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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
Commission File #0-6072

EMS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

|                                |  |                         
|------------------------------- |  | ------------------------
|Georgia                         |  | 58-1035424              
|(State or other jurisdiction of |  | (IRS Employer ID Number)
|incorporation of organization)  |  |                         

660 Engineering Drive
Norcross, Georgia 30092
(Address of principal executive offices) (Zip Code)

Registrants Telephone Number, Including Area Code: (770) 263-9200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
(Title of Class)

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

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined by Rule 12b-2 of the
Act)      Yes   [X]      No   [   ]

The aggregate market value of voting stock held by persons other than
directors or executive officers on June 29, 2002 was $217 million, based on a
closing price of $20.69 per share. The basis of this calculation does not
constitute a determination by the registrant that all of its directors and
executive officers are affiliates as defined in Rule 405.

As of March 3, 2003, the number of shares of the registrants common stock
outstanding was 10,658,038 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information contained in the Companys definitive proxy statement for
the 2003 Annual Meeting of Shareholders of the registrant is incorporated
herein by reference in Parts II, III and IV of this Annual Report on Form 10-K.

AVAILABLE INFORMATION

EMS Technologies, Inc. makes available free of charge, on or through its
website at www.ems-t.com,its annual, quarterly and current reports, and any
amendments to those reports, as soon as reasonably practicable after
electronically filing such reports with the Securities and Exchange Commission.
Information contained on the Companys website is not part of this report.





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ITEM 1. BUSINESS

GENERAL

SUMMARY

EMS Technologies, Inc. (the Company) designs, manufactures and markets
products that are important in many kinds of wireless communications. The
Company focuses on the needs of the mobile information user, with an increasing
emphasis on broadband applications for high-data-rate, high-capacity wireless
communications.

The Company is organized into four reportable business segments: Space &
Technology, LXE, EMS Wireless and SATCOM. Each segment is separately managed
and comprises a range of products and services that share distinct operating
characteristics. However, the Company believes that one of its competitive
strengths is the technological and marketing synergy that occurs among the
segments, as well as among the Companys various product lines. The Company
believes that this synergy creates a path for highly advanced technologies
developed for narrow space and defense markets to migrate to products for
broader markets.

1. Space & Technology

This segment manufactures custom-designed, highly engineered hardware for use
in space (both commercial and defense satellite electronics), aerospace
(defense electronics), and ground (commercial broadband hubs and terminals)
applications. Orders in this segment typically involve long-term contracts with
production schedules that can extend a year or more, and most revenues are
recognized under percentage-completion accounting. Space & Technology products
are sold primarily to space and aerospace prime contractors or commercial
communication system integrators, rather than to end-users. The Space &
Technology segment accounted for 43%, 45%, and 42% of consolidated net sales in
2002, 2001, and 2000, respectively.

A major source of business is the defense market. Orders in this market were
strong in 2002, with defense sales doubling from the prior year. The Company
believes that military applications for secure communications, surveillance,
and electronic counter-measures will continue to offer opportunities
well-suited for the Companys unique technology base and its considerable
experience on such programs.

A major strategic emphasis in this segment is the development of broadband
technologies for use in high-data-rate, high-capacity satellite communication
systems. This strategic emphasis has resulted in the formation, in mid-2002, of
the EMS Satellite Networks business group within the Space &
Technology/Montreal operations. This business group is focused on high speed,
two-way Internet via satellite hubs and terminals that use the DVB-RCS open
standard pioneered by EMS. EMS Satellite Networks has supplied DVB-RCS hubs and
terminals to eight of the worlds ten largest satellite operators, several of
which have begun commercial deployment.

2. LXE

The LXE segment is conducted through a wholly owned subsidiary, LXE Inc., and
manufactures wireless mobile computers and other wireless local area network
(LAN) products for logistics and other enterprise applications. Typical uses
include real-time data communications on inventory movement in a large
warehouse, manufacturing facility, or seaport. The manufacturing cycle for each
order is generally just a few days, and revenues are recognized upon shipment
of hardware. Hardware is marketed to end-users and to third parties that
incorporate their products and services with the Companys hardware for
delivery to end-users. The LXE segment accounted for 28%, 30% and 27% of
consolidated net sales in 2002, 2001 and 2000, respectively.

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3. EMS Wireless

The EMS Wireless segment manufactures base-station antennas and repeaters for
PCS/cellular communications systems. The manufacturing cycle for each order is
generally just a few days, and revenues are recognized upon shipment of
hardware. Hardware is marketed to wireless service providers and to original
equipment manufacturers (OEMs) for mobile voice/paging services, as well as
for other emerging high-speed wireless systems. The EMS Wireless segment
accounted for 15%, 15% and 22% of consolidated net sales in 2002, 2001 and
2000, respectively.

4. SATCOM

The SATCOM segment is a division of the Companys wholly owned Canadian
subsidiary, EMS Technologies Canada, Ltd. (EMS Canada), and manufactures
earth-based antennas, terminals and other hardware for communications via
satellite link. Typical applications include voice/data communications aboard
corporate jets, search-and-rescue systems that use satellite surveillance, and
tracking/messaging for long-haul trucks. The manufacturing cycle for most
orders is generally just a few days, and revenues are recognized upon shipment
of hardware. Hardware is marketed to third parties who incorporate their
products and services with the Companys hardware for delivery to end-users.
The SATCOM segment accounted for 11%, 8% and 6% of consolidated net sales in
2002, 2001 and 2000, respectively.

The discussion of the Companys business set forth in this Item 1 is qualified
by the materials appearing below under the headings Risk Factors and
Forward-Looking Statements.

BACKGROUND

In its Space & Technology segment, the Company has developed strong expertise
in components and subsystems. In the mid-1970s, the Company pioneered the use
of ferrite materials for electronic beam-forming. Electronic beam-forming
networks (BFNs) allow a satellite to steer and adjust the shape of its
antenna pattern. BFN technology was originally used in military communication
satellites to combat interference from the ground, but this technology has important
new applications in both commercial and defense satellite communication
systems. For example, BFN technology enables a spot-beam approach, in which a
satellite focuses its transmit-and-receive capabilities to a specific
geographic area of the earth. When coupled with the use of high frequencies,
such as the Ka-band, this spot-beam technology allows for increased
data-rates and capacities.

The Company also produced the first all-electronic switch matrix to provide
flexible interconnectivity between uplink and downlink channels in
communication satellites. These switch matrices have found application in a
number of commercial and military satellite systems. This technology has also
evolved and is providing enhanced capabilities in todays latest radar imaging
and communication satellites.

The core technologies required to accomplish space-based BFNs are directly
applicable to a range of defense applications, including line-of-sight
communications, radar, signal intelligence, and electronic countermeasure
systems. Further, the Company has produced highly-engineered antenna,
signal-management, and signal processing hardware that are used in many
critical weapon systems.

In 1999, the Company added expertise in space systems, payload integration and
ground terminal technologies by acquiring the Space Systems and Products
Division of Spar Aerospace Limited, based in Montreal. This division (now the
Space & Technology/Montreal division of EMS Canada) has long been a leading
participant in the Canadian and international space industries. It has produced
payloads and full antenna systems for major communications and remote sensing
satellites, as well as robotics for NASAs Space Shuttle and the International
Space Station, and is leading the Companys broadband initiatives.

In the early 1980s, the Company sought to diversify its predominantly
defense-related business base by moving into commercial markets. As a result,
the Company used its expertise in wireless technologies to develop the LXE
product line of wireless mobile computers and network products. By
communicating with the host computer network in real-time, these LXE
products enhance the productivity of mobile workers

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and
improve the accuracy and timeliness of transaction-processing data. LXEs
principal market is for material management functions in warehouses and
distribution centers (the logistics market), including seaports. A major
factor in the long-term growth of the logistics market and the LXE product line
has been expanding use by many industries of more advanced information
technologies, including wireless networking, enterprise software and
auto-identification (such as barcoding).

The EMS Wireless segment includes PCS/cellular base station antennas and
repeaters. The leading product in this line (marketed under the DualPol
trademark) employs polarization-diversity technology. These antennas allow
cell-site tower structures that are much simpler and less obtrusive than
conventional antenna towers. In addition, these antennas offer superior
coverage and resistance to signal-fading, as compared with networks with
conventional vertically-polarized antennas. The Company also offers a line of
repeaters and in-building products, as well as a full line of lower-priced,
conventional antennas for both cellular and PCS networks. These infrastructure
products, along with a family of accessory products, are marketed to service
providers and to OEMs domestically and internationally.

The Company has also established an industry-leading position in the market for
mobile earth-based SATCOM (satellite communications) antennas and terminals.
Initially these products were developed for international search and rescue, in
which satellite technology helps locate downed aircraft or ocean-going ships in
distress. The most successful component of the Companys SATCOM product lines
was developed for advanced communications by corporate jets. In these
aeronautical applications, the Companys antennas are mounted atop the jets
tail fin and are automatically steered to remain pointed at a communications
satellite during flight; these systems provide voice, data and video
communications via satellite. The Company has introduced other SATCOM products,
including (1) a high-speed data product to provide both voice and data
connections with speeds up to 128 kbps, (2) a packet-data terminal to provide
two-way real-time data communications for messaging, tracking and monitoring in the transportation, public
safety and remote industrial controls markets, and (3) a maritime high-speed
terminal for digital communications at sea. SATCOM has also made initiatives
with software products used for incident management for search and rescue
applications with customers around the world.

MARKETS AND PRODUCTS

Space & Technology Markets

In the U.S., satellite technology was historically funded by the military for
defense applications. Commercial use was cost-effective only for specialized
high-capacity applications in the telecommunications and broadcast industries.
However, satellite-based voice and data networks are increasingly being used
for a variety of lower-cost, high-volume commercial applications as a result of
improvements in satellite technology. New commercial applications include
mobile telephony and data communications.

Satellites provide a number of advantages over terrestrial facilities for many
high-speed communications service applications:



|1. |  | Satellites enable high-speed communications service
where a terrestrial alternative is not available or is not
adequate.                                      
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Unlike the cost of terrestrial networks, the cost to
provide services by satellite does not increase with the
distance between sending and receiving stations.
|  
|3. |  | In contrast to the installation of fiber optic cable,
satellite networks can be rapidly and cost-effectively
deployed, once the satellite is in orbit.        

Demand for commercial satellites will be determined by several factors,
including:



|1. |  | growth in demand for new satellite-based applications,
such as mobile communications or data services;
|-- |  | ------------------------------------------------------------------------------------------------------
|  
|2. |  | growth in business networking;                                                                        

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|3. |  | growth in direct-to-home television and related voice,
video and data systems; and                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|4. |  | development of new satellite-based communications
architectures to provide basic telephone and television
services in developing regions of the world.

The Company believes that its Space & Technology business will be able to make
significant contributions in defense systems of increasing national importance,
such as secure satellite communications, secure intelligence and imagery
collection satellite, advanced electronic warfare, and secure line-of-sight
communications. EMSs base of technologies, including ferrite ceramics for
radio frequency management and advanced antennas for low-observable aircraft,
are well suited to many advanced defense applications. As a result, EMS
continues to supply hardware to important U.S. and international military
satellites for communication, sensing and surveillance. In addition, EMS is
applying its technologies to a number of significant weapon systems such as
F/A-22 (intra-flight datalink antennas), CV-22 (suite of integrated RF
countermeasures subsystems), JSTARS (synthetic aperture radar phase shifters),
and Predator Unmanned Aerial Vehicle (common data link antenna switching).

Space & Technology Products

The Company designs and manufactures innovative satellite communications
products. These products include satellite systems, subsystems and components
that address the need for reliable, high-speed communications. The products
developed by the Company for the Space & Technology segment comprise six main
lines:



|1. |  | Space systems                                          
|-- |  | -------------------------------------------------------
|  
|2. |  | Antenna products                                       
|  
|3. |  | Electronic products for space                          
|  
|4. |  | Ferrite subsystems and components for space and
defense
|  
|5. |  | Electronics and subsystems for defense, and            
|  
|6. |  | Ground products for satellite broadband networks.      

 Space Systems

The Company designs and builds payloads and payload equipment for a wide
variety of fixed, mobile and broadband communications satellites. For example,
EMS is building an advanced active-array radar antenna for RADARSAT-2 (a remote
sensing satellite) that can capture images on earth with three-meter
resolution. We are also constructing specialized payloads such as S-Band
transponders for the Japanese HTV unmanned supply spacecraft. In 2002, EMS
completed the redesign of a repeater for the SARR 2000 search and rescue
satellite, and our work on the next phase of this important program will focus
on telemetry control and power design. In addition, the Company has developed
scientific instruments such as the MAESTRO spectrometer for Canadas SCISAT
program.

 Antenna Products

For over thirty years, EMS has been providing innovative products for satellite
antennas. The Company has experience in a variety of frequency ranges,
including the UHF, S, C, X, Ku, Ka, Q, V and W bands. The Companys antenna
products use a wide variety of technologies and architectures for fixed, mobile
and broadcast applications. They include shaped reflectors, dual aperture
shaped reflectors, direct radiating arrays, steerable antennas, omni antennas,
Gregorian and Cassegrain antennas, lens antennas, deployable reflectors, dual
polarized antennas, and phased arrays.

The Companys antenna products are believed to be well-positioned in potential
growth markets such as broadband service systems (with Company antennas being
used on Telesats Anik-F2 and Eutelsats W3A satellite), and mobile telephony
systems (with antennas on the Inmarsat IV satellites). Varying by frequency or
market served, EMSs antennas pace industry standards by maximizing available
spacecraft power and reducing radio interference between beams.

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EMS is pursuing new commercial opportunities for terrestrial antennas, such as
the recently awarded contract for high-frequency antennas for helicopter
obstacle avoidance systems. The Space & Technology segment also manufactures an
aeronautical antenna for a multi-channel video system used in commercial
aircraft. The video system combines the Companys antennas with electronics and
small flat-panel video screens installed in each seat back, and is installed
and marketed by the Companys customer. The Companys antennas for video
systems are now mainly deployed with an airline based in New York.

 Electronic Products for Space

Microwave products and subsystems are an integral part of many space systems.
They control the microwave communications signals processed in a spacecraft,
and include low-noise amplifiers, repeaters, transponders and solid-state power
amplifiers.

Power products provide highly efficient (up to 95%) conditioning of electric
power aboard a spacecraft. In addition to their efficiency, the Companys power
products have low mass and very low noise levels, and are hardened against the
radiation that spacecraft experience at various orbit levels. Recent contracts
include electronic power conditioners for Superbird 6 and the S-Band
Transponder for the Japanese HTV vehicle.

Certain of the Companys microwave and power products, such as crystal
oscillators, electronic power conditioners, transponders and low-noise
amplifiers, have become industry standards. The same microwave technologies are
being used to build the next generation of international search-and-rescue
satellite (SARSAT) signal repeater panels to be installed on selected civil
government satellites to allow immediate location of distress signals from
planes, ships and lost hikers.

The Company also has a long heritage of supplying space-qualified computers,
controllers and digital signal processors. This equipment is used for
antenna-pointing mechanism electronics, payload control, attitude control,
power switching, command decoding and telemetry gathering. EMS-built
processors and digital products are critical elements on-board the
International Space Station. The significant advancements EMS has made in
spacecraft data-processing capacity are being applied to the next generation of
space computers and processors for both manned and unmanned systems, promising
a 100-fold improvement in on-board computation power.

 Ferrite Subsystems and Components

EMS pioneered the use of ferrite materials in space and defense systems.
Ferrite products provide phase and amplitude control of communications signals.
The design, development and manufacture of ferrite products require
considerable specialized in-house capabilities. These products include ferrite
circulators, isolators, phase shifters, switches and switching networks, and
transmit-receive networks. Ferrite products are integrated into satellite,
shipboard, ground-based and airborne applications, including direct broadcast,
direct audio, commercial and military communications, earth observation,
multimedia, and defense systems. The Companys ferrite products have been
utilized in such programs as XM Radio, GEOSAT, ENVISAT, TDRSS, MILSTAR/AEHF and
ACTS.

 Electronics and Subsystems for Defense

Electronic warfare is increasingly important to modern defense strategy.
Electronic warfare systems perform many crucial military operations, such as
targeting for weapons systems, disrupting enemy communications, and jamming
enemy attempts to track or target aircraft. The Company has developed unique
signal processing capabilities that are key to advanced electronic warfare
systems. These capabilities, combined with our antenna, ferrite, and microwave
products, create significant subsystems in aircraft electronic protection
suites. Major programs that use these products include AN/ALQ-172 Low Band, and
AN/ALQ-211 SIRFC. The Company believes that there will also be significant
opportunities to apply these capabilities in unmanned aerial vehicle systems
and the newest generation of tactical aircraft.

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 Ground Products for Satellite Broadband Networks

The new EMS Satellite Networks business group is establishing itself as a major
brand in the high-speed, two-way satellite communications market, and
deliveries have been completed to SES/Satlynx and to key customers in Russia,
Europe, Canada, the United States and Japan. EMS has been a pioneer in the
development of the DVB-RCS world-wide open standard for communicating
high-speed, two-way Internet data. The proven commercial stability of the
Companys DVB-RCS hub is one of the key differentiators in the market place for
this product. The latest generation of terminals was launched in 2002, with
significant reductions in cost from the preceding generation. These new
lower-priced terminals are expected to encourage a more rapid rate of adoption
and deployment of commercial broadband services via satellite.

LXE Markets

Major technological advances and changes in the regulatory environment have led
to the development and proliferation of wireless data networks that extend the
reach of existing hard-wired networks. Wireless local area networks (LANs)
now accommodate notebook, pen-based, and other handheld computers, as well as
rugged computers mounted on vehicles, such as forklifts. By providing network
connectivity for mobile users, these products increase the accuracy, timeliness
and convenience of data collection and information access. In the past, these
wireless LAN systems were developed for operation using proprietary narrow-band
UHF radios at 450 MHz. Current wireless LAN systems comply with open system
(IEEE 802.11) standards and operate at data rates of 11 Mbps at 2.4 GHz.
Evolving 802.11-based products increase data transmission rates to 54 Mbps in
both the 2.4 GHz and 5.7 GHz bands. The development of these advanced products
and widespread adoption of the 802.11 wireless LAN standard is creating new
applications in established industrial markets and in other vertical markets,
such as transportation and service applications.

The Companys rugged computers and wireless LANs have been installed at more
than 6,500 sites world-wide, including the facilities of many Fortune 500
companies and some of the worlds largest materials-handling installations.

LXE Products

The Companys wireless data systems, which generally incorporate bar-code
scanning or other auto-identification capabilities, are increasingly based on
the IEEE 802.11 open system standard and feature rugged mobile computers
specifically designed for demanding industrial environments. A typical system
consists of mobile computers which incorporate wireless LAN radios and
auto-identification capabilities, network access points which provide a radio
link to the wired network and host computers, and software that manages and
facilitates the communications process.

 Mobile Computers

The Company offers several types of mobile computers, all of which utilize
radio frequency technology:



|1. |  | Hand-held mobile computers are small and lightweight,
and are available in a number of form factors with
varying degrees of ruggedization; and                                                                                                                                                            
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Vehicle-mounted mobile computers are larger, heavy-duty products for use on forklifts, cranes and other
mobile materials handling equipment. These can also be
used in fixed positions where network cabling is impractical,
or in cart-mounted solutions using a self-contained battery and power supply.

All mobile computers incorporate built-in radios that operate on wireless
networks using either the IEEE 802.11 network standard at 2.4 GHz, or a
licensed, narrowband frequency. The Companys mobile computers incorporate
Intel® processors that allow support for terminal emulation, client-server, or
browser-based applications.

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The Companys latest generation of mobile computers has significantly more
computing power than previous models, as well as improved power-management
features and superior ergonomics. The MX3 mobile handheld computer supports the
Windows CE operating system and offers many of the performance features of a
desktop PC in a handheld computer. New handheld product introductions include
the Windows CE-based MX4 and MX5, both designed for extremely demanding
environmental conditions in the warehouse and intermodal yard. The VX series
of vehicle-mounted computers feature even better environmental specifications
and ruggedization, and includes two Pentium-class models that support the
Windows 98, 2000, and XP operating systems.

 Wireless Networks

The wireless communications link between a mobile computer and a host network
consists of: (1) a series of access points that are attached to a customers
hardwired network at appropriate locations, and (2) wireless transceivers
located in each mobile computer. The access points connect the wireless network
to the hardwired network. The wireless transceivers act as wireless LAN
interface cards.

LXE provides and supports wireless network equipment compatible with the
existing 802.11 standards, as well as its proprietary system at 900 MHz. LXE
also offers a complete suite of supporting products and services for its
wireless networks, including wireless network management tools, wireless
security tools, facility analysis, installation and support.

 Host Connectivity Software

LXE also provides terminal emulation software and communications gateways that
allow any of LXEs mobile computers to interface seamlessly to a customers
legacy applications. LXEs host connectivity software supports UNIX, IBM
midrange, and IBM mainframe legacy systems.

 Other Products and Services

In addition to the basic system hardware and software, the Company offers a
wide range of accessory products and services, including bar-code scanners,
battery chargers, portable printers, pre- and post-sale professional services,
and repair and maintenance services.

EMS Wireless Markets

National and international infrastructure for terrestrial-based wireless
communications has expanded since the mid 1990s to support growing worldwide
demand, although infrastructure build-out has slowed substantially during the
past two years. This demand has been fueled by:



| |  | decreasing prices for wireless handsets,        
|- |  | ------------------------------------------------
| 
| |  | a more favorable regulatory environment,        
| 
| |  | greater competition among service providers, and
| 
| |  | more availability of services and RF spectrum.  

In addition, many developing countries are installing wireless telephone
networks as an alternative to installing, expanding or upgrading traditional
hard-wired networks. Emerging wireless data applications may also expand the
market by allowing service providers to increase revenue-generating traffic on
their networks.

Specific technological trends have also affected the wireless industry. For
example, in the late 1990s the continuing growth of the wireless
communications market strained the capacity of traditional analog cellular
systems that can carry only one call per channel of radio spectrum. As a
result, many service providers have installed new digital equipment to increase
per-channel capacity by factors ranging from three to eight. In addition,
service providers have constructed PCS digital networks that operate at twice
the frequency level of cellular systems; this provides the greater bandwidth
necessary for an expanded range of voice and data services. However, PCS
technology requires smaller cells than analog technology and, as a
result, approximately four times the number of base stations to complete its
geographical build-out.

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In 2002 and 2001, EMS Wireless product sales were substantially lower than
during 2000 due to a slowdown in capital spending by the telecommunications
industry across all product types, and slower-than-expected sales for repeater
products typically associated with more complex networks. However, the Company
is a preferred supplier to the leading wireless service providers in North
America, and based on industry analysts reports, and information from
customers and other distribution-channel participants, the Company believes
that it is, for North American PCS/cellular communications systems, the leading
supplier of base station antennas of the types designed and manufactured by the
Company. The Company has manufacturing facilities in Brazil, from which it is
also exporting to other South American countries and to Eastern Europe.

In addition to technical performance of the antennas, key competitive factors
in this market are manufacturing capacity and ability to provide quick
turnaround time in response to an order. The Company believes its turnaround
times are the fastest in the industry.

EMS Wireless Products

The Company has developed several advanced base station antennas for the
PCS/cellular wireless infrastructure market, and has a new line of repeaters
and other wireless signal distribution products.

 Dual Polarization Antenna Products

The Companys DualPol antenna utilities polarization diversity to combine
the functionality of three vertically polarized antennas (two receive and one
transmit) into a single, compact device. With fewer antennas required, DualPol
technology allows the supporting antenna tower to be much smaller and less expensive than for
a traditional PCS/cellular antenna site, which must support the weight and wind-loading
of a large mounting structure atop the tower. An increasingly important factor in establishing the
location of a cell site is the aesthetics of the tower structure. Unlike
traditional vertical-polarization cellular antennas, the Companys DualPol
antennas can be mounted in a very compact configuration that can fit on top of
existing utility poles, or be disguised, for example, in a clock tower. The
mounting flexibility not only benefits the service provider in obtaining site
approvals, but also results in lower installation and structure costs. Further,
these antennas offer superior coverage and resistance to signal-fading, as
compared with networks with conventional vertical-polarization antennas.

The Companys AcCELLerator antenna combines multiple DualPol antennas
pre-packaged in a compact cylindrical enclosure that provides the same
multi-sector coverage as a large, nine-antenna, spatially diverse base station,
yet with a less visually obtrusive structure.

The Companys Micro AcCELLerator antenna is a much smaller version of the
AcCELLerator, and was originally designed to help a Houston service provider
gain zoning approval for new cell sites. Micro AcCELLerator antennas provide a
complete, three-sector cell site in a highly integrated package as small as six
inches in diameter, which is mounted atop an unobtrusive monopole. This
configuration led to a new line of Custom Site Solutions consisting of the
micro version of the AcCELLerator in an aesthetically pleasing mounting
fixture (most often atop a light pole) that has application in shopping malls
and office centers.

 Vertical-Polarization Antenna Products

The Companys lower-cost vertically polarized antennas apply beam-shaping
techniques of amplitude and phase weighting to achieve the most effective
antenna performance for specific applications. The Companys OptiFill antennas
are designed for use in a typical crowded coverage area. These antennas utilize
null filling, upper sidelobe suppression and electronic down-tilt to lower
co-channel interference, reduce the number of dropped calls, and improve sound quality. The Companys OptiRange antennas are designed to
maximize gain, and are

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useful in systems that have large cells, such as rural
areas or initial urban system roll-outs with a small number of base stations.

 Repeaters and Other Wireless Signal Distribution Products

During 2001, the Company acquired a small manufacturer of repeaters and other
wireless signal distribution products. This acquisition provided two new
product lines. The first product line enables carriers to extend indoor RF
coverage through the use of indoor repeaters and fiberoptic-based RF
distribution systems. The second product line helps carriers extend their
coverage in rural areas or uneven terrain through the use of outdoor repeaters.

SATCOM Markets

The first aeronautical systems for telephony utilized a ground-based network.
These networks were not only limited in the voice-quality of their
communications, but they were unable to provide coverage over water for
international travel. Evolution of aeronautical telephony involved a special
antenna aboard the aircraft that allowed the use of satellite transmissions,
not only for voice but also for limited data and fax capabilities. Reflecting
the need for mobile communications in the business world, aeronautical
satellite communications systems of some type are now commonly used in
corporate jets around the world. Current developments are directed towards
higher-speed satellite-based video and Internet-access applications. The market
acceptance of the Companys HSD-64 and HSD-128 high speed data products has
positioned EMS as a market leader in this segment, serving both military and
commercial applications.

The Company believes that it is the top supplier of antennas for voice/data
communications aboard corporate aircraft, with an over-90% share of this
market. To date, there are more than 1,000 EMS installations on over 50
different types of aircraft. The Company has major contracts with Gulfstream,
Honeywell and Bombardier  the industrys largest users of general aviation communications equipment.

The Company has also pursued opportunities in the land mobile market. Customers
in this market use small SATCOM terminals for such functions as tracking and
two-way messaging for transportation or public safety, or remote monitoring of
industrial process controls. A growing concern in this market is that terminals
utilize an open architecture that would be compatible with other communications
systems. The Companys PDT-100 terminal addresses many of this markets needs,
with its compact size, strong and reliable performance, and open architecture.

For over two decades, satellite-based surveillance systems have saved lives and
led to the safe recovery of thousands of disaster and accident victims. One of
the worlds largest search-and-rescue systems is COSPAS-SARSAT, sponsored by
Canada, France, Russia and the U.S. The COSPAS-SARSAT satellites continuously
listen for distress transmissions, determine the location of those
transmissions, and provide alerts to worldwide search-and-rescue operations.
The Company believes that it is a leading provider to COSPAS-SARSAT
search-and-rescue systems of ground station equipment, including
high-performance terminals that handle a systems vital communications
function.

SATCOM Products

The Companys SATCOM line of products include the following:

 Aeronautical Antennas

The Company has developed a family of aeronautical communications products,
including an industry-leading Inmarsat antenna, the AMT-50, which is a
mechanically-steered antenna that is connected to an aircrafts navigational
system and automatically remains directed toward a geostationary communications
satellite for voice and low data-rate communications. This antenna is either
mounted within the aircrafts tail or under a small, unobtrusive radome atop an aircrafts tail. The Company believes that this product has the
leading market share in the

10



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high-end corporate jet market. The Company has also
developed its CALQUEST product, which is a complete satellite telephone system
for use over North and Central America on a wide range of turbo-prop and jet
aircraft.

EMS has an aeronautical product, called the HSD-128, that provides aircraft
operators with high-speed data capability using the new Aeronautical Swift64
and Mobile Packet Data Services from Inmarsat. These services, which have been
operational in the land transportable market for nearly two years, will support
data rates of up to 64 Kbps (which the HSD-128s two-channel capability
increases to 128 Kbps), a considerable advance on other service offerings
currently available in the market. These new services can provide economical
airborne access to the business support services typically found in a
ground-based office, including voice, data, e-mail, Internet and corporate
Intranet products.

The Company has also developed a steerable antenna system designed to provide
live television to jet aircraft from a broadcast satellite. The system includes
a mechanically steerable antenna system, mechanical positioner, and a
beam-steering unit to keep the antenna properly pointed at the satellite during
the motion associated with flight. This DBS antenna and the AMT-50 Inmarsat
antenna can be mounted together under a single radome (designed and supplied by
the Company) atop a jets tail fin. These products are sold by the Company as
part of a full system for delivery of live video service to aircraft, provided
by Honeywell.

