##### 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 July 2, 2011
 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)
  Yes þ No o
 Yes þ No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 Yes o No þ
  Class
    
    Number of SharesCommon Stock, $0.10 par value
    
    15,551,048




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##### 



TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATION
    
    
    2Item 1. Financial Statements
    
    
    2Consolidated Statements of Operations (unaudited)
    
    
    2Consolidated Balance Sheets (unaudited)
    
    
    3Consolidated Statements of Cash Flows (unaudited)
    
    
    5Notes to Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 4. Controls and Procedures
    
    
    35PART II  OTHER INFORMATION
    
    
    36Item 1A. Risk Factors
    
    
    36Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 6. Exhibits
    
    
    38SIGNATURES
    
    
    39Exhibit 31.1Exhibit 31.2Exhibit 32




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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)
 Three Months Ended
    
    
    Six Months EndedJuly 2
    
    
    July 3
    
    
    July 2
    
    
    July 32011
    
    
    2010
    
    
    2011
    
    
    2010Product net sales
    
    $
    75,567
    
    
    
    71,879
    
    
    
    146,563
    
    
    
    138,080Service net sales
    
    
    15,472
    
    
    
    16,598
    
    
    
    29,513
    
    
    
    33,299Net sales
    
    
    91,039
    
    
    
    88,477
    
    
    
    176,076
    
    
    
    171,379Product cost of sales
    
    
    53,419
    
    
    
    48,066
    
    
    
    100,165
    
    
    
    93,311Service cost of sales
    
    
    7,828
    
    
    
    8,054
    
    
    
    14,642
    
    
    
    16,091Cost of sales
    
    
    61,247
    
    
    
    56,120
    
    
    
    114,807
    
    
    
    109,402Selling, general and administrative
expenses
    
    
    23,987
    
    
    
    22,128
    
    
    
    45,501
    
    
    
    43,801Research and development expenses
    
    
    6,921
    
    
    
    4,709
    
    
    
    12,595
    
    
    
    10,130Proxy contest and merger-related costs
    
    
    6,114
    
    
    
    
    
    
    
    6,834
    
    
    
    Impairment loss on goodwill related
charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    384Acquisition-related items
    
    
    
    
    
    
    346
    
    
    
    
    
    
    
    563Operating (loss) income
    
    
    (7,230
    )
    
    
    5,174
    
    
    
    (3,661
    )
    
    
    7,099Interest income
    
    
    110
    
    
    
    101
    
    
    
    222
    
    
    
    281Interest expense
    
    
    (557
    )
    
    
    (542
    )
    
    
    (1,070
    )
    
    
    (1,019
    )Foreign exchange (loss) gain, net
    
    
    (104
    )
    
    
    244
    
    
    
    (283
    )
    
    
    (449
    )(Loss) earnings before income taxes
    
    
    (7,781
    )
    
    
    4,977
    
    
    
    (4,792
    )
    
    
    5,912Income tax (benefit) expense
    
    
    (1,337
    )
    
    
    1,109
    
    
    
    (742
    )
    
    
    1,453Net (loss) earnings
    
    $
    (6,444
    )
    
    
    3,868
    
    
    
    (4,050
    )
    
    
    4,459Net (loss) earnings per share:Basic
    
    $
    (0.42
    )
    
    
    0.25
    
    
     
    (0.27
    )
    
    
    0.29Diluted
    
    
    (0.42
    )
    
    
    0.25
    
    
    
    (0.27
    )
    
    
    0.29Weighted-average number of common
shares
outstanding:Basic
    
    
    15,304
    
    
    
    15,191
    
    
    
    15,267
    
    
    
    15,185Diluted
    
    
    15,304
    
    
    
    15,230
    
    
    
    15,267
    
    
    
    15,218
   2




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EMS Technologies, Inc. and Subsidiaries
 
 Consolidated Balance Sheets

(Unaudited)
 (in thousands)
 July 2
    
    
    December 312011
    
    
    2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    72,847
    
    
    
    55,938Trade accounts receivable, net of allowance for doubtful accounts of
$1,184 in 2011 and $1,389 in 2010
    
    
    63,608
    
    
    
    68,691Costs and estimated earnings in excess of billings on long-term
contracts
    
    
    24,247
    
    
    
    21,980Inventories
    
    
    48,731
    
    
    
    41,649Deferred income taxes
    
    
    2,317
    
    
    
    3,891Other current assets
    
    
    8,228
    
    
    
    7,319Total current assets
    
    
    219,978
    
    
    
    199,468Property, plant and equipment:Land
    
    
    1,150
    
    
    
    1,150Buildings and leasehold improvements
    
    
    19,463
    
    
    
    19,115Machinery and equipment
    
    
    123,086
    
    
    
    117,855Furniture and fixtures
    
    
    11,019
    
    
    
    10,850Total property, plant and equipment
    
    
    154,718
    
    
    
    148,970Less accumulated depreciation
    
    
    106,370
    
    
    
    100,587Net property, plant and equipment
    
    
    48,348
    
    
    
    48,383Deferred income taxes
    
    
    12,930
    
    
    
    11,845Goodwill
    
    
    60,554
    
    
    
    60,474Other intangible assets, net of accumulated amortization
of $32,510 in 2011 and $28,079 in 2010
    
    
    37,682
    
    
    
    41,319Costs and estimated earnings in excess of billings on long-term contracts
    
    
    8,538
    
    
    
    8,611Other assets
    
    
    2,898
    
    
    
    2,844Total assets
    
    $
    390,928
    
    
    
    372,944
   3




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EMS Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited), continued
(in thousands, except share data)
 July 2
    
    
    December 312011
    
    
    2010LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current installments of long-term debt
    
    $
    1,559
    
    
    
    1,496Accounts payable
    
    
    35,135
    
    
    
    24,979Billings in excess of contract costs and estimated earnings on
long-term contracts
    
    
    6,293
    
    
    
    8,593Accrued compensation and related costs
    
    
    13,697
    
    
    
    20,626Deferred revenue
    
    
    11,130
    
    
    
    10,897Other current liabilities
    
    
    8,826
    
    
    
    6,946Total current liabilities
    
    
    76,640
    
    
    
    73,537Long-term debt, excluding current installments
    
    
    40,109
    
    
    
    27,476Deferred income taxes
    
    
    1,164
    
    
    
    4,859Other liabilities
    
    
    11,711
    
    
    
    10,052Total liabilities
    
    
    129,624
    
    
    
    115,924Shareholders equity:Preferred stock of $1.00 par value per share; Authorized 10,000
shares; none issued
    
    
    
    
    
    
    Common stock of $0.10 par value per share; Authorized 75,000 shares;
issued and
outstanding 15,514 in 2011 and 15,311 in 2010
    
    
    1,551
    
    
    
    1,531Additional paid-in capital
    
    
    141,727
    
    
    
    138,138Accumulated other comprehensive income  foreign currency translation
adjustment
    
    
    14,623
    
    
    
    9,898Retained earnings
    
    
    103,403
    
    
    
