##### 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 October 1, 2005
 Commission file number 0-6072
 EMS
TECHNOLOGIES, INC.
  Georgia
    
    58-1035424(State or other jurisdiction of
    
    (IRS Employer ID Number)incorporation or organization)660 Engineering DriveNorcross, Georgia
    
    30092(Address of principal executive offices)
    
    (Zip Code)
 (770) 263-9200
 
  þ o
 þ o
 o þ
  Class
    
    Number of SharesCommon Stock, $.10 par Value
    
    11,165,496
 AVAILABLE INFORMATION
 www.ems-t.com




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TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATION
    
    
    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
    
    
    15ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    28ITEM 4. Controls and Procedures
    
    
    29PART II  OTHER INFORMATION
    
    
    30ITEM 6. Exhibits
    
    
    30SIGNATURES
    
    
    31EX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32 SECTION 906 CERTIFICATION OF THE CEO AND CFO




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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 Ended
    
    
    Nine Months EndedOct 1
    
    
    Oct 2
    
    
    Oct 1
    
    
    Oct 22005
    
    
    2004
    
    
    2005
    
    
    2004Net sales
    
    $
    84,419
    
    
    
    57,634
    
    
    
    226,162
    
    
    
    179,733Cost of sales
    
    
    58,256
    
    
    
    37,557
    
    
    
    153,441
    
    
    
    116,185Selling, general and administrative expenses
    
    
    16,253
    
    
    
    14,283
    
    
    
    48,403
    
    
    
    43,634Research and development expenses
    
    
    3,979
    
    
    
    3,988
    
    
    
    11,656
    
    
    
    12,740Operating income
    
    
    5,931
    
    
    
    1,806
    
    
    
    12,662
    
    
    
    7,174Non-operating income, net
    
    
    295
    
    
    
    152
    
    
    
    453
    
    
    
    1,234Foreign exchange loss
    
    
    (196
    )
    
    
    (40
    )
    
    
    (270
    )
    
    
    (157
    )Interest expense
    
    
    (1,024
    )
    
    
    (515
    )
    
    
    (2,976
    )
    
    
    (1,561
    )Earnings from continuing operations before income taxes
    
    
    5,006
    
    
    
    1,403
    
    
    
    9,869
    
    
    
    6,690Income tax expense
    
    
    (1,702
    )
    
    
    (391
    )
    
    
    (3,356
    )
    
    
    (1,867
    )Earnings from continuing operations
    
    
    3,304
    
    
    
    1,012
    
    
    
    6,513
    
    
    
    4,823Discontinued operations (note 2):Loss from discontinued operations
    
    
    (4,193
    )
    
    
    (2,733
    )
    
    
    (13,594
    )
    
    
    (4,719
    )Income tax benefit (expense)
    
    
    (112
    )
    
    
    5
    
    
    
    130
    
    
    
    176Loss from discontinued operations
    
    
    (4,305
    )
    
    
    (2,728
    )
    
    
    (13,464
    )
    
    
    (4,543
    )Net earnings (loss)
    
    $
    (1,001
    )
    
    
    (1,716
    )
    
    
    (6,951
    )
    
    
    280Earnings (loss) per share (note 4):Basic:Earnings from continuing operations
    
    $
    0.30
    
    
    
    0.09
    
    
    
    0.58
    
    
    
    0.44Loss from discontinued operations
    
    
    (0.39
    )
    
    
    (0.24
    )
    
    
    (1.20
    )
    
    
    (0.41
    )Net earnings (loss)
    
    $
    (0.09
    )
    
    
    (0.15
    )
    
    
    (0.62
    )
    
    
    0.03Diluted:Earnings from continuing operations
    
    $
    0.29
    
    
    
    0.09
    
    
    
    0.58
    
    
    
    0.43Loss from discontinued operations
    
    
    (0.38
    )
    
    
    (0.24
    )
    
    
    (1.20
    )
    
    
    (0.41
    )Net earnings (loss)
    
    $
    (0.09
    )
    
    
    (0.15
    )
    
    
    (0.62
    )
    
    
    0.02Weighted average number of shares (note 4):Common
    
    
    11,165
    
    
    