 Other Mobile Terminals

EMSs packet-data terminal provides fail-safe, two-way messaging and location
information anywhere in North America. The PDT-100 terminal features GPS
technology and combines what the Company believes are the fastest response
times with the lowest terminal and airtime prices currently offered in this
market. The PDT-100 is commercially available and in use throughout North and
Central America providing tracking and messaging to the transportation industry.

The PDT-100 also serves as a valuable tool for the public safety market,
offering communications to police, enforcement officers and other public safety
employees who must travel outside of traditional wireless coverage maps. This
terminal can also be used to monitor industrial controls in remote areas (such
as controls on an oil or gas pipeline).

In 2002, the Company added a maritime high-speed terminal to complement its
land-mobile and industry-leading aeronautical products. The maritime terminal
delivers clear digital voice communications, as well as e-mail and Internet
capabilities, through Inmarsats global maritime service.

 Emergency Management Products

The Company is a leading provider of the ground-station equipment associated
with satellite-based search-and-rescue systems, including the local-user
terminals (LUTs) that process information received from satellites. Using a
low-earth-orbit satellite system, a LUT can determine the location of the
maritime or aviation beacons that transmit distress signals, and display the
results for intervention by emergency authorities. This terminal technology can
also be adapted for routine tracking and management of aviation and maritime
fleets.

Another LUT model uses satellites in geostationary orbit, which reduces the
critical time needed to detect and identify distress beacon signals. This
system is PC-based and can be efficiently managed through Internet protocols.
In addition to satellite ground stations for search-and-rescue, EMS offers
software for incident management and rescue coordination. The Company has also
combined new communications technologies with Web-based geographic information
systems and graphical tools. The Company believes that fast, widespread
distribution of graphical data via the Web will allow for more effective
coordination of rescue efforts.

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SALES AND MARKETING

The Companys sales and marketing strategy varies depending upon the segment.
Due to the technical nature of the Companys products, internal personnel with
strong engineering backgrounds must conduct some of these sales efforts.
Particularly in the Space & Technology segment, many of these personnel have
other engineering or management responsibilities within the Company. The
Company also utilizes independent marketing representatives, both in the U.S.
and internationally. These individuals are selected for their knowledge of the
local markets and their ability to provide technical support and ongoing,
direct contact with the Companys current and potential customers.

In the Space & Technology segment, the development of major business
opportunities often involves significant bid-and-proposal efforts; this work
can include complex engineering to determine the technical feasibility and
cost-effectiveness of various design approaches. Most of the Companys
bid-and-proposal costs are reported in cost of sales, although a portion of
these costs is classified as selling, general and administrative expense. Total
bid-and-proposal costs were $5.0 million in 2002, $4.4 million in 2001 and $3.6
million in 2000.

The markets for space and satellite communications comprise a relatively small
number of customers, which are typically well known large corporations. The
Companys Space & Technology marketing efforts rely on ongoing communications
with this base of potential customers, both to determine the customers future
needs and to inform customers of the Companys capabilities. Because the
Company can often receive multiple orders from many of these customers,
technical support and service after the sale are also crucial to maintaining a
strong supply relationship.

The Companys sales and marketing strategy for its other business segments
involves:



|1. |  | direct sales to end users, and                                                                                                                                       
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | indirect sales through third parties that often incorporate their products and services with the Companys
hardware for delivery to end-users. Third parties include:



| | a. |  | strategic partners,                                     
| | -- |  | --------------------------------------------------------
|
| | b. |  | value-added resellers,                                  
|
| | c. |  | original equipment manufacturers, and                   
|
| | d. |  | distributors, including representatives in
35 countries.

Direct sales of LXE systems are performed by an internal sales support staff,
by 20 regional sales persons in North America, and by nine international
subsidiaries (seven in Europe). For EMS Wireless, an internal staff and three
regional sales offices in North America perform sales and marketing. For
marketing of SATCOM products, the Company relies on its relationships with
major airframe manufacturers, avionics manufacturers, a network of completion
centers that install aeronautical products, and value-added resellers.

BACKLOG

The backlog of consolidated orders at December 31, 2002, was $108 million,
compared with $157 million one year earlier. EMS Wireless, LXE and many SATCOM
customers typically require short delivery cycles; as a result these segments
usually convert orders into revenues within a few weeks, and they do not build
up an order backlog that extends substantially beyond one fiscal quarter.
However, backlog is very important in the Space & Technology segment, due to
the long-term nature of that business. The backlog for Space & Technology at
December 31, 2002 was $73 million compared with $111 million one year earlier.
This reduction is due to a reduction in the backlog for commercial space
applications.

MATERIALS

Materials used in the Companys Space & Technology products consist of magnetic
microwave ferrites, metals such as aluminum and brass, permanent magnet
materials and electronic components such as transistors, diodes,
ICs, resistors, capacitors and printed circuit boards.

12



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Most of the magnetic
microwave ferrite materials are purchased from two suppliers, and permanent
magnet materials are purchased from a limited number of suppliers. Electronic
components and metals are available from a larger number of suppliers and
manufacturers.

The electronic components and supplies, printed circuit assemblies, and molded
parts needed for the Companys various standard products are generally
available from a variety of sources. However, LXE systems include bar code
scanners in almost all orders, and a significant number of the scanners are
purchased from Symbol Technologies, Inc. (Symbol), which is also a competitor
of the Company; however, there are alternative suppliers that manufacture and
sell bar code scanners under license agreements with Symbol. The Company
believes that LXEs competitors also rely on scanning equipment purchased from
or licensed by Symbol. In addition, Symbol and the Company have a license
agreement, which allows the Company to utilize Symbols patented integrated
scanning technology in certain products.

The Companys advanced technology products often require sophisticated
subsystems supplied or cooperatively developed by third parties having
specialized expertise, production skills and economies of scale. Important
examples include critical specialized components and subsystems required for
successful completion of particular Space & Technology programs, and
application-specific integrated circuitry and computers incorporated in LXE
products. In such cases, the performance, reliability and timely delivery of
the Companys products can be heavily dependent on the effectiveness of those
third parties.

The Company believes that its present sources of required materials are
adequate. The Company does not believe that the loss of any supplier or
subassembly manufacturer would have a material adverse effect on its business.
In the past, shortages of supplies and delays in the receipt of necessary
components have not had a material adverse effect on shipments of the Companys
products. However from time to time, the Companys rollout of new standard
products or its performance on Space & Technology programs has been affected by
quality and scheduling problems with developers/suppliers of critical
subsystems.

COMPETITION

The Company believes itself to be, in sales, a major independent supplier of
(1) satellite components, subsystems and systems, (2) wireless local-area
computer network products for logistics systems, (3) base station antennas and
other wireless infrastructure products for cellular and PCS mobile networks,
and (4) aeronautical SATCOM communications systems for voice, telephony and
video. However, the Companys markets are highly competitive. Some of the
Companys competitors have substantial resources and facilities that exceed
those of the Company, but the Company also competes against smaller,
specialized firms.

In the Space & Technology segment, the Company competes with divisions of
certain large U.S. industrial concerns, such as Raytheon, Hughes, Loral,
M/A-Com, and Rockwell, as well as non-U.S. companies such as COMDEV and RACAL.
Some of these companies, as well as others, are both potential competitors of
the Company for certain contracts and potential customers on other contracts.
Certain major customers could also elect to internally develop and manufacture
the products that they presently purchase from the Company.

In the LXE market, the Companys principal competitors are Unova, Symbol (which
holds patents protecting the barcode scanning devices supplied to LXE for
incorporation in these products), and Psion Teklogix. In the EMS Wireless
segment, the Company competes with divisions of certain large U.S. and
international companies, including Allen Telecom, Andrew Corporation and
Alcatel. In the SATCOM market, the company competes with Honeywell, Thales,
Thrane & Thrane, Qualcomm and TSI.

The Company believes that the key competitive factors in all of its segments
continue to be product performance, technical expertise and support to
customers, adherence to delivery schedules, and price.

13



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RESEARCH AND DEVELOPMENT

The Space & Technology segment conducts most of its research and development in
direct response to the unique technical requirements of a customers order, and
most of these costs are included with the overall manufacturing costs for
specific orders. The remaining segments conduct substantial internally funded
research and development activities. In 2002, 2001 and 2000, the Company spent
$26.1 million, $27.1 million and $27.7 million, respectively, on internally
sponsored research and development.

EMPLOYEES

As of December 31, 2002, the Company and its subsidiaries employed a total of
approximately 1,700 persons. Over 70% of the Companys employees are directly
involved in engineering or manufacturing activities.

RISK FACTORS

The business operations of EMS Technologies, Inc. involve significant risks and
uncertainties that could adversely affect its financial condition, results of
operations, and future development. In addition to domestic economic
conditions, which can change unexpectedly and generally affect U.S. businesses,
these risks and uncertainties include the following:

Competing technology could be superior to ours, and could cause customer orders
and revenues to decline.

The markets in which we compete are very sensitive to technological advances.
As a result, technological developments by competitors can cause our products
to be less desirable to customers, or even to become obsolete. Those
developments could cause our customer orders to diminish, which would have an
adverse impact on our revenues and could cause the market value of our shares
to decline.

Our competitors marketing and pricing strategies could make their products
more attractive than ours. This could cause reductions in customer orders or
profits.

We operate in highly competitive technology markets. Our competition may pursue
aggressive marketing strategies, such as significant price discounting. These
competitive activities could cause our customers to purchase our competitors
products rather than ours, and reduce our sales and profit margins below
expected levels.

If our customers fail to find adequate funding for major potential programs,
our sales could decline.

Major communications infrastructure programs, such as proposed satellite
communications systems or PCS/cellular systems for large urban areas, are
important sources of our current and anticipated future revenues. We also
participate in a number of large defense programs. Programs of these types
cannot proceed unless the customer can raise adequate funds, from either
governmental or private sources. As a result, our expected revenues can be
adversely affected by political developments or by conditions in private
capital markets. Expected revenues can also be adversely affected if private
capital markets are not receptive to a customers proposed business plans.

Slow public acceptance of new communications systems could limit purchases by
our customers.

Construction and expansion of new communications systems depend on public
demand for the new services. As a result, growth rates in our revenues from
wireless infrastructure products and proposed high-speed satellite
communications systems are likely to be heavily affected by the timing and
extent of public willingness to buy mobile and/or broadband communications
services. If public acceptance of the new systems does not develop as expected,
our customers are unlikely to place the levels of orders we expect, and our
revenues and profits would also fall short of expectations.

Among the factors that could affect the growth of markets for new wireless
communications systems is the potential concern about alleged health risks
relating to radio frequency (RF) emissions. Media reports and some studies have
suggested that RF emissions from wireless handsets and cell sites may be
associated with various health problems, including cancer, and may interfere
with electronic medical devices,

14



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including hearing aids and pacemakers. In addition, lawsuits have been filed
against participants in the wireless industry alleging various adverse health
consequences as a result of wireless equipment emissions. Additional studies of
radio frequency emissions are ongoing. Consumers may be discouraged from
purchasing new wireless services if consumers health concerns over radio
frequency emissions increase. In addition, concerns over RF emissions could
lead government authorities to increase restrictions on the location and
operation of wireless-related hardware, or could result in wireless companies
being held liable for costs or damages associated with these concerns.

We can encounter technical problems or contractual uncertainties, which can
cause delays, added costs, lost sales, and liability to customers.

Technical difficulties can cause delays and additional costs in our technology
development efforts. We are particularly exposed to this risk in new product
development efforts, and in fixed-price contracts on technically advanced
programs in our Space & Technology segment that require novel approaches and
solutions. Technical difficulties could cause us to miss expected delivery
dates for new product offerings, which could cause customer orders to fall
short of expectations. Our products may perform mission-critical functions in
space applications. If we experience technical problems and are unable to
adhere to a customers schedule, the customer could experience costly launch
delays or re-procurements from other vendors. The customer may then be
contractually entitled to substantial financial damages from us. The customer
would also be entitled to cancel future deliveries, which would reduce our
future revenues and could make it impossible for us to recover our design,
tooling or inventory costs, or our remaining commitments to third-party
suppliers.

Due to technological uncertainties in new or unproven applications of
technology, a contract may be broadly defined in its early stages, with a structure to accommodate future changes in
the scope of work or contract value as technical development progresses. In
such cases, management must evaluate these contract uncertainties and estimate
the future expected levels of scope of work and likely contract value changes
to determine the appropriate level of revenue associated with costs incurred.
Actual changes may vary from expected changes, resulting in a reduction of
revenues and earnings recognized in future periods.

Our transitions to new product offerings can be costly and disruptive, and
could adversely affect our revenues or profitability.

Because our businesses involve constant efforts to improve existing technology,
we regularly introduce new generations of products. During these transitions,
customers may reduce purchases of older equipment more rapidly than we expect,
or may choose not to migrate to our new products, which can cause lower
revenues and excessive inventories. In addition, product transitions create
uncertainty about both production costs and customer acceptance. These
potential problems are generally more severe if our product introduction
schedule is delayed by technical development problems. These problems could
cause our revenues or profitability to be less than expected.

Our products may unexpectedly infringe third party patents, which could cause
us to have substantial liability to our customers or the patent owners.

As we regularly develop and introduce new technology, we have a risk that our
new products or manufacturing techniques infringe on patents held or currently
being processed by others. The U.S. Patent Office does not publish patents
until 18 months after their initial filing. Thus, we may be unaware of a
pending patent until well after we have introduced an infringing product. In
addition, questions of whether a particular product infringes a particular
patent can involve significant uncertainty. As a result of these factors, third-party patents may interfere with

15



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marketing
plans, or may, from time to time, create significant expense to defend or pay
damages on infringement claims or to respond to customer indemnification
claims.

We depend on highly skilled employees, who could become unavailable.

Because our products and programs are technically sophisticated, we must
attract and retain employees with advanced technical and program-management
skills. Other employers also often recruit persons with these skills, both
generally and in focused engineering fields. If skilled employees were to
become unavailable to us, our performance obligations to our customers could be
affected and our revenues could decline.

We depend on highly skilled suppliers, who may become unavailable or fail to
achieve desired levels of technical performance.

In addition to our requirements for basic materials and electronic components,
our advanced technological products often require sophisticated subsystems
supplied or cooperatively developed by third parties. To meet those
requirements, our suppliers must have specialized expertise, production skills
and economies of scale. Our ability to perform according to contract
requirements, or to introduce new products on the desired schedule, can be
heavily dependent on our ability to identify and engage appropriate suppliers,
and on the effectiveness of those suppliers in meeting our development and
delivery objectives. If key suppliers were unavailable when we needed them, our
ability to meet our performance obligations to our customers could be affected
and our revenues and earnings could decline.

Changes in government regulations that limit the availability of radio
frequency licenses or cause us to incur increased expenses could cause our
revenues or profitability to decline.

Many of our products are incorporated into wireless communications systems
that are regulated in the U.S. by the Federal Communications Commission (FCC) and internationally by other government
agencies. Changes in government regulations could reduce the growth potential
of our markets by limiting either the access to or availability of frequency
spectrum. Changes in government regulations could make the competitive
environment more difficult by restricting our customers efforts to develop or
introduce new technologies and products. Finally, changes in government
regulations could substantially increase the difficulty and cost of compliance
with government regulations for both our customers and us. All of these factors
could result in reductions in our profits and revenues.

The export license process for space products has become uncertain, increasing
the chance that we may not obtain required export licenses in a timely or
cost-effective manner.

As a result of 1998 legislation, products for use on commercial satellites are
included on the U.S. Munitions List and are subject to State Department
licensing requirements. The licensing process is time-consuming, and political
considerations can increase the time and difficulty of obtaining licenses for
export of technically advanced products. The license process may prevent
particular sales, and in general has created schedule uncertainties that are
encouraging foreign customers, such as those in Western Europe, to develop
internal or other foreign sources rather than use U.S. suppliers. If we are
unable to obtain required export licenses when we expect them or at the costs
we expect, our revenues and profits could be harmed.

Export controls on space technology restrict our ability to hold technical
discussions with customers, suppliers and internal engineering resources, which
reduces our ability to obtain sales from foreign customers or to perform
contracts with the desired level of efficiency or profitability.

U.S. export controls severely limit unlicensed technical discussions with any
persons who are not U.S. citizens. As a result, we are restricted in our
ability to hold technical discussions between U.S. personnel and current or
prospective non-U.S. customers or suppliers, between Canadian

16



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personnel and current or prospective U.S. customers or suppliers, and between
U.S. employees and non-U.S. (including Canadian) employees. These restrictions
reduce our ability to win cross-border space work, to utilize cross-border
supply sources, to deploy technical expertise in the most effective manner, and
to pursue cooperative development programs involving our U.S. and Canadian
space facilities.

Economic or political conditions in other countries could cause our revenues or
profitability to decline.

International sales significantly affect our financial performance. Almost $84
million in revenues for fiscal year 2002, or 27% of consolidated revenues, were
derived from customers residing outside of North America. Adverse economic
conditions in our customers countries, mainly in Western Europe, Latin America
and the Pacific Rim, have affected us in the past, and could adversely affect
future international revenues in all of our businesses, especially from our
wireless local-area network and PCS/cellular infrastructure businesses.
Unfavorable currency exchange rate movements could result in foreign exchange
losses, or could adversely affect the marketability of our products by
increasing the local-currency cost. In addition to these economic factors
directly related to our markets, there are risks and uncertainties inherent in
doing business internationally that could have an adverse effect on us, such as
potential adverse effects from changes in foreign income tax laws, as well as
unfavorable changes in laws and regulations governing a broad range of business
concerns, including proprietary rights, legal liability and employee relations.
All of these factors could cause significant harm to our revenues or
profitability.

The level and profitability of our sales in certain markets depend on the
availability and performance of other companies with which we have marketing
relationships.

In some applications, including mobile satellite communications, we are
seeking to develop marketing relationships with other companies that have, for
example, specialized software and established customer service systems. In other markets, such as
wireless local-area networks, a major element of our distribution channels is a
network of value-added retailers and independent distributors. If we are unable
to identify and structure effective relationships with other companies that are
able to market our products, our revenues could fail to grow in the ways we
expect.

Customer orders in backlog may not result in sales.

Our order backlog represents firm orders for products and services. However,
our customers may cancel or defer orders for wireless products, in most cases
without penalty. Cancellation or deferral of an order in our Space & Technology
business typically involves penalties and termination charges for costs
incurred to date, but these termination penalties would still be considerably
less than what we would have expected to earn if the order could have been
completed. We make management decisions based on our backlog, including hiring
of personnel, purchasing of materials, and other matters that may increase our
production capabilities and costs. Cancellations, delays or reductions of
orders could adversely affect our results of operations and financial
condition.

We could incur an impairment loss on certain long-term inventory.

In the Space & Technology segment, we have capitalized $4 million of costs for
certain long-term inventory. We believe that this quantity of inventory will be
used to meet expected demand for this product over the next several years.
However, if actual orders are much less than expected, then the value of this
inventory would be impaired, resulting in an earnings charge.

Our business and revenue growth could be limited by our inability to obtain
additional financing.

Our current cash and available credit facilities are not large enough to
finance either potential growth in certain business areas, or synergistic

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acquisitions to complement our technical and
product capabilities. We may not be able to secure sufficient additional credit
or other financing, on acceptable terms, to support our growth objectives.

We may not effectively manage possible future growth, which could result in
reduced earnings.

Historically, we have experienced broad fluctuations in demand for our products
and services. These changes in demand have depended on many factors and have
been difficult to predict. In recent years, there has been a general growth
trend in certain of our businesses, as well as increasing complexity in the
technologies and applications involved. These changes in our businesses place
significant demands on both our management personnel and our management systems
for information, planning and control. If we are to achieve further strong
growth on a profitable basis, our management must identify and exploit
potential market opportunities for our products and technologies, while
continuing to manage our current businesses effectively. Furthermore, our
management systems must support the changes to our operations resulting from
our business growth.

We may make acquisitions and investments that could adversely affect our
business.

To support growth, we may continue in the future to make acquisitions of and
investments in businesses, products and technologies that could complement or
expand our businesses. However, if we should be unable to successfully
negotiate with a potential acquisition candidate, finance the acquisition, or
effectively integrate the acquired businesses, products or technologies into
our existing business and products, we could be adversely affected.
Furthermore, to complete future acquisitions, we may issue equity securities,
incur debt, assume contingent liabilities, or have amortization expenses and
writedowns of acquired assets, which could cause our earnings per share to
decline.

***************************

In addition to risks and uncertainties related to our operations, there are
investment risks that could adversely affect the return to an investor in our
common stock, and also could adversely affect our ability to raise capital for
financing future operations.

Our quarterly results are volatile and difficult to predict. If our quarterly
performance results fall short of market expectations, the market value of our
shares are likely to decline.

The quarterly earnings contributions of some of our segments are heavily
dependent on customer orders or product shipments in the final weeks or days of
the quarter. This can create volatility in quarterly results, and hinders our
ability to determine in advance whether quarterly earnings will meet prevailing
analyst expectations. The market price for our shares is likely to be adversely
affected by quarterly earnings results that are below analyst and market
expectations.

Our share price may fluctuate significantly, and an investor may not be able to
sell our shares at a price that would yield a favorable return on investment.

The market price of our stock will fluctuate in the future, and such
fluctuations could be substantial. Price fluctuations may occur in response to
a variety of factors, including:



|1. |  | actual or anticipated operating results,                                                                                                      
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | announcements of technological innovations, new
products or new contracts by us, our customers, our
competitors or our customers competitors,
|  
|3. |  | government regulatory action,                                                                                                                 
|  
|4. |  | developments with respect to wireless and satellite
communications, and                                                                       
|  
|5. |  | general market conditions.                                                                                                                    

In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have particularly affected the market prices
for the stocks of technology companies and that have been unrelated to the operating performance
of particular companies.

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Future sales of our common stock may cause our stock price to decline.

Our outstanding shares are freely tradable without restriction or further
registration, and shares reserved for issuance upon exercise of stock options
will also be freely tradable upon issuance. Sales of substantial amounts of
common stock by our shareholders, including those who have acquired a
significant number of shares in connection with business acquisitions or
private investments, or even the potential for such sales, may depress the
market price of our common stock and could impair our ability to raise capital
through the sale of our equity securities.

FORWARD-LOOKING STATEMENTS

The discussions of the Companys business in this Report, and in other public
documents or statements that may from time to time incorporate or refer to
these disclosures, contain various statements that are or may be deemed to be
forward-looking. Forward-looking statements include, but are not limited to:



|1. |  | statements about what the Company or management
believes or expects,                                                                                                     
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | statements about anticipated technological developments
or anticipated market response to or impact of
current or future technological developments or product
offerings,
|  
|3. |  | statements about trends in markets that are served or
pursued by the Company,                                                                                            
|  
|4. |  | statements implying that the Companys technology or
products are well suited for particular emerging markets,
and                                                       
|  
|5. |  | statements about the Companys plans for product
developments or market initiatives.                                                                                     

These forward-looking statements may differ materially from actual results due
to the variety of risks and uncertainties that affect the Company, including those set forth under the foregoing
Risk Factors heading.

EXECUTIVE OFFICERS OF THE REGISTRANT

Information concerning the executive officers of the Company is set forth
below:

Alfred G. Hansen,age 69, became President and Chief Executive Officer in
January 2001. Mr. Hansen joined the Company as President and Chief Operating
Officer in January 2000. He became a Director in 1999. From 1998 through 1999,
Mr. Hansen was President of A.G. Hansen Associates, Inc., Marietta, Georgia, an
aerospace marketing and manufacturing consultant. From 1995 to 1998, Mr. Hansen
served as Executive Vice President of Lockheed Martin Aeronautical Systems,
with broad operational responsibilities for its aerospace business, and as a
Vice President of its parent company, Lockheed Martin Corporation. Mr. Hansen
retired from the U.S. Air Force in 1989 as a four-star general, serving in his
last assignment as commander of the Air Force Logistics Command.

Don T. Scartz,age 60, was elected Executive Vice President of the Company in
February 2003, and is also Chief Financial Officer (since 1995) and Treasurer
(since 1981). He served as Senior Vice President since 1995, as Vice
President-Finance from 1981 to 1995, and as Secretary from 1982 to 1991. He
joined the Company as Controller in 1978. He also serves as the Chief Financial
Officer of each of the Companys operating subsidiaries. He became a Director
of the Company in 1995.

William S. Jacobs,age 57, became General Counsel and Secretary of the Company
in 1992, and Vice President in 1993. He is also responsible for the legal
affairs of the operating subsidiaries. Previously, he was engaged in the
private practice of law, and in such capacity had served as the Companys
principal corporate legal counsel since 1982.

Gerald S. Bush,age 46, is Senior Vice President of the Company, and President
of its Space & Technology/Montreal operations. He joined the Company in
January 1999, when the Company acquired the Satellite Products business of Spar
Aerospace Limited (Spar), where Dr. Bush had been Vice President and General
Manager since 1998. Dr. Bush joined Spar in 1981 and served in various
engineering and program management positions until 1995, when he became
Director of Manufacturing for the Spar Satellite Products business, and in 1996
he became Vice President of Operations for that business.

19



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James S. Childress,age 58, was appointed as a Vice President of the Company,
and as President and General Manager of the LXE subsidiary, in 2001. He joined
the Company in August 2000 as Vice President of Business Development at LXE.
Prior to joining EMS, he served as Vice President of EG&G Technical Services,
Inc., a leading provider of technical and support services to the U.S.
Departments of Defense, Energy, Transportation, Treasury, Justice and Commerce,
and to the National Aeronautics and Space Administration. He joined EG&G in
1998 following a career in the U.S. Air Force focused on logistics and systems
acquisition. In the Air Force, he attained the rank of major general, and last
served as commander of the San Antonio Air Logistics Center.

Jay R. Grove,age 39, is a Vice President of the Company, and Senior Vice
President and General Manager of its Space & Technology/Atlanta operations. He
joined the Company in January 2001. Formerly he was a director of Mobile
SATCOM Systems for ViaSat, Inc., an advanced digital satellite
telecommunications and wireless signal processing equipment provider.

T. Gerald Hickman,age 61, is a Vice President of the Company, and Senior Vice
President and General Manager, EMS Wireless (since March 2000). He joined the
Company in 1988 as Vice President, Marketing, and prior to his current position
was a Vice President in the Companys EMS Wireless division.

Neilson A. Mackay,age 61, is a Vice President of the Company, and Senior Vice
President and General Manager, SATCOM Products (since 2001). He joined the Company in January 1993, when the
Company acquired an Ottawa, Ontario-based space satellite communications
business of which he was serving as President.

Donald F. Osborne,age 42, is a Vice President of the Company, and since August
2002 has served as Senior Vice President and General Manager for the EMS
Satellite Networks group, a part of the Space & Technology/Montreal
operations. Prior to that position, he served as Senior Vice President and
General Manager of the Space & Technology/Montreal operations. He joined the
Company in January 1999, when the Company acquired the Spar Satellite Products
business, where Mr. Osborne had been Vice President, Marketing since 1986. Mr.
Osborne joined Spar in 1983 as a mechanical engineer.

ITEM 2. PROPERTIES

The Companys corporate headquarters and its Georgia operations are located in
two buildings owned by the Company (comprising 250,000 square feet of floor
space on 21 acres), as well as in 142,000 square feet of leased office space
(leases to expire prior to 2004) in three other buildings, all located in or
near Technology Park, Norcross, Georgia, a suburb of Atlanta. The combined
Georgia facilities comprise clean rooms, a microelectronics laboratory,
materials storage and control areas, assembly and test areas, offices,
engineering laboratories, a ferrites laboratory, drafting and design
facilities, a machine shop, a metals finishing facility and painting
facilities.

The Companys Canadian operations include a 330,000 square-foot facility
surrounded by 34 acres of undeveloped land in a suburb of Montreal. One-fourth
of the facility comprises manufacturing, assembly and laboratory space,
including advanced near-field and far-field test range areas and a subsystem
and payload integration area. Three-fourths of the facility is used for
engineering and administrative office space. The facilitys location in the
province of Quebec affords it significant tax incentives and credits
sponsored by the provincial government. The Company also leases
approximately 63,000 square feet of office and manufacturing space for its
operations located in Ottawa, Ontario; the lease on this facility expires
in 2007.

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The Companys EMS Wireless division leases an 11,000
square-foot manufacturing facility in Curitiba, Brazil, from
its local industrial partner (a manufacturer of antenna
towers for wireless telecommunications). The lease is annually
renewable, and management expects to continue the
lease on terms comparable to those of the current lease.

The Company has leased several small sites in the U.K.,
Europe and Australia for LXE sales offices and a SATCOM
engineering facility. If any of these leases were terminated,
the Company believes that it could arrange for comparable
replacement facilities on favorable terms.

ITEM 3. LEGAL PROCEEDINGS

None.

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

None.

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PART II

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

The common stock of EMS Technologies, Inc. is traded in the over-the-counter
market (NASDAQ symbol ELMG). At March 3, 2003, there were approximately 500
shareholders of record, and the Company believes that there were approximately
4,000 beneficial shareholders, based upon broker requests for distribution of
Annual Meeting materials. The price range of the stock is shown below:

|               |  |                  |       |                  |  |      |       |     |  |  |       |  |  |  |       | 
|-------------- |  | ---------------- | ----- | ---------------- |  | ---- | ----- | --- |  |  | ----- |  |  |  | ----- | 
|               |  | 2002 Price Range |       | 2001 Price Range
|               |  |                  |       |                 
|               |  | High             |       | Low              |  | High |       | Low
|               |  |                  |       |                  |  |      |       |    
|First Quarter  |  | $                | 22.65 |                  |  |      | 14.77 |     |  |  | 17.06 |  |  |  | 11.50 | 
|Second Quarter |  |                  | 25.60 |                  |  |      | 17.10 |     |  |  | 16.15 |  |  |  | 13.35 | 
|Third Quarter  |  |                  | 22.65 |                  |  |      | 10.02 |     |  |  | 17.10 |  |  |  | 13.80 | 
|Fourth Quarter |  |                  | 17.36 |                  |  |      | 10.30 |     |  |  | 17.50 |  |  |  | 14.00 | 

The Company has never paid a cash dividend with respect to shares of its common
stock, and has retained its earnings to provide cash for the operation and
expansion of its business. Future dividends, if any, will be determined by the
Board of Directors in light of the circumstances then existing, including the
Companys earnings and financial requirements and general business conditions.

