##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For
the quarterly period ended April 1, 2006
 Commission file number 0-6072
 EMS TECHNOLOGIES, INC.
  Georgia
    
    58-1035424(State or other jurisdiction of
incorporation or organization)
    
    (IRS Employer ID Number)660 Engineering Drive Norcross, Georgia
    
    30092(Address of principal executive offices)
    

    (Zip Code)
 (770) 263-9200
 
  þ o
  o þ o
 o þ
  Class
    
    Number of SharesCommon Stock, $.10 par Value
    
    15,158,474
 AVAILABLE INFORMATION
 www.ems-t.com




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##### 



TABLE OF CONTENTS
 PART I
    
    
    2ITEM 1. Financial Statements
    
    
    2Consolidated Statements of Operations
    
    
    2Consolidated Balance Sheets
    
    
    3Consolidated Statements of Cash Flows
    
    
    5Notes to Consolidated Financial Statements
    
    
    6ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    29ITEM 4. Controls and Procedures
    
    
    30PART II
    
    
    31ITEM 1A. Risk Factors
    
    
    31ITEM 6. Exhibits
    
    
    31SIGNATURES
    
    
    32EX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32 SECTION 906 CERTIFICATION OF THE CEO & CFO




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##### Table of Contents



PART I
 FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 EMS Technologies, Inc. and Subsidiaries
 
 Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
 Quarters endedApr 1
    
    
    Apr 22006
    
    
    2005Net sales
    
    $
    74,670
    
    
    
    60,184Cost of sales
    
    
    48,848
    
    
    
    40,743Selling, general and administrative expenses
    
    
    17,216
    
    
    
    16,053Research and development expenses
    
    
    4,965
    
    
    
    3,619Operating income (loss)
    
    
    3,641
    
    
    
    (231
    )Non-operating income, net
    
    
    341
    
    
    
    68Foreign exchange gain (loss)
    
    
    (341
    )
    
    
    7Interest expense
    
    
    (722
    )
    
    
    (898
    )Earnings (loss) from continuing operations before income taxes
    
    
    2,919
    
    
    
    (1,054
    )Income tax (expense) benefit
    
    
    (934
    )
    
    
    358Earnings (loss) from continuing operations
    
    
    1,985
    
    
    
    (696
    )Discontinued operations (note 2):Earnings (loss) from discontinued operations before income taxes
    
    
    (1,727
    )
    
    
    114Income tax (expense) benefit
    
    
    (30
    )
    
    
    278Earnings (loss) from discontinued operations
    
    
    (1,757
    )
    
    
    392Net earnings (loss)
    
    $
    228
    
    
    
    (304
    )Net earnings (loss) per share (note 4):Basic:Earnings (loss) from continuing operations
    
    $
    0.15
    
    
    
    (0.06
    )Earnings (loss) from discontinued operations
    
    
    (0.13
    )
    
    
    0.03Net earnings (loss)
    
    $
    0.02
    
    
    
    (0.03
    )Diluted:Earnings (loss) from continuing operations
    
    $
    0.15
    
    
    
    (0.06
    )Earnings (loss) from discontinued operations
    
    
    (0.13
    )
    
    
    0.03Net earnings (loss)
    
    $
    0.02
    
    
    
    (0.03
    )Weighted average number of shares (note 4):Basic
    
    
    13,247
    
    
    
    11,164Diluted
    
    
    13,309
    
    
    
    11,164
  2




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EMS Technologies, Inc. and Subsidiaries
 
 Consolidated Balance Sheets (Unaudited)
(in thousands)
 Apr 1
    
    
    Dec 312006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    48,157
    
    
    
    12,978Restricted cash
    
    
    2,653
    
    
    
    2,620Trade accounts receivable, net (note 6)
    
    
    87,637
    
    
    
    92,973Inventories (note 7)
    
    
    37,454
    
    
    
    34,673Deferred income taxes, net
    
    
    1,433
    
    
    
    1,433Other current assets
    
    
    573
    
    
    
