<PAGE>

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 10-Q

(MARK ONE)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

        FOR THE TRANSITION PERIOD FROM _______________ TO _______________

                          COMMISSION FILE NUMBER 1-3985

                                   ----------

                                 EDO CORPORATION
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
                NEW YORK                                  11-0707740
        (State of Incorporation)               (IRS Employer Identification No.)
</TABLE>

<TABLE>
<S>                                                       <C>
    60 EAST 42ND STREET, 42ND FLOOR,                         10165
           NEW YORK, NEW YORK                             (Zip Code)
(Address of principal executive offices)
</TABLE>

                                 (212) 716-2000
              (Registrant's telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer (as defined in Rule 12b-2 of the Act), or a non-accelerated
filer.

  Large accelerated filer [ ]  Accelerated filer [X]  Non-accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).

                                                                  [ ] Yes [X] No

     The number of shares of EDO common stock outstanding as of November 3, 2006
was 21,111,072 shares, with a par value $1 per share.

================================================================================

<PAGE>

                                 EDO CORPORATION

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
PART I       FINANCIAL INFORMATION

   ITEM 1    Financial Statements........................................     3

             Consolidated Balance Sheets - September 30, 2006
             (unaudited) and December 31, 2005...........................     3

             Consolidated Statements of Earnings - (unaudited)
             Three months ended September 30, 2006 and
             September 24, 2005..........................................     4

             Consolidated Statements of Earnings - (unaudited)
             Nine months ended September 30, 2006 and
             September 24, 2005..........................................     5

             Consolidated Statements of Cash Flows - (unaudited)
             Nine months ended September 30, 2006 and
             September 24, 2005..........................................     6

             Notes to Consolidated Financial Statements (unaudited)......     7

   ITEM 2    Management's Discussion and Analysis of Financial Condition
             and Results of Operations...................................    18

   ITEM 3    Quantitative and Qualitative Disclosures about Market Risk..    27

   ITEM 4    Controls and Procedures.....................................    27

PART II      OTHER INFORMATION

   ITEM 1A   Risk Factors

   ITEM 4    Submission of Matters to a Vote of Security Holders.........    27

   ITEM 6    Exhibits and Reports on Form 8-K............................    27

SIGNATURE PAGE...........................................................    28
</TABLE>


                                        2
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                        EDO CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                 SEPTEMBER 30,   DECEMBER 31,
                                                                                      2006           2005
                                                                                 -------------   ------------
                                                                                  (UNAUDITED)
                                                                                        (IN THOUSANDS)
<S>                                                                              <C>             <C>
                                     ASSETS

Current assets:
   Cash and cash equivalents .................................................      $ 42,806       $108,731
   Accounts receivable, net ..................................................       212,803        189,190
   Inventories ...............................................................        74,231         56,567
   Deferred income tax asset, net ............................................         9,849          8,946
   Notes receivable ..........................................................         7,000          7,100
   Prepayments and other .....................................................         6,414          3,809
                                                                                    --------       --------
      Total current assets ...................................................       353,103        374,343
                                                                                    --------       --------
Property, plant and equipment, net ...........................................        58,103         49,574
Goodwill .....................................................................       416,785        152,347
Other intangible assets, net .................................................        55,017         55,925
Deferred income tax asset, net ...............................................        27,101         29,637
Other assets .................................................................        30,276         25,573
                                                                                    --------       --------
                                                                                    $940,385       $687,399
                                                                                    ========       ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable ..........................................................      $ 36,640       $ 33,111
   Accrued liabilities .......................................................        65,510         52,126
   Contract advances and deposits ............................................        43,438         42,244
   Short-term borrowings under revolver ......................................       200,000             --
   Notes payable .............................................................         7,766          2,000
                                                                                    --------       --------
      Total current liabilities ..............................................       353,354        129,481
                                                                                    --------       --------
   Income taxes payable ......................................................         4,450          6,513
   Notes payable, long-term ..................................................        16,533          5,000
Long-term debt ...............................................................       201,250        201,250
Post-retirement benefits obligations .........................................       104,518        103,815
Environmental obligation .....................................................         1,372          1,392
Other long-term liabilities ..................................................            44             55
Shareholders' equity:
   Preferred shares, par value $1 per share, authorized 500,000 shares .......            --             --
   Common shares, par value $1 per share, authorized 50,000,000 shares,
      21,105,872 issued in 2006 and 20,305,815 issued in 2005 ................        21,106         20,306
   Additional paid-in capital ................................................       174,414        167,219
   Retained earnings .........................................................       125,842        120,103
   Accumulated other comprehensive loss, net of income tax benefit
      (32,454 in 2006 and 32,711 in 2005) ....................................       (46,703)       (47,072)
   Treasury shares at cost (111,561 shares in 2006 and 111,317 shares
      in 2005) ...............................................................        (1,945)        (1,868)
   Unearned Employee Stock Ownership Plan shares .............................       (13,850)       (14,789)
   Deferred compensation under Long-Term Incentive Plan ......................            --         (3,866)
   Management group receivables ..............................................            --           (140)
                                                                                    --------       --------
      Total shareholders' equity .............................................       258,864        239,893
                                                                                    --------       --------
                                                                                    $940,385       $687,399
                                                                                    ========       ========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


                                        3

<PAGE>

                        EDO CORPORATION AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
                                                                                   FOR THE THREE MONTHS ENDED
                                                                                 -----------------------------
                                                                                 SEPTEMBER 30,   SEPTEMBER 24,
                                                                                      2006            2005
                                                                                 -------------   -------------
                                                                                          (UNAUDITED)
                                                                                         (IN THOUSANDS,
                                                                                   EXCEPT PER SHARE AMOUNTS)
<S>                                                                              <C>             <C>
NET SALES ....................................................................      $184,393        $175,884
                                                                                    --------        --------
COSTS AND EXPENSES
   Cost of sales .............................................................       144,586         133,098
   Selling, general and administrative .......................................        30,207          21,626
   Research and development ..................................................         4,701           3,578
   Acquisition-related costs .................................................         1,008              --
   Impairment loss on other intangible assets ................................         1,487              --
   Environmental cost provision, Deer Park facility ..........................            --             288
                                                                                    --------        --------
                                                                                     181,989         158,590
                                                                                    --------        --------
OPERATING EARNINGS ...........................................................         2,404          17,294
NON-OPERATING INCOME (EXPENSE)
   Interest income ...........................................................         1,096             407
   Interest expense ..........................................................        (3,624)         (2,408)
   Other, net ................................................................           113             (18)
                                                                                    --------        --------
                                                                                      (2,415)         (2,019)
                                                                                    --------        --------
(Loss) earnings before income taxes ..........................................           (11)         15,275
Income tax benefit (expense) .................................................         2,076          (5,434)
                                                                                    --------        --------
NET EARNINGS .................................................................      $  2,065        $  9,841
                                                                                    ========        ========
NET EARNINGS PER COMMON SHARE:
   Basic .....................................................................      $   0.11        $   0.54
                                                                                    ========        ========
   Diluted ...................................................................      $   0.11        $   0.48
                                                                                    ========        ========
Weighted-average common shares outstanding:
   Basic .....................................................................        18,205          18,136
                                                                                    ========        ========
   Diluted ...................................................................        18,598          22,794
                                                                                    ========        ========
Dividends declared per common share ..........................................      $   0.03        $   0.03
                                                                                    ========        ========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


                                        4

<PAGE>

                        EDO CORPORATION AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
                                                                                   FOR THE NINE MONTHS ENDED
                                                                                 -----------------------------
                                                                                 SEPTEMBER 30,   SEPTEMBER 24,
                                                                                      2006            2005
                                                                                 -------------   -------------
                                                                                          (UNAUDITED)
                                                                                         (IN THOUSANDS,
                                                                                   EXCEPT PER SHARE AMOUNTS)
<S>                                                                              <C>             <C>
NET SALES ....................................................................      $456,500        $448,504
                                                                                    --------        --------

COSTS AND EXPENSES
   Cost of sales .............................................................       355,487         336,512
   Selling, general and administrative .......................................        79,021          61,928
   Research and development ..................................................        10,913          11,990
   Acquisition-related costs .................................................         1,455              --
   Impairment loss on other intangible assets ................................         1,487              --
   Environmental cost provision, Deer Park facility ..........................            --           1,538
                                                                                    --------        --------
                                                                                     448,363         411,968
                                                                                    --------        --------

OPERATING EARNINGS ...........................................................         8,137          36,536

NON-OPERATING INCOME (EXPENSE)
   Interest income ...........................................................         3,218           1,202
   Interest expense ..........................................................        (8,285)         (6,873)
   Other, net ................................................................          (144)            (78)
                                                                                    --------        --------
                                                                                      (5,211)         (5,749)
                                                                                    --------        --------
Earnings before income taxes .................................................         2,926          30,787
Income tax benefit (expense) .................................................         4,471         (11,949)
                                                                                    --------        --------
NET EARNINGS .................................................................      $  7,397        $ 18,838
                                                                                    ========        ========

NET EARNINGS PER COMMON SHARE:
   Basic: ....................................................................      $   0.41        $   1.04
                                                                                    ========        ========
   Diluted: ..................................................................      $   0.40        $   0.97
                                                                                    ========        ========

Weighted-average common shares outstanding:
   Basic .....................................................................        18,105          18,044
                                                                                    ========        ========
   Diluted ...................................................................        18,563          22,725
                                                                                    ========        ========
Dividends declared per common share ..........................................      $   0.09        $   0.09
                                                                                    ========        ========
</TABLE>

           See accompanying Notes to Consolidated Financial Statements


                                        5

<PAGE>

                        EDO CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                   FOR THE NINE MONTHS ENDED
                                                                                 -----------------------------
                                                                                 SEPTEMBER 30,   SEPTEMBER 24,
                                                                                      2006            2005
                                                                                 -------------   -------------
                                                                                          (UNAUDITED)
                                                                                         (IN THOUSANDS)
<S>                                                                              <C>             <C>
OPERATING ACTIVITIES:
   Earnings from operations ..................................................     $   7,397        $ 18,838
   Adjustments to earnings to arrive at cash provided by operations:
      Depreciation ...........................................................         8,865           7,238
      Amortization ...........................................................         5,121           4,319
      Impairment loss on other intangible assets .............................         1,487              --
      Bad debt (recovery) expense ............................................            (6)            999
      Deferred tax provision .................................................            15              --
      (Gain) loss on disposal of property, plant and equipment ...............           (59)              3
      Environmental cost provision, Deer Park facility .......................            --           1,538
      Long-Term Incentive Plan compensation expense ..........................         2,261           1,298
      Stock option compensation expense ......................................           838              --
      Employee Stock Ownership Plan compensation expense .....................         3,310           3,771
      Dividends on unallocated Employee Stock Ownership Plan shares ..........           172             191
      Common shares issued for directors' fees ...............................           162             148
      Changes in operating assets and liabilities, excluding effects of
         acquisitions:
         Accounts receivable .................................................        23,065         (22,214)
         Inventories .........................................................       (12,336)        (10,133)
         Prepayments and other assets ........................................         1,630           3,614
         Accounts payable, accrued liabilities and other .....................       (23,831)           (620)
         Contribution to defined benefit pension plan ........................        (6,000)         (6,000)
         Contract advances and deposits ......................................         1,194          17,108
                                                                                   ---------        --------
Cash provided by operations ..................................................        13,285          20,098
                                                                                   ---------        --------
INVESTING ACTIVITIES:
    Purchase of property, plant and equipment ................................       (14,216)        (18,404)
    Proceeds from the sale of property, plant and equipment ..................           633              --
    Payments received on notes receivable ....................................           100             225
    Cash paid for acquisitions, net of cash acquired .........................      (265,318)        (45,180)
                                                                                   ---------        --------
Cash used by investing activities ............................................      (278,801)        (63,359)
                                                                                   ---------        --------
FINANCING ACTIVITIES:
   Short-term borrowings under revolver ......................................       200,000              --
   Proceeds from exercise of stock options ...................................           852             839
   Excess income tax benefit from stock options and Long-Term
      Incentive Plan .........................................................           429             661
   Proceeds from management group receivables ................................           140              11
   Repayments of acquired debt ...............................................            --          (6,931)
   Payment of common share cash dividends ....................................        (1,830)         (1,815)
                                                                                   ---------        --------
Cash provided (used) by financing activities .................................       199,591          (7,235)
                                                                                   ---------        --------
Net decrease in cash and cash equivalents ....................................       (65,925)        (50,496)
Cash and cash equivalents at beginning of period .............................       108,731          98,884
                                                                                   ---------        --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................................     $  42,806        $ 48,388
                                                                                   =========        ========
Supplemental disclosures:
   Cash paid for:
      Interest ...............................................................     $   3,891        $  3,617
                                                                                   =========        ========
      Income taxes ...........................................................     $  10,937        $ 11,017
                                                                                   =========        ========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


                                        6
<PAGE>

                        EDO CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with instructions to Form 10-Q and, therefore, do not
include all information and footnotes normally included in consolidated
financial statements prepared in conformity with accounting principles generally
accepted in the United States. They should be read in conjunction with the
consolidated financial statements and notes thereto of EDO Corporation and
Subsidiaries (the "Company") for the year ended December 31, 2005 filed by the
Company on Form 10-K with the Securities and Exchange Commission.

