EX-99.1 2 d68926_ex99-1.txt PRESS RELEASE FOR IMMEDIATE RELEASE Contact: Leonard E. Moodispaw Chairman, CEO & President 301.939.7000 Essex Corporation Raises 2006 Revenue Guidance and Reports Q2 2006 Results COLUMBIA, MD - August 8, 2006 - Essex Corporation (NASDAQ: KEYW) announces it is increasing 2006 revenue guidance to the range of $230-$240 million. Revenues for the three month period ended June 30, 2006 were $63.8 million as compared to $41.4 million in the same period of 2005, an increase of 54%. Income After Taxes was $1.6 million and $1.8 million in the three month periods ended June 30, 2006 and June 30, 2005, respectively. Earnings per Share (EPS) were $0.07 per share (diluted) for Q2 2006 versus EPS for the same period in 2005 of $0.08 per share (diluted). Beginning with the first quarter 2006, Net Income and EPS reflect the impact of provisions for taxes and stock option expenses. Income Before Income Taxes for the three month period ended June 30, 2006 was $2.6 million compared to $1.8 million for the same period of 2005. "Essex is in another period of exciting growth in its core business delivering services and products to its intelligence and defense customers," according to Leonard Moodispaw, CEO and President of Essex Corporation. "The growth indicators for this core business remain very strong and positive, including the growth in Services and Products revenue, the demand for more facility space to support customer requirements, and a high ordering volume on Purchased Materials. Key accomplishments in Q2 2006 include record revenue; the launch of the Software Configurable Radar Product; opening of a dedicated 37,000 square foot facility for the Cougar program; and record setting Net Cash Provided by Operating Activities." Q2 2006 Services and Products revenue has grown by 19.3% since Q4 2005, and Q2 Purchased Materials revenue has grown by 59.8% in the same period. Total quarterly revenue in Q2 2006 has grown organically by 27.7% over quarterly revenue in Q4 2005. "I believe that these growth numbers demonstrate the strong momentum Essex has in its core business," commented Mr. Moodispaw. "Responding to these customer requirements has required that we further invest in expanded infrastructure and that we increase, in the near-term, our use of subcontractors. The impact of these expansions in the short-term is a reduction in gross and operating margins. However, by seizing the opportunity for expanded market share in our primary markets, I believe we are reinforcing our position of leadership in responsiveness, innovation, and rapid growth capacity, and strengthening our long-term position in these markets." - M O R E - Essex Corporation 2006 Q2 Results Page 2 of 4 For the three month period ended June 30, 2006, Services and Products Gross Margin decreased to 28.1% from 31.4% for the comparable period of 2005. For the six month period ended June 30, 2006, Services and Products Gross Margin decreased to 29.5% from 30.6% for the comparable period of 2005. The decrease for the respective three and six month periods in Services and Products Gross Margin percent results primarily from increased subcontractor activity. Overall Gross Margin declined because of the revenue mix. Low margin materials revenue growth outpaced the revenue from Services and Products, lowering the overall Gross Margin from 27.6% for the six month period ended June 30, 2005 to 24.3% for the six month period ended June 30, 2006. As of June 30, 2006, we had total backlog, funded and unfunded, of $412.2 million, as compared with $396.9 million at June 30, 2005. Of these amounts, funded backlog was $116.0 million and unfunded backlog was $296.2 million at June 30, 2006 compared to $101.3 million and $295.6 million, respectively, at June 30, 2005. Our Working Capital at June 30, 2006 decreased to $35.6 million from $48.1 million at fiscal year end 2005. The decrease was primarily a result of the Windermere earn-out payment for cash. We also anticipate continued investment in infrastructure for the remainder of 2006 as we continue to support our growing workforce and as we expand our facilities to support our contracts. For the three month period ended June 30, 2006 and the three month period ended June 30, 2005, Amortization of Other Intangible Assets was $585,000 and $1.2 million, respectively. For the six month period ended June 30, 2006, Amortization of Other Intangible Assets decreased by $600,000 to $1.2 million compared to $1.8 million in the comparable period in 2005. The decrease for the three and six month periods ended June 30, 2006 from the comparable periods in 2005 resulted from the declining amortization of customer contracts and other intangibles associated with the Windermere acquisition that occurred in February 2005. Amortization of Other Intangible Assets is expected to decline for the remainder of fiscal 2006. Essex has scheduled a conference call to discuss these results today (August 8th) at 5:00 p.m. (EDT). At that time, management will review the Company's second quarter 2006 financial results, followed by a question-and-answer session to further discuss the results. Management will present financial highlights using presentation materials that may be viewed via Webcast or downloaded from our website at the Investor page on our website, http://www.essexcorp.com/investor.html. Interested parties will be able to connect to our Webcast via this website, on August 8th. Interested parties may also listen to the conference call by calling 1-866-770-7129, participant passcode 71515825. The International Dial-In access number will be 617-213-8067. An archive of the Webcast will also be available on our webpage following the call. In addition, a dial-up replay of the call will be available at approximately 7:00 p.m. (EDT) on