    716Assets held for sale (note 2)
    
    
    
    
    
    
    6,732Total current assets
    
    
    177,907
    
    
    
    152,125Property, plant and equipment:Land
    
    
    1,150
    
    
    
    1,150Buildings and leasehold improvements
    
    
    15,291
    
    
    
    15,242Machinery and equipment
    
    
    78,574
    
    
    
    76,342Furniture and fixtures
    
    
    8,354
    
    
    
    8,511Total property, plant and equipment
    
    
    103,369
    
    
    
    101,245Less accumulated depreciation and amortization
    
    
    68,972
    
    
    
    66,965Net property, plant and equipment
    
    
    34,397
    
    
    
    34,280Deferred income taxes, net  non-current
    
    
    3,634
    
    
    
    3,634Intangible assets, net
    
    
    3,021
    
    
    
    3,298Goodwill
    
    
    13,526
    
    
    
    13,526Other assets
    
    
    16,129
    
    
    
    12,597Total assets
    
    $
    248,614
    
    
    
    219,460
  3




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EMS Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited), continued
(in thousands, except share data)
 Apr 1
    
    
    Dec 312006
    
    
    2005LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current installments of long-term debt
    
    $
    3,735
    
    
    
    6,825Accounts payable
    
    
    27,065
    
    
    
    34,089Income taxes payable
    
    
    1,504
    
    
    
    1,866Accrued compensation costs
    
    
    8,741
    
    
    
    9,402Accrued retirement costs
    
    
    3,303
    
    
    
    2,603Deferred service revenue
    
    
    7,452
    
    
    
    5,755Liabilities related to assets held for sale
(note 2)
    
    
    
    
    
    
    2,130Other current liabilities
    
    
    6,889
    
    
    
    4,801Total current liabilities
    
    
    58,689
    
    
    
    67,471Long-term debt, excluding current installments
    
    
    12,603
    
    
    
    36,583Other liabilities
    
    
    1,740
    
    
    
    1,750Total liabilities
    
    
    73,032
    
    
    
    105,804Shareholders equity:Preferred stock of $1.00 par value per share
Authorized 10,000,000 shares; none issued
    
    
    
    
    
    
    Common stock of $.10 par value per share
Authorized 75,000,000 shares, issued and
outstanding 15,151,000 in 2006 and
11,343,000 in 2005
    
    
    1,515
    
    
    
    1,134Additional paid-in capital
    
    
    130,059
    
    
    
    71,389Accumulated other comprehensive income (loss)
- foreign currency translation adjustment
    
    
    2,550
    
    
    
    (97
    )Retained earnings
    
    
    41,458
    
    
    
    41,230Total shareholders equity
    
    
    175,582
    
    
    
    113,656Total liabilities and shareholders equity
    
    $
    248,614
    
    
    
    219,460
  4




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EMS Technologies, Inc. and Subsidiaries
 
 Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
 Three Months EndedApr 1
    
    
    Apr 22006
    
    
    2005Cash flows from operating activities:Net earnings (loss)
    
    $
    228
    
    
    
    (304
    )Adjustments to reconcile net earnings (loss) to net cash provided by (used in)
operating activities:Depreciation and other intangibles amortization
    
    
    2,337
    
    
    
    2,336Loss (earnings) from discontinued operations
    
    
    1,757
    
    
    
    (392
    )Stock-based compensation expense
    
    
    138
    
    
    
    Loss on sale of assets
    
    
    36
    
    
    
    Changes in operating assets and liabilities, net of effects of acquisition:Trade accounts receivable
    
    
    5,693
    
    
    
    (155
    )Inventories
    
    
    (2,624
    )
    
    
    (1,351
    )Accounts payable
    
    
    (6,518
    )
    
    
    (1,331
    )Income taxes payable
    
    
    (319
    )
    
    
    (1,129
    )Accrued costs, deferred revenue, and other current liabilities
    
    
    1,929
    
    
    
    2,550Other
    
    
    (2,274
    )
    
