EX-99 2 a4829388ex99.txt EXHIBIT 99 Exhibit 99 EDO Reports Record Revenue and Earnings in 2004 NEW YORK--(BUSINESS WIRE)--Feb. 24, 2005--EDO Corporation (NYSE: EDO) reported record revenue of $536.2 million in 2004, up 16.4 percent from the $460.7 million recorded in 2003. Net earnings were $29.1 million, up 96.3 percent from the $14.8 million recorded in the prior year. On a diluted per-share basis, earnings for 2004 were $1.49, up 77.4 percent from the $0.84 recorded in 2003. This included an income-tax adjustment in the fourth quarter of 2004 that added approximately $2.8 million to net earnings. Without this adjustment, the diluted per-share earnings would have been $1.37. For the quarter ended Dec. 31, 2004, revenue was $169.1 million, up 24.6 percent from the $135.8 million recorded in the fourth quarter of 2003. Net earnings for the fourth quarter of 2004 were $14.2 million, up 118.0 percent from the $6.5 million recorded in the fourth quarter of 2003. On a diluted per-share basis, earnings for the fourth quarter of 2004 were $0.68, double the $0.34 recorded during the same period in the prior year. "This has been a very successful year, in which we have surpassed all of our major financial goals, and have converted our revenue growth into a substantially improved net income," said Chief Executive Officer James M. Smith. "This has been achieved while managing facilities consolidations in three major divisions, as well as accelerating key areas of production in support of our nation's war effort." Highlights for the Year -- Successfully fielded a new line of electronic-force-protection equipment, generating sales of approximately $40 million in its first year. -- Won production contracts with the Marine Corps for 11 new mobile communication systems, known as JECCS (Joint Enhanced Core Communications Systems). -- Secured a significant new platform for our interference-cancellation technology on the EA-18G aircraft. -- Added $41 million in new development and support contracts for the B-1B bomber. -- Won a contract renewal for professional services to USAID's Office of Foreign Disaster Support. Under this contract, we have highly-skilled technicians deployed around the world, such as in tsunami-stricken areas, to provide communications networks and other specialized functions. -- Formed a strategic alliance with BAE subsidiary Atlas Elektronic to address opportunities for mine countermeasures, such as proposals for the future Littoral Combat Ship. -- Completed the consolidation of six Washington D.C. area facilities into one location, and made substantial consolidation progress in newly leased facilities on Long Island and in southern California, both of which will be completed in the first half of 2005. -- Made substantial technology improvements and new product introductions in key areas of defense electronics and aircraft armament systems. -- Eliminated "staggered" terms of office for the board of directors, thus allowing each board member to stand for election annually. Backlog The total funded backlog of unfilled orders at Dec. 31, 2004 increased to $474.6 million from $462.3 million at Dec. 31, 2003. 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 $535 million in what we view as high-confidence future revenue, for a total of more than $1.0 billion. Margins Gross margins increased slightly to 26.7 percent of revenue in 2004, versus 26.6 percent in 2003. For the fourth quarter, the gross profit margin was 27.4 percent of revenue, versus 23.1 percent in the prior year. Operating margins for 2004 were 9.8 percent versus 6.7 percent in 2003. The relatively low operating margin in 2003 was due primarily to a non-recurring charge related to the sale of real estate. Excluding this and other unusual items, operating margins for 2003 were 9.2 percent. The increase in 2004 was due primarily to efficiencies achieved from the integration of recently-acquired