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                                   FORM 10-K

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

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

For the Fiscal Year Ended                                Commission File Number
    December 31, 1996                                             1-3985

                                EDO CORPORATION
             Exact name of Registrant as specified in its charter.

State of Incorporation:                        IRS Employer Identification No.:
      New York                                           11-0707740

                    Address of principal executive offices:
            14-04 111th Street, College Point, New York 11356-1434

                                Telephone No.:
                                (718) 321-4000

          Securities registered pursuant to Section 12(b) of the Act:

 Title of each class:                Name of each exchange on which registered:
   Common Shares                               New York Stock Exchange
par value $1 per share

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.    [X]

State the aggregate market value of the voting stock held by non-affiliates of
the Registrant as of March 4, 1997................................. $42,863,715

Indicate the number of shares outstanding of each of the Registrant's classes
of common stock as of March 4, 1997 ................................. 6,146,766

                      Documents Incorporated by Reference

Portions of the Definitive Proxy Statement of the Registrant, dated March 21,
1997, are incorporated by reference into Part III.
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                               Table of Contents

PART I.......................................................................1
ITEM 1. BUSINESS.............................................................1
DEFENSE AND SPACE SYSTEMS....................................................1
Marine and Aircraft Systems..................................................1
Aircraft Stores Suspension and Release Equipment.............................1
Airborne Mine Countermeasures Systems........................................1
Combat Systems...............................................................2
Command and Control Systems..................................................2
Antisubmarine Warfare Sonar..................................................2
Electro-Optics Systems.......................................................2
INDUSTRIAL PRODUCTS..........................................................2
Acoustic Products............................................................2
Ceramics.....................................................................3
Fiber Science................................................................3
DISCONTINUED OPERATIONS......................................................3
RESEARCH AND DEVELOPMENT.....................................................3
MARKETING AND INTERNATIONAL SALES............................................4
BACKLOG......................................................................4
GOVERNMENT CONTRACTS.........................................................4
COMPETITION AND OTHER FACTORS................................................5
EMPLOYEES....................................................................5
EXECUTIVE OFFICERS OF THE REGISTRANT.........................................5
ITEM 2. PROPERTIES...........................................................6
ITEM 3. LEGAL PROCEEDINGS....................................................6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................6
PART II......................................................................6
ITEM 5. MARKET FOR REGISTRANT'S COMMON
        EQUITY AND RELATED STOCKHOLDER MATTERS...............................6
ITEM 6. SELECTED FINANCIAL DATA .............................................6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS..................................6
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................6
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING AND FINANCIAL DISCLOSURE..................................6
PART III.....................................................................6
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..................6
ITEM 11. EXECUTIVE COMPENSATION..............................................6
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
         BENEFICIAL OWNERS AND MANAGEMENT....................................7
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................7
PART IV......................................................................7
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
         AND REPORTS ON FORM 8-K.............................................7
SIGNATURES...................................................................9
SELECTED FINANCIAL DATA.....................................................10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
   FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................11
BUSINESS ENVIRONMENT........................................................11
RESULTS OF OPERATIONS - 1996 COMPARED TO 1995...............................11
FINANCIAL CONDITION.........................................................12
RESULTS OF OPERATIONS - 1995 COMPARED TO 1994...............................12
COMMON SHARE PRICES.........................................................13
DIVIDENDS...................................................................13
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE
   SECURITIES LITIGATION REFORM  ACT OF 1995................................13
CONSOLIDATED STATEMENTS OF OPERATIONS.......................................14
CONSOLIDATED BALANCE SHEETS.................................................15
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY.............................16
CONSOLIDATED STATEMENTS OF CASH FLOWS.......................................17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..................................18
INDEPENDENT AUDITORS' REPORT................................................27
QUARTERLY FINANCIAL INFORMATION (UNAUDITED).................................28
<PAGE>
                                    PART I

ITEM 1. BUSINESS

The term "Registrant" as used in this Annual Report refers to EDO Corporation.
The term "Company" as used in this Annual Report, except where the context
otherwise requires, includes the Registrant and its subsidiaries.

EDO Corporation was incorporated in New York in 1925 by Earl Dodge Osborn, from
whose initials "EDO" is derived.

The Company is principally a supplier of proprietary advanced electro-optical,
electronic, mechanical, acoustic and composite products to major prime defense
contractors and commercial original equipment manufacturers. The Company also
serves the domestic and international defense markets as a prime contractor for
military systems.

The Company organizes its business into two segments, which constitute its
continuing operations: Defense and Space Systems; and Industrial Products. A
description of the principal products of the Company within the two industry
segments is set forth below.

In 1996, the Company sold its general aviation floats business and announced
the discontinuance of its energy-related businesses. Further information about
the discontinuance of the energy-related businesses is provided in
"Discontinued Operations" on page 3 and in Note 3 on page 20 of this Report.

During 1993 and 1994, the Company adopted and implemented a restructuring plan.
Information about this restructuring is contained in Note 2 on page 19 of this
Report.

Certain business segment information on the Company's continuing operations is
set forth in Note 18 on page 26 of this Report.

The following discussion relates to the Company's continuing operations.

                           DEFENSE AND SPACE SYSTEMS

The Company's Defense and Space Systems operations, which accounted for 68%,
66% and 70% of consolidated net sales for 1996, 1995 and 1994, respectively,
are conducted by three separate business units. These business units are:
Marine and Aircraft Systems located in College Point, New York; Combat Systems
located in Chesapeake, Virginia; and Electro-Optics located in Shelton,
Connecticut. In 1994, all sonar related business was transferred from the
Marine and Aircraft Systems unit to the Combat Systems unit. As a result, the
Marine and Aircraft Systems unit in New York is now dedicated to mechanical and
structural products and the military electronics/software design business is
conducted at Combat Systems.

Marine and Aircraft Systems

The Marine and Aircraft business unit designs, develops and manufactures
sophisticated mechanical, electromechanical, structural, hydrodynamic and
aerodynamic systems for military use. Additionally, the business unit provides
logistics support for its products following initial hardware deliveries
including spare and repair parts, upgrade modifications, training and technical
services. The revenue from these support functions is a significant portion of
sales. The major products of the Marine and Aircraft Systems business unit are
aircraft stores suspension and release equipment and airborne mine
countermeasures systems. This business unit also designs and manufactures speed
measuring equipment for municipal rapid transit trains.

Aircraft Stores Suspension and Release Equipment

The Company developed and manufactured bomb release units (BRU) for the U.S.
Air Force F-15E, ejection release units (ERU) for the Tornado Multirole Combat
Aircraft and jettison release mechanisms (JRM) for the U.S. Navy F-14 aircraft.
In 1996, the Company continued production of BRUs for the F-15E under prior
orders received and new orders received in 1996, and provided spare parts
support for Tornado ERUs previously produced. In addition, the Company
continued the development of the Advanced Medium Range Air To Air Missile
(AMRAAM) launcher for the F-22 air superiority fighter. Funded development for
this missile launcher, which employs new internal carriage technology, is
expected to continue throughout 1997. In 1996, the Company received a
subcontract from Boeing for development of new weapons carriage technology for
application to existing and future aircraft. This effort is expected to
continue throughout 1997. For 1996, 1995 and 1994, respectively, sales of
aircraft stores suspension and release equipment represented 19%, 19%, and 21%
of consolidated net sales.

Airborne Mine Countermeasures Systems

The Company is the only manufacturer of the MK 105 helicopter towed magnetic
minesweeping system designed and developed by the Company in conjunction with
the U.S. Navy. In 1994, the Company completed development of a funded upgrade
to the MK 105. The upgraded system was delivered to the U.S. Navy for testing
and evaluation. These tests were completed in the first half of 1995. The first

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production contract for this upgrade was received at the end of 1995. An
additional production contract was received in 1996. Production under this
contract is expected to continue throughout 1997. In 1994, the Company began
work on a new U.S. Navy funded contract to develop a lightweight, self
contained, helicopter towed magnetic sweep for shallow water applications. This
system underwent U.S. Navy testing and evaluation in 1996. In addition, the
Company continued to provide logistic support for MK 105 systems previously
provided to both the U.S. Navy and an international customer.

For 1996, 1995 and 1994, respectively, sales of airborne mine countermeasures
systems represented 7%, 5% and 13% of consolidated net sales.

Combat Systems

The Combat Systems business unit designs, develops and produces combat systems
equipment including command, control and communications systems, and
antisubmarine warfare (ASW) systems. In addition, the business unit provides
logistics support including spare and repair parts, training and technical
services for its products.

Command and Control Systems

Command, control and communications systems include digital tactical data links
for domestic and international military customers. In 1996, this business unit
delivered an integrated command and control system for the U.S. Air Force. Work
on the Ship Shore Ship Buffer (SSSB) program, awarded in 1995, continued in
1996. In 1996, new orders were received from another international customer for
additional SSSB systems and additional data links.

Antisubmarine Warfare Sonar

The Company has been a supplier of ASW systems for more than forty years. In
1994, this business was transferred from the New York business unit to the
business unit in Virginia. In 1996, development and testing continued for a new
passive/active sonar system variation of the AN/SQR-18A(V) for the U.S. Navy.
An additional contract for this program was received in 1996 and work is
scheduled to continue throughout 1997. Logistics, maintenance and training
support was provided for EDO sonar systems installed in the now decommissioned
U.S. Navy FF-1052-class ships which are in service with several international
navies through the foreign military sales program. In 1996, a significant
contract was received from an international customer for a major upgrade to a
previously provided EDO sonar system. Work under this contract is expected to
continue for five years. For 1996, 1995 and 1994, respectively, sales of sonar
systems represented 3%, 10% and 11% of consolidated net sales.

Electro-Optics Systems

The Electro-Optics business unit designs, develops and manufactures
electro-optical products and systems for satellites. The primary products are
infrared earth sensors, which are used to provide satellites with information
relative to stabilization and orbit position. In 1996, Electro-Optics continued
to provide earth sensor assemblies for Hughes communication satellites, the
U.S. Air Force Global Positioning Satellite System, and Orbital Science's
ORBCOM digital data transmission system, and began delivering earth sensor
assemblies for the Motorola/Lockheed Iridium(TM) communication satellite
constellation. In addition, work continued on the sensors for the Loral/DASA
Globalstar(TM) communication satellite with deliveries scheduled for 1997. New
orders were received for additional sensors for Hughes geosynchronous
satellites and for the new INMARSAT constellation and for ORBCOM. For 1996,
1995 and 1994, respectively, sales of spaceflight systems represented 24%, 14%
and 9% of consolidated net sales.

                              INDUSTRIAL PRODUCTS

In 1994, the business units that are primarily related to non-military markets
were reorganized into the Industrial Products business segment. In late 1996,
the Company announced the discontinuance of its participation in the
energy-related market, and its intention to dispose of its interest in EDO
(Canada) Ltd., EDO Automotive Natural Gas, Inc. (EDO ANGI) and EDO Energy
Corporation. EDO Sports, a business unit dedicated to the production of
composite sporting products, was discontinued in late 1994.

The Industrial Products operations now include the Acoustic Products, Ceramics
and Fiber Science business units. The Acoustic Products business unit, located
in Salt Lake City, supplies the Industrial Products business units with support
services as required. The Industrial Products operations accounted for 32%, 34%
and 30% of consolidated net sales for 1996, 1995 and 1994, respectively.

Acoustic Products

The Acoustic Products business unit concentrates on industrial/commercial
applications of acoustic technology. Standard product lines are focused on the
precision measurement of velocity of objects in water or fluid streams. The
Company has invested in recent years in this technology. Most undersea
vehicles, both military and commercial, now carry the Company's velocity
measurement instruments.

                                    Page 2
<PAGE>
The Company has entered production of a new instrument product line, a
precision current profiler, which will be used by the environmental sciences
industry to map ocean and river currents. It was developed in a joint program
with a major European company.

Military transducer design and production also continue at the Acoustic
Products business unit. This business unit provides all of the Company's
commercial transducers as well.

The Acoustic Products unit is developing products for the active vibration
control marketplace. This initiative is intended to apply the Company's
expertise in piezoceramic materials and transducers to reduce vibration
emanating from industrial machinery. The Company has been working on a
partially government funded program for vibration reduction in precision
machine tools, specifically cylindrical grinders. In addition, the Company is
delivering products it designed and manufactured to reduce vibration in the
manufacturing process for semiconductors.

