-----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, Tu/k5ndGdjDhWDhQ8VgMecJqYOcs1r1n3DiOch7/PkSaMxt52ut7jLi9MQ0/8qWA fL9/Tz68xwL9aGsPezO6Jw== 0001157523-04-001612.txt : 20040219 0001157523-04-001612.hdr.sgml : 20040219 20040219081428 ACCESSION NUMBER: 0001157523-04-001612 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040219 ITEM INFORMATION: FILED AS OF DATE: 20040219 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: 04614582 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 a4576402.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): February 19, 2004 EDO Corporation (Exact name of Registrant as specified in its charter) New York 3812 11-0707740 (State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Incorporation or Organization) Classification Code Number) Identification No.) -------------------------------- 60 East 42nd Street 42nd Floor 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 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION. On February 19, 2004, EDO Corporation issued an earnings release announcing its financial results for the quarter and year ended December 31, 2003. A copy of this earnings release is attached hereto as Exhibit 99. The information in this Current Report on Form 8-K and the Exhibit attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing. 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: February 19, 2004 EDO CORPORATION By: /s/ Frederic B. Bassett --------------------------------------- Name: Frederic B. Bassett Title: Vice President-Finance, Treasurer and Chief Financial Officer EXHIBIT INDEX Exhibit Number Description of Exhibit - ----------------------- -------------------------------------------------------- 99 Earnings Press Release of EDO Corporation dated February 19, 2004 - -------------------------------------------------------------------------------- EX-99 3 a4576402_ex991.txt EDO EXHIBIT 99 Exhibit 99 EDO Revenue up 40 Percent; Earnings up 39 Percent NEW YORK--(BUSINESS WIRE)--Feb. 19, 2004--EDO Corporation (NYSE: EDO) recorded record revenue of $460.7 million in 2003, up $131.8 million or 40.1 percent from the $328.9 million recorded in 2002. Net earnings for the year were $14.8 million, up 39.3 percent from the $10.6 million recorded in the prior year. On a diluted per-share basis, earnings for 2003 were $0.84, up 37.7 percent from the $0.61 recorded in 2002. Without the items normally excluded from GAAP earnings by industry analysts, in this instance a real estate sale, pension curtailment charges, and acquisition charges, earnings were $1.14 per share in 2003 versus $0.89 in 2002. (See attached "Reconciliation from GAAP to Pro Forma Earnings.") For the quarter ended Dec. 31, 2003, revenue was $135.8 million, up $32.6 million or 31.6 percent from the $103.1 million recorded in the fourth quarter of 2002. Net earnings for the fourth quarter of 2003 were $6.5 million, up 37.1 percent from the $4.7 million recorded in the fourth quarter of 2002. On a diluted per-share basis, earnings for the fourth quarter of 2003 were $0.34, up 30.8 percent from the $0.26 recorded during the same period in the prior year. The company's convertible notes had a $0.03 per share dilutive effect in the fourth quarter of 2003, versus a $0.01 per share dilutive effect in the fourth quarter of 2002. "We have had the wind at our back in 2003, with momentum building in a number of our major markets and product lines," said Chief Executive Officer James M. Smith. "In addition, 2003 saw the completion and integration of three significant acquisitions that have expanded our capabilities in aircraft-armament systems and professional services, and added new product lines in areas such as communications systems and rugged computers." Highlights for the Year -- Acquisition of Advanced Engineering & Research Associates, Inc. strengthened and expanded EDO's range of professional services. -- Acquisition of Darlington, Inc. expanded EDO's capabilities in communications-related professional services and C4I. -- Acquisition of Emblem Group Ltd. reinforced EDO's position as a global leader in aircraft armament systems and broadened our customer base in Europe. The acquisition also added capabilities in C4I, with a product line of rugged computers and related devices. -- Major contract awards included: a 5-year, $108 million contract from the Navy to provide C4I support worldwide, both afloat and ashore; a $33.5 million contract for production of weapons-storage and release systems on 43 additional F/A-22 aircraft; and new positions on the Comanche helicopter for high-performance composite materials, anti-jam global positioning satellite antennas, and