     The accompanying consolidated financial statements include all adjustments
(consisting of normal recurring adjustments) that management considers necessary
for a fair presentation of its consolidated financial position and results of
operations for the interim periods presented. The results of operations for the
interim periods are not necessarily indicative of the results that may be
expected for the entire year.

     Certain reclassifications have been made to prior year's presentations to
conform to current year's presentations.

(2) ACQUISITIONS

     On September 15, 2006, the Company acquired all of the stock of Impact
Science and Technology Inc., (IST) for $123.7 million, consisting of a cash
payment of $106.4 million and a $17.3 million promissory note to be paid over
three years. IST was a privately-held company providing signals intelligence
(SIGINT) systems and analysis support to the intelligence community, and
advanced countermeasures and electronic-attack systems to the U.S. Department of
Defense (DoD) and other government agencies. The acquisition is expected to
strengthen EDO's position in specialized communication products and expand the
Company's business in the intelligence community. The acquired company became
part of the Company's Electronic Systems and Communications segment. The Company
has not yet completed its analysis of the fair value of the acquired assets and
liabilities. Consequently, the excess purchase price over the net assets
acquired has been temporarily assigned to goodwill, and amounts recorded are
subject to change. The excess of the purchase price over the net assets acquired
related to IST is not deductible for income tax purposes.

     On September 6, 2006, the Company acquired all of the stock of CAS Inc.,
(CAS) for $178.1 million, consisting of a cash payment of $173.2 million and
214,574 EDO common shares valued at $4.9 million. CAS was a privately-held
company providing engineering services, logistics support, and weapon-systems
analysis to the DoD. This acquisition is expected to strengthen and expand our
range of professional and engineering services. The acquired company became part
of the Company's Engineered Systems and Services segment. The Company has not
yet completed its analysis of the fair value of the acquired assets and
liabilities. Consequently, the excess purchase price over the net assets
acquired has been temporarily assigned to goodwill, and amounts recorded are
subject to change. The excess of the purchase price over the net assets acquired
recorded as goodwill is deductible for income tax purposes over 15 years.

     On December 20, 2005, the Company acquired for cash all of the membership
interest of NexGen Communications LLC (NexGen), a privately-held company
specializing in the design and production of communications systems for a
diverse set of U.S. government organizations. The acquisition strengthened EDO's
position in specialized communication products. The acquired company became part
of the Company's Electronic Systems and Communications segment. The excess of
the purchase price over the net assets acquired related to NexGen is not
deductible for income tax purposes. During the second quarter of 2006, the
purchase price for NexGen was finalized and resulted in an additional cash
payment of $0.4 million.

     On September 19, 2005, the Company acquired for cash all of the stock of
Fiber Innovations, Inc., (Fiber Innovations) a privately-held company that is a
designer and manufacturer of fiber reinforced-composites. This acquisition has
added important complementary design and manufacturing capabilities to EDO's
integrated-composite-structures business. The acquired company became part of
the Company's Engineered Systems and Services segment. The excess of the
purchase price over the net assets acquired related to Fiber Innovations is not
deductible for income tax purposes. During the first quarter of 2006, the
purchase price for Fiber Innovations was finalized and resulted in an additional
cash payment of $0.4 million.

     On May 2, 2005, the Company acquired for cash all of the units of EVI
Technology, LLC (EVI), a privately-held company. EVI


                                       7

<PAGE>

is a designer, manufacturer and integrator of classified intelligence systems.
EVI has strengthened and expanded EDO's range of products and engineering
expertise in a number of synergistic areas. The acquired company became part of
the Company's Electronic Systems and Communications segment. The excess of the
purchase price over the net assets acquired related to EVI recorded as goodwill
and other intangible asset is deductible for income tax purposes over 15 years.

     Unaudited pro forma results of operations, assuming the acquisitions of IST
and CAS had been completed at the beginning of each period are summarized below.
The results reflect adjustments to net sales, cost of sales, compensation
expense, interest income and expense, acquisition-related costs, and income tax
expense. The interest rates used in determining pro forma adjustments to
interest income are based on the average yield of the Company's invested cash
and cash equivalents which approximated 4.4% and 4.1% for the three and
nine months ended September 30, 2006 and 3.1% and 2.6% for the three and nine
months ended September 24, 2005, respectively. The interest rates used in
determining the pro forma adjustments for interest expense is related to our
credit facility and approximated 6.8% and 6.6% for the three and nine months
ended September 30, 2006, and 5.2% and 4.7% for the three and nine months ended
September 24, 2005, respectively.

<TABLE>
<CAPTION>
                                             FOR THE THREE MONTHS ENDED      FOR THE NINE MONTHS ENDED
                                           -----------------------------   -----------------------------
                                           SEPTEMBER 30,   SEPTEMBER 24,   SEPTEMBER 30,   SEPTEMBER 24,
                                                2006            2005            2006            2005
                                           -------------   -------------   -------------   -------------
                                                      (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                        <C>             <C>             <C>             <C>
Net sales ..............................      $245,442        $233,849        $647,639        $617,521
Net earnings ...........................         9,459          10,746          10,680          21,127
Diluted earnings per common share ......      $   0.43        $   0.51        $   0.57        $   1.06
                                              ========        ========        ========        ========
</TABLE>

     On a pro forma basis, the effect of the convertible subordinated notes
was dilutive for the three months ended September 30, 2006, and anti-dilutive
for the nine months ended September 30, 2006. The effect of the convertible
subordinated notes was dilutive for the three and nine months ended
September 24, 2005.

     The pro forma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had these acquisitions
been completed at the beginning of the periods, or of the results which may
occur in the future.

     On a pro forma basis, had the acquisitions of NexGen, Fiber Innovations,
and EVI taken place as of the beginning of each period, the results of
operations would not have been materially affected.

(3) STOCK-BASED COMPENSATION

     The Company has granted non-qualified stock options and restricted shares
under the 2002 Long-Term Incentive Plan (LTIP), the 2002 Non-Employee
Director Stock Option Plan (NEDSOP) and in connection with the CAS and IST
acquisitions. These plans are described in Note 13 to the
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2005.

     Prior to January 1, 2006, the Company accounted for its stock-based
compensation plans in accordance with Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees" and related interpretations,
as permitted by Financial Accounting Standard Board (FASB) Statement No. 123
(SFAS No. 123), "Accounting for Stock-based Compensation." Under APB No. 25,
because the exercise price of the Company's stock options is set equal to the
market price of the underlying stock on the date of grant, no employee
compensation expense was recognized in the Statement of Earnings. Effective
January 1, 2006, the Company adopted the fair value recognition provisions of
FASB Statement No. 123(R) (FAS 123(R)), Share-Based Payment, using the modified
prospective transition method. Under this method, compensation cost recognized
in the nine months ended September 30, 2006 includes: (a) compensation cost for
all options granted prior to January 1, 2006, but not yet vested, based on the
fair value on the grant date and (b) compensation cost for all options granted
to Directors under the NEDSOP subsequent to January 1, 2006, which are 100%
vested on the date of grant. Results of prior periods are not required to be
restated.

     As a result of adopting FAS 123(R) on January 1, 2006, the Company's income
before income taxes and net income for the nine months ended September 30, 2006,
were $0.8 million and $0.5 million lower, respectively, than if it had continued
to account for share-based compensation under Opinion No. 25. Basic and diluted
earnings per share for the nine months ended September 30, 2006 were $0.03 and
$0.03 lower, respectively, than if the company had continued to account for
share-based compensation under Opinion No. 25.

     Prior to the adoption of FAS 123(R), the Company presented all excess tax
benefits on deductions resulting from the exercise of stock options as an
operating cash flow in the Statement of Cash Flows. FAS 123(R) requires that
this excess tax benefit now be classified as a financing cash flow. For the nine
months ended September 30, 2006, $0.4 million excess tax benefit was classified
as a financing cash flow.

     During the nine months ended September 30, 2006, the Company only granted
options to its Board of Directors, which when issued were 100% vested. The
Company estimated the fair value of the 2006 stock option awards as of the grant
date by applying the


                                       8

<PAGE>

Black-Scholes pricing valuation model. The application of this valuation model
involves assumptions that are judgmental and sensitive in the determination of
compensation expense. The weighted average for key assumptions used in
determining the fair value of options granted are as follows: expected dividend
yield of 1%, risk free interest rate of 4.3%, expected volatility of 44%, and an
expected option life of 7 years.

     A summary of the Company's stock option activity during the nine months
ended September 30, 2006 is as follows:

<TABLE>
<CAPTION>
                                                                     WEIGHTED-
                                                                      AVERAGE
                                                        WEIGHTED-    REMAINING       AGGREGATE
                                                         AVERAGE    CONTRACTUAL      INTRINSIC
                                           OPTIONS       EXERCISE       TERM           VALUE
                                       (IN THOUSANDS)     PRICE      (IN YEARS)   (IN THOUSANDS)
                                       --------------   ---------   -----------   --------------
<S>                                    <C>              <C>         <C>           <C>
Outstanding on January 1, 2006 .....       1,045          $17.25
Options granted ....................          55           27.39
Options exercised ..................         (69)          12.38
Options expired/canceled ...........         (36)          23.86
                                           -----          ------        ----          ------
Exercisable on September 30, 2006 ..         995           17.90        5.08          $6,829
                                           =====
</TABLE>

     As of September 30, 2006, there was no unrecognized future compensation
expense related to non-vested options not yet recognized in the consolidated
statement of earnings.

     Stock based compensation expense recognized for restricted share awards was
$0.7 million and $0.4 million for the three months ended September 30, 2006 and
September 24, 2005, respectively. Stock based compensation expense recognized
for restricted share awards was $2.3 million and $1.3 million for the nine
months ended September 30, 2006 and September 24, 2005, respectively. The
unrecognized compensation cost related to the unvested restricted shares at
September 30, 2006 was approximately $13.4 million, which will be recognized
over a weighted-average period of 2.5 years.

     A summary of the activity of restricted shares for the nine months ended
September 30, 2006 is as follows:

<TABLE>
<CAPTION>
                                                         WEIGHTED-
                                                          AVERAGE
                                           SHARES       GRANT DATE
                                       (IN THOUSANDS)   FAIR VALUE
                                       --------------   ----------
<S>                                    <C>              <C>
Outstanding on January 1, 2006 .....        219           $27.78
Granted ............................        517            23.74
Vested .............................         --               --
Forfeited/Canceled .................         (7)           28.23
                                           ----           ------
Outstanding on September 30, 2006 ..        729           $27.89
                                           ====           ======
</TABLE>

     Prior to adoption of FAS 123(R), the fair value of restricted share awards
was recorded as deferred compensation expense as a separate component of
shareholders equity. In accordance with FAS 123(R), the deferred compensation
expense balance of $3.9 million at December 31, 2005 was reclassified to
additional paid-in-capital. The restricted share awards cliff vest in 3 years
and are subject to continued employment. If such employment goal is not met, no
compensation cost is recognized and any previously recognized compensation cost
is reversed.