Ceramics

The Ceramics business unit, located in Salt Lake City, is one of North
America's largest manufacturers of piezoceramic components. Piezoceramic
elements convert acoustic energy to electrical energy and form the basis of
many industrial and commercial products ranging from military sonars to ink jet
printers. The Company has automated and improved this unit's production
processes and is focusing its efforts on industrial markets in addition to
maintaining its position as a leading supplier of ceramics for military
applications. For 1996, 1995 and 1994, respectively, sales of piezoceramics
represented 11%, 10% and 8% of consolidated net sales.

Fiber Science

In 1994, the Company decided to focus its Fiber Science business unit on the
development and production of its traditional composite water and waste tanks
for the commercial aviation market. This concentrated technical and marketing
effort yielded long-term production contracts from Boeing and Airbus.

While concentration on water and waste tanks is the primary mission of Fiber
Science, the Company continues to pursue programs in other commercial markets.
Fiber Science is now supplying composite pressure vessels for use as air start
reservoirs on large trucks, through a program with Ingersoll-Rand. Composite
pressure vessels are also being developed and tested for use in railroad car
braking systems.

                            DISCONTINUED OPERATIONS

The Company's former energy-related businesses consisted of the following: its
wholly-owned subsidiary EDO Energy Corporation, which provides program
management activities for compressed natural gas vehicles (CNGVs) and other
alternative fuel projects; its wholly-owned subsidiary EDO Automotive Natural
Gas, Inc., which designs and manufactures CNGV refueling stations and related
equipment; and a 50.4% interest in EDO (Canada) Ltd., which designs and
manufactures LiteRider_ fuel cylinders. The products of these businesses are
generally sold through independent distributors and dealers to end users, and
by employees of these businesses to original equipment manufacturers.

Due to the current and projected growth rates and financial returns of the
energy-related businesses failing to meet the Company's strategic criteria, the
Company decided in September 1996 to divest itself from these businesses.
Accordingly, the Company recorded a provision for loss of $7,000,000,
consisting of $2,000,000 in operating losses for the phase out period, and
$5,000,000 for reduction of asset values and provisions for estimated future
disposal costs.

These businesses continue to operate while the Company seeks investors
interested in their long-term development. The Company believes that adequate
provision for the ultimate loss on disposal of these businesses has been made
in the Company's financial statements, which provision is described in Note 3
on page 20 of this Report.

                           RESEARCH AND DEVELOPMENT

Research and development, performed both under development contracts with
customers and at Company expense, are important factors in the Company's
business. The Company's research and development efforts involve approximately
72 employees in the fields of acoustic, electronic, hydrodynamic, aerodynamic,
structural and material engineering. Research and development programs are
designed to develop technology for new products or to extend the capability of
existing products and to assess their commercial potential.

Customer-sponsored research and development programs are principally related to
military programs in the Defense and Space Systems segment. Major
customer-sponsored research and development programs include: continued
development of improvements to the AN/SQR-18A(V) TACTAS system; improvements to
the MK 105 mine countermeasures system; development of a new shallow-water mine
countermeasures system; development of new aircraft weapons carriage

                                    Page 3
<PAGE>
technology; developments in combat systems integration; development of new and
improved stores launchers; and development of new earth and sun sensors for
satellites.

Expenditures under development contracts with customers vary in amount from
year to year because of the timing of contract funding. In 1995, expenditures
for customer-sponsored research and development declined 28% from1994,
primarily as a result of less available funding, consistent with the general
decline in military spending. In 1996, expenditures rose 34% over 1995 due
primarily to increased funding in all business areas.

Company-sponsored research and development has contributed to a number of
advances in sonar systems, transducers, stores release systems, mine
countermeasures systems, digital data links, filament-wound structures, and
composite pressure vessels.

Principal current research and development involves: image and signal
processing and other improvements for combat systems, improvements to
minesweeping technology, continued development of satellite-based sensors, the
application of its acoustic and ceramic technologies to vibration control, and
development of composite pressure vessels for the truck and train markets.

The following table sets forth research and development expenditures for the
periods presented.
            ======================================================
                                         Year Ended December 31,
                                      1996        1995        1994
                                           (in thousands)
            ------------------------------------------------------
            Customer-sponsored    $ 17,800    $ 13,300    $ 18,400
            Company-sponsored        1,000       1,000       2,500
            ------------------------------------------------------
            Total                 $ 18,800    $ 14,300    $ 20,900
            ======================================================

                       MARKETING AND INTERNATIONAL SALES

Military sales of the Company's products to both the U.S. and foreign
governments are usually made under negotiated long-term contracts or
subcontracts covering one or more years of production. The Company believes
that its long history of association with its military customers is an
important factor in the Company's overall business, and that the experience
gained through this history has enhanced the Company's ability to anticipate
its customers' needs. The Company's approach to its military business is to
anticipate specific customer needs and to develop systems to meet those needs
either at its own expense or pursuant to research and development contracts.

The Company sells products in its Defense and Space Systems segment as a prime
contractor and through subcontracts with other prime contractors. In addition
to military sales to the U.S. Department of Defense, the Company also sells
Defense and Space Systems segment equipment to the U.S. Government for resale
to foreign governments under the Foreign Military Sales program and, subject to
approval by the U.S. Department of State, directly to foreign governments.

Products within the Industrial Products segment are sold in industrial and
commercial markets. In foreign markets, piezoelectric and electronic products
are generally sold commercially through a network of sales representatives.
Fiber-reinforced composite products are sold, in certain product areas, on a
direct basis and, in other product areas, through sales representatives.

It is the Company's policy to denominate all foreign contracts in U.S. dollars
and generally to incur no significant costs in connection with long-term
foreign contracts until the Company has received advance payments or letters of
credit on amounts due under the contracts.

                                    BACKLOG

A significant portion of the Company's sales are made directly or indirectly
through prime contractors to the U.S. armed services and foreign governments
pursuant to long-term contracts. Accordingly, the Company's backlog of unfilled
orders consists in large part of orders under these government contracts. As of
December 31, 1996, the Company's total backlog was approximately $103.0
million, as compared with $85.6 million on December 31, 1995. Of the total
backlog as of December 31, 1996, approximately 63% was scheduled for delivery
in 1997. Total backlog as of December 31, 1996, divided between the Company's
two industry segments, was Defense and Space Systems, $86.9 million, and
Industrial Products, $16.1 million, as compared, respectively, with $64.1
million and $21.5 million as of December 31, 1995.

                             GOVERNMENT CONTRACTS

Sales to the U.S. Government, as a prime contractor and through subcontracts
with other prime contractors, accounted for 36% of the Company's 1996
consolidated net sales compared with 43% in 1995 and 59% in 1994, and consisted
primarily of sales to the Department of Defense. Such sales do not include
sales of military equipment to the U.S. Government for resale to foreign
governments under the Foreign Military Sales program.

The Company's military business can be and has been significantly affected by
changes in national defense policy and spending. The Company's U.S. Government
contracts and subcontracts and certain foreign government contracts contain the

                                    Page 4
<PAGE>
usual required provisions permitting termination at any time for the
convenience of the government with payment for work completed and committed
along with associated profit at the time of termination.

The Company's contracts with the Department of Defense consist of fixed price
contracts, cost-reimbursable contracts and incentive contracts of both types.
Fixed-price contracts provide fixed compensation for specified work.
Cost-reimbursable contracts require the Company to perform specified work in
return for reimbursement of costs (to the extent allowable under government
regulations) and a specified fee. In general, while the risk of loss is greater
under fixed-price contracts than under cost-reimbursable contracts, the
potential for profit under such contracts is greater than under
cost-reimbursable contracts. Under both fixed-price incentive contracts and
cost-reimbursable incentive contracts, an incentive adjustment is made in the
Company's fee based on attainment of scheduling, cost, quality or other goals.
The distribution of the Company's government contracts among the categories of
contracts referred to above varies from time to time, although in recent years
only a small percentage of the Company's contracts have been on a
cost-reimbursable or incentive basis.

                         COMPETITION AND OTHER FACTORS

Some of the Company's products are sold in markets containing a number of
competitors substantially larger than the Company and with greater financial
resources. Direct sales of military products to U.S. and foreign governments
are based principally on product performance and reliability. Such products are
generally sold in competition with products of other manufacturers that may
fulfill an equivalent function, but which are not direct substitutes.

The Company purchases certain materials and components used in its systems and
equipment from independent suppliers. These materials and components are
normally not purchased under long-term contracts unless the Company has
actually received a long-term sales contract requiring them. The Company
believes that most of the items it purchases are obtainable from a variety of
suppliers and it normally obtains alternative sources for major items, although
the Company is sometimes dependent on a single supplier or a few suppliers for
some items.

It is difficult to state precisely the Company's market position in all of its
market segments because information as to the volume of sales of similar
products by its competitors is not generally available and the relevant markets
are often not precisely defined. However, the Company believes that it is a
significant factor in the markets for stores release mechanisms for military
aircraft, military sonar systems, military data links, helicopter-towed mine
countermeasures systems, piezoelectric ceramics, and satellite attitude and
position sensors.

Although the Company owns some patents and has filed applications for
additional patents, it does not believe that its businesses depend
significantly upon its patents. In addition, most of the Company's U.S.
Government contracts license it to use patents owned by others. Similar
provisions in the U.S. Government contracts awarded to other companies make it
impossible for the Company to prevent the use by other companies of its patents
in most domestic defense work.

                                   EMPLOYEES

As of December 31, 1996, the Company employed 718 persons.

                     EXECUTIVE OFFICERS OF THE REGISTRANT
===============================================================================
Name                 Age   Position, Term of Office and Prior Positions
-------------------------------------------------------------------------------

Frank A. Fariello    62    Chairman of the Board since 1997, Chief Executive
                           Officer since 1994, President since 1993 and
                           Director since 1982.
William J. Frost     55    Vice President-Administration since 1994, prior to
                           which he was Assistant to the Vice President-
                           Administration since 1989.

Marvin D. Genzer     56    Vice President since 1990, General Counsel since
                           1988, and Secretary since 1995.

Ira Kaplan           61    Executive Vice President and Chief Operating
                           Officer since 1997, prior to which he was corporate
                           Vice President since 1995. From 1989 to 1995, he
                           was Vice President/General Manager of the
                           Government Systems Division.

J. Douglas Moore     51    Vice President-Special Assignments since 1997,
                           prior to which he was corporate Vice President
                           since 1995. From 1989 to 1995, he was Vice
                           President/General Manager of the Acoustics Division.

Kenneth A. Paladino  39    Vice President-Finance and Treasurer since 1995,
                           prior to which he was Controller since 1989.
===============================================================================

Each executive officer is appointed by the Board of Directors (the "Board"),
and holds office until the first meeting of the Board following the next
succeeding annual meeting of shareholders, and thereafter until a successor is
appointed and qualified, unless the executive officer dies, is disqualified,
resigns or is removed in accordance with the Company's By-Laws.

                                    Page 5
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ITEM 2. PROPERTIES

All operating properties are leased facilities. The College Point corporate
headquarters and manufacturing facility had been owned until early 1996 when it
was sold. The Company's facilities are adequate for present purposes. Except
for College Point, all facilities in the following listing are suitable for
expansion by using available but unused space, leasing additional available
space, or by physical expansion of leased buildings. The Company's obligations
under the various leases are set forth in Note 16 on page 26 of this Report.

Set forth below is a listing of the Company's principal plants and other
materially important physical properties.
           =========================================================
                                              Approximate Floor Area
                   Location                        (in sq. ft.)
           ---------------------------------------------------------
            Defense and Space Systems:
              Marine and Aircraft                     97,000
              College Point, NY

              Combat Systems                          30,000
              Chesapeake, VA

              Electro-Optics                          72,000
              Shelton, CT

            Industrial Products:
              Acoustic Products and Ceramics         117,000
              Salt Lake City, UT

              Fiber Science                          105,000
              Salt Lake City, UT
           =========================================================

ITEM 3. LEGAL PROCEEDINGS

The information responsive to this item is set forth under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 11 through 13, and in Note 17 on page 26 of this Report.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The information responsive to this item is set forth under the headings "Common
Share Prices" and "Dividends" on page 13, together with dividend information
contained in the "Consolidated Statements of Shareholders' Equity" on page 16,
Note 9 on page 21 and Note 10 on page 22 of this Report.

