-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A9n+P7QiqjkOnkE0psqNEqLt7pEtNa/6WKBuvcPsXbj1tI7qjLYFJ98Qt4svgI4Y LUhblA6AheSif6oaZ3MQ1A== 0001157523-03-003680.txt : 20030806 0001157523-03-003680.hdr.sgml : 20030806 20030806073950 ACCESSION NUMBER: 0001157523-03-003680 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030806 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDO CORP CENTRAL INDEX KEY: 0000031617 STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [3812] IRS NUMBER: 110707740 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03985 FILM NUMBER: 03825020 BUSINESS ADDRESS: STREET 1: 60 EAST 42ND STREET STREET 2: 42ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10165 BUSINESS PHONE: 2127162000 MAIL ADDRESS: STREET 1: 60 EAST 42ND STREET STREET 2: 42ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10165 8-K 1 a4449272.txt EDO 8-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): August 6, 2003 EDO Corporation (Exact name of Registrant as specified in its charter) New York 3812 11-0707740 (State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer of Incorporation or Organization)Classification Code Number) Identification No.) ------------------- 60 East 42nd Street New York, NY 10165 212.716.2000 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) Not applicable (Former name or former address, if changed since last report) ------------------- ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. 99.1 Earnings Release, dated August 6, 2003, announcing financial results for the quarter ended June 28, 2003. ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION. On August 6, 2003, EDO Corporation issued an earnings release announcing its financial results for the quarter ended June 28, 2003. A copy of this earnings release is attached hereto as Exhibit 99.1 and incorporated by reference into this Item 12. SIGNATURE Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: August 6, 2003 EDO CORPORATION By: /s/ Frederic B. Bassett ------------------------ Name: Frederic B. Bassett Title: Vice President-Finance, Treasurer and Chief Financial Officer EX-99 3 a4449272_ex991.txt EDO EXHIBIT 99.1 Exhibit 99.1 EDO Reports 52 Percent Revenue Increase in Second Quarter NEW YORK--(BUSINESS WIRE)--Aug. 6, 2003--EDO Corporation (NYSE: EDO) recorded revenue of $111.7 million for the second quarter ended June 28, 2003, up $38.0 million or 51.6 percent from the $73.7 million recorded in the second quarter of 2002. The company recorded a net loss for the quarter of $0.2 million, or ($0.01) per share, versus net earnings of $3.1 million, or $0.18 per diluted share, in the second quarter of 2002. As previously disclosed, second quarter 2003 results included a pre-tax charge of $9.2 million related to the sale of property in Deer Park, N.Y. Other unusual pre-tax charges included non-cash compensation expense of $0.3 million and acquisition-related charges of $0.2 million. These charges were partially offset by an after-tax, non-cash gain from discontinued operations of $1.4 million. Excluding these unusual items, pro forma net earnings were $3.9 million, or $0.22 per share. "We took a number of decisive steps this quarter that further our growth strategy," said Chief Executive Officer James M. Smith. "Our acquisition of Emblem Group Ltd in the U.K. reinforces EDO's position as the global leader in aircraft armament-release systems. Operationally, we continue to make solid progress integrating our recent Darlington and AERA acquisitions, including the previously announced consolidation of our professional services units that will be completed this year. Another major step in implementing our company-wide facilities plan took place with the sale of our Deer Park plant. All of these initiatives should contribute to future financial progress." For the six-month period ended June 28, 2003, revenue was $206.1 million, up $65.5 million or 46.6 percent from the $140.6 million recorded in the first half of 2002. Net earnings for the first half of 2003 were $2.8 million, or $0.16 per diluted share, versus $2.5 million, or $0.15 per diluted share, in the same period last year. Non-GAAP Financial Measures In addition to the financial results contained