EDO Reports 21 Percent Revenue Growth in 2005.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- EDO Corporation EDO Corporation (NYSE: EDO) is an American company that designs and manufactures products for defense, intelligence, and commercial markets, and provides related engineering and professional services. It employs 4,000 people worldwide and had revenues of $715 million in 2006. (NYSE NYSE See: New York Stock Exchange : EDO Edo: see Tokyo, Japan. ) reported record revenue of $648.5 million in 2005, up 20.9 percent from the $536.2 million recorded in 2004. Net earnings were $26.3 million, a decline of $2.8 million from the $29.1 million recorded in the prior year. On a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. per-share basis, earnings for 2005 were $1.33, down 10.7 percent from the $1.49 recorded in 2004. For the quarter ended Dec. 31, 2005, revenue was $200.0 million, up 18.2 percent from the $169.1 million recorded in the fourth quarter of 2004. Net earnings for the fourth quarter of 2005 were $7.4 million, down $6.8 million from the $14.2 million recorded in the fourth quarter of 2004. On a diluted per-share basis, which reflects the new convertible notes, earnings for the fourth quarter of 2005 were $0.37, versus the $0.68 in the fourth quarter of 2004. The decline in earnings reflects debt refinancing Refinancing An extension and/or increase in amount of existing debt. costs of $4.2 million. It also included approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $7.3 million of expenses related to facilities projects, of which $6.6 million was previously announced in prior quarters. Excluding these costs and the additional dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. related to the new convertible notes, the diluted per-share earnings would have been $0.50 in the fourth quarter and $1.65 for the full year. "We continued to make substantial progress in 2005 towards our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth objectives," said Chief Executive Officer James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. M. Smith. "We strengthened our capital resources with our refinancing and credit facility, completed three acquisitions, and made investments in R&D and new facilities and equipment that will support sustained growth and profitability in the future. "Our backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. has grown by 18 percent and we have won a number of important new contracts. Looking ahead, we are confident that 2006 will see strong growth in revenue and earnings. The people and assets needed to do the job are in place, and we expect continued progress in achieving our goals." Highlights for the Year --Acquired EVI Evi (ē`vī), in the Bible, Midianite king. Technologies and NexGen Communications in pursuit of our stated objective to increase participation in markets related to the intelligence communities. --Acquired Fiber Innovations in pursuit of our stated objective to increase participation in weapons systems. Fiber Innovations adds state-of-the-art composite-structure design and manufacturing capabilities in this area. --Redeemed the company's 5.25% notes and replaced them with a new 4% issue. At the same time, we took advantage of the strong demand for our new issue to raise an additional $58 million, with a net after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. increase in interest payments of only $481,000. --Successfully fielded advanced Warlock electronic-force-protection equipment, generating sales of approximately $144 million, up from $40 million in 2004. --Won a $240 million contract with the Marine Corps for new battlefield communications equipment, known as the Transition Switch Module. --Awarded a $30 million contract by Lockheed Martin For the former company, see . Lockheed Martin (NYSE: LMT) is a leading multinational aerospace manufacturer and advanced technology company formed in 1995 by the merger of Lockheed Corporation with Martin Marietta. for sonar equipment on the new Spanish Spanish, river, c.150 mi (240 km) long, issuing from Spanish Lake, S Ont., Canada, NW of Sudbury, and flowing generally S through Biskotasi and Agnew lakes to Lake Huron opposite Manitoulin island. There are several hydroelectric stations on the river. S-80A submarine submarine, naval craft capable of operating for an extended period of time underwater. Submarines are almost always warships, although a few are used for scientific or business purposes (see also submersible). . The initial award covers outboard Not built in. Outboard devices are external to the main unit. Contrast with inboard. See offboard. sonar arrays on four conventionally-powered submarines. This award positions the Lockheed Martin team, including EDO, to compete for other international submarine opportunities. --Secured $20 million in new development contracts on the P-8A Multi-mission Maritime INTEREST, MARITIME. By maritime interest is understood the profit of money lent on bottomry or respondentia, which is allowed to be greater than simple interest because the capital of the lender is put in jeopardy. Aircraft. The contracts are for a sonobouy-launch system and a weapon-release system. These programs combine the technologies of pneumatics pneu·mat·ics n. (used with a sing. verb) The study of the mechanical properties of air and other gases. pneumatics Noun , composite structures, and release electronics to enhance our product line with applications to fixed and rotary Rotary can refer to:
--Added $39 million in new development and support contracts for the B-1B bomber bomber Military aircraft designed to drop bombs on surface targets. Aerial bombardment can be traced to the Italo-Turkish War (1911), in which an Italian pilot dropped grenades on two Turkish targets. . --Selected by General Dynamics General Dynamics Corporation (NYSE: GD) is a defense conglomerate formed by mergers and divestitures, and as of 2006 it is the sixth largest defense contractor in the world[1]. The company has changed markedly in the post-Cold War era of defense consolidation. to provide our ES 3601 tactical radar Electronic Support Measures (ESM (1) (Enterprise Storage Management) Managing the online, nearline and offline storage within a large organization. It includes analysis of storage requirements as well as making routine copies of files and databases for backup, archiving, disaster recovery, ) and surveillance system for use on their "Flight 0" Littoral Combat Ships The Littoral Combat Ship is the first of the U.S. Navy's next-generation surface combatants. Intended as a relatively small surface vessel for operations in the littoral region (close to shore), the LCS is smaller than the Navy's guided missile frigates, and have been compared to . The ES 3601 is a state-of-the-art precision system that enhances ship survivability sur·viv·a·ble adj. 1. Capable of surviving: survivable organisms in a hostile environment. 2. That can be survived: a survivable, but very serious, illness. by detecting, identifying, and locating hostile ship and missile missile Rocket-propelled weapon designed to deliver an explosive warhead with great accuracy at high speed. Missiles vary from small tactical weapons effective out to only a few hundred feet to much larger strategic weapons with ranges of several thousand miles. radar signals early and efficiently. --Secured a $15.6 million contract to build the microwave-receiver subsystem A unit or device that is part of a larger system. For example, a disk subsystem is a part of a computer system. A bus is a part of the computer. A subsystem usually refers to hardware, but it may be used to describe software. on the new Global Precipitation precipitation, in chemistry precipitation, in chemistry, a process in which a solid is separated from a suspension, sol, or solution. In a suspension such as sand in water the solid spontaneously precipitates (settles out) on standing. Measurement satellite system. This was a key strategic win for the Ball Aerospace/EDO team as we pursue other potential radiometer radiometer (rā'dēŏm`ətər), instrument for detection or measurement of electromagnetic radiation; the term is applied in particular to devices used to measure infrared radiation. opportunities. --Won an $11 million contract for the first production lot of 135 BRU-55 dual-carriage, "smart" bomb racks bomb rack n. A framework or mechanical holder for bombs on a combat aircraft. Noun 1. bomb rack - a device on an aircraft for carrying bombs bomber - a military aircraft that drops bombs during flight for the Navy's F/A-18 aircraft. --Opened three major operating facilities and closed three older facilities, thereby improving capabilities, efficiencies, and capacity for sustainable future growth. Financial Reporting Segments The company is reporting in new business segments to better reflect our current business and organization. The new business segments are Engineered Systems and Services, and Electronic Systems and Communications. Results by reporting segment are contained in the attached tables. Organic Revenue Growth Organic revenue grew by approximately 17 percent in 2005. This exceeds the company's 8 to 10 percent forecast made at the beginning of 2005. For the fourth quarter, organic revenue growth was approximately 13 percent. This growth was due primarily to strong sales in force-protection and communications-related products, partially offset by declines in professional and engineering services, aircraft armament systems, and electronic warfare Noun 1. electronic warfare - military action involving the use of electromagnetic energy to determine or exploit or reduce or prevent hostile use of the electromagnetic spectrum EW military action, action - a military engagement; "he saw action in Korea" equipment, primarily on the EA-6B aircraft. - 2006 Forecast Given the current contract base and internal projections, we are maintaining our forecast of long-term organic revenue growth at a range of 8 to 10 percent annually. Consequently, EDO estimates that revenue for the full year 2006, excluding any new acquisitions, will be in the range of $715 million to $730 million, as indicated on the attached "Guidance Data Estimates" worksheet See spreadsheet. worksheet - spreadsheet . Margins For the fourth quarter, the gross margin was 22.9 percent of revenue, versus 27.4 percent in the prior year. The decline was primarily related to lower sales, and thus less absorption absorption [Lat.,=sucking from], taking of molecules of one substance directly into another substance. It is contrasted with adsorption, in which the molecules adhere only to the surface of the second substance. of costs, in professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. . For the year, gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. decreased to 24.3 percent of revenue in 2005, versus 26.7 percent in 2004. In addition to the lower professional services sales, margins were reduced by the previously disclosed cost growth of $6 million related to the ALOFTS ALOFTS Active Low Frequency Towed SONAR sonar project and an aircraft data-link development project. Operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: for 2005 were 8.2 percent versus 9.8 percent