22



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ITEM 6. SELECTED FINANCIAL DATA

|                                                    |                                       |      |                         |        |  |      |         |       |  |      |         |       |  |  |         |       |  |  |         |        | 
|--------------------------------------------------- | ------------------------------------- | ---- | ----------------------- | ------ |  | ---- | ------- | ----- |  | ---- | ------- | ----- |  |  | ------- | ----- |  |  | ------- | ------ | 
|                                                    |                                       |      | Years ended December 31
|                                                    |                                       |      |                        
|(in thousands, except net earnings per share)       |                                       | 2002 |                         | 2001   |  | 2000 |         | 1999  |  | 1998
|                                                    |                                       |      |                         |        |  |      |         |       |  |     
|Net sales                                           |                                       | $    | 310,434                 |        |  |      | 291,086 |       |  |      | 273,143 |       |  |  | 242,414 |       |  |  | 177,163 |       
|Cost of sales                                       |                                       |      | 209,993                 |        |  |      | 196,572 |       |  |      | 181,937 |       |  |  | 167,118 |       |  |  | 115,127 |       
|Selling, general and administrative expenses        |                                       |      | 62,460                  |        |  |      | 55,364  |       |  |      | 50,635  |       |  |  | 45,211  |       |  |  | 38,666  |       
|Research and development expenses                   |                                       |      | 26,122                  |        |  |      | 27,093  |       |  |      | 27,735  |       |  |  | 21,816  |       |  |  | 13,140  |       
|Contract reserve adjustment                         |                                       |      | (3,500                  | )      |  |      | 3,500   |       |  |      |        |       |  |  |        |       |  |  |        |       
|Write-down of NetSat 28 assets                      |                                       |      |                        |        |  |      |        |       |  |      | 2,891   |       |  |  |        |       |  |  |        |       
|                                                    |                                       |      |                         |        |  |      |         |       |  |      |         |       |  |  |         |       |  |  |         |       
|                                                    | Operating income                      |      |                         | 15,359 |  |      |         | 8,557 |  |      |         | 9,945 |  |  |         | 8,269 |  |  |         | 10,230 | 
|Non-operating (expense) income                      |                                       |      | (108                    | )      |  |      | 403     |       |  |      | 409     |       |  |  | 2,055   |       |  |  | 1,120   |       
|Foreign exchange gain (loss)                        |                                       |      | 1,179                   |        |  |      | (22     | )     |  |      | (234    | )     |  |  | (745    | )     |  |  | 482     |       
|Interest expense                                    |                                       |      | (3,670                  | )      |  |      | (4,891  | )     |  |      | (4,326  | )     |  |  | (2,827  | )     |  |  | (1,729  | )     
|                                                    |                                       |      |                         |        |  |      |         |       |  |      |         |       |  |  |         |       |  |  |         |       
|                                                    | Earnings before income taxes          |      |                         | 12,760 |  |      |         | 4,047 |  |      |         | 5,794 |  |  |         | 6,752 |  |  |         | 10,103 | 
|Income tax (expense) benefit                        |                                       |      | (4,173                  | )      |  |      | 820     |       |  |      | (1,303  | )     |  |  | (1,912  | )     |  |  | (3,927  | )     
|                                                    |                                       |      |                         |        |  |      |         |       |  |      |         |       |  |  |         |       |  |  |         |       
|                                                    | Earnings before accounting change     |      |                         | 8,587  |  |      |         | 4,867 |  |      |         | 4,491 |  |  |         | 4,840 |  |  |         | 6,176  | 
|Cumulative effect of change in
accounting principle |                                       |      |                        |        |  |      | (351    | )     |  |      |        |       |  |  |        |       |  |  |        |       
|                                                    |                                       |      |                         |        |  |      |         |       |  |      |         |       |  |  |         |       |  |  |         |       
|                                                    | Net earnings                          |      | $                       | 8,587  |  |      |         | 4,516 |  |      |         | 4,491 |  |  |         | 4,840 |  |  |         | 6,176  | 
|                                                    |                                       |      |                         |        |  |      |         |       |  |      |         |       |  |  |         |       |  |  |         |       
|Net earnings per share:                             |                                       |      |                         |        |  |      |         |       |  |      |         |       |  |  |         |       |  |  |         |       
|                                                    | Basic                                 |      | $                       | 0.81   |  |      |         | 0.48  |  |      |         | 0.51  |  |  |         | 0.56  |  |  |         | 0.71   | 
|                                                    | Diluted                               |      |                         | 0.80   |  |      |         | 0.47  |  |      |         | 0.50  |  |  |         | 0.55  |  |  |         | 0.70   | 
|Weighted average number of shares:                  |                                       |      |                         |        |  |      |         |       |  |      |         |       |  |  |         |       |  |  |         |       
|                                                    | Common                                |      |                         | 10,561 |  |      |         | 9,464 |  |      |         | 8,766 |  |  |         | 8,703 |  |  |         | 8,675  | 
|                                                    | Common and dilutive
common equivalent |      |                         | 10,731 |  |      |         | 9,563 |  |      |         | 8,912 |  |  |         | 8,775 |  |  |         | 8,871  | 

|                                                |  |      |                   |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |         |  | 
|----------------------------------------------- |  | ---- | ----------------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  |  | ------- |  |  |  | ------- |  | 
|                                                |  |      | As of December 31
|                                                |  |      |                  
|                                                |  | 2002 |                   | 2001 |  | 2000 |         | 1999 |  | 1998
|                                                |  |      |                   |      |  |      |         |      |  |     
|Working
capital                                 |  | $    | 67,405            |      |  |      | 67,541  |      |  |      | 54,590  |  |  |  | 51,449  |  |  |  | 62,533  | 
|Total
assets                                    |  |      | 256,302           |      |  |      | 236,816 |      |  |      | 216,113 |  |  |  | 189,828 |  |  |  | 147,386 | 
|Long-term
debt (excluding current installments) |  |      | 20,768            |      |  |      | 32,892  |      |  |      | 39,617  |  |  |  | 33,707  |  |  |  | 19,150  | 
|Stockholders'
equity                            |  |      | 145,985           |      |  |      | 132,321 |      |  |      | 111,429 |  |  |  | 105,815 |  |  |  | 100,660 | 

No cash dividends have been declared or paid during any of the periods
presented.

23



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MANAGEMENTS DISCUSSION AND ANALYSIS

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

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America, which
often require the judgment of management in the selection and application of
certain accounting principles and methods. We consider the following policies
to be critical to an understanding of our financial statements because their
application requires significant judgment, and because differences, between
actual future events and the expectations on which these judgments were based,
can have significant effects on our financial results reported for future
periods.

Revenue recognition on long-term contracts

Revenue recognition for fixed-price, long-term contracts in the Space &
Technology and SATCOM segments is a critical accounting policy involving
significant management estimates. These segments long-term contracts use the
ratio of cost-incurred to total-estimated-cost as the measure of performance
that determines how much revenue should be recognized. The calculation of
total-estimated-cost relies on engineering estimates of the cost to complete
the contract, with allowances for identifiable risks and uncertainties. These
engineering estimates are frequently reviewed and updated. However, unforeseen
problems can occur to substantially reduce the rate of future revenue
recognition in relation to costs incurred.

Most of the Space & Technology segments contracts involve development of new
or unproven applications of technology. Due to technological uncertainties, a
contract may be broadly defined in its early stages, with a structure to
accommodate future changes in the scope of work or contract value as technical
development progresses. In such cases, management must estimate the future
expected levels of scope of work and likely contract value changes to determine
the appropriate level of current revenue associated with current costs incurred. Actual future changes may vary
from expected changes, resulting in a reduction (or increase) in revenues
recognized in future periods.

Accrual of government incentives for research

Our accrual of research incentives from the Canadian government is a critical
accounting policy involving management estimates for our Space & Technology
segment. These incentives are in the form of a cash reimbursement for a portion
of certain qualified research expenditures. Incentives are recorded as a
reduction of cost of sales, because the underlying research efforts primarily
apply to development of technological capabilities for specific business
opportunities. For the year ended December 31, 2002, total incentives earned
were approximately $6.2 million, compared with $4.8 million for the year ended
December 31, 2001. We have established procedures to identify qualified costs
and to submit appropriate claims for reimbursement; all of these claims are
subject to financial and scientific audits by the Canadian government
concerning whether certain expenses qualified for incentive programs. Although
there have historically been no significant disallowances of previously accrued
incentives that resulted from these audits, such disallowances in the future
would have an unfavorable effect on our statement of earnings.

Evaluation of long-lived assets for impairment

All long-lived assets on the balance sheet are periodically reviewed for
impairment. The most significant long-lived asset is a less-than-5% equity
investment in a limited partnership, SkyBridge LLP, with a carrying value on
the balance sheet of $17.9 million at December 31, 2002. The goal of this
investment is to enable us to participate in the development and implementation
of a satellite network that will provide high-data-rate wireless services. The
partnership is an active and financially viable entity, and management
representatives attend partners meetings to receive updates on the entitys
progress. Since we acquired our equity investment four years ago, new equity
partners have invested in the partnership at a higher subscription price than we paid. As a result, we believe that the asset is not impaired and
that it is appropriately

24



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accounted for
as of December 31, 2002. However, due to
current difficult economic conditions in the commercial space market, the
partnership has delayed construction of its satellite network, and is instead
developing a new business strategy based on an architecture with GEO
(geosynchronous earth orbit) satellites rather than LEO (low earth orbit)
satellites. If the current difficult market conditions persist for commercial
space ventures, we may determine at some future date that the asset has become
impaired, which would require a charge to non-operating income.

Establishment of reserves for deferred income tax assets

It is managements expectation that in the future our Canadian operations will
earn more than enough research-related tax benefits each year to offset any
Canadian federal tax liability for any given year. As a result, we have
reserved substantially all the net deferred tax assets associated with these
research-related tax benefits (totaling approximately $17 million at December
31, 2002), because they are unlikely to be realized. However, this reserve may
be reduced  resulting in an income tax benefit to a future statement of
earnings  if (1) the level of our qualified research in Canada decreases,
which would lower the tax benefits earned in future years, or (2) our
profitability in Canada increases, which would increase the tax liability
incurred in future years.

Results of Operations

Most revenues were derived from commercial and international markets
(86% in 2002, 91% in 2001 and 90% in 2000), as compared with sales for
U.S. government end-use. More revenues were derived from sales to systems
integrators, third-party manufacturers and distributors than from sales
directly to end-users.

Net Sales

Consolidated net sales increased to $310 million in 2002, compared with $291
million in 2001 and $273 million in 2000. The most significant growth in 2002
was in the Companys SATCOM segment, which benefited from the continued success
of its aeronautical communications products (including a new high-speed
terminal introduced during the year), as well as new contracts for its
emergency management products. The net revenue growth in 2002 for the Space &
Technology segment reflected much higher revenues recognized under new
long-term defense contracts and lower revenues recognized from older commercial
space contracts (which was expected, following the preceding years strong
revenues and declining order rate in commercial space).

For 2001 compared with 2000, the most important factor in the Companys sales
growth was higher revenue in the Space & Technology segment related to
long-term contracts for commercial space applications (in particular, antennas
and power control products). Also contributing to growth was the LXE segment,
which had a successful rollout of new products in North America and Europe, as
well as the SATCOM segment, which experienced strong demand for its
aeronautical communications products in the corporate jet market. EMS Wireless
revenues were affected by a slowdown in capital spending by the
telecommunications industry in North America.

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Net Sales and Operating Income By
Segment

Our segment net sales and operating income (loss) were as follows (in
thousands):

|                         |                                |                          |   |                         |         |      |  |         |         |   |  |         |         |  
|------------------------ | ------------------------------ | ------------------------ | - | ----------------------- | ------- | ---- |  | ------- | ------- | - |  | ------- | ------- | -
|                         |                                |                          |   | Years ended December 31
|                         |                                |                          |   |                        
|                         |                                |                          |   | 2002                    |         | 2001 |  | 2000   
|                         |                                |                          |   |                         |         |      |  |        
|Net sales:               |                                |                          |   |                         |         |      |  |         |         |   |  |        
|                         | Space & Technology             |                          | $ | 133,691                 |         |      |  | 131,707 |         |   |  | 113,866 |        
|                         | LXE                            |                          |   | 88,229                  |         |      |  | 85,902  |         |   |  | 73,423  |        
|                         | EMS Wireless                   |                          |   | 48,001                  |         |      |  | 45,001  |         |   |  | 61,191  |        
|                         | SATCOM                         |                          |   | 32,777                  |         |      |  | 22,379  |         |   |  | 15,224  |        
|                         | Other                          |                          |   | 7,736                   |         |      |  | 6,097   |         |   |  | 9,439   |        
|                         |                                |                          |   |                         |         |      |  |         |         |   |  |        
|                         |                                | Total                    |   | $                       | 310,434 |      |  |         | 291,086 |   |  |         | 273,143 |  
|                         |                                |                          |   |                         |         |      |  |         |         |   |  |        
|Operating income (loss): |                                |                          |   |                         |         |      |  |         |         |   |  |        
|                         | Space & Technology             |                          | $ | 1,232                   |         |      |  | 2,626   |         |   |  | (1,890  | )      
|                         | Contract reserve adjustment    |                          |   | 3,500                   |         |      |  | (3,500  | )       |   |  |        |        
|                         | Write-down of NetSat 28 assets |                          |   |                        |         |      |  |        |         |   |  | (2,891  | )      
|                         |                                |                          |   |                         |         |      |  |         |         |   |  |        
|                         |                                | Total Space & Technology |   |                         | 4,732   |      |  |         | (874    | ) |  |         | (4,781  | )
|                         | LXE                            |                          |   | 4,472                   |         |      |  | 4,690   |         |   |  | (2,069  | )      
|                         | EMS Wireless                   |                          |   | 2,217                   |         |      |  | 1,925   |         |   |  | 13,101  |        
|                         | SATCOM                         |                          |   | 3,838                   |         |      |  | 2,995   |         |   |  | 3,602   |        
|                         | Other                          |                          |   | 100                     |         |      |  | (179    | )       |   |  | 92      |        
|                         |                                |                          |   |                         |         |      |  |         |         |   |  |        
|                         |                                | Total                    |   | $                       | 15,359  |      |  |         | 8,557   |   |  |         | 9,945   |  
|                         |                                |                          |   |                         |         |      |  |         |         |   |  |        

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Space & Technology: Increasingly difficult market conditions caused commercial
space orders to decline over the three years ended December 31, 2002, with the
result that commercial space revenues and profits peaked in 2001 and decreased
significantly in 2002; furthermore, schedule delays and technical difficulties
also contributed to lower profitability on commercial space contracts in 2002.
However, orders for long-term defense contracts were very low in 2000 but
increased substantially in 2001 and 2002, with the result that defense-related
revenues and profits grew over the three-year period. We expect that difficult
market conditions in commercial space will persist in 2003, but that defense
markets will continue to improve. We also believe that we have reduced our
continuing financial risk on most of the large long-term contracts that over
recent years have presented serious technical, schedule and contractual
challenges, but on a small number of programs we continue to address technical,
schedule and contractual issues that, if not satisfactorily resolved, would
materially affect our 2003 Space & Technology revenues under the
percentage-completion method of accounting described in our critical accounting
policies.

LXE:In 2000, LXE released the first models of a new generation of wireless
products for logistics. Sales of these and other new products introduced over
the next two years resulted in the modest growth of revenues and profits,
despite generally sluggish conditions in capital goods markets, and we expect
these trends to continue in 2003. The most active geographic markets for these
products were in North America and Europe.

EMS Wireless:Sales and profits from EMS Wireless base-station antennas for
PCS/cellular communications peaked in 2000, and declined in 2001 as capital
spending in the telecommunications market slowed. The 2002 results compared
favorably with 2001 despite continued tough conditions in the
telecommunications market; management believes this improvement was due to
continued introduction of new products, improved order delivery times, and the
segment establishing itself as an approved vendor to all major wireless
carriers in the U.S. We are uncertain whether the market for base-station
antennas will significantly improve in 2003, but we are seeking to generate additional revenues
through introduction of new products and broader market acceptance of our
repeater products.

SATCOM:Most of SATCOMs sales over the three years ended December 31, 2002
have related to the corporate jet market, for which management believes that
SATCOM is the leading supplier of advanced aeronautical communications
products. In 2001, SATCOMs profits were reduced by additional costs to develop
new products, including a highspeed data aeronautical terminal and enhanced
land-mobile terminals. The rollout of these new products in 2002 helped
increase sales and profits compared with 2001. The 2002 results also benefited
from new contracts for emergency management products (in particular,
satellite-based search and rescue systems). We expect that our corporate jet
revenues will significantly slow down in 2003, but SATCOMs overall revenues
should continue to grow based on defense and security opportunities for both
our land-mobile and aeronautical products.

Cost of Sales

Cost of sales, as a percentage of consolidated net sales, was 68% in 2002 and
2001 compared with 67% in 2000. The cost-of-sales percentage did not change in
2002 compared with 2001, because the mix of sales by segment was comparable in
both years. In 2001 compared with 2000, the sales mix was different, with the
effect of higher Space & Technology revenues (with a higher cost-of-sales
percentage) slightly exceeding the effect of a decrease in EMS Wireless
revenues (with a lower cost-of-sales percentage).

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SG&A), as a percentage of
consolidated net sales, remained relatively stable at 20% in 2002 compared with
19% in 2001 and 2000. The dollar value increases in SG&A for each of the past
three years have related mainly to greater selling and marketing expenses to
support geographic expansion and new product rollouts at the LXE, EMS Wireless
and SATCOM segments.

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Research and Development Expenses

Research and development expenses (R&D) represent the cost of our internally
funded efforts. Significant R&D efforts also occur under specific customer
orders in the Space & Technology segment and, accordingly, are reflected in
cost of sales. Consolidated R&D moderately decreased over the three-year period
ended December 31, 2002. The decrease in 2002 compared with 2001 was across the
board in all segments. The decrease in 2001 related mainly to the Space &
Technology segment, which shifted development efforts to customer-funded
initiatives; offsetting this decrease somewhat were increases at SATCOM to
develop a high-speed aeronautical terminal and at EMS Wireless to develop
repeater products.

Contract Reserve Adjustment

In December 2001, we accrued a $3.5 million contract reserve, which represented
an estimate of the loss to be incurred in settlement of a Space & Technology
contract. Under this contract, we were to develop and supply the crucial
antenna technology for systems that provide multichannel, live television to
commercial airline flights. Our customer was a partner in a joint venture that
marketed these television systems to the airline industry. We had worked with
our customer on the contract for over three years and invested considerable
time and expense, and the expectations were that the product rollout to the
airline industry would have substantially begun by 2001. However, the rollout
had proceeded much slower than expected, and the airline industry faced
difficult economic conditions that had deteriorated significantly in late 2001.
There were also considerable uncertainties at the end of 2001 about the timing
of the airline industrys recovery and adoption of our technology. Based upon
these factors, we concluded that sales under the contract were unlikely to
develop at the previously expected rate, and we decided to seek a settlement of
the contract with our customer, including possible use of the contracts
provisions for dispute resolution.

In 2002, while settlement negotiations were still in an early stage, the
television-system joint venture was acquired by a new airline that had been the joint ventures largest customer.
Subsequently, we reached a new, long-term agreement to supply the airline with
advanced antennas. Based on the terms of the agreement and the strong financial
position and creditworthiness of the new airline, we concluded that we no
longer needed the $3.5 million reserve. The elimination of this reserve
resulted in a statement of earnings benefit in the fourth quarter of 2002.

Write-down of NetSat 28 Assets

Effective as of December 31, 2000, we wrote down the full $2.9 million value of
certain receivables and inventories related to NetSat 28 Company, L.L.C.
(NetSat), which proposed to offer broadband communications services via a
high-capacity geostationary Ka-band satellite over the United States. In
September 1999, we had negotiated an agreement to acquire control of NetSat.
The acquisition was subject to approval by the Federal Communications
Commission (FCC) to transfer control of NetSats license to launch and operate
its services. In the first half of 2000, prior to gaining control, we recorded
$2.9 million of receivables and inventory related to NetSats activities. In
mid-2000, the FCC unexpectedly revoked NetSats license, based upon NetSats
failure to begin satellite construction prior to a milestone date of May 1998.
As a result, in 2000 we wrote down the full value of our NetSat-related
receivables and inventories. Subsequent to an appeal by NetSat, the FCC
reinstated NetSats license and approved the transfer of control to us. With
other investors, we then established a new entity  Miraxis, L.L.C.  to pursue
a broadband communications business plan. Due to continuing uncertainty about
whether the new venture can secure enough capital to proceed with its business
plan, we have not attributed any value on the balance sheet to our minority
investment in Miraxis.

Foreign Exchange Gain (Loss)

We recognize foreign exchange gains and losses related to an asset or liability
denominated in a foreign currency, and if applicable, any embedded derivatives.
The most significant such gains and losses have been associated with U.S.
dollar-denominated contracts from customers of our Canadian subsidiary. A stronger U.S. dollar against the Canadian dollar usually
results in foreign exchange gains.

28



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We also recognize net gains and losses from translation of the LXE European
subsidiaries short-term intercompany liabilities (payable in U.S. dollars).
These liabilities arise when the subsidiaries buy LXE products from the parent
for resale in Europe. A weaker U.S. dollar against the Euro usually results in
foreign exchange gains.

In 2002, the net foreign currency gain of $1.2 million resulted primarily from
a period during the year when the U.S. dollar strengthened against the Canadian
dollar. Due to the volatility of applicable U.S. dollar exchange rates in 2002,
we increased our hedging activities in the second half of 2002 to reduce our
future exposure to foreign currency changes. Foreign currency losses of $22,000
in 2001 and $234,000 in 2000 were the result of various changes in the U.S.
dollar against both the Canadian dollar and Euro.

Non-Operating Income

The most significant item in non-operating income was interest income of
$152,000 in 2002, $287,000 in 2001 and $526,000 in 2000. These amounts vary
with our level of cash on deposit.

Interest Expense

Interest expense decreased to $3.7 million in 2002, compared with $4.9 million
in 2001 and $4.3 million in 2000. The decrease in 2002 was due to decreased
debt levels that resulted from positive cash flow, and to lower interest rates.
The increase in 2001 from 2000 was due to higher average levels of debt.

Income Tax (Expense) Benefit

The primary factor affecting our consolidated effective income tax rate each
year is the relative proportion of taxable income that we earn in Canada, where
we have a much lower effective rate than in the U.S. or other locations due to
tax benefits for research-related expenditures. In 2002, we earned almost all
of our taxable income in the U.S. and other locations, and the consolidated
effective income tax rate was 33%. In 2001, we recognized a consolidated net tax benefit despite
reporting consolidated taxable income because: (1) we incurred a loss in 2001
for our combined operations in the U.S., where we have a higher effective tax
rate, and (2) we earned substantial taxable income in Canada, where we have a
lower effective rate. Therefore, the net tax benefit on the loss in the U.S.
exceeded the net tax expense on earnings in Canada, resulting in a consolidated
net tax benefit in 2001. In 2000, we earned almost half of our taxable income
in Canada, and the resulting 22% consolidated effective income tax rate
compared very favorably with our effective tax rate outside of Canada. In 2003,
we expect to earn most of our taxable income in the U.S. and other locations;
as a result, the effective income tax rate in 2003 is expected to be
approximately 35%.

Change in Accounting Principle

In 2001, we recorded an after-tax loss from the cumulative effect of a change
in accounting principle of $351,000 related to Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments
and Hedging Activities, which requires us to recognize all derivatives on the
balance sheet at fair value. SFAS No. 133 also establishes new accounting rules
for hedging instruments which, depending on the nature of the hedge, require
that changes in the fair value of derivatives must be either: (1) offset
against the change in the fair value of the hedged assets, liabilities or firm
commitments through earnings, or (2) recognized in other comprehensive income
(a component of stockholders equity) until the hedged item is recognized in
earnings. Any ineffective portion of a hedging instruments change in fair
value must be immediately recognized in earnings. For derivative instruments
that do not qualify as hedging instruments, any change in the value is
recognized in current earnings.

Upon the adoption of the provisions of SFAS No. 133 on January 1, 2001, we
recorded a resulting net liability for all derivatives totaling $1,135,000 of
which, $352,000 ($351,000 after income taxes) was charged to the statement of
earnings as a transition adjustment for the cumulative effect of the change in
accounting principle. The remaining net liability for all derivatives was
charged to the unbilled revenue

29



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component of accounts receivable ($375,000) and to the
other comprehensive income component of stockholders equity ($408,000).

Liquidity and Capital Resources

During 2002, net cash provided by operating activities was $13.8 million,
compared with $4.1 million in 2001 and $3.2 million in 2000. The Company
purchased $13.0 million in fixed assets during 2002.

During 2002, the net repayment of long-term debt was $1.0 million. This change
included a $1.6 million increase in the balances due under revolving credit
arrangements and net repayments of term debt of approximately $2.6 million.

At December 31, 2002, the Company had $7.0 million available for borrowing
under its U.S. revolving credit agreement and $2.8 million available for
borrowing under its Canadian revolving credit agreement. These credit
agreements mature in 2003, and the Company expects to renew these agreements on
terms that are comparable with the existing terms.

We expect that capital expenditures in 2003 will range from $10 million to
$15 million. These expenditures will be used primarily to purchase equipment
that increases or enhances capacity and productivity.

The cash flow from operations during 2002 improved the Companys cash position
and its debt-to-equity ratio. Management believes that cash provided from
operations and borrowings available under its credit agreements will provide
sufficient liquidity to meet the operating and capital expenditure needs for
existing operations during the next 12 months. To fund long-term growth, the
Company may consider such measures as offerings of common stock or convertible
securities.

Commitments and Contractual Obligations

The Company does not have any undisclosed off-balance sheet arrangements with
an unconsolidated entity that are reasonably likely to materially affect
liquidity, the availability of capital resources, or requirements for capital
resources. However, the following summary information about contractual
obligations and commitments is provided to assist financial statement users.

Following is the Companys material contractual cash commitments as of December
31, 2002 (in thousands):

|                                         |                                    |       |                        |        |  |           |           |           |  |       |       |        |  |  |       |       |         |  |        |        | 
|---------------------------------------- | ---------------------------------- | ----- | ---------------------- | ------ |  | --------- | --------- | --------- |  | ----- | ----- | ------ |  |  | ----- | ----- | ------- |  | ------ | ------ | 
|                                         |                                    |       | Payments due by period
|                                         |                                    |       |                       
|                                         |                                    |       |                        |        |  |           | Less than |           |  |       |       |        |  |  |       |       | After 5
|Contractual obligations                  |                                    | Total |                        | 1 year |  | 1-3 years |           | 4-5 years |  | years
|                                         |                                    |       |                        |        |  |           |           |           |  |      
|Long-term debt, excluding capital leases |                                    | $     | 52,652                 |        |  |           | 33,142    |           |  |       | 5,580 |        |  |  | 2,136 |       |         |  | 11,794 |       
|Capital lease obligations                |                                    |       | 2,036                  |        |  |           | 778       |           |  |       | 934   |        |  |  | 324   |       |         |  |       |       
|Operating lease obligations              |                                    |       | 10,220                 |        |  |           | 4,042     |           |  |       | 3,580 |        |  |  | 2,452 |       |         |  | 146    |       
|                                         |                                    |       |                        |        |  |           |           |           |  |       |       |        |  |  |       |       |         |  |        |       
|                                         | Total contractual cash obligations |       | $                      | 64,908 |  |           |           | 37,962    |  |       |       | 10,094 |  |  |       | 4,912 |         |  |        | 11,940 | 
|                                         |                                    |       |                        |        |  |           |           |           |  |       |       |        |  |  |       |       |         |  |        |       

Following is the Companys material other commercial commitments as of December 31, 2002 (in thousands):

|                                                    |  |                                            |       |        |  |           |       |           |  |       |       |  |  |  |   |         |  |  |   | 
|--------------------------------------------------- |  | ------------------------------------------ | ----- | ------ |  | --------- | ----- | --------- |  | ----- | ----- |  |  |  | - | ------- |  |  | - | 
|                                                    |  | Amount of commitment expiration per period |       |        |  |          
|                                                    |  |                                            |       |        |  |          
|                                                    |  |                                            |       |        |  | Less than |       |           |  |       |       |  |  |  |   | After 5
|Other commercial commitments                        |  | Total                                      |       | 1 year |  | 1-3 years |       | 4-5 years |  | years
|                                                    |  |                                            |       |        |  |           |       |           |  |      
|Standby letters of credit as
performance guarantees |  | $                                          | 6,846 |        |  |           | 4,011 |           |  |       | 2,835 |  |  |  |  |         |  |  |  | 

30



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Risk Factors and Forward-Looking Statements

The Company has included forward-looking statements in managements discussion
and analysis of financial condition and results of operations. Actual results
could differ materially from those suggested in any forward-looking statements
as a result of a variety of factors. Such factors include, but are not limited
to:



| |  | economic conditions in the U.S. and abroad and their effect on capital
spending in the Companys principal markets;                                                                                                                                              
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | volatility of foreign exchange rates relative to the U.S. dollar and
their effect on purchasing power by international customers, as well
as the potential for realizing foreign exchange gains or losses
associated with net foreign assets 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 completion of technological development programs by the
Company and the effects of technology that may be developed by
competitors;                                                                                                                   
| 
| |  | 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 availability of financing for satellite data communications
systems and for expansion of terrestrial PCS/ cellular phone systems;                                                                                                                            
| 
| |  | the extent to which terrestrial systems succeed in 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 the distribution and
manufacture of products in foreign countries;                                                                               
| 
| |  | the growth rate of demand for various mobile and high speed data
communications services;                                                                                                                                                                        
| 
| |  | the Companys ability to attract and retain qualified personnel,
particularly those with key technical skills; and                                                                                                                                               
| 
| |  | the availability of sufficient additional credit or other financing, on
acceptable terms, to support the Companys expected growth.                                                                                                                              

Effect of New Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
143, Accounting for Asset Retirement Obligations. This standard requires
entities to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. Over time, the liability is
adjusted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. SFAS No. 143 is
effective for fiscal years beginning after June 15, 2002, with earlier
application encouraged. The Company does not have any asset retirement
obligations, and the adoption of this pronouncement will have no material
impact on the Companys consolidated financial statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which supersedes both SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of and the accounting and reporting provisions of APB Opinion No. 30,
Reporting the Results of Operations  Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, for the disposal of a segment of a business (as
previously defined in that Opinion). SFAS No. 144 retains the fundamental
provisions in SFAS No. 121 for recognizing and measuring impairment losses on
long-lived assets held for use and long-lived assets to be disposed of by sale,
while also resolving significant implementation issues associated with SFAS No.
121. For example, SFAS No. 144 provides guidance on how a long-lived asset that
is used as part of a group should be evaluated for impairment, establishes
criteria for when a long-lived asset is held for sale, and prescribes the
accounting for a long-lived asset that will be disposed of other than by sale.
SFAS No. 144 retains the basic provisions of Opinion No. 30 on how to present
discontinued operations in the statement of earnings, but it broadens that
presentation to include a component of an entity (rather than a segment of a
business). The Company adopted the provisions of SFAS No. 144 for the quarter ending March
31, 2002.