     The following table illustrates the effect on net earnings and earnings per
share if, for the three and nine months ended September 24, 2005, the Company
had applied the fair value recognition provisions of SFAS No. 123:

<TABLE>
<CAPTION>
                                                                                 THREE MONTHS ENDED   NINE MONTHS ENDED
                                                                                    SEPTEMBER 24,       SEPTEMBER 24,
                                                                                        2005                 2005
                                                                                 ------------------   -----------------
<S>                                                                              <C>                  <C>
Earnings:
   As reported ...............................................................         $9,841              $18,838
   Deferred compensation expense, net of tax .................................            255                  766
   Stock option compensation expense based on fair value method, net of tax ..           (417)              (2,164)
                                                                                       ------              -------
   Pro forma .................................................................         $9,679              $17,440
                                                                                       ======              =======
Basic earnings per common share:
   As reported ...............................................................         $ 0.54              $  1.04
   Pro forma .................................................................         $ 0.54              $  0.98
Diluted earnings per common share:
   As reported ...............................................................         $ 0.48              $  0.97
   Pro forma .................................................................         $ 0.48              $  0.92
</TABLE>

(4) BUSINESS COMBINATIONS AND GOODWILL AND OTHER INTANGIBLE ASSETS


                                       9

<PAGE>

     Statement of Financial Accounting Standard ("SFAS") No. 141, "Business
Combinations," requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. SFAS No. 141 also includes
guidance on the initial recognition and measurement of goodwill and other
intangible assets arising from business combinations completed after June 30,
2001. SFAS No. 142, "Goodwill and Other Intangible Assets," prohibits the
amortization of goodwill and other intangible assets with indefinite useful
lives and requires that those assets be reviewed for impairment at least
annually. Other intangible assets with definite lives are amortized over their
estimated useful lives.

     In accordance with SFAS No. 142, goodwill must be tested at least annually
for impairment at the reporting unit level. If an indication of impairment
exists, the Company is required to determine if such goodwill's implied fair
value is less than the carrying value in order to determine the amount, if any,
of the impairment loss required to be recorded. Impairment indicators include,
among other conditions, cash flow deficits, an historic or anticipated decline
in revenue or operating profits, adverse legal or regulatory developments,
accumulation of costs significantly in excess of amounts originally expected to
acquire the asset and/or a material decrease in the fair value of some or all of
the assets. The Company performs the required impairment tests of goodwill as of
October 1, each year.

The changes in the carrying amount of goodwill by segment for the nine months
ended September 30, 2006 were as follows:

<TABLE>
<CAPTION>
                                      ENGINEERED
                                        SYSTEMS      ELECTRONIC
                                          AND        SYSTEMS AND
                                       SERVICES    COMMUNICATIONS     TOTAL
                                      ----------   --------------   --------
                                                  (IN THOUSANDS)
<S>                                   <C>          <C>              <C>
Balance as of January 1, 2006 .....    $ 43,846       $108,501      $152,347
Purchase price adjustments ........         328         (3,256)       (2,928)
Acquisition of CAS ................     167,938             --       167,938
Acquisition of IST ................          --         99,428        99,428
                                       --------       --------      --------
Balance as of September 30, 2006 ..    $212,112       $204,673      $416,785
                                       ========       ========      ========
</TABLE>

Summarized below are other intangible assets:

<TABLE>
<CAPTION>
                                                                     SEPTEMBER  30,   DECEMBER 31,
                                                                          2006            2005          LIFE
                                                                     --------------   ------------   ----------
                                                                                   (IN THOUSANDS)
<S>                                                                  <C>              <C>            <C>
Other intangible assets subject to amortization:
   Capitalized non-compete agreements related to acquisitions ....      $  2,888        $  3,118     1-5 years
   Purchased technologies related to acquisitions ................        21,663          21,103     8-25 years
   Customer contracts and relationships related to acquisitions ..        48,996          45,698     6-20 years
   Tradename related to acquisitions .............................         1,734           2,069     5-10 years
                                                                        --------        --------
                                                                          75,281          71,988
      Less accumulated amortization ..............................       (20,664)        (16,463)
                                                                        --------        --------
                                                                        $ 54,617        $ 55,525
Other intangible assets not subject to amortization:
      Tradename related to acquisitions ..........................           400             400
                                                                        --------        --------
                                                                        $ 55,017        $ 55,925
                                                                        ========        ========
</TABLE>

     The amortization expense for the three months ended September 30, 2006 and
September 24, 2005 amounted to $1.7 million for both periods. The amortization
expense for the nine months ended September 30, 2006 and September 24, 2005
amounted to $5.1 million and $4.3 million, respectively. Total remaining
amortization expense for 2006, 2007, 2008, 2009, 2010 and thereafter related to
these other intangible assets is estimated to be $1.7 million, $6.6 million,
$5.8 million, $5.8 million, $5.1 million and $29.6 million, respectively.

     For the three and nine months ended September 30, 2006, the Company
incurred an impairment charge of approximately $1.5 million related to certain
other intangible assets associated with the Company's rugged computer product
line. As sales and orders were not materializing to expected levels, the Company
tested for impairment and it was determined that the future undiscounted cash
flows associated with these assets were insufficient to recover their carrying
values. These assets were written down to zero, which was determined on the
basis of future discounted cash flows.

(5) INVENTORIES

     Inventories are summarized by major classification as follows:


                                       10

<PAGE>

<TABLE>
<CAPTION>
                                             SEPTEMBER 30,   DECEMBER 31,
                                                  2006           2005
                                             -------------   ------------
                                                    (IN THOUSANDS)
<S>                                          <C>             <C>
Raw material and supplies ................     $ 15,208        $ 11,976
Work-in-process ..........................       76,415          49,829
Finished goods ...........................        4,641           1,690
   Less: Unliquidated progress payments ..      (22,033)         (6,928)
                                               --------        --------
                                               $ 74,231        $ 56,567
                                               ========        ========
</TABLE>

(6) INCOME TAXES

     In the third quarter of 2006, the Company recorded a discrete income tax
benefit of $2.3 million related primarily to claims for the federal research and
development credit and extraterritorial income (ETI) exclusion tax benefits not
previously claimed. The tax expense for the nine months ended September 30, 2006
reflects an additional tax benefit of $3.7 million due to the reversal of income
tax contingency reserves related to the resolution of an outstanding tax matter.

(7) EARNINGS PER SHARE

     The following table sets forth the computation of basic and diluted
earnings per share:

<TABLE>
<CAPTION>
                                                        FOR THE THREE MONTHS ENDED      FOR THE NINE MONTHS ENDED
                                                      -----------------------------   -----------------------------
                                                      SEPTEMBER 30,   SEPTEMBER 24,   SEPTEMBER 30,   SEPTEMBER 24,
                                                           2006            2005            2006            2005
                                                      -------------   -------------   -------------   -------------
                                                                              (IN THOUSANDS)
<S>                                                   <C>             <C>             <C>             <C>
Numerator:
   Earnings from continuing operations for basic
      calculation .................................      $ 2,065         $ 9,841         $ 7,397         $18,838
   Effect of dilutive securities:
      Convertible Notes ...........................           --           1,067              --           3,201
                                                         -------         -------         -------         -------
   Numerator for diluted calculation ..............      $ 2,065         $10,908         $ 7,397         $22,039
                                                         =======         =======         =======         =======
Denominator:
   Denominator for basic calculation ..............       18,205          18,136          18,105          18,044
   Effect of dilutive securities:
      Stock options ...............................          393             250             458             273
      Convertible Notes ...........................           --           4,408              --           4,408
                                                         -------         -------         -------         -------
   Denominator for diluted calculation ............       18,598          22,794          18,563          22,725
                                                         =======         =======         =======         =======
</TABLE>

     The assumed conversion of the Notes was anti-dilutive for 2006 and dilutive
for 2005.

     The following table summarizes, for each year presented, the number of
shares excluded from the computation of diluted earnings per share, as their
effect upon potential issuance was anti-dilutive.

<TABLE>
<CAPTION>
                                            FOR THE NINE MONTHS ENDED
                                          -----------------------------
                                          SEPTEMBER 30,   SEPTEMBER 24,
                                               2006            2005
                                          -------------   -------------
                                                  (IN THOUSANDS)
<S>                                       <C>             <C>
4.00% Convertible Subordinated Notes ..       5,886             --
Unexercised stock options .............         399             69
                                              -----            ---
                                              6,285             69
                                              =====            ===
</TABLE>

(8) DEFINED BENEFIT PLAN

     The Company maintains a qualified noncontributory defined benefit pension
plan covering less than half of its employees. In November 2002, the plan was
amended whereby benefits accrued under the plan were frozen as of December 31,
2002. The Company's funding policy is to make annual contributions to the extent
such contributions are actuarially determined and tax deductible.

     For the three months ended September 30, 2006 and September 24, 2005, the
Company recorded pension expense of $1.2 million and $1.1 million, respectively.
For the nine months ended September 30, 2006 and September 24, 2005, the Company
recorded pension expense of $3.6 million and $3.2 million, respectively.
Summarized below are the components of the expense for each period presented:


                                       11

<PAGE>

<TABLE>
<CAPTION>
                                             FOR THE THREE MONTHS ENDED      FOR THE NINE MONTHS ENDED
                                           -----------------------------   -----------------------------
                                           SEPTEMBER 30,   SEPTEMBER 24,   SEPTEMBER 30,   SEPTEMBER 24,
                                                2006            2005            2006            2005
                                           -------------   -------------   -------------   -------------
                                                                   (IN THOUSANDS)
<S>                                        <C>             <C>             <C>             <C>
Interest cost ..........................      $ 3,038         $ 3,089         $ 9,115         $ 9,266
Expected return on plan assets .........       (3,209)         (3,181)         (9,628)         (9,543)
Amortization of unrecognized net loss ..        1,365           1,162           4,095           3,486
                                              -------         -------         -------         -------
                                              $ 1,194         $ 1,070         $ 3,582         $ 3,209
                                              =======         =======         =======         =======
</TABLE>

(9) EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST

     The Company sponsors an employee stock ownership plan which provides
retirement benefits to substantially all employees. The cost basis of the
unearned/unallocated shares was initially recorded as a reduction to
shareholders' equity. Compensation expense is recorded based on the market value
of the Company's common shares as they are committed-to-be-released quarterly,
as payments are made under the related indirect loan. The difference between
the market value and the cost basis of the shares was recorded as additional
paid-in capital. Dividends on unallocated shares are recorded as compensation
expense.

(10) COMPREHENSIVE INCOME

     As of September 30, 2006, accumulated other comprehensive loss included in
the accompanying consolidated balance sheet primarily represents additional
minimum liabilities on benefit plans. Comprehensive income for the three months
ended September 30, 2006 was $2.1 million compared to comprehensive income for
the three months ended September 24, 2005 of $9.8 million. Comprehensive income
for the nine months ended September 30, 2006 was $7.8 million compared to
comprehensive income from continuing operations for the nine months ended
September 24, 2005 of $19.0 million.

(11) BUSINESS SEGMENTS

     The Company determines its operating segments based upon an analysis of its
products and services, production processes, types of customers, economic
characteristics and the related regulatory environment, which is consistent with
how management operates the Company. The Company's operations are reflected in
two business segments: Engineered Systems and Services and Electronic Systems
and Communications. The Engineered Systems and Services segment addresses the
Integrated Systems and Structures, Undersea Warfare, and Professional Services
markets. Primary products include aircraft armament systems, integrated
composite structures, mine countermeasure systems, sonar systems and flight line
products. The segment also includes a wide range of professional and engineering
services. The Electronic Systems and Communications segment includes products
that serve the Electronic Warfare, the C4 (Command, Control, Communications and
Computers) products and systems, Information and Intelligence Warfare markets.
Primary products include electronic force protection equipment, interference
cancellation technology, airborne electronic warfare systems, signal
intelligence systems, reconnaissance and surveillance systems, other specialized
electronic systems, C4 products and services and antenna products.