    11,114
    
    
    
    11,165
    
    
    
    11,076Common and dilutive common equivalent
    
    
    11,245
    
    
    
    11,189
    
    
    
    11,214
    
    
    
    11,238
  2




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EMS Technologies, Inc. and Subsidiaries
 
 Consolidated Balance Sheets (Unaudited)
 (in thousands)
 Oct 1
    
    
    Dec 312005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    15,770
    
    
    
    14,553Restricted cash
    
    
    2,607
    
    
    
    4,715Trade accounts receivable, net (note 6)
    
    
    92,820
    
    
    
    75,370Inventories (note 7)
    
    
    32,720
    
    
    
    33,408Deferred income taxes, net
    
    
    1,362
    
    
    
    1,362Assets held for sale (note 2)
    
    
    56,186
    
    
    
    64,710Total current assets
    
    
    201,465
    
    
    
    194,118Property, plant and equipment:Land
    
    
    1,150
    
    
    
    1,150Building and leasehold improvements
    
    
    15,228
    
    
    
    15,166Machinery and equipment
    
    
    77,000
    
    
    
    70,160Furniture and fixtures
    
    
    8,291
    
    
    
    8,061Total property, plant and equipment
    
    
    101,669
    
    
    
    94,537Less accumulated depreciation and amortization
    
    
    68,422
    
    
    
    63,068Net property, plant and equipment
    
    
    33,247
    
    
    
    31,469Deferred income taxes, net  non-current
    
    
    4,604
    
    
    
    4,604Intangible assets, net
    
    
    3,599
    
    
    
    3,990Goodwill
    
    
    13,526
    
    
    
    13,526Other assets
    
    
    8,653
    
    
    
    7,371$
    265,094
    
    
    
    255,078
  3




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EMS Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited), continued
(in thousands, except share data)
 Oct 1
    
    
    Dec 312005
    
    
    2004LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current installments of long-term debt
    
    $
    18,461
    
    
    
    3,462Accounts payable
    
    
    31,865
    
    
    
    23,840Income taxes payable
    
    
    3,655
    
    
    
    1,726Accrued compensation costs
    
    
    8,132
    
    
    
    6,232Accrued retirement costs
    
    
    2,153
    
    
    
    2,453Deferred service revenue
    
    
    5,915
    
    
    
    5,214Liabilities related to assets held for sale (note 2)
    
    
    18,489
    
    
    
    24,095Other current liabilities
    
    
    3,950
    
    
    
    4,043Total current liabilities
    
    
    92,620
    
    
    
    71,065Long-term debt, excluding current installments
    
    
    51,457
    
    
    
    57,992Total liabilities
    
    
    144,077
    
    
    
    129,057Stockholders 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 11,165,000 in 2005 and
11,164,000 in 2004
    
    
    1,117
    
    
    
    1,116Additional paid-in capital
    
    
    69,069
    
    
    
    69,058Accumulated other comprehensive income-foreign currency translation adjustment
    
    
    5,109
    
    
    
    3,174Retained earnings
    
    
    45,722
    
    
    
    52,673Total stockholders equity
    
    
    121,017
    
    
    
    126,021$
    265,094
    
    
    
    255,078
  4




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EMS Technologies, Inc. and Subsidiaries
 
 Consolidated Statements of Cash Flows (Unaudited)
 (in thousands)
 Nine Months EndedOct 1
    
    
    Oct 22005
    
    
    2004Cash flows from operating activities:Net earnings (loss)
    
    $
    (6,951
    )
    
    
    280Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities:Depreciation and amortization
    
    
    7,327
    
    
    
    6,476Loss from discontinued operations
    
    
    13,464
    
    
    
    4,543Loss (gain) on sale of assets
    
    
    385
    
    
    
    (1,082
    )Changes in operating assets and liabilities:Trade accounts receivable, net
    
    
    (17,177
    )
    
    
    773Inventories
    
    
    1,170
    
    
    
    (2,677
    )Accounts payable
    
    
    5,746
    
    
    
    (1,114
    )Income taxes payable
    
    
    2,030
    
    
    
