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Jax Daily Record Tuesday, Dec. 27, 201612:00 PM EST

Drone Aviation has high-ranking Trump tie

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by: Mark Basch Contributing Writer

As a company seeking U.S. government defense contracts for a big chunk of its business, Drone Aviation Holding Corp. can use all the friends in high places it can get.

Well, the Jacksonville-based maker of tethered drones and lighter-than-air aerostats will have a big-time ally in the White House as the new administration settles in next month. Its former vice chairman will be President-elect Donald Trump’s national security adviser.

Retired Lt. Gen. Michael Flynn was appointed to Drone Aviation’s board of directors and named vice chairman in April.

Despite Flynn’s impressive resume including 33 years in the U.S. Army, his appointment received little attention. Drone Aviation is, after all, a small company, albeit one with big plans.

Flynn was an adviser to Trump during the campaign and was named national security adviser Nov. 17.

Even after that appointment, Flynn was re-elected to Drone Aviation’s board at the company’s Dec. 6 annual meeting.

However, Drone Aviation said in a follow-up Securities and Exchange Commission filing that Flynn informed the company Dec. 14 he will resign from the board and as an adviser to the company as of Dec. 31.

Drone Aviation is one of several business interests for Flynn that could have a conflict of interest in his new job, according to a Bloomberg News story.

Bloomberg said government ethics rules “forbid executive-branch employees from having a financial interest in companies that do business with the agencies they lead.”

According to SEC filings, Drone Aviation was paying Flynn $3,000 a month and issued 100,000 restricted shares of common stock that would vest monthly over two years.

He would earn a pro rata portion of those shares “in the event the Vice Chairman relinquishes his position and board seat prior to the expiration date” of his two-year contract, the filings said.

While questions have been raised about his business ties, his new position does not require Senate confirmation.

Assuming Flynn completely divorces himself from the company, his key role in the new administration should still be a positive for Drone Aviation. It gives a relatively small and unknown company a high-ranking endorsement.

“For over three decades I have been directly involved with supporting our fighting men and women through the collection and use of information and firmly believe that now, more than ever, the success of our national defense and the defense of our allies has never been more dependent on access to actionable intelligence and superior communications,” Flynn said in a Drone Aviation news release announcing his appointment as vice chairman in May.

“I believe that there is a clear and growing need for novel and flexible solutions such as those produced by Drone Aviation that can assist our forces to adapt to the realities we are now facing around the world,” he said.

“Having evaluated the company’s technologies, I believe they can positively impact our military’s defense and situational awareness and that is why I am joining Jay and his team in expanding the role of persistent aerial solutions in the marketplace,” he said, referring to CEO Jay Nussbaum.

Drone Aviation is a 3-year-old company that produced revenue of $1.07 million in the first nine months of this year.

Its stock, which trades on the over-the-counter market, has been trading slightly below its Election Day closing price of $3.10 for most of this month.

However, when you talk about Jacksonville-based companies poised for a “Trump Bump” from the new administration’s policies, Drone Aviation is worth watching.

Regulators ‘pause’ Ameris acquisitions

Ameris Bancorp made a big move in the Northeast Florida market this year by acquiring The Jacksonville Bank and moving its executive offices to Jacksonville.

While the company would like to continue looking at expansion opportunities, Ameris last week said merger and acquisition activity is on “pause” because of a consent order with banking regulators.

Ameris, which is still officially headquartered in Moultrie, Ga., said it entered into the consent order with the Georgia Department of Banking and Finance and the Federal Deposit Insurance Corp. related to its compliance with the Bank Secrecy Act.

In a conference call with analysts last week, CEO Edwin Hortman said the problem resulted from the implementation of a new software system three and a half years ago.

“There were several software rules that were not set properly and naturally that caused erroneous results, which took some time to find,” he said.

The consent order was issued Dec. 16 but Ameris has been working to fix the problem since August. Hortman said he is confident it will be resolved by mid-2017.

The Bank Secrecy Act is a federal law requiring financial institutions to help the government prevent money laundering.

“We’re talking about terrorists and drug dealers, making sure they don’t have access to our systems,” Hortman said.

“We’re very confident that they don’t,” but Ameris can’t be sure until the system is tested to make sure the errors have been fixed, he said.

Ameris said it expects to incur a one-time charge in the fourth quarter this year related to the issue that will reduce earnings by 10 cents a share. Analysts have been projecting earnings between 49 cents and 62 cents, according to Yahoo Finance.

However, Hortman doesn’t expect the issue to have a major impact on the bank and its growth.

“There’s never a good time to have an issue like this but the fact is the financial impact of our organic growth engine is beating M&A deals,” he said.

Ameris is growing by more than 15 percent a year without acquisitions, he said.

Ameris also last week announced a joint venture (unaffected by the consent order) with US Premium Finance to provide credit on property and casualty insurance premiums.

The company expects the joint venture will increase 2017 earnings by 7 percent to 8 percent.

Ameris is hoping to consider acquisition opportunities again by the middle of the year if it can fix the Bank Secrecy Act issue and get the consent order lifted, Hortman said.

“It is something we want to do,” he said.

Analysts rates Landstar at ‘neutral’

Susquehanna Financial analyst Bascome Majors initiated coverage on Jacksonville-based trucking company Landstar System Inc. last week with a “neutral” rating.

“Landstar is the broker best-positioned to capitalize on expected truckload market improvement, given the company’s transactional focus (minimal customer rate commitments) and fleet of exclusive owner/operators (supply-side protection on half of revenues),” Majors said in his report.

“That said, we’re initiating neutral with a slight downside bias, as street estimates look too high (incentive comp & IT spend headwinds), despite a 12-year high valuation suggesting investors expect positive revisions,” he said.

Landstar’s stock rose more than 35 percent over two months to a high of $90.80 two weeks ago.

 

Lennar Corp. beats forecasts

In a hopeful sign for the housing market heading into the new year, homebuilder Lennar Corp. reported better-than-expected earnings last week.

Lennar reported earnings of $1.34 a share for the fourth quarter ended Nov. 30, 13 cents higher than last year and 7 cents higher than the average analyst’s forecast, according to Nasdaq.

“We have consistently believed that the housing market is continuing its slow and steady recovery, and we have crafted our operating strategies specifically to position our company to grow at a measured pace and to act opportunistically in these market conditions,” CEO Stuart Miller said in a news release.

“With the anticipation of a new president focusing on accelerating economic growth, we believe that our fortified balance sheet, our diversified business model and our refined product offerings, will continue to hold us in good stead in a high-growth economy, despite the potential of moderately rising interest rates over the next several years,” he said.

The homebuilding industry has been growing strongly in Jacksonville in the past year, with construction jobs rising 7.4 percent from November 2015 through November 2016, according to the Florida Department of Economic Opportunity.

Miami-based Lennar is building or marketing homes in 22 Northeast Florida communities, according to the company’s website.

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