ITEM 6. SELECTED FINANCIAL DATA

The information responsive to this item is set forth under the heading
"Selected Financial Data" on page 10 of this Report.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The information responsive to this item is set forth under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 11 through 13 of this Report.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of the Company, together with the
Independent Auditors' Report thereon of KPMG Peat Marwick LLP and the unaudited
"Quarterly Financial Information" are set forth on pages 14 through 28 of this
Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding directors is set forth under the headings "Election of
Directors" and "The Board of Directors and Its Committees" on pages 1 through 3
of the Company's Proxy Statement dated March 21, 1997, which is incorporated by
reference.

Information regarding executive officers is set forth in Part I of this Report
under "Executive Officers of the Registrant."

ITEM 11. EXECUTIVE COMPENSATION

Information regarding compensation of the Company's executive officers is set
forth under the heading "Compensation of Executive Officers" on pages 5 through
9 of the Company's Proxy Statement dated March 21, 1997, which is incorporated
by reference, except for such information required by Item 402(k) and (l) of
Regulation S-K, which shall not be deemed to be filed as part of this Report.

                                    Page 6
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information regarding security ownership of certain beneficial owners and
management is set forth under the headings "Securities Ownership of Directors
and Executive Officers" on page 4 and "Principal Shareholders" on page 12 of
the Company's Proxy Statement dated March 21, 1997, which is incorporated by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information responsive to this item is set forth under the headings "The
Board of Directors and Its Committees" on page 3 and "Compensation Committee
Interlocks and Insider Participation" on page 8 of the Company's Proxy
Statement dated March 21, 1997, which is incorporated by reference.

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Financial Statements and Financial Statement Schedules and Exhibits

1. Financial Statements.

The consolidated financial statements as of December 31, 1996 and 1995 and for
the years ended December 31, 1996, 1995 and 1994, together with the report
thereon of KPMG Peat Marwick LLP, independent auditors, dated February 13,
1997, appear on pages 14 through 27 of this Report.

2. Financial Statement Schedules.

Schedules have been omitted either because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.

3. Exhibits.

Exhibits which are noted with an asterisk (*) are management contracts or
compensatory plans or arrangements.

3(i) Certificate of Incorporation of the Company and amendments thereto dated
June 14, 1984, July 18, 1988 and July 22, 1988. Incorporated by reference to
Exhibit 3(i) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994.

3(ii) By-Laws of the Company.

4(a) Indenture dated December 1, 1986 between Chemical Bank as successor in
interest to Manufacturers Hanover Trust Company, as Trustee, and EDO
Corporation. Incorporated by reference to Exhibit 4(b) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992.

4(b) Guarantee Agreement, dated as of July 22, 1988, as amended, made by the
Company in favor of Fleet Bank as successor in interest to NatWest Bank NA and
Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(c)
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992.

4(c) Term Loan Agreement, dated as of July 22, 1988, as amended, between The
Bank of New York, as trustee of the trust established under the EDO Corporation
Employee Stock Ownership Plan, and Fleet Bank as successor in interest to
NatWest Bank NA and Manufacturers Hanover Trust Company. Incorporated by
reference to Exhibit 4(d) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.

4(d) Term Note, dated July 22, 1988, as amended, between The Bank of New York,
as trustee of the trust established under the EDO Corporation Employee Stock
Ownership Plan, and Fleet Bank as successor in interest to NatWest Bank NA and
Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(e)
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992.

4(e) Pledge and Security Agreement, dated as of July 22, 1988, as amended,
between The Bank of New York, as trustee of the trust established under the EDO
Corporation Employee Stock Ownership Plan, and Fleet Bank as successor in
interest to NatWest Bank NA and Manufacturers Hanover Trust Company.
Incorporated by reference to Exhibit 4(f) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992.

4(f) Amendment No. 6 to the Guarantee Agreement referred to in Exhibit 4(b)
above, effective March 27, 1993. Incorporated by reference to Exhibit 4(i) to
the Company's Quarterly Report on Form 10-Q for the quarter ended June 26,
1993.

4(g) Amendment No. 7 to the Guarantee Agreement referred to in Exhibit 4(b)
above, effective March 3, 1994. Incorporated by reference to Exhibit 4(h) to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1993.

                                    Page 7
<PAGE>
4(h) Amendment No. 8 to the Guarantee Agreement referred to in Exhibit 4(b)
above, effective February 10, 1995. Incorporated by reference to Exhibit 4(h)
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994.

4(i) Amendment No. 9 to the Guarantee Agreement referred to in Exhibit 4(b)
above, effective June 30, 1995. Incorporated by reference to Exhibit 4(i) to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995.

4(j) Amendment No. 10 to the Guarantee Agreement referred to in Exhibit 4(b)
above, effective June 30, 1996.

10(a)* EDO Corporation 1996 Long-Term Incentive Plan.

10(b)* EDO Corporation Executive Termination Agreements, as amended through
November 24, 1989, between the Company and two employees. Incorporated by
reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.

10(c)* Executive Life Insurance Plan Agreements, as amended through January 23,
1990, between the Company and 30 employees and retirees. Incorporated by
reference to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.

10(d)* Form of Directors' and Officers' Indemnification Agreements between EDO
Corporation and 14 current Company directors and officers.

10(e) Consent Decree, entered on November 25, 1992, amongst the United States,
EDO Corporation, Plessey, Inc., Vernitron Corporation and Pitney Bowes, Inc.
Incorporated by reference to Exhibit 10(j) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992.

21 List of Subsidiaries.

23 Consent of Independent Auditors to the incorporation by reference in the
Company's Registration Statements on Form S-8 of their report included in Item
14(a)1 of this Annual Report on Form 10-K.

24 Powers of Attorney used in connection with the execution of this Annual
Report on Form 10-K.

27 Financial Data Schedule.

(b) Reports on Form 8-K

No reports on Form 8-K were required to be filed during the three months ended
December 31, 1996.

                                    Page 8
<PAGE>
                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                                EDO CORPORATION (Registrant)
Dated: March 21, 1997                      By:  Kenneth A. Paladino
                                                -----------------------------
                                                Vice President-Finance

Pursuant to the requirements of Instruction D to Form 10-K under the Securities
Exchange Act of 1934, this Report has been signed below on March 21, 1997 by
the following persons on behalf of the Registrant and in the capacities
indicated.

Signature                   Title

Kenneth A. Paladino   Vice President-Finance
                        and Treasurer            __
Frank A. Fariello     Chairman of the Board,       |
                        President, Chief Executive |
                        Officer and Director       |
William J. Frost      Vice President-              |
                        Administration             |
Marvin D. Genzer      Vice President, General      |
                        Counsel and Secretary      |- By: Kenneth A. Paladino
Ira Kaplan            Executive Vice President and |     ---------------------
                        Chief Operating Officer    |        Attorney-in-Fact
J. Douglas Moore      Vice President-              |
                        Special Assignments        |
Robert E. Allen       Director                     |
Robert Alvine         Director                     |
Mellon C. Baird       Director                     |
George M. Ball        Director                     |
Joseph F. Engelberger Director                     |
Robert M. Hanisee     Director                     |
Michael J. Hegarty    Director                     |
George A. Strutz, Jr. Director                   __|

                                    Page 9
<PAGE>
SELECTED FINANCIAL DATA
EDO CORPORATION AND SUBSIDIARIES
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
===============================================================================
                             1996       1995        1994       1993       1992
                                  (in thousands, except per share amounts)
-------------------------------------------------------------------------------
Summary of Operations
Net sales:
 Defense and
  Space Systems          $ 64,110     52,055      56,568     69,182     81,432
 Industrial Products       30,476     26,877      24,688     30,925     32,807
-------------------------------------------------------------------------------
                         $ 94,586     78,932      81,256    100,107    114,239
===============================================================================
Operating earnings
  (loss):
 Defense and
  Space Systems          $ 14,060a     5,779      (6,546)b   (1,179)b   11,811
 Industrial Products        3,926      3,392      (9,853)c    2,346      2,499
 General corporate
  expense                  (4,086)    (3,806)     (4,711)    (4,146)    (4,281)
-------------------------------------------------------------------------------
                           13,900      5,365     (21,110)    (2,979)    10,029
Net interest expense         (766)    (1,199)     (2,160)    (2,337)    (2,627)
Other income
  (expense), net              (66)       (41)        335     (1,355)      (443)
-------------------------------------------------------------------------------
Earnings (loss) before
  Federal income taxes
  and cumulative effect
  of accounting change     13,068      4,125     (22,935)    (6,671)     6,959
Provision (benefit)
  for Federal income
  taxes                         -          -      (3,800)    (4,901)     1,684
-------------------------------------------------------------------------------
Earnings (loss) from
  continuing operations
  before cumulative
  effect of accounting
  change                   13,068      4,125     (19,135)    (1,770)     5,275
===============================================================================
Earnings (loss) from:
 Continuing operations     13,068      4,125     (19,135)   (11,170)d    5,275
 Discontinued operations   (8,637)    (1,465)     (3,421)    (5,178)       402
===============================================================================
Net earnings (loss)         4,431      2,660     (22,556)   (16,348)     5,677
Dividends on
  preferred shares          1,179      1,239       1,333      1,406      1,455
-------------------------------------------------------------------------------
Net earnings (loss)
  available for common
  shares                 $  3,252      1,421     (23,889)   (17,754)     4,222
===============================================================================
Per Common Share Data
Primary net earnings
  (loss)
 Continuing operations   $   1.95       0.50       (3.69)     (2.32)      0.71
 Discontinued operations $  (1.42)     (0.25)      (0.61)     (0.96)      0.07
-------------------------------------------------------------------------------
 Total                   $   0.53       0.25       (4.30)     (3.28)      0.78
Fully diluted net
  earnings (loss)        $   0.45       0.20       (4.30)     (3.28)      0.69
Average number of
  shares outstanding-
  primary                   6,086      5,768       5,551      5,415      5,389
Cash dividends per
  common share           $      -          -        0.14       0.28       0.28
Other Information
Working capital          $  37,382    33,582      31,374     40,001     45,741
Depreciation and
  amortization of
  fixed assets           $   3,471     4,568       5,677      5,974      5,852
Plant and equipment
  expenditures, net      $   4,227     1,800       1,731      4,287      4,873
Total assets             $  94,223    95,526      94,747    115,414    127,281
Long-term debt           $  29,317    29,317      29,317     29,317     30,544
ESOT loan obligation     $  11,676    12,887      14,007     15,045     16,005
Shareholders' equity     $  19,823    14,997      11,610     35,035     52,797
Backlog of
  unfilled orders        $ 102,981    85,558      70,682     86,468     92,084
===============================================================================

a Includes a $7,120 curtailment gain for the discontinuance of postretirement
health care benefits for Medicare-eligible retirees.

b Includes restructuring charges of $1,127 and $9,800 in 1994 and 1993,
respectively, relating to the discontinuance, relocation and downsizing of
certain operations.

c Includes a $5,400 write off of a previously established receivable in
anticipation of the recovery of remediation costs related to a Superfund site.

d Includes the cumulative effect of a change in accounting for postretirement
health benefits, as required by the adoption of SFAS No. 106, of $9,400, net of
taxes, or $1.74 per share on primary net earnings.

                                    Page 10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS ENVIRONMENT

In 1996, the Company's financial condition continued to improve as evidenced by
increased working capital, shareholders' equity, net sales, earnings and
backlog over the prior year results. These increases reflect the effects of the
emphasis being placed on the Company's core businesses where there has been a
general improvement in the markets for the Company's products.

In 1996, the Company announced its decision to exit its energy-related
businesses that are involved in the natural gas vehicle markets. These
businesses continue to operate while the Company seeks potential buyers. The
financial statements have been reclassified to exclude the operating results of
the energy-related businesses from the continuing operations and account for
them as discontinued operations (see Note 3 to the Consolidated Financial
Statements). The following discussion relates only to the Company's continuing
operations in its two business segments: Defense and Space Systems; and
Industrial Products.

RESULTS OF OPERATIONS - 1996 COMPARED TO 1995

Net sales for 1996 were $94.6 million, a 20% increase when compared with sales
of $78.9 million in 1995. Sales in the Defense and Space Systems segment
increased 23% to $64.1 million primarily due to an increase in satellite system
sales which in 1995, were negatively impacted by technical difficulties on a
fixed-price development program that was completed and is now in production.
Reductions in sonar system sales also partially offset the increased segment
sales. Sales in the Industrial Products segment increased by 13% to $30.5
million where increases in piezo-ceramic and fiber composite product sales were
partially offset by lower sales of acoustic products.