on the attached statements of earnings, which are presented according to Generally Accepted Accounting Principles, or GAAP, we are providing pro forma earnings and adjusted EBITDA. Management believes that such adjustments to earnings will help investors understand the underlying trends in the business, and give a clearer picture of the financial condition and results of operations. As described above, pro forma earnings for the second quarter of 2003 were $3.9 million, or $0.22 per diluted share, versus $3.1 million, or $0.18 per diluted share, in the second quarter of 2002. For the year-to-date, pro forma earnings were $7.0 million, or $0.40 per diluted share, in the first half of 2003, versus $5.9 million, or $0.34 per diluted share, in the first half of 2002. Pro forma adjustments in the first half of 2003 represent the unusual items described above, plus a first quarter 2003 pre-tax charge of $0.2 million related to the acquisition of the assets of Condor Systems. For the first half of 2002, pro forma adjustments exclude the after-tax $3.4 million cumulative effect of a change in accounting principle. EBITDA was $3.5 million for the second quarter of 2003, down from $9.2 million in the second quarter of 2002. For the year-to-date, EBITDA was $14.6 million in 2003, versus $16.5 million in 2002. Adjusting for the pro forma items, as well as ESOP compensation and pension expense, EBITDA was $15.0 million in the second quarter of 2003, up 31.2 percent from $11.4 million in the prior year. For the year-to-date, EBITDA, as adjusted, was $27.9 million, up 34.5 percent from $20.8 million in 2002. EBITDA, as adjusted, is a generally accepted metric employed by our industry. Adjustments are identified on the attached reconciliation schedule. Acquisitions During the second quarter, EDO acquired Emblem Group Ltd, a privately held company based in Brighton, England. The company was acquired for cash of GBP 15.25 million ($25.6 million), which included payment of acquired debt of GBP 2.0 million ($3.3 million). Emblem had revenues in 2002 of GBP 15.0 million (approximately $25.2 million). Emblem will be included in EDO's Defense segment. It has two primary operating subsidiaries in the U.K., EDO MBM Technology Ltd, which produces aircraft weapons-carriage and -interfacing systems and military-computer products, and EDO Aerotech Ltd, which supplies components for commercial-airline entertainment systems. Emblem's US subsidiary is currently being integrated into EDO MTech. Backlog The total funded backlog of unfilled orders at June 28, 2003 increased to a record $447.4 million from $433.5 million at March 29, 2003. As an indicator of future revenue expectations, this is a coverage level of approximately 96 percent of estimated 2003 sales, up from a 93 percent coverage level at the same time last year. The increase from March 29 is due to the Emblem acquisition, but does not include Emblem's recent award, as part of the winning team for the U.K. Precision Guided Bomb program. That award is expected to add approximately $12 to $14 million. Backlog also does not include unfunded options in current contracts that have not yet been exercised by customers. Unfunded options total approximately $485 million. Organic Revenue Growth Excluding the impact of acquisitions since the second quarter of 2002, year-to-date revenues are comparable to last year. However, 2002 benefited from the full-scale production of the Universal Exciter Upgrade program, which is now nearing completion and generating significantly less revenue. Thus, organic growth in 2003 has all but offset the revenue decline resulting from completion of the UEU program. Excluding UEU revenue from both years and thus fully reflecting the remaining operations, organic revenue growth was approximately 9.6 percent in the second quarter of 2003, and approximately 13.0 percent for the six-month period. Given the current contract base and internal projections, the company believes that organic revenue growth of seven to nine percent is sustainable. Margins Gross margins have improved in 2003 for both the second quarter and year-to-date. For the quarter, the gross profit margin was 29.1 percent of revenue, versus 23.8 percent in