    
    (2,067
    )Net cash provided by (used in) operating activities in continuing operations
    
    
    383
    
    
    
    (1,843
    )Net cash used in operating activities in discontinued operations
(Revised-Note 1)
    
    
    (1,819
    )
    
    
    (5,128
    )Net cash used in operating activities
    
    
    (1,436
    )
    
    
    (6,971
    )Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (2,142
    )
    
    
    (2,000
    )Payments for asset acquisitions
    
    
    (63
    )
    
    
    Proceeds from sale of assets
    
    
    6,585
    
    
    
    182Net cash provided by (used in) investing activities in continuing operations
    
    
    4,380
    
    
    
    (1,818
    )Net cash used in investing activities in discontinued operations (Revised
-Note 1)
    
    
    
    
    
    
    (393
    )Net cash provided by (used in) investing activities
    
    
    4,380
    
    
    
    (2,211
    )Cash flows from financing activities:Net increase (decrease) in revolving debt
    
    
    (26,664
    )
    
    
    6,594Repayment of term debt
    
    
    (317
    )
    
    
    (327
    )Increase in restricted cash
    
    
    (33
    )
    
    
    Deferred financing costs paid
    
    
    (23
    )
    
    
    (58
    )Proceeds from public stock offering, net of expenses
    
    
    58,736
    
    
    
    Proceeds from exercise of stock options, net of withholding taxes paid
    
    
    177
    
    
    
    2Net cash provided by financing activities
    
    
    31,876
    
    
    
    6,211Net change in cash and cash equivalents
    
    
    34,820
    
    
    
    (2,971
    )Effect of exchange rates on cash and cash equivalents
    
    
    359
    
    
    
    91Cash and cash equivalents at beginning of period
    
    
    12,978
    
    
    
    14,553Cash and cash equivalents at end of period
    
    $
    48,157
    
    
    
    11,673
  5




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EMS Technologies, Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements (Unaudited)
April 1, 2006 and April 2, 2005
 1. Basis of Presentation
      Managements Use of Estimates
   Cash Equivalents
  Effect of New Accounting Pronouncements
 ,
 6




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2. Discontinued Operations
   CostsLiabilities resulting from the sale
    
    Liability at
    
    
    incurred and expensed in
    
    
    Costs paid
    
    
    Adjustments
    
    
    Liability atof
the S&T/Montreal division
    
    Dec 31, 2005
    
    
    2006
    
    
    in 2006
    
    
    in 2006
    
    

April 1, 2006Termination benefits
    
    $
    1,047
    
    
    
    64
    
    
    
    (366
    )
    
    
    
    
    
    
    745Other associated costs
    
    
    161
    
    
    
    27
    
    
    
    (176
    )
    
    
    
    
    
    
    12Total
    
    $
    1,208
    
    
    
    91
    
    
    
    (542
    )
    
    
    
    
    
    $
    757
  7




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Quarters EndedApr 1
    
    
    Apr 22006
    
    
    2005Net sales
    
    $
    799
    
    
    
    19,580Expenses
    
    
    2,386
    
    
    
    19,466Loss from
sale of assets
    
    
    140
    
    
    
    Earnings (loss) before income taxes
    
    
    (1,727
    )
    
    
    114Income tax (expense) benefit
    
    
    (30
    )
    
    
    278Earnings (loss) from discontinued operations
    
    $
    (1,757
    )
    
    
    392
  Apr 1
    
    
    Dec 312006
    
    
    2005Trade accounts receivable, net
    
    $
    
    
    
    
    3,417Inventories
    
    
    
    
    
    
    3,035Other assets
    
    
    
    
    
    
    280Total assets held for sale
    
    $
    
    
    
    
    6,732Accounts payable
    
    $
    
    
    
    
    1,587Other current liabilities
    
    
    
    
    
    
    543Total liabilities related to assets held for sale
    
    $
    
    
    
    
    2,130
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3. Derivative Financial Instruments
    Quarters EndedApr 1
    