Total operating earnings, excluding the effect of a $7.1 million non-cash
curtailment gain from the discontinuance of medical benefits for Medicare
eligible retirees (see Note 15 to the Consolidated Financial Statements),
improved 26% to $6.8 million in 1996, as compared to $5.4 million in 1995. The
increase results primarily from the higher sales levels as well as a modest
improvement in margins and increases in pension and postretirement benefit
income, partially offset by higher costs incurred during the completion of the
development portion of fixed-price development programs for new satellite
products.

Operating earnings of the Defense and Space Systems segment, before general
corporate expense allocations, were $6.9 million (excluding the $7.1 million
gain mentioned above), an increase of 20% as compared to operating earnings of
$5.8 million in 1995. Operating earnings in the Industrial Products segment,
before general corporate expense allocations, were $3.9 million, a 16% increase
when compared to operating earnings of $3.4 million in 1995. The improvement in
earnings in both segments primarily results from the higher sales levels.

Selling, general and administrative expenses increased to $15.6 million from
$14.2 million in 1995 principally as a result of increased sales and marketing
expenses. Company funded research and development expenditures were
approximately $1.0 million for each year while customer funded research and
development increased $4.5 million to $17.8 million in 1996. Customer funded
research and development, which occurs primarily in the Defense and Space
Systems segment, is included in cost of sales and represents the engineering
development portion of programs where new products are being developed or
technologies are being advanced.

Interest expense, net of interest income, decreased 33% to $0.8 million from
$1.2 million in 1995, primarily due to increased interest income on higher
average balances of interest-earning assets. Interest expense primarily
represents the interest paid on the 7% Convertible Subordinated Debentures Due
2011.

In 1996, the Company did not have a provision for Federal income taxes due to
the utilization of tax loss carryforwards and tax benefits associated with the
preferred stock dividends.

Net earnings in 1996 were $3.3 million as compared to net earnings in 1995 of
$1.4 million. Net earnings in 1996 included a $7.0 million loss from
discontinuance of the Company's energy-related businesses (see Note 3 to the
Consolidated Financial Statements) and, as mentioned above, a $7.1 million
curtailment gain. Primary net earnings per share were $0.53 as compared to net
earnings of $0.25 in 1995. Primary earnings per share calculations are based on
a weighted average of 6.1 million and 5.8 million common and equivalent shares
outstanding in 1996 and 1995, respectively.

                                    Page 11
<PAGE>
FINANCIAL CONDITION

The Company's cash and cash equivalents decreased $2.2 million in 1996 to $20.7
million at December 31, 1996. The reduction results from net cash flow from
continuing operations of approximately $2.6 million and $2.0 million of
proceeds from the sale of the Company's College Point facility, offset by $4.2
million of purchases of capital equipment, a $1.2 million payment of preferred
share dividends and $1.8 million of cash used by discontinued operations.

Accounts receivable increased to $32.5 million from $23.6 million in 1995
primarily as a result of an increase in unbilled receivables. The increase in
unbilled receivables resulted principally from the recognition of revenues
under the percentage of completion method, on certain satellite system
programs, as costs are incurred and where billings are made at shipment.
Substantially all of the unbilled balances at December 31, 1996 are expected to
be billed and collected during 1997.

In January of 1996, the Company completed the sale of its College Point
facility. Proceeds of the sale were comprised of cash of approximately $2.0
million, notes of $4.6 million and other consideration, including prepaid rent
for the portion of the facility currently utilized by the Company. The notes
receivable are due in varying annual amounts through 2004, bear interest at an
effective rate of approximately 7% and are secured by a mortgage on the related
facility.

The Company has outstanding $29.3 million of 7% Convertible Subordinated
Debentures Due 2011. Commencing in 1996 and until their retirement, the Company
is making annual sinking fund payments of $1.8 million. As of December 31,
1996, the Company had $3.9 million of these debentures remaining in treasury to
be used for these annual requirements.

The Company also has an ESOT loan obligation with a balance at December 31,
1996 of $11.7 million with an interest rate of 82% of the prime lending rate.
The ESOT obligation agreement can be canceled or refinanced by the Company or
the lender on April 1, 2000. The repayment of this obligation is funded
principally through dividends on the Company's preferred shares.

The Company maintains a $15.0 million secured line of credit with a bank for
short-term borrowing and letters of credit. The agreement expires on June 30,
1997 and limits the cash portion of potential borrowings to $5.0 million. There
have been no direct borrowings under this agreement.

The Company is incurring costs in connection with the remediation of a
Superfund site (see Note 17 to the Consolidated Financial Statements). The
Company has expensed all of the costs it has incurred, as well as a discounted
estimate of all future costs related to this matter. The liability for these
future costs as of December 31, 1996 is approximately $4.1 million of which
$1.2 million is classified as a current obligation. Approximately 40% of the
$4.1 million liability will be expended over the next two years.

During 1996, the Company recognized a non-cash curtailment gain of $7.1 million
in connection with the discontinuance of postretirement medical benefits for
Medicare-eligible retirees. This gain represents the reversal of a significant
portion of the postretirement obligation established upon the adoption of
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" in 1993.

The Company believes that it has adequate liquidity and sufficient capital to
fund its current operating plans.

Backlog increased from $85.6 million at December 31, 1995 to $103.0 million at
December 31, 1996. The increase was primarily due to awards received in the
Defense and Space Systems segment.

RESULTS OF OPERATIONS - 1995 COMPARED TO 1994

Sales for 1995 were $78.9 million, a 3% decrease when compared with sales of
$81.3 million in 1994. Sales in the Defense and Space Systems segment decreased
8% to $52.1 million, due primarily to delays in expected awards in some
military programs offset in part by increases in satellite system product
sales. Sales in the Industrial Products segment increased by 9% to $26.9
million where increases were recorded in each of the business units.

A profit from operations of $5.4 million was recorded in 1995 as compared to a
loss of $21.1 million in 1994. Included in 1994 results were charges, net of a
pension curtailment gain of $1.4 million, that amounted to approximately $17.4
million. Exclusive of the effects of these net charges, the Company in general
experienced improvements in all of its operations. In addition, significant
losses previously incurred on certain fixed-price development contracts, which
included one for the development of a new earth sensor, did not recur in 1995.

The results of operations of the Defense and Space Systems segment were a
profit, before general corporate expense allocations, of $5.8 million as
compared to a loss of $2.4 million (excluding net charges mentioned above) in
1994. The improvement in earnings, exclusive of the net charges, resulted
primarily from an improvement in the Electro-Optics business unit, higher
margins in the segment in general and inclusion of a pension curtailment gain
of $0.6 million.

                                    Page 12
<PAGE>
The Industrial Products segment recorded a profit, before general corporate
expense allocations, of $3.4 million as compared to a profit of $3.5 million
(excluding net charges of $13.3 million mentioned above) in 1994.

Selling, general and administrative expenses decreased to $14.2 million from
$14.9 million, (excluding a $3.6 million reserve on a foreign receivable) in
1994 principally as a result of the effects of cost reduction efforts. Company
sponsored research and development expenditures decreased 60% to $1.0 million.
Reductions occurred in both segments, primarily as a result of a more selective
approach to, and customer sponsoring of, important Company development
programs. Customer-sponsored research and development included in cost of
sales, which occurs primarily in the Defense and Space Systems segment,
declined $5.1 million to $13.3 million consistent with the general decline in
available government development programs.

Interest expense, net of interest income, decreased 43% to $1.2 million from
$2.1 million in 1994 primarily due to increased interest income on higher
average balances of interest earning assets. Interest expense primarily
represented the interest paid on the 7% Convertible Subordinated Debentures Due
2011.

In 1995, the Company did not have a provision for Federal income taxes due to
the realization of benefits related to certain deductible temporary differences
and preferred stock dividends.

The net earnings in 1995 of $1.4 million compared to a net loss in 1994 of
$23.9 million. The primary net earnings per share were $0.25 as compared to a
net loss of $4.30 in 1994. Primary earnings per share calculations were based
on a weighted average of 5.8 million and 5.6 million shares outstanding in 1995
and 1994, respectively. The Company's 1995 year end backlog was $85.6 million
compared to $70.7 million in 1994. The increase occurred principally in the
Defense and Space Systems segment.

COMMON SHARE PRICES

EDO common shares are traded on the New York Stock Exchange. As of February 5,
1997, there were 2,607 shareholders of record (brokers and nominees counted as
one each).

The price range in 1996 and 1995 was as follows:
              ===================================================
                                 1996                  1995
                             High       Low       High       Low
              ---------------------------------------------------
              1st Quarter   5-7/8      4-5/8     3-7/8      3
              2nd Quarter  10-7/8      5         3-1/2      3
              3rd Quarter   8-5/8      5-7/8     5-7/8      3
              4th Quarter   9-1/4      6-1/2     6          4-3/8
              ===================================================

DIVIDENDS

In the third quarter of 1994, the Board of Directors suspended cash dividends
on the Company's common shares due to the financial circumstances at that time.
In January of 1997, the Company announced that the Board of Directors had
approved the payment of a quarterly cash dividend of $0.025 per common share
payable on March 31, 1997 to shareholders of record at the close of business on
March 4, 1997. The Company's ESOT guarantee agreement presently limits the
payment of cash dividends. See Note 10 of the Consolidated Financial
Statements.

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

The statements in this Annual Report on Form 10-K and in the message from the
Chairman of the Board, President and Chief Executive Officer contained in the
Annual Report to Shareholders for 1996 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.

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; and the general state
of world military readiness and deployment.

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 revenues and underestimation of
anticipated costs on specific programs.

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

                                    Page 13
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
EDO CORPORATION AND SUBSIDIARIES
===============================================================================
                                                Years Ended December 31
                                          1996           1995           1994
                                       (in thousands, except per share amounts)
-------------------------------------------------------------------------------
Continuing Operations:
 Income
  Net sales                             $ 94,586       $ 78,932       $ 81,256
  Other                                      388            450            623
-------------------------------------------------------------------------------
                                          94,974         79,382         81,879
-------------------------------------------------------------------------------
 Costs and Expenses
  Cost of sales                           71,561         58,849         75,471
  Selling, general and administrative     15,631         14,177         18,486
  Research and development                 1,002            991          2,505
  Postretirement health care
    curtailment gain                      (7,120)             -              -
  Write off of environmental receivable        -              -          5,400
  Restructuring charge                         -              -          1,127
-------------------------------------------------------------------------------
                                          81,074         74,017        102,989
-------------------------------------------------------------------------------
 Operating Earnings (Loss)                13,900          5,365        (21,110)
 Non-operating Income (Expense)
-------------------------------------------------------------------------------
  Interest income                          1,427          1,097            256
  Interest expense                        (2,193)        (2,296)        (2,416)
  Other, net                                 (66)           (41)           335
-------------------------------------------------------------------------------
                                            (832)        (1,240)        (1,825)
-------------------------------------------------------------------------------
 Earnings (loss) before Federal
   income taxes                           13,068          4,125        (22,935)
 Federal income tax benefit                    -              -         (3,800)
-------------------------------------------------------------------------------
 Earnings (Loss) from
   Continuing Operations                  13,068          4,125        (19,135)
Discontinued Operations:
 Loss from operations of
   discontinued energy business           (1,637)        (1,465)        (3,421)
 Loss from discontinuance, including
   provision of $2,000 for operating
   losses during phase out period         (7,000)             -              -
-------------------------------------------------------------------------------
 Loss from Discontinued Operations        (8,637)        (1,465)        (3,421)
-------------------------------------------------------------------------------
Net Earnings (Loss)                        4,431          2,660        (22,556)
Dividends on preferred shares              1,179          1,239          1,333
-------------------------------------------------------------------------------
Net Earnings (Loss) Available
  for Common Shares                     $  3,252       $  1,421       $(23,889)
===============================================================================
Earnings (Loss) Per Common Share:
 Primary:
  Continuing operations                 $   1.95       $   0.50       $  (3.69)
  Discontinued operations                  (1.42)         (0.25)         (0.61)
-------------------------------------------------------------------------------
Net Earnings (Loss)                     $   0.53       $   0.25       $  (4.30)
===============================================================================
 Fully diluted:
  Continuing operations                 $   1.66       $   0.41       $  (3.69)
  Discontinued operations                  (1.21)         (0.21)         (0.61)
-------------------------------------------------------------------------------
Net Earnings (Loss)                     $   0.45       $   0.20       $  (4.30)
===============================================================================

See accompanying Notes to Consolidated Financial Statements.