<TABLE>
<CAPTION>
                                                        FOR THE THREE MONTHS ENDED      FOR THE NINE MONTHS ENDED
                                                      -----------------------------   -----------------------------
                                                      SEPTEMBER 30,   SEPTEMBER 24,   SEPTEMBER 30,   SEPTEMBER 24,
                                                           2006            2005            2006            2005
                                                      -------------   -------------   -------------   -------------
                                                                              (IN THOUSANDS)
<S>                                                   <C>             <C>             <C>             <C>
Net Sales:
Engineered Systems & Services .....................      $ 77,648        $ 57,325        $199,078        $169,986
Electronic Systems & Communications ...............       106,745         118,559         257,422         278,518
                                                         --------        --------        --------        --------
                                                         $184,393        $175,884        $456,500        $448,504
                                                         --------        --------        --------        --------
Operating earnings :
Engineered Systems & Services .....................           674           3,005           3,891           9,168
Electronic Systems & Communications ...............         1,730          14,577           4,246          28,906
Environmental cost provision, Deer Park facility ..            --            (288)             --          (1,538)
                                                         --------        --------        --------        --------
                                                            2,404          17,294           8,137          36,536
Net interest expense ..............................        (2,528)          (2001)         (5,067)         (5,671)
Other, net ........................................           113             (18)           (144)            (78)
                                                         --------        --------        --------        --------
Loss (earnings) before income taxes ...............      $    (11)       $ 15,275        $  2,926        $ 30,787
                                                         ========        ========        ========        ========
</TABLE>

(12) RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2006, the FASB issued FASB Interpretation No. 48 "Accounting for
Uncertainty in Income Taxes (an interpretation of FASB Statement No. 109)" which
is effective for fiscal years beginning after December 15, 2006. This
interpretation was issued to clarify the accounting for uncertainty in income
taxes recognized in the financial statements by prescribing a recognition
threshold and


                                       12
<PAGE>

measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. We are currently
evaluating the potential impact of this interpretation.

     In September 2006, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 108 (SAB 108). Due to diversity in practice among
registrants, SAB 108 expresses SEC staff views regarding the process by which
misstatements in financial statements are evaluated for purposes of determining
whether financial statement restatement is necessary. SAB 108 is effective for
fiscal years ending after November 15, 2006, and early application is
encouraged. The Company does not believe SAB 108 will have a material impact on
our results from operations or financial position.

     In September 2006, the FASB issued Statement No. 158, Employers' Accounting
for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB
Statements No. 87, 88, 106, and 132(R) (Statement 158). Among other items,
Statement 158 requires recognition of the overfunded or underfunded status of an
entity's defined benefit postretirement plan as an asset or liability in the
financial statements, requires the measurement of defined benefit postretirement
plan assets and obligations as of the end of the employer's fiscal year, and
requires recognition of the funded status of defined benefit postretirement
plans in other comprehensive income. Statement 158 is effective for fiscal years
ending after December 15, 2006, and early application is encouraged. The Company
has not yet determined the impact this interpretation will have on our financial
position.

(13) GUARANTOR AND NON-GUARANTOR SUBSIDIARIES

     The Company may, from time to time, issue indebtedness, a condition of
which would be the guarantee of this indebtedness by certain of its
subsidiaries. Presented below is condensed consolidating financial information
for the Company and the contemplated subsidiary guarantors and non-guarantors at
September 30, 2006 and December 31, 2005 and for the three and nine month
periods ended September 30, 2006 and September 24, 2005. Each contemplated
subsidiary guarantor is 100% owned, directly or indirectly, by the Company. Any
guarantees that may be issued will be full and unconditional, as well as joint
and several. In connection with the Company's credit facility, the Company
cannot declare or pay any dividend on its outstanding common stock in an amount
that exceeds fifty percent of its consolidated net income for the immediately
preceding four quarters.

EDO CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2006
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           EDO
                                                       Corporation
                                                         Parent     Subsidiary
                                                      Company Only  Guarantors  Non-Guarantors  Eliminations  Consolidated
                                                      ------------  ----------  --------------  ------------  ------------
<S>                                                   <C>           <C>         <C>             <C>           <C>
ASSETS
Current assets:
Cash and cash equivalents                               $ 25,288     $ 11,835       $ 5,683      $      --      $ 42,806
Accounts receivable, net                                  52,568      156,688         3,547             --       212,803
Inventories                                               10,988       59,219         4,024             --        74,231
Deferred income tax asset, net                             9,038          811            --             --         9,849
Notes receivable                                           7,000           --            --             --         7,000
Prepayments and other                                      2,309        3,778           327             --         6,414
                                                        --------     --------       -------      ---------      --------
Total current assets                                     107,191      232,331        13,581             --       353,103
Investment in subsidiaries                               635,610           --            --       (635,610)           --
Property, plant and equipment, net                        26,806       27,791         3,506             --        58,103
Goodwill                                                      --      408,075         8,710             --       416,785
Other intangible assets, net                                  --       45,638         9,379             --        55,017
Deferred income tax asset, net                            29,637       (2,536)           --             --        27,101
Other assets                                              28,322        1,954            --             --        30,276
                                                        --------     --------       -------      ---------      --------
                                                        $827,566     $713,253       $35,176      $(635,610)     $940,385
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities                $ 19,790     $ 78,120       $ 4,240      $      --      $102,150
Contract advances and deposits                            16,005       27,433            --             --        43,438
Short-term borrowing under revolver                      200,000           --            --             --       200,000
Notes payable                                              7,766           --            --             --         7,766
                                                        --------     --------       -------      ---------      --------
Total current liabilities                                243,561      105,553         4,240             --       353,354
Income taxes payable                                       4,450           --            --             --         4,450
Deferred income taxes                                     (2,880)       2,497           383             --            --
Notes payable, long-term                                  16,533           --            --             --        16,533
Long-term debt                                           201,250           --            --             --       201,250
Post retirement benefits obligations                     104,518           --            --             --       104,518
Environmental obligation                                   1,372           --            --             --         1,372
Other long-term liabilities                                   44           --            --             --            44
Intercompany accounts                                         --      458,580        24,906       (483,486)           --
</TABLE>


                                       13

<PAGE>

<TABLE>
<S>                                                   <C>           <C>         <C>             <C>           <C>
Shareholders' equity:
Preferred shares                                              --           --            --             --            --
Common shares                                             21,106           98            --            (98)       21,106
Additional paid-in capital                               174,414       61,555         6,418        (67,973)      174,414
Retained earnings                                        125,842       89,022          (917)       (88,105)      125,842
Accumulated other comprehensive (loss) income, net
of income tax benefit                                    (46,849)          --           146             --       (46,703)
Treasury shares                                           (1,945)      (4,052)           --          4,052        (1,945)
Unearned ESOP shares                                     (13,850)          --            --             --       (13,850)
                                                        --------     --------       -------      ---------      --------
Total shareholders' equity                               258,718      146,623         5,647       (152,124)      258,864
                                                        --------     --------       -------      ---------      --------
                                                        $827,566     $713,253       $35,176      $(635,610)     $940,385
                                                        ========     ========       =======      =========      ========
</TABLE>

EDO CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF
EARNINGS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2006
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           EDO
                                                       Corporation
                                                         Parent     Subsidiary
                                                      Company Only  Guarantors  Non-Guarantors  Eliminations  Consolidated
                                                      ------------  ----------  --------------  ------------  ------------
<S>                                                   <C>           <C>         <C>             <C>           <C>
Net Sales                                                $53,878     $126,808       $ 6,687       $(2,980)      $184,393
Costs and expenses:
Cost of sales                                             43,901       99,740         3,925        (2,980)       144,586
Selling, general and administrative                        7,513       20,658         2,036            --         30,207
Research and development                                   1,076        3,446           179            --          4,701
Acquisition-related costs                                     --        1,008            --            --          1,008
Impairment loss on other intangible assets                    --           --         1,487            --          1,487
                                                         -------     --------       -------       -------       --------
                                                          52,490      124,852         7,627        (2,980)       181,989
                                                         -------     --------       -------       -------       --------
Operating earnings (loss)                                  1,388        1,956          (940)           --          2,404
Non-operating income (expense)
Interest income                                              918          103            75            --          1,096
Interest expense                                          (3,590)         (34)           --            --         (3,624)
Other, net                                                    (1)         167           (53)           --            113
                                                         -------     --------       -------       -------       --------
                                                          (2,673)         236            22            --         (2,415)
(Loss) earnings before income taxes                       (1,285)       2,192          (918)           --            (11)
Income tax benefit (expense)                               4,066       (1,723)         (267)           --          2,076
                                                         -------     --------       -------       -------       --------
Earnings (loss) after income taxes                         2,781          469        (1,185)           --          2,065
Equity in undistributed earnings of subsidiaries            (716)          --            --           716             --
                                                         -------     --------       -------       -------       --------
Net earnings (loss)                                      $ 2,065     $    469       $(1,185)      $   716       $  2,065
                                                         =======     ========       =======       =======       ========
</TABLE>

EDO CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF
EARNINGS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2006
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           EDO
                                                       Corporation
                                                         Parent     Subsidiary
                                                      Company Only  Guarantors  Non-Guarantors  Eliminations  Consolidated
                                                      ------------  ----------  --------------  ------------  ------------
<S>                                                   <C>           <C>         <C>             <C>           <C>
Net Sales                                               $151,218     $294,779       $19,098       $(8,595)      $456,500
Costs and expenses:
Cost of sales                                            125,091      226,766        12,225        (8,595)       355,487
Selling, general and administrative                       17,206       55,169         6,646            --         79,021
Research and development                                   2,891        7,565           457            --         10,913
Acquisition-related costs                                     --        1,455            --            --          1,455
Impairment loss on other intangible assets                    --           --         1,487            --          1,487
                                                        --------     --------       -------       -------       --------
                                                         145,188      290,955        20,815        (8,595)       448,363
                                                        --------     --------       -------       -------       --------
Operating earnings (loss)                                  6,030        3,824        (1,717)           --          8,137
Non-operating income (expense)
Interest income                                            2,933          103           182            --          3,218
Interest expense                                          (8,285)          --            --            --         (8,285)
Other, net                                                   (23)          15          (136)           --           (144)
                                                        --------     --------       -------       -------       --------
                                                          (5,375)         118            46            --         (5,211)
Earnings (loss) before income taxes                          655        3,942        (1,671)           --          2,926
Income tax benefit  (expense)                              8,610       (3,940)         (199)           --          4,471
                                                        --------     --------       -------       -------       --------
Earnings (loss) after income taxes                         9,265            2        (1,870)           --          7,397
</TABLE>


                                       14

<PAGE>

<TABLE>
<S>                                                   <C>           <C>         <C>             <C>           <C>
Equity in undistributed earnings of subsidiaries          (1,868)          --            --         1,868             --
                                                        --------     --------       -------       -------       --------
Net earnings (loss)                                     $  7,397     $      2       $(1,870)      $ 1,868       $  7,397
                                                        ========     ========       =======       =======       ========
</TABLE>

EDO CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2006
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           EDO
                                                       Corporation
                                                         Parent     Subsidiary
                                                      Company Only  Guarantors  Non-Guarantors  Eliminations  Consolidated
                                                      ------------  ----------  --------------  ------------  ------------
<S>                                                   <C>           <C>         <C>             <C>           <C>
OPERATING ACTIVITIES:
Earnings (loss) from continuing operations              $   7,397    $      2       $(1,870)       $ 1,868      $   7,397
Adjustments to earnings (loss) to arrive at cash
   (used) provided by continuing operations:
Depreciation                                                3,722       4,454           689             --          8,865
Amortization                                                   --       4,370           751             --          5,121
Impairment loss on other intangible assets                     --          --         1,487             --          1,487
Bad (recovery) debt expense                                   (75)         69            --             --             (6)
Deferred tax provision                                     (2,591)      2,606            --             --             15
Loss (gain) on sale of property, plant and equipment           15         (74)           --             --            (59)
Long-term Incentive Plan compensation expense               2,261          --            --             --          2,261
Stock option compensation expense                             838          --            --             --            838
Employee Stock Ownership Plan compensation expense          3,310          --            --             --          3,310
Dividends on unallocated Employee Stock Ownership
   Plan shares                                                172          --            --             --            172
Common shares issued for directors' fees                      162          --            --             --            162
Changes in operating assets and liabilities,
   excluding effects of acquisitions:
Equity in earnings of subsidiaries                          1,868          --            --         (1,868)            --
Intercompany                                              (36,188)     36,053           135             --             --
Accounts receivable                                        16,110       7,079          (124)            --         23,065
Inventories                                                 6,300     (17,744)         (892)            --        (12,336)
Prepayments and other assets                                8,454      (6,831)            7             --          1,630
Accounts payable, accrued liabilities and other           (18,561)     (6,285)        1,015             --        (23,831)
Contribution to defined benefit pension plan               (6,000)         --            --             --         (6,000)
Contract advances and deposits                              9,885      (8,691)           --             --          1,194
                                                        ---------    --------       -------        -------      ---------
Cash (used) provided by operations                         (2,921)     15,008         1,198             --         13,285
                                                        ---------    --------       -------        -------      ---------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment                  (5,221)     (8,048)         (947)            --        (14,216)
Payments received on notes receivable                         100          --            --             --            100
Proceeds from sale of property, plant and equipment            --         633            --             --            633
Cash paid for acquisitions, net of cash acquired         (265,318)         --            --             --       (265,318)
                                                        ---------    --------       -------        -------      ---------
Cash used by investing activities                        (270,439)     (7,415)         (947)            --       (278,801)
                                                        ---------    --------       -------        -------      ---------
FINANCING ACTIVITIES:
Proceeds from exercise of stock options                       842          10            --             --            852
Excess income tax benefit from stock options and
   Long-term Incentive Plan                                   429          --            --             --            429
Proceeds from management group receivables                    140          --            --             --            140
Short-term borrowings under revolver                      200,000          --            --             --        200,000
Payment of common share cash dividends                     (1,830)         --            --             --         (1,830)
                                                        ---------    --------       -------        -------      ---------
Cash provided by financing activities                     199,581          10            --             --        199,591
                                                        ---------    --------       -------        -------      ---------
Net (decrease) increase in cash and cash
   equivalents                                            (73,779)      7,603           251             --        (65,925)
Cash and cash equivalents at beginning of period           99,067       4,232         5,432             --        108,731
                                                        ---------    --------       -------        -------      ---------
Cash and cash equivalents at end of period              $  25,288    $ 11,835       $ 5,683        $    --      $  42,806
                                                        =========    ========       =======        =======      =========
</TABLE>