the prior year. For the year-to-date, the gross profit margin was 27.7 percent of revenue, versus 24.0 percent in the prior year. This improvement was due to a number of factors, including a higher percentage of service revenues, as well as reduced ESOP compensation expense. Pro forma operating margins declined to 7.9 percent of revenue in the second quarter, versus 9.3 percent in the prior year. For the year-to-date, the pro forma operating margin was 7.9 percent of revenue, versus 8.2 percent in the prior year. Reasons for the decrease in this ratio include: increased amortization of intangible assets of approximately $1 million per quarter associated with the acquisition of Condor assets, AERA, and Darlington; lower margins - as anticipated - while working off the acquired backlog at the Condor units; and an inventory write down of $0.7 million in the Engineered Materials segment. For the second quarter, EBITDA, as adjusted, was 13.4 percent of revenue in 2003, versus 15.5 percent in the prior year. For the year-to-date, EBITDA, as adjusted, was 13.6 percent of revenue in 2003, versus 14.8 percent in the prior year. As the company proceeds with the integration of newly acquired operations, EBITDA, as adjusted, is expected to return to the historical range of 14 to 15 percent of revenue. Revenue Guidance The following statement is based on current expectations. This statement is forward-looking, and actual results may differ materially. EDO currently estimates that revenue for the full year 2003, excluding any additional acquisitions, will be in the range of $460 to $470 million, compared to $328.9 million in 2002. This is consistent with the revised revenue guidance provided in the announcement of the Emblem Group Ltd acquisition. Conference Call EDO will conduct a conference call at 10:30 a.m. ET on August 6 to review these results in more detail. A live webcast of the conference call will be available at www.EDOcorp.com. For those who cannot listen to the live broadcast, a replay of the call will be available on the corporate site. There will also be a telephone replay of the call available through August 12. To listen to the telephone replay, dial 1-800-633-8284 (outside the U.S. dial 1-402-977-9140), and enter reservation #21154796. About EDO Corporation EDO Corporation provides military products and professional services to the United States and allied governments, and their prime defense contractors. EDO focuses on systems and subsystems that are integral to the success of long-term military platforms, such as the F/A-22, the Joint Strike Fighter, and the Comanche Helicopter. Examples of the company's highly engineered products include aircraft weapon-release systems, ship and aircraft self-protect systems, and high-performance composite structures. The company also has a number of commercial product lines. A disciplined acquisition program is diversifying the base of major platforms and customers. EDO is at the core of the transformation to a lighter, faster, and smarter national defense capability. EDO (www.EDOcorp.com) was founded in 1925, and is headquartered in New York City. The company had revenues last year of $329 million, and employs more than 2,800 people. Forward-Looking Statements Certain statements made in this release, including statements about future revenue from acquisitions and contract awards, as well as annual revenue expectations, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections about the Company's business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including those described above and the following: changes in demand for the Company's products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, difficulties encountered in the integration of acquired businesses and other risks discussed from time to time in the Company's Securities and Exchange Commission filings and reports. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. Such forward-looking statements speak only as of the date on which they are made, and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release. EDO Corporation and Subsidiaries Condensed Consolidated Statements of Earnings ($000's omitted, except per share data) Three months ended Six months ended June 28, June 29, June 28, June 29, 2003 2002 2003 2002 --------- -------- --------- --------- (unaudited) (unaudited) Net sales $111,736 $73,719 $206,113 $140,628 Costs and expenses: Cost of sales 79,190 56,139 149,020 106,846 Selling, general and administrative 21,493 8,619 36,700 18,341 Research and development 2,498 2,096 4,488 3,861 Acquisition-related costs 215 - 420 - Impairment loss on assets held for sale 9,160 - 9,160 - --------- -------- --------- --------- 112,556 66,854 199,788 129,048 --------- -------- --------- --------- Operating (loss) earnings (820) 6,865 6,325 11,580 Non-operating income (expense): Interest income 165 564 400 772 Interest expense (2,247) (2,079) (4,474) (2,125) Other, net 95 (47) 128 6 --------- -------- --------- --------- Interest & other (1,987) (1,562) (3,946) (1,347) --------- -------- --------- --------- (Loss) earnings from continuing operations before income taxes, discontinued operations, and cumulative effect of a change in accounting principle (2,807) 5,303 2,379 10,233 Income tax benefit (expense) 1,181 (2,229) (1,023) (4,349) --------- -------- --------- --------- (Loss) earnings from continuing operations before discontinued operations and cumulative effect of a change in accounting principle (1,626) 3,074 1,356 5,884 Earnings from discontinued operations, net of tax 1,398 - 1,398 - Cumulative effect of a change in accounting principle, net of tax - - - (3,363) --------- -------- --------- --------- Net (loss) earnings $(228) $3,074 $2,754 $2,521 ========= ======== ========= ========= (Loss) earnings per common share: Basic: Continuing operations $(0.09) $0.18 $0.08 $0.35 Discontinued operations 0.08 - 0.08 - Cumulative effect of a change in accounting principle - - - (0.20) --------- -------- --------- --------- Net basic (loss) earnings per common share $(0.01) $0.18 $0.16 $0.15 ========= ======== ========= ========= Diluted: (a) Continuing operations $(0.09) $0.18 $0.08 $0.34 Discontinued operations 0.08 - 0.08 - Cumulative effect of a change in accounting principle - - - (0.19) --------- -------- --------- --------- Net diluted (loss) earnings per common share $(0.01) $0.18 $0.16 $0.15 ========= ======== ========= ========= Weighted average shares outstanding Basic 17,276 17,057 17,253 17,015 ========= ======== ========= ========= Diluted (a) 17,276 17,386 17,493 17,343 ========= ======== ========= ========= Backlog of unfilled orders $447,417 $305,877 ========= ========= (a) Assumes exercise of dilutive stock options. The 5.25% Convertible Subordinated Notes were not dilutive. EDO Corporation and Subsidiaries Condensed Consolidated Balance Sheets ($000's omitted) June 28, Dec. 31, 2003 2002 ----------------------------- (unaudited) Assets Current Assets: Cash and cash equivalents $60,241 $132,320 Restricted cash 194 27,347 Marketable securities 215 193 Accounts receivable, net 117,512 100,594 Inventories 37,289 32,406 Assets held for sale 26,892 - Deferred income tax asset, net 3,222 3,222 Prepayments & other 5,133 3,133 ----------------------------- Total Current Assets 250,698 299,215 Property, plant and equipment, net 32,763 64,472 Notes receivable 2,453 2,556 Goodwill 108,265 61,352 Other intangible assets 45,188 11,867 Deferred income tax asset, net 23,256 20,439 Other assets 20,973 21,673 ----------------------------- Total Assets $483,596 $481,574 ============================= Liabilities and Shareholders' Equity Current Liabilities: Accounts payable and accrued liabilities $81,699 $74,556 Contract advances and deposits 10,760 20,277 ----------------------------- Total Current Liabilities 92,459 94,833 Long-term debt 137,800 137,800 Post-retirement benefits obligations 79,301 78,643 Environmental obligation 2,015 2,025 Shareholders' equity 172,021 168,273 ----------------------------- Total Liabilities & Shareholders' Equity $483,596 $481,574 ============================= EDO Corporation and Subsidiaries SEGMENT DATA ($000's omitted) Three months ended Six months ended June 28, June 29, June 28, June 29, 2003 2002 2003 2002 ------------------- ------------------- (unaudited) (unaudited) Net sales: Defense $86,925 $54,129 $156,943 $103,359 Communications and Space Products 13,323 10,199 27,703 