    3,539Accrued costs, deferred service revenue and other current liabilities
    
    
    3,491
    
    
    
    (637
    )Other
    
    
    (2,585
    )
    
    
    (438
    )Net cash provided by operating activities
    
    
    6,900
    
    
    
    9,663Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (7,607
    )
    
    
    (4,455
    )Payments for asset acquisitions
    
    
    (213
    )
    
    
    (1,328
    )Proceeds from sale of assets
    
    
    377
    
    
    
    1,176Net cash used in investing activities
    
    
    (7,443
    )
    
    
    (4,607
    )Cash flows from financing activities:Net increase in revolving debt
    
    
    8,186
    
    
    
    2,478Repayment of term debt
    
    
    (999
    )
    
    
    (2,572
    )Restricted cash
    
    
    2,108
    
    
    
    Deferred financing fees paid
    
    
    (73
    )
    
    
    (50
    )Proceeds from exercise of stock options, net of withholding taxes paid
    
    
    12
    
    
    
    2,972Net cash provided by financing activities
    
    
    9,234
    
    
    
    2,828Operating cash used in discontinued operations
    
    
    (10,540
    )
    
    
    (10,895
    )Net change in cash and cash equivalents
    
    
    (1,849
    )
    
    
    (3,011
    )Effect of exchange rates on cash
    
    
    3,066
    
    
    
    (457
    )Cash and cash equivalents at beginning of period
    
    
    14,553
    
    
    
    14,180Cash and cash equivalents at end of period
    
    $
    15,770
    
    
    
    10,712
  5




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EMS Technologies, Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements (Unaudited)
 October 1, 2005 and October 2, 2004
 1. Basis of Presentation
   Managements Use of Estimates
  Stock Option Plans
  6




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Quarters Ended
    
    
    Nine Months EndedOct 1
    
    
    Oct 2
    
    
    Oct 1
    
    
    Oct 22005
    
    
    2004
    
    
    2005
    
    
    2004Net earnings (loss):As reported (1)
    
    $
    (1,001
    )
    
    
    (1,716
    )
    
    
    (6,951
    )
    
    
    280Less: Stock-based employee compensation expense determined
under the fair value method, net of tax
    
    
    (216
    )
    
    
    (369
    )
    
    
    (754
    )
    
    
    (1,329
    )Pro forma
    
    $
    (1,217
    )
    
    
    (2,085
    )
    
    
    (7,705
    )
    
    
    (1,049
    )Basic net earnings (loss) per share:As reported
    
    $
    (0.09
    )
    
    
    (0.15
    )
    
    
    (0.62
    )
    
    
    0.03Pro forma
    
    
    (0.11
    )
    
    
    (0.19
    )
    
    
    (0.69
    )
    
    
    (0.09
    )Diluted net earnings (loss) per share:As reported
    
    $
    (0.09
    )
    
    
    (0.15
    )
    
    
    (0.62
    )
    
    
    0.02Pro forma
    
    
    (0.11
    )
    
    
    (0.18
    )
    
    
    (0.69
    )
    
    
    (0.09
    )
 
 (1)
    
    Stock compensation expense has not been recognized in net earnings (loss). Effect of New Accounting Pronouncements
      7




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2. Discontinued Operations
       Quarters Ended
    
    
    Nine Months EndedOct 1
    
    
    Oct 2
    
    
    Oct 1
    
    
    Oct 22005
    
    
    2004
    
    
    2005
    
    
    2004Net sales
    
    $
    14,746
    
    
    
    15,419
    
    
    
    51,756
    
    
    
    49,910Costs and expenses
    
    
    14,939
    
    
    
    16,452
    
    
    
    51,350
    
    
    
    52,929Impairment charge
    
    
    4,000
    
    
    
    1,700
    
    
    
    14,000
    
    
    
    1,700Loss before income taxes
    
    
    (4,193
    )
    
    
    (2,733
    )
    
    
    (13,594
    )
    
    
    (4,719
    )Income tax (expense) benefit
    
    
    (112
    )
    
    
    5
    
    
    
    130
    
    
    
    176Net loss
    
    $
    (4,305
    )
    
