-----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, KMUwWYdF75JXZ4Vg4qGzoxAybaambX+u7CrQNUhMjSnlZHf7Yo+14yixkekVqvTA dq32QipioGak/vBEfLe0LQ== 0001157523-07-004482.txt : 20070503 0001157523-07-004482.hdr.sgml : 20070503 20070503082509 ACCESSION NUMBER: 0001157523-07-004482 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070503 ITEM INFORMATION: Results of Operations and Financial Condition FILED AS OF DATE: 20070503 DATE AS OF CHANGE: 20070503 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: 07812902 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 a5393302.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): May 3, 2007 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: [ ] 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 May 3, 2007, EDO Corporation issued an earnings release announcing its financial results for the quarter ended March 31, 2007. 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: May 3, 2007 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 May 3, 2007 - -------------- ----------------------------------------------------------- EX-99 2 a5393302ex99.txt EXHIBIT 99 Exhibit 99 EDO Reports Strong Revenue and Earnings Growth in First Quarter NEW YORK--(BUSINESS WIRE)--May 3, 2007--EDO Corporation (NYSE: EDO) recorded revenue of $255.4 million in the first quarter of 2007, an increase of 113 percent from the $119.7 million recorded in the first quarter of 2006. Net earnings for the quarter were $6.0 million, versus a net loss of $0.9 million in the prior year's quarter. On a diluted per-share basis, earnings were $0.29 for the first quarter of 2007, versus a loss of $0.05 in the first quarter of 2006. The key drivers of these improvements were: the acquisitions of CAS Inc and Impact Science & Technology Inc in September of 2006; the strong sales of communications equipment, known as Transition Switch Modules (TSM), to the Marine Corps; a turnaround in electronic-systems sales that were weak in the prior year; and the absence of a number of previously disclosed events that reduced earnings in 2006 but not in 2007. Chief Executive Officer James M. Smith explained that "during 2006, we streamlined our management structure and addressed the significant non-operational issues affecting earnings. We did so while continuing our research and development projects and facilities expansion initiatives. We also maintained our strategic growth objectives, making 2006 our largest acquisition year. We are now a larger and stronger company, and our investments in new facilities and actions to restore historical margins are already showing results." Organic Revenue Growth Organic revenue, which excludes revenue from acquisitions owned less than one year, increased by $77.4 million, or 64.7 percent. This is due primarily to revenue from TSM production, electronic support measures products, and flight-line test systems. Increased Revenue Guidance On February 22, EDO projected full-year revenue in the range of $960 million to $1,010 million. In April, the company was awarded two contracts totaling $144.9 million for "CREW 2.1" systems. CREW is an acronym for electronic equipment that counters radio-controlled improvised explosive devices. As a result of these two awards, as well as the government's exercise of additional TSM options, EDO is now forecasting a $90 million increase in full-year revenue to a range of $1,050 million to $1,100 million for 2007. Full-scale CREW 2.1 production is expected to be underway by the fourth quarter of 2007. Margins Operating earnings in the first quarter of 2007 were $16.4 million, an increase of $16.5 million over the $0.1 million loss recorded in the prior year's quarter. The improvement was driven primarily by higher revenue, a corporate-wide effort to reduce controllable expenses, and better absorption of overhead costs. In addition, earnings in the first quarter of 2006 were reduced by certain non-operational matters that have since been addressed. In the first quarter of 2006 there was also a $0.9 million non-cash compensation expense related to options awarded under the 2004 Non-Employee Director Stock Plan versus $0.2 million of such awards in the first quarter of 2007. The company expects approximately $0.7 million in option expense in the second quarter, when awards are to be granted pursuant to the terms of this Plan. Partially offsetting these margin improvements were acquisition-related retention expenses of approximately $2.2 million in the first quarter of 2007, of which $0.9 