EDO CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2005
(IN THOUSANDS)


                                       15

<PAGE>

<TABLE>
<CAPTION>
                                                           EDO
                                                       Corporation
                                                         Parent     Subsidiary
                                                      Company Only  Guarantors  Non-Guarantors  Eliminations  Consolidated
                                                      ------------  ----------  --------------  ------------  ------------
<S>                                                   <C>           <C>         <C>             <C>           <C>
ASSETS
Current assets:
Cash and cash equivalents                               $ 99,067     $  4,232       $ 5,432             --      $108,731
Accounts receivable, net                                  68,603      117,164         3,423             --       189,190
Inventories                                               17,288       36,147         3,132             --        56,567
Deferred income tax asset, net                             8,946           --            --             --         8,946
Notes receivable                                           7,358         (258)           --             --         7,100
Prepayments and other                                      2,037        1,438           334             --         3,809
                                                        --------     --------       -------      ---------      --------
Total current assets                                     203,299      158,723        12,321             --       374,343
                                                        --------     --------       -------      ---------      --------
Investment in subsidiaries                               317,356           --            --       (317,356)           --
Property, plant and equipment, net                        25,946       20,380         3,248             --        49,574
Goodwill                                                      --      143,637         8,710             --       152,347
Other intangible assets, net                                  --       44,308        11,617             --        55,925
Deferred income tax asset, net                            29,637           --            --             --        29,637
Other assets                                              24,751          822            --             --        25,573
                                                        --------     --------       -------      ---------      --------
                                                        $600,989     $367,870       $35,896      $(317,356)     $687,399
                                                        --------     --------       -------      ---------      --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities                $ 37,942     $ 43,729       $ 3,566             --      $ 85,237
Contract advances and deposits                             6,120       36,124            --             --        42,244
Notes payable                                              2,000           --            --             --         2,000
                                                        --------     --------       -------      ---------      --------
Total current liabilities                                 46,062       79,853         3,566             --       129,481
                                                        --------     --------       -------      ---------      --------
Long-term debt                                           201,250           --            --             --       201,250
Income taxes payable                                       6,513           --            --             --         6,513
Deferred income tax liabilities, net                      (3,244)       2,891           353             --            --
Post retirement benefits obligations                     103,815           --            --             --       103,815
Notes payable                                              5,000           --            --             --         5,000
Environmental obligation                                   1,392           --            --             --         1,392
Other long-term liabilities                                   55           --            --             --            55
Inter-company accounts                                        --      174,844        24,771       (199,615)           --

Shareholders' equity:
Preferred shares                                              --           --            --             --            --
Common shares                                             20,306           98            --            (98)       20,306
Additional paid-in capital                               167,219       25,221         6,418        (31,639)      167,219
Retained earnings                                        120,103       89,103           953        (90,056)      120,103
Accumulated other comprehensive loss, net of income
   tax benefit                                           (46,819)         (88)         (165)            --       (47,072)
Treasury shares                                           (1,868)      (4,052)           --          4,052        (1,868)
Unearned ESOP shares                                     (14,789)          --            --             --       (14,789)
Management group receivables                                (140)          --            --             --          (140)
Deferred compensation under Long-Term Incentive Plan      (3,866)          --            --             --        (3,866)
                                                        --------     --------       -------      ---------      --------
Total shareholders' equity                               240,146      110,282         7,206       (117,741)      239,893
                                                        --------     --------       -------      ---------      --------
                                                        $600,989     $367,870       $35,896      $(317,356)     $687,399
                                                        ========     ========       =======      =========      ========
</TABLE>

EDO CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF
EARNINGS FOR THE THREE MONTHS ENDED
SEPTEMBER 24, 2005
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           EDO
                                                       Corporation
                                                         Parent     Subsidiary
                                                      Company Only  Guarantors  Non-Guarantors  Eliminations  Consolidated
                                                      ------------  ----------  --------------  ------------  ------------
<S>                                                   <C>           <C>         <C>             <C>           <C>
Net Sales                                                $45,238     $125,549       $7,849        $(2,752)      $175,884
Costs and expenses:
Cost of sales                                             37,270       93,426        5,154         (2,752)       133,098
</TABLE>


                                       16

<PAGE>

<TABLE>
<S>                                                   <C>           <C>         <C>             <C>           <C>
Selling, general and administrative                        3,696       16,138        1,792             --         21,626
Research and development                                     679        2,686          213             --          3,578
Environmental cost provision, Deer Park facility             288           --           --             --            288
                                                         -------     --------       ------        -------       --------
                                                          41,933      112,250        7,159         (2,752)       158,590
                                                         -------     --------       ------        -------       --------
Operating earnings                                         3,305       13,299          690             --         17,294
Non-operating income (expense)
Interest income                                              351           16           40             --            407
Interest expense                                          (2,408)          --           --             --         (2,408)
Other, net                                                    (6)          29          (41)            --            (18)
                                                         -------     --------       ------        -------       --------
                                                          (2,063)          45           (1)            --         (2,019)
Earnings before income taxes                               1,242       13,344          689             --         15,275
Income tax benefit (expense)                                 628       (5,751)        (311)            --         (5,434)
                                                         -------     --------       ------        -------       --------
Earnings after income taxes                                1,870        7,593          378             --          9,841
Equity in undistributed earnings of subsidiaries           7,971           --           --         (7,971)            --
                                                         -------     --------       ------        -------       --------
Net earnings                                             $ 9,841     $  7,593       $  378        $(7,971)      $  9,841
                                                         =======     ========       ======        =======       ========
</TABLE>

EDO CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF
EARNINGS FOR THE NINE MONTHS ENDED
SEPTEMBER 24, 2005
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           EDO
                                                       Corporation
                                                         Parent     Subsidiary
                                                      Company Only  Guarantors  Non-Guarantors  Eliminations  Consolidated
                                                      ------------  ----------  --------------  ------------  ------------
<S>                                                   <C>           <C>         <C>             <C>           <C>
Net Sales                                               $132,178     $304,555       $22,054       $(10,283)     $448,504
Costs and expenses:
Cost of sales                                            108,874      222,573        15,348        (10,283)      336,512
Selling, general and administrative                       11,230       45,892         4,806             --        61,928
Research and development                                   3,701        7,547           742             --        11,990
Environmental cost provision, Deer Park facility           1,538           --            --             --         1,538
                                                        --------     --------       -------       --------      --------
                                                         125,343      276,012        20,896        (10,283)      411,968
                                                        --------     --------       -------       --------      --------
Operating earnings                                         6,835       28,543         1,158             --        36,536
Non-operating income (expense)
Interest income                                            1,060           44            98             --         1,202
Interest expense                                          (6,873)          --            --             --        (6,873)
Other, net                                                     5           52          (135)            --           (78)
                                                        --------     --------       -------       --------      --------
                                                          (5,808)          96           (37)            --        (5,749)
Earnings before income taxes                               1,027       28,639         1,121             --        30,787
Income tax benefit (expense)                                 495      (11,836)         (608)            --       (11,949)
                                                        --------     --------       -------       --------      --------
Earnings after income taxes                                1,522       16,803           513             --        18,838
Equity in undistributed earnings of subsidiaries          17,316           --            --        (17,316)           --
                                                        --------     --------       -------       --------      --------
Net earnings                                            $ 18,838     $ 16,803       $   513       $(17,316)     $ 18,838
                                                        ========     ========       =======       ========      ========
</TABLE>

EDO CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 24, 2005
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           EDO
                                                       Corporation
                                                         Parent     Subsidiary
                                                      Company Only  Guarantors  Non-Guarantors  Eliminations  Consolidated
                                                      ------------  ----------  --------------  ------------  ------------
<S>                                                   <C>           <C>         <C>             <C>           <C>
OPERATING ACTIVITIES:
Earnings from continuing operations                     $ 18,838     $ 16,803       $   513       $(17,316)     $ 18,838
Adjustments to earnings to arrive at cash
   provided by continuing operations:
Depreciation                                               3,205        3,616           417             --         7,238
Amortization                                                  --        3,568           751             --         4,319
Bad debt expense                                             244          755            --             --           999
Loss on sale of property, plant and equipment                 --            3            --             --             3
Environmental cost provision, Deer Park facility           1,538           --            --             --         1,538
</TABLE>


                                       17

<PAGE>

<TABLE>
<S>                                                   <C>           <C>         <C>             <C>           <C>
Long-term Incentive Plan compensation expense              1,298           --            --             --         1,298
Employee Stock Ownership Plan compensation expense         3,771           --            --             --         3,771
Dividends on unallocated Employee Stock Ownership
   Plan shares                                               191           --            --             --           191
Common shares issued for directors' fees                     148           --            --             --           148
Changes in operating assets and liabilities,
   excluding effects of acquisitions:
Equity in earnings of subsidiaries                       (17,316)          --            --         17,316            --
Intercompany                                              22,997      (22,855)         (142)            --            --
Accounts receivable                                       (6,730)     (15,064)         (420)            --       (22,214)
Inventories                                               (1,491)      (8,843)          201             --       (10,133)
Prepayments and other assets                               4,234         (608)          (12)            --         3,614
Accounts payable, accrued liabilities and other          (12,044)      12,674        (1,250)            --          (620)
Contribution to defined benefit pension plan              (6,000)          --            --             --        (6,000)
Contract advances and deposits                            (3,168)      20,276            --             --        17,108
                                                        --------     --------       -------       --------      --------
Cash provided by operations                                9,715       10,325            58             --        20,098
                                                        --------     --------       -------       --------      --------
INVESTING ACTIVITIES:
Purchase of Property, plant and equipment                (11,778)      (6,434)         (192)            --       (18,404)
Payments received on notes receivable                        225           --            --             --           225
Cash paid for acquisitions, net of cash acquired         (45,180)          --            --             --       (45,180)
                                                        --------     --------       -------       --------      --------
Cash used by investing activities                        (56,733)      (6,434)         (192)            --       (63,359)
                                                        --------     --------       -------       --------      --------
FINANCING ACTIVITIES:
Proceeds from exercise of stock options                      839           --            --             --           839
Excess income tax benefit from stock options and
   Long-term Incentive Plan                                  661           --            --             --           661
Proceeds from management group receivables                    11           --            --             --            11
Repayments of acquired debt                               (6,931)          --                                     (6,931)
Payment of common share cash dividends                    (1,815)          --            --             --        (1,815)
                                                        --------     --------       -------       --------      --------
Cash used by financing activities                         (7,235)          --            --             --        (7,235)
                                                        --------     --------       -------       --------      --------
Net (decrease) increase in cash and cash
   equivalents                                           (54,253)       3,891          (134)            --       (50,496)
Cash and cash equivalents at beginning of period          93,129        1,314         4,441             --        98,884
                                                        --------     --------       -------       --------      --------
Cash and cash equivalents at end of period              $ 38,876     $  5,205       $ 4,307       $     --      $ 48,388
                                                        ========     ========       =======       ========      ========
</TABLE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

INTRODUCTION

     The Company designs and manufactures a diverse range of products with core
competencies in critical defense areas. We are a leading supplier of
sophisticated, highly engineered products and systems for defense, aerospace and
intelligence applications. We believe our advanced systems are mission-critical
on a wide range of military programs and are at the core of transforming defense
capabilities. We have two reporting segments: Engineered Systems and Services
and Electronic Systems and Communications. Our Engineered Systems and Services
segment comprises of aircraft armament systems, integrated composite structures,
undersea warfare sonar systems, and professional engineering services. Our
Electronic Systems and Communications segment provides highly-engineered
electronic systems and equipment including electronic warfare systems,
reconnaissance and surveillance systems, signal intelligence systems, command,
control, communications, and computers (C4) products and systems, Information
and Intelligence Warfare Markets. The Company has a disciplined acquisition
program which is diversifying its base of major platforms and customers.