31



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The adoption of SFAS No. 144 did not have a material impact on the
Companys financial statements because the impairment assessment under this
statement is largely unchanged from SFAS No. 121.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS No. 145 rescinds SFAS No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that statement, SFAS No. 64,
Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This
statement amends SFAS No. 13, Accounting for Leases, to eliminate an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. In addition, this
statement amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under
changed conditions. SFAS No. 145 is effective for the Companys fiscal year
beginning in 2003 with earlier application encouraged. Adoption will not have a
material impact on the consolidated financial statements of the Company.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS No. 146 addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires
that a liability for costs associated with an exit or disposal activity be
recognized when the liability is incurred rather than when a company commits to
such an activity and also establishes fair value as the objective for initial
measurement of the liability. The adoption of SFAS No. 146 during the fourth
quarter of 2002 did not have a material impact on the consolidated financial
statements of the Company.

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, which requires the guarantor to: (1)
recognize a liability for the fair value of the obligation to stand ready to
perform under a guarantee, and (2) provide disclosure information concerning
specified other guarantees, such as product warranties. The recognition and
measurement provisions of Interpretation No. 45 apply to guarantees entered
into or modified after December 31, 2002, and the implementation of these
provisions is not expected to have a material impact on the Companys
consolidated financial statements. The Company has adopted the disclosure
requirements of Interpretation No. 45 for specified guarantees, including
product warranties, contingent consideration from a business combination, and a
parents guarantee of a portion of a subsidiarys debt to a third party.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosure in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on
reporting results. The transition guidance and annual disclosure provisions of
SFAS No. 148 are effective for fiscal years ending after December 15, 2002. The
interim disclosure provisions are effective for financial reports containing
financial statements for interim periods beginning after December 15, 2002. The
disclosure requirements of SFAS No. 148 are included in Note 1. The Company
currently has no plans to adopt the fair value based method of accounting for
stock-based employee compensation.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities. The Interpretation provides guidance on
consolidating variable interest entities and applies immediately to variable
interests created after January 31, 2003. The interpretation requires variable
interest entities to be consolidated if the equity investment at risk is not
sufficient to permit an entity to finance its activities without support from
other parties, or if the equity investors lack certain specified
characteristics. Adoption of Interpretation No. 46 will not have a material
impact on the Companys consolidated financial statements.

32



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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At December 31, 2002, the Company had the following market risk sensitive
instruments (in thousands):

|                                                                                                                                                                                       |  |  |         | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ------- | 
|Revolving credit loan with a U.S. bank, $10,000
maturing in November 2003, the remainder payable upon
demand, interest payable quarterly at a variable rate
(4.04% at the end of 2002) |  |  | 20,000  | 
|                                                                                                                                                                                       |  |  |         | 
|Revolving credit loan with a bank in Canada, maturing in
April 2003, interest payable monthly at a variable rate
(5.75% at the end of 2002)                                            |  |  | 9,853   | 
|                                                                                                                                                                                       |  |  |         | 
|Term installment loan with a bank in Canada, maturing
in December 2005, principle and interest payable
quarterly at a variable interest rate (6.0% at the
end of 2002)                 |  |  | 2,659   | 
|                                                                                                                                                                                       |  |  |         | 
|Revolving credit loan with a bank in the United Kingdom,
maturing in April 2003, interest payable monthly at a variable
rate (6.0% at the end of 2002)                                 |  |  | 1,584   | 
|                                                                                                                                                                                       |  |  |         | 
|                                                                                                                                                                                       |  |  |         | 
|Total market-sensitive debt                                                                                                                                                            |  |  | $34,096 | 
|                                                                                                                                                                                       |  |  |         | 

At December 31, 2002, the Company also had intercompany accounts that eliminate
in consolidation but that are considered market risk sensitive instruments.

Short-term due to parent, payable by European and Australian subsidiaries
in the following countries and arising from purchase of the parents
products for sale in Europe and Australia at December 31, 2002 are:

|                               |  |                    |  |                      |       | 
|------------------------------ |  | ------------------ |  | -------------------- | ----- | 
|                               |  | Exchange Rate      |  |                      |       | 
|                               |  | ($U.S. per unit of |  | $U.S. in thousands  
|                               |  | local currency)    |  | (Reporting Currency)
|                               |  |                    |  |                     
|Belgium                        |  | 1.0499/Euro        |  | $                    | 1,716 | 
|Germany                        |  | 1.0499/Euro        |  |                      | 1,111 | 
|France                         |  | 1.0499/Euro        |  |                      | 697   | 
|Australia                      |  | 0.5612/Dollar      |  |                      | 659   | 
|Italy                          |  | 1.0499/Euro        |  |                      | 643   | 
|Netherlands                    |  | 1.0499/Euro        |  |                      | 231   | 
|Sweden                         |  | 0.1152/Krona       |  |                      | 137   | 
|United Kingdom                 |  | 1.6098/Pound       |  |                      | 100   | 
|                               |  |                    |  |                      |       | 
|Total
short-term due to parent |  |                    |  | $                    | 5,294 | 
|                               |  |                    |  |                      |       | 

At December 31, 2002, the Company had foreign currency risks associated with
forward contracts as follows (in thousands, except average contract rate):

|                                             |  |            |             |          |        |         |        |         |     |   |      |  
|-------------------------------------------- |  | ---------- | ----------- | -------- | ------ | ------- | ------ | ------- | --- | - | ---- | -
|                                             |  |            |             |          |        | Average |        | ($U.S.)
|                                             |  | Notional   |             | Contract |        | Fair   
|                                             |  | Amount     |             | Rate     |        | Value  
|                                             |  |            |             |          |        |        
|Foreign currency forward exchange contracts: |  |            |             |          |        |         |        |         |     |   |      |  
|Euros (sell for U.S. dollars)                |  |            | 4,500/Euros |          |        |         | 0.9961 |         |     | $ | (243 | )
|U.S. dollars (sell for Canadian dollars)     |  | 20,000/USD |             |          | 1.5838 |         |        |         | (72 | )

The Company enters into foreign currency forward contracts in order to mitigate
the risks associated with currency fluctuations on future cash flows.

33



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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information required for this item is in the Consolidated Financial Statements
and Notes to Consolidated Financial Statements included immediately after the
Signature Page and Certifications of this Annual Report on Form 10-K.

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

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information concerning directors called for by this Item is contained in
the Companys definitive Proxy Statement for its 2003 Annual Meeting of
Shareholders and is incorporated herein by reference. The information
concerning executive officers called for by this Item is set forth under the
caption Executive Officers of the Registrant in Item 1 hereof.

ITEM 11. EXECUTIVE COMPENSATION

The information called for by this Item is contained in the Companys
definitive Proxy Statement for its 2003 Annual Meeting of Shareholders and is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information about the Companys
equity compensation plans as of December 31, 2002:

|                                                           |  |                   |           |                   |  |                              |       |                      |  |  |         | 
|---------------------------------------------------------- |  | ----------------- | --------- | ----------------- |  | ---------------------------- | ----- | -------------------- |  |  | ------- | 
|                                                           |  | (a)               |           | (b)               |  | (c)                         
|                                                           |  |                   |           |                   |  |                             
|                                                           |  | Number of         |           |                   |  |                              |       |                      |  | 
|                                                           |  | securities to be  |           |                   |  |                              |       | Number of securities
|                                                           |  | issued upon       |           | Weighted average  |  | remaining available for     
|                                                           |  | exercise of       |           | exercise price of |  | future issuance under equity
|                                                           |  | outstanding       |           | outstanding       |  | compensation plans          
|                                                           |  | options, warrants |           | options, warrants |  | (excluding securities       
|Plan Category                                              |  | and rights        |           | and rights        |  | reflected in column (a))    
|                                                           |  |                   |           |                   |  |                             
|Equity compensation plans
approved by security holders     |  |                   | 1,076,488 |                   |  | $                            | 16.72 |                      |  |  | 349,187 | 
|Equity compensation plans not
approved by security holders |  |                   | 711,050   |                   |  | $                            | 17.89 |                      |  |  | 237,275 | 
|                                                           |  |                   |           |                   |  |                              |       |                      |  |  |         | 
|Total                                                      |  |                   | 1,787,538 |                   |  | $                            | 17.19 |                      |  |  | 586,462 | 
|                                                           |  |                   |           |                   |  |                              |       |                      |  |  |         | 

All other information called for in this Item is contained in the Companys
definitive Proxy Statement for its 2003 Annual Meeting of Shareholders and is
incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information called for by this Item is contained in the Companys
definitive Proxy Statement for its 2003 Annual Meeting of Shareholders and is
incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

The Company has established and maintains disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14). The objective of these
controls and procedures is to ensure that information relating to the Company,
including its consolidated subsidiaries, and required to be filed by it in
reports under the Securities Exchange Act, as amended, is effectively
communicated to the Companys CEO and CFO, and is recorded, processed,
summarized and reported on a timely basis.

The CEO and CFO have evaluated the Companys disclosure controls and procedures
within 90 days prior to the filing date of this annual report. Based upon this
evaluation, the CEO and CFO have concluded that the Companys disclosure
controls and procedures are adequate to accomplish their objective and are
functioning effectively.

Subsequent to the most recent evaluations by the CEO and CFO, there have been
no significant changes in the Companys internal controls (including corrective
actions for significant deficiencies or material weaknesses) or other factors
that could significantly affect these internal controls.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

The consolidated financial statements listed in the accompanying Index to
Financial Statements, appearing immediately after the Signature Page and
Certifications, are filed as part of this Annual Report on Form 10-K.

(a) 2. Financial Statement Schedules Independent Auditors Report

Schedule II. Valuation and Qualifying Accounts  Years ended December 31,
2002, 2001 and 2000

All other schedules are omitted as the required information is inapplicable, or
the information is presented in the financial statements or related notes.

35



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INDEPENDENT AUDITORS REPORT

The Board of Directors and Stockholders
EMS Technologies, Inc.:

Under date of February 20, 2003, we reported on the consolidated balance sheets
of EMS Technologies, Inc. and subsidiaries as of December 31, 2002 and 2001,
and the related consolidated statements of earnings, stockholders equity and
comprehensive income (loss), and cash flows for each of the years in the
three-year period ended December 31, 2002, as contained in this annual report
on Form 10-K for the year 2002. In our report specified above, we state that we
did not audit the financial statements of EMS Technologies Canada, Ltd., a
wholly owned subsidiary, which statements were audited by other auditors whose
report has been furnished to us. Our opinion, insofar as it relates to the
amounts included for EMS Technologies Canada, Ltd., is based solely on the
report of the other auditors. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule as listed in the accompanying index.
This financial statement schedule is the responsibility of the Companys
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.

In our opinion, based on our audits and the report of other auditors, the
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

KPMG LLP

Atlanta, Georgia
February 20, 2003

36



---



##### 



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS (in thousands):

|                                 |  |                                              |       |            |  |            |       |       |  |         |      |      |  |         |   |  |  |  |        | 
|-------------------------------- |  | -------------------------------------------- | ----- | ---------- |  | ---------- | ----- | ----- |  | ------- | ---- | ---- |  | ------- | - |  |  |  | ------ | 
|                                 |  | Years ended December 31, 2002, 2001 and 2000
|                                 |  |                                             
|                                 |  |                                              |       |            |  | Additions  |       |       |  |         |      |      |  |         |   |  |  | 
|                                 |  | Balance at                                   |       | charged to |  |            |       |       |  |         |      |      |  | Balance
|                                 |  | beginning                                    |       | costs and  |  |            |       |       |  |         |      |      |  | at end 
|Classification                   |  | of year                                      |       | expenses   |  | Deductions |       | Other |  | of year
|                                 |  |                                              |       |            |  |            |       |       |  |        
|Allowance for Doubtful Accounts: |  |                                              |       |            |  |            |       |       |  |         |      |      |  |         |   |  |  |  |        | 
|2000                             |  | $                                            | 293   |            |  |            | 624   |       |  |         |     |      |  |         |  |  |  |  | 917    | 
|2001                             |  |                                              | 917   |            |  |            | 91    |       |  |         | (107 | )    |  |         |  |  |  |  | 901    | 
|2002                             |  |                                              | 901   |            |  |            | 380   |       |  |         | (174 | )(a) |  |         |  |  |  |  | 1,107  | 
|Reserve for Inventory:           |  |                                              |       |            |  |            |       |       |  |         |      |      |  |         |   |  |  |  |        | 
|2000                             |  | $                                            | 958   |            |  |            | 414   |       |  |         |     |      |  |         |  |  |  |  | 1,372  | 
|2001                             |  |                                              | 1,372 |            |  |            | 565   |       |  |         |     |      |  |         |  |  |  |  | 1,937  | 
|2002                             |  |                                              | 1,937 |            |  |            | 858   |       |  |         | (741 | )(b) |  |         |  |  |  |  | 2,054  | 
|Reserve for Deferred Tax Assets: |  |                                              |       |            |  |            |       |       |  |         |      |      |  |         |   |  |  |  |        | 
|2000                             |  | $                                            | 2,999 |            |  |            | 3,258 | (c)   |  |         |     |      |  |         |  |  |  |  | 6,257  | 
|2001                             |  |                                              | 6,257 |            |  |            | 3,147 | (c)   |  |         |     |      |  |         |  |  |  |  | 9,404  | 
|2002                             |  |                                              | 9,404 |            |  |            | 1,967 | (c)   |  |         |     |      |  |         |  |  |  |  | 11,371 | 



---

|(a) |  | Deductions represent receivables that were charged off to the reserve during
the year, most of which were related to LXE and EMS Wireless customers that
encountered financial difficulties.                                                                                                                                                                                                                                                  
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Deductions represent inventory items that were charged off to the reserve
during the year, most of which relate to commercial standard-product
inventory held by the Space & Technology segment.                                                                                                                                                                                                                                              
|   
|(c) |  | The 2002, 2001 and 2000 increases in the reserve for deferred tax assets
related primarily to the net change in the underlying deferred tax assets
associated with the Montreal operations that the Company acquired in 1999.
These deferred tax assets were fully reserved at acquisition due to
uncertainty about realization. As a result, this change in reserves had no
effect on the Companys 2002, 2001 or 2000 statement of earnings.

(a)  3. Exhibits

The following exhibits are filed as part of this report:

|    |  |                                                                                                                                                                                                                                   
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 Annual Report on Form 10-K for the year
ended December 1998).
|    |  |                                                                                                                                                                                                                                   
|3.2 |  | Bylaws of EMS Technologies, Inc., as amended through March 15, 1999
(incorporated by reference to Exhibit to the Companys Annual Report on
Form 10-K for the year ended December 31, 1998).                                      
|    |  |                                                                                                                                                                                                                                   
|4.1 |  | EMS Technologies, Inc. Stockholder Rights Plan dated as of April 6,
1999 (incorporated by reference to Exhibit 4.1 to the Companys Report
on Form 8-K dated April 6, 1999).                                                      
|    |  |                                                                                                                                                                                                                                   
|4.2 |  | Agreement with respect to long-term debt pursuant to Item
601(b)(4)(iii)(A) (incorporated by reference to Exhibit 4.2 to the
Companys Annual Report on Form 10-K for the year ended December 31,
2000).                          

37



---



##### 



|      |  |                                                                                                                                                                                                                                                                                                                                                                      
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.3   |  | Second Amended and Restated Loan Agreement, dated November 9, 1998,
between the Company and SunTrust Bank, Atlanta, together with Amendment
and Consent dated as of January 29, 1999, and Second Amendment dated as
of February 24, 1999 (incorporated by reference to Exhibit 4.1 to the
Companys Annual Report on Form 10-K for the year ended December 31,
1998).
|      |  |                                                                                                                                                                                                                                                                                                                                                                      
|4.4   |  | Third Amendment, dated as of July 31, 2000, to second Amended and
Restated Loan Agreement, dated November 9, 1998, between the Company
and SunTrust Bank, Atlanta (incorporated by reference to Exhibit 4.1 to
the Companys Quarterly Report on Form 10-Q for quarter ended June 30,
2001).                                                                         
|      |  |                                                                                                                                                                                                                                                                                                                                                                      
|10.1  |  | Letter dated January 17, 2000 between the Company and Alfred G. Hansen
concerning the terms of his employment as President and Chief Operating
Officer (incorporated by reference to Exhibit 10.7 to the Companys
Annual Report on Form 10-K for the year ended December 31, 1999).                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                      
|10.2  |  | Form of Agreement between the Company and each of its executive
officers, related to certain change-of-control events (incorporated by
reference to Exhibit 10.1 to the Companys Quarterly Report on Form
10-Q for the quarter ended September 29, 2001).                                                                                                           
|      |  |                                                                                                                                                                                                                                                                                                                                                                      
|10.3  |  | EMS Technologies, Inc. Directors Stock Purchase Plan effective January
1, 2000 (incorporated by reference to Exhibit 10.8 to the Companys
Annual Report on Form 10-K for the year ended December 31, 1999).                                                                                                                                                        
|      |  |                                                                                                                                                                                                                                                                                                                                                                      
|10.4  |  | EMS Technologies, Inc. 1992 Stock Incentive Plan as amended through
October 3, 1996 (incorporated by reference to Exhibit 10.11 to the
Companys Registration Statement No. 333-14235 on Form S-4).                                                                                                                                                                  
|      |  |                                                                                                                                                                                                                                                                                                                                                                      
|10.5  |  | Amendments adopted May 2, 1997, to the EMS Technologies, Inc. 1992
Stock Incentive Plan (incorporated by reference to Exhibit 10.11 to the
Companys Annual Report on Form 10-K for the year ended December 31,
1997).                                                                                                                                               
|      |  |                                                                                                                                                                                                                                                                                                                                                                      
|10.6  |  | EMS Technologies, Inc. 1997 Stock Incentive Plan, as adopted January
24, 1997, and amended through April 28, 2000 (incorporated by reference
to Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000).                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                                      
|10.7  |  | Form of Stock Option Agreement evidencing options granted prior to 2001
to executive officers under the EMS Technologies, Inc. 1997 Stock
Incentive Plan (incorporated by reference to Exhibit 10.13 to the
Companys Annual Report on Form 10-K for the year ended December 31,
1997).                                                                              
|      |  |                                                                                                                                                                                                                                                                                                                                                                      
|10.8  |  | Form of Stock Option Agreement evidencing options granted after 2000 to
executive officers under the EMS Technologies, Inc. 1997 Stock
Incentive Plan, together with related Terms of Officer Stock Option,
Form 1/25/01 (incorporated by reference to Exhibit 10.12 to the
Companys Annual Report on Form 10-K for the year ended December 31,
2000).              
|      |  |                                                                                                                                                                                                                                                                                                                                                                      
|10.9  |  | Form of Stock Option Agreement evidencing options granted automatically
to non-employee members of the Board of Directors upon their initial
election to the Board, under the EMS Technologies, Inc. 1997 Stock
Incentive Plan (incorporated by reference to Exhibit 10.15 to the
Companys Annual Report on Form 10-K for the year ended December 31,
1999).        
|      |  |                                                                                                                                                                                                                                                                                                                                                                      
|10.10 |  | Form of Stock Option Agreement evidencing options granted automatically
to non-employee members of the Board of Directors, following five years
of service, under the EMS Technologies, Inc. 1997 Stock Incentive Plan
(incorporated by reference to Exhibit 10.16 to the Companys Annual
Report on Form 10-K for the year ended December 31, 1999).                
|      |  |                                                                                                                                                                                                                                                                                                                                                                      
|10.11 |  | Form of Stock Option Agreement evidencing options granted to executive
officers under EMS Technologies, Inc. 1992 Stock Incentive Plan
(incorporated by reference to Exhibit 10.15 to the Companys Annual
Report on Form 10-K for the year ended December 31, 1997).                                                                                                

38



---



##### 



|      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.12 |  | Form of Stock Option Agreement evidencing options granted automatically
under the 1992 Stock Incentive Plan, on a one-time basis and prior to
1998, to non-employee members of the Board of Directors (incorporated
by reference to Exhibit 10.17 to the Companys Annual Report on Form
10-K for the year ended December 31, 2000).                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|10.13 |  | Stock Option Agreement dated January 7, 2000, evidencing options
granted to Alfred G. Hansen (incorporated by reference to Exhibit
10.22 to the Companys Annual Report on Form 10-K for the year ended
December 31, 1999).                                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|10.14 |  | EMS Technologies, Inc. Executive Annual Incentive Compensation Plan, as
amended through April 30, 1999 (incorporated by reference to Exhibit
10.1 to the Companys Quarterly Report on Form 10-Q for the quarter
ended July 2, 1999).                                                                                                                                                                
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|10.15 |  | Form of Indemnification Agreement between the Company and its directors
(incorporated by reference to Exhibit 10.24 to the Companys Annual
Report on Form 10-K for the year ended December 31, 1997).                                                                                                                                                                                               
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|10.16 |  | Form of Indemnification Agreement between the Company and its Vice
President and General Counsel (incorporated by reference to Exhibit
10.25 to the Companys Annual Report on Form 10-K for the year ended
December 31, 1997).                                                                                                                                                                      
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|10.17 |  | Form of split-dollar life insurance agreement between the Company and
certain of its officers (incorporated by reference to Exhibit 10.7 to
the Companys Annual Report on Form 10-K for the year ended December
31, 1997).                                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|10.18 |  | Form of split-dollar life insurance agreement effective January 1,
1993, between the Company and William S. Jacobs (incorporated by
reference to Exhibit 10.9 to the Companys Annual Report on Form 10-K
for the year ended December 31, 1998).                                                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|10.19 |  | Letter, dated May 15, 2001, governing credit facility between EMS
Technologies Canada, Ltd., a consolidated subsidiary of the Company,
and Canadian Imperial Bank of Commerce, including Schedule-Standard
Credit Terms together with Amendment Numbers 2 and 4 thereto
(incorporated by reference to Exhibit 10.21 to the Companys Annual
Report on Form 10-K for the year ended December 3, 2001).
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|10.20 |  | Amendment No. 3, dated December 18, 2001, to letter, dated May 15,
2001, governing credit facility between EMS Technologies Canada, Ltd.
and Canadian Imperial Bank of Commerce.*                                                                                                                                                                                                                    
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|22.1  |  | Subsidiaries of the registrant.*                                                                                                                                                                                                                                                                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|23.1  |  | Independent Auditors (KPMG LLP) Consent to incorporation by reference
in Registration Statement Nos. 2-76455, 33-50528, 333-20843, 333-32425,
333-35842, 333-86973 and 333-74770, each on Form S-8, and Registration
Statement Nos. 333-61796, 333-66646, and 333-87160, each on Form
S-3.*                                                                                                         
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|23.2  |  | Independent Auditors (Ernst & Young LLP) Consent to incorporation by
reference in Registration Statement Nos. 2-76455, 33-50528, 333-20843,
333-32425, 333-35842, 333-86973 and 333-74770, each on Form S-8, and
Registration Statement Nos. 333-61796, 333-66646, and 333-87160, each
on Form S-3.*                                                                                                
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|99.1  |  | Ernst & Young LLP Independent Auditors Report.*                                                                                                                                                                                                                                                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|99.2  |  | Certification of the Companys Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the Sorbanes-Oxley Act, of
2002.*                                                                                                                                                                                                                                                      

(b).  Reports on Form 8-K.

No Reports on Form 8-K were filed by the Company during the quarter ended
December 31, 2002.

*Filed herewith

39



---



##### 



SIGNATURES

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

|    |  |                                       |  |              
|--- |  | ------------------------------------- |  | -------------
|    |  | EMS TECHNOLOGIES, INC.                |  |              
|    |  |                                       |  |              
|By: |  | /s/ Alfred G. Hansen                  |  | Date: 3/21/03
|    |  |                                       |  |              
|    |  | President and Chief Executive Officer |  |              

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

|          |  |                                            |  |       |  |                                                                                                                        |  |        
|--------- |  | ------------------------------------------ |  | ----- |  | ---------------------------------------------------------------------------------------------------------------------- |  | -------
|SIGNATURE |  |                                            |  | TITLE |  | DATE                                                                                                                  
|          |  |                                            |  |       |  |                                                                                                                       
|/s/       |  | Alfred G.
HansenAlfred G. Hansen           |  |       |  | President and Chief
Executive Officer,and Director (Principal Executive Officer)                                       |  | 3/21/03
|         
|         
|/s/       |  | Don T. ScartzDon T. Scartz                 |  |       |  | Executive Vice
President,Chief Financial Officer, Treasurer, and
Director (Principal Financial and Accounting Officer) |  | 3/21/03
|         
|         
|/s/       |  | Hermann Buerger                            |  |       |  | Director                                                                                                               |  | 3/21/03
|         
|          |  | Hermann Buerger                            |  |       |  |                                                                                                                        |  |        
|         
|/s/       |  | Robert P. CrozerRobert P. Crozer           |  |       |  | Director                                                                                                               |  | 3/21/03
|         
|/s/       |  | John P. Frazee, Jr.John P. Frazee, Jr.     |  |       |  | Director                                                                                                               |  | 3/21/03
|         
|/s/       |  | John R. KreickJohn R. Kreick               |  |       |  | Director                                                                                                               |  | 3/21/03
|         
|/s/       |  | Jerry H. LassiterJerry H. Lassiter         |  |       |  | Director                                                                                                               |  | 3/21/03
|         
|/s/       |  | John B. MowellJohn B. Mowell               |  |       |  | Director, Chairman of the Board                                                                                        |  | 3/21/03
|         
|/s/       |  | Norman E. ThagardNorman E. Thagard         |  |       |  | Director                                                                                                               |  | 3/21/03
|         
|/s/       |  | John L. Woodward, Jr.John L. Woodward, Jr. |  |       |  | Director                                                                                                               |  | 3/21/03

40



---



##### 



CERTIFICATIONS

I, Alfred G. Hansen, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of EMS Technologies, Inc.;                                                                                                                                                                                                                                              
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                



| | a) |  | Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the Evaluation Date); and                                                                                                  
|
| | c) |  | Presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee
of registrants board of directors (or persons performing the equivalent
function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weakness in internal controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                      



|6. |  | The registrants other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|    |  |                                                                                      |  |              
|--- |  | ------------------------------------------------------------------------------------ |  | -------------
|By: |  | /s/ Alfred G. Hansen                                                                 |  | Date: 3/21/03
|    |  |                                                                                      |  |              
|    |  | Alfred G. Hansen
President and Chief Executive Officer
(Principal Executive Officer) |  |              

41



---



##### 



I, Don T. Scartz, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of EMS Technologies, Inc.;                                                                                                                                                                                                                                              
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                



| | a) |  | Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the Evaluation Date); and                                                                                                  
|
| | c) |  | Presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee
of registrants board of directors (or persons performing the equivalent
function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weakness in internal controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                      



|6. |  | The registrants other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|    |  |                                                   |  |              
|--- |  | ------------------------------------------------- |  | -------------
|By: |  | /s/ Don T. Scartz                                 |  | Date: 3/21/03
|    |  |                                                   |  |              
|    |  | Don T. Scartz                                     |  |              
|    |  | Executive Vice President, Chief Financial Officer |  |              
|    |  | and Treasurer (Principal Financial Officer)       |  |              

42



---



##### 



INDEX TO FINANCIAL STATEMENTS

|                                                                                                                              |  |      |    | 
|----------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                              |  | Page
|                                                                                                                              |  |     
|Independent Auditors Report                                                                                                  |  |      | 44 | 
|Consolidated Statements of Earnings
Years ended December 31, 2002, 2001 and 2000                                             |  |      | 45 | 
|Consolidated Balance Sheets
December 31, 2002 and 2001                                                                       |  |      | 46 | 
|Consolidated Statements of Cash Flows
Years ended December 31, 2002, 2001 and 2000                                           |  |      | 48 | 
|Consolidated Statements of Stockholders Equity and Comprehensive
Income (Loss)
Years ended December 31, 2002, 2001 and 2000 |  |      | 50 | 
|Notes to Consolidated Financial Statements                                                                                    |  |      | 51 | 

43



---



##### 



INDEPENDENT AUDITORS REPORT

The Board of Directors and Stockholders
EMS Technologies, Inc.:

We have audited the accompanying consolidated balance sheets of EMS
Technologies, Inc. and subsidiaries (the Company) as of December 31, 2002 and
2001, and the related consolidated statements of earnings, stockholders equity
and comprehensive income (loss), and cash flows for each of the years in the
three-year period ended December 31, 2002. These consolidated financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the consolidated financial
statements of EMS Technologies Canada, Ltd., a wholly-owned subsidiary, which
statements reflect total assets constituting 35% and 27%, and total revenues
constituting 36%, 40% and 31% in 2002, 2001 and 2000, respectively, of the
related consolidated totals. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for EMS Technologies Canada, Ltd., is based solely on the
report of the other auditors.