    
    (2,728
    )
    
    
    (13,464
    )
    
    
    (4,543
    )
 8




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Oct 1
    
    
    Dec 312005
    
    
    2004Accounts receivable, net
    
    $
    24,274
    
    
    
    18,879Inventories
    
    
    8,107
    
    
    
    8,022Investments
    
    
    
    
    
    
    2,709Property, plant and equipment, net
    
    
    14,029
    
    
    
    24,298Non-current accounts receivable, net
    
    
    5,211
    
    
    
    6,516Accrued pension assets
    
    
    3,046
    
    
    
    3,255Other assets
    
    
    1,519
    
    
    
    1,031Total assets held for sale
    
    $
    56,186
    
    
    
    64,710Accounts payable
    
    $
    10,064
    
    
    
    15,185Long-term debt
    
    
    3,034
    
    
    
    2,783Post-retirement obligations
    
    
    4,944
    
    
    
    4,481Other current liabilities
    
    
    447
    
    
    
    1,646Total liabilities related to assets held for sale
    
    $
    18,489
    
    
    
    24,095
 3. Derivative Financial Instruments
    Quarters Ended
    
    
    Nine Months EndedOct 1
    
    
    Oct 2
    
    
    Oct 1
    
    
    Oct 22005
    
    
    2004
    
    
    2005
    
    
    2004Beginning net asset (liability) for derivatives
    
    $
    98
    
    
    
    (33
    )
    
    
    (128
    )
    
    
    99Sales:Loss in value of embedded derivatives
    
    
    (17
    )
    
    
    
    
    
    
    (18
    )
    
    
    (2
    )Foreign exchange gain (loss) on derivative instruments:Gain in value of derivative instruments that do not qualify
as hedging instruments
    
    
    84
    
    
    
    122
    
    
    
    256
    
    
    
    149Matured foreign exchange contracts
    
    
    (119
    )
    
    
    (13
    )
    
    
    (64
    )
    
    
    (170
    )Net consolidated statements of operations gain (loss)
from changes in value of derivative instruments
    
    
    (52
    )
    
    
    109
    
    
    
    174
    
    
    
    (23
    )Ending net asset for derivatives
    
    $
    46
    
    
    
    76
    
    
    
    46
    
    
    
    76
   9




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4. Earnings (Loss) Per Share
   Oct 1
    
    
    Oct 22005
    
    
    2004Dilutive stock options, included in earnings (loss) per share calculations:Shares
    
    
    784
    
    
    
    794Average exercise price per share
    
    $
    13.62
    
    
    
    13.63Anti-dilutive stock options and warrants, excluded from per share calculations:Shares
    
    
    895
    
    
    
    900Average exercise price per share
    
    $
    20.26
    
    
    
    20.26
  Quarters Ended
    
    
    Nine Months EndedOct 1
    
    
    Oct 2
    
    
    Oct 1
    
    
    Oct 22005
    
    
    2004
    
    
    2005
    
    
    2004Basic-weighted average common shares outstanding
    
    
    11,165
    
    
    
    11,114
    
    
    
    11,165
    
    
    
    11,076Common equivalent shares from stock options
    
    
    80
    
    
    
    75
    
    
    
    49
    
    
    
    162Diluted-weighted average common and common
equivalent shares outstanding
    
    
    11,245
    
    
    
    11,189
    
    
    
    11,214
    
    
    
    11,238
 5. Comprehensive Income (Loss)
  Quarters Ended
    
    
    Nine Months EndedOct 1
    
    
    Oct 2
    
    
    Oct 1
    
    
    Oct 22005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss)
    
    $
    (1,001
    )
    
    
    (1,716
    )
    
    
    (6,951
    )
    
    
    280Other comprehensive loss:Foreign currency translation adjustment
    
    
    1,157
    
    
    
    772
    
    
    
    1,935
    
    
    
    (702
    )Comprehensive income (loss)
    
    $
    156
    
    
    
    (944
    )
    
    
    (5,016
    )
    
    
    (422
    )
 10




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6. Trade Accounts Receivable
  Oct 1
    
    
    Dec 312005
    
    
    2004Amounts billed
    
    $
    68,992
    
    
    