                                    Page 14
<PAGE>
CONSOLIDATED BALANCE SHEETS
EDO CORPORATION AND SUBSIDIARIES
===============================================================================
                                                         December 31
                                                     1996           1995
                                           (in thousands, except share amounts)
-------------------------------------------------------------------------------
Assets
 Current assets:
  Cash and cash equivalents                      $  20,745       $  22,918
  Accounts receivable                               32,518          23,605
  Inventories                                        7,994           8,087
  Prepayments                                        2,678           1,180
-------------------------------------------------------------------------------
               Total current assets                 63,935          55,790
-------------------------------------------------------------------------------
Property, plant and equipment, net                  12,968          12,212
Notes receivable                                     3,900               -
Cost in excess of fair value of net
  assets acquired, net                               7,159           7,526
Other assets                                         6,261           5,957
Assets held for sale, net                                -           8,700
Net assets of discontinued operations                    -           5,341
-------------------------------------------------------------------------------
                                                 $  94,223       $  95,526
===============================================================================
Liabilities and Shareholders' Equity
Current liabilities:
 Accounts payable and accrued liabilities        $  21,517       $  16,566
 Contract advances and deposits                      4,809           5,642
 Net liabilities of discontinued operations            227               -
-------------------------------------------------------------------------------
               Total current liabilities            26,553          22,208
-------------------------------------------------------------------------------
Long-term debt                                      29,317          29,317
ESOT loan obligation                                11,676          12,887
Postretirement obligation                            3,995          12,348
Environmental obligation                             2,859           3,769
Shareholders' Equity:
 8% convertible preferred shares, par value
   $1 per share (liquidation preference
   $213.71 per share), authorized 500,000 shares
   (67,832 issued in 1996 and 71,001 in 1995)           68              71
 Common shares, par value $1 per share,
   authorized 25,000,000 shares
   (8,453,902 issued in both years)                  8,454           8,454
 Additional paid-in capital                         35,438          37,847
 Retained earnings                                  22,368          19,116
-------------------------------------------------------------------------------
                                                    66,328          65,488
Less:  Treasury shares at cost (2,409,136
         shares in 1996 and 2,645,863
         shares in 1995)                           (34,240)        (37,604)
       ESOT loan obligation                        (11,676)        (12,887)
       Deferral under Long-Term Incentive Plan        (589)              -
-------------------------------------------------------------------------------
               Total shareholders' equity           19,823          14,997
-------------------------------------------------------------------------------
                                                 $  94,223       $  95,526
===============================================================================

See accompanying Notes to Consolidated Financial Statements.

                                    Page 15
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
EDO CORPORATION AND SUBSIDIARIES
===============================================================================
                               1996               1995               1994
                                              (in thousands)
                          Amount   Shares    Amount   Shares    Amount   Shares
-------------------------------------------------------------------------------
Preferred shares
 Balance at beginning
   of year              $    71       71   $    75       75   $    80       80
 Par value of shares
   converted                 (3)      (3)       (4)      (4)       (5)      (5)
-------------------------------------------------------------------------------
 Balance at end of year      68       68        71       71        75       75
-------------------------------------------------------------------------------
Common shares
-------------------------------------------------------------------------------
 Par value of
   shares issued          8,454    8,454     8,454    8,454     8,454    8,454
-------------------------------------------------------------------------------
Additional paid-in
  capital
 Balance at beginning
   of year               37,847             39,330             41,784
 Exercise of stock
   options                 (227)                 -                 (5)
 Shares used for payment
   of directors' fees       (57)              (137)                 -
 Effect of sale of
   subsidiary's (EDO
   (Canada) Ltd.)
   capital stock              -                795                  -
 Shares used for
   Long-Term Incentive
   Plans                 (1,146)                 -                  6
 Conversion of
   preferred shares
   to common shares        (979)            (2,141)            (2,455)
-------------------------------------------------------------------------------
 Balance at end of year  35,438             37,847             39,330
-------------------------------------------------------------------------------
Retained earnings
 Balance at beginning
   of year               19,116             17,695             42,350
 Net earnings (loss)      4,431              2,660            (22,556)
 Common stock dividends
   ($0.14 per share
    in 1994)                  -                  -               (766)
 Dividends on
   preferred shares      (1,179)            (1,239)            (1,333)
-------------------------------------------------------------------------------
 Balance at end of year  22,368             19,116             17,695
-------------------------------------------------------------------------------
Treasury shares at cost
 Balance at beginning
   of year              (37,604)  (2,646)  (39,937)  (2,810)  (42,393)  (2,983)
 Shares used for
   exercise of stock
   options                  393       28         -        -         7        -
 Shares used for
   payment of
   directors' fees          106        7       188       13         -        -
 Shares used for
   Long-Term Incentive
   Plans                  1,883      133         -        -       (11)      (1)
 Shares used for
   conversion of
   preferred shares         982       69     2,145      151     2,460      174
-------------------------------------------------------------------------------
 Balance at end of year (34,240)  (2,409)  (37,604)  (2,646)  (39,937)  (2,810)
-------------------------------------------------------------------------------
ESOT loan obligation
 Balance at beginning
   of year              (12,887)           (14,007)           (15,045)
 Repayments made
   during year            1,211              1,120              1,038
-------------------------------------------------------------------------------
 Balance at end of year (11,676)           (12,887)           (14,007)
-------------------------------------------------------------------------------
Deferral under Long-
  Term Incentive Plans
 Balance at beginning
   of year                    -                  -               (195)
 Shares used for Long-
   Term Incentive Plans    (737)                 -                  5
 Amortization of Long-
   Term Incentive Plan
   deferred expense         148                  -                190
-------------------------------------------------------------------------------
 Balance at end of year    (589)                 -                  -
===============================================================================
Total Shareholders'
  Equity                $19,823            $14,997            $11,610
===============================================================================

See accompanying Notes to Consolidated Financial Statements.

                                    Page 16
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
EDO CORPORATION AND SUBSIDIARIES
===============================================================================
                                                    Years Ended December 31
                                                 1996        1995        1994
                                                        (in thousands)
-------------------------------------------------------------------------------
Operating Activities:
 Earnings (loss) from continuing operations   $ 13,068   $   4,125   $ (19,135)
 Adjustments to net earnings (loss) to
   arrive at cash provided by continuing
   operations:
  Gain on sale of building                           -           -        (427)
  Write off of environmental receivable              -           -       5,400
  Write off of nonproductive fixed assets            -           -       1,739
  Restructuring charge                               -           -       1,127
  Postretirement health care curtailment gain   (7,120)          -           -
  Depreciation and amortization                  5,303       4,935       6,044
  Deferred compensation expense                    148           -         190
  Common shares issued for directors' fees          49          51           3
  Changes in:
   Accounts receivable                          (8,913)     (2,216)     13,503
   Inventories                                      93         814       7,860
   Prepayments, other assets and other          (4,341)     (1,479)     (1,747)
   Decrease (Increase) in recoverable and
     deferred income taxes                           -       3,649        (316)
   Accounts payable and accrued liabilities      5,178      (1,877)      1,950
   Contract advances and deposits                 (833)      2,142      (2,532)
-------------------------------------------------------------------------------
Cash provided by continuing operations           2,632      10,144      13,659
Net cash used by discontinued operations        (1,804)     (2,024)     (2,519)
Investing Activities:
 Purchase of property, plant and equipment, net (4,227)     (1,800)     (1,731)
 Proceeds from assets held for sale              1,976           -           -
 Proceeds from sale of building                      -           -       3,084
-------------------------------------------------------------------------------
Cash (used) provided by investing activities    (2,251)     (1,800)      1,353
Financing Activities:
 Proceeds from exercise of stock options           166           -           -
 Payments received on notes receivable             263           -           -
 Payment of common share cash dividends              -           -        (766)
 Payment of preferred share cash dividends      (1,179)     (1,239)     (1,333)
-------------------------------------------------------------------------------
Cash used by financing activities                 (750)     (1,239)     (2,099)
===============================================================================
Net (decrease) increase in cash
  and cash equivalents                          (2,173)      5,081      10,394
Cash and cash equivalents at beginning of year  22,918      17,837       7,443
-------------------------------------------------------------------------------
Cash and cash equivalents at end of year      $ 20,745    $ 22,918    $ 17,837
===============================================================================
Supplemental disclosures:
 Cash paid for:
  Interest                                    $  2,072    $  2,143    $  2,198
  Income taxes                                $    190    $    345    $    297
===============================================================================

See accompanying Notes to Consolidated Financial Statements.

                                    Page 17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
EDO CORPORATION AND SUBSIDIARIES

(1) Summary of Significant Accounting Policies

(a) Principles of Consolidation and Business

The consolidated financial statements include the accounts of EDO Corporation
and all majority-owned subsidiaries (the "Company"). All significant
intercompany accounts and transactions have been eliminated in consolidation.

The Company is principally a supplier of proprietary advanced electro-optical,
electronic, mechanical, acoustic and composite products to major prime defense
contractors and commercial original equipment manufacturers. The Company
organizes its business into Defense and Space Systems and Industrial Products
segments. The Company discontinued its energy-related business in 1996 (Note
3).

(b) Cash Equivalents

The Company considers all securities with an original maturity of three months
or less at the date of acquisition to be cash equivalents.

(c) 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 are made. Estimated
losses on long-term contracts are recorded when identified. Sales under cost
reimbursement contracts are recorded as costs are incurred. Sales on other than
long-term contract orders (principally commercial products) are recorded as
shipments are made.

(d) 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 the
Company's defense contracts), less the portion of such costs charged to cost of
sales. Inventory costs in excess of amounts recoverable under contracts are
charged to cost of sales when they become known. All other inventories are
stated at the lower of cost (principally first-in, first-out method) or
market.

(e) Depreciation

Depreciation and amortization of property, plant and equipment have been
provided primarily using the straight-line method over the estimated useful
lives of the assets. Leasehold improvements are being amortized over the lesser
of their estimated useful lives or their respective lease periods.

Deferred financing costs are amortized on a straight-line basis over the life
of the related financing. The unamortized balances of $1,153,000 and $1,286,000
are included in other assets at December 31, 1996 and 1995, respectively.

(f) Cost in Excess of Fair Value of Net Assets Acquired (Goodwill)

The excess of the total acquisition cost of Barnes Engineering Company over the
fair value of net assets acquired of approximately $11.0 million ($7.2 million,
net of accumulated amortization at December 31, 1996) is being amortized on a
straight-line basis over thirty years. The Company assesses the recoverability
of unamortized goodwill by determining whether the amortization of the goodwill
balance over its estimated life can be recovered through the undiscounted
projected future earnings of the acquired business.

(g) Long-Lived Assets

In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of," was issued. SFAS No. 121 requires that long-lived assets
and certain identifiable intangibles to be held and used or disposed of by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable when
measured by comparing the carrying amount of an asset to the future net cash
flows expected to be generated by the asset. During 1996, the Company adopted
SFAS No. 121 and determined that no impairment loss need be recognized for
applicable assets of continuing operations or assets held for sale (Note 7),
and thus, it did not have a material impact on the Company's financial position
or results of operations.

                                    Page 18
<PAGE>
(h) Income Taxes

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be realized or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

(i) Treasury Stock

Treasury stock is recorded at cost, with issuances from treasury stock recorded
at average cost. Treasury stock issued for directors' fees is recorded as an
expense for an amount equal to the fair market value of the stock on the
issuance date.

(j) Earnings Per Share

Primary earnings per share amounts are determined by using the weighted average
number of common shares and dilutive common share equivalents (stock options)
outstanding during the year. Primary earnings per share amounts were based on
6,086,235, 5,768,189 and 5,550,868 common and common equivalent shares
outstanding for 1996, 1995 and 1994, respectively.

Fully diluted earnings per share are based on the assumption that the
convertible debentures and preferred shares, in the periods in which such
securities are dilutive, are converted into common shares and their related
interest and dividends, net of applicable income taxes, are not deducted in
determining net earnings. Fully diluted earnings per share were based on
7,148,988 and 7,037,876 common and common equivalent shares outstanding for
1996 and 1995, respectively. In 1994, both the convertible debentures and
preferred shares were antidilutive.