     The Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and all amendments to those reports, and the Proxy
Statement for its Annual Meeting of Shareholders are made available, free of
charge, on its web site www.edocorp.com, as soon as reasonably practicable after
such reports have been filed with or furnished to the Securities and Exchange
Commission.

DISCUSSION OF CRITICAL ACCOUNTING POLICIES

     We make estimates and assumptions in the preparation of our consolidated
financial statements in conformity with accounting principles generally accepted
in the United States. Actual results could differ significantly from those
estimates under different assumptions and conditions. We believe that the
following discussion addresses our critical accounting policies, which are those
that


                                       18
<PAGE>

are most important to the portrayal of our consolidated financial condition and
results of operations and which require our most difficult and subjective
judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain. The following is a brief discussion of
the critical accounting policies employed by us.

REVENUE RECOGNITION

     Sales under long-term, fixed-price contracts, including pro-rata profits,
are generally recorded based on the relationship of costs incurred to date to
total projected final costs or, alternatively, as deliveries and other
milestones are achieved or services are provided. These projections are revised
throughout the lives of the contracts. Adjustments to profits resulting from
such revisions are made cumulative to the date of change and may affect current
period earnings. Sales on other than long-term contract orders (principally
commercial products) are recorded as shipments are made. Our gross profit is
affected by a variety of factors, including the mix of products, systems and
services sold, production efficiencies, price competition and general economic
conditions. Estimated losses on long-term contracts are recorded when
identified.

INVENTORIES

     Inventories under long-term contracts and programs reflect all accumulated
production costs, including factory overhead, initial tooling and other related
costs (including general and administrative expenses relating to certain of our
defense contracts), less the portion of such costs charged to cost of sales. All
other inventories are stated at the lower of cost (principally first-in,
first-out method) or market. Inventory costs in excess of amounts recoverable
under contracts and which relate to a specific technology or application and
which may not have alternative uses are charged to cost of sales when such
circumstances are identified.

     From time to time, we manufacture certain products prior to receiving firm
contracts in anticipation of future demand. Such costs are inventoried and are
incurred to help maintain stable and efficient production schedules.

     Several factors may influence the sale and use of our inventories,
including our decision to exit a product line, technological change, new product
development and/or revised estimates of future product demand. If inventory is
determined to be overvalued due to one or more of the above factors, we would be
required to recognize such loss in value at the time of such determination.

     Under the contractual arrangements by which progress payments are received,
the United States Government has a title to or a security interest in the
inventories identified with related contracts.

PROPERTY, PLANT AND EQUIPMENT AND OTHER LONG-LIVED ASSETS

     Property, plant and equipment is recorded at cost and is depreciated on a
straight-line basis over the estimated useful lives of such assets. Leasehold
improvements are amortized over the shorter of their estimated useful lives or
their respective lease periods.

     In those cases where we determine that the useful life of property, plant
and equipment should be shortened, we depreciate the net book value in excess of
salvage value over its revised remaining useful life thereby increasing
depreciation expense. Factors such as technological advances, changes to our
business model, changes in our capital strategy, changes in the planned use of
equipment, fixtures, software or changes in the planned use of facilities could
result in shortened useful lives. Long-lived assets, other than goodwill, are
reviewed by us for impairment whenever events or changes in circumstances
indicate that the carrying amount of any such asset may not be recoverable. The
estimate of cash flow, which is used to determine recoverability, is based upon,
among other things, certain assumptions about future operating performance.

     Our estimates of undiscounted cash flow may differ from actual cash flow
due to such factors including technological advances, changes to our business
model, or changes in our capital strategy or planned use of long-lived assets.
If the sum of the undiscounted cash flows, excluding interest, is less than the
carrying value, we would recognize an impairment loss, measured as the amount by
which the carrying value exceeds the fair value of the asset.

     In accordance with SFAS No. 142, goodwill must be tested at least annually
for impairment at the reporting unit level. If an indication of impairment
exists, we are required to determine if such goodwill's implied fair value is
less than the unit carrying value in order to determine the amount, if any, of
the impairment loss required to be recorded. Impairment indicators include,
among other conditions, cash flow deficits, an historic or anticipated decline
in revenue or operating profits, adverse legal or regulatory developments,
accumulation of costs significantly in excess of amounts originally expected to
acquire the asset and/or a material decrease in the fair value of some or all of
the assets.

     To determine the fair value of our reporting units, we generally use a
present value technique (discounted cash flow) corroborated by market multiples
when available and as appropriate, for all of the reporting units. The
discounted cash flow method measures intrinsic value by reference to an
enterprise's or an asset's expected annual free cash flows. We applied what we
believe to be the


                                       19

<PAGE>

most appropriate valuation methodology for each of the reporting units. If we
had established different reporting units or utilized different valuation
methodologies, the impairment test results could differ.

PENSION AND POST-RETIREMENT BENEFITS OBLIGATIONS

     We sponsor defined benefit pension and other retirement plans in various
forms covering all eligible employees. Several statistical and other factors
which attempt to anticipate future events are used in calculating the expense
and liability related to the plans. These factors include assumptions about the
discount rate and expected return on plan assets within certain guidelines and
in conjunction with our actuarial consultants. In addition, our actuarial
consultants also use subjective factors such as withdrawal and mortality rates
to estimate the expense and liability related to these plans. The actuarial
assumptions used by us may differ significantly, either favorably or
unfavorably, from actual results due to changing market, economic or regulatory
conditions, higher or lower withdrawal rates or longer or shorter life spans of
participants.

     We used the building block approach to the estimation of the long-term rate
of return on assets. Under this approach, we reviewed the publicly available
common source data for the range of returns on basic types of equity and fixed
income instruments and the differential to those rates provided by active
investment management. In consultation with our actuarial and active asset
management consultants and taking into account the funds' actual performance and
expected asset allocation going forward, we selected an overall return rate
within the resulting range.

RESULTS OF OPERATIONS

     The following information should be read in conjunction with the
Consolidated Financial Statements as of September 30, 2006.

THREE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
24, 2005

     Net sales by segment were as follows:

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED          INCREASE/
                                          -----------------------------    (DECREASE)
                                          SEPTEMBER 30,   SEPTEMBER 24,       FROM
SEGMENT                                        2006            2005       PRIOR PERIOD
-------                                   -------------   -------------   ------------
                                                  (IN THOUSANDS)
<S>                                       <C>             <C>             <C>
Engineered Systems & Services .........      $ 77,648        $ 57,325         35.5%
Electronic Systems & Communications ...       106,745         118,559        (10.0%)
                                             --------        --------        -----
Total .................................      $184,393        $175,884          4.8%
                                             ========        --------        -----
</TABLE>

     In the Engineered Systems and Services segment, the increase in sales was
attributable to the acquisition of Fiber Innovations which was acquired on
September 19, 2005 and CAS which was acquired on September 6, 2006 plus
increased sales of undersea warfare products, flight line test products and
professional services. These increases were partially offset by lower sales in
aircraft armament systems.

     In the Electronic Systems and Communications segment, the decrease in sales
was attributable to continued lower sales volume of electronic force protection
systems resulting from lack of follow-on orders for systems in previous periods
and a delay in delivery for those systems on order. This decrease was partially
offset by increased sales of C4 products and systems, including the Transition
Switch Module (TSM), in addition to sales contributed by NexGen, which was
acquired on December 20, 2005, and the sales contributed by IST which was
acquired on September 15, 2006.

     Operating earnings by segment were as follows:

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED
                                          -----------------------------
                                          SEPTEMBER 30,   SEPTEMBER 24,
SEGMENT                                        2006            2005
-------                                   -------------   -------------
                                                  (IN THOUSANDS)
<S>                                       <C>             <C>
Engineered Systems & Services .........       $  674         $ 3,005
Electronic Systems & Communications ...        1,730          14,577
Environmental cost provision, Deer
   Park facility ......................       $   --            (288)
                                              ------         -------
Total .................................       $2,404         $17,294
                                              ======         =======
</TABLE>

     Operating earnings for the three months ended September 30, 2006 were $2.4
million or 1.3% of net sales. This compares to operating earnings for the three
months ended September 24, 2005 of $17.3 million or 9.8% of net sales.

     Items of note affecting operating earnings are summarized here to help
clarify the comparison of results.


                                       20

<PAGE>

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED
                                          -----------------------------
                                          SEPTEMBER 30,   SEPTEMBER 24,
                                               2006            2005
                                          -------------   -------------
                                                  (IN THOUSANDS)
<S>                                       <C>             <C>
Pension ...............................       $1,194          $1,070
ESOP Compensation expense .............       $  975          $1,221
Other intangible asset amortization ...       $1,707          $1,698
                                              ------          ------
                                              $3,876          $3,989
                                              ======          ======
</TABLE>

     The increase in pension expense in 2006 compared to 2005 is attributable to
changes in actuarial assumptions such as discount rate and return on plan
assets. The lower ESOP compensation expense for the three months ended September
30, 2006 is attributable to our lower average stock price compared to the three
months ended September 24, 2005. Pension and ESOP compensation expense are
allocated between cost of sales and selling, general and administrative expense.

     The Engineered Systems and Services segment's operating earnings for the
three months ended September 30, 2006 were $0.7 million or 0.9% of this
segment's net sales compared to operating earnings of $3.0 million or 5.2% of
this segment's net sales for the three months ended September 24, 2005.
Operating earnings for the three months ended September 30, 2006, were
negatively impacted by a $2.2 million cost growth on an aircraft armament
systems program and a $0.4 million cost growth on an undersea warfare program as
well as lower margins due to lower sales volume of composite structures,
primarily the Joint Air to Surface Standoff Missile units (JASSM) and the
attendant higher absorption of overhead costs. We believe that, based on our
most current estimates, we have accounted for all future costs necessary to
complete these programs. In addition, operating earnings for Engineered Systems
and Services were impacted by a write-down of unamortized other intangible
assets of $1.5 million related to the Company's rugged computer product line. As
sales and orders were not materializing to expected levels, the Company tested
for impairment and it was determined that the future undiscounted cash flows
associated with these assets were insufficient to recover their carrying values.
These assets were written down to zero, which was determined on the basis of
future discounted cash flows. These negative impacts were partially offset by
performance improvements on other undersea warfare programs and by the
acquisition of CAS on September 6, 2006.

     For the three months ended September 24, 2005 the Engineered Systems and
Services segment's operating earnings were negatively impacted by $1.0 million
for the same undersea warfare systems program noted above and a $1.4 million
impact on several sonar array/depth sounder programs.

     The Electronic Systems and Communications segment's operating earnings for
the three months ended September 30, 2006 were $1.7 million or 1.6% of this
segment's net sales compared to operating earnings of $14.6 million or 12.3% of
this segment's net sales for the three months ended September 24, 2005.
Operating earnings were negatively impacted by the significantly lower sales
volume of electronic force protection systems. For the three months ended
September 30, 2006, sales of Warlock force protection systems represented 2.1%
of our total sales compared to 32.7% for the three months ended September 24,
2005. In addition, earnings were negatively impacted by a charge of
approximately $2.1 million related to the settlement of a contract dispute
during the third quarter of 2006. This was partially offset by higher earnings
due to the above mentioned TSM sales and performance improvements on other
programs. For the three months ended September 30, 2006, sales of TSM
represented 13.9% of our total sales compared to less than 1% for the three
months ended September 24, 2005.