    57,010Unbilled revenues under long-term contracts
    
    
    27,740
    
    
    
    21,241Customer advanced payments
    
    
    (2,984
    )
    
    
    (1,875
    )Allowance for doubtful accounts
    
    
    (928
    )
    
    
    (1,006
    )Trade accounts receivable, net
    
    $
    92,820
    
    
    
    75,370
 7. Inventories
  Oct 1
    
    
    Dec 312005
    
    
    2004Parts and materials
    
    $
    23,284
    
    
    
    23,789Work in process
    
    
    3,855
    
    
    
    3,605Finished goods
    
    
    5,581
    
    
    
    6,014Inventories
    
    $
    32,720
    
    
    
    33,408
 8. Interim Segment Disclosures
      11




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Quarters Ended
    
    
    Nine Months EndedOct 1
    
    
    Oct 2
    
    
    Oct 1
    
    
    Oct 22005
    
    
    2004
    
    
    2005
    
    
    2004Net sales:LXE
    
    $
    30,720
    
    
    
    27,335
    
    
    
    89,111
    
    
    
    79,960Defense & Space Systems
    
    
    13,450
    
    
    
    11,831
    
    
    
    38,023
    
    
    
    36,892SATCOM
    
    
    14,355
    
    
    
    8,975
    
    
    
    36,408
    
    
    
    28,546EMS Wireless
    
    
    25,894
    
    
    
    9,489
    
    
    
    62,620
    
    
    
    34,568Other
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    (233
    )Total
    
    $
    84,419
    
    
    
    57,634
    
    
    
    226,162
    
    
    
    179,733Operating income (loss):LXE
    
    $
    1,553
    
    
    
    1,806
    
    
    
    4,705
    
    
    
    4,634Defense & Space Systems
    
    
    1,567
    
    
    
    148
    
    
    
    2,524
    
    
    
    1,600SATCOM
    
    
    1,546
    
    
    
    583
    
    
    
    2,887
    
    
    
    1,293EMS Wireless
    
    
    1,275
    
    
    
    (1,057
    )
    
    
    3,005
    
    
    
    (574
    )Other
    
    
    (10
    )
    
    
    326
    
    
    
    (459
    )
    
    
    221Total
    
    $
    5,931
    
    
    
    1,806
    
    
    
    12,662
    
    
    
    7,174Earnings (loss) from continuing operations:LXE
    
    $
    933
    
    
    
    1,054
    
    
    
    2,728
    
    
    
    2,654Defense & Space Systems
    
    
    920
    
    
    
    10
    
    
    
    1,393
    
    
    
    779SATCOM
    
    
    1,179
    
    
    
    591
    
    
    
    2,431
    
    
    
    1,253EMS Wireless
    
    
    713
    
    
    
    (738
    )
    
    
    1,586
    
    
    
    (614
    )Other
    
    
    (178
    )
    
    
    6
    
    
    
    (300
    )
    
    
    383Corporate
    
    
    (263
    )
    
    
    89
    
    
    
    (1,325
    )
    
    
    368Total
    
    $
    3,304
    
    
    
    1,012
    
    
    
    6,513
    
    
    
    4,823
 9. Warranty Liability
   Quarters Ended
    
    
    Nine Months EndedOct 1
    
    
    Oct 2
    
    
    Oct 1
    
    
    Oct 22005
    
    
    2004
    
    
    2005
    
    
    2004Balance at beginning of the period
    
    $
    2,535
    
    
    
    2,001
    
    
    
    2,089
    
    
    
    1,826Accruals for warranties issued during the period
    
    
    1,810
    
    
    
    756
    
    
    
    3,094
    
    
    
    1,268Settlements made during the period
    
    
    (1,042
    )
    
    
    (815
    )
    
    
    (1,880
    )
    
    
    (1,152
    )Balance at end of the period
    
    $
    3,303
    
    
    
    1,942
    
    
    
    3,303
    
    
    
    1,942
 10. Long-term Debt
  12




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11. Litigation
  13




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##### Table of Contents



12. Subsequent Events
      14




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##### Table of Contents



ITEM 2. Management s Discussion and Analysis of Financial Condition and Results of Operations.
  Overview:
  
    
    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
    
    EMS Wireless
Base station antennas and signal repeaters for PCS/cellular systems
   For continuing operations:
 
    
    Consolidated net sales reached an all-time high of $84.4 million for continuing
operations in the third quarter of 2005. This was mainly due to
record sales recorded at our EMS Wireless and SATCOM divisions for the
third quarter and first nine months of 2005, and from continued sales
growth at our LXE division.
    