    
    Apr 22006
    
    
    2005Beginning net liability for derivatives
    
    $
    (4
    )
    
    
    (128
    )Changes in
consolidated statement of operations:Sales:Gain (loss) in value of embedded derivatives
    
    
    6
    
    
    
    (1
    )Foreign exchange gain (loss):Gain (loss) in value of derivative instruments that do not qualify as hedging
instruments
    
    
    (37
    )
    
    
    19Matured foreign exchange contracts
    
    
    (18
    )
    
    
    52Net consolidated statements of operations gain (loss) from changes
in value of derivative instruments
    
    
    (49
    )
    
    
    70Ending net liability for derivatives
    
    $
    (53
    )
    
    
    (58
    )
   4. Earnings (Loss) Per Share
 Calculation
    9




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Quarters EndedApr 1
    
    
    Apr 22006
    
    
    2005Basic-weighted average common shares outstanding
    
    
    13,247
    
    
    
    11,164Incremental effect of dilutive common stock equivalents:Unexercised in-the-money stock options
    
    
    62
    
    
    
    Diluted-weighted
average common and dilutive shares outstanding
    
    
    13,309
    
    
    
    11,164
 Common Stock Public Offering
  5. Comprehensive Income (Loss)
  Quarters EndedApr 1
    
    
    Apr 22006
    
    
    2005Net income (loss)
    
    $
    228
    
    
    
    (304
    )Other comprehensive income (loss):Reclassification due to sale of discontinued operations
    
    
    2,008
    
    
    
    Foreign currency translation adjustment
    
    
    639
    
    
    
    (505
    )Comprehensive income (loss)
    
    $
    2,875
    
    
    
    (809
    )
 10




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6. Trade Accounts Receivable
  Apr 1
    
    
    Dec 312006
    
    
    2005Amounts billed
    
    $
    65,351
    
    
    
    71,662Unbilled revenues under long-term contracts (1)
    
    
    28,016
    
    
    
    25,086Customer advanced payments
    
    
    (4,881
    )
    
    
    (2,998
    )Allowance for doubtful accounts
    
    
    (849
    )
    
    
    (777
    )Trade accounts receivable, net
    
    $
    87,637
    
    
    
    92,973
 
 (1)
    
    Unbilled net sales under long-term contracts are usually billed and collected
within one year. 7. Inventories
  Apr 1
    
    
    Dec 312006
    
    
    2005Parts and materials
    
    $
    23,950
    
    
    
    23,020Work-in-process
    
    
    3,783
    
    
    
    2,783Finished goods
    
    
    9,721
    
    
    
    8,870Inventories, net
    
    $
    37,454
    
    
    
    34,673
 8. Interim Segment Disclosures
      11




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Quarters EndedApr 1
    
    
    Apr 22006
    
    
    2005Net sales:LXE
    
    $
    31,619
    
    
    
    26,819Defense & Space Systems
    
    
    11,863
    
    
    
    11,280SATCOM
    
    
    15,563
    
    
    
    9,864EMS Wireless
    
    
    15,625
    
    
    
    12,221Other
    
    
    
    
    
    
    Total
    
    $
    74,670
    
    
    
    60,184Operating income (loss):LXE
    
    $
    1,845
    
    
    
    982Defense & Space Systems
    
    
    384
    
    
    
    (499
    )SATCOM
    
    
    1,517
    
    
    
    440EMS Wireless
    
    
    264
    
    
    
    (875
    )Corporate
    
    
    (369
    )
    
    
    (279
    )Total
    
    $
    3,641
    
    
    
    (231
    )Net earnings (loss):LXE
    
    $
    1,109
    
    
    
    505Defense & Space Systems
    
    
    180
    
    
    
    (373
    )SATCOM
    
    
    1,300
    
    
    
    513EMS Wireless
    
    
    70
    
    
    
    (643
    )Other
    
    
    (58
    )
    
    
    (61
    )Corporate
    
    
    (616
    )
    