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

In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of EMS Technologies, Inc. and
subsidiaries as of December 31, 2002 and 2001, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2002, in conformity with accounting principles generally
accepted in the United States of America.

As discussed in Note 5 to the consolidated financial statements, the Company
changed its method of accounting for goodwill and other intangible assets in
2002 and as discussed in Note 13, the Company changed its method of accounting
for derivative instruments and hedging activities in 2001.

KPMG LLP

Atlanta, Georgia
February 20, 2003

44



---



##### 



EMS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

|                                                              |                                                     |                                   |         |                         |        |      |         |       |       |  |         |       |       | 
|------------------------------------------------------------- | --------------------------------------------------- | --------------------------------- | ------- | ----------------------- | ------ | ---- | ------- | ----- | ----- |  | ------- | ----- | ----- | 
|                                                              |                                                     |                                   |         | YEARS ENDED DECEMBER 31
|                                                              |                                                     |                                   |         |                        
|(in thousands, except net earnings per share)                 |                                                     | 2002                              |         | 2001                    |        | 2000
|                                                              |                                                     |                                   |         |                         |        |     
|Net sales (note 12)                                           |                                                     | $                                 | 310,434 |                         |        |      | 291,086 |       |       |  | 273,143 |      
|Cost of sales                                                 |                                                     |                                   | 209,993 |                         |        |      | 196,572 |       |       |  | 181,937 |      
|Selling, general and administrative expenses                  |                                                     |                                   | 62,460  |                         |        |      | 55,364  |       |       |  | 50,635  |      
|Research and development expenses                             |                                                     |                                   | 26,122  |                         |        |      | 27,093  |       |       |  | 27,735  |      
|Contract reserve adjustment (note 14)                         |                                                     |                                   | (3,500  | )                       |        |      | 3,500   |       |       |  |        |      
|Write-down of NetSat 28 assets (note 15)                      |                                                     |                                   |        |                         |        |      |        |       |       |  | 2,891   |      
|                                                              |                                                     |                                   |         |                         |        |      |         |       |       |  |         |      
|                                                              |                                                     | Operating income                  |         |                         | 15,359 |      |         |       | 8,557 |  |         |       | 9,945 | 
|Non-operating (expense) income                                |                                                     |                                   | (108    | )                       |        |      | 403     |       |       |  | 409     |      
|Foreign exchange gain (loss)                                  |                                                     |                                   | 1,179   |                         |        |      | (22     | )     |       |  | (234    | )    
|Interest expense                                              |                                                     |                                   | (3,670  | )                       |        |      | (4,891  | )     |       |  | (4,326  | )    
|                                                              |                                                     |                                   |         |                         |        |      |         |       |       |  |         |      
|                                                              |                                                     | Earnings before income taxes      |         |                         | 12,760 |      |         |       | 4,047 |  |         |       | 5,794 | 
|Income tax (expense) benefit (note 8)                         |                                                     |                                   | (4,173  | )                       |        |      | 820     |       |       |  | (1,303  | )    
|                                                              |                                                     |                                   |         |                         |        |      |         |       |       |  |         |      
|                                                              |                                                     | Earnings before accounting change |         |                         | 8,587  |      |         |       | 4,867 |  |         |       | 4,491 | 
|Cumulative effect of change in accounting principle (note 13) |                                                     |                                   |        |                         |        |      | (351    | )     |       |  |        |      
|                                                              |                                                     |                                   |         |                         |        |      |         |       |       |  |         |      
|                                                              |                                                     | Net earnings                      |         | $                       | 8,587  |      |         |       | 4,516 |  |         |       | 4,491 | 
|                                                              |                                                     |                                   |         |                         |        |      |         |       |       |  |         |      
|Net earnings per share (note 7):                              |                                                     |                                   |         |                         |        |      |         |       |       |  |         |      
|                                                              | Basic:                                              |                                   |         |                         |        |      |         |       |       |  |         |       |      
|                                                              | Earnings before accounting change                   |                                   | $       | 0.81                    |        |      |         | 0.52  |       |  |         | 0.51  |      
|                                                              | Cumulative effect of change in accounting principle |                                   |         |                        |        |      |         | (0.04 | )     |  |         |      |      
|                                                              |                                                     |                                   |         |                         |        |      |         |       |       |  |         |      
|                                                              |                                                     | Net earnings                      |         | $                       | 0.81   |      |         |       | 0.48  |  |         |       | 0.51  | 
|                                                              |                                                     |                                   |         |                         |        |      |         |       |       |  |         |      
|                                                              | Diluted:                                            |                                   |         |                         |        |      |         |       |       |  |         |       |      
|                                                              | Earnings before accounting change                   |                                   | $       | 0.80                    |        |      |         | 0.51  |       |  |         | 0.50  |      
|                                                              | Cumulative effect of change in accounting principle |                                   |         |                        |        |      |         | (0.04 | )     |  |         |      |      
|                                                              |                                                     |                                   |         |                         |        |      |         |       |       |  |         |      
|                                                              |                                                     | Net earnings                      |         | $                       | 0.80   |      |         |       | 0.47  |  |         |       | 0.50  | 
|                                                              |                                                     |                                   |         |                         |        |      |         |       |       |  |         |      
|Weighted average number of shares (note 7):                   |                                                     |                                   |         |                         |        |      |         |       |       |  |         |      
|                                                              | Common                                              |                                   |         | 10,561                  |        |      |         | 9,464 |       |  |         | 8,766 |      
|                                                              | Common and dilutive common equivalent               |                                   |         | 10,731                  |        |      |         | 9,563 |       |  |         | 8,912 |      

See accompanying notes to consolidated financial statements.

45



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##### 



EMS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

|                                                                                    |                                                 |                                   |         |                   |         |  |         |        |         | 
|----------------------------------------------------------------------------------- | ----------------------------------------------- | --------------------------------- | ------- | ----------------- | ------- |  | ------- | ------ | ------- | 
|(in thousands)                                                                      |                                                 | December 31, 2002                 |         | December 31, 2001
|                                                                                    |                                                 |                                   |         |                  
|ASSETS                                                                              |                                                 |                                   |         |                   |         |  |         |       
|Current assets:                                                                     |                                                 |                                   |         |                   |         |  |         |       
|                                                                                    | Cash and cash equivalents (note 11)             |                                   | $       | 12,430            |         |  |         | 11,777 |        
|                                                                                    | Trade accounts receivable, net (notes 3 and 11) |                                   |         | 101,828           |         |  |         | 84,415 |        
|                                                                                    | Inventories (note 4)                            |                                   |         | 41,003            |         |  |         | 41,465 |        
|                                                                                    | Deferred income taxes (note 8)                  |                                   |         | 1,693             |         |  |         | 1,487  |        
|                                                                                    |                                                 |                                   |         |                   |         |  |         |        |        
|                                                                                    |                                                 | Total current assets              |         |                   | 156,954 |  |         |        | 139,144 | 
|                                                                                    |                                                 |                                   |         |                   |         |  |         |        |        
|Property, plant and equipment (note 6):                                             |                                                 |                                   |         |                   |         |  |         |       
|                                                                                    | Land                                            |                                   |         | 3,450             |         |  |         | 3,431  |        
|                                                                                    | Buildings and leasehold improvements            |                                   |         | 20,512            |         |  |         | 21,181 |        
|                                                                                    | Machinery and equipment                         |                                   |         | 81,516            |         |  |         | 72,082 |        
|                                                                                    | Furniture and fixtures                          |                                   |         | 6,751             |         |  |         | 6,103  |        
|                                                                                    |                                                 |                                   |         |                   |         |  |         |        |        
|                                                                                    |                                                 |                                   | 112,229 |                   |         |  | 102,797 |       
|                                                                                    | Less accumulated depreciation and amortization  |                                   |         | 60,821            |         |  |         | 54,362 |        
|                                                                                    |                                                 |                                   |         |                   |         |  |         |        |        
|                                                                                    |                                                 | Net property, plant and equipment |         |                   | 51,408  |  |         |        | 48,435  | 
|                                                                                    |                                                 |                                   |         |                   |         |  |         |        |        
|Investment in limited partnership (note 2)                                          |                                                 |                                   | 17,909  |                   |         |  | 17,909  |       
|Deferred income taxes non-current (note 8)                                         |                                                 |                                   | 1,780   |                   |         |  | 3,766   |       
|Accrued pension asset (note 9)                                                      |                                                 |                                   | 2,739   |                   |         |  | 2,905   |       
|Intangible assets, net of accumulated amortization
of $547 in 2002 and $196 in 2001 |                                                 |                                   | 3,499   |                   |         |  | 699     |       
|Goodwill, net of accumulated amortization
of $4,984 in 2002 and 2001                |                                                 |                                   | 13,526  |                   |         |  | 12,997  |       
|Other assets                                                                        |                                                 |                                   | 8,487   |                   |         |  | 10,961  |       
|                                                                                    |                                                 |                                   |         |                   |         |  |         |        |        
|                                                                                    |                                                 | $                                 | 256,302 |                   |         |  | 236,816 |       
|                                                                                    |                                                 |                                   |         |                   |         |  |         |        |        

See accompanying notes to consolidated financial statements.

46



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##### 



EMS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

|                                                                |                                                                                                                                          |                            |         |                   |         |  |         |        |         | 
|--------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ----------------- | ------- |  | ------- | ------ | ------- | 
|(in thousands, except share data)                               |                                                                                                                                          | December 31, 2002          |         | December 31, 2001
|                                                                |                                                                                                                                          |                            |         |                  
|LIABILITIES AND STOCKHOLDERS EQUITY                            |                                                                                                                                          |                            |         |                   |         |  |         |       
|Current liabilities:                                            |                                                                                                                                          |                            |         |                   |         |  |         |       
|                                                                | Current installments of long-term debt (notes 6 and 11)                                                                                  |                            | $       | 33,920            |         |  |         | 21,158 |        
|                                                                | Accounts payable (note 11)                                                                                                               |                            |         | 35,734            |         |  |         | 31,890 |        
|                                                                | Accrued compensation costs                                                                                                               |                            |         | 7,297             |         |  |         | 7,100  |        
|                                                                | Accrued retirement costs (note 9)                                                                                                        |                            |         | 2,511             |         |  |         | 1,921  |        
|                                                                | Accrued post-retirement benefits (note 10)                                                                                               |                            |         | 2,767             |         |  |         | 2,440  |        
|                                                                | Deferred service revenue                                                                                                                 |                            |         | 4,108             |         |  |         | 4,002  |        
|                                                                | Other current liabilities                                                                                                                |                            |         | 3,212             |         |  |         | 3,092  |        
|                                                                |                                                                                                                                          |                            |         |                   |         |  |         |        |        
|                                                                |                                                                                                                                          | Total current liabilities  |         |                   | 89,549  |  |         |        | 71,603  | 
|Long-term debt, excluding current installments (notes 6 and 11) |                                                                                                                                          |                            | 20,768  |                   |         |  | 32,892  |       
|                                                                |                                                                                                                                          |                            |         |                   |         |  |         |        |        
|                                                                |                                                                                                                                          | Total liabilities          |         |                   | 110,317 |  |         |        | 104,495 | 
|                                                                |                                                                                                                                          |                            |         |                   |         |  |         |        |        
|Stockholders equity (note 7):                                  |                                                                                                                                          |                            |         |                   |         |  |         |       
|                                                                | 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
10,658,000 in 2002 and 10,407,000 in 2001 |                            |         | 1,066             |         |  |         | 1,041  |        
|                                                                | Additional paid-in capital                                                                                                               |                            |         | 60,867            |         |  |         | 56,808 |        
|                                                                | Accumulated other
comprehensive lossforeign currency translation adjustment                                                             |                            |         | (5,821            | )       |  |         | (6,814 | )      
|                                                                | Retained earnings                                                                                                                        |                            |         | 89,873            |         |  |         | 81,286 |        
|                                                                |                                                                                                                                          |                            |         |                   |         |  |         |        |        
|                                                                |                                                                                                                                          | Total stockholders equity |         |                   | 145,985 |  |         |        | 132,321 | 
|                                                                |                                                                                                                                          |                            |         |                   |         |  |         |        |        
|Commitments
and contingencies (notes 2, 6, 9, 10, 13 and 16)    |                                                                                                                                          |                            |         |                   |         |  |         |       
|                                                                |                                                                                                                                          | $                          | 256,302 |                   |         |  | 236,816 |       
|                                                                |                                                                                                                                          |                            |         |                   |         |  |         |        |        

See accompanying notes to consolidated financial statements.

47



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##### 



EMS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                  |                                                                                     |                                              |                                                               |                                           |        |                         |         |         |        |         |         |        |       |         |         |  
|------------------------------------------------- | ----------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------------------------------- | ----------------------------------------- | ------ | ----------------------- | ------- | ------- | ------ | ------- | ------- | ------ | ----- | ------- | ------- | -
|                                                  |                                                                                     |                                              |                                                               |                                           |        | YEARS ENDED DECEMBER 31
|                                                  |                                                                                     |                                              |                                                               |                                           |        |                        
|(in thousands)                                    |                                                                                     | 2002                                         |                                                               | 2001                                      |        | 2000                   
|                                                  |                                                                                     |                                              |                                                               |                                           |        |                        
|Cash flows from operating activities:             |                                                                                     |                                              |                                                               |                                           |        |                         |         |         |        |         |         |       
|                                                  | Net earnings                                                                        |                                              | $                                                             | 8,587                                     |        |                         |         | 4,516   |        |         |         | 4,491  |      
|                                                  | Adjustments to reconcile net earnings to
net cash provided by operating activities: |                                              |                                                               |                                           |        |                         |         |         |        |         |         |        |      
|                                                  |                                                                                     | Depreciation and amortization                |                                                               |                                           | 10,813 |                         |         |         | 9,602  |         |         |        | 8,625 |        
|                                                  |                                                                                     | Goodwill amortization                        |                                                               |                                           |       |                         |         |         | 650    |         |         |        | 520   |        
|                                                  |                                                                                     | Deferred income taxes                        |                                                               |                                           | 1,780  |                         |         |         | (1,823 | )       |         |        | 385   |        
|                                                  |                                                                                     | Changes in operating assets and liabilities: |                                                               |                                           |        |                         |         |         |        |         |         |        |       |        
|                                                  |                                                                                     |                                              | Trade accounts receivable                                     |                                           |        | (12,581                 | )       |         |        | (11,609 | )       |        |       | (6,722  | )      
|                                                  |                                                                                     |                                              | Inventories                                                   |                                           |        | 697                     |         |         |        | (2,282  | )       |        |       | (10,084 | )      
|                                                  |                                                                                     |                                              | Non-trade foreign government receivable                       |                                           |        | 590                     |         |         |        | 1,437   |         |        |       | (1,136  | )      
|                                                  |                                                                                     |                                              | Accounts payable                                              |                                           |        | 124                     |         |         |        | 3,344   |         |        |       | 6,535   |        
|                                                  |                                                                                     |                                              | Income taxes payable                                          |                                           |        | 1,572                   |         |         |        | (397    | )       |        |       | (213    | )      
|                                                  |                                                                                     |                                              | Accrued costs, deferred revenue and other current liabilities |                                           |        | 1,193                   |         |         |        | 3,186   |         |        |       | 2,791   |        
|                                                  |                                                                                     |                                              | Other                                                         |                                           |        | 1,055                   |         |         |        | (2,505  | )       |        |       | (2,035  | )      
|                                                  |                                                                                     |                                              |                                                               |                                           |        |                         |         |         |        |         |         |        |      
|                                                  |                                                                                     |                                              |                                                               | Net cash provided by operating activities |        |                         | 13,830  |         |        |         | 4,119   |        |       |         | 3,157   |  
|                                                  |                                                                                     |                                              |                                                               |                                           |        |                         |         |         |        |         |         |        |      
|Cash flows from investing activities:             |                                                                                     |                                              |                                                               |                                           |        |                         |         |         |        |         |         |       
|                                                  | Purchase of property, plant and equipment                                           |                                              |                                                               | (12,950                                   | )      |                         |         | (8,600  | )      |         |         | (9,342 | )    
|                                                  | Payments for asset acquisitions                                                     |                                              |                                                               | (300                                      | )      |                         |         | (3,516  | )      |         |         | (4,372 | )    
|                                                  | Investment in limited partnership                                                   |                                              |                                                               |                                          |        |                         |         |        |        |         |         | (4,909 | )    
|                                                  |                                                                                     |                                              |                                                               |                                           |        |                         |         |         |        |         |         |        |      
|                                                  |                                                                                     |                                              |                                                               | Net cash used in investing activities     |        |                         | (13,250 | )       |        |         | (12,116 | )      |       |         | (18,623 | )
|                                                  |                                                                                     |                                              |                                                               |                                           |        |                         |         |         |        |         |         |        |      
|Cash flows from financing activities:             |                                                                                     |                                              |                                                               |                                           |        |                         |         |         |        |         |         |       
|                                                  | Net increase (decrease) in revolving debt                                           |                                              |                                                               | 1,640                                     |        |                         |         | (19,022 | )      |         |         | 16,067 |      
|                                                  | Proceeds from new term debt                                                         |                                              |                                                               | 2,446                                     |        |                         |         | 17,735  |        |         |         |       |      
|                                                  | Repayment of term debt                                                              |                                              |                                                               | (5,120                                    | )      |                         |         | (2,575  | )      |         |         | (517   | )    
|                                                  | Net proceeds from private stock offering                                            |                                              |                                                               |                                          |        |                         |         | 17,619  |        |         |         |       |      
|                                                  | Proceeds from exercise of stock options, net of withholding taxes paid              |                                              |                                                               | 1,533                                     |        |                         |         | 256     |        |         |         | 434    |      
|                                                  |                                                                                     |                                              |                                                               |                                           |        |                         |         |         |        |         |         |        |      
|                                                  |                                                                                     |                                              |                                                               | Net cash provided by financing activities |        |                         | 499     |         |        |         | 14,013  |        |       |         | 15,984  |  
|                                                  |                                                                                     |                                              |                                                               |                                           |        |                         |         |         |        |         |         |        |      
|                                                  |                                                                                     |                                              |                                                               | Net change in cash and cash equivalents   |        |                         | 1,079   |         |        |         | 6,016   |        |       |         | 518     |  
|Effect of exchange rates on cash                  |                                                                                     |                                              | (426                                                          | )                                         |        |                         | 168     |         |        |         | 243     |       
|Cash and cash equivalents at January 1            |                                                                                     |                                              | 11,777                                                        |                                           |        |                         | 5,593   |         |        |         | 4,832   |       
|                                                  |                                                                                     |                                              |                                                               |                                           |        |                         |         |         |        |         |         |        |      
|Cash and cash equivalents at December 31          |                                                                                     | $                                            | 12,430                                                        |                                           |        |                         | 11,777  |         |        |         | 5,593   |       
|                                                  |                                                                                     |                                              |                                                               |                                           |        |                         |         |         |        |         |         |        |      
|Supplemental disclosure of cash flow information: |                                                                                     |                                              |                                                               |                                           |        |                         |         |         |        |         |         |       
|                                                  | Cash paid for interest                                                              |                                              | $                                                             | 3,520                                     |        |                         |         | 5,163   |        |         |         | 3,824  |      
|                                                  | Cash paid for income taxes                                                          |                                              |                                                               | 535                                       |        |                         |         | 361     |        |         |         | 755    |      

See accompanying notes to consolidated financial statements.

48



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##### 



NONCASH INVESTING AND FINANCING:

In April 2002, the Company acquired Ottercom Ltd., a leading provider of
Inmarsat communication terminals located in Tewkesbury, UK. Ottercom Ltd.
products include critical components for EMS SATCOMs high-speed aeronautical
data products. The company, now called EMS SATCOM UK, Ltd., operates as a unit
of the Companys SATCOM segment. Management believes that this acquisition will
help strengthen the Companys presence in global mobile Internet/e-mail access
and communications, and will enable the Company to broaden its wireless
product offerings and in-house development capability.

To accomplish this transaction, the Company issued 81,245 new shares of its
common stock (valued at $1.9 million) and assumed liabilities totaling
approximately $1.2 million. No goodwill was recognized in this transaction;
rather, the $3.1 million total of net assets acquired was recorded as an
intangible asset on the balance sheet. This intangible represents the value at
the acquisition date of Ottercom Ltd.s satellite communications technologies,
intellectual property and product designs. This intangible will be amortized
over an estimated useful life of 6 years.

In May 2001, the Company acquired a small manufacturer of repeaters and other
wireless signal distribution products. The transaction was accounted for as a
stock purchase initially valued at $4.0 million, with subsequent additional
purchase consideration payable annually in cash or stock, at the Companys
option, and contingent on the acquired product line achieving certain sales
targets over the next three years. In payment of the initial purchase price, the
Company issued 226,000 common shares and assumed debt of approximately $400,000.
The fair value of the tangible net assets acquired was approximately $800,000,
resulting in goodwill of approximately $3.2 million. In 2002, a cash payment of
approximately $300,000 was paid due to the acquired product line achieving sales
targets in its first year, and this increased goodwill to $3.5 million.

49



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##### 



EMS TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS

EQUITY AND COMPREHENSIVE INCOME
(LOSS)


|                                                                         |  |              |        |            |  |         |       |         |  |          |        |          |  |        |        |       |  |             |        |   |  |       |        |  |  |  |         |  
|------------------------------------------------------------------------ |  | ------------ | ------ | ---------- |  | ------- | ----- | ------- |  | -------- | ------ | -------- |  | ------ | ------ | ----- |  | ----------- | ------ | - |  | ----- | ------ |  |  |  | ------- | -
|                                                                         |  |              |        |            |  |         |       |         |  |          |        |          |  |        |        |       |  | Accumulated |        |   |  |       |        |  |  | 
|                                                                         |  |              |        |            |  |         |       |         |  |          |        |          |  | Annual |        | other |  |             |        |   |  | Total
|                                                                         |  | Common Stock |        | Additional |  | compre- |       | compre- |  |          |        |          |  | stock-
|                                                                         |  |              |        | paid-in    |  | hensive |       | hensive |  | Retained |        | holders'
|Three years ended December 31, 2002                                      |  | Shares       |        | Amount     |  | capital |       | income  |  | loss     |        | earnings |  | equity
|                                                                         |  |              |        |            |  |         |       |         |  |          |        |          |  |       
|(in thousands)                                                           |  |              |        |            |  |         |       |         |  |          |        |          |  |        |        |       |  |             |        |   |  |       |        |  |  |  |         |  
|Balance December 31, 1999                                                |  |              | 8,706  |            |  | $       | 871   |         |  |          | 34,503 |          |  |        |        |       |  |             | (1,838 | ) |  |       | 72,279 |  |  |  | 105,815 |  
|Net earnings                                                             |  |              |       |            |  |         |      |         |  |          |       |          |  |        | 4,491  |       |  |             |       |   |  |       | 4,491  |  |  |  | 4,491   |  
|Income tax benefit from exercise of non-qualified stock options (note 8) |  |              |       |            |  |         |      |         |  |          | 446    |          |  |        |       |       |  |             |       |   |  |       |       |  |  |  | 446     |  
|Exercise of common stock options                                         |  |              | 134    |            |  |         | 13    |         |  |          | 981    |          |  |        |       |       |  |             |       |   |  |       |       |  |  |  | 994     |  
|Redemption of shares upon exercise of
common stock options               |  |              | (31    | )          |  |         | (3    | )       |  |          | (557   | )        |  |        |       |       |  |             |       |   |  |       |       |  |  |  | (560    | )
|Foreign currency translation adjustment gain                             |  |              |       |            |  |         |      |         |  |          |       |          |  |        | 243    |       |  |             | 243    |   |  |       |       |  |  |  | 243     |  
|                                                                         |  |              |        |            |  |         |       |         |  |          |        |          |  |        |        |       |  |             |        |   |  |       |        |  |  |  |         |  
|Comprehensive income for 2000                                            |  |              |        |            |  |         |       |         |  |          |        |          |  |        | 4,734  |       |  |             |        |   |  |       |        |  |  |  |         |  
|                                                                         |  |              |        |            |  |         |       |         |  |          |        |          |  |        |        |       |  |             |        |   |  |       |        |  |  |  |         |  
|Balance December 31, 2000                                                |  |              | 8,809  |            |  | $       | 881   |         |  |          | 35,373 |          |  |        |        |       |  |             | (1,595 | ) |  |       | 76,770 |  |  |  | 111,429 |  
|Net earnings                                                             |  |              |       |            |  |         |      |         |  |          |       |          |  |        | 4,516  |       |  |             |       |   |  |       | 4,516  |  |  |  | 4,516   |  
|Income
tax benefit from exercise of non-qualified stock options (note 8) |  |              |       |            |  |         |      |         |  |          | 160    |          |  |        |       |       |  |             |       |   |  |       |       |  |  |  | 160     |  
|Exercise of common stock options                                         |  |              | 95     |            |  |         | 9     |         |  |          | 1,015  |          |  |        |       |       |  |             |       |   |  |       |       |  |  |  | 1,024   |  
|Redemption of shares upon exercise of
common stock options               |  |              | (51    | )          |  |         | (5    | )       |  |          | (763   | )        |  |        |       |       |  |             |       |   |  |       |       |  |  |  | (768    | )
|Foreign currency translation adjustment loss                             |  |              |       |            |  |         |      |         |  |          |       |          |  |        | (5,219 | )     |  |             | (5,219 | ) |  |       |       |  |  |  | (5,219  | )
|Stock issued for an acquisition (note 2)                                 |  |              | 226    |            |  |         | 23    |         |  |          | 3,537  |          |  |        |       |       |  |             |       |   |  |       |       |  |  |  | 3,560   |  
|Stock issued in a private offering,
net of offering costs of $973        |  |              | 1,328  |            |  |         | 133   |         |  |          | 17,486 |          |  |        |       |       |  |             |       |   |  |       |       |  |  |  | 17,619  |  
|                                                                         |  |              |        |            |  |         |       |         |  |          |        |          |  |        |        |       |  |             |        |   |  |       |        |  |  |  |         |  
|Comprehensive loss for 2001                                              |  |              |        |            |  |         |       |         |  |          |        |          |  |        | (703   | )     |  |             |        |   |  |       |        |  |  |  |         |  
|                                                                         |  |              |        |            |  |         |       |         |  |          |        |          |  |        |        |       |  |             |        |   |  |       |        |  |  |  |         |  
|Balance December 31, 2001                                                |  |              | 10,407 |            |  | $       | 1,041 |         |  |          | 56,808 |          |  |        |        |       |  |             | (6,814 | ) |  |       | 81,286 |  |  |  | 132,321 |  
|Net
earnings                                                             |  |              |       |            |  |         |      |         |  |          |       |          |  |        | 8,587  |       |  |             |       |   |  |       | 8,587  |  |  |  | 8,587   |  
|Income tax benefit from exercise of non-qualified stock options (note 8) |  |              |       |            |  |         |      |         |  |          | 651    |          |  |        |       |       |  |             |       |   |  |       |       |  |  |  | 651     |  
|Exercise of common stock options                                         |  |              | 214    |            |  |         | 21    |         |  |          | 2,393  |          |  |        |       |       |  |             |       |   |  |       |       |  |  |  | 2,414   |  
|Redemption of shares upon exercise of
common stock options               |  |              | (44    | )          |  |         | (4    | )       |  |          | (877   | )        |  |        |       |       |  |             |       |   |  |       |       |  |  |  | (881    | )
|Foreign currency translation adjustment gain                             |  |              |       |            |  |         |      |         |  |          |       |          |  |        | 993    |       |  |             | 993    |   |  |       |       |  |  |  | 993     |  
|Stock issued for an acquisition (note 2)                                 |  |              | 81     |            |  |         | 8     |         |  |          | 1,892  |          |  |        |       |       |  |             |       |   |  |       |       |  |  |  | 1,900   |  
|                                                                         |  |              |        |            |  |         |       |         |  |          |        |          |  |        |        |       |  |             |        |   |  |       |        |  |  |  |         |  
|Comprehensive income for 2002                                            |  |              |        |            |  |         |       |         |  |          |        |          |  |        | 9,580  |       |  |             |        |   |  |       |        |  |  |  |         |  
|                                                                         |  |              |        |            |  |         |       |         |  |          |        |          |  |        |        |       |  |             |        |   |  |       |        |  |  |  |         |  
|Balance December 31, 2002                                                |  |              | 10,658 |            |  | $       | 1,066 |         |  |          | 60,867 |          |  |        |        |       |  |             | (5,821 | ) |  |       | 89,873 |  |  |  | 145,985 |  
|                                                                         |  |              |        |            |  |         |       |         |  |          |        |          |  |        |        |       |  |             |        |   |  |       |        |  |  |  |         |  

See accompanying notes to consolidated financial statements.