    Strong operating profits were recorded by each of the four
divisions for the third quarter and the first nine months of 2005,
and in total, for continuing operations, were over three times those
reported in the third quarter of 2004, and nearly double those
reported in the first nine months of that same year.
 For discontinued operations:
 
    
    On October 28, 2005, the Company signed a definitive agreement for the sale of the
assets and operating liabilities of its Space & Technology/Montreal division to MacDonald,
Dettwiler and Associates, Ltd. of Vancouver, B.C. The Company expects to finalize the
transaction during 2005, subject to the satisfaction of various conditions, including
regulatory approval by Canadian competition authorities and consent by certain key
customers.
    
    The first nine months of 2005 included impairment charges of $4.0 million for our SatNet
division and $10
 
 15




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##### Table of Contents



million for our Space & Technology/Montreal division. They were recorded in the third
quarter and second quarter of 2005, respectively, to reflect the revised estimate of the
fair value, less cost to sell, of these divisions. Excluding these impairment charges, net
earnings before income taxes from all discontinued operations improved due to higher
revenues, improved margins, and lower selling, general and administrative expenses at the
S&T/Montreal division.
 Description of Net Sales, Costs and Expenses
 Net sales
   Cost of sales
     Selling, general and administrative expenses
  Research and development expenses
  16




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##### Table of Contents



Non-operating
income, net
  Foreign exchange gains and losses
   Interest expense
  Income tax expense
  Discontinued operations
  Results of Operations
 Three Months ended October 1, 2005 and October 2, 2004:
    17




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Nine Months ended October 1, 2005 and October 2, 2004:
        18




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##### Table of Contents



Net Sales, Cost of Sales, and Operating Income (Loss) by Segment
  Percentage IncreaseQuarters Ended
    
    
    Nine Months Ended
    
    
    (Decrease)Oct 1
    
    
    Oct 2
    
    
    Oct 1
    
    
    Oct 2
    
    
    Three
    
    
    Nine2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    Months
    
    
    MonthsNet sales:LXE
    
    $
    30,720
    
    
    
    27,335
    
    
    
    89,111
    
    
    
    79,960
    
    
    
    12
    %
    
    
    11
    %Defense & Space Systems
    
    
    13,450
    
    
    
    11,831
    
    
    
    38,023
    
    
    
    36,892
    
    
    
    14
    %
    
    
    3
    %SATCOM
    
    
    14,355
    
    
    
    8,975
    
    
    
    36,408
    
    
    
    28,546
    
    
    
    60
    %
    
    
    28
    %EMS Wireless
    
    
    25,894
    
    
    
    9,489
    
    
    
    62,620
    
    
    
    34,568
    
    
    
    173
    %
    
    
    81
    %Other
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    (233
    )
    
    
    *
    *
    
    
    *
    *Total
    
    $
    84,419
    
    
    
    57,634
    
    
    
    226,162
    
    
    
    179,733
    
    
    
    46
    %
    
    
    26
    %Cost of sales percentage:LXE
    
    
    61
    %
    
    
    60
    %
    
    
    60
    %
    
    
    60
    %
    
    
    1
    %
    
    
    
    %Defense & Space Systems
    
    
    75
    %
    
    
    83
    %
    
    
    79
    %
    
    
    79
    %
    
    
    (8
    )%
    
    
    
    %SATCOM
    
    
    61
    %
    
    
    54
    %
    
    
    60
    %
    
    
    58
    %
    
    
    7
    %
    
    
    2
    %EMS Wireless
    
    
    79
    %
    
    
    68
    %
    
    
    76
    %
    
    
    66
    %
    
    
    11
    %
    
    
    10
    %Total
    
    
    69
    %
    
    
    65
    %
    
    
    68
    %
    
    
    65
    %
    
    
    4
    %
    
    
    3
    %Operating income (loss):LXE
    
    $
    1,553
    
    
    
