Veridian Corporation History

Address:

1200 South Hayes Street, Suite 1100
Arlington, Virginia 22202
U.S.A.

Telephone: (703) 575-3100
Fax: (703) 575-3200

Public Company
Incorporated: 1997
Employees: 7,000
Sales: $834.1 million (2002)
Stock Exchanges: New York
Ticker Symbol: VNX
NAIC: 514210 Data Processing Services; 541512 Computer Systems Design Services; 541710 Research and Development in the Physical, Engineering, and Life Sciences; 514191 On-Line Information Services; 541511 Custom Computer Programming Services; 541519 Other Computer Related Services

Company Perspectives:

Vision: Applying technology to solve problems that matter for our customers; setting the standard of performance as a community of leaders and the employer of choice; making a difference in areas that make a difference. Values: Doing the right thing, consistently and over the long term, for our customers, our employees, our partners, our shareholders and our communities.

Key Dates:

1946:: Cornell Aeronautical Laboratory is formed.
1972:: Cornell Aeronautical Laboratory is spun off as Calspan Corp.
1978:: Auto parts maker Arvin Industries acquires Calspan.
1992:: Calspan merges with Houston Space Industries International.
1997:: Veridian is formed from the merger of Calspan SRL with Veda International.
1998:: Three acquisitions turn Veridian into a systems integration and IT service company.
1999:: Veridian makes three acquisitions in a single day.
2002:: Veridian goes public, acquires Signal Corporation.

Company History:

Veridian Corporation supplies IT services to the federal government. These include systems engineering and network security, both vitally important as agencies upgrade their IT capabilities in the wake of the September 11, 2001 terrorist attacks. Beyond number crunching, Veridian's units produce cameras and sensors to detect chemical, biological, and nuclear weapons. Formed from the 1997 merger of Calspan SRL and Veda International, the company has grown rapidly from a series of acquisitions in 1998 and 1999, followed in 2002 by a successful initial public offering (IPO). The October 2002 acquisition of Signal Corporation has made Veridian a $1 billion company.

Cornell Origins

Veridian's origins can be traced back to the Cornell Aeronautical Laboratory, Inc., formed in 1946 at Cornell University. After the war, the lab's Variable Stability & Control Research Airplanes unit was at the leading edge of aircraft handling studies.

A T-33 trainer delivered to the lab in 1954 would be used to teach virtually all of the astronauts the United States produced in the next 40 years. Its slow speed handling characteristics could be modified to mimic a very broad collection of other aircraft, ranging from the X-15 rocket plane to the Boeing 777 and YF-22 stealth fighter prototype.

In 1972, Cornell Aeronautical Laboratory went public as Calspan Corporation. Arvin Industries Inc., an auto parts manufacturer based in Columbus, Indiana, acquired Calspan six years later. The company had begun monitoring government computer networks, the earliest roots of the Internet. This formed the basis of much of the company's work in the 1980s.

Calspan Merging into SII in 1992

By 1991, Calspan had achieved annual revenues of $214 million; it employed 2,500 people. The next year, Arvin Industries Inc. announced the merger of Calspan Corporation with Houston Space Industries International Inc., a 100-person firm with sales of about $10 million. Arvin owned 70 percent of the new company, called Space Industries International Inc. (SII), which was headquartered in Washington, D.C. Systems Research Laboratories Inc. (SRL), based in Dayton, Ohio, also was merged into SII. In 1993, Calspan SRL began leasing some of the Washington area's most expensive office space at 800 Connecticut Avenue NW; it was singled out by the Washington Post in an article on panoramic office views.

Calspan retired its venerable T-33 jet trainer in April 1997. It was replaced by an F-16, which was better at imitating other high-performance aircraft.

Creation of Veridian from 1997 Merger

Veridian was formed in 1997 from the merger of Washington-based Calspan SRL Corporation and Veda International, an Alexandria, Virginia, firm that worked primarily for the Navy. Veda's expertise lay in IT services and motion-based simulation; in 1992, it had formed Chameleon Technologies to develop amusement park rides.

At the time of the merger, Calspan sold its Dayton, Ohio-based Military Products Group to Tracor Inc. The unit manufactured displays, monitors, and other defense electronics equipment. Its annual sales were about $16 million.

The merger was completed and the new name rolled out in November 1997. The well-known Calspan SRL and Veda names continued to be used in marketing. Veridian started out with 2,200 employees and about $250 million a year in annual sales. A spokesperson said the company aimed to achieve $500 million by 2000 and $1 billion by 2003.

Acquisitions in the Late 1990s

Three acquisitions in 1998 turned Veridian into a systems integration and IT services company. Two of these were Edgewood, Maryland-based Rail Co. and Santa Monica-based Pacific-Sierra Research Corp. In September 1998, Veridian acquired the North American operations of Datumtech, a $5 million intelligent transportation system (ITS) firm based in Williamsville, New York. Veridian's Calspan unit had been partnering with Datumtech on a federally funded project to develop a vehicle location system that would automatically notify authorities in the event of a collision. The three acquisitions all were integrated into Veridian, which reorganized into three business units in January 1999. Veridian had 3,000 employees at 35 locations in the United States.