(k) Financial Instruments

The fair value and book value of the Company's long-term debt and ESOT
obligation at December 31, 1996 were $36,676,000 and $40,993,000, respectively
(Notes 9 and 10). The net carrying value of the notes receivable approximates
fair value based on current rates for comparable commercial mortgages.

The fair values of all other financial instruments approximate book values
because of the short maturity of these instruments.

(l) Use of Estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Among the more
significant estimates included in these financial statements are the estimated
costs to complete contracts in process, the estimated remediation costs related
to the environmental matter discussed in Note 17, the collectibility of
receivables and the estimated net realizable value of net assets of
discontinued operations and the accrual for losses during the phase out period.
Actual results could differ from these and other estimates.

(m) Accounting for Stock-Based Compensation

The Company records compensation expense for employee and director stock
options and warrants only if the current market price of the underlying stock
exceeds the exercise price on the date of the grant. On January 1, 1996, the
Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation." The
Company has elected not to implement the fair value based accounting method for
employee and director stock options and warrants, but has elected to disclose
the pro forma net earnings and pro forma earnings per share for employee and
director stock option and warrant grants made beginning in 1995 as if such
method had been used to account for stock-based compensation cost as described
in SFAS No. 123.

(2) Restructuring of Operations

In 1993, the Company adopted a restructuring plan to address the continuing
worldwide decline in the defense and aerospace business, reduce costs and
improve its competitiveness. This restructuring plan included discontinuing a
portion of a business, relocating certain operations, the related disposition
of nonproductive assets (principally land and buildings) and work force
reductions. The accompanying consolidated statements of operations reflect a
pretax charge of $1,127,000 for 1994 relating to this plan. The increase to the
restructuring charge in 1994 principally resulted from a longer than
anticipated holding period associated with the College Point production
facility held for sale and severance costs. As of December 31, 1996, all
expenditures related to the restructuring were made and were consistent in all
material respects with the original charges taken.

                                    Page 19
<PAGE>
(3) Discontinued Operations

Pursuant to a Board of Directors resolution in September 1996, the Company
adopted a plan to exit its energy-related businesses. Those businesses include:
the Company's 50.4% interest in EDO (Canada) Limited, a manufacturer of
Compressed Natural Gas (CNG) fuel cylinders; EDO Automotive Natural Gas Inc., a
designer and manufacturer of CNG refueling stations and related equipment; and
EDO Energy Corporation, a wholly owned subsidiary of the Company involved in
program management activities in CNG and other alternative fuel projects. All
of these businesses will continue to operate while the Company attempts to sell
them.

The consolidated financial statements of the Company have been reclassified to
reflect the effects of the Company's decision to treat its energy-related
businesses as discontinued operations. Accordingly, the revenues, costs and
expenses, assets and liabilities, and cash flows associated with EDO (Canada)
Limited, EDO Automotive Natural Gas Incorporated, and EDO Energy Corporation
have been excluded from the respective captions in the Consolidated Statements
of Operations, Balance Sheets and Statements of Cash Flows. The net operating
results of these entities have been reported as "Loss from discontinued
operations"; the net assets (liabilities) of these entities have been reported
as "Net assets (liabilities) of discontinued operations"; and the cash flows of
these entities have been reported as "Net cash used by discontinued
operations."

Net sales of the discontinued operations prior to the date of discontinuance
were $9,321,000, $12,181,000, and $9,346,000 for the years ended December 31,
1996, 1995 and 1994, respectively. Net assets (liabilities) of discontinued
operations were as follows:
===============================================================================
                                                            At December 31
                                                         1996            1995
                                                            (in thousands)
-------------------------------------------------------------------------------
Assets-net                                             $1,579          $6,520
Liabilities                                              (806)         (1,179)
Accrual for losses during phase out period             (1,000)              -
-------------------------------------------------------------------------------
Net assets (liabilities) of discontinued operations      (227)          5,341
===============================================================================

Assets-net at December 31, 1996 consisted primarily of accounts receivable and
liabilities consisted of trade payables. Interest expense was not allocated to
discontinued operations.

(4) Canadian Subsidiary

In December 1995, EDO (Canada) Ltd. received $3.5 million from the sale of its
capital stock to three companies. As a result, the Company's ownership of EDO
(Canada) Ltd. was reduced from approximately 60% to approximately 50.4% with
approximately 33% owned by the Province of Alberta and approximately 17% owned
by three other minority shareholders. The Company's additional paid-in capital
was increased by $795,000, representing its equity in EDO (Canada)'s capital
transactions in 1995. In 1996, the Company discontinued its energy business,
including its interest in EDO (Canada) Ltd. as noted above in Note 3.

(5) Accounts Receivable

Accounts receivable included $16,121,000 and $9,742,000 at December 31, 1996
and 1995, respectively, representing unbilled revenues. Substantially all of
the unbilled balances at December 31, 1996 will be billed and are expected to
be collected during 1997. Total receivables due from the United States
government, either directly or as a subcontractor to a prime contractor with
the government, were $6,910,000 at December 31, 1996, and $9,562,000 at
December 31, 1995.

(6) Inventories

Inventories are summarized by major classification as follows at December 31,
1996 and 1995:
===============================================================================
                                                         1996            1995
                                                            (in thousands)
-------------------------------------------------------------------------------
Raw material and supplies                              $4,226          $5,051
Work-in-process                                         3,380           2,245
Finished goods                                            388             791
-------------------------------------------------------------------------------
                                                       $7,994          $8,087
===============================================================================

                                    Page 20
<PAGE>
(7) Property, Plant and Equipment, Net

The Company's property, plant and equipment at December 31, 1996 and 1995, and
their related useful lives are summarized as follows:
===============================================================================
                                         1996            1995       Range in
                                            (in thousands)            Years
-------------------------------------------------------------------------------
Machinery and equipment                 50,244          46,349        3 - 10
Leasehold improvements                   8,595           9,517     lease terms
-------------------------------------------------------------------------------
                                        58,839          55,866
Less accumulated depreciation
  and amortization                      45,871          43,654
-------------------------------------------------------------------------------
                                       $12,968         $12,212
===============================================================================

Assets held for sale at December 31,1995, amounting to $8.7 million,
represented buildings, building improvements and land at the Company's College
Point facility, net of related accumulated depreciation. In January 1996, such
assets were sold for $2.0 million of cash, net of expenses, $4.6 million of
notes, and other consideration including prepaid rent. The total consideration
received approximated the carrying value of the assets held for sale.

The notes receivable of $4,038,000 (net of deferred interest of $250,000) at
December 31, 1996, of which $138,000 is included in current assets are due in
varying annual amounts through 2004 and bear interest at 7% commencing January
1, 1998 for $1,850,000 of the notes and January 1, 1999 for the balance of the
notes. The notes receivable are secured by a mortgage on the related facility.

(8) Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following at December
31, 1996 and 1995:
===============================================================================
                                                         1996            1995
                                                            (in thousands)
-------------------------------------------------------------------------------
Trade payables                                         $3,568          $3,105
Employee compensation and benefits                      2,579           2,567
Current Portion of Environmental Obligation             1,254           1,890
Other                                                  14,116           9,004
-------------------------------------------------------------------------------
                                                      $21,517         $16,566
===============================================================================

(9) Long-Term Debt and Line of Credit

Long-term debt of the Company at December 31, 1996 and 1995 consisted of the 7%
Convertible Subordinated Debentures Due 2011 that were issued in November 1986.
The debentures are convertible at the rate of 45.45 common shares for each
$1,000 principal amount, which is equivalent to $22 per share. Debentures are
redeemable at the option of the Company at par and at the option of the holder
under certain circumstances involving a change in control of the Company.
Commencing in 1996 and until retirement, the Company is required to make
sinking fund payments of $1,750,000 per year. As of December 31, 1996, the
Company had $3,933,000 of these debentures remaining in treasury which will be
used to satisfy these annual payments. The carrying value of the debentures as
of December 31, 1996 is $29,317,000. The Company estimates the fair value of
the debentures as of December 31, 1996 to be approximately $25,000,000 based on
trades during late 1996.

The Company has a $15.0 million line of credit agreement with a bank for both
short-term borrowings and letters of credit. The agreement expires on June 30,
1997 and limits the cash portion of potential borrowings to $5.0 million.
Borrowings under the agreement bear interest based on the bank's prime rate
plus 0.5% and are secured by the Company's accounts receivable, inventory,
machinery and equipment. A condition to this agreement is compliance with the
Company's Employee Stock Ownership Trust guarantee agreement that is described
in Note 10. There have been no direct borrowings under this agreement.

                                    Page 21
<PAGE>
(10) Employee Stock Ownership Plan and Trust

The Company's Employee Stock Ownership Plan (ESOP) provides retirement benefits
to substantially all employees. During 1996, 1995 and 1994, respectively, cash
contributions of $879,000, $839,000 and $497,000 were made to the ESOP. As of
December 31, 1996, there were 300,325 common shares in the ESOP.

During 1988, the Employee Stock Ownership Trust (ESOT) purchased 89,772
convertible preferred shares from the Company for approximately $19,185,000.
The shares are being allocated to employees through 2003 on the basis of
compensation. The preferred shares provide for dividends of 8% per annum, which
are deductible by the Company for Federal and state income tax purposes. The
tax benefit that is attributable to unallocated shares is reflected as an
increase to retained earnings. Each unallocated preferred share is convertible
at its stated conversion rate into 10 common shares. Allocated shares are
convertible at the greater of the stated conversion rate or the fair value of
each preferred share ($175 at December 31, 1996) divided by the current market
price of each common share. As of December 31, 1996, 47,708 shares have been
allocated, 42,064 shares remained unallocated and 21,940 shares have been
converted into 620,500 common shares. Until converted, each preferred share is
entitled to 12.3 votes. The preferred shares are entitled to vote on all
matters presented to holders of common shares voting together as a class,
except that certain amendments and mergers could entitle the holders of
preferred shares to vote separately as a class. The ESOP provides for
pass-through of voting rights to the ESOP participants and beneficiaries.

The ESOT purchased the preferred shares from the Company using the proceeds of
a borrowing guaranteed by the Company. The ESOT services this obligation with
the dividends received on the preferred shares and any additional contributions
from the Company as required. Principal and interest payments on the note of
the ESOT are to be made in quarterly installments through 2003. Interest is
charged at 82% of the prime lending rate. During 1996, 1995 and 1994,
respectively, the Company's cash contributions and preferred dividends were
used to repay principal of $1,211,000, $1,120,000 and $1,038,000 and pay
interest of $865,000, $982,000 and $816,000. Both the Company and the lender
have the option to cancel or refinance the borrowing on or after April 1, 2000.
The guarantee agreement also provides that the Company may be obligated to
prepay the ESOT loan through redemption of the preferred shares at $213.71 per
share upon the occurrence of certain prepayment events.

In addition to these prepayment events, there are certain covenants placed on
the Company that require that several predetermined ratios be maintained. At
December 31, 1996, the Company was in compliance with such covenants. In
addition, payments of common stock dividends in 1997 and beyond will be limited
to each year's net income in excess of net income for that year required for
the Company to be in compliance with its net worth debt covenant (approximately
$4.8 million in 1997) up to $0.28 per common share. This obligation is secured
with the Company's accounts receivable, inventory, machinery and equipment. The
fair value of the ESOT obligation approximates book value since the interest
rate is prime-based and accordingly is adjusted for market rate fluctuations.

The ESOT's borrowing guaranteed by the Company is reflected as a liability on
the balance sheet with an equal amount as a reduction of shareholders' equity,
offsetting the increase in the capital stock accounts. As the principal portion
of the note is repaid through 2003, the liability and the ESOT loan obligation
will be reduced concurrently.

(11) Federal Income Taxes

The 1996, 1995 and 1994 (benefit) provision for Federal income taxes for
continuing operations was comprised of the following amounts:
===============================================================================
                                         1996            1995            1994
                                                    (in thousands)
-------------------------------------------------------------------------------
Federal
 Current                              $    -         $    -           $(2,809)
 Deferred                                  -              -              (991)
-------------------------------------------------------------------------------
Total                                 $    -         $    -           $(3,800)
===============================================================================

Included in the 1996 current Federal provision is $858,000 of benefit for the
utilization of net operating loss carryforwards.

State income taxes of $257,000, $295,000 and $192,000 in 1996, 1995 and 1994,
respectively, are included in general and administrative expenses.