    107,453Total shareholders equity
    
    
    261,304
    
    
    
    257,020Commitments and contingenciesTotal liabilities and shareholders equity
    
    $
    390,928
    
    
    
    372,944
   4




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EMS Technologies, Inc. and Subsidiaries
 
 Consolidated Statements of Cash Flows

(Unaudited)
 (in thousands)
 Six Months EndedJuly 2
    
    
    July 32011
    
    
    2010Cash flows from operating activities:Net (loss) earnings
    
    $
    (4,050
    )
    
    
    4,459Adjustments to reconcile net earnings to net cash provided by operating
activities:Depreciation and amortization
    
    
    9,861
    
    
    
    9,819Deferred income taxes
    
    
    (3,191
    )
    
    
    (119
    )Stock-based compensation expense
    
    
    992
    
    
    
    885Change in fair value of contingent consideration liability
    
    
    
    
    
    
    304Excess tax benefits from stock-based compensation
    
    
    (130
    )
    
    
    Payment for acquisition of business under contingent consideration
arrangement
    
    
    (325
    )
    
    
    (1,248
    )Changes in operating assets and liabilities:Trade accounts receivable
    
    
    6,742
    
    
    
    (16,503
    )Costs and estimated earnings in excess of billings on long-term contracts
    
    
    (1,708
    )
    
    
    (545
    )Billings in excess of costs and estimated earnings on long-term contracts
    
    
    (2,304
    )
    
    
    3,035Inventories
    
    
    (6,407
    )
    
    
    (6,112
    )Accounts payable
    
    
    9,897
    
    
    
    4,105Income taxes
    
    
    1,596
    
    
    
    316Accrued compensation and retirement costs
    
    
    (7,244
    )
    
    
    459Deferred revenue
    
    
    1,413
    
    
    
    3,287Other
    
    
    85
    
    
    
    4,041Net cash provided by operating activities in continuing operations
    
    
    5,227
    
    
    
    6,183Net cash used in operating activities in discontinued operations
    
    
    
    
    
    
    (8,810
    )Net cash provided by (used in) operating activities
    
    
    5,227
    
    
    
    (2,627
    )Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (5,726
    )
    
    
    (3,820
    )Proceeds from sales of assets
    
    
    356
    
    
    
    24Net cash used in investing activities
    
    
    (5,370
    )
    
    
    (3,796
    )Cash flows from financing activities:Net borrowings under revolving credit facility
    
    
    13,500
    
    
    
    12,000Repayment of other debt
    
    
    (804
    )
    
    
    (687
    )Deferred financing costs paid
    
    
    
    
    
    
    (28
    )Payment for acquisition of business under contingent consideration
arrangement
    
    
    (626
    )
    
    
    (5,952
    )Payments for repurchase and retirement of common shares
    
    
    (121
    )
    
    
    (51
    )Excess tax benefits from stock-based compensation
    
    
    130
    
    
    
    Proceeds from exercises of stock options
    
    
    2,738
    
    
    
    13Net cash provided by financing activities
    
    
    14,817
    
    
    
    5,295Effect of changes in exchange rates on cash and cash equivalents
    
    
    2,235
    
    
    
    (1,241
    )Net change in cash and cash equivalents
    
    
    16,909
    
    
    
    (2,369
    )Cash and cash equivalents at beginning of period
    
    
    55,938
    
    
    
    47,174Cash and cash equivalents at end of period
    
    $
    72,847
    
    
    
    44,805
   5




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EMS Technologies, Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements (Unaudited)
 July 2, 2011 and July 3, 2010
 1. Basis of Presentation
    Managements Use of Estimates
   Recently Adopted Accounting Pronouncements
 Improving Disclosures About Fair Value Measurements
  6




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Disclosure of Supplementary Pro Forma Information
for Business Combinations TM Business Combinations
  Revenue Recognition  Multiple-Deliverable Revenue Arrangements
 
    
    Eliminates the requirement for objective evidence of fair value of an undelivered item
for treatment of the delivered item as a separate unit of accounting;
 
    
    Requires use of the relative selling price method for allocating total consideration to
elements of the arrangement instead of the relative-fair-value method or the residual
method;
 
    
    Allows the use of an estimated selling price for any element within the arrangement to
allocate consideration to individual elements when vendor-specific objective evidence or
other third party evidence of selling price do not exist; and
 
    
    Expands the required disclosures.
 Software  Certain Revenue Arrangements That Include Software Elements
   7




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
    
    Certain arrangements require that the Company design and develop technology
products to specifications provided by the customer and manufacture and deliver the
technology products. Such arrangements may also include services. These arrangements
generally do not fall under the guidelines of the new accounting standards updates, but are
accounted for in accordance with specific accounting guidance for construction-type and
production-type contracts for which specifications are provided by the customer, generally
following the percentage-of-completion method of accounting. If an arrangement includes
post-contract support, revenue for the support services is generally recognized on the
straight-line basis over the period of support.
 
    
    Other customer arrangements include the delivery of a standard product and a
related service contract that provides warranty and product maintenance over periods
ranging from one to three years. Generally, the products are considered a separate unit of
accounting, and revenue is recognized upon delivery. The service contracts are accounted
for as separately priced extended warranty and product maintenance contracts and the
revenue is deferred based on the stated contract price and recognized in income on a
straight-line basis over the contract period.
 
    
    The Company also enters arrangements under which the Company delivers a
standard product and one or more services, such as, installation, training certification,
airtime and support. Under certain of these arrangements, the product and certain services
are considered a single unit of accounting since the product does not have standalone value
without the related services. Under such arrangements the revenue is recognized for that
combined unit of accounting when the revenue recognition criteria are met for the services.
In other arrangements, the product does have standalone value without the service, in
which case the revenue is recognized when the recognition criteria are met for that unit of
accounting. The arrangement consideration is allocated to the units of accounting based on
the relative selling prices of each element on a standalone basis. The standalone selling
prices for each element are determined based on the best available information for each
element of the arrangement. Many of the Companys products and services are sold in
standalone transactions, in which case the Company uses the selling prices in those
standalone sales transactions to comparable customers for the standalone selling prices.
Such standalone
sales are considered vendor specific objective evidence of selling price. For products and
services for which the Company has no, or limited, standalone sales transactions, the
Company estimates standalone selling price using a combination of the limited standalone
sales, price lists, cost plus margins, standalone sales of similar products and stated
contract prices.
  8




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Recently Issued Accounting Pronouncements Not Yet Adopted
 Comprehensive Income:
Presentation of Comprehensive Income
 2. Plan of Merger
     9




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3. Goodwill and Other Intangible Assets
  GlobalLXE
    
    
    Tracking
    
    
    Aviation
    
    
    TotalBalance as of December 31, 2010
    
    $
    1,937
    
    
    
    23,429
    
    
    
    35,108
    
    
    
    60,474Foreign currency translation
adjustment
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    80Balance as of July 2, 2011
    
    $
    2,017
    
    
    