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EMS TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

1.     BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include the accounts
of EMS Technologies, Inc. and its wholly owned subsidiaries, LXE Inc., EMS Holdings, Inc. and EMS
Technologies Canada, Ltd. (collectively, the Company).
All significant intercompany balances and transactions
have been eliminated in consolidation. Certain balance
sheet amounts in 2001 were reclassified to conform with
classifications adopted in 2002. Following is a summary of
the Companys significant accounting policies:

Managements Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities in the financial
statements and accompanying notes, including revenue recognition under
long-term contracts. Actual future results could differ from those estimates.

Revenue Recognition

Revenues are derived from sales of the Companys products to end-users and to
other manufacturers or systems integrators. Revenues under certain long-term
contracts of the Space & Technology and SATCOM segments, many of which provide
for periodic payments, are recognized under the percentage-of-completion
method using the ratio of cost incurred to total estimated cost as the measure
of performance. Revenues under cost-reimbursement contracts in the Space &
Technology segment are recorded as costs are incurred and include an estimate of
fees earned. Revenues under all other contracts in the Space & Technology and
SATCOM segment, as well as in the LXE and EMS Wireless segments, are recognized
when units are shipped or services are performed. Provisions for estimated
losses on uncompleted contracts are made in the period in which the probable
amounts of such losses are determined. To properly match revenues with costs,
certain contracts may have revenue recognized in excess of billings (unbilled
revenues), and other contracts may have billings in excess of revenue recognized
(customer advanced payments). Revenues collected in
advance under service contracts are recorded as a liability and recognized over
the term of the contract.

Government Research Incentives

The Companys Canadian operations receive government-sponsored research
incentives in the form of cash reimbursement for a portion of certain
qualified research expenditures. These incentives are recorded as a reduction of
cost of sales, because the underlying research efforts primarily apply to
development of technological capabilities for specific business opportunities.

Cash Equivalents

Cash equivalents as of December 31 included investments of $7,434,000 in 2002
and $5,633,000 in 2001 in money market instruments issued by corporations and
the U.S. Government, and interest-bearing deposits with an initial term of less
than three months. The Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash equivalents.

Inventories

Inventories are valued at the lower of cost (first-in, first-out) or market
(net realizable value). Work in process consists of raw material and production
costs, including indirect manufacturing costs.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is provided
primarily using the straight-line method over the following estimated useful
lives of the respective assets:

|                        |  |                |  | 
|----------------------- |  | -------------- |  | 
|Buildings               |  | 20 to 40 years
|Machinery and equipment |  | 3 to 8 years  
|Furniture and fixtures  |  | 10 years      

Leasehold improvements are amortized over the shorter of their estimated useful
lives or the terms of the respective leases.

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1.     BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Long-Lived Assets

The Company reviews long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets. If assets are to be disposed of, such assets are reported at the
lower of carrying amount or fair value less costs to sell.

Income Taxes

The Company provides for income taxes using the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Deferred tax assets and
liabilities are classified as current or non-current based upon the nature of
the underlying temporary differences. The effect on deferred taxes of a change
in tax rates is recognized in earnings in the period that includes the enactment
date.

Earnings Per Share

Basic earnings per share is the per share allocation of income available to
common stockholders based only on the weighted average number of common shares
actually outstanding during the period. Diluted earnings per share represents the per share allocation of income attributable to
common stockholders based on the weighted average number of common shares
actually outstanding plus all dilutive potential common shares outstanding
during the period.

Goodwill And Intangible Assets

Goodwill represents the excess purchase price paid by the Company over the fair
value of the tangible and intangible assets and liabilities acquired. Other
intangible assets are recorded at fair value at the date of acquisition. In
accordance with SFAS No. 142, Goodwill and Other Intangible Assets, the
goodwill is not being amortized, but instead will be subject to an annual
assessment of impairment by applying a fair-value based test. Intangible assets
held by the Company represent satellite communications technology,
intellectual property and products designs purchased as part of the acquisitions
of Ottercom Ltd. in 2002 and Digital Space Systems, Inc. in 2001. These
intangible assets are amortized on a straight-line basis over their estimated
useful lives of 5 to 6 years.

The Company evaluates the carrying value of goodwill for impairment in the
fourth quarter of each fiscal year or more frequently if circumstances indicate
impairment may exist. As part of the evaluation, the Company compares the
carrying value of each reporting unit with its fair value to determine whether
there has been impairment. Intangible assets subject to amortization are
reviewed for impairment whenever events or circumstances indicate that the
carrying amount may not be recoverable. The ongoing recoverability of intangible
assets subject to amortization are assessed by determining whether the
intangible asset balance can be recovered over the remaining amortization
period through projected undiscounted future cash flows. If projected future
cash flows indicate that the unamortized intangible asset balances will not be
recovered, an adjustment is made to reduce the net intangible asset to an
amount consistent with discounted projected future cash flows. Cash flow
projections, although subject to a degree of uncertainty, are based on managements estimates of future performance, giving consideration to existing and
anticipated competitive and economic conditions.

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1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)

Stock Option Plans

Prior to January 1, 1996, the Company accounted for its stock option plans in
accordance with the provisions of Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations. As
such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1996, the Company adopted SFAS No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense, over the vesting
period, the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net earnings and pro
forma earnings per share disclosures for employee stock option grants made in
1995 and future years as if the fair-value-based method defined in SFAS No. 123
had been applied. The Company has elected to continue to apply the provisions of
APB Opinion No. 25 and provide the pro forma disclosure required by SFAS No.
123. The following table illustrates the effect on net earnings, and earnings
per share if the Company had applied the fair value method to measure
stock-based compensation (in thousands, except net earnings per share):

|                                |                                                                                              |  |      |        |      |  |      |        |   |  |  |        |  
|------------------------------- | -------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | -
|                                |                                                                                              |  | 2002 |        | 2001 |  | 2000
|                                |                                                                                              |  |      |        |      |  |     
|Net earnings:                   |                                                                                              |  |      |        |      |  |      |        |   |  |  |       
|                                | As reported                                                                                  |  | $    | 8,587  |      |  |      | 4,516  |   |  |  | 4,491  |  
|                                | Stock-based employee compensation expense
determined under the fair value method, net of tax |  |      | (3,299 | )    |  |      | (2,344 | ) |  |  | (2,588 | )
|                                |                                                                                              |  |      |        |      |  |      |        |   |  |  |        |  
|                                | Pro forma                                                                                    |  | $    | 5,288  |      |  |      | 2,172  |   |  |  | 1,903  |  
|                                |                                                                                              |  |      |        |      |  |      |        |   |  |  |        |  
|Basic net earnings per share:   |                                                                                              |  |      |        |      |  |      |        |   |  |  |       
|                                | As reported                                                                                  |  | $    | 0.81   |      |  |      | 0.48   |   |  |  | 0.51   |  
|                                | Pro forma                                                                                    |  |      | 0.50   |      |  |      | 0.23   |   |  |  | 0.22   |  
|Diluted net earnings per share: |                                                                                              |  |      |        |      |  |      |        |   |  |  |       
|                                | As reported                                                                                  |  |      | 0.80   |      |  |      | 0.47   |   |  |  | 0.50   |  
|                                | Pro forma                                                                                    |  |      | 0.49   |      |  |      | 0.23   |   |  |  | 0.22   |  

Foreign Currency Translation

Assets and liabilities of the Companys foreign subsidiaries are translated into
U.S. dollars at current exchange rates. Income and expenses of the foreign
subsidiaries are translated into U.S. dollars at the approximate average
exchange rates that prevailed during the years presented. The functional
currency of all subsidiaries is considered to be the local currency;
consequently, adjustments resulting from the translation of the subsidiaries
financial statements (including long-term financing from the parent) are
reflected in accumulated other comprehensive income (loss) in stockholders
equity and not as a part of the results of operations.

The Company accrues foreign currency exchange gains or losses on direct export
activity and on the LXE European subsidiaries short-term intercompany
liabilities that arise from the purchase of the parents products for resale.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income and foreign currency
translation adjustments, and changes in the fair value of derivative instruments
that qualify as cash flow hedges, and is presented in the consolidated
statements of stockholders equity and comprehensive income (loss).

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1.     BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Derivative Financial Instruments

The Company uses derivative financial instruments (forward exchange contracts)
to hedge currency fluctuations in future cash flows denominated in foreign
currencies, thereby limiting the Companys risk that would otherwise result from
changes in exchange rates. The Company has established policies and procedures
for risk assessment and for the approval, reporting and monitoring of derivative
financial instrument activities. The Company does not enter into derivative
financial instruments for trading or speculative purposes.

In January 2001, the Company adopted the provisions of SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities. SFAS No. 133 requires the
Company to recognize all derivatives on the balance sheet at fair value. SFAS
No. 133 also establishes new accounting rules for hedging instruments which,
depending on the nature of the hedge, require that changes in the fair value of
derivatives must be either: (1) offset against the change in the fair value of
the hedged assets, liabilities or firm commitments through earnings, or (2)
recognized in other comprehensive income (a component of stockholders equity)
until the hedged item is recognized in earnings. Any ineffective portion of a
derivatives change in fair value must be immediately recognized in earnings.

The accounting treatment for a derivative instrument depends upon whether it
qualifies under SFAS No. 133 as a hedging instrument, and whether the Company
has designated, in advance, the derivative instrument as one of the following
hedge types, based upon the particular exposure being hedged:



|(1) |  | a fair value hedge(i.e., hedging the exposure to
changes in the fair value of an asset or a liability that
is attributable to a particular risk);
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | a cash flow hedge(i.e., hedging the exposure to
variability in expected future cash flows that is attributable to a particular risk); or         
|   
|(3) |  | a hedge of a net investment in a foreign operation                                                                                               

Under its hedging policies and procedures, the Company has designated all of its
qualified derivatives as cash flow hedges. SFAS No. 133 requires that a change
in the value of the highly effective portion of a foreign currency cash flow
hedge (i.e., hedging at least 80% of a particular risk) should be reported in
the other comprehensive income component of stockholders equity. This change is
subsequently reclassified into earnings in the same period or periods during
which the hedged transaction affects earnings. The remaining portion of the
cash flow hedge is considered to be not highly effective (i.e., ineffective),
and the change in the value of this portion of the hedge is recognized in
current earnings. For derivative instruments that do not qualify as hedging
instruments, any change in the value is recognized in current earnings.

Certain of the Companys routine long-term contracts to deliver space and
technology products are considered to be derivative instruments because these
contracts create long-term obligations for non-U.S. customers to pay the
Companys Canadian subsidiary in U.S. dollars. These embedded derivatives do
not qualify as hedging instruments.

Prior to the adoption of SFAS No. 133 at the beginning of 2001, all gains and
losses on the forward contracts used to hedge the currency fluctuations on
transactions denominated in foreign currencies and the offsetting losses and
gains on hedged transactions were recorded in non-operating income in the
statement of earnings. After the adoption of SFAS No. 133, changes in fair value
of all qualified hedges were recorded in other comprehensive income rather than
in non-operating income. However, all qualified hedges were settled during 2001.
As a result, there was no net gain or loss for the year in comprehensive
income. None of the Companys derivative instruments were designated as hedges
in 2002.

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2.     ACQUISITIONS

The Company has made several acquisitions. All acquisitions were accounted for
as purchases. Acquisitions after January 1, 2002 were accounted for in
accordance with SFAS No. 141, Business Combinations. Acquisitions
before this date were accounted for in accordance with
APB Opinion No. 16, Business Combinations. Both
accounting pronouncements require that the purchase
price be allocated to the assets acquired and the liabilities assumed based on estimates of fair values as of the
acquisition date.

In April 2002, the Company acquired Ottercom Ltd., a leading provider of
Inmarsat communication terminals located in Tewkesbury, UK. Ottercom Ltd.
products include critical components for EMS SATCOMs high-speed aeronautical
data products. The company, now called EMS SATCOM UK, Ltd., operates as a unit
of the Companys SATCOM segment. Management believes that this acquisition will
help strengthen the Companys presence in global mobile Internet/e-mail access
and communications, and will enable the Company to broaden its wireless product
offerings and in-house development capability.

To accomplish this transaction, EMS issued 81,245 new shares of its common stock
(valued at $1.9 million) and assumed liabilities totaling approximately $1.2
million. No goodwill was recognized in this transaction; rather, the $3.1
million total of net assets acquired was recorded as an intangible asset on the
balance sheet. This intangible represents the value at the acquisition date of
Ottercom Ltd.s satellite communications technologies, intellectual property and
product designs. This intangible will be amortized over an estimated useful
life of 6 years. Amortization expense relating to this intangible asset was
$375,000 in 2002, with amortization expense of $519,000 expected for each of the
next five years, and $130,000 thereafter.

The Company could owe additional purchase consideration contingent upon specific
future business developments related to Ottercom products. The contingent
consideration is payable quarterly through March 31, 2004 in the Companys
common stock, and equals 15% of the amount by which actual quarterly gross
profits from specific Ottercom product sales exceed specific targets. Additional
contingent consideration is due in the amount of 15% of the net gross profit
related to potential new development funding from a specific customer. The
Company did not
incur additional purchase consideration for business developments though
December 31, 2002.

In May 2001, the Company acquired a small manufacturer of repeaters and other
wireless signal distribution products. The transaction was accounted for as a
stock purchase initially valued at $4.0 million, with subsequent additional
purchase consideration payable annually in cash or stock, at the Companys
option, and contingent on the acquired product line achieving certain sales
targets over the next three years. In payment of the initial purchase price,
the Company issued 226,000 common shares and assumed debt of approximately
$400,000. The fair value of the tangible net assets acquired was approximately
$800,000, resulting in goodwill of approximately $3.2 million. The Company could
owe additional purchase consideration if future sales of repeater products reach
specified levels. The contingent consideration is payable, at the Companys
discretion, in cash or equivalent value of the Companys common stock. The
maximum total contingent consideration payable under the purchase agreement is
$7 million if repeater sales reach $20 million and $25 million for the 12-month
measurement periods ending in 2003 and 2004. In 2002, a cash payment of
approximately $300,000 was paid due to the acquired product line achieving sales
targets in its first year, and this increased goodwill to $3.5 million.

In November 2000, the Company acquired (through its subsidiary EMS Technologies
Canada, Ltd.) Digital Space Systems, Inc. (DSSI), an Ottawa, Ontario software
firm specializing in search-and-rescue applications. The transaction was
accounted for as an asset purchase valued at approximately $1.3 million. The
cash paid at closing totaled approximately $900,000. No goodwill was recognized in this transaction; rather the $900,000 payment was recorded as an
intangible asset on the balance sheet. This intangible is amortized over an
estimated useful life of 5 years. Amortization expense for 2002 was $172,000,
with amortization expense of $176,000 expected for each of the next
three years. The final cash payment of approximately $400,000, which was contingent upon the
DSSI principals remaining employed with the Company,

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2.     ACQUISITIONS (CONTINUED)

was paid in December 2002. Generally accepted
accounting principles require that the contingent payment be accounted for as
compensation expense and not as part of the asset purchase price.

The sole asset of Spar Holdings, Inc. (which was acquired in 1999 and renamed
EMS Holdings, Inc.) was an equity investment of less than 5% in a limited
partnership in the amount of approximately $10 million. The general partner of
the venture is a large, international aerospace firm. The goal of the investment
is to enable the Company to participate in the development and implementation of
a satellite network that would provide high-data-rate wireless services. In
subsequent negotiations with the general partner concerning the Companys future
scope of work, the Company agreed to invest an additional $9 million,
comprising a $3 million payment made in late 1999, a $3 million payment made in
May 2000, and an in-kind contribution in the form of $3 million of specified
technological development. After completing these additional investments, the
Companys equity stake in the limited partnership will remain below 5%. The
Company does not expect to make any further cash or in-kind investments beyond
the most recent agreement. The Companys equity investment is accounted for at
historical cost and has a carrying value of $17.9 million at December 31,
2002, which includes an in-kind contribution to date of $1.9 million.

3.     TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable at December 31, 2002 and 2001 included the following
(in thousands):

|                                            |                                |   |        |         |      |  |         |        | 
|------------------------------------------- | ------------------------------ | - | ------ | ------- | ---- |  | ------- | ------ | 
|                                            |                                |   | 2002   |         | 2001
|                                            |                                |   |        |         |     
|Amounts billed                              |                                | $ | 61,969 |         |      |  | 65,903  |       
|Unbilled revenues under long-term contracts |                                |   | 47,878 |         |      |  | 29,813  |       
|Customer advanced payments                  |                                |   | (6,912 | )       |      |  | (10,400 | )     
|Allowance for doubtful accounts             |                                |   | (1,107 | )       |      |  | (901    | )     
|                                            |                                |   |        |         |      |  |         |       
|                                            | Trade accounts receivable, net |   | $      | 101,828 |      |  |         | 84,415 | 
|                                            |                                |   |        |         |      |  |         |       

4.     INVENTORIES

Inventories at December 31, 2002 and 2001 included the following (in thousands):

|                    |             |   |        |        |      |  |        |        | 
|------------------- | ----------- | - | ------ | ------ | ---- |  | ------ | ------ | 
|                    |             |   | 2002   |        | 2001
|                    |             |   |        |        |     
|Parts
and materials |             | $ | 27,073 |        |      |  | 27,582 |       
|Work
in process     |             |   | 9,569  |        |      |  | 10,702 |       
|Finished
goods      |             |   | 4,361  |        |      |  | 3,181  |       
|                    |             |   |        |        |      |  |        |       
|                    | Inventories |   | $      | 41,003 |      |  |        | 41,465 | 
|                    |             |   |        |        |      |  |        |       

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5.     GOODWILL

In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets, which was adopted by the Company effective January 1, 2002. Under SFAS
No. 142, goodwill and intangible assets with indefinite useful lives will no
longer be amortized but will instead be tested periodically for impairment. SFAS
No. 142 also requires that intangible assets with definite useful lives be
amortized over their respective estimated useful lives to their estimated
residual values, and be reviewed periodically for impairment. At December 31,
2001, the Company reported $13 million of unamortized goodwill that is subject
to the transition provisions of SFAS No. 142. At June 30, 2002, the Company had
completed the first step of the transitional impairment test and determined that
there was no impairment of goodwill. All of the Companys goodwill was deemed to
have indefinite lives and therefore will no longer be subject to amortization.
If the Company had not adopted SFAS No. 142, $744,000 of goodwill amortization
would have been recorded for the year ended December 31, 2002.

Following is a summary of the Companys net earnings and net earnings per share
for the period ended December 31, 2002, as compared with pro forma data for the
same periods in 2001 and 2000 assuming that goodwill amortization was excluded
from the pro forma results (in thousands, except per share data):

|                          |                           |                                 |       |        |       |           |       |           |       |  |       |      |       | 
|------------------------- | ------------------------- | ------------------------------- | ----- | ------ | ----- | --------- | ----- | --------- | ----- |  | ----- | ---- | ----- | 
|                          |                           |                                 |       | Actual |       | Pro forma |       | Pro forma
|                          |                           |                                 |       | 2002   |       | 2001      |       | 2000     
|                          |                           |                                 |       |        |       |           |       |          
|Net earnings:             |                           | $                               | 8,587 |        |       |           | 4,516 |           |       |  | 4,491 |     
|Add goodwill amortization |                           |                                 |      |        |       |           | 650   |           |       |  | 520   |     
|                          |                           |                                 |       |        |       |           |       |           |       |  |       |     
|                          |                           | Adjusted net earnings           |       | $      | 8,587 |           |       |           | 5,166 |  |       |      | 5,011 | 
|                          |                           |                                 |       |        |       |           |       |           |       |  |       |     
|Net earnings per share:   |                           |                                 |       |        |       |           |       |           |       |  |       |     
|                          | Basic:                    |                                 |       |        |       |           |       |           |       |  |       |      |      
|                          | Net earnings per share    |                                 | $     | 0.81   |       |           |       | 0.48      |       |  |       | 0.51 |      
|                          | Add goodwill amortization |                                 |       |       |       |           |       | 0.07      |       |  |       | 0.06 |      
|                          |                           |                                 |       |        |       |           |       |           |       |  |       |     
|                          |                           | Adjusted net earnings per share |       | $      | 0.81  |           |       |           | 0.55  |  |       |      | 0.57  | 
|                          |                           |                                 |       |        |       |           |       |           |       |  |       |     
|Net earnings per share:   |                           |                                 |       |        |       |           |       |           |       |  |       |     
|                          | Diluted:                  |                                 |       |        |       |           |       |           |       |  |       |      |      
|                          | Net earnings per share    |                                 | $     | 0.80   |       |           |       | 0.47      |       |  |       | 0.50 |      
|                          | Add goodwill amortization |                                 |       |       |       |           |       | 0.07      |       |  |       | 0.06 |      
|                          |                           |                                 |       |        |       |           |       |           |       |  |       |     
|                          |                           | Adjusted net earnings per share |       | $      | 0.80  |           |       |           | 0.54  |  |       |      | 0.56  | 
|                          |                           |                                 |       |        |       |           |       |           |       |  |       |     

57



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6.     LONG-TERM DEBT

The following is a summary of long-term debt at December 31, 2002 and 2001 (in
thousands):

|                                                                                                                                                                                                                              |                                                |   |        |        |      |  |        |        | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | - | ------ | ------ | ---- |  | ------ | ------ | 
|                                                                                                                                                                                                                              |                                                |   | 2002   |        | 2001
|                                                                                                                                                                                                                              |                                                |   |        |        |     
|Revolving credit loan with a bank, unsecured, $10 million maturing in November
2003, the remainder payable upon demand, interest payable quarterly at a
variable rate (4.04% at the end of 2002 and 5.83% at the
end of 2001) |                                                | $ | 20,000 |        |      |  | 18,700 |       
|Promissory note, secured by a first mortgage on the Companys headquarters
facility, maturing in 2016, principal and interest payable in equal monthly
installments with a fixed interest rate of 8.0%                        |                                                |   | 10,351 |        |      |  | 10,721 |       
|Revolving credit loan with a bank, secured by the assets of EMS Technologies
Canada, Ltd. maturing in April 2003, interest payable monthly at a variable
rate
(5.75% at the end of 2002 and 5.0% at the end of 2001)          |                                                |   | 9,853  |        |      |  | 9,716  |       
|Term loan with an insurance company, secured by a U.S. building, maturing in
January 2014, principal and interest payable in equal monthly installments
with a fixed interest rate of 7.1%                                    |                                                |   | 6,234  |        |      |  | 6,591  |       
|Term installment loan with a bank in Canada, maturing in December 2005,
principal and interest payable quarterly at a variable interest rate (6.0% at
the end of 2002 and 5.5% at the end of 2001)                            |                                                |   | 2,659  |        |      |  | 3,516  |       
|Capital lease agreements, secured by machinery and equipment, computer hardware,
software and peripherals, with various terms through 2006,
due in quarterly installments with implicit interest rates of 3.0% to 13.0%       |                                                |   | 2,036  |        |      |  | 2,150  |       
|Repayable funding from the Government of Canada to support research, due in
annual installments based on royalties of .675% of future
space-related revenues as of 2002 and 2001, no interest to accrue                       |                                                |   | 1,971  |        |      |  | 2,271  |       
|Revolving credit loan with a bank in the United Kingdom, maturing in
April 2003, variable-rate interest payable monthly (6.0% at the end of 2002)                                                                             |                                                |   | 1,584  |        |      |  |       |       
|Term loan with a bank, principal and interest payable monthly at a
variable interest rate (8.0% at the end of 2001)                                                                                                           |                                                |   |       |        |      |  | 385    |       
|                                                                                                                                                                                                                              |                                                |   |        |        |      |  |        |       
|                                                                                                                                                                                                                              | Total long-term debt                           |   |        | 54,688 |      |  |        | 54,050 | 
|Less current installments of long-term debt                                                                                                                                                                                   |                                                |   | 33,920 |        |      |  | 21,158 |       
|                                                                                                                                                                                                                              |                                                |   |        |        |      |  |        |       
|                                                                                                                                                                                                                              | Long-term debt, excluding current installments |   | $      | 20,768 |      |  |        | 32,892 | 
|                                                                                                                                                                                                                              |                                                |   |        |        |      |  |        |       

58



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6. LONG-TERM DEBT (CONTINUED)

In July 2001, the Company amended its U.S. revolving credit agreement to reduce
the available funding under this debt facility from $40 million to $30 million.
The reduction in the available funding was due to the transfer of the security
in the land and building to another lender in exchange for proceeds of $10.9
million under a promissory note. As of December 31, 2002, $10 million borrowed
under the U.S. revolving credit agreement is due November 2003, with no
principal payments required until maturity. The remaining $10 million of
borrowings are due on demand. This credit agreement is expected to be renewed on
terms comparable with the existing agreement.

Interest under the U.S. revolving credit agreement is, at the Companys option,
a function of either the banks prime rate or LIBOR. A
commitment fee equal to .20% per annum of the daily average unused credit available is payable quarterly
in arrears.

The U.S. revolving credit agreement includes a covenant that annually
establishes a minimum required consolidated net worth. The minimum consolidated
net worth required at December 31, 2002 was approximately $112 million, as
compared with the reported consolidated net worth of approximately $146 million.
Other covenants limit the amount of debt as compared with total capitalization,
or set a minimum ratio by which earnings before interest and income taxes must
exceed interest expense. At December 31, 2002 the Company was in compliance with
these covenants.

During April 2001, the Company entered into a master lease financing agreement
with a U.S. bank. At that time, the Company completed a sale-leaseback
transaction under this agreement on $2.2 million of existing equipment, with
$1.9 million on a five-year lease and $300,000 on a three-year lease, in each
case at 7.2% per annum.

In December 2000, the Company agreed to amend its credit facility with a bank in
Canada to fund Canadian operations. As a result, the total Canadian credit
facility was increased in January 2001 to $27 million, with $12.7 million available under
a revolving credit agreement payable on demand, $4.7 million under a term
installment loan payable in 20 quarterly payments, and the remainder of the
facility for letters of credit. The revolving credit agreement is secured by a
general pledge of the assets of EMS Technologies Canada, Ltd and $3.2 million of
this credit facility is guaranteed by EMS Technologies, Inc. The revolving
credit agreement and the facility for the letters of credit expire in April
2003, while the term loan expires in December 2005.

Interest under the Canadian revolving credit agreement and term loan is a
function of the banks prime rate. A commitment fee equal to .33% per annum of
the daily average unused credit available is payable monthly in arrears.

The Canadian revolving credit agreement includes a covenant that annually
establishes a minimum required net worth for EMS Technologies Canada, Ltd. The
minimum net worth required at December 31, 2002 was approximately $26 million,
as compared with the reported net worth of approximately $36 million. Other
covenants limit the amount of debt as compared with total capitalization, set a
minimum ratio by which earnings before interest and income taxes must exceed
interest expense, and set a minimum ratio of current assets as compared with
current liabilities. At December 31, 2002, the Company was either in compliance
or had received a bank waiver of compliance relating to all covenants.

In January 1999, the Company purchased the Space Systems and Products Division
of Spar Aerospace Limited for approximately $17.4 million. One-third of the
purchase price was financed under the Companys U.S. revolving credit agreement,
and the remainder financed by the seller at 5.5% in four installments due over a
three-year period. In December 2001, the final installment was paid in cash.

59



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6. LONG-TERM DEBT (CONTINUED)

Following is a summary of the combined principal maturities of all long-term
debt (in thousands):

|                           |  |   |        | 
|-------------------------- |  | - | ------ | 
|2003                       |  | $ | 33,920 | 
|2004                       |  |   | 4,269  | 
|2005                       |  |   | 2,245  | 
|2006                       |  |   | 1,352  | 
|2007                       |  |   | 1,108  | 
|Thereafter                 |  |   | 11,794 | 
|                           |  |   |        | 
|Total principal maturities |  | $ | 54,688 | 
|                           |  |   |        | 

Included in these totals are principal payments to be made under the Companys
capital lease agreements.

Following is a summary of annual payment totals under capital lease agreements
(in thousands):

|                             |  |   |       |  
|---------------------------- |  | - | ----- | -
|2003                         |  | $ | 903   |  
|2004                         |  |   | 596   |  
|2005                         |  |   | 443   |  
|2006                         |  |   | 332   |  
|2007                         |  |   |      |  
|                             |  |   |       |  
|Total capital lease payments |  |   | 2,274 |  
|Less: Interest payments      |  |   | (238  | )
|                             |  |   |       |  
|Capitalized lease obligation |  | $ | 2,036 |  
|                             |  |   |       |  

At December 31, 2002, the Company had $7.0 million available for borrowing under
the U.S. revolving credit agreement and $2.8 million available for borrowing
under its Canadian revolving credit agreement. At December 31, 2002, the Company
also had outstanding standby letters of credit as performance guarantees
totaling $6.8 million.

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##### 



7. STOCK PLANS

The Company has granted non-qualified stock options to key employees and
directors under several stock option plans. All outstanding options have been
granted at 100% of fair market value on each options grant date. All
outstanding options become exercisable from one to three years after the date of
grant and expire from six to ten years after the date of grant. Under all plans
at December 31, 2002, options for a total of 1,086,000 shares of stock were
exercisable, and there were 586,000 shares available for future grants.

