- The Washington Times - Monday, March 20, 2006

Essex Corp. signed a $46 million defense-related contract early in the first quarter, building on strong 2005 financial results for the Columbia-based company that provides optical and signal processing products and services.

Essex, which primarily serves U.S. intelligence customers, last year netted an $8.6 million profit — a 274-percent surge over $2.3 million in 2004. Since 2003, the company’s annual net income has increased 60-fold as existing defense-related contracts continue to expand.

“Having these contracts is a significant base to build on,” Essex Chief Executive Officer Leonard Moodispaw told investors during a company conference call. “We’re getting those contracts because of our reputation and performance.”

Shares of Essex stock closed yesterday at $21.02 per share, up 2 cents from Friday.

The company’s annual sales of $159.8 million — compared with $70.5 million in 2004 — included $76.8 million in revenue from the Windermere Group of Annapolis, which Essex acquired in February 2005 for $72 million.

In addition, the company’s balance sheet reflects two major classified contracts that have grown significantly. The so-called “Thunder” contract, which was originally a $57 million software systems engineering contract awarded in October of 2003, expanded to $200 million in November of 2004. Likewise, Windermere’s “Woodstock” contract increased in value from $102 million in 2004 to $200 million last fall, according to James McIlree, an analyst with C.E. Unterberg Towbin, a New York investment bank.

In January, the company won a $46 million critical-mission defense contract known as the “Cougar” contract, which analysts expect to expand similarly.

“They’ve been talking as if Cougar could ultimately grow faster than Woodstock and Thunder did, which would be a fairly amazing performance — to have two contracts that are both $200 million for a little company,” Mr. McIlree said, adding that in 2003 Essex, which now has 761 employees, only saw $16 million in revenue.

“The growth rate is unmatched. I haven’t seen anything like it,” he added.

Mr. McIlree doesn’t own any shares of Essex. C.E. Unterberg Towbin has had an investment banking relationship with the company in the past, but not within the past year.

James McCarthy, an analyst with Friedman, Billings, Ramsey & Co. in Arlington, said Essex should continue to experience strong growth.

“Over the long term, if you look at the next five, six, seven years, there are few [Department of Defense] budgets we think are as solid as the intelligence budget,” Mr. McCarthy said. “Today, [Essex is] a very, very strong intelligence services company and that portion of the business is growing, by my estimate, by about 40 percent in ‘06 to ‘07, which is faster than the rest of the group.”

Mr. McCarthy, whose firm has an investment banking relationship with the company, predicts the company’s smaller commercial business will ramp up in the next few years as private customers begin to adopt products used first by the Defense Department.

This year, Essex predicts revenue of $210 million to $220 million.

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