    23,429
    
    
    
    35,108
    
    
    
    60,554
   10




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As of July 2, 2011Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    AmountDeveloped technology
    
    $
    42,115
    
    
    
    21,905
    
    
    
    20,210Customer relationships
    
    
    19,305
    
    
    
    5,941
    
    
    
    13,364Trade names and trademarks
    
    
    6,332
    
    
    
    2,318
    
    
    
    4,014Other
    
    
    2,440
    
    
    
    2,346
    
    
    
    94$
    70,192
    
    
    
    32,510
    
    
    
    37,682
 As of December 31, 2010Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    AmountDeveloped technology
    
    $
    41,525
    
    
    
    19,039
    
    
    
    22,486Customer relationships
    
    
    19,164
    
    
    
    4,787
    
    
    
    14,377Trade names and trademarks
    
    
    6,281
    
    
    
    1,961
    
    
    
    4,320Other
    
    
    2,428
    
    
    
    2,292
    
    
    
    136$
    69,398
    
    
    
    28,079
    
    
    
    41,319
   Three Months Ended
    
    
    Six Months EndedJuly 2
    
    
    July 3
    
    
    July 2
    
    
    July 32011
    
    
    2010
    
    
    2011
    
    
    2010Cost of sales
    
    $
    1.0
    
    
    
    0.9
    
    
    
    2.1
    
    
    
    1.9Selling, general and
administrative
    
    
    1.0
    
    
    
    1.4
    
    
    
    1.9
    
    
    
    2.3Research and development
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Total amortization expense
    
    $
    2.1
    
    
    
    2.4
    
    
    
    4.1
    
    
    
    4.3
  11




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4. Fair Value Measurements
 Fair Value Measurements and
Disclosures
 
    
    Level 1  Observable inputs consisting of quoted prices in active markets;
 
    
    Level 2  Inputs, other than quoted prices in active markets, that are observable
either directly or indirectly; and
 
    
    Level 3  Unobservable inputs in which there is little or no market data, which
require the reporting entity to develop its own assumptions.
       12




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5. Interim Segment Disclosures
       Three Months Ended
    
    
    Six Months EndedJuly 2
    
    
    July 3
    
    
    July 2
    
    
    July 32011
    
    
    2010
    
    
    2011
    
    
    2010Net sales:LXE
    
    $
    37,801
    
    
    
    36,365
    
    
    
    74,020
    
    
    
    66,938Global Tracking
    
    
    11,736
    
    
    
    10,526
    
    
    
    21,644
    
    
    
    20,386Less intercompany sales
    
    
    (186
    )
    
    
    (510
    )
    
    
    (358
    )
    
    
    (761
    )Global Tracking external sales
    
    
    11,550
    
    
    
    10,016
    
    
    
    21,286
    
    
    
    19,625Aviation
    
    
    25,947
    
    
    
    25,338
    
    
    
    50,957
    
    
    
    51,524Defense & Space
    
    
    15,741
    
    
    
    16,758
    
    
    
    29,813
    
    
    
    33,292Total
    
    $
    91,039
    
    
    
    88,477
    
    
    
    176,076
    
    
    
    171,379Operating income (loss):LXE
    
    $
    113
    
    
    
    2,077
    
    
    
    1,798
    
    
    
    2,969Global Tracking
    
    
    1,190
    
    
    
    684
    
    
    
    1,395
    
    
    
    838Aviation
    
    
    (2,867
    )
    
    
    1,816
    
    
    
    (2,042
    )
    
    
    2,125Defense & Space
    
    
    292
    
    
    
    1,694
    
    
    
    724
    
    
    
    2,612Corporate & Other
    
    
    (5,958
    )
    
    
    (1,097
    )
    
    
    (5,536
    )
    
    
    (1,445
    )Total
    
    $
    (7,230
    )
    
    
    5,174
    
    
    
    (3,661
    )
    
    
    7,099
  13




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Three Months Ended
    
    
    Six Months EndedJuly 2
    
    
    July 3
    
    
    July 2
    
    
    July 32011
    
    
    2010
    
    
    2011
    
    
    2010Earnings (loss) before income
taxes:LXE
    
    $
    169
    
    
    
    2,050
    
    
    
    1,826
    
    
    
    2,833Global Tracking
    
    
    1,184
    
    
    
    888
    
    
    
    1,343
    
    
    
    934Aviation
    
    
    (2,943
    )
    
    
    1,877
    
    
    
    (2,141
    )
    
    
    1,805Defense & Space
    
    
    292
    
    
    
    1,694
    
    
    
    724
    
    
    
    2,616Corporate & Other
    
    
    (6,483
    )
    
    
    (1,532
    )
    
    
    (6,544
    )
    
    
    (2,276
    )Total
    
    $
    (7,781
    )
    
    
    4,977
    
    
    
    (4,792
    )
    
    
    5,912
  July 2
    
    
    December 312011
    
    
    2010Assets:LXE
    
    $
    96,020
    
    
    
    78,588Global Tracking
    
    
    81,638
    
    
    
    80,103Aviation
    
    
    153,041
    
    
    
    149,834Defense & Space
    
    
    41,477
    
    
    
    45,968Corporate & Other
    
    
    18,752
    
    
    
    18,451Total
    
    $
    390,928
    
    
    
    372,944Concentration of net assets by geographic
region:United States
    
    $
    54,468
    
    
    
    77,006Canada
    
    
    75,031
    
    
    
    68,677Europe
    
    
    122,713
    
    
    
    101,880Other
    
    
    9,092
    
    
    
    9,457Total
    
    $
    261,304
    
    
    
    257,020
   14




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6. Earnings Per Share
  Three Months Ended
    
    
    Six Months EndedJuly 2
    
    
    July 3
    
    
    July 2
    
    
    July 32011
    
    
    2010
    
    
    2011
    
    
    2010Basic weighted-average number of common shares
outstanding
    
    
    15,304
    
    
    
    15,191
    
    
    
    15,267
    
    
    
    15,185Dilutive potential shares using the treasury share method
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    33Diluted weighted-average number of common shares
outstanding
    
    
    15,304
    
    
    
    15,230
    
    
    
    15,267
    
    
    
    15,218Shares that were not included in computation of diluted
earnings
per share that could potentially dilute future basic earnings
per share because their effect on the periods were
antidilutive
    
    
    1,281
    
    
    
    1,008
    
    
    
    971
    
    
    
    1,045
  7. Comprehensive (Loss) Income
  Three Months Ended
    
    
    Six Months EndedJuly 2
    
    
    July 3
    
    
    July 2
    
    
    July 32011
    
    
    2010
    
    
    2011
    
    
    2010Net (loss) earnings
    
    $
    (6,444
    )
    
    
    3,868
    
    
    
    (4,050
    )
    
    
    4,459Other comprehensive income (loss):Foreign currency translation
adjustment
    
    
    1,116
    
    
    
    (5,056
    )
    
    
    4,725
    
    
    
    (3,245
    )$
    (5,328
    )
    