One of Veridian's projects was developing virtual training environments for soldiers. This led to a simulator for the Transportation Department for use in training police for terrorist attacks.

Veridian tended to buy companies with advanced R&D capabilities. In the fall of 1999, Veridian acquired Trident Data Systems, MRJ Technology Solutions, and ERIM International Inc., concurrent with an $80 million investment from Cambridge, Massachusetts-based Monitor Clipper Partners and a $20 million investment from the Texas Growth Fund (TGF). CIBC World Markets also invested in Veridian at the time. These complementary businesses were all integrated into Veridian.

Trident Data Systems was a Los Angeles-based company offering a suite of front-end IT security tools, such as intrusion detection. Founded in 1975, it had 900 employees and annual revenue of about $90 million, mostly from defense and intelligence agencies.

ERIM International, based in Ann Arbor, was a 1997 spinoff of the Environmental Research Institute of Michigan. It developed radar and motion-detection systems for military, automotive, and aviation applications; the company also had satellite, aerial, and ground-based imagery capabilities, which would allow Veridian to become a prime contractor in the remote-sensing market. Revenues were $80 million a year and employees numbered 550. ERIM's plan for an IPO was frustrated by a lack of enthusiasm in the financial markets, particularly for government-related businesses. Veridian began pursuing ERIM in January 1998.

MRJ Technology Solutions, based in Fairfax, Virginia, was an IT and engineering services company specializing in network systems, simulation and modeling, decision support, and engineering analysis. It had 800 employees and annual revenue of about $130 million.

Veridian was working with NASA to develop a secure, earth-to-space network for manipulating space shuttle experiments. The system, successfully demonstrated in November 1999, linked Veridian's virtual private network (VPN) hardware to the Advanced Communications Technology Satellite.

Information and network security accounted for nearly a fifth of Veridian's 1999 revenues of $613 million. The company had almost 5,000 employees at more than 50 locations. A total of 2,000 of the employees were in the Washington, D.C. area. Veritect, a new unit to provide network security management for commercial markets, was created in 2000. Telecommunications, financial services, and utilities were the first private sector markets addressed due to the importance of their information systems in the daily functioning of society. Healthcare, transportation, and e-commerce were other markets Veridian would be targeting. Local and regional Internet service providers (ISPs) also had begun to avail themselves of Veridian's network security services. The company was building a new 5,000-square-foot building to house business security operations. Veritect was sold off for $500,000 in mid-2002.

After 9/11

The September 11, 2001 terrorist attacks had a profound effect on the company. The shock waves of the jet that crashed into the Pentagon were felt a few hundred yards away, at Veridian headquarters. With the demand for defense-related IT services obvious, Veridian soon followed rivals ManTech Inc. and Anteon Corporation into a very welcoming stock market.

Veridian lost money in 1999 and 2000 and posted a net loss of $21.4 million for 2001, but was profitable again by the first quarter of 2002. Its June 2002 IPO raised $216 million. The IPO came just as criticism was circulating of the national intelligence community's inability to communicate among various agencies. It was the government, not the private sector, that needed help updating its IT systems, and that was where investors' money now flowed. Shares rose 13 percent in the first day of trading, reflecting the demand for companies involved in national security.

High valuations of intelligence-related businesses led to another wave of consolidation in 2002. In October 2002, Veridian made its first acquisition since 1999, paying $227 million for Signal Corporation, a Fairfax, Virginia-based security technology firm. Signal had revenues of $252 million a year and was growing at a 20 percent a year clip; clients included the Department of Justice, Environmental Protection Agency, Social Security Administration, Commerce Department, and the Federal Aviation Administration. This helped extend Veridian's reach into civil agencies, which were expected to grow more important due to developments in homeland security. Signal also contracted for the Pentagon, which in fact accounted for more than half of its business.

The company had multiplied its net revenues by a factor of six in just two years. The Signal buy pushed Veridian's total post-acquisition revenues past $1 billion a year, making it still more eligible for prime contractor status. This was important because government contracts were getting larger.

Veridian sold its commercially oriented Veritect unit in 2002 to focus on the federal sector, which was showing much more demand for IT services. Government work typically had a difficult bidding process, lower margins, awards subject to cancellation on the whim of the feds, and other restrictions; however, contracts usually lasted longer.

In late 2002, the federal government began to cobble together a new Homeland Security Department from 22 existing agencies (Veridian was already a vendor for a third of them). CEO David Langstaff welcomed the development, and estimated the total size of the market Veridian served as more than $400 billion.

Principal Divisions: Engineering; Information Solutions; IT Services; Systems.

Principal Competitors: Anteon Corporation; Computer Sciences Corporation; CACI International Inc.; ManTech International Corporation; Science Applications International Corporation.

Veridian Corporation History

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Key Dates:

Company History:

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