    
    (637
    )Earnings (loss) from continuing operations
    
    
    1,985
    
    
    
    (696
    )Discontinued operations, net
    
    
    (1,757
    )
    
    
    392Total
    
    $
    228
    
    
    
    (304
    )
 9. Warranty Liability
   Apr 1
    
    
    Apr 22006
    
    
    2005Balance at beginning of quarter
    
    $
    3,369
    
    
    
    2,088Accruals for warranties issued during the period
    
    
    634
    
    
    
    333Settlements made during the period
    
    
    (448
    )
    
    
    (398
    )Balance at end of quarter
    
    $
    3,555
    
    
    
    2,023
 12




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10. Long-Term Debt
     11. Stock-Based Compensation
   13




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Options with service-based vesting only
   QuarterEndedApril 22005Net loss:As reported (1)
    
    $
    (304
    )Less: Stock-based employee compensation expense determined
under the fair value method, net of tax
    
    
    (317
    )Pro forma
    
    $
    (621
    )Basic net loss per share:As reported
    
    $
    (0.03
    )Pro forma
    
    
    (0.06
    )Diluted net loss per share:As reported
    
    $
    (0.03
    )Pro forma
    
    
    (0.06
    )
 
 (1)
    
    Stock compensation expense has not been recognized in net earnings (loss).  14




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WeightedAverageWeighted
    
    
    Remaining
    
    
    AggregateAverage
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    Term (years)
    
    
    ValueOptions outstanding at December 31, 2005
    
    
    1,228
    
    
    $
    18.13Granted
    
    
    
    
    
    
    Exercised
    
    
    (29
    )
    
    
    15.62
    
    
    
    
    
    
    $
    55Forfeited or expired
    
    
    (124
    )
    
    
    18.81Options outstanding at April 1, 2006
    
    
    1,075
    
    
    
    18.12
    
    
    
    4.4
    
    
    
    1,348Options exercisable at April 1, 2006
    
    
    980
    
    
    
    18.33
    
    
    
    4.2
    
    
    
    1,161
  WeightedAverageGrant-DateShares
    
    

Fair ValueNon-vested outstanding at December 31, 2005
    
    
    175
    
    
    $
    12.22Granted
    
    
    Vested
    
    
    (80
    )
    
    
    13.75Forfeited or expired
    
    
    Non-vested outstanding at April 1, 2006
    
    
    95
    
    
    $
    10.93
  Options with performance-based and service-based vesting
  15




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WeightedWeighted

    
    
Weighted



    AverageAverage
    
    
Average



    Remaining
    
    
    AggregateExercise
    
    
Grant-Date



    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
Fair Value



    Term (years)
    
    
    ValueOptions outstanding at December 31, 2005
    
    
    
    
    
    $
    Granted
    
    
    108
    
    
    
    18.05
    
    
$
9.57Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (1
    )
    
    
    18.05Options outstanding at April 1, 2006
    
    
    107
    
    
    
    18.05
    
    




    
    5.9
    
    
    $
    
    12. Litigation
  16




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ITEM 2. Management s Discussion and Analysis of Financial Condition and Results of Operations
   
    
    LXE- Rugged mobile computer terminals and other equipment for wireless local area
networks;
    
    Defense & Space Systems- Highly engineered hardware for satellites and defense
electronics applications;
    
    SATCOM- Satellite communications antennas and terminals for aircraft and ground-based
vehicles, other portable satellite terminals, and satellite ground stations for search and
rescue operations;
    
    EMS Wireless- Base station antennas and signal repeaters for PCS/cellular systems;
  Overview:
 
    
    In February 2006, the Company completed the sale of 3,795,000 shares of its common
stock, including the underwriters over-allotment option of 495,000 shares, in a registered
public offering. The offering price was $16.70 per share, and the Company received net
proceeds of approximately $58.7 million after deducting underwriting discounts, commissions
and other offering expenses. The Company used a portion of these net proceeds to repay all
of its borrowings under its U.S. and Canadian revolving credit facilities.
    