August 8th, and will remain available through August 15, 2006. To access the dial-up replay, call 1-888-286-8010, passcode 42504030. International callers may access the replay by calling 617-801-6888 with the same passcode. - M O R E - Essex Corporation 2006 Q2 Results Page 3 of 4 About Essex: Essex provides advanced signal, image, information processing, information assurance and cyber-security solutions, primarily for U.S. Government intelligence and defense customers, as well as for select commercial customers. We create our solutions by combining our services and expertise with hardware, software, and proprietary and patented technology to meet our customers' requirements. For more information contact Essex Corporation, 6708 Alexander Bell Drive, Columbia MD 21046-2100; Phone 301.939.7000; Fax 301.953.7880; E-mail info@essexcorp.com, or on the Web at www.essexcorp.com. ESSEX CORPORATION FINANCIAL HIGHLIGHTS - (In thousands, except per share amounts) --------------------------------------------------------------------------------
Three Month Three Month Six Month Period Six Month Period Period Ended Period Ended Ended Ended June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005 (unaudited) (unaudited) ------------------------------- ---------------------------------- Revenue: Services and Products $ 47,301 $ 34,801 $ 90,747 $ 58,224 Purchased Materials 16,523 6,644 27,363 8,899 ------------ ------------ ------------ ------------ Total 63,824 41,445 118,110 67,123 Cost of Goods Sold: Services and Products (33,993) (23,873) (63,984) (40,427) Purchased Materials (15,362) (6,097) (25,370) (8,164) ------------ ------------ ------------ ------------ Total (49,355) (29,970) (89,354) (48,591) Gross Margin 14,469 11,475 28,756 18,532 Selling, General and Administrative Expenses (10,146) (7,854) (19,998) (13,048) Research and Development Expenses (1,323) (759) (2,670) (1,246) Amortization of Other Intangible Assets (585) (1,211) (1,181) (1,763) Interest/Dividend Income 200 149 444 881 Provision for Income Taxes (1,049) (20) (1,708) (40) ------------ ------------ ------------ ------------ Net Income $ 1,566 $ 1,780 $ 3,643 $ 3,316 ============ ============ ============ ============ Weighted Average Number of Shares - Basic 21,650 21,125 21,568 21,066 ============ ============ ============ ============ - Diluted 23,110 22,795 22,981 22,796 ============ ============ ============ ============ Earnings per Common Share - Basic $ 0.07 $ 0.08 $ 0.17 $ 0.16 ============ ============ ============ ============ - Diluted $ 0.07 $ 0.08 $ 0.16 $ 0.15 ============ ============ ============ ============ Working Capital $ 35,643 $ 39,754 Working Capital Ratio 2.16:1 2.72:1
- M O R E - Essex Corporation 2006 Q2 Results Page 4 of 4 CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) --------------------------------------------------------------------------------
June 30, 2006 December 31, 2005 ------------- ----------------- (unaudited) (audited) ASSETS Current Assets Cash and cash equivalents $ 15,371 $ 27,562 Accounts receivable, net 44,973 39,229 Note receivable - current portion 867 852 Deferred tax assets - current portion 2,853 4,097 Prepayments and other 2,353 1,771 ---------- ---------- Total Current Assets 66,417 73,511 ---------- ---------- Property and Equipment, Net 20,241 13,748 ---------- ---------- Other Assets Goodwill 86,707 71,935 Patents, net 406 378 Other intangible assets, net 4,388 5,569 Note receivable - non-current portion 880 1,314 Deferred tax assets - non-current portion 1,260 820 Other 1,277 1,308 ---------- ---------- Total Other Assets 94,918 81,324 ---------- ---------- TOTAL ASSETS $ 181,576 $ 168,583 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 13,929 $ 5,925 Accrued wages and vacation 3,912 4,400 Accrued retirement plans contribution payable 659 815 Other accrued expenses 12,239 14,282 Capital leases 35 27 ---------- ---------- Total Current Liabilities 30,774 25,449 Long-Term Debt 68 55 ---------- ---------- TOTAL LIABILITIES 30,842 25,504 ---------- ---------- Shareholders' Equity Common stock and additional paid-in capital 150,522 146,510 Accumulated earnings (deficit) 212 (3,431) ---------- ---------- Total Shareholders' Equity 150,734 143,079 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 181,576 $ 168,583 ========== ==========
This press release contains "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to risks, uncertainty and changes in circumstances, which may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. All statements contained herein that are not clearly historical in nature are forward looking. Factors, among others, that could cause actual results to differ materially from those described in the forward-looking statements includes: Essex's dependence on sales and revenues from government contracts; backlog reflects the total value of signed contracts based upon expected performance levels, such amounts, and revenues from such contracts, may not be realized; dependence upon Federal government appropriations for contract funding; Federal government awards are subject to termination at government convenience and are heavily regulated; declines in defense and intelligence spending; dependence on realization of benefits of recent and any potential future acquisitions; properly identifying attractive acquisition candidates, executing on acquisitions and integrating acquisitions; managing growth properly and retaining key employees. More detailed information about these and other factors that could cause actual results to differ materially from those described in the forward-looking statements is set forth in Essex's Annual Report on Form 10-K for the fiscal year ended December 31, 2005. Essex is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise. # # # #