in 2004. The lower operating margin in 2005 was due to a number of factors in addition to those mentioned above. EDO incurred expenses of $7.3 million for facilities projects, including an environmental cost provision and the start-up Start-up The earliest stage of a new business venture. of a new undersea-warfare operation in Panama City, Florida Panama City is a city located along U.S. Highway 98 in Bay County, Florida. It is the largest city between Pensacola, Florida and Tallahassee, Florida. It is the larger (population wise) of two principal cities of the Panama City-Lynn Haven, Florida Metropolitan Statistical Area. . There was also a $5.5 million increase in research and development expenses. As a result, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become , as adjusted, was 12.0 percent of revenue in 2005, below our expectations. However, we continue to maintain our long-term target range of 13 to 14 percent. EBITDA is a generally accepted metric employed by our industry. Our adjustments include primarily ESOP ESOP See: Employee Stock Ownership Plan ESOP See Employee Stock Ownership Plan (ESOP). and pension expenses, and are identified in detail on the attached reconciliation schedule. Cash Flow Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses for the year was $39.2 million, up 52.9 percent from the $25.7 million derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. from operations in 2004. Our cash balance was $108.7 million at year end. Backlog The total funded backlog of unfilled orders at Dec. 31, 2005 increased to $558.7 million from $474.6 million at Dec. 31, 2004. 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 $646 million in what we view as high-confidence future revenue, for a total of more than $1.2 billion. Conference Call EDO will conduct a conference call at 10:30 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy on Feb. 23 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 2. 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 #191148. About EDO Corporation EDO Corporation designs and manufactures a diverse range of products for defense, intelligence, and commercial markets, and provides related engineering and professional services. Major product groups include: Defense Electronics, Communications, Aircraft Armament Systems, Undersea Warfare Operations conducted to establish battlespace dominance in the underwater environment, which permits friendly forces to accomplish the full range of potential missions and denies an opposing force the effective use of underwater systems and weapons. , and Integrated Composite 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 New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. . The company employs 3,000 people. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Certain statements made in this release, including statements about revenue expectations (including revenue expectations for 2006), organic revenue growth, earnings growth, EBITDA margin expectations,, future profitability, pension expenses, effective tax rate ranges and expected long-term production contracts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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, but not limited to, those described above and the following: changes in demand for the company's products and services, changes in product mix, the timing of customer orders and deliveries, award or termination of contracts, changes in the government's funding priorities, the impact of competitive products and pricing, the failure to make or successfully integrate acquisitions, changes in interest rates, discount rates or other changes that may impact pension cost assumptions, unanticipated cost growth 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 Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. , 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or 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,
2005 2004 2005 2004
----------- --------- --------- ---------
(unaudited)
Net sales $199,978 $169,131 $648,482 $536,173
Costs and expenses:
Cost of sales 154,105 122,871 490,617 392,961
Selling, general and
administrative 23,993 21,554 85,921 78,791
Research and development 5,132 3,971 17,122 11,620
Environmental cost provision 5 - 1,543 -
----------- --------- --------- ---------
183,235 148,396 595,203 483,372
----------- --------- --------- ---------
Operating earnings 16,743 20,735 53,279 52,801
Interest income 1,098 490 2,300 1,271
Interest expense (2,547) (2,348) (9,420) (9,119)
Premium paid for redemption
of 5.25% Notes (2,894) - (2,894) -
Write-off of unamortized
costs on 5.25% Notes (1,277) - (1,277) -
Other, net (69) (168) (147) (319)
----------- --------- --------- ---------
Non-operating expense, net (5,689) (2,026) (11,438) (8,167)
----------- --------- --------- ---------
Earnings before income taxes 11,054 18,709 41,841 44,634
Income-tax expense (3,623) (4,548) (15,572) (15,566)
----------- --------- --------- ---------
----------- --------- --------- ---------
Net earnings $ 7,431 $ 14,161 $ 26,269 $ 29,068
=========== ========= ========= =========
Net earnings per common share:
Basic: $ 0.41 $ 0.79 $ 1.45 $ 1.64
Diluted: $ 0.37 $ 0.68 $ 1.33 $ 1.49
=========== ========= ========= =========
Weighted average shares
outstanding
Basic 18,192 17,824 18,081 17,695
=========== ========= ========= =========
Diluted (a) 23,762 22,526 23,001 22,377
=========== ========= ========= =========
Backlog of unfilled orders $558,685 $474,605
========= =========
(a) Assumes exercise of dilutive stock options, and conversion of
convertible notes into common shares.