    1,806
    
    
    
    4,705
    
    
    
    4,634
    
    
    
    (14
    )%
    
    
    2
    %Defense & Space Systems
    
    
    1,567
    
    
    
    148
    
    
    
    2,524
    
    
    
    1,600
    
    
    
    959
    %
    
    
    58
    %SATCOM
    
    
    1,546
    
    
    
    583
    
    
    
    2,887
    
    
    
    1,293
    
    
    
    165
    %
    
    
    123
    %EMS Wireless
    
    
    1,275
    
    
    
    (1,057
    )
    
    
    3,005
    
    
    
    (574
    )
    
    
    221
    %
    
    
    624
    %Other
    
    
    (10
    )
    
    
    326
    
    
    
    (459
    )
    
    
    221
    
    
    
    *
    *
    
    
    *
    *Total
    
    $
    5,931
    
    
    
    1,806
    
    
    
    12,662
    
    
    
    7,174
    
    
    
    228
    %
    
    
    76
    %
 
 **
    
    = Not Meaningful LXE:
  Defense & Space Systems:
  SATCOM:
 19




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EMS Wireless:
  Discontinued Operations:
     20




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Liquidity and Capital Resources
           21




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##### Table of Contents



Less than
    
    
    
    
    
    
    
    
    
    After 5Total
    
    1 year
    
    1-3 years
    
    4-5 years
    
    yearsContinuing Operations:December 31, 2004 (no significant change to
date):Operating lease obligations
    
    $
    13.2
    
    
    
    4.4
    
    
    
    6.7
    
    
    
    2.1
    
    
    
    Deferred compensation
    
    
    0.2
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency forward contracts, net
    
    
    0.2
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    October 1, 2005:Long-term debt, excluding capital leases
    
    
    69.5
    
    
    
    15.4
    
    
    
    42.3
    
    
    
    2.5
    
    
    
    9.3Capital lease obligations
    
    
    0.4
    
    
    
    0.1
    
    
    
    0.3
    
    
    
    
    
    
    
    Interest on outstanding long-term debt (2)
    
    
    12.7
    
    
    
    1.3
    
    
    
    7.5
    
    
    
    1.6
    
    
    
    2.3Purchase commitments (1)
    
    
    33.4
    
    
    
    33.4
    
    
    
    
    
    
    
    
    
    
    
    Discontinued Operations:December 31, 2004 (no significant change to
date):Capital lease obligations
    
    $
    0.4
    
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.1
    
    
    
    Operating lease obligations
    
    
    1.0
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    
    
    
    
    Purchase commitments (1)
    
    
    8.1
    
    
    
    7.8
    
    
    
    0.3
    
    
    
    
    
    
    
    October 1, 2005:Long-term debt, excluding capital leases (3)
    
    
    2.7
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    1.2
 
 (1)
    
    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.(2)
    
    Assumes a reduction in revolving loan balance of $15.0 million upon the potential closing
of the S&T/Montreal sale, and the related reduction in variable interest rate as of the end
of the fourth quarter of 2005 which remains unchanged until the loan matures in December of
2007.(3)
    
    Long-term debt for discontinued operations is included in liabilities related to assets
held for sale on the consolidated balance sheets.  Amount of commitment expiration per periodLess than
    
    
    
    
    
    
    
    
    
    After 5Other commercial commitments
    
    Total
    
    1 year
    
    1-3 years
    
    4-5 years
    
    yearsStandby letters of credit
as performance guarantees
    
    $
    6,334
    
    
    
    1,064
    
    
    
    5,099
    
    
    
    171
    
    
    
    
  22




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Critical Accounting Policies
  Revenue recognition on long-term contracts
     23




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Accounting for government research incentives
  Inventory valuation
  Evaluation of long-lived assets for impairment
     24




