a delay in the contracting situation here.

HANS ERIK JACOBSEN, ANALYST, FIRST SECURITIES ASA: Hans Erik Jacobsen,
Also given the sharp increase we are seeing in sales in this area, or expected increase, what about your production facilities? Do you still believe you are able to deliver the CROWS III and all the other prospects that you are working on?
WALTER QVAM: And then in terms of capacity for production we have -- we are not worried about that. We've got our production capacity in Norway of course, which is scalable. Even more scalable, the capacity we have in Johnstown. So we were running 100 units per month in most of 2010. And that has been -- we have tested that. We are running a little bit lower on it now, but we can expand in terms of facility construction and also production lines at very short notice. So we're not worried about that

[Another question] Could you give us an update on the status of the CROWS III program?
WALTER QVAM: The status on the program is as we've reported before. There are no new things to report. So just to repeat what is the situation, the situation is that the US Army will have to announce -- or first decide and then announce the so-called acquisition strategy, which is which type of bidding situation will they be looking for.

And as we've said before, that might be of course, a single source situation, negotiated contract. It might be a full, open bid with one or more, and it might also be a bidding on a technical data package. And we are prepared for all eventualities. And we expect them to announce this acquisition strategy in the not too distant future because that is the first step they need to make before they can go out and ask for bidding.

Needless to say if the announcement is that they will go for TDP, the technical data package situation, of course that would be good news for us, because that would mean that the Kongsberg technology is the one that has been chosen for this. We will have to see.

Then a few days later the Army comes out with the pre-solicitation notice previously noted by Jalton……

Follow the contracting process here> fbo.gov 
Search on “Crows”

Presolicitation notice 2-16-2011 Solicitation Number: W15QKN-11-R-F015

FedBizOpps Presolicitation Notice W15QKN-11-R-F015.

fbo.gov 


Common Remotely Operated Weapon Station (CROWS)

The Army Contracting Command (ACC) - Picatinny, on behalf of Project Manager Soldier Weapons, has a requirement for manufacturing the XM153, Common Remotely Operated Weapon Station (CROWS), recapitalization of the previously delivered XM153 CROWS, engineering and logistics services, and spares parts.

Highlights
To support production of a maximum of 18,000 CROWS field maintenance support, and spares.

The Government has determined that a Full and Open Competition Indefinite Delivery/Indefinite Quantity (IDIQ) multiple award contract will be utilized for the CROWS requirement. The expected contract duration is five (5) years.

This approach will ensure a very high level of commonality between multiple CROWS producers and commonality/interchangeability with the existing CROWS fleet.

The present schedule projects a release of a draft solicitation on or about 3QFY11. [US govt fiscal year]


[And as noted by Jalton, Kongsberg reacts the next day. Refer to last bolded comment above at end of conference call.]

17 Feb 2011
US Army has released new and important information related to the future CROWS program procurement. This announcement refers to a future request for proposal for the next phase of the CROWS Program for the US Army.
"The information from US Army is a confirmation of the leading quality and performance position of the KONGSBERG CROWS system. I view this announcement as very encouraging for us in the upcoming competition for the next phase of the CROWS Program," says Walter Qvam, President and CEO.
kongsberg.com 



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