     Selling, general and administrative expenses for the three months ended
September 30, 2006 of $30.2 million increased as a percent of net sales to 16.4%
from 12.3% for the three months ended September 24, 2005. The increase is
attributable to the three acquisitions made in 2005, which resulted in an
increase in other intangible asset amortization expense and costs accrued for
stay pay agreements. The acquisitions of CAS and IST also contributed to the
increase. In addition, the aforementioned legal settlement is reflected in
selling, general and administrative costs for the three months ended September
30, 2006.

     Research and development expense for the three months ended September 30,
2006 increased to $4.7 million or 2.5% of net sales from $3.6 million or 2.0% of
net sales for the three months ended September 24, 2005. The increase is
attributable to higher than usual spending on advanced communications detections
technologies partially offset by lower spending on force protection.

     Interest expense, net of interest income, for the three months ended
September 30, 2006 increased to $2.5 million from $2.0 million for the three
months ended September 24, 2005. Interest expense for the three months ended
September 30, 2006 is associated primarily with our 4.0% Convertible
Subordinated Notes ("Notes") due 2025 and recent borrowings under our revolving
credit facility. Also included in interest expense is the amortization of
deferred debt issuance costs associated with the offering of the Notes and
amortization of deferred financing costs associated with our credit facility.
Interest expense for the three months ended September 24, 2005 included the
costs of our $138.0 million 5.25% Convertible Subordinated Notes.


                                       21

<PAGE>

     For the three months ended September 30, 2006, we recorded a discrete
income tax benefit of $2.3 million related primarily to claims for the federal
research and development credit and extraterritorial income (ETI) exclusion tax
benefits not previously claimed. In the third quarter of 2005, the Company
recorded an income tax benefit of $0.8 million resulting from the reversal of
income tax contingencies which were determined to be no longer needed.

     For the three months ended September 30, 2006, net earnings were $2.1
million or $0.11 per diluted common share on 18.6 million diluted shares
compared to net earnings of $9.8 million or $0.48 per diluted common share on
22.8 million diluted shares for the three months ended September 24, 2005. The
convertible notes were anti-dilutive for the third quarter 2006 and dilutive in
the third quarter of 2005.

NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
24, 2005

     Net sales by segment were as follows:

<TABLE>
<CAPTION>
                                                NINE MONTHS ENDED           INCREASE/
                                          -----------------------------    (DECREASE)
                                          SEPTEMBER 30,   SEPTEMBER 24,       FROM
SEGMENT                                        2006            2005       PRIOR PERIOD
-------                                   -------------   -------------   ------------
                                                  (IN THOUSANDS)
<S>                                       <C>             <C>             <C>
Engineered Systems & Services .........      $199,078        $169,986        17.1%
Electronic Systems & Communications ...       257,422         278,518        (7.6%)
                                             --------        --------        ----
Total .................................      $456,500        $448,504         1.8%
                                             ========        ========        ----
</TABLE>

     In the Engineered Systems and Services segment, the increase in sales was
attributable to higher sales of aircraft armament systems relating to the F-22
missile launcher program, higher sales in composite structures which include
Fiber Innovations which was acquired on September 19, 2005 and the acquisition
of CAS on September 6, 2006. In addition, sales increased in undersea warfare
products and in professional services and were slightly offset by sales decline
in the flight line test systems due to delayed orders in the early part of the
period. The award was originally expected in the first quarter of 2006, but was
not received until August 2006.

     In the Electronic Systems and Communications segment, the decrease in sales
was attributable to lower sales due to lack of orders this year for our
electronic force protection systems and a delay in delivery of those systems on
order. These lower sales were partially offset by sales of EVI, NexGen and CAS,
which were acquired in the second and fourth quarter of 2005 and the third
quarter of 2006, respectively. Additional offset to the lower force protection
sales resulted from the increase in sales of the TSM units for the Marine Corps
and higher sales in B-1B spares, as well as radar and RF products.

     Operating earnings by segment were as follows:

<TABLE>
<CAPTION>
                                                NINE MONTHS ENDED
                                          -----------------------------
                                          SEPTEMBER 30,   SEPTEMBER 24,
SEGMENT                                        2006            2005
-------                                   -------------   -------------
                                                  (IN THOUSANDS)
<S>                                       <C>             <C>
Engineered Systems & Services .........       $3,891         $ 9,168
Electronic Systems & Communications ...        4,246          28,906
Environmental cost provision, Deer Park
   facility ...........................           --          (1,538)
                                              ------         -------
Total .................................       $8,137         $36,536
                                              ======         =======
</TABLE>

     Operating earnings for the nine months ended September 30, 2006 were $8.1
million or 1.8% of net sales. This compares to operating earnings for the nine
months ended September 24, 2005 of $36.5 million or 8.1% of net sales.

     Items of note affecting operating earnings are summarized here to help
clarify the comparison of results.

<TABLE>
<CAPTION>
                                                NINE MONTHS ENDED
                                          -----------------------------
                                          SEPTEMBER 30,   SEPTEMBER 24,
                                               2006            2005
                                          -------------   -------------
                                                  (IN THOUSANDS)
<S>                                       <C>             <C>
Pension ...............................      $ 3,582         $ 3,209
ESOP Compensation expense .............      $ 3,310         $ 3,771
Other intangible asset amortization ...      $ 5,121         $ 4,319
Stock-based compensation expense for
   options ............................      $   838         $    --
                                             -------         -------
                                             $12,851         $11,299
                                             =======         =======
</TABLE>

     The increase in pension expense in 2006 compared to 2005 is attributable to
changes in actuarial assumptions such as discount rate and return on plan
assets. The lower ESOP compensation expense for the first nine months of 2006 is
attributable


                                       22

<PAGE>

to our lower average stock price compared to the first nine months of 2005.
Pension and ESOP compensation expense are allocated between cost of sales and
selling, general and administrative expense. The increase in other intangible
asset amortization expense is attributable to the three acquisitions made in
2005.

     The increase in Stock-Based Compensation Expense relates to the
implementation of Financial Accounting Standards Board Statement No. 123(R),
Accounting for Stock-Based Compensation, (FAS 123(R)). With respect to FAS
123(R), no further costs are anticipated in 2006 related to non-vested stock
options. Prior to adoption of FAS 123(R) as of January 1, 2006, we accounted for
our stock-based compensation plans in accordance with Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees" and
related interpretations. Under APB No. 25, because the exercise price of the
Company's stock options is set equal to the market price of the underlying stock
on the date of grant, no compensation expense was recognized and pro-forma
disclosure information was provided. In 2006, we issued options only to
Directors. Those options were 100% vested at issuance and, therefore, accounted
for most of the $0.8 million of expense recorded in the first quarter.

     The Engineered Systems and Services segment's operating earnings for the
nine months ended September 30, 2006 were $3.9 million or 2.0% of this segment's
net sales compared to operating earnings of $9.2 million or 5.4% of this
segment's net sales for the nine months ended September 24, 2005. Operating
earnings were negatively impacted by a $2.5 million cost growth on an undersea
warfare program, $1.4 million and $2.2 million on two aircraft armament systems
programs. We believe that, based on our most current estimates, we have
accounted for all future costs necessary to complete these programs. In
addition, operating earnings were negatively impacted by $1.2 million in respect
of the conclusion of a legal action as well as a write-off of unamortized other
intangible assets of $1.5 million related to the Company's rugged computer
product line. Sales and orders were not materializing to expected levels.
Consequently, the related other intangible assets were deemed impaired. These
reductions were partially offset by performance improvement on other jobs,
release of a $0.9 million reserve on a completed aircraft armament program and a
$0.5 million reserve release on a sonar systems program, both due to program
completion under anticipated cost, and by earnings from the recently acquired
CAS.

     For the nine months ended September 24, 2005, the Engineered Systems and
Services segment's operating earnings were negatively impacted by a cost growth
of approximately $3.2 million on an undersea warfare sonar program. This was
offset by a positive impact to operating earnings of approximately $1.6 million
due to performance improvements on an aircraft armament program.

     In the Electronic Systems and Communications segment, operating earnings
for the nine months ended September 30, 2006 were $4.2 million or 1.6% of this
segment's net sales compared to operating earnings of $28.9 million or 10.4% of
this segment's net sales for the nine months ended September 24, 2005. Operating
earnings were negatively impacted by less recovery of overhead expenses due to
lower sales volume of electronic force protection systems, cost growth of $2.5
million on an interference cancellation program, lower milestone achievements of
reconnaissance and surveillance systems and acquisition-related costs for stay
pays associated with the acquisitions in 2005 and 2006. For the nine months
ended September 30, 2006, sales of warlock force protection systems represented
2.9% of our total sales compared to 21.4% for the nine months ended September
24, 2005. Operating earnings were additionally impacted by $3.8 million relating
to the settlement of the above-mentioned contract dispute. This was partially
offset by higher earnings relating to our RF products, B-1B support and radar
products.

     Legal costs and provisions for liabilities for the concluded legal matters
referred to above had an adverse effect on the results of operations for the
nine months ended September 30, 2006 of approximately $5.0 million.

     Selling, general and administrative expenses for the nine months ended
September 30, 2006 of $79.0 million increased as a percent of net sales to 17.3%
from 13.8% for the nine months ended September 24, 2005. The increase is
attributable to the three acquisitions made in 2005 and the two in the current
year, the aforementioned legal matters and the effect of the implementation of
FAS 123(R). Other intangible asset amortization also increased due to an
increase in other intangibles from the acquisitions of EVI, Fiber Innovations,
and NexGen.

     Research and development expense for the nine months ended September 30,
2006 decreased to $11.0 million or 2.4% of net sales from $12.0 million or 2.7%
of net sales for the nine months ended September 24, 2005, during which time
there was higher spending on electronic force protection, aircraft armament and
composite munitions.

     Interest expense, net of interest income, for the nine months ended
September 30, 2006 decreased to $5.1 million from $5.7 million for the nine
months ended September 24, 2005 primarily due to higher interest income on a
higher average cash balance and a lower interest rate on our 4.0% Convertible
Notes issued in November 2005. These decreases were partially offset by interest
expense associated with borrowings under the revolver. Also included in interest
expense is the amortization of deferred debt issuance costs associated with the
offering of the Notes and amortization of deferred financing costs associated


                                       23
<PAGE>

with our credit facility.

     Income tax expense reflects a benefit of 153% for the nine months ended
September 30, 2006 and an expense of 38.8% for the nine months ended September
24, 2005. For the nine months ended September 30, 2006, we recorded a discrete
income tax benefit during the third quarter of $2.3 million related primarily to
claims for the federal research and development credit and extraterritorial
income (ETI) exclusion tax benefits not previously claimed and an income tax
benefit of $3.7 million due to the reversal of income tax contingency reserves
related to the resolution of an outstanding tax matter which was determined
during the second quarter to be no longer needed. In the nine months ended
September 24, 2005, the Company recorded an income tax benefit of $0.8 million
resulting from the reversal of income tax contingencies which were determined
during the third quarter to be no longer needed.

     For the nine months ended September 30, 2006, net earnings were $7.4
million or $0.40 per diluted common share on 18.6 million diluted shares
compared to net earnings of $18.8 million or $0.97 per diluted common share on
22.7 million diluted shares for the nine months ended September 24, 2005. The
convertible notes were anti-dilutive for the nine months ended September 30,
2006 and dilutive for the nine months ended September 24, 2005.

LIQUIDITY AND CAPITAL RESOURCES

BALANCE SHEET

     Our cash and cash equivalents decreased 60.6% to $42.8 million at September
30, 2006 from $108.7 million at December 31, 2005. This decrease was due
primarily to the acquisition of CAS and IST in the third quarter of 2006, as
well as $14.2 million used for the purchase of capital equipment and $1.8
million for the payment of common share dividends.