million was non-cash expense. EBITDA, as adjusted, was $25.1 million, or 9.8 percent of revenue in the first quarter of 2007, versus $6.5 million, or 5.5 percent of revenue in the prior year's quarter. We are maintaining our guidance of 10.5 to 11.5 percent margins for the full year. EBITDA is a generally accepted metric employed by our industry. Our adjustments consist of non-cash ESOP, pension, and acquisition-related retention expenses. These adjustments are identified in detail on the attached reconciliation schedule. Cash Flow Cash flow provided by operations in the quarter was $5.4 million, versus $14.0 million in the first quarter of 2006. As expected, the company collected substantial cash from the TSM program during the first quarter, which was used to fund working capital and reduce short-term debt. The increase in working capital was needed to fund the company's accelerating production levels. Funding of production under the company's recently awarded CREW 2.1 contracts is expected to increase the company's working-capital needs during the second half of 2007. We maintain a $300 million bank line of credit in order to provide for such short-term funding requirements. As of March 31, the money borrowed under this line of credit was $161.5 million, down from $180 million at the end of 2006. Backlog The total funded backlog of unfilled orders as of March 31 was $878.2 million, up 9.2 percent from $804.4 million at year end, and up 50 percent from $585.5 million at the end of the first quarter of 2006. The backlog as of March 31 does not include the $144.9 million of new CREW 2.1-related orders received in April 2007. Funded 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 $1.6 billion in what we view as high-confidence future revenue, for a total of approximately $2.5 billion. Conference Call EDO will conduct a conference call at 10:30 a.m. EDT on May 3 to review these results in more detail. A live webcast of the conference call, including presentation slides, will be available at www.edocorp.com or www.InvestorCalendar.com. For those who cannot listen to the live webcast, a replay of the call will be available on these websites. There will also be a telephone replay available until May 10. To listen to the telephone replay, dial 1-877-660-6853, account #286, and conference ID #237022 (outside the U.S. dial 1-201-612-7415). About EDO Corporation EDO designs and manufactures a diverse range of products for aerospace, defense, intelligence, and commercial markets. Major product groups include: Defense Electronics, Communications, Aircraft Armament Systems, Undersea Warfare, Integrated Composite Structures, and Professional and Engineering Services. EDO (www.edocorp.com) was founded in 1925, and is headquartered in New York City. The company employs 4,000 people. Forward-Looking Statements Statements made in this release, including statements about projected revenues, long-term organic revenue growth, projected expenses, and EBITDA margins, 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, 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 March 31, March 25, 2007 2006 ----------- ---------- (unaudited) Net sales $255,416 $119,709 Costs and expenses: Cost of sales 201,030 91,244 Selling, general and administrative 33,713 25,358 Research and development 2,093 3,206 Acquisition-related retention expense 2,152 - ----------- ---------- 238,988 119,808 ----------- ---------- Operating earnings (loss) 16,428 (99) Interest income 186 1,021 Interest expense (6,176) (2,424) Other, net (39) (146) ----------- ---------- Non-operating expense, net (6,029) (1,549) ----------- ---------- Earnings (loss) before income taxes 10,399 (1,648) Income tax (expense) benefit (4,411) 709 ----------- ---------- Net earnings (loss) $ 5,988 $ (939) =========== ========== Net earnings (loss) per common share: Basic: $ 0.32 $ (0.05) Diluted: $ 0.29 $ (0.05) =========== ========== Weighted average shares outstanding Basic 18,538 18,012 Diluted 24,894 18,012 =========== ========== Backlog of unfilled orders $878,219 $585,502 EDO Corporation and Subsidiaries Condensed Consolidated Balance Sheets ($000's omitted) March 31, Dec. 31, 2007 2006 ------------------- Assets Current Assets: Cash and cash equivalents $ - $ 25,322 Accounts receivable, net 270,694 265,298 Inventories 66,161 56,255 Deferred income tax asset, net 12,549 12,160 Prepayments & other 15,542 13,682 ------------------- Total Current Assets 364,946 372,717 Property, plant and equipment, net 58,325 59,109 Goodwill 