businesses and consolidation of facilities. EBITDA, as adjusted, was 14.0 percent of revenue in 2004, at the top of the company's forecasted 13 to 14 percent target range. EBITDA is a generally accepted metric employed by our industry. Our adjustments include primarily ESOP and pension expenses, and are identified in detail on the attached reconciliation schedule. Net margins were 5.4 percent in 2004 versus 3.2 percent in 2003. As mentioned in the first paragraph, an income-tax adjustment added approximately $2.8 million to net income in 2004. The adjustment resulted from the favorable resolution of tax audits and other issues, allowing the release of related contingency accruals. Without this adjustment, the net margin for 2004 would have been 4.9 percent of sales. Organic Revenue Growth Revenue from operations owned for more than one year grew by 11.8 percent in 2004. This exceeds the company's 7 to 9 percent forecast made at the beginning of 2004. For the fourth quarter, all of the 24.6 percent revenue growth is organic, since there is no acquisition-related revenue increase in this quarter's comparison. This growth was aided by strong sales in force-protection and communications-related products. - 2005 Forecast Given the current contract base and internal projections, the company is increasing its forecast of long-term organic revenue growth to a range of 8 to 10 percent. Consequently, EDO estimates that revenue for the full year 2005, excluding any acquisitions, will be in the range of $585 million to $600 million, as indicated on the attached "Guidance Data Estimates" worksheet. Also included is a breakdown of average revenue by quarter over the past three years. This calculation is provided to illustrate the quarterly trends affecting EDO's results. Conference Call EDO will conduct a conference call at 10:30 a.m. EST on Feb. 24 to review these results in more detail. A live web cast of the conference call will be available at www.edocorp.com or www.vcall.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 March 3. To listen to the telephone replay, dial 1-877-660-6853 (outside the U.S. dial 1-201-612-7415), account #1628, and conference ID #134242. About EDO Corporation EDO Corporation designs and manufactures a diverse range of products for the defense industry and commercial markets, and provides related engineering and professional services. Major product groups include: Aircraft Armament, Defense Electronics, Communications, Undersea Warfare, and Integrated Structures. EDO's advanced systems are at the core of the transformation to lighter, faster, and smarter defense capabilities. EDO (www.edocorp.com) was founded in 1925, and is headquartered in New York City. The company employs 2,500 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 Year ended Dec 31, Dec 31, Dec 31, Dec 31, 2004 2003 2004 2003 ---------- ---------- ---------- ---------- (unaudited) Net sales $ 169,131 $ 135,771 $ 536,173 $ 460,667 Costs and expenses: Cost of sales 122,871 104,421 392,961 338,259 Selling, general and administrative 21,554 14,767 78,791 71,855 Research and development 3,971 2,656 11,620 8,594 Acquisition-related costs - 260 - 929 Impairment loss on Deer Park facility - - - 9,160 Non-qualified-pension-plan- curtailment loss - 942 - 942 ---------- ---------- ---------- ---------- 148,396 123,046 483,372 429,739 ---------- ---------- ---------- ---------- Operating earnings 20,735 12,725 52,801 30,928 Interest income 490 268 1,271 941 Interest expense (2,348) (2,324) (9,119) (9,093) Other, net (168) 254 (319) 279 ---------- ---------- ---------- ---------- Non-operating expense, net (2,026) (1,802) (8,167) (7,873) ---------- ---------- ---------- ---------- Earnings before income taxes and discontinued operations 18,709 10,923 44,634 23,055 Income-tax expense (4,548) (4,427) (15,566) (9,644) ---------- ---------- ---------- ---------- Earnings before