    
    (1,188
    )
    
    
    675
    
    
    
    1,214
 8. Inventories
  July 2
    
    
    December 312011
    
    
    2010Parts and materials
    
    $
    30,942
    
    
    
    24,996Work-in-process
    
    
    8,791
    
    
    
    6,127Finished goods
    
    
    8,998
    
    
    
    10,526$
    48,731
    
    
    
    41,649
  15




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##### Table of Contents



9. Revolving Credit Facility
   10. Warranty Liability
  Three Months Ended
    
    
    Six Months EndedJuly 2
    
    
    July 3
    
    
    July 2
    
    
    July 32011
    
    
    2010
    
    
    2011
    
    
    2010Balance at beginning of the period
    
    $
    4,424
    
    
    
    4,510
    
    
    
    4,205
    
    
    
    4,085Accruals for warranties issued
during the period
    
    
    966
    
    
    
    849
    
    
    
    1,921
    
    
    
    2,056Settlements made during the period
    
    
    (848
    )
    
    
    (835
    )
    
    
    (1,584
    )
    
    
    (1,617
    )Balance at end of period
    
    $
    4,542
    
    
    
    4,524
    
    
    
    4,542
    
    
    
    4,524
 11. Stock-Based and Other Compensation
    16




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12. Income Taxes
   13. Litigation
    17




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
   
    
    LXE Provides rugged mobile terminals and wireless data networks used for logistics
applications such as distribution centers, warehouses and container ports. LXE operates
mainly in three markets: the Americas market, which is comprised of North, South and
Central America; the International market, which is comprised of all other geographic
areas, with the highest concentration in Europe; along with direct sales to original
equipment manufacturers (OEM);
 
    
    Global Tracking Provides satellite-based machine-to-machine mobile communications
equipment and services to track, monitor and control remote assets, regardless of whether
they are fixed, semi-fixed or mobile. Additionally, Global Tracking provides equipment for
the Cospas-Sarsat search-and-rescue system and incident-management software for rescue
coordination worldwide;
 
    
    Aviation Designs and develops communications solutions through a broad array of
terminals and antennas for the aeronautical market that enable end-users in aircraft and
other mobile platforms to communicate over satellite and air-to-ground links. This segment
also designs and builds aircraft cabin equipment to process data on board aircraft,
including rugged data storage, cabin-wireless connectivity, and air-to-ground connectivity;
and
 
    
    Defense & Space (D&S) Supplies highly engineered subsystems for defense electronics
and sophisticated satellite applications from military communications, radar, surveillance
and countermeasures to commercial high-definition television, satellite radio, and live TV
for innovative airlines.
 Plan of Merger
   18




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##### Table of Contents




    
    Consolidated net sales were $91.0 million and $176.1 million in the three and six months
ended July 2, 2011, up approximately 3% from the same periods in 2010, reflecting the
second highest second quarter and first six months sales in our history. The increase in
net sales was mainly driven by record sales achieved by our LXE segment for both periods in
2011, reflecting the continued improvement in the overall logistics market and the positive
effects of changes in its marketing strategy. Net sales also increased at Global Tracking
primarily from an increase in shipments of tracking product to the security market in both
periods of 2011. Net sales at our D&S segment were lower in the three and six months ended
July 2, 2011 as compared to the same period in 2010 mainly due to a decrease in activity on
certain development programs that were completed at the end of 2010. However, net sales
were higher in the second quarter of 2011 by $1.7 million as compared with the first
quarter of 2011 due to an acceleration in scheduled production activity for certain
programs. Net sales at Aviation were comparable in both periods.
 
    
    Operating results for the second quarter and first six months of 2011 included charges
of $6.1 million and $6.8 million, respectively, for proxy contest and merger related costs.
These costs were primarily for professional fees related to the proxy contest initiated by
one of our shareholders, professional fees related to the review of various strategic
alternatives and costs related to the proposed merger with Honeywell. We anticipate
additional professional fees related to the merger in the third quarter of 2011.
 
    
    On a consolidated basis, we incurred losses of $6.4 million and $4.1 million for the
three and six months ended July 2, 2011, respectively, despite positive net earnings
reported by three of our four segments. The net losses were mainly due to approximately $6
million for proxy contest and merger related costs, a $2.2 million net loss recorded by our
Aviation segment, and research and development costs and marketing expenses related to new
product introductions that were included in the second quarter of 2011. New products were
introduced by our LXE (the ThorTM vehicle-mount computer and the
MarathonTM field computer), Aviation (the Aspire line of satellite communication
equipment and the portable Airmail solutions) and Global Tracking (the OCC-600 operations
control console for emergency management applications) segments.
 
    
    Certain of our markets continue to see the unfavorable impact of the economy, and they
are not immune to increasing pressures and risks. We expect that we will continue to be
faced with these economic pressures at least through 2011. The economy and other factors
could cause a decline in expected future cash flows for one or more of our business units,
and it is reasonably possible that we may be required to recognize impairment losses
related to goodwill or other long-lived assets.
  19




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Results of Operations
  Three Months Ended
    
    
    Six Months EndedJuly 2
    
    
    July 3
    
    
    July 2
    
    
    July 32011
    
    
    2010
    
    
    2011
    
    
    2010Product net sales
    
    $
    75,567
    
    
    
    83.0
    %
    
    $
    71,879
    
    
    
    81.2
    %
    
    $
    146,563
    
    
    
    83.2
    %
    
    $
    138,080
    
    
    
    80.6
    %Service net sales
    
    
    15,472
    
    
    
    17.0
    
    
    
    16,598
    
    
    
    18.8
    
    
    
    29,513
    
    
    
    16.8
    
    
    
    33,299
    
    
    
    19.4Net sales
    
    
    91,039
    
    
    
    100.0
    
    
    
    88,477
    
    
    
    100.0
    
    
    
    176,076
    
    
    
    100.0
    
    
    
    171,379
    
    
    
    100.0Product cost of sales
    
    
    53,419
    
    
    
    70.7
    
    
    
    48,066
    
    
    
    66.9
    
    
    
    100,165
    
    
    
    68.3
    
    
    
    93,311
    
    
    
    67.6Service cost of sales
    
    
    7,828
    
    
    
    50.6
    
    
    
    8,054
    
    
    
    48.5
    
    
    
    14,642
    
    
    
    49.6
    
    
    
    16,091
    
    
    
    48.3Cost of sales
    
    
    61,247
    
    
    
    67.3
    
    
    
    56,120
    
    
    
    63.4
    
    
    
    114,807
    
    
    
    65.2
    
    
    
    109,402
    
    
    
    63.9Selling, general and
administrative expenses
    
    
    23,987
    
    
    
    26.3
    
    
    
    22,128
    
    
    
    25.1
    
    
    
    45,501
    
    
    
    25.9
    
    
    
    43,801
    
    
    
    25.6Research and development
expenses
    
    
    6,921
    
    
    
    7.6
    
    
    
    4,709
    
    
    
    5.3
    
    
    
    12,595
    
    
    