                                    Page 22
<PAGE>
The effective Federal income tax rate differed from the statutory Federal
income tax rate for the following reasons:
===============================================================================
                                              Percent of Pretax Earnings
                                         1996            1995            1994
-------------------------------------------------------------------------------
Tax at statutory rate                   34.0%           34.0%          (34.0%)
Preferred stock dividends               (1.2)           (6.5)              -
(Decrease) increase in valuation
  allowance                            (29.4)          (26.3)           24.0
Adjustment of prior year accruals          -               -            (3.7)
Other, net                              (3.4)           (1.2)           (0.4)
-------------------------------------------------------------------------------
Effective Federal income tax rate          -               -           (14.1%)
===============================================================================

The items that comprise the significant portions of deferred tax assets and
liabilities as of December 31, 1996 and 1995 are as follows:
===============================================================================
                                                              December 31
Deferred Tax Assets                                      1996            1995
-------------------------------------------------------------------------------
Postretirement obligation other than pensions          $1,358          $4,198
U.S. net operating loss carryforwards                   3,091           4,422
Restructuring costs                                         -           1,847
Environmental obligation                                1,398           1,641
R&D and alternative minimum tax credit carryforwards    2,326           2,023
Deferred compensation                                   1,480           1,123
Capital loss carryforwards                              1,207           1,207
Discontinued operations                                 2,380               -
Other                                                     429             392
-------------------------------------------------------------------------------
Total deferred tax assets                              13,669          16,853
Less: Valuation allowance                              (5,328)         (4,515)
-------------------------------------------------------------------------------
                                                        8,341          12,338
Deferred Tax Liabilities
-------------------------------------------------------------------------------
Depreciation and amortization                           3,357           8,381
Contract tax accounting                                   839             753
Prepaid pension asset                                   1,393             956
Other                                                   2,752           2,248
-------------------------------------------------------------------------------
Total deferred tax liabilities                          8,341          12,338
-------------------------------------------------------------------------------
Net deferred tax asset (liability)                    $     -         $     -
===============================================================================

Deferred income tax assets as of December 31, 1996 include U.S. net operating
loss carryforwards and capital loss carryforwards for income tax purposes of
approximately $9,100,000 and $3,550,000, respectively, primarily expiring in
2009, of which approximately $857,000 of the tax benefits will be allocated to
retained earnings. R&D credits expire in the years 2008 and 2009. Realization
of these assets is dependent on future taxable earnings and capital gains. A
valuation allowance has been established at December 31, 1996 for the
Company's net deferred tax asset since, based on the Company's recent
cumulative losses, management cannot conclude that it is more likely than not
that the deferred tax assets will be realized.

(12) Shareholders' Equity

At various times beginning in 1983, the Board of Directors has authorized and
subsequently increased by amendments, a plan to purchase an aggregate amount of
4,190,000 shares of the Company's common stock. As of December 31, 1996, the
Company had acquired approximately 3,957,000 shares in open market transactions
at prevailing market prices. Approximately 1,548,000 of these shares have been
used for various purposes, including: conversion of preferred shares;
contributions of shares to the EDO Corporation Employee Stock Ownership Plan;
grants pursuant to the Company's Long-Term Incentive Plans; payment of
directors' fees; partial payment of a 50% stock dividend; and stock options
exercised. As of December 31, 1996 and 1995, the Company held 2,409,136 and
2,645,863 treasury shares, respectively, for future use.

At December 31, 1996, the Company had reserved, authorized and unissued common
shares for the following purposes:
===============================================================================
                                                                        Shares
-------------------------------------------------------------------------------
Conversion of 7% Convertible Subordinated Debentures Due 2011        1,332,590
Stock option and long-term incentive plans                           1,202,063
Conversion of preferred shares                                       1,053,502
-------------------------------------------------------------------------------
                                                                     3,588,155
===============================================================================

(13) Stock Plans

The Company has granted nonqualified stock options to officers, directors and
other key employees, under a plan, approved by the shareholders in 1996, which
replaced all previous stock option and long-term incentive plans, for the
purchase of its common shares at the fair market value of the shares on the
date of grant. Options generally become exercisable in four substantially equal
annual installments beginning on the first anniversary of the date of the grant
and expire on the tenth anniversary of the date of the grant.

Changes in options outstanding are as follows:

                                    Page 23
<PAGE>
===============================================================================
                      1996                   1995                  1994
               Weighted   Shares      Weighted   Shares     Weighted   Shares
                Average   Subject      Average   Subject     Average   Subject
               Exercise     to        Exercise     to       Exercise     to
                 Price    Option        Price    Option       Price    Option
-------------------------------------------------------------------------------
Beginning
 of year        $ 6.54    767,800     $ 7.09    790,238      $ 7.91    791,963
Options
 granted          5.54     27,500       3.40     96,750        3.46    126,000
Options
 exercised        5.12    (27,662)         -          -        4.31       (500)
Options
 cancelled        6.30    (30,325)      7.67   (119,188)       8.61   (127,225)
-------------------------------------------------------------------------------
End of year     $ 6.57    737,313     $ 6.54    767,800      $ 7.09    790,238
-------------------------------------------------------------------------------
Exercisable
 at year end              595,985               576,800                623,657
===============================================================================

The options outstanding as of December 31, 1996 are summarized in ranges as
follows:
===============================================================================
   Range of         Weighted Average    Number of Options   Weighted Average -
Exercise Price      Exercise Price        Outstanding        Remaining Life
-------------------------------------------------------------------------------
 $3.07- 5.99             3.75               232,938            7-1/2 years
 $6.00- 8.99             7.64               473,650            4-1/2 years
 $9.00-11.56            11.37                30,725                5 years
-------------------------------------------------------------------------------
                                            737,313
===============================================================================


The options exercisable as of December 31, 1996 have a weighted average
exercise price of $7.21.

The plan, approved by the shareholders of the Company in 1996, also provides
for common share long-term incentive awards as defined under the plan. All
shares authorized under the previous plans not yet awarded were canceled upon
the approval of the 1996 plan. As of December 31, 1996, plan participants had
been awarded 132,500 restricted common shares and 7,500 non qualified stock
options. The 1996 plan will expire in 2005. The cost of the awards under the
1996 plan (and the previous plans which it replaced) are amortized over the
five-year period the related services are provided. The amount charged to
operations in 1996, 1995 and 1994 was $148,000, $0 and $166,000, respectively.

The per share weighted-average fair value of stock options granted during 1996
and 1995 was $2.70 and $2.37, respectively, on the date of grant using the
Black Scholes option-pricing model with the following weighted-average
assumptions: 1996 - expected dividend yield of 0%, risk free interest rate of
6%, expected stock volatility of 40%, and an expected option life of 7-1/2
years; 1995 - expected dividend yield of 0%, risk free interest rate of 5%,
expected stock volatility of 50%, and an expected option life of 7-1/2 years.

The Company applies APB Opinion No. 25 in accounting for its stock option
grants and, accordingly, no compensation cost has been recognized in the
financial statements for its stock options which have an exercise price equal
to or greater than the fair value of the stock on the date of the grant. Had
the Company determined compensation cost based on the fair value at the grant
date for its stock options under SFAS No. 123, the Company's net earnings from
continuing operations and primary net earnings from continuing operations per
common share would have been reduced to the pro forma amounts indicated below:
===============================================================================
                                                         1996            1995
                                                            (in thousands)
-------------------------------------------------------------------------------
Net earnings:
 As reported                                         $  13,068       $  4,125
 Pro forma                                              13,007          4,079
Net earnings per share:
 As reported                                         $    1.95       $   0.50
 Pro forma                                                1.94           0.49
===============================================================================

Pro forma net earnings reflects only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net earnings amounts
presented above because compensation cost is reflected over the options'
vesting period and compensation cost for options granted prior to January 1,
1995 was not considered.

(14) Other Employee Benefit Plans

The Company maintains a noncontributory defined benefit pension plan covering
substantially all of its employees. The benefits are based on years of service
and the employees' highest five-year average base salary in the final ten years
of employment. The Company's funding policy is to make annual contributions to
the extent such contributions are actuarially determined and tax deductible.

The net pension (income) expense for 1996, 1995 and 1994 was $(1,285,000),
$316,000 and $73,000, respectively. In addition, during 1995 and 1994, the
Company experienced curtailment gains of $645,000 and $1,394,000, respectively,
which reduced cost of sales in the consolidated statements of operations, as a
result of its reduction in the number of employees in those years. The expected
long-term rate of return on plan assets was 9.0% in 1996, 1995 and 1994. The

                                    Page 24
<PAGE>
actuarial computations assumed a discount rate on benefit obligations at
December 31, 1996 and 1995 of 7.5% and 7.25%, respectively. The assumed rate of
compensation increase approximates the Company's previous experience. The
assets of the pension plan consist primarily of equity and fixed income
securities which are readily marketable.

A summary of the components of net periodic pension (income) expense follows:
===============================================================================
                                         1996            1995            1994
                                                    (in thousands)
-------------------------------------------------------------------------------
Service cost                       $   1,277      $   1,192        $    1,784
Interest cost on projected
  benefit obligation                   5,359          5,469             5,138
Actual return on plan assets         (16,369)       (18,791)            1,180
Net amortization and deferral          8,448         12,446            (8,029)
-------------------------------------------------------------------------------
Net pension (income) expense       $  (1,285)     $     316        $       73
===============================================================================

The funded status of the plan as of December 31 was as follows:
===============================================================================
                                                         1996            1995
                                                            (in thousands)
-------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
  benefits of $69,704 and $68,656 for 1996 and
  1995, respectively                                 $(71,404)       $(70,926)
-------------------------------------------------------------------------------
Projected benefit obligation for service
  rendered to date                                   $(76,290)       $(77,009)
Plan assets at fair value                              97,837          87,456
-------------------------------------------------------------------------------
Funded status of plan                                  21,547          10,447
Unrecognized net gain from past experience
  different from that assumed and effects of
  changes in assumptions                              (18,777)         (7,940)
Unrecognized prior service cost at December 31,
  being amortized over 5 years through 2000             1,368             354
Unrecognized net asset at December 31, being
  amortized over 15 years through 2001                    (42)            (50)
-------------------------------------------------------------------------------
Prepaid pension cost (in other assets)               $  4,096        $  2,811
===============================================================================

In addition, the Company established in 1988 a supplemental defined benefit
plan for substantially all employees. In 1996, 1995 and 1994, the net pension
expense for this plan was approximately $64,800, $58,300 and $104,900,
respectively.

The Company also has a supplemental retirement plan for officers and certain
employees under which the Company has agreed to pay, at the option of the
individual, either a predetermined retirement benefit or a fully paid up life
insurance policy. In the event of preretirement death or disability, the plan
provides for similar benefits. Total expenses under this plan in 1996, 1995 and
1994 were $585,000, $468,000, and $404,000, respectively.

(15) Postretirement Health Care and Life Insurance Benefits

The Company provides certain health care and life insurance benefits to
qualified retired employees and dependents at certain locations. These benefits
are funded on a pay-as-you-go basis, with the retiree paying a portion of the
cost through contributions, deductibles and coinsurance provisions. The Company
has always retained the right to modify or terminate the plans providing these
benefits.

In accordance with SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," the Company recognizes these benefit expenses on
an accrual basis as the employees earn them during their employment rather than
when they are actually paid.

Cash outlays relating to retiree health care and life insurance benefits
amounted to $631,000, $1,131,000 and $1,017,000 for 1996, 1995 and 1994,
respectively.

Postretirement health care and life insurance expense (income) included the
following components:
===============================================================================
                                         1996            1995            1994
                                                    (in thousands)
-------------------------------------------------------------------------------
Service cost                       $      42      $      53        $       93
Interest cost                            320            694               884
Amortization of prior service cost      (796)          (662)                -
Amortization of net unrecognized
  gain                                  (36)            (71)                -
-------------------------------------------------------------------------------
Total postretirement health care
  and life insurance expense
  (income)                         $   (470)      $      14        $      977
===============================================================================

In 1995 the Company modified these benefit plans to shift the cost for certain
participants over age 65 to Medicare HMO type plans. The effect of this change
was to reduce the postretirement obligation by approximately $5.0 million.
During 1996, the Company recognized a non-cash curtailment gain of $7,120,000
in connection with the discontinuance of postretirement medical benefits for
Medicare-eligible retirees. This gain represents the reversal of a significant
portion of the postretirement obligation established upon the adoption of SFAS
No. 106 in 1993.