a full suite of interactive operating and maintenance courseware. -- A commitment by the Air Force to extend the life of EDO's AN/ALQ-161 defensive suite on the B-1B bomber until at least 2015, beginning with a contract to upgrade the digital radio-frequency memory. -- New positions on two major Coast Guard modernization programs, Rescue 21 and Deepwater, for EDO's interference cancellation technology. -- A letter contract for fast-track procurement of new versions of EDO's Shortstop Electronic Protection System. -- Continuing growth of international sales, which accounted for 18 percent of revenue in 2003, up from 15 percent in 2002. -- The filing of a $500 million shelf registration, which combined with a growing $86 million cash position and a $200 million line of credit, positions EDO to act if favorable acquisition opportunities should become available. Backlog The total funded backlog of unfilled orders at Dec. 31, 2003 increased to a record $462.3 million from $449.6 million at Sept. 27, 2003 and $375.0 million at Dec. 31, 2002. Backlog does not include portions of contracts for which the U.S. government has not yet appropriated funds, nor does it include unexercised options in any contract. Such unfunded contracts and unexercised options add approximately $520 million in high-confidence future revenue, for a total of nearly $1 billion. Organic Revenue Growth Revenue from operations owned for more than one year declined by approximately $12 million in 2003. This was due to the completion of the Universal Exciter Upgrade program, which generated sales of approximately $47 million in 2002, but only $11 million in 2003. Excluding UEU revenue from both years and thus fully reflecting the remaining operations, organic revenue growth exceeded eight percent in 2003. Given the current contract base and internal projections, the company believes that long-term organic revenue growth of seven to nine percent is sustainable, and may exceed this range in 2004. Margins Gross margins were 26.6 percent of revenue in 2003, versus 26.8 percent in 2002. For the fourth quarter, the gross profit margin was 23.1 percent of revenue, versus 30.7 percent in the prior year. This change was due to a number of factors, but primarily the closeout of certain projects that caused a short-term increase in margins for the fourth quarter of 2002, and a retroactive reclassification of certain expenses in the fourth quarter of 2003. The reclassification involved a recently acquired business, and had the effect of reducing SG&A expense and increasing cost of sales. Operating margins for the full year were 6.7 percent in 2003 versus 8.9 percent in 2002. The primary reason for this decline was due to the loss in 2003 on the sale of property in Deer Park, N.Y. Excluding this $9.2 million non-cash item, operating margins for 2003 were 8.7 percent. For the fourth quarter, operating margins were 9.4 percent of revenue, versus 10.1 percent in the prior year, primarily due to the project closeouts in 2002, as discussed in the previous paragraph. EBITDA margins, as adjusted, were 14.5 percent of revenue in 2003, above the company's 13.0 to 14.0 percent target range. For the fourth quarter of 2003, EBITDA, as adjusted, was 15.1 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 estimates that revenue for the full year 2004, excluding any acquisitions, will be in the range of $525 million to $535 million, compared to $460.7 million in 2003. Approximately two-thirds of this year-over-year revenue growth is expected to be from operations owned by EDO for more than one year. Conference Call EDO will conduct a conference call at 10:30 a.m. EST on Feb. 19 to review these results in more detail. A live web cast of the conference call will be available at www.edocorp.com or www.fulldisclosure.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 until Feb. 26. To listen to the telephone replay, dial 1-800-633-8284 (outside the U.S. dial 1-402-977-9140), and enter reservation #21182181. About EDO Corporation EDO Corporation provides military products and professional services to the United States and allied governments, and their prime defense contractors. The company also has a number of commercial product lines. EDO focuses on systems that are integral to the success of long-term military platforms, such as the B-1B bomber, the F/A-22, the Joint Strike Fighter, the Los Angeles and Virginia-class submarines, and the Comanche helicopter. EDO is a technology-driven company, with core competencies in a wide range of critical defense-mission areas, including: -- Defense Electronics -- Aircraft Armament -- Undersea Warfare -- Professional Services -- C4I - Command, Control, Communications, Computers, and Intelligence -- Integrated Composite Structures EDO (www.edocorp.com) was founded in 1925, and is headquartered in New York City. The company employs 2,700 people. Forward-Looking Statements Certain statements made in this release, including statements about future revenues and long-term organic revenue growth, 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, changes in the government's funding priorities, 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 Twelve months ended Dec 31, Dec 31, Dec 31, Dec 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ (unaudited) Net sales $135,771 $103,144 $460,667 $328,876 Costs and expenses: Cost of sales 104,421 71,463 338,259 240,850 Selling, general and administrative 14,767 16,477 71,855 47,584 Research and development 2,656 2,551 8,594 8,492 Acquisition- related costs 260 213 929 567 Impairment loss on sale of property - - 9,160 - Non-qualified- pension-plan curtailment loss 942 - 942 - Defined-benefit- pension-plan curtailment loss - 1,998 - 1,998 ------------ ------------ ------------ ------------ 123,046 92,702 429,739 299,491 ------------ ------------ ------------ ------------ Operating earnings 12,725 10,442 30,928 29,385 Non-operating income (expense): Interest income 268 445 941 1,729 Interest expense (2,324) (2,514) (9,093) (6,685) Other, net 254 (135) 279 (95) ------------ ------------ ------------ ------------ Interest & other (1,802) (2,204) (7,873) (5,051) ------------ ------------ ------------ ------------ Earnings from continuing operations before income taxes and cumulative effect of a change in accounting principle 10,923 8,238 23,055 24,334 Income tax expense (4,427) (3,501) (9,644) (10,342) Earnings from discontinued operations, net of tax - - 1,398 - Cumulative effect of a change in accounting principle, net of tax - - - (3,363) ------------ ------------ ------------ ------------ Net earnings $6,496 $4,737 $14,809 $10,629 ============ ============ ============ ============ Earnings (loss) per common share: Basic: Continuing operations $0.37 $0.28 $0.78 $0.82 Discontinued operations - - 0.08 - Cumulative effect of a change in accounting principle - - - (0.20) ------------ ------------ ------------ ------------ Net basic earnings per common share $0.37 $0.28 $0.86 $0.62 ============ ============ ============ ============ Diluted: (a) Continuing operations $0.34 $0.26 $0.76 $0.81 Discontinued operations - - 0.08 - Cumulative effect of a change in accounting principle - - - (0.20) ------------ ------------ ------------ ------------ Net diluted earnings per common share $0.34 $0.26 $0.84 $0.61 ============ ============ ============ ============ Weighted average shares outstanding Basic 17,389 17,170 17,308 17,080 ============ ============ ============ ============ Diluted (a) 22,073 21,836 17,561 17,379 ============ ============ ============ ============ Backlog of unfilled orders $462,327 $375,029 ============ ============ (a) Assumes exercise of dilutive stock options. The 5.25% Convertible Subordinated Notes were dilutive for the three-month periods, but not the twelve-month periods. EDO Corporation and Subsidiaries Condensed Consolidated Balance Sheets ($000's omitted) Dec 31, Dec 31, 2003 2002 -------------------- Assets Current Assets: Cash and cash equivalents $86,416 $132,320 Restricted cash - 27,347 Marketable securities 216 193 Accounts receivable, net 134,303 100,594 Inventories 34,733 32,406 Deferred income tax asset, net 3,594 3,222 Prepayments & other 5,954 3,133 -------------------- Total Current Assets 265,216 299,215 Property, plant and equipment, net 31,355 64,472 Notes receivable 6,538 2,556 Goodwill 92,527 61,352 Other intangible assets 55,898 11,867 Deferred income tax asset, net 21,774 20,439 Other assets 21,388 21,673 -------------------- Total Assets $494,696 $481,574 ==================== Liabilities and Shareholders' Equity Current Liabilities: Accounts payable and accrued liabilities $84,743 $74,556 Contract advances and deposits 8,195 20,277 -------------------- Total Current Liabilities 92,938 94,833 Long-term debt 137,800 137,800 Post-retirement benefits obligations 71,898 78,643 Environmental obligation 1,728 2,025 Shareholders' equity 190,332 168,273 -------------------- Total Liabilities & Shareholders' Equity $494,696 $481,574 ==================== EDO Corporation and Subsidiaries SEGMENT DATA ($000's omitted) Three months ended Twelve months ended Dec 31, Dec 31, Dec 31, Dec 31, 2003 2002 2003 2002 -------------------- -------------------- (unaudited) Net sales: Defense $108,950 $77,328 $360,001 $243,447 Communications and Space Products 14,447 15,702 