19,116 Engineered Materials 11,488 9,391 21,467 18,153 ------------------- ------------------- $111,736 $73,719 $206,113 $140,628 =================== =================== Operating (loss) earnings: Defense (1) $7,364 $6,474 $12,739 $12,466 Communications and Space Products 827 (209) 2,051 (2,033) Engineered Materials 149 600 695 1,147 Impairment loss on assets held for sale (9,160) - (9,160) - ------------------- ------------------- (820) 6,865 6,325 11,580 Net interest expense (2,082) (1,515) (4,074) (1,353) Other, net 95 (47) 128 6 ------------------- ------------------ (Loss) earnings from continuing operations before income taxes, discontinued operations and the cumulative effect of a change in accounting principle $(2,807) $5,303 $2,379 $10,233 =================== ================== (1) Acquisition-related costs included above. 215 - 420 - EDO Corporation and Subsidiaries Reconciliation from GAAP to Pro Forma Earnings ($000's omitted, except per share data) (Before Discontinued Operations in 2003 and Cumulative Effect of Change in Accounting Principle in 2002) Three months ended Six months ended June 28, June 29, June 28, June 29, 2003 2002 2003 2002 -------- -------- -------- -------- (unaudited) (unaudited) (Loss) earnings from continuing operations before income taxes $(2,807) $5,303 $2,379 $10,233 Impairment loss on assets held for sale 9,160 - 9,160 - Acquisition-related costs 215 - 420 - Compensation expense re: accelerated options 292 - 292 - -------- ------- ------- -------- Pro forma earnings before income taxes 6,860 5,303 12,251 10,233 Income tax expense (2,977) (2,229) (5,268) (4,349) -------- ------- -------- -------- Pro forma net earnings $3,883 $3,074 $6,983 $5,884 -------- ------- -------- -------- Diluted shares outstanding 17,515 17,386 17,493 17,343 Pro forma diluted earnings per share $0.22 $0.18 $0.40 $0.34 ======== ======= ======== ======== Calculation of EBITDA Three months ended Six months ended June 28, June 29, June 28, June 29, 2003 2002 2003 2002 -------- -------- -------- -------- (unaudited) (unaudited) (Loss) earnings from continuing operations before income taxes $(2,807) $5,303 $2,379 $10,233 Interest expense 2,247 2,079 4,474 2,125 Interest income (165) (564) (400) (772) -------- ------- ------- -------- Net interest expense 2,082 1,515 4,074 1,353 Depreciation 3,103 2,302 5,998 4,750 Amortization 1,165 71 2,105 120 -------- ------- ------- -------- Total depreciation & amortization 4,268 2,373 8,103 4,870 -------- ------- ------- -------- EBITDA 3,543 9,191 14,556 16,456 Impairment loss on assets held for sale 9,160 - 9,160 - Acquisition-related costs 215 - 420 - Compensation expense re: accelerated options 292 - 292 - ESOP compensation expense 744 1,210 1,510 2,315 Pension expense 1,000 1,000 2,000 2,000 -------- ------- ------- -------- EBITDA, as adjusted $14,954 $11,401 $27,938 $20,771 Diluted shares outstanding 17,515 17,386 17,493 17,343 EBITDA, as adjusted, per share $0.85 $0.66 $1.60 $1.20 ======== ======= ======= ======== EDO Corporation and Subsidiaries GUIDANCE DATA ESTIMATES Fiscal 2003 --------------------------- Revenue range $460 million - $470 million Pension costs $4 million Current-year Condor acquisition-related charge $800,000 Effective operating tax rate 42.5% - 43.0% EBITDA, as adjusted, margin range 13.0% - 14.0% ESOP shares issued per quarter 42,376 Average shares outstanding (excluding Note conversion(a)) 17.6 million (a) "If-converted method" (FAS 128) to determine diluted EPS: (Using the first quarter's representative numbers) - - Shares to be issued if 5.25% Notes are converted at $31.26/share would be 4,408,189. - - Quarterly interest on Notes reduced Net Earnings by $1,030,916. The decision point for the dilution test was $1,030,916/4,408,189, or $0.2339 per share. Since EPS was otherwise less than $0.2339, the impact of the Notes was not dilutive, thus conversion of the Notes was not assumed in calculating diluted EPS this quarter. This table contains estimates based on management's current expectations. This information is forward-looking, and actual results may differ materially. CONTACT: EDO Corporation William A. Walkowiak, 212-716-2038 ir@edocorp.com -----END PRIVACY-ENHANCED MESSAGE-----