EDO Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
($000's omitted)
Dec 31, Dec 31,
2005 2004
-------------------
Assets
Current Assets:
Cash and cash equivalents $108,731 $ 98,884
Accounts receivable, net 189,190 153,810
Inventories 56,567 52,867
Deferred income tax asset, net 8,946 5,046
Notes receivable 7,100 7,202
Prepayments & other 3,809 3,493
Assets held for sale 914 -
-------------------
Total Current Assets 375,257 321,302
Property, plant and equipment, net 48,660 34,830
Goodwill 152,347 91,651
Other intangible assets 55,925 50,356
Deferred income tax asset, net 29,637 30,241
Other assets 25,573 18,309
-------------------
Total Assets $687,399 $546,689
===================
Liabilities & Shareholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 85,237 $ 80,898
Contract advances and deposits 42,244 13,696
Note payable, current 2,000 -
-------------------
Total Current Liabilities 129,481 94,594
Income taxes payable 6,513 5,768
Note payable, long term 5,000 -
Long-term debt 201,250 137,800
Post-retirement benefits obligations 103,815 94,936
Environmental obligation 1,392 1,663
Other long-term liabilities 55 -
Shareholders' equity 239,893 211,928
-------------------
Total Liabilities & Shareholders' Equity $687,399 $546,689
===================
EDO Corporation and Subsidiaries
SEGMENT DATA
($000's omitted)
Year ended
Dec 31, Dec 31,
2005 2004
-----------------
Net sales:
Electronic Systems & Communications $408,217 $273,306
Engineered Systems & Services 240,265 262,867
-------- --------
$648,482 $536,173
======== ========
Operating earnings (loss):
Electronic Systems & Communications $ 42,071 $ 26,493
Engineered Systems & Services 12,751 26,308
Environmental cost provision (1,543) -
-------- --------
53,279 52,801
Net interest and debt redemption expense (11,291) (7,848)
Other, net (147) (319)
-------- --------
Earnings before income taxes $ 41,841 $ 44,634
======== ========
EDO Corporation and Subsidiaries
Calculation of EBITDA
(In thousands, except per share amounts)
Three months ended Year ended
Dec 31, Dec 31, Dec 31, Dec 31,
2005 2004 2005 2004
--------- -------- --------- ---------
(unaudited) (unaudited)
Earnings before income taxes $ 11,054 $18,709 $ 41,841 $ 44,634
Interest income (1,098) (490) (2,300) (1,271)
Interest expense 2,547 2,348 9,420 9,119
Premium paid for redemption of
5.25% Notes 2,894 - 2,894 -
Write-off of unamortized costs
on 5.25% Notes 1,277 - 1,277 -
-------- ------- -------- --------
Net interest expense 5,620 1,858 11,291 7,848
Depreciation 2,530 2,403 9,768 10,476
Amortization 1,612 1,310 5,931 5,564
-------- ------- -------- --------
Total depreciation &
amortization 4,142 3,713 15,699 16,040
--------- -------- --------- ---------
EBITDA 20,816 24,280 68,831 68,522
ESOP compensation expense 1,181 1,244 4,952 4,330
Pension expense 1,068 533 4,277 2,183
-------- ------- -------- --------
EBITDA, as adjusted $ 23,065 $26,057 $ 78,060 $ 75,035
Diluted shares outstanding 18,431 18,118 18,345 17,969
EBITDA, as adjusted, per share* $ 1.25 $ 1.44 $ 4.26 $ 4.18
======== ======= ======== ========
* Excludes potential impact of subordinated note conversion.
Summary of Cash Flows
(In thousands)
Three months ended Year ended
Dec 31, Dec 31, Dec 31, Dec 31,
2005 2004 2005 2004
--------- -------- --------- ---------
(unaudited) (unaudited)
Cash provided by operations $ 18,492 $ 5,340 $ 39,251 $ 25,687
Cash (used) by investing
activities $(21,099) $(6,226) $(84,458) $(12,705)
Cash (used) by financing
activities $ 62,950 $ (55) $ 55,054 $ (730)
-------- ------- -------- --------
$ 60,343 $ (941) $ 9,847 $ 12,252
======== ======= ======== ========
EDO Corporation and Subsidiaries
GUIDANCE DATA ESTIMATES
Fiscal 2006
-----------
Revenue range $715 million - $730 million
Pension expense $4.8 million
FAS 123(R) Option Expense $1.0 million (All in 1Q06)
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 18.6 million
- If Note conversion is dilutive 24.5 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.)
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
$4,749,500 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.
Based on current projections, the Notes are expected to be
dilutive for the 2006 full-year. If so, the EPS calculation will be
based on about 24.5 million shares.
This table contains estimates based on management's current
expectations.
This information is forward-looking, and actual results may differ
materially.
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