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Establishment of reserves for deferred income tax assets
  Risk Factors and 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 our quarterly results;
    
    the requirement to obtain waivers from its bank creditors of financial-performance
covenants continued in the Companys credit agreements, should the Company fail to meet its
expectations for earnings and positive cash flow in future quarters, and the risk of credit
agreement default if any such waiver should be required and cannot be obtained;
    
    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;
    
    uncertainties related to the completion of the proposed sales of the Companys Space &
Technology/Montreal division, for which a contract is currently in effect, and its SatNet
division, which is the subject of a non-binding letter of intent, as well as external
market conditions, internal priorities and constraints, and financing availability that
could affect a purchasers willingness and ability to complete the transactions on terms
and timing expected by the Company (in the event a sales transaction is not completed, the
Space & Technology/Montreal operations and/or the SatNet division could be required to be
reclassified back into continuing operations, and prior-year financial statements would be
restated to reflect that status);
    
    uncertainties relating to the Companys estimates of the financial effect of the sale of
S&T/Montreal, including the effect on such estimates of the timing of the closing and
financial performance of S&T/Montreal prior to closing, and adjustments to current
estimates that may be determined to be appropriate in the process of formally recording the
transaction in the Companys financial records;
    
    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
 
 25




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##### Table of Contents



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;
    
    customer response to new products and services, and general conditions in our target
markets (such as logistics, PCS/cellular telephony and space-based communications);
    
    the success of certain of our 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 the Companys expected growth;
    
    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 our 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.
  26




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Effect of New Accounting Pronouncements
      27




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##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
  Revolving credit loan with U.S. and Canadian banks, maturing in December 2007,
interest payable quarterly at a variable rate (7.48% at the end of the quarter)
    
    $
    53,043Revolving credit loan with a bank in the United Kingdom, maturing in April 2006,
interest payable monthly at a variable rate (5.50% at the end of the quarter)
    
    
    1,454Total market-sensitive debt
    
    $
    54,497
   Exchange Rate
    

    $U.S.($U.S. per unit of
    

    in thousandslocal currency)
    

    (reporting currency)Australia
    
    0.7643/Dollar
    
    
    $
    934France
    
    1.2060/Euro
    
    
    
    513Canada
    
    0.8613/Dollar
    
    
    
    459United Kingdom
    
    1.7696/Pound
    
    
    
    108Netherlands
    
    1.2060/Euro
    
    
    
    80Singapore
    
    0.5918/Dollar
    
    
    
    49Italy
    
    1.2060/Euro
    
    
    
    94Belgium
    
    1.2060/Euro
    
    
    
    56Sweden
    
    0.1294/Krona
    
    
    
    29Germany
    
    1.2060/Euro
    
    
    
    (2
    )Total short-term due to parent
    
    
    
    
    $
    2,320
  Average
    
    
    ($U.S.)Notional

    
    Contract
    
    
    FairAmount

    
    Rate
    
    
    ValueForeign currency forward contracts:Continuing Operations:Euros (sell for U.S. dollars)
    
    250 Euros
    
    
    1.1928
    
    
    $
    U.S. dollars (sell for Canadian dollars)
    
    9,500 Dollars
    
    
    1.1720
    
    
    
    105Australian dollars (sell for U.S. dollars)
    
    1,000 Dollars
    
    
    0.7058
    
    
    
    (40
    )$
    65
  28




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ITEM 4. Controls and Procedures
    29




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PART II
 OTHER INFORMATION
 
 ITEM 6. Exhibits
  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 3, 2004).3.2
    
    Bylaws of EMS Technologies, Inc., as amended through March 15, 1999 (incorporated by reference to
Exhibit 3.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended April 3, 2004).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
    
    Certifications of the Registrants Chief Executive and Chief Financial Officers, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 30




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SIGNATURES
  EMS TECHNOLOGIES, INC.By:
    
    /s/ Alfred G. Hansen
    
    Date: 11/14/2005Alfred G. HansenPresident, Chief Executive Officer (Principal Executive Officer)By:
    
    /s/ Don T. Scartz

Don T. Scartz
    
    Date: 11/14/2005Executive Vice President, Chief FinancialOfficer and Treasurer (Principal Financial Officer)
 31