    On March 9, 2006, the Company completed the sale of the assets and operating liabilities
of its SatNet division, reported in discontinued operations, to Advantech.
 For continuing operations:
 
    
    Net sales of $74.7 million were reported for continuing operations in 2006. This was
mainly due to record first quarter net sales from our SATCOM, EMS Wireless and LXE
divisions.
    
    Strong operating income was reported by each of the four divisions in the first quarter
of 2006, and in total for continuing operations, was $3.9 million higher than that reported
in 2005.
 For discontinued operations:
 
    
    Results from our discontinued operations was a $1.7 million loss before income tax for
the quarter, mainly as a result of lower than expected net sales by our SatNet division,
and an increase in reported costs for this Canadian-based operation as a result of a weaker
U.S. dollar versus the Canadian dollar.
 17




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Description of Net Sales, Costs and Expenses
 Net sales
   Cost of sales
     Selling, general and administrative expenses
  Research and development expenses
  18




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Non-operating income, net
  Foreign exchange gains and losses
   Interest expense
  Income tax expense
  Discontinued operations
  19




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Results of Operations
 Quarters EndedApr 1
    
    Apr 22006
    
    2005Net sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    65.4
    
    
    
    67.7Selling, general and administrative expenses
    
    
    23.1
    
    
    
    26.7Research and development expenses
    
    
    6.6
    
    
    
    6.0Operating income (loss)
    
    
    4.9
    
    
    
    (0.4
    )Non-operating income, net
    
    
    0.5
    
    
    
    0.1Foreign exchange gain (loss)
    
    
    (0.5
    )
    
    
    0.0Interest expense
    
    
    (1.0
    )
    
    
    (1.5
    )Earnings (loss) from continuing operations before
income taxes
    
    
    3.9
    
    
    
    (1.8
    )Income tax (expense) benefit
    
    
    (1.2
    )
    
    
    0.6Earnings (loss) from continuing operations
    
    
    2.7
    
    
    
    (1.2
    )Discontinued operations:Earnings (loss) from discontinued operations before
income taxes
    
    
    (2.3
    )
    
    
    0.2Income tax (expense) benefit
    
    
    (0.1
    )
    
    
    0.5Earnings (loss) from discontinued operations
    
    
    (2.4
    )
    
    
    0.7Net earnings (loss)
    
    
    0.3
    %
    
    
    (0.5
    )%
 Three Months ended April 1, 2006 and April 2, 2005:
      20




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Net Sales, Cost of Sales, and Operating Income (Loss) by Segment
  Quarters EndedApr 1
    
    
    Apr 2(in thousands, except percentages)
    
    2006
    
    
    2005Net sales:LXE
    
    $
    31,619
    
    
    
    26,819Defense & Space Systems
    
    
    11,863
    
    
    
    11,280SATCOM
    
    
    15,563
    
    
    
    9,864EMS Wireless
    
    
    15,625
    
    
    
    12,221Other
    
    
    
    
    
    
    Total
    
    $
    74,670
    
    
    
    60,184Cost of sales percentage:LXE
    
    
    60.4
    %
    
    
    59.8
    %Defense & Space Systems
    
    
    79.3
    
    
    
    88.3SATCOM
    
    
    59.0
    
    
    
    58.4EMS Wireless
    
    
    72.0
    
    
    
    73.9Total
    
    
    65.4
    %
    
    
    67.7
    %Operating income (loss):LXE
    
    $
    1,845
    
    
    
    982Defense & Space Systems
    
    
    384
    
    
    
    (499
    )SATCOM
    
    
    1,517
    
    
    
    440EMS Wireless
    
    
    264
    
    
    
    (875
    )Corporate and other
    
    
    (369
    )
    
    
    (279
    )Total
    
    $
    3,641
    
    
    
    (231
    )
 LXE:
  Defense & Space Systems:
  SATCOM:
 21




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##### Table of Contents



EMS Wireless:
  Discontinued Operations
    Liquidity and Capital Resources
     22