Following is a summary of activity in all of the Companys stock option plans
for the years ended December 31, 2002, 2001 and 2000 (shares in thousands):

|                                         |  |        |       |           |  |                  |       | 
|---------------------------------------- |  | ------ | ----- | --------- |  | ---------------- | ----- | 
|                                         |  |        |       |           |  | Weighted Average
|                                         |  |        |       |           |  | Exercise Price  
|                                         |  | Shares |       | Per Share
|                                         |  |        |       |          
|Options outstanding at December 31, 1999 |  |        | 1,198 |           |  | $                | 15.38 | 
|Granted                                  |  |        | 729   |           |  |                  | 15.04 | 
|Canceled or expired                      |  |        | (104  | )         |  |                  | 18.89 | 
|Exercised                                |  |        | (134  | )         |  |                  | 7.45  | 
|                                         |  |        |       |           |  |                  |       | 
|Options outstanding at December 31, 2000 |  |        | 1,689 |           |  |                  | 15.64 | 
|Granted                                  |  |        | 393   |           |  |                  | 15.75 | 
|Canceled or expired                      |  |        | (186  | )         |  |                  | 17.64 | 
|Exercised                                |  |        | (95   | )         |  |                  | 10.83 | 
|                                         |  |        |       |           |  |                  |       | 
|Options outstanding at December 31, 2001 |  |        | 1,801 |           |  |                  | 15.71 | 
|Granted                                  |  |        | 410   |           |  |                  | 20.88 | 
|Canceled or expired                      |  |        | (209  | )         |  |                  | 17.77 | 
|Exercised                                |  |        | (214  | )         |  |                  | 11.28 | 
|                                         |  |        |       |           |  |                  |       | 
|Options
outstanding at December 31, 2002 |  |        | 1,788 |           |  | $                | 17.19 | 
|                                         |  |        |       |           |  |                  |       | 

The weighted average fair value of options granted in 2002, 2001 and 2000 was
$13.91, $8.03, and $8.73, respectively. These fair values were based on the
Black-Scholes option pricing model and a weighted average risk-free rate of
return of 2.8% in 2002, 3.7% in 2001 and 5.1% in 2000, terms from four to eight
years, expected volatility of 68% in 2002, 64% in 2001 and 65% in 2000, and no
expected dividend yield.

61



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7. STOCK PLANS (CONTINUED)

Following is a summary of options outstanding at December 31, 2002 (shares in
thousands):

|                |  |             |       |           |  |                  |       |                    |  |           |     |  |  |               |       |  |  |   |       | 
|--------------- |  | ----------- | ----- | --------- |  | ---------------- | ----- | ------------------ |  | --------- | --- |  |  | ------------- | ----- |  |  | - | ----- | 
|                |  | Outstanding |       |           |  |                  |       | Exercisable       
|                |  |             |       |           |  |                  |       |                   
|                |  |             |       |           |  | Weighted         |       | Weighted Average   |  |           |     |  |  | Weighted     
|Range of        |  |             |       |           |  | Average Price    |       | Remaining Years In |  |           |     |  |  | Average Price
|Exercise Prices |  | Shares      |       | Per Share |  | Contractual Life |       | Shares             |  | Per Share
|                |  |             |       |           |  |                  |       |                    |  |          
|$5.25 - 8.50    |  |             | 10    |           |  | $                | 6.04  |                    |  |           | 5.6 |  |  |               | 9     |  |  | $ | 6.04  | 
|11.63 - 14.94   |  |             | 437   |           |  |                  | 12.80 |                    |  |           | 3.8 |  |  |               | 375   |  |  |   | 12.61 | 
|15.10 - 16.75   |  |             | 681   |           |  |                  | 15.81 |                    |  |           | 2.9 |  |  |               | 430   |  |  |   | 15.50 | 
|17.00 - 18.89   |  |             | 227   |           |  |                  | 18.46 |                    |  |           | 3.9 |  |  |               | 86    |  |  |   | 18.49 | 
|19.90 - 23.75   |  |             | 236   |           |  |                  | 22.75 |                    |  |           | 2.9 |  |  |               | 174   |  |  |   | 23.58 | 
|23.81 - 27.63   |  |             | 197   |           |  |                  | 24.04 |                    |  |           | 6.9 |  |  |               | 12    |  |  |   | 26.63 | 
|                |  |             |       |           |  |                  |       |                    |  |           |     |  |  |               |       |  |  |   |       | 
|$5.25 - 27.63   |  |             | 1,788 |           |  | $                | 17.19 |                    |  |           | 3.7 |  |  |               | 1,086 |  |  | $ | 16.08 | 
|                |  |             |       |           |  |                  |       |                    |  |           |     |  |  |               |       |  |  |   |       | 

In the Companys capital structure, stock options are the only securities that
are potentially dilutive in the future to basic earnings per share for the years
ended December 31, 2002, 2001 and 2000, summarized as follows (shares in
thousands):

|                                                                            |                         |  |      |       |      |  |      |       |  |  |  |       | 
|--------------------------------------------------------------------------- | ----------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                                                                            |                         |  | 2002 |       | 2001 |  | 2000
|                                                                            |                         |  |      |       |      |  |     
|Dilutive stock options, included in earnings per share calculations:        |                         |  |      |       |      |  |      |       |  |  |  |      
|                                                                            | Shares                  |  |      | 437   |      |  |      | 1,159 |  |  |  | 483   | 
|                                                                            | Average price per share |  | $    | 12.61 |      |  |      | 13.59 |  |  |  | 11.93 | 
|Anti-dilutive stock options, excluded from earnings per share calculations: |                         |  |      |       |      |  |      |       |  |  |  |      
|                                                                            | Shares                  |  |      | 1,351 |      |  |      | 642   |  |  |  | 1,206 | 
|                                                                            | Average price per share |  | $    | 18.67 |      |  |      | 19.53 |  |  |  | 17.12 | 

Following is a reconciliation of the denominator for basic and diluted earnings
per share calculations for the years ended December 31, 2002, 2001 and 2000
(shares in thousands):

|                                                     |  |      |        |      |  |      |       |  |  |  |       | 
|---------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ----- |  |  |  | ----- | 
|                                                     |  | 2002 |        | 2001 |  | 2000
|                                                     |  |      |        |      |  |     
|Basic earnings per share denominator                 |  |      | 10,561 |      |  |      | 9,464 |  |  |  | 8,766 | 
|Common equivalent shares from dilutive stock options |  |      | 170    |      |  |      | 99    |  |  |  | 146   | 
|                                                     |  |      |        |      |  |      |       |  |  |  |       | 
|Diluted earnings per share denominator               |  |      | 10,731 |      |  |      | 9,563 |  |  |  | 8,912 | 
|                                                     |  |      |        |      |  |      |       |  |  |  |       | 

62



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7. STOCK PLANS (CONTINUED)

Under SFAS No. 123, Accounting for Stock-Based Compensation, the Company is
permitted to continue accounting for the issuance of stock options in accordance
with Accounting Principles Board (APB) Opinion No. 25, which does not require
recognition of compensation expense for option grants unless the exercise price
is less than the market price on the date of grant. As a result, the Company has
not recognized any compensation cost for stock options. If the Company had
recognized compensation cost for the fair value of option grants under the
provisions of SFAS No. 123, the pro forma financial results for 2002, 2001 and
2000 would have differed from the actual results, as presented in Note 1 (Basis
of Presentation and Summary of Significant Accounting Policies).

Under SFAS No. 123, the fair value of stock options issued in any given year is
expensed as compensation over the vesting period, which for substantially all of
the Companys options is three years. Therefore, the pro forma net earnings
and net earnings per share do not reflect the total compensation cost for
options granted in the respective years.

The Company adopted a Shareholder Rights Plan effective April 6, 1999, to
replace a similar plan adopted in 1989 that expired on April 6, 1999. Under the
new plan, the Company declared a dividend distribution of one right for
each outstanding share of the Companys common stock to stockholders of record
at the close of business on April 16, 1999. Subsequent transfers of common stock
certificates also transfer the associated rights. The rights become exercisable for one share of common stock at a specific purchase price (initially
$45) upon the acquisition of at least 20% beneficial ownership in the Company
without the consent of a majority of the Companys Board of Directors not having
an interest in the acquirer. The rights will become exercisable for shares of
common stock having a value equal to two times the purchase price, upon the following events: (1) the acquisition of at least a 20% beneficial ownership in
the Company without the consent of a majority of the members of the Companys
Board of Directors not having an interest in the acquirer, (2) the acquisition
of 2% of the outstanding common stock without such consent, following
acquisition of 20% with consent, or (3) certain merger, consolidation or asset
sale transactions, in each case without the consent of a majority of the members
of the Companys Board of Directors not having an interest in the acquirer. If
the Company is purchased or merged into another company, the rights may become
exercisable for comparable securities of the surviving entity. The rights
expire on August 6, 2009. At any time before their expiration, the outstanding
rights may be redeemed by vote of the Board of Directors at a price of $.01 per
right.

63



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8. INCOME TAXES

Total income tax (expense) benefit provided for in the Companys consolidated
financial statements consists of the following for the years ended December 31,
2002, 2001 and 2000 (in thousands):

|                                                                                             |       |   |        |        |      |  |      |     |  |  |        |      |  
|-------------------------------------------------------------------------------------------- | ----- | - | ------ | ------ | ---- |  | ---- | --- |  |  | ------ | ---- | -
|                                                                                             |       |   | 2002   |        | 2001 |  | 2000
|                                                                                             |       |   |        |        |      |  |     
|Consolidated income tax (expense) benefit                                                    |       | $ | (4,173 | )      |      |  | 820  |     |  |  | (1,303 | )   
|Income tax benefit resulting from exercise of stock
options credited to stockholders equity |       |   | 651    |        |      |  | 160  |     |  |  | 446    |     
|                                                                                             |       |   |        |        |      |  |      |     |  |  |        |     
|                                                                                             | Total |   | $      | (3,522 | )    |  |      | 980 |  |  |        | (857 | )
|                                                                                             |       |   |        |        |      |  |      |     |  |  |        |     

The components of income tax (expense) benefit for the years ended December 31,
2002, 2001 and 2000 were (in thousands):

|          |                                    |  |      |        |      |  |      |        |   |  |  |        |  
|--------- | ---------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | -
|          |                                    |  | 2002 |        | 2001 |  | 2000
|          |                                    |  |      |        |      |  |     
|Current:  |                                    |  |      |        |      |  |      |        |   |  |  |       
|          | Federal                            |  | $    | (2,161 | )    |  |      | 606    |   |  |  | (533   | )
|          | State                              |  |      | (373   | )    |  |      | 27     |   |  |  | 4      |  
|          | Foreign                            |  |      | 141    |      |  |      | (1,636 | ) |  |  | (389   | )
|          |                                    |  |      |        |      |  |      |        |   |  |  |       
|          | Total current expense              |  |      | (2,393 | )    |  |      | (1,003 | ) |  |  | (918   | )
|          |                                    |  |      |        |      |  |      |        |   |  | 
|Deferred: |                                    |  |      |        |      |  |      |        |   |  | 
|          | Federal                            |  |      | (1,554 | )    |  |      | 1,256  |   |  |  | (37    | )
|          | State                              |  |      | (127   | )    |  |      | 237    |   |  |  | (27    | )
|          | Foreign                            |  |      | (99    | )    |  |      | 330    |   |  |  | (321   | )
|          |                                    |  |      |        |      |  |      |        |   |  |  |       
|          | Total deferred (expense) benefit   |  |      | (1,780 | )    |  |      | 1,823  |   |  |  | (385   | )
|          |                                    |  |      |        |      |  |      |        |   |  |  |       
|          | Total income tax (expense) benefit |  | $    | (4,173 | )    |  |      | 820    |   |  |  | (1,303 | )
|          |                                    |  |      |        |      |  |      |        |   |  |  |       

Income tax (expense) benefit differed as follows from the amounts computed by
applying the U.S. federal income tax rate of 34% to earnings before income taxes
for the years ended December 31, 2002, 2001 and 2000 (in thousands):

|                                                     |                              |   |        |        |      |  |        |     |  |  |        |        |  
|---------------------------------------------------- | ---------------------------- | - | ------ | ------ | ---- |  | ------ | --- |  |  | ------ | ------ | -
|                                                     |                              |   | 2002   |        | 2001 |  | 2000  
|                                                     |                              |   |        |        |      |  |       
|Computed expected income tax expense               |                              | $ | (4,339 | )      |      |  | (1,376 | )   |  |  | (1,970 | )     
|Tax credits from research activities                 |                              |   | 44     |        |      |  | 164    |     |  |  | 215    |       
|State income taxes, net of federal income tax effect |                              |   | (330   | )      |      |  | 174    |     |  |  | (15    | )     
|Difference in effective foreign tax rates            |                              |   | 635    |        |      |  | 2,004  |     |  |  | 621    |       
|Amortization of goodwill                             |                              |   |       |        |      |  | (214   | )   |  |  | (177   | )     
|Benefit from foreign sales corporation               |                              |   |       |        |      |  | 94     |     |  |  | 216    |       
|Other                                                |                              |   | (183   | )      |      |  | (26    | )   |  |  | (193   | )     
|                                                     |                              |   |        |        |      |  |        |     |  |  |        |       
|                                                     | Income tax (expense) benefit |   | $      | (4,173 | )    |  |        | 820 |  |  |        | (1,303 | )
|                                                     |                              |   |        |        |      |  |        |     |  |  |        |       

64



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8. INCOME TAXES (CONTINUED)

In the years 2002, 2001 and 2000, income tax (expense) benefit is net of tax
benefits, totaling $355,000, $408,000 and $570,000, respectively, recognized
from foreign net operating loss carryforwards.

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 2002 and
2001 are presented below (in thousands):

|                          |                                                      |                                 |   |        |         |      |  |        |        |  
|------------------------- | ---------------------------------------------------- | ------------------------------- | - | ------ | ------- | ---- |  | ------ | ------ | -
|                          |                                                      |                                 |   | 2002   |         | 2001
|                          |                                                      |                                 |   |        |         |     
|Deferred tax assets:      |                                                      |                                 |   |        |         |      |  |       
|                          | Accounts receivable                                  |                                 | $ | 172    |         |      |  | 184    |       
|                          | Inventories                                          |                                 |   | 540    |         |      |  | 633    |       
|                          | Accrued compensation costs                           |                                 |   | 675    |         |      |  | 670    |       
|                          | Accrued contract reserve                             |                                 |   |       |         |      |  | 1,330  |       
|                          | Accrued warranty costs                               |                                 |   | 454    |         |      |  | 562    |       
|                          | Accrued post-retirement benefits                     |                                 |   | 872    |         |      |  | 780    |       
|                          | Capital loss carryforward                            |                                 |   | 473    |         |      |  | 473    |       
|                          | Foreign
research expense and tax credit carryforward |                                 |   | 16,552 |         |      |  | 13,830 |       
|                          | Foreign net operating loss carryforward              |                                 |   | 2,086  |         |      |  | 1,994  |       
|                          | Gain on sales to foreign subsidiaries                |                                 |   | 306    |         |      |  | 252    |       
|                          | Credit for corporate minimum tax                     |                                 |   | 347    |         |      |  | 397    |       
|                          | Other                                                |                                 |   | 57     |         |      |  | 121    |       
|                          |                                                      |                                 |   |        |         |      |  |       
|                          |                                                      | Total gross deferred tax assets |   |        | 22,534  |      |  |        | 21,226 |  
|                          |                                                      | Valuation allowance             |   |        | (11,371 | )    |  |        | (9,404 | )
|                          |                                                      |                                 |   |        |         |      |  |       
|                          |                                                      | Total deferred tax assets       |   |        | 11,163  |      |  |        | 11,822 |  
|                          |                                                      |                                 |   |        |         |      |  |       
|Deferred tax liabilities: |                                                      |                                 |   |        |         |      |  |       
|                          | Property, plant and equipment                        |                                 |   | 6,572  |         |      |  | 5,357  |       
|                          | Net
gain from foreign transactions and remeasurement |                                 |   | 283    |         |      |  | 283    |       
|                          | Pension asset                                        |                                 |   | 835    |         |      |  | 929    |       
|                          |                                                      |                                 |   |        |         |      |  |       
|                          |                                                      | Total deferred tax liabilities  |   |        | 7,690   |      |  |        | 6,569  |  
|                          |                                                      |                                 |   |        |         |      |  |       
|                          |                                                      | Net deferred tax assets         |   | $      | 3,473   |      |  |        | 5,253  |  
|                          |                                                      |                                 |   |        |         |      |  |       

The U.S. operations are consolidated for federal income tax purposes. These U.S.
operations had earnings before income taxes of $11,319,000 in 2002, a combined
loss before income taxes of $5,093,000 in 2001 and earnings before income taxes
of $1,874,000 in 2000. The combined foreign operations reported earnings before
income taxes of $1,441,000, $9,140,000, and $3,920,000 in 2002, 2001 and 2000,
respectively. The Companys net deferred tax assets at December 31, 2002 include
$2,086,000 related to a cumulative $7,164,000 net operating loss incurred by
certain international operations, for which the Company has recognized an income
tax benefit. Most of these net operating losses can be carried forward
indefinitely. Management believes it is more likely than not that the expected
performance of these operations and the utilization of tax planning strategies
will generate adequate earnings to fully realize the deferred tax asset, net of
valuation allowance, relating to foreign net operating losses. The changes in
the valuation allowance for the years ended December 31, 2002 and 2001 were
increases of $1,967,000 and $3,147,000, respectively.

65



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9. RETIREMENT PLANS

The Company established a qualified defined contribution plan in 1993. All
U.S.-based employees that meet a minimum service requirement (approximately 800)
are eligible to participate in the plan. Company contributions are allocated to
each participant based upon an age-weighted formula that discounts an equivalent
benefit (as a percentage of eligible compensation) at age 65 to each
employees current age. Accumulated contributions are invested at each
participants discretion from among a diverse range of investment options
offered by an independent investment firm selected by the Company.

The Companys contribution to this plan is determined each year by the Board of
Directors. There is no required minimum annual contribution, but the target
contribution has been approximately 6% of base payroll. The Company accrued an
expense for the defined contribution plan of $2.5 million for 2002, $2.0 million
for 2001 and $2.1 million for 2000.

The Company sponsors qualified retirement savings plans in the U.S. and Canada,
in which the Company matches a portion of each eligible employees
contributions. The Companys matching contributions to these plans were
$2,333,000 in 2002, $1,667,000 in 2001 and $604,000 in 2000.

As part of the Companys 1999 acquisition of the Montreal-based Space Systems
and Products Division of Spar Aerospace Limited, the Company assumed the assets
and liabilities of four defined benefit pension plans, both contributory and
non-contributory, that collectively cover substantially all employees
(approximately 600) at these operations. Benefit provisions in three of the
plans are subject to collective bargaining. Benefits are based upon an
employees years of service and average compensation. In 2001, the Company
amended two of the defined benefit plans to become defined contribution plans.
This action resulted in a net loss on plan curtailment and settlement of
$51,000, which comprised a curtailment loss of $78,000 on one plan (final
settlement pending regulatory approval), and a curtailment and settlement gain
of $27,000 for the other plan. The combined pension benefit on the statement of
earnings under the Canadian plans for the years ended December 31, 2002, 2001
and 2000 included the following components (in thousands):

|                                              |                 |   |        |     |      |  |        |     |  |  |        |     | 
|--------------------------------------------- | --------------- | - | ------ | --- | ---- |  | ------ | --- |  |  | ------ | --- | 
|                                              |                 |   | 2002   |     | 2001 |  | 2000  
|                                              |                 |   |        |     |      |  |       
|Expected return on plan assets                |                 | $ | 1,960  |     |      |  | 1,999  |     |  |  | 1,831  |    
|Service cost for benefits earned              |                 |   | (393   | )   |      |  | (201   | )   |  |  | (379   | )  
|Interest cost on projected benefit obligation |                 |   | (1,211 | )   |      |  | (1,189 | )   |  |  | (1,321 | )  
|Loss on plan curtailment and settlement       |                 |   |       |     |      |  | (51    | )   |  |  |       |    
|                                              |                 |   |        |     |      |  |        |     |  |  |        |    
|                                              | Pension benefit |   | $      | 356 |      |  |        | 558 |  |  |        | 131 | 
|                                              |                 |   |        |     |      |  |        |     |  |  |        |    

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9. RETIREMENT PLANS (CONTINUED)

The funding policy is to contribute amounts sufficient to meet minimum funding
requirements as set forth in employee benefit and tax laws. Changes in the
combined projected benefit obligation for the Canadian pension plans were as
follows for the years ended December 31, 2002 and 2001 (in thousands):

|                                                   |                                             |   |        |        |      |  |        |        | 
|-------------------------------------------------- | ------------------------------------------- | - | ------ | ------ | ---- |  | ------ | ------ | 
|                                                   |                                             |   | 2002   |        | 2001
|                                                   |                                             |   |        |        |     
|Projected benefit obligation at January 1          |                                             | $ | 18,099 |        |      |  | 18,958 |       
|Service cost for benefits earned during the period |                                             |   | 393    |        |      |  | 201    |       
|Interest cost on benefit obligation                |                                             |   | 1,211  |        |      |  | 1,189  |       
|Actuarial loss (gain)                              |                                             |   | 1,101  |        |      |  | (626   | )     
|Benefits paid                                      |                                             |   | (1,761 | )      |      |  | (1,496 | )     
|Remeasurement gain on plan settlement              |                                             |   | (206   | )      |      |  | (127   | )     
|                                                   |                                             |   |        |        |      |  |        |       
|                                                   | Projected benefit obligation at December 31 |   | $      | 18,837 |      |  |        | 18,099 | 
|                                                   |                                             |   |        |        |      |  |        |       

Changes in the fair value of assets for the Canadian pension plans were as
follows for the years ended December 31, 2002 and 2001 (in thousands):

|                                      |                                     |   |        |        |      |  |        |        | 
|------------------------------------- | ----------------------------------- | - | ------ | ------ | ---- |  | ------ | ------ | 
|                                      |                                     |   | 2002   |        | 2001
|                                      |                                     |   |        |        |     
|Fair value of assets at January 1     |                                     | $ | 25,015 |        |      |  | 28,209 |       
|Actual return on plan assets          |                                     |   | 163    |        |      |  | (820   | )     
|Employer contributions (transfers)    |                                     |   | (544   | )      |      |  | (683   | )     
|Benefits paid                         |                                     |   | (1,761 | )      |      |  | (1,496 | )     
|Remeasurement loss on plan settlement |                                     |   | (552   | )      |      |  | (195   | )     
|                                      |                                     |   |        |        |      |  |        |       
|                                      | Fair value of assets at December 31 |   | $      | 22,321 |      |  |        | 25,015 | 
|                                      |                                     |   |        |        |      |  |        |       

Pension plan assets are held in a master trust arrangement managed by an
independent advisor. Assets of the plans are invested primarily in publicly
traded equity and fixed income securities through a master trust arrangement.

The Company recorded pension assets and liabilities as of December 31, 2002 and
2001 as follows (in thousands):

|                                               |                       |   |         |       |      |  |         |       | 
|---------------------------------------------- | --------------------- | - | ------- | ----- | ---- |  | ------- | ----- | 
|                                               |                       |   | 2002    |       | 2001
|                                               |                       |   |         |       |     
|Fair value of plan assets                      |                       | $ | 22,321  |       |      |  | 25,015  |      
|Projected benefit obligation                   |                       |   | (18,837 | )     |      |  | (18,099 | )    
|Unrecognized actuarial net loss (gain)         |                       |   | 365     |       |      |  | (2,808  | )    
|Purchase price allocation of negative goodwill |                       |   | (1,110  | )     |      |  | (1,203  | )    
|                                               |                       |   |         |       |      |  |         |      
|                                               | Accrued pension asset |   | $       | 2,739 |      |  |         | 2,905 | 
|                                               |                       |   |         |       |      |  |         |      

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9. RETIREMENT PLANS (CONTINUED)

The actuarial assumptions that were used to determine costs and benefit
obligations for the Canadian pension plans were as follows:

|                           |  |      |      |      |  |  |      |  
|-------------------------- |  | ---- | ---- | ---- |  |  | ---- | -
|                           |  | 2002 |      | 2001
|                           |  |      |      |     
|Discount rate              |  |      | 6.75 | %    |  |  | 6.75 | %
|Compensation increases     |  |      | 3.50 |      |  |  | 3.50 |  
|Long-term return on assets |  |      | 7.50 |      |  |  | 7.50 |  

10. POST-RETIREMENT BENEFITS OTHER THAN PENSION

The Company sponsors four unfunded plans to provide selected health and dental
care and life insurance benefits for employees retired from the Montreal
operations and their dependents. Employees of the Companys Montreal operations
may become eligible for those benefits if they retire while working for the
Company. Benefit provisions in three of the plans are subject to collective
bargaining. The estimated cost for these benefits is accrued over periods of
employee service on an actuarially determined basis. Combined post-retirement
benefit cost of all plans for the years ended December 31, 2002, 2001 and 2000
included the following components (in thousands):

|                                                |                              |   |      |     |      |  |      |     |  |  |     |     | 
|----------------------------------------------- | ---------------------------- | - | ---- | --- | ---- |  | ---- | --- |  |  | --- | --- | 
|                                                |                              |   | 2002 |     | 2001 |  | 2000
|                                                |                              |   |      |     |      |  |     
|Service cost for benefits earned                |                              | $ | 118  |     |      |  | 81   |     |  |  | 67  |    
|Interest cost on accumulated benefit obligation |                              |   | 279  |     |      |  | 217  |     |  |  | 204 |    
|Amortization of experience loss                 |                              |   | 87   |     |      |  | 39   |     |  |  | 23  |    
|                                                |                              |   |      |     |      |  |      |     |  |  |     |    
|                                                | Post-retirement benefit cost |   | $    | 484 |      |  |      | 337 |  |  |     | 294 | 
|                                                |                              |   |      |     |      |  |      |     |  |  |     |    

Changes in the combined accumulated benefit obligation for post-retirement
benefits were as follows for the years ended December 31, 2002 and 2001 (in
thousands):

|                                                   |                                               |   |       |       |      |  |       |       | 
|-------------------------------------------------- | --------------------------------------------- | - | ----- | ----- | ---- |  | ----- | ----- | 
|                                                   |                                               |   | 2002  |       | 2001
|                                                   |                                               |   |       |       |     
|Accumulated benefit obligation at January 1        |                                               | $ | 4,157 |       |      |  | 3,452 |      
|Service cost for benefits earned during the period |                                               |   | 118   |       |      |  | 81    |      
|Interest cost on accumulated benefit obligation    |                                               |   | 279   |       |      |  | 217   |      
|Curtailment gain                                   |                                               |   | (227  | )     |      |  |      |      
|Actuarial loss                                     |                                               |   | 1,186 |       |      |  | 562   |      
|Benefits paid                                      |                                               |   | (174  | )     |      |  | (155  | )    
|                                                   |                                               |   |       |       |      |  |       |      
|                                                   | Accumulated benefit obligation at December 31 |   | $     | 5,339 |      |  |       | 4,157 | 
|                                                   |                                               |   |       |       |      |  |       |      

In 2002, the population of Space & Technology/Montreal employees entitled to
post retirement healthcare and dental and life insurance benefits under these
plans decreased by 15% as a result of layoffs undertaken by the Company. This
resulted in a curtailment gain of $227,000 as the benefit obligation decreased
following the layoff.

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10. POST RETIREMENT BENEFITS OTHER
THAN PENSION (CONTINUED)

Subsequent to the measurement date, additional employees were laid off,
resulting in a decrease of 22% of the population of employees entitled to
receive post-retirement benefits, the effect of which will be recognized in 2003
post-retirement benefit expense.

The Company recorded a liability for post-retirement benefits at December 31,
2002 and 2001, as follows (in thousands):

|                                |                                           |   |        |       |      |  |        |       | 
|------------------------------- | ----------------------------------------- | - | ------ | ----- | ---- |  | ------ | ----- | 
|                                |                                           |   | 2002   |       | 2001
|                                |                                           |   |        |       |     
|Accumulated benefit obligation  |                                           | $ | 5,339  |       |      |  | 4,157  |      
|Unrecognized actuarial net loss |                                           |   | (2,572 | )     |      |  | (1,717 | )    
|                                |                                           |   |        |       |      |  |        |      
|                                | Accrued post-retirement benefit liability |   | $      | 2,767 |      |  |        | 2,440 | 
|                                |                                           |   |        |       |      |  |        |      

The actuarial assumptions that were used to determine costs and benefit
obligations for post-retirement benefits were as follows:

|                                 |  |      |      |      |  |  |      |  
|-------------------------------- |  | ---- | ---- | ---- |  |  | ---- | -
|                                 |  | 2002 |      | 2001
|                                 |  |      |      |     
|Discount rate                    |  |      | 6.75 | %    |  |  | 6.75 | %
|Healthcare cost trend current   |  |      | 9.54 |      |  |  | 9.54 |  
|Healthcare cost trend ultimate  |  |      | 4.52 |      |  |  | 4.52 |  
|Dental care cost trend ultimate |  |      | 4.50 |      |  |  | 4.50 |  

Increasing the assumed healthcare and dental care cost trend rates by one
percentage point would increase the aggregate service and interest cost
components of net post-retirement benefit expense for 2002 by $35,000, and the
accumulated post-retirement benefit obligation at December 31, 2002 by
$517,000. A decrease of one percentage point would reduce service and interest
costs by $29,000, and decrease the December 31, 2002 obligation by $430,000.

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following summarizes certain information regarding the fair value of the
Companys financial instruments at December 31, 2002 and 2001:

Cash and cash equivalents, trade accounts receivable and accounts payable  The
carrying amount approximates fair value because of the short maturity of these
instruments.