discontinued operations 14,161 6,496 29,068 13,411 Earnings from discontinued operations, net of tax - - - 1,398 ---------- ---------- ---------- ---------- Net earnings $ 14,161 $ 6,496 $ 29,068 $ 14,809 ========== ========== ========== ========== Earnings per common share: Basic: Continuing operations $ 0.79 $ 0.37 $ 1.64 $ 0.78 Discontinued operations - - - 0.08 ---------- ---------- ---------- ---------- Net basic earnings per common share $ 0.79 $ 0.37 $ 1.64 $ 0.86 ========== ========== ========== ========== Diluted: (a) Continuing operations $ 0.68 $ 0.34 $ 1.49 $ 0.76 Discontinued operations - - - 0.08 ---------- ---------- ---------- ---------- Net diluted earnings per common share $ 0.68 $ 0.34 $ 1.49 $ 0.84 ========== ========== ========== ========== Weighted average shares outstanding Basic 17,824 17,389 17,695 17,308 ========== ========== ========== ========== Diluted (a) 22,526 22,073 22,377 17,561 ========== ========== ========== ========== Backlog of unfilled orders $ 474,605 $ 462,327 ========== ========== (a) Assumes exercise of dilutive stock options, and conversion of the 5.25% Convertible Subordinated Notes into 4.4 million common shares. The Notes were dilutive for the year ended Dec 31, 2004, but not 2003. EDO Corporation and Subsidiaries Condensed Consolidated Balance Sheets ($000's omitted) Dec 31, Dec 31, 2004 2003 --------------------- Assets Current Assets: Cash and cash equivalents $ 98,884 $ 86,632 Accounts receivable, net 153,810 134,303 Inventories 52,867 34,733 Deferred income tax asset, net 5,046 4,836 Notes receivable 7,202 1,600 Prepayments & other 3,493 4,354 --------------------- Total Current Assets 321,302 266,458 Property, plant and equipment, net 34,830 31,355 Notes receivable - 6,538 Goodwill 91,651 92,527 Other intangible assets 50,356 55,898 Deferred income tax asset, net 30,241 20,532 Other assets 18,309 21,388 --------------------- Total Assets $ 546,689 $ 494,696 ===================== Liabilities and Shareholders' Equity Current Liabilities: Accounts payable and accrued liabilities $ 80,898 $ 82,548 Contract advances and deposits 13,696 8,195 --------------------- Total Current Liabilities 94,594 90,743 Income taxes payable, long term 5,768 2,195 Long-term debt 137,800 137,800 Post-retirement benefits obligations 94,936 71,898 Environmental obligation 1,663 1,728 Shareholders' equity 211,928 190,332 --------------------- Total Liabilities & Shareholders' Equity $ 546,689 $ 494,696 ===================== EDO Corporation and Subsidiaries SEGMENT DATA ($000's omitted) Three months ended Year ended Dec 31, Dec 31, Dec 31, Dec 31, 2004 2003 2004 2003 --------------------- --------------------- (unaudited) Net sales: Defense $ 120,053 $ 108,950 $ 406,301 $ 360,001 Communications and Space Products 35,094 14,447 81,641 55,458 Engineered Materials 13,984 12,374 48,231 45,208 --------------------- --------------------- $ 169,131 $ 135,771 $ 536,173 $ 460,667 ===================== ===================== Operating earnings (loss): Defense (1) $ 15,561 $ 11,542 $ 43,064 $ 35,062 Communications and Space Products 2,655 1,237 4,294 3,583 Engineered Materials 2,519 888 5,443 2,385 Impairment loss on assets held for sale - - - (9,160) Non-qualified-pension-plan- curtailment loss - (942) - (942) --------------------- --------------------- 20,735 12,725 52,801 30,928 Net interest expense (1,858) (2,056) (7,848) (8,152) Other, net (168) 254 (319) 279 --------------------- --------------------- Earnings before income taxes $ 18,709 $ 10,923 $ 44,634 $ 23,055 ===================== ===================== (1) Acquisition-related costs included above. - 260 - 929 EDO Corporation and Subsidiaries Reconciliation from GAAP to Pro Forma Earnings ($000's omitted, except per share data) (Before Discontinued Operations in 2003) Three months ended Year ended Dec 31, Dec 31, Dec 31, Dec 31, 2004 2003 2004 2003 ---------- ---------- ---------- ---------- (unaudited) (unaudited) Earnings from continuing operations before income taxes $ 18,709 $ 10,923 $ 44,634 $ 23,055 Impairment loss on assets held for sale - - - 9,160 Acquisition-related costs - 260 - 929 Compensation expense re: accelerated options - - - 292 Non-qualified-pension-plan- curtailment loss - 942 - 942 ---------- ---------- ---------- ---------- Pro forma earnings before income taxes 18,709 12,125 44,634 34,378 Income tax expense (4,548) (4,801) (15,566) (14,370) ---------- ---------- ---------- ---------- Pro forma net earnings $ 14,161 $ 7,324 $ 29,068 $ 20,008 ---------- ---------- ---------- ---------- Calculation of pro forma diluted earnings per share: Interest expense avoided on convertible notes, net of tax 1,067 1,076 4,268 - ---------- ---------- ---------- ---------- Pro forma net earnings available for common shares 15,228 8,400 33,336 20,008 Diluted shares outstanding 22,526 22,073 22,377 17,561 Pro forma diluted earnings per share $ 0.68 $ 0.38 $ 1.49 $ 1.14 ========== ========== ========== ========== Calculation of EBITDA Three months ended Year ended Dec 31, Dec 31, Dec 31, Dec 31, 2004 2003 2004 2003 ---------- ---------- ---------- ---------- (unaudited) (unaudited) Earnings from continuing operations before income taxes $ 18,709 $ 10,923 $ 44,634 $ 23,055 Interest expense 2,348 2,324 9,119 9,093 Interest income (490) (268) (1,271) (941) ---------- ---------- ---------- ---------- Net interest expense 1,858 2,056 7,848 8,152 Depreciation 2,403 3,163 10,476 12,180 Amortization 1,310 1,356 5,564 4,885 ---------- ---------- ---------- ---------- Total depreciation & amortization 3,713 4,519 16,040 17,065 ---------- ---------- ---------- ---------- EBITDA 24,280 17,498 68,522 48,272 Impairment loss on assets held for sale - - - 9,160 Acquisition-related costs - 260 - 929 Compensation expense re: accelerated options - - - 292 Non-qualified-pension-plan- curtailment loss - 942 - 942 ESOP compensation expense 1,244 925 4,330 3,281 Pension expense 533 931 2,183 3,931 ---------- ---------- ---------- ---------- EBITDA, as adjusted $ 26,057 $ 20,556 $ 75,035 $ 66,807 Diluted shares outstanding 18,118 17,664 17,969 17,561 EBITDA, as adjusted, per share * $ 1.44 $ 1.16 $ 4.18 $ 3.80 ========== ========== ========== ========== * Excludes potential impact of subordinated note conversion. EDO Corporation and Subsidiaries GUIDANCE DATA ESTIMATES Fiscal 2005 -------------- Revenue range $585 million - $600 million 1Q 2Q 3Q 4Q Three-year average sales by quarter 22% 24% 25% 29% (adjusted for acquisitions) Pension costs $2.2 million Effective operating tax rate 42% EBITDA, as adjusted, margin range 13.0% - 14.0% ESOP shares issued per quarter 42,376 Average diluted shares outstanding*: - If Note conversion is NOT dilutive 18.4 million - If Note conversion is dilutive 22.8 million * "If-converted method" (FAS 128) to determine diluted EPS: (Shares to be issued if 5.25% Notes are converted at $31.26/share would be 4,408,189.) - Quarterly Dilution Test Since the after-tax interest on Notes reduces Net Earnings by $1,067,089 per quarter, the decision point for the dilution test is $1,067,089 / 4,408,189, or $0.2421 per share. When basic EPS for a quarter are more than $0.2421, the impact of the Notes is dilutive. The Notes were dilutive to EPS this quarter and for the full year. - Annual Dilution Test Since the after-tax interest on Notes reduces Net Earnings by $4,268,355 per year, the decision point for the dilution test is $4,268,355 / 4,408,189, or $0.9683 per share. When basic EPS for the year are more than $0.9683, the impact of the Notes is dilutive. Based on current projections, the Notes are expected to be dilutive for the 2005 full-year. If so, the EPS calculation will be based on about 22.8 million shares. 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, CFA, 212-716-2038 Director of Investor Relations ir@edocorp.com