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##### Table of Contents



Off-Balance Sheet Arrangements
     23




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##### Table of Contents



Commitments and Contractual Obligations
  Payments due by period2007-
    
    
    2009-Total
    
    
    2006
    
    
    2008
    
    
    2010
    
    
    ThereafterContinuing Operations:April 1, 2006:Long-term debt, excluding capital lease
obligations
    
    $
    16,080
    
    
    
    1,226
    
    
    
    4,258
    
    
    
    2,680
    
    
    
    7,916Interest on outstanding long-term debt (1)
    
    
    5,766
    
    
    
    861
    
    
    
    1,800
    
    
    
    1,443
    
    
    
    1,662Purchase commitments (2)
    
    
    28,727
    
    
    
    28,564
    
    
    
    107
    
    
    
    56
    
    
    
    December 31, 2005 (no significant change to date):Capital lease obligations
    
    $
    344
    
    
    
    326
    
    
    
    18
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    8,925
    
    
    
    3,422
    
    
    
    5,333
    
    
    
    168
    
    
    
    2Deferred compensation agreements
    
    
    308
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    308Agreement to acquire satellite service
sub-license
    
    
    8,000
    
    
    
    
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    4,000
 
 (1)
    
    Reflects the repayment of the Companys revolving loan balance from the proceeds
of its stock offering in February 2006, and the related reduction in variable interest
rate.(2)
    
    Purchase commitments primarily represent existing commitments under purchase orders
or contracts to purchase inventory and raw materials for our products. Most of these
purchase orders and contracts can be terminated for a fee that is either fixed or based
on when termination occurs. Critical Accounting Policies
  Revenue recognition on long-term contracts
   24




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Accounting for government research incentives
  Inventory valuation
  Evaluation of long-lived assets for impairment
   25




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Establishment of reserves for deferred income tax assets
  Forward-Looking Statements
  
    
    economic conditions in the U.S. and abroad and their effect on capital spending
in the Companys principal markets;
    
    difficulty predicting the timing of receipt of major customer orders, and the
effect of customer timing decisions on the Companys quarterly results;
    
    successful completion of technological development programs by the Company and
the effects of technology that may be developed by, and patent rights that may be held or
obtained by, competitors;
    
    the ability of the Company to obtain patent licenses, with satisfactory license
rights and royalty rates, from owners of RFID-related patents that the Company concludes
are valid and would otherwise be infringed by Company products;
    
    U.S. defense budget pressures on near-term spending priorities;
    
    uncertainties inherent in the process of converting contract awards into firm
contractual orders in the future;
    
    volatility of foreign exchange rates relative to the U.S. dollar and their
effect on purchasing power by international customers, and the cost structure of the
Companys non-U.S. operations, as well as the potential for realizing foreign exchange
gains and losses associated with non-U.S. assets or liabilities held by the Company;
    
    successful resolution of technical problems, proposed scope changes, or
proposed funding changes that may be encountered on contracts;
    
    changes in the Companys consolidated effective income tax rate caused by the
extent to which actual taxable earnings in the U.S., Canada and other taxing jurisdictions
may vary from expected taxable earnings;
    
    successful transition of products from development stages to an efficient
manufacturing environment;
 26




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##### Table of Contents




    
    changes in the rate at which the Companys products are returned for repair or
replacement under warranty;
    
    customer response to new products and services, and general conditions in the
Companys target markets (such as logistics, PCS/cellular telephony and space-based
communications);
    
    the success of certain of the Companys customers in marketing our line of
high-speed commercial airline communications products as a complimentary offering with
their own lines of avionics products;
    
    the availability of financing for satellite data communications systems and for
expansion of terrestrial PCS/cellular phone systems;
    
    the extent to which terrestrial systems reduce market opportunities for
space-based broadband communications systems by providing extensive broadband Internet
access on a dependable and economical basis;
    