    7.1
    
    
    
    10,130
    
    
    
    5.9Proxy contest and
merger-related costs
    
    
    6,114
    
    
    
    6.7
    
    
    
    
    
    
    
    
    
    
    
    6,834
    
    
    
    3.9
    
    
    
    
    
    
    
    Impairment loss on goodwill
related charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    384
    
    
    
    0.2Acquisition-related items
    
    
    
    
    
    
    
    
    
    
    346
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    563
    
    
    
    0.3Operating (loss) income
    
    
    (7,230
    )
    
    
    (7.9
    )
    
    
    5,174
    
    
    
    5.8
    
    
    
    (3,661
    )
    
    
    (2.1
    )
    
    
    7,099
    
    
    
    4.1Interest income
    
    
    110
    
    
    
    0.1
    
    
    
    101
    
    
    
    0.1
    
    
    
    222
    
    
    
    0.1
    
    
    
    281
    
    
    
    0.2Interest expense
    
    
    (557
    )
    
    
    (0.6
    )
    
    
    (542
    )
    
    
    (0.6
    )
    
    
    (1,070
    )
    
    
    (0.6
    )
    
    
    (1,019
    )
    
    
    (0.6
    )Foreign exchange(loss) gain, net
    
    
    (104
    )
    
    
    (0.1
    )
    
    
    244
    
    
    
    0.3
    
    
    
    (283
    )
    
    
    (0.1
    )
    
    
    (449
    )
    
    
    (0.3
    )(Loss) earnings before income
taxes
    
    
    (7,781
    )
    
    
    (8.5
    )
    
    
    4,977
    
    
    
    5.6
    
    
    
    (4,792
    )
    
    
    (2.7
    )
    
    
    5,912
    
    
    
    3.4Income tax (benefit) expense
    
    
    (1,337
    )
    
    
    (1.4
    )
    
    
    1,109
    
    
    
    1.2
    
    
    
    (742
    )
    
    
    (0.4
    )
    
    
    1,453
    
    
    
    0.8Net (loss) earnings
    
    $
    (6,444
    )
    
    
    (7.1
    )%
    
    $
    3,868
    
    
    
    4.4
    %
    
    $
    (4,050
    )
    
    
    (2.3
    )%
    
    $
    4,459
    
    
    
    2.6
    %
 Three Months ended July 2, 2011 and July 3, 2010:
    20




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Six Months ended July 2, 2011 and July 3, 2010:
   21




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22




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Segment Analysis
  PercentageThree Months Ended
    
    
    Six Months Ended
    
    
    Increase (Decrease)July 2
    
    
    July 3
    
    
    July 2
    
    
    July 3
    
    
    Three
    
    
    Six2011
    
    
    2010
    
    
    2011
    
    
    2010
    
    
    Months
    
    
    MonthsNet sales:LXE
    
    $
    37,801
    
    
    
    36,365
    
    
    
    74,020
    
    
    
    66,938
    
    
    
    3.9
    %
    
    
    10.6Global Tracking
    
    
    11,736
    
    
    
    10,526
    
    
    
    21,644
    
    
    
    20,386
    
    
    
    11.5
    
    
    
    6.2Less intercompany sales
    
    
    (186
    )
    
    
    (510
    )
    
    
    (358
    )
    
    
    (761
    )Global Tracking external sales
    
    
    11,550
    
    
    
    10,016
    
    
    
    21,286
    
    
    
    19,625Aviation
    
    
    25,947
    
    
    
    25,338
    
    
    
    50,957
    
    
    
    51,524
    
    
    
    2.4
    
    
    
    (1.1
    )Defense & Space
    
    
    15,741
    
    
    
    16,758
    
    
    
    29,813
    
    
    
    33,292
    
    
    
    (6.1
    )
    
    
    (10.4
    )Total
    
    $
    91,039
    
    
    
    88,477
    
    
    
    176,076
    
    
    
    171,379
    
    
    
    2.9
    
    
    
    2.7Cost of sales percentage:LXE
    
    
    62.4
    %
    
    
    59.7
    
    
    
    61.6
    
    
    
    59.1
    
    
    
    2.7
    
    
    
    2.5Global Tracking
    
    
    49.1
    
    
    
    51.1
    
    
    
    52.0
    
    
    
    51.8
    
    
    
    (2.0
    )
    
    
    0.2Aviation
    
    
    73.1
    
    
    
    62.7
    
    
    
    69.0
    
    
    
    65.0
    
    
    
    10.4
    
    
    
    4.0Defense & Space
    
    
    79.5
    
    
    
    74.5
    
    
    
    77.9
    
    
    
    76.0
    
    
    
    5.0
    
    
    
    1.9Total
    
    
    67.3
    
    
    
    63.4
    
    
    
    65.2
    
    
    
    63.9
    
    
    
    3.9
    
    
    
    1.3Operating (loss) income:LXE
    
    $
    113
    
    
    
    2,077
    
    
    
    1,798
    
    
    
    2,969
    
    
    
    (94.6
    )
    
    
    (39.4
    )Global Tracking
    
    
    1,190
    
    
    
    684
    
    
    
    1,395
    
    
    
    838
    
    
    
    74.0
    
    
    
    66.5Aviation
    
    
    (2,867
    )
    
    
    1,816
    
    
    
    (2,042
    )
    
    
    2,125
    
    
    
    
    (2)

    
    
    
    (2)Defense & Space
    
    
    292
    
    
    
    1,694
    
    
    
    724
    
    
    
    2,612
    
    
    
    (82.8
    )
    
    
    (72.3
    )Corporate & Other
    
    
    (5,958
    )
    
    
    (1,097
    )
    
    
    (5,536
    )
    
    
    (1,445
    )
    
    
    
    (2)
    
    
    283.1Total
    
    $
    (7,230
    )
    
    
    5,174
    
    
    
    (3,661
    )
    
    
    7,099
    
    
    
    (239.7
    )
    
    
    (151.6
    )Adjusted EBITDA (1)LXE
    
    $
    1,398
    
    
    
    3,076
    
    
    
    4,112
    
    
    
    4,783
    
    
    
    (54.6
    )
    
    
    (14.0
    )Global Tracking
    
    
    2,165
    
    
    
    1,808
    
    
    
    3,275
    
    
    
    2,762
    
    
    
    19.7
    
    
    
    18.6Aviation
    
    
    (810
    )
    
    
    3,713
    
    
    
    1,959
    
    
    
    5,872
    
    
    
    (121.8
    )
    
    
    (66.6
    )Defense & Space
    
    
    1,186
    
    
    
    2,616
    
    
    
    2,474
    
    
    
    4,447
    
    
    
    (54.7
    )
    
    
    (44.4
    )Corporate & Other
    
    
    490
    
    
    
    (84
    )
    
    
    2,145
    
    
    
    718
    
    
    
    
    (2)
    
    
    198.7Total
    
    $
    4,429
    
    
    
    11,129
    
    
    
    13,965
    
    
    
    18,582
    
    
    
