-----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, VXGytHTN41eHh3Iurn2zAnJcolmnLp/cugFd06JGW+wMG/0ktxkbM/e4fIXdALX1 P2RcDVc8EScIlVTFxn+wbw== 0001157523-05-009269.txt : 20051027 0001157523-05-009269.hdr.sgml : 20051027 20051027075707 ACCESSION NUMBER: 0001157523-05-009269 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20051027 ITEM INFORMATION: Results of Operations and Financial Condition FILED AS OF DATE: 20051027 DATE AS OF CHANGE: 20051027 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: 051158429 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 a5005451.txt EDO CORPORATION 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): October 27, 2005 EDO Corporation (Exact name of Registrant as specified in its charter) New York 3812 11-0707740 (State or Other Jurisdiction (Primary Standard (I.R.S. Employer of Incorporation Industrial Classification Identification No.) or Organization) Code Number) -------------------- 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) -------------------- Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION. On October 27, 2005, EDO Corporation issued an earnings release announcing its financial results for the quarter ended September 24, 2005. 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: October 27, 2005 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 October 27, 2005 - -------------------------------------------------------------------------------- EX-99 2 a5005451ex99.txt EDO CORPORATION EXHIBIT 99 Exhibit 99 EDO Reports 35 Percent Revenue Increase in Third Quarter; Earnings Per Share Increase 37 Percent NEW YORK--(BUSINESS WIRE)--Oct. 27, 2005--EDO Corporation (NYSE: EDO) recorded revenue of $175.9 million in the third quarter of 2005, up 35.4 percent from the $129.9 million recorded in the third quarter of 2004. Net earnings for the quarter were $9.8 million, up 43.2 percent from $6.9 million in the prior year's quarter. On a diluted per-share basis, GAAP earnings were $0.48, up 37.1 percent from $0.35 in the third quarter of 2004. For the nine-month period ended Sept. 24, 2005, revenue was $448.5 million, up 22.2 percent from the $367.0 million recorded in the first three quarters of 2004. Net earnings for the first nine months of 2005 were $18.8 million, up 26.4 percent from $14.9 million in the same period last year. On a diluted per-share basis, earnings were $0.97, up 19.8 percent from $0.81 in the first three quarters of 2004. "As expected, 2005 is proving to be a year of substantial growth, with third quarter revenue on target to meet or exceed our projection of $630 million to $640 million for the full year," said Chief Executive Officer James M. Smith. "I am very proud of the all-out effort that our employees have made to accelerate production of electronic force protection products, in support of ongoing military operations. We continue to reinvest in research and development to further improve our technology in this area. We believe that EDO has the most effective, battle-proven systems available today, and we intend to remain the leader." Acquisitions At the end of the third quarter, EDO acquired Fiber Innovations, Inc., a privately held company based in Walpole, Mass., at a purchase price of $12.4 million. Fiber Innovations has annual revenue of approximately $13 million. The acquisition had no impact on revenue or earnings during the third quarter. Fiber Innovations develops and manufactures composite structures for aerospace, defense, and commercial customers. As a leader in the specialty processes of braiding, resin transfer molding, and vacuum-assisted resin transfer molding, it has perfected one of the most practical and effective manufacturing methods available to the composite industry today. This adds important complementary design and manufacturing capabilities to EDO's integrated-composite-structures business. The company employs approximately 80 people and has been added to EDO's Engineered Materials segment. Revenue Organic revenue growth, which excludes acquisitions owned for less than one year, was approximately 30 percent for the quarter, and 19 percent for the year-to-date. For the full year, the company expects organic revenue growth to exceed 14 percent, substantially above our long-term target rate of 8 to 10 percent. The largest contributor to revenue growth during the quarter was the accelerated delivery of electronic force protection systems. Antenna products and battlefield communications systems also contributed to revenue growth. In addition, revenue related to the acquisition of EVI Technologies in May added approximately $7.6 million during the quarter. Partially offsetting the growth in this quarter were lower revenues in certain electronic systems, aircraft armament systems, and professional services. Much of this was due to the normal, often-uneven timing of revenue. This timing depends on various factors and milestones, causing substantial variations from quarter to quarter. Also during the quarter, it was determined that revisions were needed to the percentage-of-completion estimates on several programs. This resulted in a reduction to revenue and