394,647 385,926 Other intangible assets 91,611 103,776 Deferred income tax asset, net 17,890 8,291 Other assets 14,981 20,003 ------------------- Total Assets $942,400 $949,822 =================== Liabilities & Shareholders' Equity Current Liabilities: Accounts payable and accrued liabilities $130,316 $143,908 Borrowings from bank line of credit 161,500 180,000 Contract advances and deposits 47,511 44,323 Note payable, current 7,766 7,766 ------------------- Total Current Liabilities 347,093 375,997 Income taxes payable 19,044 4,154 Note payable, long term 14,533 14,533 Long-term debt 201,250 201,250 Post-retirement benefits obligations 77,220 77,734 Environmental obligation 1,195 1,198 Other long-term liabilities 37 40 Shareholders' equity 282,028 274,916 ------------------- Total Liabilities & Shareholders' Equity $942,400 $949,822 =================== EDO Corporation and Subsidiaries SEGMENT DATA ($000's omitted) Three months ended March 31, March 25, 2007 2006 ------------------- Net sales: Engineered Systems & Services $116,386 $ 59,266 Electronic Systems & Communications 139,030 60,443 ------------------- $255,416 $119,709 =================== Operating earnings (loss): Engineered Systems & Services $ 9,289 $ 1,628 Electronic Systems & Communications 7,139 (1,727) ------------------- 16,428 (99) Net interest expense (5,990) (1,403) Other, net (39) (146) ------------------- Earnings (loss) before income taxes $ 10,399 $ (1,648) =================== EDO Corporation and Subsidiaries Calculation of EBITDA (In thousands, except per share amounts) Three months ended March 31, March 25, 2007 2006 ------------- ----------- (unaudited) Earnings (loss) before income taxes $ 10,399 $(1,648) Interest income (186) (1,021) Interest expense 6,176 2,424 ------------- ----------- Net interest expense 5,990 1,403 Depreciation 3,509 2,778 Amortization 2,565 1,614 ------------- ----------- Total depreciation & amortization 6,074 4,392 ------------- ----------- EBITDA 22,463 4,147 Acquisition-related retention expense (non-cash) 852 - ESOP compensation expense 1,010 1,186 Pension expense 811 1,194 ------------- ----------- EBITDA, as adjusted $ 25,136 $ 6,527 Diluted shares outstanding 19,007 18,012 EBITDA, as adjusted, per share * $ 1.32 $ 0.36 ============= =========== * Excludes potential impact of subordinated note conversion. Summary of Cash Flows (In thousands) Three months ended March 31, March 26, 2007 2005 ------------- ----------- (unaudited) Cash provided by operations $ 5,367 $14,017 Cash used by investing activities $(12,119) $(5,224) Cash used by financing activities $(18,570) $ (37) ------------- ----------- $(25,322) $ 8,756 ============= =========== EDO Corporation and Subsidiaries GUIDANCE DATA ESTIMATES Fiscal 2007 ---------------- Revenue range $1,050 million - $1,100 million Pension expense $3.2 million Acquisition-related retention expense $8.0 million Effective tax rate (Fed & State) 42% EBITDA, as adjusted, margin 10.5% - 11.5% (see reconciliation table on previous page) ESOP shares issued per quarter 55,700 Average diluted shares outstanding*: - If Note conversion is NOT dilutive 18.7 million - If Note conversion is dilutive 25.0 million * "If-converted method" (FAS 128) to determine diluted EPS: (Shares to be issued if 4.00% Notes are converted at $34.19/share would be 5,886,422.) - - Quarterly Dilution Test Since the after-tax interest on Notes reduces Net Earnings by $1,187,375 per quarter, the decision point for the dilution test is $1,187,375 / 5,886,422, or $0.20 per share. When basic EPS for a quarter are more than $0.20, the impact of the Notes is dilutive. (During the 4th quarter of 2005, this calculation was based on a weighted average of the 4.00% Notes and the 5.25% Notes that were redeemed in November 2005.) The Notes were dilutive to EPS in the fourth quarter. - - Annual Dilution Test Since the after-tax interest on Notes reduces Net Earnings by $4,749,500 per year, the decision point for the dilution test is $4,749,500 / 5,886,422, or $0.81 per share. When basic EPS for the year are more than $0.81, the impact of the Notes is dilutive. The Notes were not dilutive to EPS in the 2006 full year. Based on current projections, the Notes are expected to be dilutive for the 2007 full year. If so, the EPS calculation will be based on about 24.6 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 Vice President of Investor Relations ir@edocorp.com or Sara Banda, 212-716-2071 Media Relations media@edocorp.com -----END PRIVACY-ENHANCED MESSAGE-----