    (60.2
    )
    
    
    (24.8
    )
 (1)
    
    Adjusted EBITDA is a financial measure that is not defined within
generally accepted accounting principles (GAAP). See section entitled Adjusted EBITDA
for an explanation of this measure and a reconciliation of the measure to net earnings
(loss).(2)
    
    The percentage change is not calculable or not meaningful.
 LXE:
  23




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TM TM
  Global Tracking:
    24




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##### Table of Contents



Aviation:
    Defense & Space
  25




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##### Table of Contents



Supplemental Information
  Three Months Ended
    
    
    Six Months EndedJuly 2
    
    
    July 3
    
    
    July 2
    
    
    July 32011
    
    
    2010
    
    
    2011
    
    
    2010Net sales:LXE
    
    $
    37,801
    
    
    
    36,365
    
    
    
    74,020
    
    
    
    66,938Global Tracking
    
    
    11,550
    
    
    
    10,016
    
    
    
    21,286
    
    
    
    19,625Global Resource
Management
    
    
    49,351
    
    
    
    46,381
    
    
    
    95,306
    
    
    
    86,563Aviation
    
    
    25,947
    
    
    
    25,338
    
    
    
    50,957
    
    
    
    51,524Defense & Space
    
    
    15,741
    
    
    
    16,758
    
    
    
    29,813
    
    
    
    33,292AeroConnectivity
    
    
    41,688
    
    
    
    42,096
    
    
    
    80,770
    
    
    
    84,816Total
    
    $
    91,039
    
    
    
    88,477
    
    
    
    176,076
    
    
    
    171,379Cost of sales percentage:LXE
    
    
    62.4
    %
    
    
    59.7
    
    
    
    61.6
    
    
    
    59.1Global Tracking
    
    
    49.1
    
    
    
    51.1
    
    
    
    52.0
    
    
    
    51.8Global Resource
Management
    
    
    59.2
    
    
    
    57.8
    
    
    
    59.4
    
    
    
    57.4Aviation
    
    
    73.1
    
    
    
    62.7
    
    
    
    69.0
    
    
    
    65.0Defense & Space
    
    
    79.5
    
    
    
    74.5
    
    
    
    77.9
    
    
    
    76.0AeroConnectivity
    
    
    75.5
    
    
    
    67.4
    
    
    
    72.3
    
    
    
    69.3Total
    
    
    67.3
    
    
    
    63.4
    
    
    
    65.2
    
    
    
    63.9
  26




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJuly 2
    
    
    July 3
    
    
    July 2
    
    
    July 32011
    
    
    2010
    
    
    2011
    
    
    2010Operating income (loss):LXE
    
    $
    113
    
    
    
    2,077
    
    
    
    1,798
    
    
    
    2,969Global Tracking
    
    
    1,190
    
    
    
    684
    
    
    
    1,395
    
    
    
    838Global Resource
Management
    
    
    1,303
    
    
    
    2,761
    
    
    
    3,193
    
    
    
    3,807Aviation
    
    
    (2,867
    )
    
    
    1,816
    
    
    
    (2,042
    )
    
    
    2,125Defense & Space
    
    
    292
    
    
    
    1,694
    
    
    
    724
    
    
    
    2,612AeroConnectivity
    
    
    (2,575
    )
    
    
    3,510
    
    
    
    (1,318
    )
    
    
    4,737Corporate & Other
    
    
    (5,958
    )
    
    
    (1,097
    )
    
    
    (5,536
    )
    
    
    (1,445
    )Total
    
    $
    (7,230
    )
    
    
    5,174
    
    
    
    (3,661
    )
    
    
    7,099Adjusted EBITDALXE
    
    $
    1,398
    
    
    
    3,076
    
    
    
    4,112
    
    
    
    4,783Global Tracking
    
    
    2,165
    
    
    
    1,808
    
    
    
    3,275
    
    
    
    2,762Global Resource
Management
    
    
    3,563
    
    
    
    4,884
    
    
    
    7,387
    
    
    
    7,545Aviation
    
    
    (810
    )
    
    
    3,713
    
    
    
    1,959
    
    
    
    5,872Defense & Space
    
    
    1,186
    
    
    
    2,616
    
    
    
    2,474
    
    
    
    4,447AeroConnectivity
    
    
    376
    
    
    
    6,329
    
    
    
    4,433
    
    
    
    10,319Corporate & Other
    
    
    490
    
    
    
    (84
    )
    
    
    2,145
    
    
    
    718Total
    
    $
    4,429
    
    
    
    11,129
    
    
    
    13,965
    
    
    
    18,582
 Adjusted EBITDA (a non-GAAP financial measure)
  Global
    
    
    
    
    
    
    
    
    
    
    Corp &LXE
    
    
    Tracking
    
    
    Aviation
    
    
    D&S
    
    
    Other
    
    
    TotalThree Months Ended July 2, 2011Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (6,444
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,337
    )Earnings (loss) before income taxes
    
    $
    169
    
    
    
    1,184
    
    
    
    (2,943
    )
    
    
    292
    
    
    
    (6,483
    )
    
    
    (7,781
    )Interest expense
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    521
    
    
    
    557Depreciation and amortization
    
    
    1,073
    
    
    
    934
    
    
    
    1,974
    
    
    
    751
    
    
    
    293
    
    
    
    5,025Stock-based compensation
    
    
    75
    
    
    
    25
    
    
    
    93
    
    
    
    88
    
    
    
    233
    
    
    
    514Proxy contest costs
    
    
    45
    
    
    
    22
    
    
    
    66
    
    
    
    55
    
    
    
    5,926
    
    
    
    6,114Adjusted EBITDA
    
    $
    1,398
    
    
    
    2,165
    
    
    
    (810
    )
    
    
    1,186
    
    
    
    490
    
    
    $
    4,429
  27




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##### Table of Contents



Global
    
    
    
    
    
    
    
    
    
    
    Corp &LXE
    
    
    Tracking
    
    
    Aviation
    
    
    D&S
    
    
    Other
    
    
    TotalSix Months Ended July 2, 2011Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (4,050
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (742
    )Earnings (loss) before income taxes
    
    $
    1,826
    
    
    
    1,343
    
    
    
    (2,141
    )
    
    
    724
    
    
    
    (6,544
    )
    
    
    (4,792
    )Interest expense
    
    
    60
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    1,007
    
    
    
    1,070Depreciation and amortization
    
    
    2,032
    
    
    
    1,861
    
    
    
    3,852
    
    
    
    1,524
    
    
    
    592
    
    
    
    9,861Stock-based compensation
    
    
    149
    
    
    
    49
    
    
    
    179
    
    
    
    171
    
    
    
    444
    
    
    
    992Proxy contest costs
    
    
    45
    
    
    
    22
    
    
    
    66
    
    
    
    55
    
    
    
    6,646
    
    
    
    6,834Adjusted EBITDA
    
    $
    4,112
    
    
    
    3,275
    
    
    
    1,959
    
    
    
    2,474
    
    
    