earnings on those programs, primarily sonar programs in the Engineered Materials segment. Earnings Operating earnings in the third quarter increased 23.1 percent over the same period last year, to $17.3 million. This increase corresponded to the issues discussed above in "Revenue." In addition, operating earnings were reduced by approximately $1.0 million due to higher pension and ESOP expense and intangible-asset amortization. Other items impacting earnings during the quarter included an income-tax benefit of $0.8 million, as well as an additional $0.3 million environmental remediation cost incurred at the recently vacated facility in Deer Park, N.Y. The year-over-year earnings comparison was also impacted by a net $0.8 million benefit in the third quarter of 2004, related to a legal settlement. Earnings before interest, taxes, depreciation, and amortization, referred to as adjusted EBITDA, were $23.6 million, or 13.4 percent of revenue in the third quarter of 2005. For the year-to-date, EBITDA, as adjusted, was $55.0 million, or 12.3 percent of revenue. The company expects adjusted EBITDA margins to reach or exceed the target range of 13 to 14 percent for the full year. EBITDA is a generally accepted metric employed by our industry. Our adjustments include primarily non-cash ESOP and pension expenses, and are identified in detail on the attached reconciliation schedule. Cash Flow Cash flow from operations for the third quarter was a record $28.2 million. This resulted in a $10.5 million increase in the net cash balance during the three-month period. This increase was accomplished even with the $12.4 million payment for the acquisition of Fiber Innovations and a $6.0 million pension fund contribution. At the end of the third quarter, including these payments, the cash balance was $48.4 million, up from $37.9 million at the end of the second quarter. For the full year, EDO expects to generate cash flow from operations in a range consistent with historical performance. New Contracts During the third quarter, the company was successful in winning a number of new contracts. These include two pneumatic-ejection systems on the U.S. Navy's new P-8A Multi-mission Maritime Aircraft, as well ESM (electronic support measures) systems for two international customers. The company also won a competition to provide its advanced-technology ALOFTS undersea-warfare sensor to an international customer. "EDO continues to actively pursue new business opportunities," added Mr. Smith. "We are leaders in many important niche markets. Our team is working to extend such expertise into related products, as we have successfully done in electronic force protection technology. We believe these efforts will continue to open new areas of future growth." Backlog The total funded backlog of unfilled orders as of September 24 stood at $533.9 million, down slightly from the end of the second quarter, but up from $501.3 million at the end of the third quarter of 2004, and $474.6 million on Dec. 31, 2004. Due to the urgent need to accelerate production of electronic force protection equipment, including the company's authorization to manufacture these products before contracts are definitized, many of these orders have not been included in the funded backlog. Backlog also 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 $590 million in what we view as high-confidence future revenue, for a total of more than $1.1 billion. Conference Call EDO will conduct a conference call at 10:30 a.m. EDT on October 27 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 these websites. There will also be a telephone replay available until November 3. To listen to the telephone replay, dial 1-877-660-6853 (outside the U.S. dial 1-201-612-7415), account #286, and conference ID #171981. 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 Systems, 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 2,800 people. Forward-Looking Statements Certain statements made in this release, including statements about future revenue, organic revenue growth, annual revenue, net income, and EBITDA margin expectations, and future cash flow from operations, 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 and services, product mix, the timing of customer orders and deliveries, changes in the government's funding priorities, the impact of competitive products and pricing, the negotiation of undefinitized contracts, 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 (In thousands, except per share amounts) Three months ended Nine months ended Sept 24, Sept 25, Sept 24, Sept 25, 2005 2004 2005 2004 ----------- --------- ----------- --------- (unaudited) (unaudited) Net sales $175,884 $129,875 $448,504 $367,042 Costs and expenses: Cost of sales 133,098 94,168 336,512 270,090 Selling, general and administrative 21,626 18,326 61,928 57,237 Research and development 3,578 3,333 11,990 7,649 Environmental cost provision 288 - 1,538 - -------- -------- -------- -------- 158,590 115,827 411,968 334,976 ----------- --------- ---------- -------- Operating earnings 17,294 14,048 36,536 32,066 Interest income 407 337 1,202 781 Interest expense (2,408) (2,304) (6,873) (6,771) Other, net (18) (126) (78) (151) -------- -------- -------- -------- Non-operating expense, net (2,019) (2,093) (5,749) (6,141) ----------- --------- ---------- -------- Net earnings before income taxes 15,275 11,955 30,787 25,925 Income tax expense (5,434) (5,081) (11,949) (11,018) ----------- --------- ---------- -------- Net earnings $ 9,841 $ 6,874 $ 18,838 $ 14,907 ======== ======== ======== ======== Net earnings per common share: Basic: $ 0.54 $ 0.39 $ 1.04 $ 0.84 Diluted: $ 0.48 $ 0.35 $ 0.97 $ 0.81 ======== ======== ======== ======== Weighted average shares outstanding Basic 18,136 17,737 18,044 17,652 Diluted (a) 22,794 22,406 22,725 22,328 ======== ======== ======== ======== Backlog of unfilled orders $533,872 $501,320 (a) Assumes exercise of dilutive stock options, and conversion of the 5.25% Convertible Subordinated Notes into 4.4 million common shares. EDO Corporation and Subsidiaries Condensed Consolidated Balance Sheets (In thousands, except per share amounts) Sept 24, Dec 31, 2005 2004 ------------ ---------- (unaudited) Assets Current Assets: Cash and cash equivalents $ 48,388 $ 98,884 Accounts receivable, net 180,753 153,810 Inventories 64,558 52,867 Deferred income tax asset, net 4,990 5,046 Notes receivable 7,175 7,202 Prepayments & other 4,472 3,493 ------------ ---------- Total Current Assets 310,336 321,302 Property, plant and equipment, net 47,002 34,830 Goodwill 132,388 91,651 Other intangible assets 51,737 50,356 Deferred income tax asset, net 30,092 30,241 Other assets 20,332 18,309 ------------ ---------- Total Assets $ 591,887 $ 546,689 ============ ========== Liabilities and Shareholders' Equity Current Liabilities: Accounts payable and accrued liabilities $ 83,513 $ 80,898 Contract advances and deposits 31,233 13,696 ------------ ---------- Total Current Liabilities 114,746 94,594 Income taxes payable 5,768 5,768 Long-term debt 137,800 137,800 Post-retirement benefits obligations 96,123 94,936 Environmental obligation 1,648 1,663 Shareholders' equity 235,802 211,928 ------------ ---------- Total Liabilities & Shareholders' Equity $ 591,887 $ 546,689 ============ ========== EDO Corporation and Subsidiaries SEGMENT DATA (In thousands) Three months ended Nine months ended Sept 24, Sept 25, Sept 24, Sept 25, 2005 2004 2005 2004 -------- -------- -------- -------- (unaudited) (unaudited) Net sales: Defense $ 96,823 $ 98,781 $286,986 $286,248 Communications and Space Products 68,690 20,485 129,805 46,547 Engineered Materials 10,371 10,609 31,713 34,247 -------- -------- -------- -------- $175,884 $129,875 $448,504 $367,042 ======== ======== ======== ======== Operating earnings (loss): Defense $ 7,507 $ 9,503 $ 22,848 $ 27,503 Communications and Space Products 10,706 2,633 15,539 1,639 Engineered Materials (631) 1,912 (313) 2,924 Environmental cost provision (288) - (1,538) - -------- -------- -------- -------- 17,294 14,048 36,536 32,066 Net interest expense (2,001) (1,967) (5,671) (5,990) Other, net (18) (126) (78) (151) -------- -------- -------- -------- Net earnings before income taxes $ 15,275 $ 11,955 $ 30,787 $ 25,925 ======== ======== ======== ======== EDO Corporation and Subsidiaries Calculation of EBITDA (In thousands, except per share amounts) Three months ended Nine months ended Sept 24, Sept 25, Sept 24, Sept 25, 2005 2004 2005 2004 --------- -------- --------- ---------- (unaudited) (unaudited) Net earnings before income taxes $15,275 $11,955 $ 30,787 $ 25,925 Interest expense 2,408 2,304 6,873 6,771 Interest income (407) (337) (1,202) (781) ------- ------- -------- -------- Net interest expense 2,001 1,967 5,671 5,990 Depreciation 2,331 2,618 7,238 8,073 Amortization 1,698 1,369 4,319 4,254 ------- ------- -------- -------- Total depreciation & amortization 4,029 3,987 11,557 12,327 --------- -------- -------- ---------- EBITDA 21,305 17,909 48,015 44,242 ESOP compensation expense 1,221 1,058 3,771 3,086 Pension expense 1,070 550 3,209 1,650 ------- ------- -------- -------- EBITDA, as adjusted $23,596 $19,517 $ 54,995 $ 48,978 Diluted shares outstanding * 18,385 17,998 18,316 17,919 EBITDA, as adjusted, per share * $ 1.28 $ 1.08 $ 3.00 $ 2.73 ======= ======= ======== ======== * Excludes potential impact of subordinated note conversion. Summary of Cash Flows (In thousands) Three months ended Nine months ended Sept 24, Sept 25, Sept 24, Sept 25, 2005 2004 2005 2004 ---------- --------- ---------- --------- (unaudited) (unaudited) Cash provided by operations $ 28,211 $ 22,068 $ 20,759 $ 20,347 Cash (used) by investing activities $(17,402) $ (2,731) $(63,359) $ (6,479) Cash (used) by financing activities $ (349) $ (253) $ (7,896) $ (675) -------- -------- -------- -------- $ 10,460 $ 19,084 $(50,496) $ 13,193 ======== ======== ======== ======== EDO Corporation and Subsidiaries GUIDANCE DATA ESTIMATES Fiscal 2005 ----------- Revenue range $630 million - $640 million Pension expense $4.3 million Effective operating tax rate range 41% - 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 year to date. - - 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, 212-716-2038 ir@edocorp.com -----END PRIVACY-ENHANCED MESSAGE-----