55,458 47,262 Engineered Materials 12,374 10,114 45,208 38,167 -------------------- -------------------- $135,771 $103,144 $460,667 $328,876 ==================== ==================== Operating earnings (loss): Defense (1) $11,542 $10,199 $35,062 $28,674 Communications and Space Products 1,237 1,226 3,583 (441) Engineered Materials 888 1,015 2,385 3,150 Impairment loss on sale of property - - (9,160) - Non-qualified-pension-plan curtailment loss (942) - (942) - Defined-benefit-pension- plan curtailment loss - (1,998) - (1,998) -------------------- -------------------- 12,725 10,442 30,928 29,385 Net interest expense (2,056) (2,069) (8,152) (4,956) Other, net 254 (135) 279 (95) -------------------- -------------------- Earnings from continuing operations before income taxes and the cumulative effect of a change in accounting principle in 2002 $10,923 $8,238 $23,055 $24,334 ==================== ==================== (1) Acquisition-related costs included above 260 213 929 567 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) This table shows adjustments that management believes will help investors understand the underlying trends in the business, and will give a clearer picture of the company's year-to-year results from operations. Three months ended Twelve months ended Dec 31, Dec 31, Dec 31, Dec 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ (unaudited) (unaudited) Earnings from continuing operations before income taxes $10,923 $8,238 $23,055 $24,334 Impairment loss on sale of property - - 9,160 - Acquisition-related costs 260 213 929 567 Compensation expense re: accelerated options - - 292 - Non-qualified- pension-plan curtailment loss 942 - 942 - Defined-benefit- pension-plan curtailment loss - 1,998 - 1,998 ------------ ------------ ------------ ------------ Pro-forma earnings before income taxes 12,125 10,449 34,378 26,899 Income tax expense (4,801) (4,441) (14,370) (11,432) ------------ ------------ ------------ ------------ Pro-forma net earnings $7,324 $6,008 $20,008 $15,467 ------------ ------------ ------------ ------------ Calculation of pro forma diluted earnings per share: Interest expense avoided on convertible notes, net of tax 1,076 1,040 - - ------------ ------------ ------------ ------------ Pro forma net earnings available for common shares 8,400 7,048 20,008 15,467 Diluted shares outstanding 22,073 21,836 17,561 17,379 Pro forma diluted earnings per share $0.38 $0.32 $1.14 $0.89 ============ ============ ============ ============ Calculation of EBITDA Three months ended Twelve months ended Dec 31, Dec 31, Dec 31, Dec 31, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ (unaudited) (unaudited) Earnings from continuing operations before income taxes $10,923 $8,238 $23,055 $24,334 Interest expense 2,324 2,514 9,093 6,685 Interest income (268) (445) (941) (1,729) ------------ ------------ ------------ ------------ Net interest expense 2,056 2,069 8,152 4,956 Depreciation 3,163 2,887 12,180 10,365 Amortization 1,356 407 4,885 956 ------------ ------------ ------------ ------------ Total depreciation & amortization 4,519 3,294 17,065 11,321 ------------ ------------ ------------ ------------ EBITDA 17,498 13,601 48,272 40,611 Impairment loss on sale of property - - 9,160 - Acquisition-related costs 260 213 929 567 Compensation expense re: accelerated options - - 292 - Non-qualified- pension-plan curtailment loss 942 - 942 - Defined-benefit- pension-plan curtailment loss - 1,998 - 1,998 ESOP compensation expense 925 813 3,281 4,043 Pension expense 931 965 3,931 3,965 ------------ ------------ ------------ ------------ EBITDA, as adjusted $20,556 $17,590 $66,807 $51,184 Diluted shares outstanding 17,664 17,428 17,561 17,379 EBITDA, as adjusted, per diluted share* $1.16 $1.01 $3.80 $2.95 ============ ============ ============ ============ * Excludes potential impact of subordinated note conversion. EDO Corporation and Subsidiaries GUIDANCE DATA ESTIMATES Fiscal 2004 -------------------------------- Revenue range $525 million - $535 million Pension costs $2.2 million Effective operating tax rate 42.0% - 43.0% EBITDA, as adjusted, margin range 13.0% - 14.0% ESOP shares issued per quarter 42,376 Average shares outstanding (excluding Note conversion* and unallocated ESOP shares.) 17.8 million * "If-converted method" (FAS 128) to determine diluted EPS: (Using the third 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 more than $0.2339, the impact of the Notes was dilutive, thus conversion of the Notes was 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 Director of Investor Relations William A. Walkowiak, CFA, 212-716-2038 ir@edocorp.com -----END PRIVACY-ENHANCED MESSAGE-----