     Accounts receivable increased 12.5% to $212.8 million at September 30, 2006
from $189.2 million at December 31, 2005 due in part to timing of collections of
billed receivables, increased sales, and the aforementioned acquisitions. At
September 30, 2006 approximately 85% of billed receivables were in the under-60
days aging category compared with 81% at December 31, 2005.

     Inventories increased 31.2% to $74.2 million at September 30, 2006 from
$56.6 million at December 31, 2005 due primarily to the efforts expended on
work-in-process on major programs and the delays in milestone achievements
which would have generated sales and reduced inventories.

     The note receivable of $7.0 million at September 30, 2006 relates to the
sale of our facility in Deer Park in 2003. The Deer Park facility note was due
on the later of October 9, 2005 or the date EDO achieved "Material Closure" as
defined as the note of certain environmental conditions. Subsequent to the end
of the quarter, we received a payment in respect of this note. There is an
on-going dispute between the Company and purchaser of the Deer Park facility
relating to the date of Material Closure.

     In the nine months ended September 30, 2006, capital expenditures were
$14.2 million. This compares to $18.4 million for the nine months ended
September 24, 2005. For the nine months ended September 24, 2005 the higher
expenditures were attributable to new facility capital for our Antenna Products
business unit which was relocated to a new leased facility, as well as expansion
and upgrades at several other facilities.

FINANCING ACTIVITIES

Credit Facility

     We have a five-year credit facility with a consortium of banks, led by
Citibank, N.A., as the administrative agent, Bank of America as the syndication
agent and Wachovia Bank, N.A. as the documentation agent. The facility expires
in November 2010.

     The credit agreement provides for a revolving credit facility in an
aggregate amount equal to $300 million with sub-limits of $20 million for
short-term swing loans and $100 million for letters of credit. The potential
cash borrowing under the facility is reduced by the amount of outstanding
letters of credit. The Company has the option to select Base Rate or Eurodollar
Rate loans under the terms of the Credit Agreement. Any borrowings under the
facility would be priced initially at LIBOR plus a predetermined amount
depending on our consolidated leverage ratio at the time of the borrowing. At
September 30, 2006, LIBOR was approximately 5.3% and the applicable adjustment
to LIBOR was 2.5%. The facility requires us to pay each lender in the consortium
a commitment fee on the average daily unused portion of their respective
commitment at a rate equal to 0.25%. In addition, the agreement provides for
potential incremental credit extensions in the form of term loans or revolving
credit commitment increases of up to $300 million.


                                       24

<PAGE>

     Letters of credit outstanding at September 30, 2006 pertaining to the
credit facility were $38.7 million, resulting in $261.3 million available for
borrowings. As at September 30, 2006, there were $200 million direct borrowings
outstanding under the credit facility. There were no direct borrowings
outstanding under the credit facility at December 31, 2005. Accrued interest
payable was $0.9 million at September 30, 2006.

     In connection with the credit facility, the Company is required to maintain
both financial and non-financial covenants and ratios, including, but not
limited to, leverage ratio, fixed charge coverage ratio, and senior secured
leverage ratio. As of September 30, 2006, the Company was in compliance with its
covenants. The credit facility is secured by the Company's accounts receivable,
inventory and machinery and equipment.

4.0% Convertible Subordinated Notes due 2025 ("4.0% Notes")

     In November 2005, we completed the offering of $201.2 million principal of
4.0% Notes and received proceeds of $195.7 million, net of $5.5 million of
commissions. Interest payments are due May 15 and November 15 of each year
commencing on May 15, 2006. Accrued interest payable was $3.1 million at
September 30, 2006. The Notes are convertible, unless previously redeemed or
repurchased by the Company, at the option of the holder at any time prior to
maturity, into the Company's common stock at an initial conversion price of
$34.19 per share, subject to adjustment in certain events. As of September 30,
2006, there had been no such conversions.

Shelf Registration

     At September 30, 2006, our remaining capacity under the universal shelf
registration statement that became effective in January 2004 was approximately
$298.8 million.

     We believe that, for the foreseeable future, we have adequate liquidity and
sufficient capital to fund our currently anticipated requirements for working
capital, capital expenditures, including acquisitions, research and development
expenditures, interest payments and funding of our pension and post-retirement
benefit obligations. We continue to focus on positioning ourselves to be a
significant player in the consolidation of first-tier defense suppliers and, to
that end, have actively sought candidates for strategic acquisitions. Future
acquisitions may be funded from any of the following sources: cash on hand;
borrowings under our credit facility; issuance of our common stock or other
equity securities; and/or convertible or other debt offerings.

COMMITMENTS AND CONTINGENCIES

     In order to aggregate all commitments and contractual obligations as of
September 30, 2006, we have included the following table. We are obligated under
building and equipment leases expiring between 2006 and 2019. The aggregate
future minimum lease commitments under those obligations with non-cancellable
terms in excess of one year are included in the table shown below. Our
commitments under letters of credit and advance payment and performance bonds
relate primarily to advances received on foreign contracts should we fail to
perform in accordance with the contract terms. We do not expect to have to make
payments under these letters of credits or bonds since these obligations are
removed as we perform under the related contracts. The amounts for letters of
credit and performance bonds represent the amount of commitment expiration per
period.

<TABLE>
<CAPTION>
                                                                      PAYMENTS DUE IN (IN MILLIONS):
                                                        ----------------------------------------------------------
                                                                                                          2011 AND
COMMITMENTS AND CONTRACTUAL OBLIGATIONS:                 TOTAL    2006     2007    2008    2009    2010    BEYOND
----------------------------------------                ------   ------   -----   -----   -----   -----   --------
<S>                                                     <C>      <C>      <C>     <C>     <C>     <C>      <C>
Borrowings Under Revolver ...........................   $200.0   $200.0   $  --   $  --   $  --   $  --    $   --
Notes payable .......................................     24.3      2.0     7.8     8.8     5.7      --        --
4.0% Convertible Subordinated Notes due 2025 (1) ....    201.2       --      --      --      --      --     201.2
Operating leases ....................................    159.3      5.7    22.7    21.6    19.9    17.4      72.0
Letters of credit ...................................     38.6      2.4    21.6     0.6    13.4      --       0.6
Projected pension contributions .....................     17.0       --     6.0     6.0     5.0      --        --
Advance payment and performance bonds ...............      1.9      0.2      --      --     1.7      --        --
                                                        ------   ------   -----   -----   -----   -----    ------
Total ...............................................   $642.3   $210.3   $58.1   $37.0   $45.7   $17.4    $273.8
                                                        ======   ======   =====   =====   =====   =====    ======
</TABLE>

(1)  Excludes interest of approximately $8 million annually.


                                       25

<PAGE>

     During the third quarter of 2006, the Company contributed $6.0 million to
the pension plan. Actual pension contributions may differ from amounts presented
above and are contingent on cash flow and liquidity.

     Additionally, the Company is subject to certain legal actions that arise
out of the normal course of business. It is our belief that the ultimate outcome
of these actions is unlikely to have a material adverse effect on our
consolidated financial position, results of operations or liquidity. However,
certain legal matters did adversely impact results of operations for the nine
months ended September 30, 2006, as noted above.

CONCENTRATION OF SALES

     We conduct a significant amount of our business with the United States
Government. Although there are currently no indications of a significant change
in the status of government funding of certain programs, should this occur, our
results of operations, financial position and liquidity could be materially
affected. Such a change could have a significant impact on our profitability and
our stock price. This could also affect our ability to acquire funds from our
credit facility due to covenant restrictions or from other sources.

     For the three and nine months ended September 30, 2006, sales of Warlock
force protection systems represented 2.1% and 2.9% of net sales compared to
32.7% and 21.4% for the three and nine months ended September 24, 2005,
respectively. In addition, for the three and nine months ended September 30,
2006, sales of TSM represented 13.9% and 7.3% of net sales compared to less than
1% of net sales for the same periods ended September 24, 2005.

BACKLOG

     The funded backlog of unfilled orders at September 30, 2006 increased to
$771.6 million from $558.7 million at December 31, 2005. Our backlog consists
primarily of current orders under long-lived, mission-critical programs on key
defense platforms.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995

     The statements in this Quarterly Report and in oral statements that may be
made by representatives of the Company relating to plans, strategies, economic
performance and trends and other statements that are not descriptions of
historical facts may be forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27(a) of the
Securities Act of 1933 and Section 21(e) of the Securities Exchange Act of 1934.
Forward looking statements are inherently subject to risks and uncertainties,
and actual results could differ materially from those currently anticipated due
to a number of factors, which include, but are not limited to the following for
each of the types of information noted below.

     U.S. and international military program sales, follow-on procurement,
contract continuance, and future program awards, upgrades and spares support are
subject to: U.S. and international military budget constraints and
determinations; U.S. congressional and international legislative body
discretion; U.S. and international government administration policies and
priorities; changing world military threats, strategies and missions;
competition from foreign manufacturers of platforms and equipment; NATO country
determinations regarding participation in common programs; changes in U.S. and
international government procurement timing, strategies and practices, the
general state of world military readiness and deployment; and the ability to
obtain export licenses.

     Commercial product sales are subject to: success of product development
programs currently underway or planned; competitiveness of current and future
production costs and prices and market and consumer base development of new
product programs.

     Achievement of margins on sales, earnings and cash flow can be affected by:
unanticipated technical problems; government termination of contracts for
convenience; decline in expected levels of sales; underestimation of anticipated
costs on specific programs; the ability to effect acquisitions; and risks
inherent in integrating recent acquisitions into our overall structure.

     Expectations of future income tax rates can be affected by a variety of
factors, including statutory changes in Federal and state tax rates and IPR&D
acquired in a stock purchase business combination and the non-deductibility of
our non-cash ESOP compensation expense.

     The Company has no obligation to update any forward-looking statements.


                                       26

<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

     For quantitative and qualitative disclosures about market risk, see Item
7A, "Quantitative and Qualitative Disclosures About Market Risk," of our annual
report on Form 10-K for the year ended December 31, 2005.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

     As of the end of the period covered by this Quarterly Report on Form 10-Q
the Company carried out an evaluation, under the supervision and with the
participation of the Company's senior management, including the Chief Executive
Officer and the Chief Financial Officer, as well the audit committee of the
Board of Directors, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures.

     Based on their evaluation, the Chief Executive Officer and the Chief
Financial Officer of the Company have concluded that the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934) are effective to ensure that the information
required to be disclosed by the Company in the reports that it files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms.

CHANGES IN INTERNAL CONTROLS

     There were no changes in EDO's internal controls over financial reporting
during EDO's last fiscal quarter that have materially affected, or are likely to
materially affect internal controls over financial reporting.

                           PART II - OTHER INFORMATION

ITEM 1A. RISK FACTORS

     None.

ITEM 4. Submission of Matters to a Vote of Security Holders

     None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

10*    2004 Non-Executive Director Stock Ownership Plan, as amended.

31.1*  Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and
       15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
       Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*  Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and
       15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
       Section 302 of the Sarbanes-Oxley Act of 2002.

32*    Certification of Chief Executive Officer and Chief Financial Officer
       Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
       Sarbanes-Oxley Act of 2002.

*    Filed herewith.

(B) REPORTS ON FORM 8-K

     The following report on Form 8-K was filed during the three months ended
September 30, 2006:

<TABLE>
<CAPTION>
  DATE OF REPORT                         ITEMS REPORTED
  --------------                         --------------
<S>                  <C>
   July 26, 2006     Item 1.01. Entry into a material definitive agreement.

                     Item 5.02. Departures of Directors or Principal Officers;
                     Election of Directors; Appointment of Principal Officers.
</TABLE>


                                       27

<PAGE>

<TABLE>
<S>                  <C>
   July 27, 2006     Item 2.02. Results of Operations and Financial Condition.

  August 31, 2006    Item 1.01. Entry into a material definitive agreement.

 September 6, 2006   Item 1.01. Entry into a material definitive agreement.

                     Item 2.01. Completion of Acquisition or Disposition of
                     Assets.

September 15, 2006   Item 2.01. Completion of Acquisition or Disposition of
                     Assets.
</TABLE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, its principal financial officer, thereunto duly authorized.

                                        EDO CORPORATION (Registrant)


Dated: November 6, 2006                 By: /s/ FREDERIC B. BASSETT
                                            ------------------------------------
                                            Frederic B. Bassett
                                            Senior Vice President Finance,
                                            Treasurer and Chief Financial
                                            Officer


                                       28