    2,145
    
    
    $
    13,965Three Months Ended July 3, 2010Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,868Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,109Earnings (loss) before income taxes
    
    $
    2,050
    
    
    
    888
    
    
    
    1,877
    
    
    
    1,694
    
    
    
    (1,532
    )
    
    
    4,977Interest expense
    
    
    1
    
    
    
    1
    
    
    
    4
    
    
    
    
    
    
    
    536
    
    
    
    542Depreciation and amortization
    
    
    951
    
    
    
    899
    
    
    
    1,752
    
    
    
    865
    
    
    
    312
    
    
    
    4,779Stock-based compensation
    
    
    74
    
    
    
    20
    
    
    
    80
    
    
    
    57
    
    
    
    254
    
    
    
    485Acquisition-related items
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    346
    
    
    
    346Adjusted EBITDA
    
    $
    3,076
    
    
    
    1,808
    
    
    
    3,713
    
    
    
    2,616
    
    
    
    (84
    )
    
    $
    11,129Six Months Ended July 3, 2010Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,459Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,453Earnings (loss) before income taxes
    
    $
    2,833
    
    
    
    934
    
    
    
    1,805
    
    
    
    2,616
    
    
    
    (2,276
    )
    
    
    5,912Interest expense
    
    
    18
    
    
    
    1
    
    
    
    4
    
    
    
    
    
    
    
    996
    
    
    
    1,019Depreciation and amortization
    
    
    1,789
    
    
    
    1,793
    
    
    
    3,920
    
    
    
    1,710
    
    
    
    607
    
    
    
    9,819Impairment loss on goodwill
related charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    384
    
    
    
    384Stock-based compensation
    
    
    143
    
    
    
    34
    
    
    
    143
    
    
    
    121
    
    
    
    444
    
    
    
    885Acquisition-related items
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    563
    
    
    
    563Adjusted EBITDA
    
    $
    4,783
    
    
    
    2,762
    
    
    
    5,872
    
    
    
    4,447
    
    
    
    718
    
    
    $
    18,582
   28




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##### Table of Contents



Backlog
  July 2
    
    
    December 312011
    
    
    2010LXE
    
    $
    23,985
    
    
    
    29,106Global Tracking
    
    
    16,490
    
    
    
    15,449Aviation
    
    
    44,376
    
    
    
    38,049Defense & Space
    
    
    76,112
    
    
    
    73,058Total
    
    $
    160,963
    
    
    
    155,662
  Liquidity and Capital Resources
        29




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Commitments and Contractual Obligations
  Critical Accounting Policies
  Revenue Recognition 
Multiple-Deliverable Revenue Arrangements Software  Certain Revenue
Arrangements That Include Software Elements
  30




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##### Table of Contents



Risk Factors and Forward-Looking Statements
  
    
    failure to consummate the proposed merger of the Company with Honeywell;
 
    
    the time required of our management and employees, the general disruption to
our operations, and additional cost due to the proposed merger transaction with Honeywell;
 
    
    economic conditions in the U.S. and abroad and their effect on capital spending
in our principal markets;
 
    
    difficulty predicting the timing of receipt of major customer orders, and the
effect of customer timing decisions on our results;
 
    
    our successful completion of technological development programs and the effects
of technology that may be developed by, and patent rights that may be held or obtained by,
competitors;
 
    
    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 currency exchange rates relative to the U.S. dollar and
their effect on purchasing power by international customers, and on the cost structure of
our operations outside the U.S., as well as the potential for realizing foreign exchange
gains and losses associated with assets or liabilities denominated in foreign currencies;
 
    
    successful resolution of technical problems, proposed scope changes, or
proposed funding changes that may be encountered on contracts;
 
    
    changes in our 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, and the extent to which deferred tax assets are considered
realizable;
 
    
    successful transition of products from development stages to an efficient
manufacturing environment;
 
    
    changes in the rate at which our products are returned for repair or
replacement under warranty;
 
    
    customer response to new products and services, and general conditions in our
target markets (such as logistics, and space-based communications), and whether these
responses and conditions develop according to our expectations;
 
    
    the increased potential for asset impairment charges as unfavorable economic or
financial market conditions or other developments might affect the estimated fair value of
one or more of our business units;
 
    
    the success of certain of our customers in marketing our line of high-speed
commercial airline communications products as a complementary offering with their own lines
of avionics products;
 
    
    the continued availability of financing for various mobile and high-speed data
communications systems;
  31




---



##### Table of Contents




    
    risk that changes in the credit markets may make it more difficult for some
customers to obtain financing and adversely affect their ability to pay, which in turn
could have an adverse impact on our business, operating results, and financial condition;
 
    
    development of successful working relationships with local business and
government personnel in connection with the distribution and manufacture of products in
foreign countries;
 
    
    the demand growth for various mobile and high-speed data communications
services;
 
    
    our ability to attract and retain qualified senior management and other
personnel, particularly those with key technical skills;
 
    
    our ability to effectively integrate our acquired businesses, products or
technologies into our existing businesses and products, and the risk that any such acquired
businesses, products or technologies do not perform as expected, are subject to undisclosed
or unanticipated liabilities, or are otherwise dilutive to our earnings;
 
    
    the potential effects, on cash and results of discontinued operations, of final
resolution of potential liabilities under warranties and representations that we made, and
obligations assumed by purchasers, in connection with our dispositions of discontinued
operations;
 
    
    the availability, capabilities and performance of suppliers of basic materials,
electronic components and sophisticated subsystems on which we must rely in order to
perform according to contract requirements, or to introduce new products on the desired
schedule;
 
    
    uncertainties associated with U.S. export controls and the export license
process, which restrict our ability to hold technical discussions with customers, suppliers
and internal engineering resources and can reduce our ability to obtain sales from
customers outside the U.S. or to perform contracts with the desired level of efficiency or
profitability; and
 
    
    our ability to maintain compliance with the requirements of the Federal
Aviation Administration and the Federal Communications Commission, and with other
government regulations affecting our products and their production, service and
functioning.
   32




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##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
  Money market funds with interest payable monthly at variable
rates and interest-bearing time deposits with interest payable
upon maturity (a weighted-average rate of 1.1% at July 2, 2011)
    
    $
    30,318Revolving credit agreement with U.S. and Canadian banks, maturing
in February 2013, interest payable quarterly at a variable rate
(4.00% at July 2, 2011)
    
    
    34,500
    Exchange Rate
    
    
    Receivable /Functional
    
    
    (Payable)Currency per
    
    
    USDCurrency
    
    Functional
    
    
    Denominated
    
    
    EquivalentDenomination
    
    Currency
    
    
    Currency
    
    
    (in thousands)AUD
    
    CAD
    
    
    1.0348
    
    
    $
    4,677USD
    
    CAD
    
    
    0.9585
    
    
    
    (2,211
    )USD
    
    EUR
    
    
    0.6884
    
    
    
    (1,136
    )USD
    
    SEK
    
    
    6.2634
    
    
    