    development of successful working relationships with local business and
government personnel in connection with distribution and manufacture of products in foreign
countries;
    
    the demand growth for various mobile and high-speed data communications
services, and the possible effect of public health concerns about alleged health risks of
radio frequency emissions;
    
    the Companys ability to attract and retain qualified personnel, particularly
those with key technical skills;
    
    the availability of sufficient additional credit or other financing, on
acceptable terms, to support any large acquisitions that we believe would contribute to our
growth and profitability;
    
    the ability to negotiate successfully with potential acquisition candidates,
finance acquisitions, or effectively integrate the acquired businesses, products or
technologies into the Companys existing businesses and products;
    
    the availability, capabilities and performance of suppliers of basic materials,
electronic components and sophisticated subsystems on which the Company must rely in order
to perform according to contract requirements, or to introduce new products on the desired
schedule;
    
    the effects of consolidation in the telecommunications service provider
industry, including effects on the numbers of suppliers used by the Companys customers,
the overall demand by such customers for the Companys products, and the possibility that
such customers may demand greater price concessions; and
    
    uncertainties associated with U.S. export controls and the export license
process, which restrict the Companys ability to hold technical discussions with customers,
suppliers and internal engineering resources and can reduce the Companys ability to obtain
sales from foreign customers or to perform contracts with the desired level of efficiency
or profitability.
  27




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Effect of New Accounting Pronouncements
 ,
    28




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##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
  Revolving credit loan with a bank in the United Kingdom, matured in
April 2006, and then was renewed until April 2007, interest payable
monthly at a variable rate (5.5% at the end of the quarter)
    
    $
    1,842Total market-sensitive debt
    
    $
    1,842
   Exchange Rate
    
    $U.S.($U.S. per unit of
    
    in thousandslocal currency)
    
    (reporting currency)France
    
    1.2140 /Euro
    
    $
    1,930Belgium
    
    1.2140 /Euro
    
    
    1,693Canada
    
    0.8568 /Dollar
    
    
    1,541Australia
    
    0.7165 /Dollar
    
    
    1,394United Kingdom
    
    1.7393 /Pound
    
    
    1,140Germany
    
    1.2140 /Euro
    
    
    618Sweden
    
    0.1287 /Krona
    
    
    167Italy
    
    1.2140 /Euro
    
    
    106Singapore
    
    0.6189 /Dollar
    
    
    49Netherlands
    
    1.2140 /Euro
    
    
    34Total short-term due to parent
    
    
    
    $
    8,672
  Average
    
    
    ($U.S.)Notional
    
    
    Contract
    
    
    FairAmount
    
    
    Rate
    
    
    ValueForeign currency forward contractsContinuing Operations:Euros (sell for U.S. dollars)
    

    3,500
    Euros
    
    
    1.1946
    
    
    $
    (71
    )U.S. dollars (sell for Canadian dollars)
    

    15,000
    USD
        
    1.1663
    
    
    
    19Australian dollars (sell for U.S. dollars)
    

    1,000
    AUD
    
    
    0.7131
    
    
    
    (1
    )British pounds (sell for U.S. dollars)
    

    650
    GBP
    
    
    1.7253
    
    
    
    (9
    )British pounds (sell for Canadian dollars)
    

    1,000
    GBP
    
        2.0440
    
    
    
    16$
    (46
    )
  29




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ITEM 4. Controls and Procedures
    30




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PART II
 OTHER INFORMATION
 
 ITEM 1A. Risk Factors
  
 ITEM 6. Exhibits
        
 *
    
    Filed herewith 31




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SIGNATURES
  EMS TECHNOLOGIES, INC.By:
    
    /s/ Alfred G. Hansen
    
    Date: May 11, 2006Alfred G. HansenPresident, Chief Executive Officer
and Director 
(Principal Executive Officer)By:
    
    /s/ Don T. Scartz
    
    Date: May 11, 2006Don T. ScartzExecutive Vice President, Chief FinancialOfficer and Treasurer (Principal Financial Officer)
 32