Long-term debt  Most of the Companys long-term debt bears interest at
variable rates that management believes are commensurate with rates currently
available on similar debt. Accordingly, the carrying value of variable-rate
long-term debt approximates fair value.

The Company has two fixed-rate, long-term mortgages. One mortgage has a 7.1%
current rate and a carrying amount at December 31, 2002 and 2001 of $6.2 million
and $6.6 million, respectively. The other mortgage has an 8.0% rate and a
carrying amount at December 31, 2002 and 2001 of $10.4 million and $10.7
million, respectively. The mortgages approximate fair value, based on current
market rates at which the Company could borrow funds with similar remaining
maturities.

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12. BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION

The Company is organized into four reportable segments: Space & Technology, LXE,
EMS Wireless and SATCOM. Each segment is separately managed and comprises a
range of products and services that share distinct operating characteristics.
The Company evaluates each segment primarily upon operating profit.

The Space & Technology segment manufactures custom-designed, highly engineered
hardware for use in space and satellite communications, radar, surveillance and
military counter-measures. Orders typically involve development and production
schedules that can extend a year or more, and most revenues are recognized under
percentage-of-completion long-term contract accounting. Hardware is sold to
prime contractors or systems integrators rather than to end-users.

The LXE segment manufactures wireless local area networks (LAN) products for use
mainly in logistics. The manufacturing cycle for each order is generally just a
few days, and revenues are recognized upon shipment of hardware. Hardware is
marketed to end-users and to third parties that incorporate their products and
services with the Companys hardware for delivery to end-users.

The EMS Wireless segment manufactures antennas and repeaters for PCS/cellular
communications systems. The manufacturing cycle for each order is generally just
a few days, and revenues are recognized upon shipment of hardware. Hardware is
marketed to wireless service providers and to original equipment manufacturers
(OEMs) for mobile voice/paging services, as well as for other emerging
high-speed wireless systems.

The SATCOM segment manufactures antennas and other hardware for satellite
communications systems. The manufacturing cycle for each order is generally just
a few days, and revenues are recognized upon shipment of hardware. Hardware is
marketed to third parties that incorporate their products and services with the
Companys hardware for delivery to end-users.

Accounting policies for segments are the same as those described in the summary
of significant accounting policies, except that deferred income tax assets and
liabilities are provided for only at the consolidated level.

The following segment data is presented in thousands:

|                         |                                |          |   |                         |         |      |  |         |         |   |  |         |         |  
|------------------------ | ------------------------------ | -------- | - | ----------------------- | ------- | ---- |  | ------- | ------- | - |  | ------- | ------- | -
|                         |                                |          |   | Years ended December 31
|                         |                                |          |   |                        
|                         |                                |          |   | 2002                    |         | 2001 |  | 2000   
|                         |                                |          |   |                         |         |      |  |        
|Net sales:               |                                |          |   |                         |         |      |  |         |         |   |  |        
|                         | Space & Technology             |          | $ | 133,691                 |         |      |  | 131,707 |         |   |  | 113,866 |        
|                         | LXE                            |          |   | 88,229                  |         |      |  | 85,902  |         |   |  | 73,423  |        
|                         | EMS Wireless                   |          |   | 48,001                  |         |      |  | 45,001  |         |   |  | 61,191  |        
|                         | SATCOM                         |          |   | 32,777                  |         |      |  | 22,379  |         |   |  | 15,224  |        
|                         | Other                          |          |   | 7,736                   |         |      |  | 6,097   |         |   |  | 9,439   |        
|                         |                                |          |   |                         |         |      |  |         |         |   |  |        
|                         |                                | Total    |   | $                       | 310,434 |      |  |         | 291,086 |   |  |         | 273,143 |  
|                         |                                |          |   |                         |         |      |  |         |         |   |  |        
|Operating income (loss): |                                |          |   |                         |         |      |  |         |         |   |  |        
|                         | Space & Technology             |          | $ | 1,232                   |         |      |  | 2,626   |         |   |  | (1,890  | )      
|                         | Contract reserve adjustment    |          |   | 3,500                   |         |      |  | (3,500  | )       |   |  |        |        
|                         | Write-down of NetSat 28 assets |          |   |                        |         |      |  |        |         |   |  | (2,891  | )      
|                         |                                |          |   |                         |         |      |  |         |         |   |  |        
|                         |                                | Subtotal |   |                         | 4,732   |      |  |         | (874    | ) |  |         | (4,781  | )
|                         | LXE                            |          |   | 4,472                   |         |      |  | 4,690   |         |   |  | (2,069  | )      
|                         | EMS Wireless                   |          |   | 2,217                   |         |      |  | 1,925   |         |   |  | 13,101  |        
|                         | SATCOM                         |          |   | 3,838                   |         |      |  | 2,995   |         |   |  | 3,602   |        
|                         | Other                          |          |   | 100                     |         |      |  | (179    | )       |   |  | 92      |        
|                         |                                |          |   |                         |         |      |  |         |         |   |  |        
|                         |                                | Total    |   | $                       | 15,359  |      |  |         | 8,557   |   |  |         | 9,945   |  
|                         |                                |          |   |                         |         |      |  |         |         |   |  |        

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12. BUSINESS SEGMENT AND GEOGRAPHIC
AREA INFORMATION (CONTINUED)

|                                     |                             |          |   |                         |        |      |  |        |        |   |  |        |        |  
|------------------------------------ | --------------------------- | -------- | - | ----------------------- | ------ | ---- |  | ------ | ------ | - |  | ------ | ------ | -
|                                     |                             |          |   | Years ended December 31
|                                     |                             |          |   |                        
|                                     |                             |          |   | 2002                    |        | 2001 |  | 2000  
|                                     |                             |          |   |                         |        |      |  |       
|Non-operating
income (expense), net: |                             |          |   |                         |        |      |  |        |        |   |  |       
|                                     | Space & Technology          |          | $ | 676                     |        |      |  | (429   | )      |   |  | 2      |       
|                                     | LXE                         |          |   | 246                     |        |      |  | 197    |        |   |  | (165   | )     
|                                     | EMS Wireless                |          |   | 311                     |        |      |  | (7     | )      |   |  |       |       
|                                     | SATCOM                      |          |   | 82                      |        |      |  | 454    |        |   |  | 131    |       
|                                     | Other                       |          |   | 12                      |        |      |  |       |        |   |  |       |       
|                                     | Corporate                   |          |   | (256                    | )      |      |  | 166    |        |   |  | 207    |       
|                                     |                             |          |   |                         |        |      |  |        |        |   |  |       
|                                     |                             | Total    |   | $                       | 1,071  |      |  |        | 381    |   |  |        | 175    |  
|                                     |                             |          |   |                         |        |      |  |        |        |   |  |       
|Interest expense:                    |                             |          |   |                         |        |      |  |        |        |   |  |       
|                                     | Space & Technology          |          | $ | (2,886                  | )      |      |  | (3,574 | )      |   |  | (2,565 | )     
|                                     | LXE                         |          |   | (428                    | )      |      |  | (469   | )      |   |  | (547   | )     
|                                     | EMS Wireless                |          |   | (241                    | )      |      |  | (353   | )      |   |  | (511   | )     
|                                     | SATCOM                      |          |   | (64                     | )      |      |  | (304   | )      |   |  | (334   | )     
|                                     | Other                       |          |   | (51                     | )      |      |  | (36    | )      |   |  |       |       
|                                     | Corporate                   |          |   |                        |        |      |  | (155   | )      |   |  | (369   | )     
|                                     |                             |          |   |                         |        |      |  |        |        |   |  |       
|                                     |                             | Total    |   | $                       | (3,670 | )    |  |        | (4,891 | ) |  |        | (4,326 | )
|                                     |                             |          |   |                         |        |      |  |        |        |   |  |       
|Income tax (expense) benefit:        |                             |          |   |                         |        |      |  |        |        |   |  |       
|                                     | Space & Technology          |          | $ | 512                     |        |      |  | 2,019  |        |   |  | 3,011  |       
|                                     | Contract reserve adjustment |          |   | (1,330                  | )      |      |  | 1,330  |        |   |  |       |       
|                                     |                             |          |   |                         |        |      |  |        |        |   |  |       
|                                     |                             | Subtotal |   |                         | (818   | )    |  |        | 3,349  |   |  |        | 3,011  |  
|                                     | LXE                         |          |   | (1,627                  | )      |      |  | (1,877 | )      |   |  | 858    |       
|                                     | EMS Wireless                |          |   | (861                    | )      |      |  | (596   | )      |   |  | (4,785 | )     
|                                     | SATCOM                      |          |   | (604                    | )      |      |  | (400   | )      |   |  | (422   | )     
|                                     | Other                       |          |   | (23                     | )      |      |  | 82     |        |   |  | (36    | )     
|                                     | Corporate                   |          |   | (240                    | )      |      |  | 262    |        |   |  | 71     |       
|                                     |                             |          |   |                         |        |      |  |        |        |   |  |       
|                                     |                             | Total    |   | $                       | (4,173 | )    |  |        | 820    |   |  |        | (1,303 | )
|                                     |                             |          |   |                         |        |      |  |        |        |   |  |       
|Net earnings (loss):                 |                             |          |   |                         |        |      |  |        |        |   |  |       
|                                     | Space & Technology          |          | $ | 1,704                   |        |      |  | (1,528 | )      |   |  | (4,333 | )     
|                                     | LXE                         |          |   | 2,663                   |        |      |  | 2,541  |        |   |  | (1,923 | )     
|                                     | EMS Wireless                |          |   | 1,405                   |        |      |  | 969    |        |   |  | 7,805  |       
|                                     | SATCOM                      |          |   | 3,252                   |        |      |  | 2,745  |        |   |  | 2,977  |       
|                                     | Other                       |          |   | 38                      |        |      |  | (133   | )      |   |  | 56     |       
|                                     | Corporate                   |          |   | (475                    | )      |      |  | (78    | )      |   |  | (91    | )     
|                                     |                             |          |   |                         |        |      |  |        |        |   |  |       
|                                     |                             | Total    |   | $                       | 8,587  |      |  |        | 4,516  |   |  |        | 4,491  |  
|                                     |                             |          |   |                         |        |      |  |        |        |   |  |       
|Capital expenditures:                |                             |          |   |                         |        |      |  |        |        |   |  |       
|                                     | Space & Technology          |          | $ | 7,687                   |        |      |  | 4,626  |        |   |  | 5,921  |       
|                                     | LXE                         |          |   | 1,995                   |        |      |  | 1,597  |        |   |  | 1,851  |       
|                                     | EMS Wireless                |          |   | 348                     |        |      |  | 1,592  |        |   |  | 1,371  |       
|                                     | SATCOM                      |          |   | 1,805                   |        |      |  | 324    |        |   |  | 116    |       
|                                     | Other                       |          |   | 508                     |        |      |  | 71     |        |   |  | 83     |       
|                                     | Corporate                   |          |   | 607                     |        |      |  | 390    |        |   |  |       |       
|                                     |                             |          |   |                         |        |      |  |        |        |   |  |       
|                                     |                             | Total    |   | $                       | 12,950 |      |  |        | 8,600  |   |  |        | 9,342  |  
|                                     |                             |          |   |                         |        |      |  |        |        |   |  |       

71



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12. BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION (CONTINUED)

|                               |                    |       |   |                         |        |      |  |       |        |  |  |       |       | 
|------------------------------ | ------------------ | ----- | - | ----------------------- | ------ | ---- |  | ----- | ------ |  |  | ----- | ----- | 
|                               |                    |       |   | Years ended December 31
|                               |                    |       |   |                        
|                               |                    |       |   | 2002                    |        | 2001 |  | 2000 
|                               |                    |       |   |                         |        |      |  |      
|Depreciation and amortization: |                    |       |   |                         |        |      |  |       |        |  |  |      
|                               | Space & Technology |       | $ | 5,578                   |        |      |  | 4,811 |        |  |  | 4,759 |      
|                               | LXE                |       |   | 2,630                   |        |      |  | 4,303 |        |  |  | 3,550 |      
|                               | EMS Wireless       |       |   | 791                     |        |      |  | 941   |        |  |  | 507   |      
|                               | SATCOM             |       |   | 1,329                   |        |      |  | 133   |        |  |  | 309   |      
|                               | Other              |       |   | 358                     |        |      |  | 29    |        |  |  | 20    |      
|                               | Corporate          |       |   | 127                     |        |      |  | 35    |        |  |  |      |      
|                               |                    |       |   |                         |        |      |  |       |        |  |  |      
|                               |                    | Total |   | $                       | 10,813 |      |  |       | 10,252 |  |  |       | 9,145 | 
|                               |                    |       |   |                         |        |      |  |       |        |  |  |      

|          |                    |       |   |                   |         |      |  |         |         | 
|--------- | ------------------ | ----- | - | ----------------- | ------- | ---- |  | ------- | ------- | 
|          |                    |       |   | As of December 31
|          |                    |       |   |                  
|          |                    |       |   | 2002              |         | 2001
|          |                    |       |   |                   |         |     
|Assets:   |                    |       |   |                   |         |      |  |        
|          | Space & Technology |       | $ | 129,994           |         |      |  | 113,813 |        
|          | LXE                |       |   | 67,152            |         |      |  | 66,142  |        
|          | EMS Wireless       |       |   | 21,277            |         |      |  | 23,334  |        
|          | SATCOM             |       |   | 23,261            |         |      |  | 13,050  |        
|          | Other              |       |   | 5,185             |         |      |  | 3,502   |        
|          | Corporate          |       |   | 9,433             |         |      |  | 16,975  |        
|          |                    |       |   |                   |         |      |  |        
|          |                    | Total |   | $                 | 256,302 |      |  |         | 236,816 | 
|          |                    |       |   |                   |         |      |  |        
|Goodwill: |                    |       |   |                   |         |      |  |        
|          | LXE                |       | $ | 9,982             |         |      |  | 9,982   |        
|          | EMS Wireless       |       |   | 3,544             |         |      |  | 3,015   |        
|          |                    |       |   |                   |         |      |  |        
|          |                    | Total |   | $                 | 13,526  |      |  |         | 12,997  | 
|          |                    |       |   |                   |         |      |  |        

Following is a summary of enterprise-wide information (in thousands):

|                                                   |                         |       |   |                         |         |      |  |         |         |  |  |         |         | 
|-------------------------------------------------- | ----------------------- | ----- | - | ----------------------- | ------- | ---- |  | ------- | ------- |  |  | ------- | ------- | 
|                                                   |                         |       |   | Years ended December 31
|                                                   |                         |       |   |                        
|                                                   |                         |       |   | 2002                    |         | 2001 |  | 2000   
|                                                   |                         |       |   |                         |         |      |  |        
|Net sales to customers in the following countries: |                         |       |   |                         |         |      |  |         |         |  |  |        
|                                                   | United States           |       | $ | 178,085                 |         |      |  | 151,103 |         |  |  | 160,958 |        
|                                                   | Canada                  |       |   | 48,360                  |         |      |  | 50,517  |         |  |  | 53,124  |        
|                                                   | United Kingdom          |       |   | 16,696                  |         |      |  | 24,764  |         |  |  | 10,236  |        
|                                                   | Belgium                 |       |   | 12,585                  |         |      |  | 7,987   |         |  |  | 4,581   |        
|                                                   | France                  |       |   | 9,576                   |         |      |  | 16,114  |         |  |  | 9,092   |        
|                                                   | Other foreign countries |       |   | 45,132                  |         |      |  | 40,601  |         |  |  | 35,152  |        
|                                                   |                         |       |   |                         |         |      |  |         |         |  |  |        
|                                                   |                         | Total |   | $                       | 310,434 |      |  |         | 291,086 |  |  |         | 273,143 | 
|                                                   |                         |       |   |                         |         |      |  |         |         |  |  |        

|                                                      |                         |       |   |                   |        |      |  |        |        | 
|----------------------------------------------------- | ----------------------- | ----- | - | ----------------- | ------ | ---- |  | ------ | ------ | 
|                                                      |                         |       |   | As of December 31
|                                                      |                         |       |   |                  
|                                                      |                         |       |   | 2002              |        | 2001
|                                                      |                         |       |   |                   |        |     
|Long-lived assets located in the following countries: |                         |       |   |                   |        |      |  |       
|                                                      | United States           |       | $ | 57,123            |        |      |  | 67,481 |       
|                                                      | Canada                  |       |   | 40,107            |        |      |  | 28,437 |       
|                                                      | Other foreign countries |       |   | 2,118             |        |      |  | 1,754  |       
|                                                      |                         |       |   |                   |        |      |  |       
|                                                      |                         | Total |   | $                 | 99,348 |      |  |        | 97,672 | 
|                                                      |                         |       |   |                   |        |      |  |       

No customer accounted for more than 10% of consolidated net sales in 2002, 2001
or 2000.

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13. DERIVATIVE FINANCIAL INSTRUMENTS

In January 2001, the Company adopted the provisions of SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities. As a result, the Company
recognized a net liability for all derivatives totaling $1,135,000, of which,
$352,000 ($351,000 after income taxes) was charged to the statement of earnings
as a transition adjustment for the cumulative effect of the change in accounting
principle. The remaining net liability for all derivatives was charged to the
unbilled revenue component of accounts receivable for $375,000 and to the
other comprehensive income component of stockholders equity for $408,000.

At December 31, 2002, the Companys net value of all derivatives was a liability
of $246,000. The derivative activity as reported in the Companys financial
statements for the years ended December 31 was (in thousands):

|                                                        |                                                                                                    |                                                                                       |      |      |     |      |        |      |     | 
|------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ---- | ---- | --- | ---- | ------ | ---- | --- | 
|                                                        |                                                                                                    |                                                                                       |      | 2002 |     | 2001
|                                                        |                                                                                                    |                                                                                       |      |      |     |     
|Net liability for derivatives at January 1              |                                                                                                    | $                                                                                     | (166 | )    |     |      | (1,135 | )   
|Changes in statements of earnings:                      |                                                                                                    |                                                                                       |      |      |     |      |        |     
|Sales:                                                  |                                                                                                    |                                                                                       |      |      |     |      |        |     
|                                                        | Gain in value of embedded derivatives                                                              |                                                                                       |      | 106  |     |      |        | 718  |    
|Foreign exchange gain (loss) on derivative instruments: |                                                                                                    |                                                                                       |      |      |     |      |        |     
|                                                        | Gain in value of ineffective portion of derivative instruments
that qualify as hedging instruments |                                                                                       |      |     |     |      |        | 32   |    
|                                                        | Loss in value of derivative instruments that do not qualify
as hedging instruments                 |                                                                                       |      | (366 | )   |      |        | (607 | )  
|                                                        | Matured foreign exchange contracts                                                                 |                                                                                       |      | 180  |     |      |        | 418  |    
|                                                        |                                                                                                    |                                                                                       |      |      |     |      |        |     
|                                                        |                                                                                                    | Net statement of earnings gain (loss) from changes in
value of derivative instruments |      |      | (80 | )    |        |      | 561 | 
|                                                        |                                                                                                    |                                                                                       |      |      |     |      |        |     
|Other comprehensive income:                             |                                                                                                    |                                                                                       |      |      |     |      |        |     
|                                                        | Matured foreign exchange contracts                                                                 |                                                                                       |      |     |     |      |        | 366  |    
|                                                        | Gain in value of highly effective hedging instruments                                              |                                                                                       |      |     |     |      |        | 31   |    
|                                                        | Hedges determined to be ineffective                                                                |                                                                                       |      |     |     |      |        | 11   |    
|                                                        |                                                                                                    |                                                                                       |      |      |     |      |        |     
|                                                        |                                                                                                    | Net other comprehensive income                                                        |      |      |    |      |        |      | 408 | 
|                                                        |                                                                                                    |                                                                                       |      |      |     |      |        |     
|Net liability for derivatives at December 31            |                                                                                                    | $                                                                                     | (246 | )    |     |      | (166   | )   
|                                                        |                                                                                                    |                                                                                       |      |      |     |      |        |     

The Company recognized no gains or losses during the year for cash flow hedges
that have been discontinued because the forecasted transactions did not occur.
All of the derivative contracts in place at December 31, 2002 will expire by the
end of June 2003. As of December 31, 2002, the Companys cash flow hedges had
resulted in no cumulative charges to other comprehensive income because the
qualified cash flow hedges have been completed.

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##### 



13. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

The table below summarizes, by major currency, the notional amounts of foreign
currency forward contracts in U.S. dollars at December 31, 2002. The buy
amounts represent the U.S. dollar equivalent of commitments to purchase foreign
currencies, and the sell amounts represent the U.S. dollar equivalent of
commitments to sell foreign currencies (in thousands).

|                |       |   |        |        |      |  |       |       | 
|--------------- | ----- | - | ------ | ------ | ---- |  | ----- | ----- | 
|                |       |   | Buy    |        | Sell
|                |       |   |       
|Canadian dollar |       | $ | 20,000 |        |      |  |      |      
|Euro            |       |   |       |        |      |  | 4,482 |      
|                |       |   |        |        |      |  |       |      
|                | Total |   | $      | 20,000 |      |  |       | 4,482 | 
|                |       |   |        |        |      |  |       |      

The fair market value of these foreign exchange contracts was a net liability of
$315,000 at December 31, 2002.

14. CONTRACT RESERVE ADJUSTMENT

In December 2001, the Company accrued a $3.5 million contract reserve, which
represented an estimate of the loss to be incurred in settlement of a Space &
Technology contract. Under this contract, the Company was to develop and supply
the crucial antenna technology for systems that provide multi-channel, live
television to commercial airline flights. The customer was a partner in a joint
venture that marketed these television systems to the airline industry. The
Company had worked with this customer on the contract for over three years and
invested considerable time and expense. The expectations were that the product
rollout to the airline industry would have substantially begun by 2001. However,
the rollout had proceeded much slower than expected, and the airline industry
faced difficult economic conditions that had deteriorated significantly in late
2001. As a result, there were considerable uncertainties at the end of 2001
about the timing of the airline industrys recovery and adoption of the
technology. Based upon these factors, the Company concluded that sales under the
contract were unlikely to develop at the previously expected rate, and decided
to seek a settlement of the contract with the customer, including possible use
of the contracts provisions for dispute resolution.

In 2002, while settlement negotiations were still in an early stage, the
television-system joint venture was acquired by a new airline that had been the
joint ventures largest customer. Subsequently, the Company reached a new,
long-term agreement to supply the airline with advanced antennas. Based on the
terms of this agreement and the strong financial position and creditworthiness
of the new airline, the Company concluded that it no longer needed the $3.5
million reserve. The elimination of this reserve resulted in a statement of
earnings benefit in the fourth quarter of 2002.

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15. WRITE-DOWN OF NETSAT 28 ASSETS

Effective as of December 31, 2000, the Company wrote down the full $2.9 million
value of certain receivables and inventories related to NetSat 28 Company,
L.L.C. (NetSat), which proposes to offer broadband communications services via a
high-capacity geostationary Ka-band satellite over the United States. In
September 1999, the Company had negotiated an agreement to acquire control of
NetSat. The acquisition was subject to approval by the Federal Communications
Commission (FCC) to transfer control of NetSats license to launch and operate
its services. In the first half of 2000, the Company recorded $2.9 million of
receivables and inventory related to NetSats activities. In mid-2000, the FCC
unexpectedly revoked NetSats license, based upon NetSats failure to begin
satellite construction prior to a milestone date of May 1998. The Company was
unable to determine, prior to the issuance of its financial statements for the
year 2000, the probable outcome and timing of: (1) the FCCs response to
NetSats application to reinstate its license or (2) negotiations with potential
investors in the NetSat venture. As a result of these uncertainties, the
Company wrote down the full value of its NetSat-related receivables and
inventories. Subsequent to the issuance of the 2000 financial statements, the
FCC reinstated NetSats license and approved the transfer of control to the
Company. With other investors, the Company then established a new entity 
Miraxis, L.L.C.  to pursue a broadband communications business plan. Due to
continuing uncertainty about whether the new venture can secure enough capital
to proceed with its business plan, the Company has not attributed any value on
its balance sheet to its minority investment in Miraxis.

16. COMMITMENTS AND CONTINGENCIES

The Company is committed under several non-cancelable operating leases for
office space, computer and office equipment and automobiles. Minimum annual
lease payments under such leases are $4,042,000 in 2003, $2,160,000 in 2004,
$1,420,000 in 2005, $1,226,000 in 2006, $1,226,000 in 2007 and $146,000
thereafter.

The Company also has short-term leases for regional sales offices, equipment and
automobiles. Total rent expense under all operating leases was approximately
$5,074,000, $4,622,000, and $4,868,000 in 2002, 2001 and 2000, respectively.

The Companys Canadian operations have received cost-sharing assistance from
the Government of Canada under several programs that support the development of
new commercial technologies and products for space. This funding is repayable in
the form of royalties, the level of which will depend upon several factors,
including future revenue and profit levels to be derived from the potential new
technologies and products. To the extent that the royalties may exceed the
repayable amounts already recorded in long-term debt, the Company will incur
royalty expense; however, these royalties accrue at rates generally less than
one percent of related sales, and will be incurred only if additional revenues
and profits are also recognized from new technologies and products. As a result,
although the Company cannot accurately estimate the level of future possible
royalties, the Company does not believe that such royalties will have a material
adverse effect on future results of operations.

The Company provides a limited warranty for each of its products. The basic
warranty periods vary from one to five years, depending upon the type of
product. For certain products, customers can purchase warranty coverage for
specified additional periods.

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##### 



16. COMMITMENTS AND CONTINGENCIES (CONTINUED)

The Company records a liability for the estimated costs to be incurred under
warranties. The amount of this liability is based upon historical, as well as
expected, rates of warranty claims. The warranty liability is periodically
reviewed for adequacy and adjusted as necessary. Following is a reconciliation
of the aggregate product warranty liability for the year ended December 31, 2002
(in thousands):

|                                                 |                              |   |        |       | 
|------------------------------------------------ | ---------------------------- | - | ------ | ----- | 
|                                                 |                              |   | 2002  
|                                                 |                              |   |       
|Balance at December 31, 2001                     |                              | $ | 1,089  |      
|Accruals for warranties issued during the period |                              |   | 1,519  |      
|Settlements made during the period               |                              |   | (1,190 | )    
|                                                 |                              |   |        |      
|                                                 | Balance at December 31, 2002 |   | $      | 1,418 | 
|                                                 |                              |   |        |      

17. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Following is a summary of interim financial information for the years ended
December 31, 2002 and 2001 (in thousands, except net earnings per share):

|                        |         |   |                     |      |         |  |              |      |             |  |        |      |  |  |        |      | 
|----------------------- | ------- | - | ------------------- | ---- | ------- |  | ------------ | ---- | ----------- |  | ------ | ---- |  |  | ------ | ---- | 
|                        |         |   | 2002 Quarters ended
|                        |         |   |                    
|                        |         |   | March 30            |      | June 29 |  | September 28 |      | December 31
|                        |         |   |                     |      |         |  |              |      |            
|Net sales               |         | $ | 70,439              |      |         |  | 82,870       |      |             |  | 75,061 |      |  |  | 82,064 |     
|Operating income        |         |   | 3,636               |      |         |  | 4,275        |      |             |  | 2,320  |      |  |  | 5,128  |     
|Net earnings            |         |   | 2,112               |      |         |  | 2,491        |      |             |  | 1,966  |      |  |  | 2,018  |     
|Net earnings per share: |         |   |                     |      |         |  |              |      |             |  |        |      |  |  |        |     
|                        | Basic   |   |                     | 0.20 |         |  |              | 0.24 |             |  |        | 0.18 |  |  |        | 0.19 | 
|                        | Diluted |   |                     | 0.20 |         |  |              | 0.23 |             |  |        | 0.18 |  |  |        | 0.19 | 

|                        |         |   |                     |      |         |  |              |      |             |  |        |      |  |  |        |   | 
|----------------------- | ------- | - | ------------------- | ---- | ------- |  | ------------ | ---- | ----------- |  | ------ | ---- |  |  | ------ | - | 
|                        |         |   | 2001 Quarters ended
|                        |         |   |                    
|                        |         |   | March 31            |      | June 30 |  | September 29 |      | December 31
|                        |         |   |                     |      |         |  |              |      |            
|Net sales               |         | $ | 67,164              |      |         |  | 74,567       |      |             |  | 68,886 |      |  |  | 80,469 |  
|Operating income (loss) |         |   | 3,720               |      |         |  | 3,931        |      |             |  | 1,903  |      |  |  | (997   | )
|Net earnings            |         |   | 1,806               |      |         |  | 1,701        |      |             |  | 1,005  |      |  |  | 4      |  
|Net earnings per share: |         |   |                     |      |         |  |              |      |             |  |        |      |  |  |        |  
|                        | Basic   |   |                     | 0.20 |         |  |              | 0.19 |             |  |        | 0.10 |  |  |        |  | 
|                        | Diluted |   |                     | 0.20 |         |  |              | 0.19 |             |  |        | 0.10 |  |  |        |  | 

Operating income in the fourth quarter of 2002 included a reversal of the $3.5
million contract reserve for a long-term supply contract to the commercial
airline industry.

Operating loss in the fourth quarter of 2001 included a $3.5 million contract
reserve adjustment for a long-term supply contract to the commercial airline
industry. In addition, the Companys net earnings in the fourth quarter of 2001
included favorable year-to-date adjustments of approximately $575,000 after
tax, related mainly to foreign exchange for its LXE European operations. The
Company believes that these adjustments, if applied retroactively, would not
have had a material effect on the quarterly results for 2001 as reported.

76