    (397
    )Other currencies
    
    
    
    
    
    
    
    
    
    
    (388
    )$
    545
  33




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##### Table of Contents



Exchange RateFunctionalCurrency per
    
    
    USDCurrency
    
    Functional
    
    
    Denominated
    
    
    EquivalentDenomination
    
    Currency
    
    
    Currency
    
    
    (in thousands)Accounts
ReceivableUSD
    
    CAD
    
    
    0.9585
    
    
    $
    16,525USD
    
    SEK
    
    
    6.2972
    
    
    
    531USD
    
    EUR
    
    
    0.6884
    
    
    
    458GBP
    
    EUR
    
    
    1.1062
    
    
    
    444Other
currencies
    
    
    
    
    
    
    
    
    
    
    1,066$
    19,024Accounts
PayableUSD
    
    CAD
    
    
    0.9585
    
    
    $
    2,341Other
currencies
    
    
    
    
    
    
    
    
    
    
    262$
    2,603
  Exchange RateFunctionalCurrency per
    
    
    USDCurrency
    
    Functional
    
    
    Denominated
    
    
    EquivalentDenomination
    
    Currency
    
    
    Currency
    
    
    (in thousands)GBP
    
    USD
    
    
    1.6075
    
    
    $
    1,281GBP
    
    CAD
    
    
    1.5493
    
    
    
    931EUR
    
    GBP
    
    
    0.9040
    
    
    
    799USD
    
    SEK
    
    
    6.2634
    
    
    
    682USD
    
    CAD
    
    
    0.9585
    
    
    
    657Other
currencies
    
    
    
    
    
    
    
    
    
    
    1,090$
    5,440
  Average
    
    
    FairNotional
    
    
    Contract
    
    
    ValueAmount
    
    
    Rate
    
    
    (USD)Foreign currency forward contracts:U.S. dollars (sell for Canadian dollars)
    
    
    12,300
    
    
    USD
    
    
    0.9611
    
    
    $
    (17
    )British pounds (sell for Canadian
dollars)
    
    
    150
    
    
    GBP
    
    
    1.5791
    
    
    
    (1
    )Euros (sell for U.S. dollars)
    
    
    300
    
    
    EUR
    
    
    1.4311
    
    
    
    (6
    )$
    (24
    )
  34




---



##### Table of Contents



Item 4.
    
    Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures
   (b) Changes in Internal Control Over Financial Reporting
   35




---



##### Table of Contents



PART II
 OTHER INFORMATION
 
 Item 1A.
    
    Risk Factors
  The merger transaction with Honeywell may not be completed. If the merger is not completed, our
stock price, future business and results of operations could be materially adversely affected.
  The time required of our management and employees, the general disruption to our operations, and
additional cost due to the proposed merger transaction with Honeywell could adversely affect our
business and results of operations.
   36




---



##### Table of Contents



Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  ISSUER PURCHASES OF EQUITY SECURITIES
 (d) Maximum Number(c) Total Number
    
    
    (or Approximateof Shares
    
    
    Dollar Value) ofPurchased as
    
    
    Shares that May YetPart of Publicly
    
    
    Be Purchased(a) Total Number
    
    
    (b) Average
    
    
    Announced
    
    
    Under the Plans orof Shares
    
    
    Price Paid
    
    
    Plans or
    
    
    Programs (3)Period
    
    Purchased (1)
    
    
    Per Share
    
    
    Program (2)
    
    
    (in millions)Period 4 2011 (April 3 to April
30)
    
    
    
    
    
    
    
    
    
    
    Period 5 2011 (May 1 to May 28)
    
    
    2,050
    
    
    $
    25.54
    
    
    
    Period 6 2011 (May 29 to July 2)
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    2,050
    
    
    $
    25.54
    
    
    
    
    
    
    
    
 (1)
    
    The category represents 2,050 shares delivered to us by employees to pay withholding
taxes due upon vesting of restricted share awards.(2)
    
    During the period covered by this Quarterly Report on Form 10-Q, no shares were
repurchased under the Companys $20 million repurchase program (the Program) which was
initially announced on July 30, 2008. Further repurchases are no longer permitted under
the terms of the Companys principal credit agreements.
  37




---



##### Table of Contents



Item 6.
    
    Exhibits
  2.1
    
    
    Agreement and Plan of Merger, dated June 13, 2011, by and among EMS Technologies, Inc.,
Honeywell International Inc., and Egret Acquisition Corp. (incorporated by reference to Exhibit 2.1
to the Companys Report on Form 8-K filed with the SEC by the Company on June 13, 2011).3.1
    
    
    Second Amended and Restated Articles of Incorporation of EMS Technologies, Inc., effective
March 22, 1999 (incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on Form
10-Q for the quarter ended April 4, 2009).3.2
    
    
    Bylaws of EMS Technologies, Inc. as amended through November 5, 2010 (incorporated by
reference to Exhibit 3.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended
October 2, 2010).3.3
    
    
    EMS Technologies, Inc. Shareholder Rights Plan (incorporated by reference to Exhibit 4.1 to
the Companys report on Form 8-A/A dated January 7, 2011).3.4
    
    
    Amendment No. 1 to Amended and Restated Shareholder Rights Plan, dated as of June 12, 2011
(incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed on June
13, 2011).10.1
    
    
    Amendment, dated June 12, 2011, to the Employee Performance Bonus Plan (incorporate by
reference to Exhibit 10.3 to the Companys Current Report on Form 8-K filed on June 16, 2011).10.2
    
    
    Amendments, dated June 12, 2011, to the 1997 Stock Incentive Plan, 2000 Stock Incentive Plan
and 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Companys Current
Report on Form 8-K filed on June 16, 2011).10.3
    
    
    Amendment, dated June 12, 2011, to the Directors Deferred Compensation Plan (incorporated by
reference to Exhibit 10.5 to the Companys Current Report on Form 8-K filed on June 16, 2011).10.4
    
    
    Amended and Restated Executive Protection Agreement between the Company and Neilson A.
Mackay, dated June 12, 2011 (incorporated by reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K filed on June 16, 2011).10.5
    
    
    Amended and Restated Executive Protection Agreement between the Company and Gary B. Shell,
dated June 23, 2011 (incorporated by reference to Exhibit 10.1 to the Companys Current Report on
Form 8-K filed on June 27, 2011).31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. *31.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. *32
    
    
    Certification of the Companys Chief Executive Officer and Chief Financial Officer pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
 *
    
    Filed herewith
  38




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##### Table of Contents



SIGNATURES
  EMS TECHNOLOGIES, INC.By:
    
    /s/ Neilson A. Mackay
    
    
    
    Date: August 11, 2011Neilson A. MackayPresident, and Chief Executive Officer(Principal Executive Officer)By:
    
    /s/ Gary B. Shell
    
    
    
    Date: August 11, 2011Gary B. ShellSenior Vice President, Chief Financial Officer and Treasurer(Principal Financial Officer)
 AVAILABLE INFORMATION
 www.ems-t.com
  39