The funded status and breakdown of the postretirement health care and life
insurance benefits are as follows as of December 31:

                                    Page 25
<PAGE>
===============================================================================
                                                         1996            1995
                                                            (in thousands)
-------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees                                             $  2,367        $  5,787
Eligible active employees                                 571             857
Other ineligible active employees                         583             962
-------------------------------------------------------------------------------
Unfunded accumulated postretirement benefit
  obligation                                         $  3,521        $  7,606
Unrecognized prior service cost                             -           4,801
Unrecognized net (loss) gain                              474             (59)
-------------------------------------------------------------------------------
Accrued postretirement benefit cost                  $  3,995        $ 12,348
===============================================================================

Actuarial assumptions used in determining the accumulated postretirement
benefit obligation include a discount rate of 7.50% and 7.25% at December 31,
1996 and 1995, respectively, and estimated increases in health care costs of 5%
per year.

(16) Commitments and Contingencies

The Company is contingently liable under the terms of letters of credit (Note
9) aggregating approximately $6,529,000 at December 31, 1996, should it fail to
perform in accordance with the terms of its contracts with foreign customers.

At December 31, 1996, the Company and its subsidiaries were obligated under
building and equipment leases expiring between 1997 and 2005. Rental expense
under such leases for the years ended December 31, 1996, 1995 and 1994 amounted
to $3,050,000, $2,450,000 and $1,980,000, respectively. Minimum future rentals
under those obligations with noncancellable terms in excess of one year are as
follows:
            1997 - $1,970,000
            1998 - $1,900,000
            1999 - $1,670,000
            2000 - $1,480,000
            2001 - $1,480,000
      Thereafter - $5,290,000

(17) Legal Matters

The Company and three other companies have entered into a consent decree with
the Federal government for the remediation of a Superfund site. Management
estimates that as of December 31, 1996 the remaining discounted liability over
the remainder of the thirty years related to this matter is approximately $4.1
million of which approximately $1.3 million has been classified as current and
is included in accounts payable and accrued liabilities. Approximately 40% of
the $4.1 million liability will be expended over the next two years. Management
believes it is covered by liability insurance for all of the unreimbursed costs
it incurs. The matter is in court to determine the insurers' defense and
indemnification obligations to the Company. Although the Company intends to
continue to pursue its liability insurance carriers, in 1994 the Company
recognized an expense of $5.4 million when it wrote off a previously recorded
receivable relating to the amount the Company believes is covered by its
insurance policies.

The Company is also involved in other environmental cleanup efforts, none of
which, management believes, is likely to have a material adverse effect on the
Company's consolidated financial position or results of operations.

Additionally, the Company and its subsidiaries are subject to certain legal
actions that arise out of the normal course of business. It is management's
belief that the ultimate outcome of these actions will not have a material
adverse effect on the Company's consolidated financial position or results of
operations.

(18) Business Segments

The Company operates in two industry segments: Defense and Space Systems, and
Industrial Products. Sales between industry segments approximate market price.
Sales are made and credit is granted generally to the U.S. Government or to
customers in the defense or aerospace industry. The Company considers the risks
associated with such customers to be minimal.

Domestic government sales, which include sales where the Company is a
subcontractor to a prime contractor with the government, amounted to 36%, 43%
and 59% of net sales, which were 36%, 46% and 66% of Defense and Space Systems
sales and 37%, 37% and 43% of Industrial Products sales for 1996, 1995 and
1994, respectively.

Export sales comprised 35%, 31% and 22% of net sales for 1996, 1995 and 1994,
respectively.

Principal products and systems by industry segment are as follows:

            Defense and Space Systems
            * Suspension and Release Equipment
            * Sonar Systems
            * Spaceflight Systems
            * Infrared Instrumentation
            * Airborne Mine Countermeasures Systems
            * Command, Control, Communications & Intelligence Systems

            Industrial Products
            * Electroceramic Components
            * Acoustic Instrument Systems
            * Acoustic Systems
            * Fiber-Reinforced Structures

                                    Page 26
<PAGE>
The distribution of net sales, operating earnings and identifiable assets for
continuing operations of the Company's business segments follows:
===============================================================================
                                                1996         1995         1994
                                                       (in thousands)
-------------------------------------------------------------------------------
Net Sales:
 Defense and Space Systems:
  Unaffiliated customers                    $ 64,110     $ 52,055     $ 56,568
 Industrial Products:
  Unaffiliated customers                      30,476       26,877       24,688
  Intersegment sales                              36          751          776
-------------------------------------------------------------------------------
                                              94,622       79,683       82,032
 Less intersegment sales                          36          751          776
-------------------------------------------------------------------------------
Net sales                                   $ 94,586     $ 78,932     $ 81,256
-------------------------------------------------------------------------------
Operating (loss) earnings:
 Defense and Space Systems                  $ 14,060     $  5,779     $ (6,546)
 Industrial Products                           3,926        3,392       (9,853)
General corporate expenses                    (4,086)      (3,806)      (4,711)
-------------------------------------------------------------------------------
                                              13,900        5,365      (21,110)
Net interest expense                            (766)      (1,199)      (2,160)
Other income (expense), net                      (66)         (41)         335
-------------------------------------------------------------------------------
Earnings (loss) from continuing operations
  before Federal income taxes               $ 13,068     $  4,125     $(22,935)
-------------------------------------------------------------------------------
Identifiable assets:
 Defense and Space Systems                  $ 42,198     $ 40,187     $ 43,404
 Industrial Products                          19,846       19,349       18,805
 Corporate                                    32,179       30,649       28,565
-------------------------------------------------------------------------------
                                            $ 94,223     $ 90,185     $ 90,774
-------------------------------------------------------------------------------
Depreciation expense:
 Defense and Space Systems                  $  2,271     $  3,233     $  3,412
 Industrial Products                           1,200        1,335        2,265
-------------------------------------------------------------------------------
                                            $  3,471     $  4,568     $  5,677
-------------------------------------------------------------------------------
Capital expenditures:
 Defense and Space Systems                  $  3,423     $  1,567     $    953
 Industrial Products                             804          233          778
-------------------------------------------------------------------------------
                                            $  4,227     $  1,800     $  1,731
===============================================================================

KPMG PEAT MARWICK LLP

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
EDO Corporation

We have audited the accompanying consolidated balance sheets of EDO Corporation
and subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
years in the three year period ended December 31, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of EDO Corporation and
subsidiaries at December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the years in the three year period ended
December 31, 1996, in conformity with generally accepted accounting principles.

                                                     KPMG Peat Marwick LLP
Jericho, New York
February 13, 1997

                                    Page 27
<PAGE>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table sets forth unaudited quarterly financial information for
1996 and 1995 (in thousands, except per share amounts).
===============================================================================
                First Quarter   Second Quarter  Third Quarter   Fourth Quarter
                 1996    1995    1996    1995    1996    1995    1996    1995
-------------------------------------------------------------------------------
Net sales      $23,669 $18,211 $24,771 $21,616 $23,107 $18,634 $23,039 $20,471
Gross
 profitb         5,022   4,978   5,891   4,194   4,711   4,082   6,399   5,838
Net
  earnings
  (loss)
 Continuing
  operations    1,480      838   1,534     869   8,754a  1,168   1,300   1,250
 Discontinued
  operations     (527)    (407)   (491)   (279) (7,619)   (384)      -    (395)
-------------------------------------------------------------------------------
 Total            953      431   1,043     590   1,135     784   1,300     855
Earnings
  (loss) per
  share:
 Primary
  Continuing
   operations    0.20     0.09    0.20    0.10    1.38    0.15    0.16    0.16
  Discontinued
   operations   (0.09)   (0.07)  (0.08)  (0.05)  (1.24)  (0.07)      -   (0.06)
-------------------------------------------------------------------------------
  Total          0.11     0.02    0.12    0.05    0.14    0.08    0.16    0.10
 Fully diluted
  Continuing
   operations    0.17     0.07    0.18    0.08    1.18    0.13    0.14    0.14
  Discontinued
   operations   (0.07)   (0.06)  (0.07)  (0.04)  (1.06)  (0.06)      -   (0.06)
-------------------------------------------------------------------------------
  Total          0.10     0.01    0.11    0.04    0.12    0.07    0.14    0.08
Preferred
  dividends
  paid            303      322     293     307     293     307     290     303
===============================================================================
a The 1996 third quarter results from continuing operations include a $7,120
curtailment gain (or $1.17 per share) for the discontinuance of postretirement
health care benefits for Medicare-eligible retirees.

b Gross profit represents net sales less cost of sales and Company-sponsored
research and development.

                                    Page 28

<PAGE>
                                 EXHIBIT INDEX

Exhibits which are noted with an asterisk (*) are management contracts or
compensatory plans or arrangements.

3(i) Certificate of Incorporation of the Company and amendments thereto dated
June 14, 1984, July 18, 1988 and July 22, 1988. Incorporated by reference to
Exhibit 3(i) to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994.

3(ii) By-Laws of the Company.

4(a) Indenture dated December 1, 1986 between Chemical Bank as successor in
interest to Manufacturers Hanover Trust Company, as Trustee, and EDO
Corporation. Incorporated by reference to Exhibit 4(b) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992.

4(b) Guarantee Agreement, dated as of July 22, 1988, as amended, made by the
Company in favor of Fleet Bank as successor in interest to NatWest Bank NA and
Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(c)
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992.

4(c) Term Loan Agreement, dated as of July 22, 1988, as amended, between The
Bank of New York, as trustee of the trust established under the EDO Corporation
Employee Stock Ownership Plan, and Fleet Bank as successor in interest to
NatWest Bank NA and Manufacturers Hanover Trust Company. Incorporated by
reference to Exhibit 4(d) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.

4(d) Term Note, dated July 22, 1988, as amended, between The Bank of New York,
as trustee of the trust established under the EDO Corporation Employee Stock
Ownership Plan, and Fleet Bank as successor in interest to NatWest Bank NA and
Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(e)
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992.

4(e) Pledge and Security Agreement, dated as of July 22, 1988, as amended,
between The Bank of New York, as trustee of the trust established under the EDO
Corporation Employee Stock Ownership Plan, and Fleet Bank as successor in
interest to NatWest Bank NA and Manufacturers Hanover Trust Company.
Incorporated by reference to Exhibit 4(f) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992.

4(f) Amendment No. 6 to the Guarantee Agreement referred to in Exhibit 4(b)
above, effective March 27, 1993. Incorporated by reference to Exhibit 4(i) to
the Company's Quarterly Report on Form 10-Q for the quarter ended June 26,
1993.

4(g) Amendment No. 7 to the Guarantee Agreement referred to in Exhibit 4(b)
above, effective March 3, 1994. Incorporated by reference to Exhibit 4(h) to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1993.

4(h) Amendment No. 8 to the Guarantee Agreement referred to in Exhibit 4(b)
above, effective February 10, 1995. Incorporated by reference to Exhibit 4(h)
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994.

4(i) Amendment No. 9 to the Guarantee Agreement referred to in Exhibit 4(b)
above, effective June 30, 1995. Incorporated by reference to Exhibit 4(i) to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995.

4(j) Amendment No. 10 to the Guarantee Agreement referred to in Exhibit 4(b)
above, effective June 30, 1996.

10(a)* EDO Corporation 1996 Long-Term Incentive Plan.

10(b)* EDO Corporation Executive Termination Agreements, as amended through
November 24, 1989, between the Company and two employees. Incorporated by
reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.

10(c)* Executive Life Insurance Plan Agreements, as amended through January 23,
1990, between the Company and 30 employees and retirees. Incorporated by
reference to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.

10(d)* Form of Directors' and Officers' Indemnification Agreements between EDO
Corporation and 14 current Company directors and officers.

10(e) Consent Decree, entered on November 25, 1992, amongst the United States,
EDO Corporation, Plessey, Inc., Vernitron Corporation and Pitney Bowes, Inc.
Incorporated by reference to Exhibit 10(j) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992.

21 List of Subsidiaries.

23 Consent of Independent Auditors to the incorporation by reference in the
Company's Registration Statements on Form S-8 of their report included in Item
14(a)1 of this Annual Report on Form 10-K.

24 Powers of Attorney used in connection with the execution of this Annual
Report on Form 10-K.

27 Financial Data Schedule.